Dynamic group formation in the repeated prisoner?s dilemma

We consider dynamic group formation in repeated n-person prisoner?s dilemma. Agreements in coalitional bargaining are self-binding in that they are supported as subgame perfect equilibria of repeated games. Individuals are allowed to renegotiate the cooperating group agreement through a process of voluntary participation. We prove that a cooperating group forms as an absorbing state of a Markov perfect equilibrium after a finite number of renegotiations if and only if the group is Pareto efficient, provided that individuals are patient. The cooperating group can only expand.     

Binary Games with State Dependent Stochastic Choice

This paper studies a stochastic equilibrium selection model for binary coordination games. Players switch strategies stochastically so that the mistake probabilities are fully dependent on the population states. A probabilistic behavior is said to be aspiration (imitation, resp.) oriented if strategy switches are mainly driven by the aspiration (imitation, resp.) effect. In general, a strategy switch by one player generates externalities on others. Strategies in a coordination game can be classified according to the relative magnitude of their externality effects. It is shown that the selection outcome for a linear coordination game is determined in a specific way by the balance of the risk dominance, the aspiration/imitation, and the externality effects. It is also shown that an aspiration (imitation, resp.) oriented behavior tends to select payoff dominant (maxmin, resp.) equilibrium and that risk dominant equilibrium is always selected if and only if the aspiration and the imitation effects exactly cancel each other out, which in turn makes the selection process insensitive to externality effects. Journal of Economic Literature Classification Number: C72.     

On the Relationship between Risk-Dominance and Stochastic Stability

In a 2 × 2 symmetric game with two symmetric equilibria, one risk-dominates another if and only if the equilibrium strategy is a unique best response to any mixture that gives itself at least a probability of one-half. In a two-person strategic form game, we call a Nash equilibriumglobally risk-dominantif it consists of strategies such that each one of them is a unique best response to any mixture that gives the other at least a probability of one-half. We show that if a weakly acyclic two-person game has a globally risk-dominant equilibrium, then this is the one that is selected by the stochastic equilibrium selection process of Young.Journal of Economic LiteratureClassification Numbers: C72, C73.     

Does financial inclusion empower women in Africa?

This paper examines the effect of financial inclusion on women's empowerment. We contribute to the growing interest in financial inclusion effectiveness literature by conducting an empirical analysis of 42 African countries to examine the role of financial inclusion in empowering women. We also examine and compare the effectiveness of the three dimensions of financial inclusion viz. usage, access, and quality, and the first most influential indicators, based on their PCA score, of these dimensions. Our findings suggest that financial inclusion has a significantly positive effect on women's empowerment-measured by females' human development index. Examining the relative importance of financial inclusion dimensions, we find access to financial services has a higher effect on women's empowerment. These results are robust to alternative measures of women's empowerment and financial inclusion, and alternative estimation procedures. We also find that the effect of financial inclusion on women's empowerment is higher in low and lower-middle-income countries compared with upper-middle-income countries in the region. This study provides evidence of one of the channels through which financial inclusion contributes to reducing gender inequality, and thereby enhancing economic development.