Rationality, Ethnicity And Institutions: A Survey Of Issues And Results

Abstract.  This paper focuses on the relationship between institutions and ethnocentrism as discussed in the rational choice literature. The institutional environment can influence both the formation and the expression of ethnic tastes by rational individuals. Ethnocentrism is likely to be mitigated by, on the one hand, a private sector characterized by a wide and competitive market with effective property right and antitrust law enforcement provided by non-ethnic institutions and, on the other hand, a public sector which is characterized by institutional restrictions on the differential fiscal or regulatory treatment on the basis of ethnicity, a redistributive system based on non-ethnic criteria and finally, the possibility for decentralized collective decision making. These insights may be of particular utility when designing the institutions of potentially divided multi-ethnic states.     

THE ECONOMICS OF COUNTERTERRORISM: A SURVEY

We provide a review of theoretical and empirical contributions on the economic analysis of terrorism and counterterrorism. We argue that simple rational‐choice models of terrorist behavior – in the form of cost‐benefit models – already provide a well‐founded theoretical framework for the study of terrorism and counterterrorism. We also hint at their limitations which relate to the failure of accounting for the dynamics between terrorism and counterterrorism that may produce unintended second‐order effects as well as for the costs associated with counterterrorism and its international dimension. We reevaluate previously proposed counterterrorism strategies accordingly. Finally, in the light of our findings, we discuss interesting areas of future research.     

Learning in linear models with expectational leads

Models with expectational leads typically admit multiple rational expectations solutions. Based on the ordinary least-squares algorithm, this paper provides an adaptive learning scheme which allows a forecasting agent to select a particular solution on economic grounds. Conditions are given under which this scheme converges to rational expectations solutions globally for all initial conditions. We strengthen convergence results in relaxing standard assumptions and in providing conditions ensuring algorithm convergence which are easier to verify and to interpret than those previously known.     

Game Theoretic Models of Wage Bargaining

This paper aims at being a tool to help apply game theoretic bargaining models to wage negotiations. In this perspective, we review a number of articles which explicitly deal with wage determination as well as purely game theoretical models which we believe can be fruitfully extended to account for specific features of labour markets. We discuss some common shortcomings in the wage negotiation literature, and suggest possible lines of research worth pursuing to deal with such weaknesses.     

The commuting time paradox

We examine the conditions for the ‘commuting time paradox’ which states that the average commuting time does not vary between different periods. We develop therefore an equilibrium job search model with endogenously chosen commuting costs. Presuming wage bargaining between workers and firms, the optimally chosen maximum commuting costs jointly maximise the worker's and firm's payoffs. We demonstrate that when productivity levels increase over time, average commuting costs and average wages both increase, which affects the optimally chosen commuting time. We establish the conditions under which the paradox holds.     

Arbitration systems and negotiations

We consider a model of bargaining by concessions where agents can terminate negotiations by accepting the settlement of an arbitrator. The impact of pragmatic arbitrators—that enforce concessions that precede their appointment—is compared with that of arbitrators that act on principle—ignoring prior concessions. We show that while the impact of arbitration always depends on how costly that intervention is relative to direct negotiation, the range of scenarios for which it has an impact, and the precise effect of such impact, does change depending on the behavior—pragmatic or on principle—of the arbitrator. Moreover the requirement of mutual consent to appoint the arbitrator matters only when he is pragmatic. Efficiency and equilibrium are not aligned since agents sometimes reach negotiated agreements when an arbitrated settlement is more efficient and vice versa. What system of arbitration has the best performance depends on the arbitration and negotiation costs, and each can be optimal for plausible environments.      

How to select a Supply Chain Finance solution?

In the complex picture of Supply Chain Finance (SCF), there is still a need for a model supporting managerial decisions in selecting the most suitable financing solution. The objective of the presented exploratory work is to bring together the relational aspects between buyers and suppliers, and the characteristics of SCF solutions. Based on expert interviews and a focus group, the main result consists of a classification model of buyer-led SCF solutions, according to the characteristics of the relationship between a buyer and its suppliers, in terms of bargaining power and cumulative transaction value. The model thus describes the logics behind the adoption by a buyer firm of one or more SCF solutions to be implemented with different suppliers.     

The Impact of Compulsory Arbitration on Bargaining Behavior: An Experimental Study

A series of experiments compares bargaining behavior under three different settings: no arbitration, conventional and final-offer arbitration. Under no arbitration, disputes with zero payoffs were around 10%, while the pie was equally split in less than half of the cases. Under conventional arbitration – where the arbitrator is free to choose his award – every third negotiation ended in dispute, evidencing a modified chilling effect. Under final-offer arbitration – where the arbitrator must award the bargainers either one of their final offers – there was only a small increase in disputes, while equal splits doubled to 80%. The experiment shows that final-offer arbitration, despite having lower dispute rates, interferes more with bargaining behavior than conventional arbitration, where bargaining behavior is similar to that seen in the no-arbitration treatment. Under final-offer arbitration, negotiators adjust their bargaining strategy on the arbitrator’s expected award.     

