Reinforcement-Based Adaptive Learning in Asymmetric Two-Person Bargaining with Incomplete Information

The sealed bidk-double auction is a mechanism used to structure bilateral bargaining under two-sided incomplete information. This mechanism is tested in two experiments in which subjects are asked to bargain repeatedly for 50 rounds with the same partner under conditions of information disparity favoring either the buyer (Condition BA) or seller (Condition SA). Qualitatively, the observed bid and offer functions are in agreement with the Bayesian linear equilibrium solution (LES) constructed by Chatterjee and Samuelson (1983). A trader favored by the information disparity, whether buyer or seller, receives a larger share of the realized gain from trade than the other trader. Comparison with previous results reported by Daniel, Seale, and Rapoport (1998), who used randomly matched rather than fixed pairs, shows that when reputation effects are present this advantage is significantly enhanced. A reinforcement-based learning model captures the major features of the offer and bid functions, accounting for most of the variability in the round-to-round individual decisions.     

Provision of Step-Level Public Goods with Uncertain Provision Threshold and Continuous Contribution

Common to most theoretical and empirical research on public goods is the assumption that the parameters of the game are common knowledge. Recent theoretical and empirical studies have questioned this assumption by arguing that many public goods situations are characterized by uncertainty regarding various aspects of the situation. In particular, Suleiman (1997) argued that members of production groups of step-level public goods are often uncertain about the value of the provision threshold. For this type of uncertainty he proposed three distinct models to account for the individual's contribution.The present study reports the results of an experiment designed primarily to test and contrast the predictions derived from two of these models – a subjective expected utility model and a cooperative model – regarding the effects of threshold uncertainty on contribution for the provision of step-level public goods. Other goals of the study were to test the joint effect of the threshold uncertainty level, and its mean (low vs. high), on contribution, and to examine the effect of threshold uncertainty on the individuals' estimates regarding the contributions of other group members.The results show that the effect of threshold uncertainty is moderated by the threshold mean: Contribution to the public good increased as a function of uncertainty for the lower threshold mean, and decreased (though not significantly) for the higher threshold mean. In contrast, for the two threshold means the subjects' estimates of the mean and variability of others' contribution increased with threshold uncertainty.The models' comparison revealed that the cooperative model was superior to the subjective expected utility model. This result adds to a substantial body of research on social dilemmas showing that under conditions of social (strategic) uncertainty, group members tacitly coordinate their choice behavior by anchoring their decisions on rules of fairness.     

The redemption of science

The appearance of nuclear weapons suddenly made the extinction of humanity a distinct possibility. In view of this obverse side of scientific progress, attitudes toward science in the general population became ambivalent, at times bordering on hostility. It is argued that to a great extent the scientists themselves are responsible for the tarnished image of science. Accordingly they should restore science to its role of furthering human welfare and, above all, as a source of enlightenment. In our age enlightenment entails emancipating humanity from superstitions generated by the cooptation of science in the service of power.Anatol Rapoport received the Ph.D. degree in mathematics from the University of Chicago in 1941. He was professor of mathematical biology at the University of Michigan (1955–1970), professor of mathematics and psychology at the University of Toronto (1970–1980), and director of the Institute for Advanced Studies in Vienna (1980–1984). Currently he is professor of peace and conflict studies at the University of Toronto. Professor Rapoport is author of fifteen books on conflict theory, game theory, semantics, and the philosophy of science.     

An integrative analysis of business bankruptcy in Australia

This paper proposes an integrative and dynamic approach for analyzing business failure. The simultaneous estimation results obtained with Australian data indicate significant associations between bankruptcy rates in different industries. Most of these associations are positive and hence implying that bankruptcy in one industry can inflict a ‘domino’ effect on other industries. The estimated significant negative association between current and lagged bankruptcy rates in the industries under consideration lend support to the survival of the fittest hypothesis. The estimation results also highlight the important effects of industry, domestic and international economic conditions on bankruptcy rates.     

A pareto optimal collaboration period: The role of financial,industrial and macroeconomic conditions in liquidation decision and timing

In this paper, the author highlights the nexus of interactions among financial, industrial and macroeconomic factors determining the Pareto optimal date on which the firm’s claimants stop collaborating and force the firm into liquidation. The condition for optimal liquidation time summarizes the effects of volatility of the aggregate consumer income and the overall price level, demand elasticity, the industry’s concentration level and depreciation on the firm’s going-concern value. It also takes into account the effects of the firm’s level of indebtedness, foregone interest on alternative usages of the financial resources extended to the firm and the costs of risk bearing perceived by the firm’s claimants from continued collaboration.     

Joining a Queue or Staying Out: Effects of Information Structure and Service Time on Arrival and Staying Out Decisions

We study a class of single-server queueing systems with a finite population size, FIFO queue discipline, and no balking or reneging. In contrast to the predominant assumptions of queueing theory of exogenously determined arrivals and steady state behavior, we investigate queueing systems with endogenously determined arrival times and focus on transient rather than steady state behavior. When arrival times are endogenous, the resulting interactive decision process is modeled as a non-cooperative n-person game with complete information. Assuming discrete strategy spaces, the mixed-strategy equilibrium solution for groups of n = 20 agents is computed using a Markov chain method. Using a 2 × 2 between-subject design (private vs. public information by short vs. long service time), arrival and staying out decisions are presented and compared to the equilibrium predictions. The results indicate that players generate replicable patterns of behavior that are accounted for remarkably well on the aggregate, but not individual, level by the mixed-strategy equilibrium solution unless congestion is unavoidable and information about group behavior is not provided.JEL Classification: C71, C92, D81     

An introduction to the economics of immigration in OECD countries

The share of the foreign-born population in member countries of the OECD is increasing, and this article summarizes economics research on the effects of immigration in those nations. Four broad topics are addressed: labour market issues, fiscal questions, the political economy of immigration, and productivity and international trade. Extreme concerns about deleterious labour market and fiscal impacts following from new immigrants are not found to be warranted. However, it is also clear that government policies and practices regarding the selection and integration of new migrants affect labour market, fiscal, social and cultural outcomes. Policies that are well informed, well crafted and well executed beneficially improve population welfare.