E–Commerce and the Australian Economy

This paper considers the likely impact of e–commerce and the Internet on the Australian economy. It surveys literature on the extent and development of e–commerce in Australia and its impact on the shape of the Australian economy. Evidence for the 'renewal' of the Australian economy is presented and examined, especially the question of whether Australia has enjoyed increases in productivity as a result of the production and/or use of new information and communications technology. Australia is seen as broadly well placed to benefit from the Internet and e–commerce. Traditionally isolated from the world's main economic centres and reliant on commodities in international trade, the advent of the Internet is ideal for a country in transition to a service–orientated, knowledge–based economy. As the composition of Australia's exports becomes more service–orientated and knowledge–intensive, traditional trading links with Europe and North America may strengthen relative to those with Asia.     

Communication,timing, and common learning

We study the effect of stochastically delayed communication on common knowledge acquisition (common learning). If messages do not report dispatch times, communication prevents common learning under general conditions even if common knowledge is acquired without communication. If messages report dispatch times, communication can destroy common learning under more restrictive conditions. The failure of common learning in the two cases is based on different infection arguments. Communication can destroy common learning even if it ends in finite time, or if agents communicate all of their information. We also identify conditions under which common learning is preserved in the presence of communication.     

Consumer demand for local honey

How to best target and attract niche market consumers is an important marketing problem for producers of specialty agricultural products. It is particularly an issue in the honey market where consumers increasingly face media messages regarding threats to honey bee health, honey adulteration and health benefits of locally produced honey. Using auction experiments, this research evaluates consumer behaviour related to informational messages about honey that is produced locally, domestically and internationally. Results from 115 adult consumers show that consumers’ demand for honey varies significantly based on the geographic location of the honey’s production, product packaging and the information they have about the product. Consumers demonstrate greater demand for locally produced honey, especially when provided information about negative aspects of internationally produced honey that include adulteration. This shows that such negative media attention on specialty products offers small producers an opportunity to increase profitability by marketing themselves as a specialized niche alternative.     

ASSESSING THE VALUE OF ECONOMICS RESEARCH: THE CASE OF THE BIAS IN THE CONSUMER PRICE INDEX

Economists provide sometimes contradictory information about economic systems that contribute to policy design. How does one value this type of knowledge? A political‐economic game is presented that allows for reinforcing and contradictory research messages. Policy makers are assumed to follow a Bayesian decision theory process and the model is tested with quantitative estimates of the value of research on the degree of bias in the Consumer Price Index. Most economists agree that a bias exists, but published estimates vary widely. A blue‐ribbon panel of economists recommended revisions to how the index is calculated, and the Bureau of Labor Statistics subsequently made revisions that differed from their original plans, but how much influence did the panel really have on the revisions? (JEL Z00)     

Allocation of resources in a team

The informational efficiency of “price” and “demand” messages in a resource allocation mechanism is studied here with the aid of the theory of teams¹. In the usual analysis of adjustment mechanisms (tâtonnement, decomposition), the adjustment process is assumed to run to completion, so that all the allocation and resource decisions can be made on the basis of enough information to guarantee optimal decisions². If, however, decisions must be made before the adjustment process is completed, say, after only a few iterations, then the decisions must be taken with limited information, and thus under conditions of uncertainty. This paper discusses a simple model in an attempt to examine explicitly these problems of uncertainty and limited information. A set of enterprise managers are assumed to produce various commodities, using scarce resources allocated to the enterprises by a resource manager. The enterprise managers also make decisions that affect their individual outputs. Varous kinds of communication among the managers, together with the corresponding information structures, are formulated, including the communication of price and demand messages. Optimal decision rules for the managers are calculated for the objective of maximizing the expected value of an index of total output. (It is assumed that the production functions and the supplies of scarce resources are stochastic, but are observed by the respective managers.) It is shown that optimal decision rules based on a single exchange of price and demand messages, between the resource manager on the one hand and the enterprise managers on the other, produces as good results as rules based on (1) complete information for the resource manager, and (2) information about the supplies of resources on the part of the enterprise managers. Furthermore, these price and demand messages produce approximately fully optimal results when the number of enterprises is large. However, the optimal decisions of the enterprise managers do not maximize profits, at least relative to any price that is the same for all enterprises. An assumption that the production functions are quadratic plays a key role.     