Bargaining: separately or together?

This paper explores conditions under which economic agents will want to bargain collectively instead of individually with a common third party—when, for example, two firms (or unions), who are bargaining with the same, indispensable, outside party, will want to merge and bargain as one. I use a non-cooperative sequential bargaining model to analyze this question. Previous work has shown that agents prefer to bargain collectively if they are substitutes for each other in production. This result, however, depends on an exogenously fixed sequence of bargaining. I allow the bargaining sequence to be determined endogenously and investigate how incentives for collective bargaining vary with heterogeneity when delay is costly. The previous results are not robust when the agents are substitutes. In particular, substitute agents prefer individual to collective bargaining if they are heterogeneous and sufficiently patient. In the presence of transaction costs, substitutability of agents is no longer the sole determinant of collectivization. Rather, the degree of heterogeneity in production, in conjunction with the degree of substitutability between agents determine the incentives for collective action.     

ARE ECONOMISTS ‘MARKET FUNDAMENTALISTS’?

We summarise Bryan Caplan's defence of economists from The Myth of the Rational Voter, in which he argues that economists undersell the benefits of markets. We also elaborate on his conclusions and discuss applications to specific topics, such as the minimum wage, as well as how Caplan's results might affect the way economics courses are taught.     

社会地位对宏观经济变量的动态影响——基于两部门搜索均衡模型的研究

本文将失业理论的搜索模型与社会地位结合起来考察社会地位的动态影响。研究发现社会地位引入效用函数等价于代表性家庭时间偏好率的降低,利用对数效用函数,得到经济系统均衡状态存在的唯一性。在均衡状态下,更强的社会地位意识意味着更高的储蓄率和资本积累,以及提供更多的社会空闲职位、更高的工资、更高的就业率、更为宽松的劳动力市场和更低的利率。     

Negotiation games with unobservable mixed disagreement actions

A negotiation model combines an alternating offers bargaining game with a normal form stage game that determines players’ (interim) disagreement payoffs. Busch and Wen [Econometrica 63 (1995) 545] investigated this negotiation model under the assumption that players’ past mixed disagreement actions are observable. The question arises if this assumption is a substantial restriction. In this paper, we adopt the more plausible assumption that only the realizations of past mixed actions are observable, and find that the set of equilibrium payoffs shrinks, compared to that when mixed disagreement actions are observable. We precisely identify the effects of the unobservability and characterize the limiting set of equilibrium payoffs as the two players become sufficiently patient.     

Reject and renegotiate: The Shapley value in multilateral bargaining

This paper investigates three distinctive and intuitive renegotiation bargaining protocols that all yield the Shapley value as the unique subgame perfect equilibrium outcome. These protocols, built on the multi-bidding procedure of Pérez-Castrillo and Wettstein (2001), allow more freedom in multilateral bargaining where rejected players can further negotiate and form coalitions. The self-duality of the Shapley value plays a key role in the second and third results. Moreover, these renegotiation protocols allow an actual play along the equilibrium path to restore the Shapley value in case of a ‘mistake’ made before.     

Distressed exchange,bargaining power,and prior capital structure

Financially troubled companies often make Distressed Exchange (DE) offers to its creditors, to postpone costly bankruptcy reorganization. We derive the optimal terms and timing of a DE offer consisting of debt reduction and an equity stake in the restructured firm. The DE terms and timing are affected by shareholder bargaining power, with greater shareholder bargaining power resulting in earlier DE offer, smaller debt reduction and smaller equity stake. The impact of shareholder bargaining power is greater when bankruptcy cost is larger and tax rate is higher. We also show that renegotiability of debt increases ex-ante firm value and results in a higher optimal leverage ratio. Both firm value and optimal leverage ratio are decreasing functions of shareholder bargaining power.     

企业剩余分配:一种以经济权力为状态依存特征的动态均衡--兼论控制权控制和完善上市公司治理结构

本文基于Nash讨价还价模型，引入经济权力概念，扩展了双人讨价还价模型和利益保护机制设计。指出在个体经济权力禀赋差异下，经济权力特性和自我强化功能决定了以经济权力状态依存特征的企业剩余分配过程，即经济权力大，个体获取的企业剩余分配比例就大，并随经济权力作用而得到强化。因此，要实现对弱势群体的利益保护，应赋予其足以制衡强权主体的经济权力。若经济权力用于代理人激励约束，委托主体的奖惩和承诺对代理人而言是可信的，就可实现企业效率和利益保护的双重功能。