nep-hpe New Economics Papers
on History and Philosophy of Economics
Issue of 2016‒03‒06
27 papers chosen by
Erik Thomson
University of Manitoba

  1. Frederic S. Lee and His Fight for the Future of Heterodox Economics By Jo, Tae-Hee
  4. Parameterized games, minimal Nash correspondences, and connectedness By Frank Page
  5. Dynamic stochastic general equilibrium (dsge) modelling: Theory and practice By Dilip M. Nachane
  6. Price expectations in neo-Walrasian equilibrium models: an overview By Fratini, Saverio M.; Levrero, Enrico Sergio; Ravagnani, Fabio
  7. On the definition of externality as a missing market By Nathalie Berta
  8. Pluralism in the Market of Science? A citation network analysis of economic research at universities in Vienna By Florentin Gloetzl; Ernest Aigner
  9. Piketty in the long run By Frank A Cowell
  10. Bread and Bullets By Akerlof, George A.; Snower, Dennis J.
  11. Does the Reliability of Institutions Affect Public Good Contributions? Evidence from a Laboratory Experiment By Fochmann, Martin; Jahnke, Bjoern; Wagener, Andreas
  12. How the Intelligent Non-Economist can Refute Every Economist Hands Down By Kakarot-Handtke, Egmont
  13. Civil liability, Knight's UnCertainty and non-diCtatorial regUlator Documents de travail GREDEG GREDEG Working Papers Series By Gérard Mondello
  14. The Associated Solidarity Game of n-Person Transferable Utility Games: Linking the Solidarity Value to the Shapley Value. By Miamo Wendji, Clovis
  15. Monopoly Capital and Capitalist Inefficiency By Lambert, Thomas; Kwon, Ed
  16. Epistemic democracy with correlated voters By Pivato, Marcus
  17. Плоды социального либерализма и некоторые причины устойчивости выбора неэффективных стратегий (Fruits of the Social Liberalism and some reasons of inefficient strategies choices' stability) By Sergey Zhavoronkov; Konstantin Yanovskiy
  18. On Peer Effects: Behavioral Contagion of (Un)Ethical Behavior and the Role of Social Identity By Dimant, Eugen
  19. Clower's about-face regarding the 'Keynesian Revolution' By Plassard, Romain
  20. Is Economics Research Replicable? Sixty Published Papers from Thirteen Journals Say "Usually Not" By Chang, Andrew C.; Li, Phillip
  21. New Result in Consumption Theory: Change in Savings and Income Growth – Nineteen Years Later By Wu, Cheng
  22. The curious incident of the franc in the Gambia: exchange rate instability and imperial monetary systems in the 1920s By Leigh Gardner
  23. Dette Extérieure, Croissance Économique et Crises dans Les Pays En Développement : Un Bref Aperçu Théorique, Historique et Statistique By Gharyeni, Abdellatif
  24. Ambiguous Games without a State Space and Full Rationality By Giuseppe De Marco
  25. Blended automation: integrating algorithms on the floor of the New York Stock Exchange By Daniel Beunza; Yuval Millo
  26. Gossip and the Efficiency of Interactions By Fehr, Dietmar; Sutter, Matthias
  27. Pleasures of skill and moral conduct By Falk, Armin; Szech, Nora

  1. By: Jo, Tae-Hee
    Abstract: Frederic S. Lee (1949-2014) was a dedicated captain of the heterodox economics movement over the past thirty years. In his unfaltering fight for the future of heterodox economics, Lee contributed to both the development of heterodox microeconomic theory and the establishment of a global community of heterodox economists. This short tribute delineates Lee’s unique and important contribution that should be remembered and renewed in order to reproduce heterodox economics.