Communication and coordination in the laboratory collective resistance game

This paper presents a laboratory collective resistance (CR) game to study how different forms of non-binding communication among responders can help coordinate their collective resistance against a leader who transgresses against them. Contrary to the predictions of analysis based on purely self-regarding preferences, we find that non-binding communication about intended resistance increases the incidence of no transgression even in the one-shot laboratory CR game. In particular, we find that the incidence of no transgression increases from 7 percent with no communication up to 25–37 percent depending on whether communication occurs before or after the leader’s transgression decision. Responders’ messages are different when the leaders can observe them, and the leaders use the observed messages to target specific responders for transgression.

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An experimental study of strategic information transmission

Summary We examine strategic information transmission in an experiment. Senders are privately informed about a state. They send messages to Receivers, who choose actions resulting in payoffs to Senders and Receivers. The payoffs depend on the action and the state. We vary the degree to which the Receivers' and the Senders' preferences diverge. We examine the relationship between the Senders' messages and the true state as well as that between actions and the true state and contrast the ability of different equilibrium message sets to explain the data.When preferences are closely aligned Senders disclose more. We assess two comparative statics: (i) as preferences diverge, state and action are less frequently matched, and (ii) messages tend to become less informative as preferences diverge. The first result is weakly confirmed for adjacent treatments but is considerably stronger when non-adjacent treatments are compared. We find that as preferences diverge messages become less informative. While the ex-ante Pareto-optimal Bayesian Nash Equilibrium does not explain our conditions, the equilibrium message sets supported by the data are similar to the ex-ante Pareto Optimal message sets.We would like to thank seminar participants at the Economic Science Association meetings, the University of Iowa, the University of Minnesota, Northwestern University and the Society for the Advancement of Economic Theory meetings for their comments. We would like to thank Beth Allen, Joyce Berg, Robert Forsythe, Yong-Gwan Kim, Antonio Merlo, Leonard Mirman, In-Uck Park, Charles Plott, Jennifer Reinganum and an anonymous referee for their suggestions. Financial support from the Accounting Research Center at the University of Minnesota is also acknowledge.     

Multidimensional cheap talk with sequential messages

This paper studies a two-dimensional cheap talk game with two senders and one receiver. The senders possess the same information and sequentially send messages about that information. In one-dimensional sequential message cheap talk games where the state space is unbounded, the information is fully transmitted under the self-serving belief, as suggested by Krishna and Morgan (2001b). However, this result depends crucially on the structure of the one-dimensional model. It generally does not hold in two-dimensional models. We consider the extended self-serving belief, which implies full information transmission even if the self-serving belief cannot work. Then, we show that the necessary and sufficient condition for the existence of the fully revealing equilibrium is that the senders have opposing-biased preferences.     

MONEY TALKS? AN EXPERIMENTAL INVESTIGATION OF CHEAP TALK AND BURNED MONEY

We experimentally study the strategic transmission of information in a setting where both cheap talk and money can be used. Theoretically, many equilibria exist side by side, in which senders use either costless messages, money, or both. We find that senders prefer to communicate through costless messages. Only when the interest disalignment between sender and receiver increases does cheap talk tend to break down and high sender types start burning money to enhance the credibility of their costless messages. A behavioral model assuming that sellers bear a cost of lying fits the data best.     

Let's Get Physical! Or Financial? A Study of Electricity Transmission Rights

I test experimentally the predictions of neoclassical theory for a radial electricity market without rights to the transmission line, with rights that give the owner a financial right to a share of the transmission congestion charges collected by a network operator, and with physical rights which give the owner the exclusive right to utilize a portion of the transmission line. I find that physical rights lead to more right market signals, diminish some market-power, and remove an uncertainty about electricity transmission congestion better than financial rights or the absence of rights.     

Discriminating Among Alternative Theories of the Multinational Enterprise

Recent theoretical developments have incorporated endogenous multinational firms into the general–equilibrium model of trade. One simple taxonomy separates the theory into "vertical" models, in which firms geographically separate activities by stages of production, and "horizontal" models, in which multiplant firms duplicate roughly the same activities in many countries. The authors nest a horizontal and a vertical model within a hybrid (unrestricted) "knowledge–capital model" and estimate the specifications with data on US foreign direct investment activity. In the nested econometric tests, the data sample cannot distinguish statistically between the unrestricted model and the restricted horizontal model, indicating that the latter captures virtually all of the determinants of FDI. The tests overwhelmingly reject the vertical model.     

