Are 18 Holes Enough for Tiger Woods?

This article addresses the selection problem in promotion tournaments. I consider a situation with heterogeneous employees and ask whether an employer might be interested in repeating a promotion tournament. On the one hand, this yields a reduction in uncertainty over the employees’ abilities. On the other hand, there are costs if a workplace stays vacant.     

The nature and units of social selection

On the basis of the technical definition of selection developed by George Price (1995), we describe two forms of selection that commonly occur at the social level, subset selection and generative selection. Both forms of selection are abstract and general, and therefore also incomplete; both leave aside the question of explaining the selection criterion and why entities possess stable traits. However, an important difference between the two kinds of selection is that generative selection can accommodate an explanation of how new variation is created, while subset selection cannot. An evolutionary process involving repeated cycles of generative selection can, in principle, continue indefinitely because imperfect replication generates new variation along the way, whereas subset selection reduces variation and eventually grinds to a halt. Even if the two kinds of selection are very different, they share a number of features. First, neither subset selection nor generative selection implies improvement: neither kind of selection necessarily leads to efficiency or implies systematic outcomes. Second, both subset selection and generative selection can lead to extremely rapid effects in a social population. Third, in the social domain, both generative selection and subset selection involve choice and preference in some way: neither form of selection necessarily excludes intentionality. In concluding the article, we single out a challenge for future research in identifying the role of various units of culture in selection processes and the multiple levels at which social selection processes take place.     

Collusion and biased tournaments

Tournaments are vulnerable to collusion. This paper finds that biased tournaments can be more effective at preventing collusion than unbiased ones. When agents can collude to exert low effort, introducing some bias into tournaments generates opposite effects on favored and disfavored agents׳ respective incentives to exert high effort and provides strong incentives for the favored agent to deviate from collusion. Introducing an adequate degree of bias reduces the principal׳s incentive cost for preventing collusion; however, granting excessive bias instead increases the incentive cost. We show that the optimal level of bias can be endogenously determined.     

Honesty in tournaments

We apply the die rolling experiment of Fischbacher and Föllmi-Heusi (2013) to a two-player tournament incentive scheme. Our treatments vary the prize spread. The data highlights that honesty is more pronounced when the prize spread is small.     

代理人能力分布不均情形下首位晋升制与末位淘汰制的比较研究

在基于相对业绩比较的锦标赛激励机制中,首位晋升制与末位淘汰制是两种常见的竞赛激励机制。在代理人能力分布不均情形下,将代理人之间的拆台行为引入传统的锦标赛模型,可以研究代理人能力分布不同时首位晋升制与末位淘汰制下代理人的行为以及对委托人收益的影响。通过数理模型推导可获得以下结论:第一,首位晋升制下代理人的努力水平和拆台水平均比较高,委托人采用首位晋升制更有利,能力分布对委托人最优选择不产生影响。第二,低能力代理人占多数时,高能力代理人努力水平过高,受到的拆台也更多,高能力代理人占多数时,低能力代理人努力水平更高受到的拆台更多,能力分布对代理人的行为产生影响。     

Collusion in homogeneous and heterogeneous tournaments

In tournaments, only the relative performance of agents is important. Therefore, the agents have an incentive to collude by jointly deviating to low effort levels. Previous papers on collusion have proposed to make the tournament asymmetric to prevent agents from colluding. However, by allowing side payments between the agents and focusing on implicit enforcement of collusion, the current study demonstrates that this is not true. Often, the principal prefers to hire homogeneous agents to make collusions less stable.     

Collusion and group lending with adverse selection

In an environment with correlated returns, this paper characterizes optimal lending contracts when the bank faces adverse selection and borrowers have limited liability. Group lending contracts are shown to be dominated by revelation mechanisms which do not use the ex post observability of the partners' performances. However, when collusion between borrowers under complete information is allowed, group lending contracts are optimal in the class of simple revelation mechanisms (which elicit only the borrower's own private information) and remain useful with extended revelation mechanisms.     

When outcome heterogeneously matters for selection: a generalized selection correction estimator

The classical Heckman (1976, 1979) selection correction estimator (heckit) is misspecified and inconsistent, if an interaction of the outcome variable with an explanatory variable matters for selection. To address this specification problem, a full information maximum likelihood (FIML) estimator and a simple two-step estimator are developed. Monte Carlo (MC) simulations illustrate that the bias of the ordinary heckit estimator is removed by these generalized estimation procedures. Along with OLS and ordinary heckit, we apply these estimators to data from a randomized trial that evaluates the effectiveness of financial incentives for reducing obesity. Estimation results indicate that the choice of the estimation procedure clearly matters.     

The origin of utility: Sexual selection and conspicuous consumption

This paper proposes an explanation for the universal human desire for increasing consumption and the associated propensity to trade survival opportunity off conspicuous consumption. I argue that this desire was moulded in evolutionary times by a mechanism known to biologists as sexual selection, whereby an observable trait – conspicuous consumption in this case – is used by members of one sex to signal their unobservable characteristics valuable to members of the opposite sex. It then shows that the standard economics problem of utility maximisation is formally equivalent to the standard biology problem of the maximisation of individual fitness, the ability to pass genes to future generations, and thus establishes a rigorous theoretical foundation for including conspicuous consumption in the utility function.     

Minimal stable sets in tournaments

We propose a systematic methodology for defining tournament solutions as extensions of maximality. The central concepts of this methodology are maximal qualified subsets and minimal stable sets. We thus obtain an infinite hierarchy of tournament solutions, encompassing the top cycle, the uncovered set, the Banks set, the minimal covering set, and the tournament equilibrium set. Moreover, the hierarchy includes a new tournament solution, the minimal extending set, which is conjectured to refine both the minimal covering set and the Banks set.     

