Life Expectancy and Claiming Behavior in a Flexible Pension System

We study the relationship between early claiming of pensions and incentives in the highly flexible Norwegian public pension system, measuring incentives to claim based on an estimated model for expected longevity. Despite a strong correlation between incentives and claiming decisions, the additional costs to public budgets arising from this selection turn out to be modest. Based on analyses exploiting only variation in expected pensions generated by variation in parental longevities and only claiming of pensions not in conjunction with retirement, we conclude that part of the selection is active: some individuals claim pensions early because they gain from doing so.     

JAMES WATT AS INTELLECTUAL MONOPOLIST: COMMENT ON BOLDRIN AND LEVINE*

In their 2003 Lawrence R. Klein Lecture, Michele Boldrin and David Levine argue that intellectual property rights may be damaging to social welfare. As empirical evidence for their theory they offer James Watt's steam engine patent, claiming that it delayed the Industrial Revolution by as much as two decades. We show that this claim, as well as the more general claim that Watt's story supports Boldrin and Levine's theory, rests upon a distorted summary of the historical record.     

On the interpretation of bribery in a laboratory corruption game: moral frames and social norms

Past studies on laboratory corruption games have not been able to find consistent evidence that subjects make “immoral” decisions. A possible reason, and also a critique of laboratory corruption games, is that the experiment may fail to trigger the intended immorality frame in the minds of the participants, leading many to question the very raison d’être of laboratory corruption games. To test this idea, we compare behavior in a harassment bribery game with a strategically identical but neutrally framed ultimatum game. The results show that fewer people, both as briber and bribee, engage in corruption in the bribery frame than in the alternative and the average bribe amount is lesser in the former than in the latter. These suggest that moral costs are indeed at work. A third treatment, which relabels the bribery game in neutral language, indicates that the observed treatment effect arises not from the neutral language of the ultimatum game but from a change in the sense of entitlement between the bribery and ultimatum game frames. To provide further support that the bribery game does measure moral costs, we elicit the shared perceptions of appropriateness of the actions or social norm, under the two frames. We show that the social norm governing the bribery game frame and ultimatum game frame are indeed different and that the perceived sense of social appropriateness plays a crucial role in determining the actual behavior in the two frames. Furthermore, merely relabelling the bribery game in neutral language makes no difference to the social appropriateness norm governing it. This indicates that, just as in the case of actual behavior, the observed difference in social appropriateness norm between bribery game and ultimatum game comes from the difference in entitlement too. Finally, we comment on the external validity of behavior in lab corruption games.     

Individual autonomy in evolutionary game theory: defending Sugden against Ross’s accusation of eliminativism

In this paper, I provide a defence of Robert Sugden’s contribution to evolutionary game theory against Donald Ross’s accusation of eliminating the individual’s autonomy by denying the explanatory role of rationality, utility maximization and rational beliefs. In this regard, I claim that Sugden’s methodological remarks on evolutionary game theory do not imply a characterization of real agents as automata. On the methodological level, Sugden claims that it is not correct to conceive the empirical phenomenon of social evolution in terms of normative concepts, whose empirical status is not obvious. However, Sugden proposes a theory that explains the agent’s behaviour in terms of inductive reasoning, adaptive beliefs, salience and pattern recognition. The latter are psychological features that describe the way agents manage to self-determine their own actions. From these clarifications, I draw the conclusion that Ross’s critique misunderstands Sugden’s contribution both on the methodological and empirical level.     

Vertical product differentiation under demand uncertainty

In this paper, I examine a quality-then-price game in a fully covered market where firms are uncertain about consumer tastes regarding quality. The equilibrium is characterized under the fixed costs and variable costs of quality improvement, respectively. It is shown that the uncertainty is a differentiation force, and the quality differentiation increases more under variable costs than under fixed costs. In addition, an increase in uncertainty leads to higher profits and higher social welfare regardless of whether under fixed or variable costs. This result contrasts with the lower welfare in the Hotelling model with uncertainty. Finally, an analysis of the case of partial market coverage with uncertainty completes this paper.     

CORPORATE BANKRUPTCY REORGANIZATIONS: ESTIMATES FROM A BARGAINING MODEL*

This article uses a novel approach to measure the unobserved liquidation value of a firm that relies on the information contained in the allocations that are agreed upon in Chapter 11 negotiations. I estimate a game theoretic model that captures the influence of liquidation value on the equilibrium allocations using a newly collected data set. I find that the liquidation values are higher when the industry conditions are more favorable, and the real interest rates are higher. I use the estimated model to conduct a counterfactual experiment to quantitatively assess the impact of a mandatory liquidation on the equilibrium allocations.     