A Merchant Mechanism for Electricity Transmission Expansion

We propose a merchant mechanism to expand electricity transmission based on long-term financial transmission rights (FTRs). Due to network loop flows, a change in network capacity might imply negative externalities on existing transmission property rights. The system operator thus needs a protocol for awarding incremental FTRs that maximize investors’ preferences, and preserves certain currently unallocated FTRs (or proxy awards) so as to maintain revenue adequacy. In this paper we define a proxy award as the best use of the current network along the same direction as the incremental awards. We then develop a bi-level programming model for allocation of long-term FTRs according to this rule and apply it to different network topologies. We find that simultaneous feasibility for a transmission expansion project crucially depends on the investor-preference and the proxy-preference parameters. Likewise, for a given amount of pre-existing FTRs the larger the current capacity the greater the need to reserve some FTRs for possible negative externalities generated by the expansion changes.     

Inter-gender interaction and communication in ultimatum games

In this article, we focus on bargaining within male–female pairs, the most pervasive partnership in humankind. We analyse data from an ultimatum game played by Greek participants. Parallel to this, we introduce a one-way communication protocol according to which the responders can send short messages to the receivers, after making their decisions. The analysis shows that gender and message effects exist and males are more effective bargainers.     

Uncertainty,trust, and the regulation of the banking industry

This paper suggests that, in presence of uncertainty, individual choices are made on the basis of subjective evaluations, and the transmission of information is too expensive, so that the decision-making process must largely be based on other agents’ knowledge. Banks operate by developing a network of personal relationships, based on trust, that allows agents to make use of the subjective knowledge of others. The deregulation process of the financial industry of the 1990s was based on the principle that information disclosure would make the market for securities more efficient, increasing risk diversification, and making the financial system safer. Many innovative financial contracts, however, were not backed by trust and reputation mechanism as traditional banking activities. The shadow banking system emerging from these market-based transactions was thus much more risky and fragile than the traditional one, based on private information and unwritten rules of conduct.     

Conformism and public news

We study a model where investment decisions are based on investor’s information about the unknown and endogenous return of the investment. The information of investors consists of endogenously determined messages sold by financial analysts who have access to both public and private information on the return. We assume that the return is increasing in the aggregate investment. This results into a beauty contest among analysts (or a “conformism” effect). There may exist multiple equilibria, each of which entails analysts sending the most informative messages possible. Beyond the “regular” equilibrium involving an overweighing of the public information, multiplicity introduces “inverted” equilibria where public information is negatively correlated with the return. The correlation across analysts’ information sources implies that not all the information available is transmitted to investors.     

Comparing finite mechanisms

Summary. This paper obtains finite analogues to propositions that a previous literature obtained about the informational efficiency of mechanisms whose possible messages form a continuum. Upon reaching an equilibrium message, to which all persons “agree”, a mechanism obtains an action appropriate to the organization's environment. Each person's privately observed characteristic (a part of the organization's environment) enters her agreement rule. An example is the Walrasian mechanism in an exchange economy. There a message specifies a proposed trade vector for each trader as well as a price for each non-numeraire commodity. A trader agrees if the price of each non-numeraire commodity equals her marginal utility for that commodity (at the proposed trades) divided by her marginal utility for the numeraire. At an equilibrium message, the mechanism's action consists of the trades specified in that message, and (for classic economies) those trades are Pareto-optimal and individually rational. Even though the space of environments (characteristics) is a continuum, mechanisms with a continuum of possible messages are unrealistic, since transmitting every point of a continuum is impossible. In reality, messages have to be rounded off and the number of possible messages has to be finite. Moreover, reaching a continuum mechanism's equilibrium message typically requires infinite time and that difficulty is absent if the number of possible messages is finite. The question therefore arises whether results about continuum mechanisms have finite counterparts. If we measure a continuum mechanism's communication cost by its message-space dimension, then our corresponding cost measure for a finite mechanism is the (finite) number of possible equilibrium messages. We find that if two continuum mechanisms yield the same action but the first has higher message-space dimension, then a sufficiently fine finite approximation of the first has larger error than an approximation of the second if the cost of the first approximation is no higher than the cost of the second approximation. An approximation's “error” is the largest distance between the continuum mechanism's action and the approximation's action. We obtain bounds on error. We also study the performance of Direct Revelation (DR) mechanisms relative to “indirect” mechanisms, both yielding the same action, when the environment set grows. We find that as the environment-set dimension goes to infinity, so does the extra cost of the DR approximation, if the error of the DR approximation is at least as small as the error of the indirect approximation. While the paper deals with information-processing costs and not incentives, it is related to the incentive literature, since the Revelation Principle is central to much of that literature and one of our main results is the informational inefficiency of finite Direct Revelation mechanisms. Received: May 21, 2001; revised version: December 14, 2001 RID="*" ID="*" Earlier versions of this paper were presented at the Decentralization Conference, Washington University, St Louis, April 2000 and at the Eighth World Congress of the Econometric Society, August 2000. We are grateful for comments received on those occasions. The second author gratefully acknowledges support from National Science Foundation grant #IIS9712131. Correspondence to: T. Marschak     

