Inefficient entry order in preemption games

In a preemption game, players decide when to take an irreversible action. Delaying the action exogenously increases payoffs, but there is an early mover advantage. Riordan (1992) shows that in a preemption game with two asymmetric players, players act in decreasing order of efficiency. This provides a microfoundation to the assumption that entry in a market occurs in the order of profitability, commonly used in the empirical analysis of market entry. We provide a counterexample showing that with more than two players this intuitive result can be reversed. We present a preemption game of entry into a new market. The potential entrants are three asymmetric firms: one “efficient” firm with high post-entry profits, and two “inefficient firms”. We show that the set of parameters such that the equilibrium entry order does not reflect the efficiency ranking is nonempty, and analyse which changes in post-entry profits preserve this entry order.     

Good signals gone bad: Dynamic signalling with switched effort levels

This paper examines signalling when the sender exerts effort and receives benefits over time. Receivers only observe a noisy public signal about the effort, which has no intrinsic value.The modelling of signalling in a dynamic context gives rise to novel equilibrium outcomes. In some equilibria, a sender with a higher cost of effort exerts strictly more effort than his low-cost counterpart. The low-cost type can compensate later for initial low effort, but this is not worthwhile for a high-cost type. The interpretation of a given signal switches endogenously over time, depending on which type the receivers expect to send it.     

Symmetric equilibrium strategies in game theoretic real option models

This paper considers the problem of investment timing under uncertainty in a duopoly framework. When both firms want to be the first investor a coordination problem arises. Here, a method is proposed to deal with this coordination problem, involving the use of symmetric mixed strategies.     

Learning a population distribution

This paper introduces a dynamic Bayesian game with an unknown population distribution. Players do not know the true population distribution and assess it based on their private observations using Bayes׳ rule. First, we show the existence and characterization of an equilibrium in which each player׳s strategy is a function not only of the player׳s type but also of experience. Second, we show that each player׳s initial belief about the population distribution converges almost surely to a “correct” belief.     

国际金融市场波动溢出效应与动态相关性

在DCC GARCH、DCC EGARCH、DCC TGARCH方法下,采用中、美、日、德、英等国家1993年1月至2013年12月的金融数据,实证得出如下结论：样本国市场利率和股指波动率呈现尖峰、肥尾、有偏的特征,更为符合t分布。样本国市场利率波动表现出显著的溢出效应、杠杆效应和联动效应。样本国股指波动率对中国股指波动率的溢出效应趋于增强,特别在美国金融危机后。样本国利率波动对中国股指波动率具有一定的溢出效应和杠杆效应,但影响程度非常低。治理世界性金融风险,各国当局应加强政策协调性,合理进行风险分担。     

Subgame-perfect equilibria in stochastic timing games

We develop a notion of subgames and the related notion of subgame-perfect equilibrium – possibly in mixed strategies – for stochastic timing games. To capture all situations that can arise in continuous-time models, it is necessary to consider stopping times as the starting dates of subgames. We generalize Fudenberg and Tirole’s (Rev. Econom. Stud. 52, 383–401, 1985) mixed-strategy extensions to make them applicable to stochastic timing games and thereby provide a sound basis for subgame-perfect equilibria of preemption games. Sufficient conditions for equilibrium existence are presented, and examples illustrate their application as well as the fact that intuitive arguments can break down in the presence of stochastic processes with jumps.     

Experimental evidence of bank runs as pure coordination failures

We investigate how coordination requirement, measured by the coordination parameter, affects the occurrence of miscoordination-based bank runs in controlled laboratory environments. We identify an indeterminacy region of the coordination parameter such that games with the parameter within the region have varying coordination outcomes and exhibit persistent path dependence. Experimental economies with the parameter above (below) the region stay close or converge to the run (non-run) equilibrium. Switches between the two equilibria occur even with fixed economic fundamentals. The experimental results are well accounted for by a version of the evolutionary algorithm that uses experimentation rates estimated from the experimental data.     