    Keywords: Frederic S. Lee, Heterodox Economics, Heterodox Microeconomics
    JEL: B21 B31 B50
    Date: 2016–01–12
  2. By: Marion Dieudonné (LEDA-SDFi - LEDA-SDFi - Université Paris IX - Paris Dauphine, PSL - Université Paris-Dauphine)
    Abstract: Thorstein Veblen published an important book in 1904, The Theory of Business Enterprise, in which he focused on the financial theory of the business enterprise. Although this book was an early contribution to corporate finance, it is little-known compared with Absentee Ownership, published in 1923. From the perspective of his institutionalist tradition, Veblen observes and describes the transition of business enterprise to corporation finance. We can identify a trinity: credit, shares and goodwill. For Veblen, this trinity refers to predation, oligarchic power and goodwill-seeking, which are the guiding principles of the new era of corporate governance. Our aim is to bring to the light the links established by Veblen between credit, shares and goodwill that seem too little explored in the literature. According to Veblen, credit, shares and goodwill form a system which lay at the heart of American business in the early 20th century. Through his work The Theory of Business Enterprise, Veblen gives us an early and significant U.S analysis of the two-sided concept of goodwill. The book was one of the first institutionalist studies of the firm, opening the way for many other works on behavior within and between companies. In order to highlight this, we propose a literature review allowing a comprehensive analysis of the evolution of the concept of goodwill, its definition, valorization, and ambiguities. This overall perspective is not made by the literature.
    Keywords: earning capacity, credit,common shares and preferred shares, corporate finance, goodwill, insiders and outsiders, Veblen
    Date: 2016–01–29
  3. By: Horioka, Charles Yuji
    Abstract: Martin Stuart ("Marty") Feldstein, currently George F. Baker Professor of Economics at Harvard University and President Emeritus of the National Bureau of Economic Research, Inc. (NBER), is an American economist who has made important contributions to public finance, macroeconomics, international economics, social insurance, health economics, the economics of national security, and many other fields of economics, trained a large number of prominent economists, served as President of the National Bureau of Economic Research for some thirty years, and served as President Ronald Reagan's chief economic advisor.
    Keywords: Capital accumulation, capital gains tax, charitable giving, Council of Economic Advisors, deadweight loss, economics of national security, euro, European Monetary Union, Feldstein, M., Feldstein-Horioka paradox, Feldstein-Horioka puzzle, health economics, health insurance, home bias, inflation, international capital flows, international capital mobility, investment, National Bureau of Economic Research, pensions, public finance, public pensions, saving, social insurance, social security, tax expenditures, taxation, unemployment compensation, unemployment insurance, Capital accumulation, capital gains tax, charitable giving, Council of Economic Advisors, deadweight loss, economics of national security, euro, European Monetary Union, Feldstein, M., Feldstein-Horioka paradox, Feldstein-Horioka puzzle, health economics, health insurance, home bias, inflation, international capital flows, international capital mobility, investment, National Bureau of Economic Research, pensions, public finance, public pensions, saving, social insurance, social security, tax expenditures, taxation, unemployment compensation, unemployment insurance
    JEL: B31 D14 D22 E21 F21 F32 F33 F52 H20 H55 I13 J65
    Date: 2015–03
  4. By: Frank Page
    Abstract: Economics and game theory are replete with examples of parameterized games. We show that all minimal Nash payoff USCOs belonging to the Nash equilibrium correspondence of a parameterized game with payoff functions that are uniformly equicontinuous in players’ action choices with respect to parameters have minimal Nash USCOs that are essentially-valued as well as connected-valued. We also show that in general for any uniformly equicontinuous parameterized game, the Nash equilibrium correspondence is the composition of two correspondences: the graph correspondence of the collective security mapping and the Ky Fan Correspondence. The graph correspondence, a mapping from the parameter space into Ky Fan sets, encodes the specifics of the parameterized game being consider, while the Ky Fan Correspondence (i.e., the KFC), a mapping from Ky Fan sets into Nash equilibria, is universal and common to all parameterized games. We also show that the range of the graph correspondence, contained in the hyperspace of Ky Fan sets is a hyperspace Peano continuum - and is therefore locally connected. This means that for any two distinct Ky Fan sets contained in the range of graph correspondence there is a continuous segment in the range of the graph correspondence containing these two distinct Ky Fan sets as endpoints.
    Keywords: minimal USCO; uniformly equicontinuous sets of payoff functions; essential Nash equilibria; connected sets of Nash equilibria; hyperspaces of Ky Fan sets; Nikaido and Isoda functions; quasi-minimal USCOs; 3M mappings; KFC correspondences; dense selections; Peano continua; locally connected continua.
