The recursive approach to time inconsistency

We introduce a new class of finite horizon stochastic decision problems in which preferences change over time, and provide a proof of the existence of a recursively optimal strategy. Recursive optimization techniques dominate many areas of economic dynamics. However, in decision problems in which tastes change over time, the solution technique most commonly applied is not recursive, but rather strategic (subgame perfection). In this paper we argue in favor of the recursive approach, and we take the necessary theoretical steps to make the recursive methodology applicable.     

Effective strategic management the prospective approach

La prospective recognizes that the future is the raison d'être of the present, that it is multiple and uncertain, and that it is a way for everyone to take control of their own future. This article looks at the role of such qualitative prospective analysis in the business planning and forecasting context, and, from the experience of application of this analysis over a decade or more, draws ten golden rules for effective strategic management.     

On the inconsistency of a weak version of the libertarian principle

It is shown that even granting weak group rights will sometimes result in a conflict with such a widely acceptable efficiency criterion as the Pareto principle. On the other hand, if we strengthen the decesive power of groups, this may lead to a conflict even with the weak non-imposition condition, provided that a social choice function satisfies a rather mild choice-consistency property.     

Peacekeeping: A strategic approach

This paper presents a theoretical model of conflict between two players, with intervention by a peacekeeping force. Peacekeepers are treated as a military contingent, capable of taking sides, acting as a third (independent) side in the war or remaining inactive, depending on circumstances. This departs from previous models, in which peacekeeping was no more than a parameter affecting players' fighting costs. The main result is an optimal deployment strategy by peacekeepers, detailing the nature and level of intervention required under different circumstances; this strategy results in the lowest possible level of warfare between the two antagonists. The credible threat of force (rather than mere intervention) is the strategy's key component.     

On the inconsistency of certain axioms on solution concepts for non-cooperative games

The mutual compatibility of four recently discussed axioms on solution concepts for extensive form games is explored. Two subsets of the axioms are shown to be inconsistent. Our results underline the importance of the information lost in moving from the extensive form to the normal (or agent-normal) form of a game.     

On the effects of group identity in strategic environments

We examine differences in behavior between subjects interacting with a member of either the same or different identity group in both a centipede game and a series of stag hunt games. We find evidence that subjects interacting with outgroup members are more likely to behave as though best-responding to uniform randomization of the partner. We conclude that group identity not only affects player׳s social preferences, as identified in earlier research, but also affects the decision making process, independent of changes in the utility function.     

On eliciting beliefs in strategic games

Several recent studies in experimental economics have tried to measure beliefs of subjects engaged in strategic games with other subjects. Using data from one such study we conduct an experiment where our experienced subjects observe early rounds of strategy choices from that study and are given monetary incentives to report forecasts of choices in later rounds. We elicit beliefs using three different scoring rules: linear, logarithmic, and quadratic. We compare forecasts across the scoring rules and compare the forecasts of our trained observers to forecasts of the actual players in the original experiment. We find significant differences across scoring rules. The improper linear scoring rule produces forecasts closer to 0 and 1 than the proper rules, and these forecasts are poorly calibrated. The two proper scoring rules induce significantly different distributions of forecasts. We find that forecasts by observers under both proper scoring rules are significantly different from the forecasts of the actual players, in terms of accuracy, calibration, and the distribution of forecasts. We also find evidence for belief convergence among the observers.     

On strategic stability in discontinuous games

We identify a class of discontinuous normal-form games whose members possess strategically stable sets, defined according to an infinite-game extension of Kohlberg and Mertens’s (1986) equilibrium concept, and show that, generically, a set is stable if and only if it contains a single Nash equilibrium.     

On the strategic impact of an event under non-common priors

This paper studies the impact of a small probability event on strategic behavior in incomplete information games with non-common priors. It is shown that the global impact of a small probability event (i.e., its propensity to affect strategic behavior at all states in the state space) has an upper bound that is an increasing function of a measure of discrepancy from the common prior assumption. In particular, its global impact can be arbitrarily large under non-common priors, but is bounded from above under common priors. These results quantify the different implications common prior and non-common prior models have on the (infinite) hierarchies of beliefs.     

Samaritan agents? On the strategic delegation of aid policy

Should a donor delegate the responsibility for allocating its aid budget to a less inequality-averse agent to alleviate the consequences of the Samaritan's Dilemma it is facing? I show that when aid impact differs across recipients the optimal type of agent depends on whether or not committing to a greater share for countries where the productivity of aid is low raises the combined domestic incomes of recipients. This is the case for donors too concerned with efficiency ex post. They therefore delegate the decision on the discretionary aid allocation rule to agents more sensitive to distributional issues than themselves.     

On Stackelberg competition in strategic multilateral exchange

In this paper, we consider a strategic equilibrium concept which extends Stackelberg competition to cover a general equilibrium framework. From the benchmark of strategic market games proposed by Sahi and Yao (1989), we define the notion of Stackelberg equilibrium. This concept captures strategic interactions in interrelated markets on which a finite number of leaders and followers compete on quantities. Within the framework of an example, convergence and welfare are studied. More specifically, we analyze convergence toward the competitive equilibrium and make welfare comparisons with other strategic equilibria.     