Preemptive behavior in sequential-move tournaments with heterogeneous agents

Rank-order tournaments are usually modeled simultaneously. However, real tournaments are often sequential. We show that agents' strategic behavior in sequential-move tournaments significantly differ from the one in simultaneous-move tournaments: In a sequential-move tournament with heterogeneous agents, the first acting agent may choose a preemptively high effort so that the following agent gives up. The principal is able to prevent preemptive behavior in equilibrium by choosing a sufficiently small spread between winner and loser prize. Received: January 2003, Accepted: November 2004 JEL Classification: J3, M12, M5 We would like to thank two anonymous referees and the editor Kai Konrad for helpful comments. Financial support by the Deutsche Forschungsgemeinschaft (DFG), projects no. KR 2077/2-1 and SFB/TR 15 ("Governance and the Efficiency of Economic Systems"), is gratefully acknowledged.     

Multiproduct price competition with heterogeneous consumers and nonconvex costs

This paper extends the oligopolistic model of price competition to environments with multiple goods, heterogeneous consumers, and arbitrary continuous cost functions. A Nash equilibrium in mixed strategies with an endogenous sharing rule is proven to exist. It is also shown that, in environments with fixed costs and constant marginal costs, all (symmetric and asymmetric) equilibria exhibit price dispersion across stores. Furthermore, the paper identifies scenarios in which prices will necessarily be random. In these markets, stores keep each other guessing because, given the fixed costs, they would incur a loss if their price strategies were anticipated and beaten by competitors. This is interpreted as an important economic feature that is possibly behind random price promotions such as weekly specials.     

Solving dynamic public insurance games with endogenous agent distributions: Theory and computational approximation

We make two contributions in this paper. First, we extend the characterization of equilibrium payoff correspondences in history-dependent dynamic policy games to a class with endogenously heterogeneous private agents. In contrast to policy games involving representative agents, this extension has interesting consequences as it implies additional nonlinearity (i.e., bilinearity) between the game states (distributions) and continuation/promised values in the policymaker’s objective and incentive constraints. The second contribution of our paper is in addressing the computational challenges arising from this payoff-relevant nonlinearity. Exploiting the game’s structure, we propose implementable approximate bilinear programming formulations to construct estimates of the equilibrium value correspondence. Our approximation method respects the property of upper hemicontinuity in the target correspondence. We provide small-scale computational examples as proofs of concept.     

Supporting others and the evolution of influence

In this paper we study environments in which agents can transfer influence to others by supporting them. When planning whom to support, they should take into account the future effect of this, since the receiving agent might use this influence to support others in the future. We show that in the presence of a finite horizon there is an essentially unique optimal support behavior which can be characterized in terms of associated marginal value functions. The analysis of these marginal value functions allows us to derive qualitative properties of optimal support strategies under different specific environments and to explicitly compute the optimal support behavior in some numerical examples. We also investigate the case of an infinite horizon. Examples show that multiple equilibria may appear in this setting, some of which sustaining a degree of cooperation that would not be possible under a finite horizon.     

Dynamic R&D with spillovers: A comment

Cellini and Lambertini [2009. Dynamic R&D with spillovers: competition vs cooperation. J. Econ. Dyn. Control 33, 568–582] study a dynamic R&D game with spillovers. This comment demonstrates that, contrary to what is claimed in their paper, the game is not state redundant and the open-loop Nash equilibrium is not subgame perfect.     

Dynamic Lobbying Conflicts

This paper analyzes a dynamic lobbying model in which two antagonistic lobbies compete with each other for a prize over two time periods that are linked through status quo bias. The attacker has to decide whether to attempt an attack on the status quo already in the first period or whether to wait. We identify how the attacker’s behavior in the dynamic model differs from that in a comparable static model. Two antagonistic effects are the “option value effect” that is similar to the real option effect in the theory of investment decisions under uncertainty; and a “defender discouragement effect” that often makes change cheaper to achieve than in a comparable static model.      

Asymptotic theory for heterogeneous dynamic pseudo-panels

Dynamic pseudo-panel models with inter-cohort parameter heterogeneity are studied. The population is divided into cohorts and the cohort sample means are used as a heterogeneous panel. Least squares and instrumental variables estimators are considered. Multidimensional limits are analyzed as the cross-sectional and temporal dimensions of the data pass to infinity, allowing for both stationary and nonstationary cases. Monte-Carlo simulations on the finite-sample performance of the estimators in these two dimensions are conducted and these, in conjunction with the asymptotic results, are used to make recommendations for practical implementation of the techniques. An empirical illustration finds heterogeneity in consumption growth rates among Taiwanese birth cohorts.     