    JEL: C7
    Date: 2015–09
  5. By: Dilip M. Nachane (Indira Gandhi Institute of Development Research)
    Abstract: In recent years DSGE (dynamic stochastic general equilibrium) models have come to play an increasing role in central banks, as an aid in the formulation of monetary policy (and increasingly after the global crisis, for maintaining financial stability). DSGE models, compared to other widely prevalent econometric models (such as VAR, or large-scale econometric models) are less a theoretic and with secure micro-foundations based on the optimizing behavior of rational economic agents. Apart from being "structural", the models bring out the key role of expectations and (being of a general equilibrium nature) can help the policy maker by explicitly projecting the macro - economic scenarios in response to various contemplated policy outcomes. Additionally the models in spite of being strongly tied to theory, can be "taken to the data" in a meaningful way. A major feature of these models is that their theoretical underpinnings lie in what has now come to be called as the New Consensus Macro -economics (NCM). Using the prototype real business cycle model as an illustration, this paper brings out the econometric structure underpinning such models. Estimation and inferential issues are discussed at length with a special emphasis on the role of Bayesian maximum likelihood methods. A detailed analytical critique is also presented together with some promising leads for future research.
    Keywords: real business cycle, log-linearization, stochastic singularity, Bayesian maximum likelihood, complexity theory, agent-based modeling, robustness
    JEL: C52 E32
    Date: 2016–01
  6. By: Fratini, Saverio M.; Levrero, Enrico Sergio; Ravagnani, Fabio
    Abstract: Since the late 1960s, the efforts of general equilibrium theorists have been directed towards overcoming the evident limitation of the Arrow-Debreu model, i.e. the assumption that the transactions associated with the future activities of agents are all regulated at the initial date on a complete system of forward markets. Research has thus focused on ‘sequential economies’, in which spot markets are active in each period, and has developed along two paths, both inspired by Hicks’s Value and Capital and stressing the dependence of agents’ choices on their expectations of future prices. The first is temporary equilibrium theory, in which expectations are assumed to be subjective. The second postulates that all agents exactly predict the future prices (sequential economies with perfect foresight). This paper examines the analytical problems that the inclusion of expectations among the determinants of equilibrium originates within each approach. In the light of the studies of the 1970s and 1980s, it first illustrates the difficulties that arise in temporary equilibrium theory due to the subjective nature of individual forecasts. Then it moves on to examine sequential economies with perfect foresight. After illustrating the equilibrium notion on which the analysis of those economies relies, i.e. the ‘equilibrium of plans, prices and price expectations’ introduced by Radner (1972), it indicates, on the basis of recent contributions, that for plausible configurations of the economy the perfect foresight associated with Radner equilibria proves not only unrealistic but also theoretically dubious.
    Keywords: expectations; temporary equilibrium; Radner equilibrium
    JEL: B21 D46 D51 D84
    Date: 2016–02
  7. By: Nathalie Berta (REGARDS - Université de Reims et Centre d'Economie de la Sorbonne)
    Abstract: Despite its increasing role in economic theory, the concept of externality seems to elude any attempt at rigorous and consensual definition. While problems of definition have emerged with the concept itself in the 1950s, the paper focuses on the definition of externality within the general equilibrium theory. In the Arrow-Debreu framevork, externality is a kind of “missing market” (Arrow 1969) – an unpriced effect that upsets the assumption of the complete system of markets – and its formalization is achieved by introducing a direct interdependence between utility or production functions. The paper shows that this Arrovian definition allows some ambiguities to persist. As witnessed by some authors' positions in the 1970s (Mishan 1971, Baumol and Oates 1975, Heller and Starrett 1976, Laffont 1988), it does not highlight two features associated with the traditional meaning of externalities: whether or not it is an exogenous effect and an unintended effect. This raises, although differently, the issue of the dilution of externality within the larger notion of individual interdependences. Beyond the conceptual importance of clarifying the definition of externality, this issue has also a strong normative content: giving a strict definition of externality amounts, implicitly, to drawing the frontier of legitimate internalisation and economic policy