On strategic complementarity conditions in Bertrand oligopoly

Summary. For Bertrand duopoly with linear costs, we establish via a single (counter-)example that: (i) A new monotone transformation of the firms' profit functions may lead to the supermodularity of transformed profits when the standard log and identity transformations both fail to do so, and (ii) Topkis's notion of critical sufficient condition for monotonicity of a Bertrand firm's best-reply correspondence cannot be extended to rely only on positive unit costs. Received: January 16, 2001; revised version: March 20, 2002 RID="*" ID="*" This work was completed while the first author was visiting the Institute for Industrial Economics at the University of Copenhagen during Spring 2000. Their financial support and stimulating research environment are gratefully acknowledged. The views expressed here are those of the authors and should not be attributed to the European Commission. Correspondence to: R. Amir     

Biased managers as strategic commitment: The relative profit approach

This paper analyzes a duopolistic model wherein each firm׳s owner can hire a biased manager for strategic reasons. We focus on the situation wherein each firm׳s owner evaluates the performance of her/his manager on the basis of her/his relative profit, which is equal to the weighted sum of her/his absolute profit and the absolute profit of her/his opponent firm. We show that in both price-setting and quantity-setting competitions, the owners of the two private firms employ aggressive managers rather than absolute profit maximizing managers regardless of the degree of importance of each firm׳s relative performance. Furthermore, in both the price competition and the quantity competition, as the degree of importance of each firm׳s relative performance increases, we show that the firms׳ owners tend to hire more aggressive managers when the degree of importance of each firm׳s relative performance is sufficiently low, whereas in both the price competition and the quantity competition, the firms׳ owners tend to hire less aggressive managers otherwise. Thus, in both the price competition and the quantity competition, the type of each firm׳s manager is not monotone with respect to the degree of each firm׳s relative performance. Thus, in both the price competition and the quantity competition, we find that the change in the optimal type of manager hired by each firm is non-monotone against the change of competitiveness in the market with the increase in the degree of importance of each firm׳s relative performance.     

On the strategic potential of technological aid in international environmental relations

Prior to noncooperative choices of abatement of a transboundary pollutant, a technologically advanced country considers making an unconditional transfer of abatement technology to its less-advanced rival. Even though technological aid is given unconditionally and abatement strategies are chosen noncooperatively, in a number of plausible circumstances, a transfer of a superior control technology will induce Pareto-superior pollution abatement.     

Time inconsistency of benevolent government economies

A dynamic Walrasian economy is said to exhibit inconsistency if the competitive equilibrium path resulting from government reoptimization at some time τ>0 is not a continuation of the competitive equilibrium path resulting from the initial government optimization at time 0. The present paper establishes necessary and sufficient conditions for consistency for a general class of dynamic Walrasian economies. It is seen, for example, that reliance on nondistortionary policy instruments is neither necessary nor sufficient for consistency. It is also shown that Pareto optimal paths can be supported as optimal competitive equilibrium paths only if consistency prevails. However, consistent optimal competitive equilibrium paths need not be Pareto optimal.     

浅谈高职院校发展战略下的财务战略规划

时代的飞速变化,促进了高职院校发展;随着其办学规模的扩大,高职院校财务管理成为人们所关注的焦点内容。做好财务战略规划不仅可以提高经营利润,还可以提高市场竞争力,得以在变化莫测的市场体系中占据一席之地。本文就高职院校发展战略下的财务战略规划展开分析,主要对财务战略的特点作出研究,也给出了几点有效对策,希望以此来促进高职院校财务战略规划的有效落实,并且提高整体教学质量和效率。     

On the generic strategic stability of Nash equilibria if voting is costly

Summary. We prove that for generic plurality games with positive cost of voting, the number of Nash equilibria is finite. Furthermore all the equilibria are regular, hence stable sets as singletons.JEL Classification Numbers: C72, D72.We would like to thank Luisa Bassotto, Marco Celentani, Mamoru Kaneko, and participants at the 6 International Conference on Current Trends in Economics for helpful comments. We also thank an anonymous referee of this journal for precious advices that have substantially improved this paper. This paper was partially written while Francesco was visiting Tor Vergata University, which he thanks for hospitality and financial support. The usual disclaimer applies.     

Time inconsistency and alcohol sales restrictions

Restrictions on alcohol sales hours or days are commonly used tools in order to reduce alcohol consumption. However, a forward-looking consumer can buy in advance, and thereby mostly undo the impact of the restriction. I study whether time inconsistent consumer preferences can provide a justification for restrictions on alcohol sales time. I estimate a demand model, which allows a fraction of consumers to be time inconsistent, using scanner data of beer purchases and other shopping behavior. According to the estimation results, 16% of regular beer buyers, or only 3% of all consumers, behave as if they are time inconsistent. I find that in terms of consumer welfare, the sales restriction may be welfare improving, but is worse than increasing taxes.     

A multi-stage race model with strategic interaction: An agent-based simulation approach

We consider a multi-stage race characterized by technological uncertainty and winner-take-all stakes. A number of studies have found that players in such a race tend to behave strategically by adjusting their effort levels according to their relative ranks. The aim of the present study was to examine the dynamics and the results of such interaction. For this purpose, we employed an agent-based computational approach that enabled us to better understand the dynamics of a race, particularly those in which players exhibit heterogeneous behaviors. The results found that strategic interaction decreases the total cost but also results in delaying the completion of a race. Also, it was discovered, larger budgets rather than strategy differences have more significant effects on the probability of players winning a race. Finally, our study suggested that early preemption is an effective strategy that can improve the probability of winning races substantially.