On Sraffa's Standard commodity

The necessity of expressing the relative price of a commodityin terms of another commodity makes it impossible to distinguishthat part of any change that can be ascribed to the characteristicsof the commodity itself from the part of that change that isto be ascribed to the characteristics of the commodity of reference,i.e., the numéraire. Ricardo (1817) was the first topoint out this problem and the need to find an ‘invariablemeasure of value’, but he was not able to solve the problem.In 1960, Sraffa suggested using a bundle of commodities, thathe called ‘Standard commodity’, to accomplish thisfunction, claiming that it was a standard of value invariantwith respect to changes in the distribution of income. But inSraffa's book there is no explicit proof of this claim. Thisgave rise to many misunderstandings about the Standard commodityand its role as invariable measure of value. This paper proposesa proper definition of an ‘invariable measure of value’,and then proves that the Sraffa ‘Standard commodity’does fulfil the requirements of this definition.     

Stackelberg equilibrium with many leaders and followers. The case of zero fixed costs

I study a version of the Stackelberg game with many identical firms in which leaders and followers use a continuous cost function with no fixed cost. Using lattice theoretical methods I provide a set of conditions that guarantee that the game has an equilibrium in pure strategies. With convex costs the model shows the same properties as a quasi-competitive Cournot model. The same happens with concave costs, but only when the number of followers is small. When this number is large the leaders preempt entry. I study the comparative statics and the limit behavior of the equilibrium and I show how the main determinants of market structure interact. More competition between the leaders always displaces the followers. Instead, how a stronger threat of entry affects the equilibrium depends on the technology. With strictly convex costs it is the followers that eventually displace the leaders.     

Political Denials: The Policy Effect of Intercameral Partisan Differences in Bicameral Parliamentary Systems

Bicameralism in legislatures affects both the legislative processand partisan competition. In the United States, divided partisancontrol of Congress has been found to lead to interparty logrollsand increased budget deficits. In parliamentary systems, itis generally assumed that similarly divided legislatures havelittle effect on policy. I argue, by contrast, that party disciplinemeans that divided control of the legislature has the oppositeeffect: because cooperation dilutes party labels, parties havean interest in passing and claiming credit for policy, but alsoin preventing their counterparts from doing the same. The resultis a game in which chamber majorities balance the desire tomake policy with the need to differentiate themselves from eachother (to the extent that they are different). I test the hypothesisof an inverse relationship between divergence and policy makingin a nine-country, TSCS regression of deficits on an index ofchamber divergence.     

Non-cooperative solutions for estate division problems

In an estate division problem an estate has to be divided among several players whose total entitlement to the estate exceeds its size. This paper extends the non-cooperative approach through a claim game, as initiated by O?Neill (1982), by allowing players to put multiple claims on the same part of the estate, and by considering the case where individual entitlements may exceed the estate. A full characterization of the set of Nash equilibria of the claim game is obtained both for restricted estate division problems, where individual entitlements do not exceed the estate, and for the general case. Variations on the claim game are considered, which result in proportional division in equilibrium.     

Measurement error in models of welfare participation

We consider the problem of modeling welfare participation when measurement error may affect simulated welfare entitlement. We identify a flaw in past implementations of the ML approach and develop a more appropriate ML approach. A model of welfare participation is estimated for British pensioners, linking the probability of participation to the value of benefit entitlement, incorporating the nonlinear rule relating entitlement to the household's income and financial assets. The model is used to evaluate the claim costs incurred by participants. When we allow for measurement errors in income and assets, estimated claim costs are substantially reduced.     

Conventions: An evolutionary approach

Conventions are social institutions that solve recurrent coordination problems. In normative game theory, coordination games are considered problematic because of the multiplicity of equilibria. From a neoinstitutionalist perspective, however, this multiplicity should be an important part of the explanation of real-world institutions. The paper discusses the evolutionary (or “positive”) game-theoretical approach to the emergence of conventions. I note a precise sense in which conventions may be said to minimize transaction costs, but that they need not be efficient. Example applications to language, money, and the theory of the firm are discussed.     