    Keywords: Externality; K. Arrow; missing market; market failure; utility interdependences
    JEL: B21 B41 H23 Q02
    Date: 2016–01
  8. By: Florentin Gloetzl (Vienna University of Economics and Business, Welthandelsplatz 1, 1020 Vienna, Austria); Ernest Aigner (Vienna University of Economics and Business, Welthandelsplatz 1, 1020 Vienna, Austria)
    Abstract: Pluralism has become a central issue not only in the public discourse but also in heterodox economics, as the focus on impact factors and rankings based on citations continues to increase. This marketization of science has been an institutional vehicle for the economic mainstream to promote its ideas. Citations thus have become a central currency in economics as a discipline. At the same time they allow to investigate patterns in the discourse. Analyzing articles published by the two major economics departments and the more interdisciplinary Department for Socioeconomics in Vienna, this paper is novel in applying both bibliometric techniques and citation network analysis on the department level. We find that (1) Articles in heterodox journals strongly reference the economic mainstream, while the mainstream does not cite heterodox journals, (2) Articles written by researchers of the Department of Socioeconomics cite more heterodox journals irrespective of whether they are published in mainstream or heterodox journals, (3) The economics departments display a citation network exhibiting a clear ‘mainstream core – heterodox periphery’ structure, as Dobusch & Kapeller (2012b) suggest the overall discourse in economics to be, while the Department of Socioeconomics could be described as a plural though not pluralistic department with many distinct modules in the network , reflecting various disciplines, topics and schools of thought.
    Date: 2015–11
  9. By: Frank A Cowell
    Abstract: I examine the idea of 'the long run' in Piketty (2014) and related works. In contrast to simplistic interpretations of long-run models of income- and wealth-distribution Piketty (2014) draws on a rich economic analysis that models the intra- and inter-generational processes that underlie the development of the wealth distribution. These processes inevitably involve both market and non-market mechanisms. To understand this approach, and to isolate the impact of different social and economic factors on inequality in the long run, we use the concept of an equilibrium distribution. However the long-run analysis of policy should not presume that there is an inherent tendency for the wealth distribution to approach equilibrium.
    Keywords: long run, income distribution, wealth distribution, inequality, inheritance, equilibrium
    JEL: D31
    Date: 2015–02
  10. By: Akerlof, George A. (Georgetown University); Snower, Dennis J. (Kiel Institute for the World Economy)
    Abstract: Standard economics omits the role of narratives (the stories that people tell themselves and others) when they make all kinds of decisions. Narratives play a role in understanding the environment; focusing attention; predicting events; motivating action; assigning social roles and identities; defining power relations; and establishing and conveying social norms. This paper describes the role narratives play in decision making, as it also juxtaposes this description against the backdrop of the Bolshevik-spawned narrative that played a critical role in the history of Russia and the Soviet Union in the 20th Century.
    Keywords: narrative, motivation, attention, prediction, identity, social assignment
    JEL: A12 A13 A14 D03 D04 D20 D23 D30 D62 D71 D72 D74 E02
    Date: 2016–02
  11. By: Fochmann, Martin; Jahnke, Bjoern; Wagener, Andreas
    Abstract: Reliable institutions - i.e., institutions that live up to the norms that agents expect them to keep - foment cooperative behavior. We experimentally confirm this hypothesis in a public goods game with a salient norm that cooperation was socially demanded and corruption ought not to occur. When nevertheless corruption attempts came up, groups that were told that "the system" had fended off the attempts made considerably higher contributions to the public good than groups that only learned that the attempt did not affect their payoffs or that were not at all exposed to corruption.
    Keywords: Public goods, Experiment, Institutions
    JEL: H41 A13 C91
    Date: 2016–02
  12. By: Kakarot-Handtke, Egmont
    Abstract: Most non-economists tend to think that economists know what they are talking about when they use specific terms like income, profit, capital, market equilibrium, and so on. This is not the case. What, then, follows from the well-documented fact that the representative economist has no idea of what profit is? Quite simple: if the core concept profit is false then the whole economic theory/model is false. This holds for the Walrasian, the Keynesian, the Marxian, and the Austrian approach.
