Social status and group norms: Indirect reciprocity in a repeated helping experiment

In the economic literature, reciprocity is typically studied in situations of repeated interaction between two individuals. It refers to one individual rewarding kind acts of the other or punishing hostile acts. In contrast, this paper studies indirect reciprocity, where a cooperative action is rewarded by a third actor, not involved in the original exchange. We provide experimental evidence on indirect reciprocity. The experiment is based on the ‘repeated helping game’ developed by Nowak and Sigmund (J. Theoret. Biol. 194 (1998) 561; Nature 393 (1998) 573), involving random pairing in large groups. Pairs consist of a donor and a recipient. Donors decide whether or not to provide costly ‘help’ to the recipients they are matched with, based on information about the recipient's behavior in encounters with third parties. We observe clear evidence of indirect reciprocity. Many decision-makers respond to the information about previous decisions (whether or not to help others) of the recipients. In our experiments, this indirect reciprocity is largely based on norms about how often the recipient should have helped others in the past. We show that these norms develop similarly within groups of interacting subjects, but distinctly across groups. This leads to the emergence of group norms.     

Integrating ecosystem services into conservation assessments: A review

A call has been made for conservation planners to include ecosystem services into their assessments of conservation priority areas. The need to develop an integrated approach to meeting different conservation objectives and a shift in focus towards human wellbeing are some of the motivations behind this call. There is currently no widely accepted approach to planning for ecosystem services. This study contributes towards the development of this approach through a review of conservation assessments and the extent to which they include ecosystem services. Of the 476 conservation assessments identified by a set of search terms on the Web of Science, 100 were randomly selected for this review. Of these only seven had included ecosystem services, while another 13 had referred to ecosystem services as a rationale for conservation without including them in the assessment. The majority of assessments were based on biodiversity pattern data while 19 used data on ecological processes. A total of 11 of these 19 assessments used processes, which could be linked to services. Ecosystem services have witnessed an increase in attention received in conservation assessments since the year 2000, however trends were not apparent beyond this date. In order to assess which types of ecosystem services and how they have been accounted for in conservation assessments, we extended our review to include an additional nine conservation assessments which included ecosystem services. The majority included cultural ecosystem services, followed by regulatory, provisioning and supporting services respectively. We conclude with an analysis of the constraints and opportunities for the integration of ecosystem services into conservation assessments and highlight the urgent need for an appropriate framework for planning for ecosystem services.     

Component efficient solutions in line-graph games with applications

Recently, applications of cooperative game theory to economic allocation problems have gained popularity. We investigate a class of cooperative games that generalizes some economic applications with a similar structure. These are the so-called line-graph games being cooperative TU-games in which the players are linearly ordered. Examples of situations that can be modeled like this are sequencing situations and water distribution problems. We define four properties with respect to deleting edges that each selects a unique component efficient solution on the class of line-graph games. We interpret these solutions and properties in terms of dividend distributions, and apply them to economic situations. This research has been done while the third author was visiting Tinbergen Institute at the Free University, Amsterdam. The research is part of the Research Programme “Strategic and Cooperative Decision Making” at the Department of Econometrics. Financial support from the Netherlands Organization for Scientific Research (NWO) in the framework of the Russian-Dutch programme for scientific cooperation, is gratefully acknowledged. The third author also appreciates partial financial support from the Russian Leading Scientific Schools Fund (grant 80.2003.6) and Russian Humanitarian Scientific Fund (grant 02-02-00189a). We thank three anonymous referees for their valuable comments.     

Competitive supply behavior when price information is fuzzy

The theory of fuzzy sets is applied to the output decisions of a price-taking firm facing imprecise information about expected future prices. Accepting risk resulting from the randomness of prices, the manager is interested in expected profits only. Since the set of possible expected-price vectors is fuzzy, a suitable defuzzification strategy is defined in analogy to the pessimism-optimism index proposed by L. Hurwicz. It depends on the manager's willingness to accept surprises resulting from a deviation of the true expected prices from the values that guided output decisions. Despite a linear cost function, well specified solutions to the optimization problem are possible without resorting to capacity constraints.     

Decomposing Redistributive Effects of Taxes and Transfers in Australia: Annual and Lifetime Measures

This paper decomposes the redistributive effect on annual and lifetime inquality of a range of taxes and transfers in Australia, using a dynamic cohort lifetime simulation model. The redistributive effect is decomposed into vertical, horizontal and reranking effects. Horizontal inequities in the tax and transfer system are found to be negligible. The extent of reranking is greater in the lifetime than in the annual context and is affected by the equivalence scales used to adjust household incomes. If no adjustment is made to household incomes, reranking is about nine per cent of the reduction in lifetime inequality. However, if each child is counted as equivalent to one-third of an adult, reranking is found to be less than one per cent.     

Evolution of harvesting strategies: replicator and resource dynamics

Abstract. Economic theories of managing renewable resources, such as fisheries and forestry, traditionally assume that individual harvesters are perfectly rational and thus able to compute the harvesting strategy that maximizes their discounted profits. The current paper presents an alternative approach based on bounded rationality and evolutionary mechanisms. It is assumed that individual harvesters face a choice between two harvesting strategies. The evolution of the distribution of strategies in the population is modeled through a replicator dynamics equation. The latter captures the idea that strategies yielding above average profits are demanded more than strategies yielding below average profits, so that the first type ends up accounting for a larger part in the population. From a mathematical perspective, the combination of resource and evolutionary processes leads to complex dynamics. The paper presents the existence and stability conditions for each steady-state of the system and analyzes dynamic paths to the equilibrium. In addition, effects of changes in prices are analyzed. A main result of the paper is that under certain conditions both strategies can survive in the long-run. Correspondence to: J. Noailly