Great game or Grubby game? the struggle for control of the Caspian

In this article I examine the way in which resource conflict in the Caspian Sea Basin has become entwined in the development of geopolitical thought and ideas since the late nineteenth century. I argue that Mackinder's inclusion of the Caspian in his original pivot was significant and that because of its considerable strategic importance control of the region was seen as crucial to all sides in both the First World War and the Second World War. The struggle for control of the Caspian bolstered Mackinder's ideas which were influential in the development of Cold War geopolitics. Since the collapse of the Soviet Union the desire to control the ‘heartland’ has been played out via the control of the region's energy resources.     

State investment tax incentives: A zero-sum game?

Over the past four decades, state investment tax incentives have proliferated. This emergence of state investment tax credits (ITC) and other investment tax incentives raises two important questions: 1) Are these tax incentives effective in achieving their stated objective, to increase investment within the state?; 2) To the extent these incentives raise investment within the state, how much of this increase is due to investment drawn away from other states?To begin to answer these questions, we construct a detailed panel dataset for 48 states for 20+ years. The dataset contains series on output and capital, their relative prices, and establishment counts. The effects of tax variables on capital formation and establishments are measured by the Jorgensonian user cost of capital that depends in a nonlinear manner on federal and state tax variables. Cross-jurisdictional differences in state investment tax credits and state corporate tax rates entering the user cost, combined with a panel that is long in the time dimension, are key to identifying the effectiveness of state investment incentives.Two models are estimated. The Capital Demand Model is motivated by the first-order condition for a profit-maximizing firm and relates at the state level the capital/output ratio to the relative user cost of capital. The Twin-Counties Model exploits both the spatial breaks (“discontinuities”) in tax policy at state borders and our panel dataset to relate at the county level the relative user cost to the location of manufacturing establishments. Using the Capital Demand Model, we find that own-state capital formation is substantially increased by tax-induced reductions in the own-state price of capital and, more interestingly, substantially decreased by tax-induced reductions in the price of capital in competitive-states. Similarly, using our Twin-Counties Model, we find that county manufacturing establishment counts around state borders are higher on the side of the border with the lower price of capital, but the difference is economically small, suggesting that establishments are much less mobile than overall capital. Extensions of the Capital Demand Model also reveal that state capital tax policy appears to be a zero-sum game among the states in that an equiproportionate increase in own-state and competitive-states user costs tends to have no effect on own-state capital formation.     

Does income inequality increase charitable giving?

Do households react to changes in the distribution of income in their localities by changing their charitable giving? The theoretical prediction of the effects of income inequality on giving is unclear. We study how changes in income inequality measured at the neighbourhood and municipality levels affect charitable giving by households in Canada between 1991 and 2006. We find that increases in inequality increase giving. Results are sensitive to the geographic dispersion of low‐ and high‐income households in neighbourhoods within a municipality. The effect on donations is smaller in areas with high levels of inequality at both neighbourhood and municipality levels.     

Do preferences for charitable giving help auctioneers?

Preferences for charitable giving in auctions can be modeled by assuming that bidders receive additional utility proportional to the revenue raised by an auctioneer. The theory of bidding in the presence of such preferences results in a very counterintuitive prediction which is that, in many cases, bidders having preferences for charitable giving does not lead to a substantial revenue advantage for an auctioneer. We test this theory and this prediction with a series of experiments. In one experiment we induce charitable preferences exactly as specified in the model to see if bidders respond to them as predicted. We find that they do. We then conduct a second experiment in which the revenue from the auctions is donated to actual charities to verify the robustness of the prediction when charitable preferences are generated by a more natural source and find again that the theoretical prediction holds: even strong charitable preferences do not result in substantial revenue increases to the auctioneer.     

Overqualification: permanent or transitory?

This article analyses job mismatches in Switzerland based on a subjective measure of overqualification. According to job search and job matching theories, overqualification is a transitory problem. Other theories show that overqualification can also be of a permanent nature. We test the perpetuity of overeducation using panel data from the first eight waves of the Swiss Household Panel (SHP) covering the period 1999 to 2006. Our empirical analysis reveals little evidence for lasting rigidities that would cause permanent job mismatches. Rather, spells of overqualification are relatively short: about half of all individuals who were overqualified in a given year had an adequate job match 1 year later. While a short duration of overqualification would be consistent with job search and job matching theories, our observation that the probability of a job mismatch does not significantly decrease with experience is at odds with these theories. Our article provides an alternative explanation for this phenomenon: the constant accumulation of experience and qualifications throughout a worker's career implies that, for a good job match to be maintained, qualification-specific job requirements must increase as the worker ages. If this does not occur, even older workers face a risk of becoming overqualified.     

Does the trust game measure trust?

Could altruism explain observed choices in the standard trust game? With dominant altruism, trustors would give more to poor trustees. However, we find trustors to give no more to poor than to rich trustees, confirming trust as the dominant motivation for “trust like” choices.     

Evolutionary game theory and evolutionary economics: are they different species?