    Keywords: new framework of concepts; structure-centric; price mechanism; profit mechanism
    JEL: B49 B59
    Date: 2016–01–20
  13. By: Gérard Mondello (GREDEG - Groupe de Recherche en Droit, Economie et Gestion - UNS - Université Nice Sophia Antipolis - CNRS - Centre National de la Recherche Scientifique)
    Abstract: Abstract: This paper reviews the foundations of the unilateral standard accident model under Knightian uncertainty. It extends the Teitelbaum (2007)’s seminal article (who introduces radical uncertainty) by expanding it from producers to victims and from the probability distribution of accidents to the scale of damage. Mainly, it also considers a regulator who aggregates the agents’ preferences (Neghisi (1960) type). Under the condition that the troublemakers’ resources are sufficient to cover the damage, the article shows that uncertainty does not preclude, first, the determination of a socially optimal level of care, and second, whatever the civil liability regime (strict liability or negligence) it shows that they determine the same level of socially first-best care. The solution is inefficient only when the polluter’s wealth is insufficient to repair the victim’s losses.
    Keywords: unilateral accident, tort law, safety, large risks, ambiguity, pessimism and
    Date: 2015–12
  14. By: Miamo Wendji, Clovis
    Abstract: We introduce for any TU-game, a new TU-game referred as its associated solidarity game (ASG). The ASG gives more power to the grand coalition by reducing the payoffs of others coalitions. It comes that, the Shapley value of the ASG is the Solidarity value of the initial game.
    Keywords: TU-game, Shapley value, Solidarity value
    JEL: C71 D63
    Date: 2015–05
  15. By: Lambert, Thomas; Kwon, Ed
    Abstract: This paper examines the arguments and assertions of Baran’s and Sweezy’s Monopoly Capital: An Essay on the American Economic and Social Order (1966) by assessing the degree of economic efficiency or inefficiency in how surplus value and economic surplus were created by 16 major capitalist economies during the 2000s using data envelopment analysis (DEA). After assigning a score to the degree of economic efficiency/inefficiency for each country, one can then assess which factors influence the degree of efficiency/inefficiency. This paper finds empirical support for many of the arguments put forth by the authors, Baran and Sweezy, as well as others regarding the inefficiency of the use of some forms of economic activity to help absorb economic surplus and to create surplus value.
    Keywords: data envelopment analysis, Marxian economics, neoclassical economics, over production, over investment, stagnation thesis, surplus value, under consumption, x-inefficiency
    JEL: B24 B51
    Date: 2014–09–22
  16. By: Pivato, Marcus
    Abstract: We develop a general theory of epistemic democracy in large societies, which subsumes the classical Condorcet Jury Theorem, the Wisdom of Crowds, and other similar results. We show that a suitably chosen voting rule will converge to the correct answer in the large-population limit, even if there is significant correlation amongst voters, as long as the average correlation between voters becomes small as the population becomes large. Finally, we show that these hypotheses are consistent with models where voters are correlated via a social network, or through the DeGroot model of deliberation.
    Keywords: Condorcet Jury Theorem; Wisdom of Crowds; epistemic social choice; deliberation; social network; DeGroot.
    JEL: D71 D81
    Date: 2016–02–15
  17. By: Sergey Zhavoronkov (Gaidar Institute for Economic Policy); Konstantin Yanovskiy (Gaidar Institute for Economic Policy)
    Abstract: The authors support restriction of functions of state by the defense and the maintenance of order (pure public goods provision, or, "simply to prevent evil" lige threats to life, liberty and property, instead of "to promote happiness" Humboldt, 1852). They criticize the combination of social doctrines with the ideas of liberalism. In their view the social doctrines distort liberal ideas and create serious problems in the functioning of modern states.