Insurance contracts with imprecise probabilities and adverse selection

Summary. This article deals with optimal insurance contracts in the framework of imprecise probabilities and adverse selection. Agents differ not only in the objective risk they face but also in the perception of risk. In monopoly, a range of configurations that VNM preferences preclude appears: a pooling contract may be optimal, incomplete coverage may be offered to high risks, low risks may be better covered.Received: 1 November 2001, Revised: 15 April 2003, JEL Classification Numbers: D81, D82, G22.Useful suggestions by Emmanuelle Auriol, Bernard Bensaïd, Michéle Cohen, Isaac Meilijson and the anonymous referee are acknowledged. Correspondence to: M. Jeleva     

Income maximization and the selection and sorting of international migrants

Two prominent features of international labor movements are that the more educated are more likely to emigrate (positive selection) and more educated migrants are more likely to settle in destination countries with high rewards to skill (positive sorting). Using data on emigrant stocks by schooling level and source country in OECD destinations, we find that a simple model of income maximization can account for both phenomena. Results on selection show that migrants for a source-destination pair are more educated relative to non-migrants the larger is the absolute skill-related difference in earnings between the destination country and the source. Results on sorting indicate that the relative stock of more educated migrants in a destination is increasing in the absolute earnings difference between high and low-skilled workers. We use our framework to compare alternative specifications of international migration, estimate the magnitude of migration costs by source-destination pair, and assess the contribution of wage differences to how migrants sort themselves across destination countries.     

Adverse selection and bilateral asymmetric information

A simple principal-agent model with bilateral asymmetric information and common values is developed. The agent(s) has private information about his characteristics but does not knowhow these affect outcomes. The principal knows how the characteristics translate into outcomes, but does not observe the characteristics. It is shown that equilibrium contracts aresimple in being designednot to reveal the agent's characteristics. When the agent knows howsome of his characteristics affect the outcome, contracts will be differentiated with respect to precisely those characteristics. An application to the use of genetic information is considered.     

The first-order approach in rank-order tournaments

The first-order approach in rank-order tournaments is addressed. It is demonstrated that the conditions given in the literature are not sufficient to guarantee concavity of agents' objective functions. Additional conditions are provided that ensure validity of the first-order approach.     

Dynamic adverse selection and the supply size

In this paper we examine the problem of dynamic adverse selection in a stylized market where the quality of goods is a seller׳s private information while the realized distribution of qualities is public information. We obtain that full trade occurs in every dynamic competitive equilibrium. Moreover, we show that if prices can be conditioned on the supply size then a dynamic competitive equilibrium always exists, while it fails to exist if prices cannot be conditioned on the supply size and the frequency of exchanges is high enough. We conclude that the possibility to condition prices on the supply size allows us to reach efficiency in the limit for exchanges becoming more and more frequent, while otherwise the welfare loss due to delays of exchanges remains bounded away from zero.     

Scale functions in equilibrium selection games

We present here an evolutionary game model, and address the issue of equilibrium selection working with the scale function of a diffusion process describing the dynamics of population processes with mutation modeled as white noise. This model is the same as the one in Foster and Young (1990) but with a different interpretation at the boundaries and with different mutation modelings. First, we justifiably assume that the boundaries of the solution of the stochastic differential equation are absorbing so that the first boundary of the interval [0,1] hit will determine the equilibrium selected. Then, working with the scale function, we obtain for 2×2 symmetric games and different mutation parameters, some new and interesting equilibrium selection results. The aim of this article is to describe another method of approach in evolutionary games with mutation which we believe will prove to be very useful in studying more general normal form games and different mutation modelings.     

Model selection when estimating and predicting consumer demands using international,cross section data

This paper assesses the ability of five structural demand systems to predict demands when estimated with cross sectional data spanning countries with widely varying per capita expenditure levels. Results indicate demand systems with less restrictive income responses are superior to demand systems with more restrictive income effects. Among the least restrictive demand systems considered, An Implicitly, Directly Additive Demand System (AIDADS) and Quadratic Almost Ideal Demand System (QUAIDS) seem roughly tied for best, while the Quadratic Expenditure System (QES) is a close second. Given differences in the characteristics of AIDADS and QUAIDS, it is concluded the former is better suited to instances where income exhibits wide variation and the latter to cases when prices exhibit considerable variation. First Version Received: November 2000/Final Version Received: February 2002 RID="*" ID="*"  The authors acknowledge the insightful comments of two journal referees and Baldev Raj. Bettina Aten kindly provided the data used in this study. Any errors or omissions remain the responsibility of the authors. Partial financial support of the United States Department of Agriculture – National Research Initiative Grant #97-35400-4752 and the Purdue Research Foundation is gratefully acknowledged. An expanded version of this paper is available from the authors upon request. RID="**" ID="**"  Contact author     

Assortative matching, adverse selection, and group lending

This note reconsiders a theoretical result asserted to explain the success of group lending programs in LDCs. It has been claimed that if groups are allowed to form themselves, risky and safe borrowers will sort themselves into relatively homogenous groups. This “positive assortative matching” can be exploited by lenders to solve an adverse selection problem that would otherwise undermine the effectiveness of such lending programs. I show that the positive assortative matching result does not necessarily hold if earlier models are extended to incorporate dynamic incentives.     

Economic natural selection in Bertrand and Cournot settings

We study economic natural selection in classical oligopoly settings. When underlying pure strategies consist of a finite number of prices, convex monotonic dynamics always converge under a weak condition to the smallest price in the support of the initial state that exceeds marginal cost. When underlying pure strategies consist of a finite number of quantities, monotonic dynamics always converge under a specific condition to a quantity equal or similar to classical Cournot equilibrium.