Sequential coordination,higher-order belief dynamics and the E-stability principle

This paper explores convergence in higher-order beliefs – otherwise called eductive stability – when coordination is sequential, that is, when each agent of a given type fixes his own actions after observing the ones of earlier types in a given order. The presence of sequential types enhances expectational coordination in the case of strategic substitutability, but not in the case of strategic complementarity. In particular, eductive stability can be obtained for any degree of substitutability, provided the number of sequential types is large enough. Therefore, sequential coordination opens up to the possibility that eductive convergence occurs at the same conditions of adaptive convergence, in accordance to the E-stability principle.     

Endogenous specialization of heterogeneous innovative activities of firms under the technological spillovers

This paper proposes a reduced form model of dynamic duopoly in the context of heterogeneous innovations framework. Two agents invest into expansion of variety of available products and into the improvement of quality of existing products simultaneously. Every newly introduced product has its own dimension of quality-improving innovations and there is a continuum of possible new products. In the area of quality innovations the costless imitation effect is modelled while in the area of variety expanding innovations agents are cooperating with each other. As a result the specialization of innovative activity is observed. This specialization arises from strategic interactions of agents in both fields of innovative activity and is endogenously defined from the dynamics of the model.     

Career coordination strategies among dual career expatriate couples

The combination of two trends common in working life – international work and a dual career situation – is challenging for both genders. In order to cope with the situation, international dual career couples have to be able to coordinate their careers. The purpose of this article is to identify how dual career expatriates view their career coordination strategies with their partners, and how these views differ between the genders. Semi-structured interviews were carried out among 39 expatriates on assignment who had a partner working, at least before the assignment. Our findings identify three career coordination strategies applied by dual career couples, and confirm gender plays an essential role in the formation of those strategies. Male expatriates predominated among the group adopting a hierarchical strategy and female expatriates predominated among the group adopting an egalitarian and a loose coordination strategy. Strategies also seemed prone to change over time. Companies should pay attention to both the career development of the partner and the relationship coping skills of the couple to maximize the chances of dual career expatriate assignments being successful.     

Optimal money growth in a limited participation model with heterogeneous agents

This paper studies optimal money growth in a cash-in-advance production economy with heterogeneity in patience levels and know-how. We show that the rate of deflation suggested by the Friedman rule is limited by the subjective discount rate of the most patient agent in the economy. The output distortion due to cash-in-advance constraints on firms can completely be eliminated by means of the Friedman rule if and only if firms are run by the most patient agents.Received: 16 August 2003, Accepted: 22 March 2005, JEL Classification: D52, D90, E21, E41, E52Parts of this paper were completed while the first and second authors were visiting the University of York and Princeton University respectively. We are thankful for the hospitality of these institutions. The second author also acknowledges the hospitality and support of Bilkent University that he is currently visiting, the support from the Turkish Academy of Sciences in the framework of the ‘Distinguished Young Scientist Award Program’ (TUBA-GEBIP/2004), the grant awarded by the Scientific and Technical Research Council of Turkey (TUBITAK) under the NATO Science Fellowship Program as well as the support from the Center for Economic Design of Bogaziçi University. This paper was presented in the ERC/METU Second International Conference on Economics, Ankara, September 1998, and at seminars in Bilkent, Bogaziçi and Ohio State Universities. We thank, in particular, Emre Alper, Sumru Altug, Huw Dixon, Tatsuro Ichiishi, Ivan Pastine, Murat Sertel and Alan Sutherland for useful comments. We also thank two anonymous referees for comments and suggestions. The views expressed in this paper are those of the authors and do not necessarily reflect that of the Central Bank of Republic of Turkey.     

Dynamic incentive effects of assignment mechanisms: Experimental evidence

Optimal assignment and matching mechanisms have been the focus of exhaustive analysis. We focus on their dynamic effects, which have received less attention, especially in the empirical literature: Anticipating that assignment is based on prior performance may affect prior performance. We test this hypothesis in a lab experiment. Participants first perform a task individually without monetary incentives; in a second stage, they are paired with another participant according to a pre‐announced assignment policy. The assignment is based on the first‐stage performance, and compensation is determined by average performance. Our results are largely consistent with a theory: Pairing the worst‐performing individuals with the best yields 20% lower first‐stage effort than random matching (RAM) and does not induce truthful revelation of types, which undoes any policy that aims to reallocate types based on performance. Perhaps surprisingly, however, pairing the best with the best yields only 5% higher first‐stage effort than RAM and the difference is not statistically significant.