    Keywords: liberalism, social liberalism, Universal Suffrage, Public Goods, Democracy, political competition
    JEL: D78 D73 D72
    Date: 2013
  18. By: Dimant, Eugen
    Abstract: Social interactions and the resulting peer effects loom large in both economic and social contexts. This is particularly true for the spillover of (un)ethical behavior in explaining how behavior and norms spread across individual people, neighborhoods, or even cultures. Although we understand and observe the outcomes of such contagion effects, little is known about the drivers and the underlying mechanisms, especially with respect to the role of social identity with one’s peers and the (un)ethicality of behavior one is exposed to. We use a variant of a give-or-take dictator game to shed light on these aspects in a con-trolled laboratory setting. Our experiment contributes to the existing literature in two ways: first, using a novel approach of inducing social identification with one’s peers in the lab, our design allows us to analyze the spillover-effects of (un)ethical behavior under varied levels of social identification. Second, we study whether contagion of ethical behavior differs from contagion of unethical behavior. Our results suggest that a) unethical behavior is more contagious, and b) social identification with one’s peers and not the (un)ethicality of observed behavior is the main driver of behavioral contagion. Our findings are particularly important from a policy perspective both in order to foster pro-social and mitigate deviant behavior.
    Keywords: Conformity, Behavioral Contagion, Peer effects, Social Identity, Unethical Behavior
    JEL: D03 D73 D81
    Date: 2015–12–28
  19. By: Plassard, Romain
    Abstract: Robert W. Clower’s article “The Keynesian Counter-Revolution: A Theoretical Appraisal” (1965) deeply influenced the course of Keynesian macroeconomics by contributing to the transition from IS/LM macroeconomics to fix-price theories. Despite this influence, no scholar proposed to explain its origins, with the notable exception of Roger E. Backhouse and Mauro Boianovsky (2013). They explained that the 1965 piece was the result of an independent research program rooted in the works of Clower during the 1950s. My paper aims to offer an alternative explanation. It is synthesized in the metaphor of an about-face to stress that a theoretical break is at the origin of this contribution. This break, initiated in the early 1960s, is characterized by a double change in perspective (individual equilibrium vs. individual disequilibrium, and compatibility vs. incompatibility between Keynesian and Walrasian theories). The intellectual context, particularly Don Patinkin (1956; 1958), will be invoked to trace the roots of this about-face. Consequently, rather than independency and linearity, I argue that dependency and non-linearity are the two salient features of Clower’s intellectual path.
    Keywords: microfoundations of macroeconomics, disequilibrium theory, instability of the full employment equilibrium, Clower.
    JEL: B21 B22 D50
    Date: 2015–09
  20. By: Chang, Andrew C. (Board of Governors of the Federal Reserve System (U.S.)); Li, Phillip (Officer of the Comptroller of the Currency)
    JEL: B41 C80 C82 C87 C88 E01
    Date: 2015–09–04
  21. By: Wu, Cheng
    Abstract: This new version uses the definitions and some of the results found in Sargent’s Macroeconomic Theory. Hall’s (1978) proof of the corollary 4, ct+1 = ct, can be found in Flavin (1981). Writing the same consumption stated in Flavin, for period t+1, in a different way for the summation of the expected future incomes, it is possible to show that changes in savings is a function of income growth. This new result has implications, for instance, in Keynes’ (1936) saving and dissaving.
    Keywords: consumption; martingale; savings; growth; income
    JEL: B00 E2 E21 E6 E60 F0 F00 J3 J30 N1 N10
    Date: 2016–02–17
  22. By: Leigh Gardner
    Abstract: In 1922, British colonial Gambia demonetized the French 5-franc coin, which had been legal tender at a fixed rate in the colony since 1843. Until World War I, this rate was close to the international rate under the gold standard. When the franc began to depreciate in 1918, however, a gap emerged between the Gambian rate and the international rate, prompting a rapid influx of the coins. The demonetization cost the colonial administration over a year's revenue, affecting the later development of the colony. The 1920s have long been a fruitful period for the study of monetary history owing to the instability of exchange rates during and after the war. This article extends the study of this period to examine the impact of these changes on dependent colonies in West Africa, highlighting the importance of local compromises and particularities in colonial monetary systems.
    Keywords: colonialism; exchange rates; West Africa
    JEL: N17 N27 N47
    Date: 2015–12
  23. By: Gharyeni, Abdellatif
    Abstract: The past three decades, developing countries have not spared of all international financial changes. They almost followed the same historical trends. Today, the destabilizing effects of financial liberalization affect even developed economies. The finding is iconic and risk economic policy. This article provides an overview on the theoretical foundations and the different assessments of relations between external debt and economic growth. A statistical analysis, since the 1960s, comes in support of this thesis. For the last two decades, the data show that the stock of debt of developing countries has risen sharply. They are almost 5 times more indebted. Nonetheless, funders have launched various initiatives to revive growth in these countries. The results are relative. However, these countries are continue vulnerable to climate crisis.