Evolutionary game theory and evolutionary economics seem to inhabit different academic spheres and have little collaboration with one another. Neither side cites much research by the other. Does this de facto academic separation impede fruitful possibilities for mutual inspiration and joint development? This paper addresses this question by considering (1) the different origins and research orientations of the two genres, (2) to what extent evolutionary economists could make use of evolutionary game theory, and (3) what evolutionary game theorists might learn from other, less formal, modes of theorising. The paper concludes that while significant possibilities for collaboration exist, the foremost test is whether they can help enhance our understanding of structures and causal processes in the real world.     

Inflation-targeting rules: History-dependent or forward-looking?

This note discusses the inflation-targeting strategy if price setting gives rise to a hybrid Phillips curve. The strategy is inverted relative to private sector pricing behavior: if private sector price setting is backward-looking, policy should be forward-looking, and vice versa.     

To obey or not to obey? Can game theory explain human behavior in the context of coronavirus disease?

The objective of the current study is to explain noncompliance to social distancing rules in Western societies in the absence of a stringent law enforcement mechanism and vaccines. In the first part of the analysis, an evolutionary game theory mechanism of two players is developed. The theoretical model assumes the existence of the prisoner's dilemma due to personal inconveniences associated with mask wearing, hand washing, and lockdowns. The model demonstrates that in the absence of sufficient law enforcement mechanism, and regardless of the initial strategy undertaken, one of the three potential equilibria solutions is the convergence of the system to defection of both players. In the second part of the analysis, based on the freedom-house measures, we provide empirical evidence supporting the notion that law enforcement efficiency is higher in autocratic countries. We show the perseverance of higher projected infection rates per 100,000 persons in democratic countries even 8 months after the outbreak of the COVID-19 pandemic. Given the well-known inclination to cooperate more often than expected by game theory, this real-life outcome of noncompliance is remarkable. Moreover, the recent protests against lockdowns in China might reflect a shift from one equilibrium point (cooperation) to another (noncompliance).     

Are the treasures of game theory ambiguous?

Goeree and Holt (Am Econ Rev 91:1402?C1422, 2001) experimentally study a number of games. In each case, they initially find strong support for Nash equilibrium; however, by changing an apparently irrelevant parameter, they find results which contradict Nash equilibrium. In this paper, we study the five normal form games from Goeree and Holt (Am Econ Rev 91:1402?C1422, 2001). We argue that their results may be explained by the hypothesis that subjects view their opponents?? behaviour as ambiguous. Ambiguity-aversion causes players to avoid strategies, which give low out of equilibrium payoffs. Similarly, ambiguity preference can make strategies with high payoffs more attractive.     

Self-serving altruism? The lure of unethical actions that benefit others

In three experiments, we propose and find that individuals cheat more when others can benefit from their cheating and when the number of beneficiaries of wrongdoing increases. Our results indicate that people use moral flexibility to justify their self-interested actions when such actions benefit others in addition to the self. Namely, our findings suggest that when people's dishonesty would benefit others, they are more likely to view dishonesty as morally acceptable and thus feel less guilty about benefiting from cheating. We discuss the implications of these results for collaborations in the social realm.     

Too much of a good thing? Why altruism can harm the environment?

Success of eco-labeling schemes, broadly defined, varies among products and across countries. Based on a simple theoretical framework, we show that the nature of environmental attributes among products (i.e., private versus public) and the consumer type (i.e., egoist versus altruist) shape the overall performance of such schemes. In addition, we demonstrate that altruistic consumers exhibiting a too high willingness to pay for the eco-labeled product can inadvertently prevent egoistic consumers from purchasing it, leading to a sub-optimal outcome in terms of environmental performance. Several policy and managerial implications are drawn.     

Bundled discounts: Strategic substitutes or complements?

Bundled discounts by pairs of otherwise independent firms play an increasingly important role as a strategic tool in several industries. Given that prices of firms competing for the same consumers are strategic complements, one would expect their discounts levels also to be strategic complements. However, in this paper we show that under some circumstances bundled discounts may be strategic substitutes. This occurs under vertically differentiated products where a low quality pair of producers may indeed prefer to lower its discount after an increase in the discount offered by a high quality pair of producers.     

Severance Payment: Incentive or Lethargy Effect?

The aim of the paper is to determine the impact of severance payment on the motivation of the worker to make an effort, when there is a risk for him to be dismissed once his effort was made. We highlight through a two‐stage model the various factors which influence the dismissal decision by the firm and the worker's effort, such as the initial wage, the litigation costs and the relative bargaining powers of the parties when the relationship ends or goes on. In this context, we show that the impact of the severance payment paid ex post in case of dismissal on the level of effort chosen by the worker ex ante may depend on such characteristics.     

Hysteresis in unemployment: Fact or fiction?

A stylized fact of European unemployment dynamics is one of extreme persistence and possible unit root behavior. This has led to a major reconsideration of the natural rate paradigm. We apply the Kalman filter to estimate the natural rate of unemployment for Germany and France. When the moving natural rate model is tested against the alternative of a unit root process, the unit root hypothesis is resoundingly rejected.