The Minimum Wage and the Cause of Democracy

Too often the minimum wage is conceived of as a small policy measure that will be of benefit to only a small segment of the labor market while imposing costs on another segment of the labor market. Unexplored, however, are the larger philosophic questions that such a small measure may actually raise. One such issue is the relationship between the minimum wage and democratic principles. In this paper I argue that the minimum wage furthers the ends of democratic society in that low-wage workers may achieve greater equality of standing with their piers to the extent that income inequality is at all lessened; their autonomy as individuals is enhanced through higher wages, which in turn enables them to claim the benefits of citizenship and participate more effectively in the democratic process; and it fosters greater economic development in that it raises the overall structure of a region and perhaps the productivity of that region.     

Early claiming of social security benefits and labour supply behaviour of older Americans

The labour supply incentives provided by the early retirement rules of the United States Social Security Old Age benefits program are of growing importance as the Normal Retirement Age (NRA) increases to 67 and the labour force participation of older Americans starts to increase. These incentives allow individuals who claim benefits before the NRA but continue to work, or return to the labour force, to increase their future rate of benefit pay by having benefits withheld. Since the adjustment of the benefit rate takes place only after the NRA is reached, benefits received before the NRA can become actuarially unfair for those who continue to work after claiming. Consistent with these incentives, estimates from bivariate models of the monthly labour force exit and claiming hazards using data from the Health and Retirement Study indicate that early claimers who do not withdraw from the labour force around the time they claim are increasingly likely to stay in the labour force.     

The circular road revisited: Uniqueness and supermodularity

The model of the circular road has proved to be a popular model of oligopolistic interaction, yet its theoretical properties are not fully explored. In this paper I extend the uniqueness result of price equilibrium in the circular road with equidistant locations from quadratic transportation costs, to a class of convex power transportation costs, i.e. I show uniqueness in oligopoly for a class of utility functions of the consumers. I show that the associated game is supermodular and dominance solvable. The paper also discusses possible extensions and limitations of the model.     

社会创业组织双重价值实现的博弈分析

作为一种创新的组织形式,社会创业组织在助人自助、解决社会问题等方面起到了积极的作用,但是社会创业组织的＂经济性＂和＂社会性＂引起了社会和学术界的普遍关注,并成为争论的焦点。本文通过对＂社会创业＂定义的概述以及对社会创业组织的双重价值的内涵进行分析研究,就社会创业组织如何实现双重价值,维持组织的可持续发展这个焦点问题,运用了博弈论的分析方法以社会创业组织与政府为参与者,以＂经济性＂和＂社会性＂为策略选择建立一个博弈模型,证明社会创业组织与政府二者可以形成合作博弈均衡。     

Auctions as coordination devices

This paper develops an economic argument relating auctions to high market prices. At the core of the argument is the claim that market competition and bidding in an auction should be analyzed as part of one game, where the pricing strategies in the market subgame depend on the bidding strategies during the auction. I show that when there are two licenses for sale the only equilibrium in the overall game that is consistent with the logic of forward induction is the one where firms bid an amount (almost) equal to the profits of the cooperative market outcome and follow a cooperative pricing strategy in the market game resulting in high prices. With three or more licenses the auction format co-determines whether or not the forward induction argument works.     

Credible Collusion in Spatially Separated Markets*

In an infinitely repeated game, sellers employ a trigger strategy of mutual forbearance from invasion of each other's markets, stabilized against invasion by the threat of Bertrand pricing. Contrary to conventional static models, this article shows stability for a wide range of transportation costs and present value parameters, and that increases in transportation costs tend to destabilize the collusive agreement.     

The Limitations of Buyer-Option Contracts in Solving the Holdup Problem

In a recent article, Lyon and Rasmusen (2004) argue that buyer-optioncontracts are more effective at solving the holdup problem thanhas been previously recognized. This article examines the robustnessof that claim to changes in the bargaining game they analyzeand to changes in the nature of the trade between the buyerand seller. I find that the possibility of renegotiation ina model of cooperative investment (Che and Hausch 1999) doesgenerate a holdup problem if the players discount the futureand the bargaining game is sufficiently long. This change inthe bargaining game does not resurrect the holdup problem inthe basic product complexity model (of Hart and Moore 1999).However, if the good to be traded must be supplied continuallyrather than only one time, then the holdup problem reemerges(even with buyer-option contracts) for some parameter values.