    Keywords: Macroéconomie; Surendettement (courbe de Laffer); effet de levier; Croissance Économique; Pays en Développement; Développement Économique; Économie Informelle; Fluctuations du PIB; Instabilité Financière; Données Statistiques.
    JEL: C0 C02 E26 E4 E42 E5 E58 H63 N1 O5 O57
    Date: 2015–03–16
  24. By: Giuseppe De Marco (Università di Napoli Parthenope and CSEF)
    Abstract: Aim of this paper to differentiate and to better understand the assumptions that must be imposed on the structure of ambiguity and on the attitudes towards ambiguity in order to have the existence of equilibria in games under ambiguous belief correspondences. In the present paper, this class of games is studied under weaker restrictions on preferences which are not required to be rational. This paper shows that the assumption of imprecision averse (resp. loving) preferences is key to obtain equilibrium existence whenever it is combined with the property of convexity (resp. concavity) of the ambiguous belief correspondences. The paper also studies the role played by these assumptions in different specific models, so as to illustrate the applicability of the results of equilibrium existence.
    Date: 2016–01–18
  25. By: Daniel Beunza; Yuval Millo
    Abstract: The recent automation of the American stock market has replaced floor intermediaries with trading algorithms, calling into question the sociological claim that markets are structured by networks of intermediaries. Our study examines the social nature of markets in automated settings with an inductive, qualitative study of the automation of the NYSE during the period 2003-12. It proposes the concept of blended automation to denote an automation design that preserves the social structure of a market. Our analysis of the Flash Crash of 2010 suggests that such design offers greater resilience to economic shocks. Our study contributes to the literature on technology in organizations by characterizing a novel automation design that reconciles technology with social relations, and contributes to economic sociology by outlining how automated markets can remain socially structured, pointing to role of politics, ideology and design in market automation.
    JEL: R14 J01 J50
    Date: 2015–12
  26. By: Fehr, Dietmar (WZB - Social Science Research Center Berlin); Sutter, Matthias (University of Cologne)
    Abstract: Human communication in organizations often involves a large amount of gossiping about others. Here we study in an experiment whether gossip affects the efficiency of human interactions. We let subjects play a trust game. Third parties observe a trustee's behavior and can gossip about it by sending a message to the trustor with whom the observed trustee will be paired (for the first time) in the next round. While messages are non-verifiable and sometimes also incorrect, the possibility of gossip is highly efficiency-increasing compared to a situation without any gossip. In two further control treatments, we show that the mere fact of being observed by third parties cannot explain the efficiency-increasing effect of gossip, and that noisy gossip (where information transmission from third parties to trustors can fail) still increases efficiency, but less so than if information transmission is undisturbed.
    Keywords: gossip, communication, trust game, efficiency, experiment
    JEL: C72 C92
    Date: 2016–02
  27. By: Falk, Armin; Szech, Nora
    Abstract: As was recognized by Bentham, skillfulness is an important source of pleasure. Humans like achievement and to excel in tasks relevant to them. This paper provides controlled experimental evidence that striving for pleasures of skill can have negative moral consequences and causally reduce moral values. In the study, subjects perform an IQ-test. They know that each correctly solved question not only increases test performance but also the likelihood of moral transgression. In terms of self-image, this creates a trade-off between signaling excellence and immoral disposition. We contrast performance in the IQ-test to test scores in an otherwise identical test, which is, however, framed as a simple questionnaire with arguably lower self-relevance. We find that subjects perform significantly better in the IQ-test condition, and thus become more willing to support morally problematic consequences. Willingness to reduce test performance in order to behave more morally is significantly less pronounced in the IQ versus the more neutral context. The findings provide controlled and causal evidence that the desire to succeed in a challenging, self-relevant task has the potential to seduce subjects into immoral behaviors and to significantly decrease values attached to moral outcomes.
    Date: 2016

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