Extensive and strategic forms: Games and models for games

This paper aims to make precise, in the context of epistemic models for games, some relations between the normal or strategic form representation of a game and the extensive or dynamic form representation. It is argued, first, that epistemic models defined for strategic form representations provide all the materials necessary for defining models for corresponding extensive form representations of the game, models that provide information about the way the game is played that is sufficient to evaluate the rationality of the choices that the players make, and are disposed to make, in the course of playing the dynamic game. Second, two definitions of rationality are compared — one for strategy choices in the normal form representation, and one for the individual choices that the player is disposed to make in the course of playing the dynamic game. It is shown that they are essentially equivalent in games with perfect recall. The main focus is on the intuitive foundational assumptions about rationality and dynamic choice that are needed to motivate the definitions. It is argued that to evaluate the rationality of a player's choices in a dynamic context, it is essential to distinguish passive knowledge (knowledge about nature and about the prior beliefs and strategy choices of other players that is based on observation and inference) fromactive knowledge (knowledge about one's own choices and future choices that is grounded in one's decisions).     

基于云计算的高技术产业创新网络知识传播模式分析

系统分析了高技术产业创新网络中知识云传播过程和特征,构建了知识云传播的系统模型。考虑到知识云传播过程中受传者接收知识后由于离线或其它原因导致不能即时再传播的潜伏状态,建立了高技术产业创新网络中知识云传播的传染病动力学模型,并以此对知识云传播模式进行了定量分析。仿真结果刻画了知识云传播过程中各节点随时间的变化趋势,分析了成员行为和云平台网络参数对云传播过程的影响。高技术产业创新网络中知识云传播模式能正确反映云环境下的知识传播趋势,并能较为准确地描述知识云传播过程。     

Mechanism design with partial state verifiability

We study implementation in environments where agents have limited ability to imitate others. Agents are randomly and privately endowed with type-dependent sets of messages. So sending a message becomes a partial proof regarding type. For environments where agents can send any combination of available messages, we develop an Extended Revelation Principle and characterize the incentive constraints which implementable allocations must satisfy. When not all message combinations are feasible, static mechanisms no longer suffice. If a ‘punishment’ allocation exists for each agent, then implementable allocations can be characterized as equilibria of a “Revelation Game,” in which agents first select from the menus of allocation rules, then the mediator requests each agent to send some verifying messages. When a punishment allocation fails to exist for some agent, dynamic games in which agents gradually reveal their evidence implement a larger set of outcomes. The latter result provides a foundation for a theory of debate.     

Classification of natural language messages using a coordination game

The role of natural language communication in economic exchange has been the focus of substantial experimental analysis. Recently, scholars have taken the important step of investigating whether certain types of communication (e.g., promises) might affect decisions differently than other types of communication. This requires classifying natural language messages. Unfortunately, no broadly-accepted method is available for this purpose. We here describe a coordination game for classification of natural language messages. The game is similar in spirit to the “ESP” game that has proven successful for the classification of tens of millions of internet images. We compare our approach to self-classification as well as to classifications based on a standard content analysis. We argue that our classification game has advantages over those alternative approaches, and that these advantages might stem from the salient rewards earned by our game’s participants.