The Formateurs’ Role in Government Formation

Following an election, Heads of State typically choose a formateur to report back a prospective government by some deadline. If this formateur fails then another party leader is chosen on the same terms. We model this mechanism as a bargaining game, in which a single party leader has exclusive access to the Head of State, but does not have a monopoly on making proposals. We characterize the unique equilibrium of the game in which all parties are symmetric and parties split a fixed-size pie. We also show that supra-minimal governments may form when parties are asymmetrically sized: a result consistent with the evidence on government formation in countries which use a formateur mechanism. We are grateful to Maria Montero, Rick Thomas and Paul Warwick for valuable conversations, and to seminar participants in UBC and Warwick.     

Scoring rules: an alternative parameterization

This note presents an alternative parameterization of any scoring rule that satisfies the score-expansion property. This parameterization is based on the vector that specifies, for every number of alternatives k, k ≥ 3, the minimal size of a coalition that can veto an alternative which is preferred by everybody outside the coalition. Our result sheds new light on the commonly used plurality and Borda rules, as well as the inverse plurality rule and any “vote for t alternatives rule”.     

The asymptotic strategyproofness of scoring and Condorcet consistent rules

We calculate the proportion of preference profiles where “small” coalitions of agents may successfully manipulate any given scoring rule and show that it decreases to zero at a rate proportional to with the number of agents. If agents have to incur a small cost in order to decide how to manipulate the voting rule, our results imply that scoring rules are robust to such manipulation in large groups of agents. We present examples of asymptotically strategyproof and non strategyproof Condorcet consistent rules. We thank Eric Maskin and Shmuel Nitzan for useful discussions. We also thank seminar participants at Harvard, Haifa, and Technion universities for their comments. Neeman is grateful for the generous financial support of the NSF under grant SBR-9806832.     

Similarities and differences when building trust: the role of cultures

We run an experiment in which students of different European nationalities are matched in groups of five and repeatedly choose with whom within their group they want to play a trust game. Participants observe of each other age, gender, nationality and number of siblings. The region of origin, “North” or “South” is a major determinant of success in the experiment. Participants tend to trust those they trusted before and who trusted them. We do not find evidence of regional discrimination per se. It is only the underlying and significant differences in behavior that translate through repeated interactions into differences in payoffs between the two regions.     

An Evaluation of the Determinants and Implications of Panel Attrition in the National Income Dynamics Survey (2008‐2010)

Panel surveys offer a valuable tool for researchers to explore the dynamics underlying individual and household behaviours. The Achilles heel of panel data is attrition. This paper examines the determinants and implications of attrition in the first two waves of South Africa's National Income Dynamics Survey. Multivariate tests in labour market and health specifications show that there is some moderate evidence of attrition bias in estimated coefficients based on the non‐attriting sample. This bias can be seen in labour market specifications, in particular for men, and for Africans, and to a much lesser degree in health specifications, in particular for small samples of Whites. Researchers should take care when using the panel data set to generalise to the overall population.     

Religious institutions and entrepreneurship

This article focuses on the impact of religious institutions on entrepreneurship. We find clear evidence that different religious institutions have a significantly different impact on the tendency to become an entrepreneur. Our article makes important contributions to the research of both religion and entrepreneurship. First, it proposes empirical evidence in which the country’s main religion significantly affects its level of entrepreneurship at the macro level. Second, it adds to our theoretical understanding of the mechanisms that characterize the effects of religion on entrepreneurship. We suggest that macro effects of religion as part of the country’s culture and institutions affect the country’s level of entrepreneurship beyond the direct effects of religion on the behavior of the religion’s members in the society.     

Don’t fear risk,learn about it: how familiarity reduces perceived risk

This article suggests that learning about basic concepts concerning the risk and return of assets will reduce perceived risk. We show experimentally that people who learn about these basic concepts are willing to allocate more money to risky assets and consider the asset’s return relative to its risk.     

Optimal portfolio liquidation in target zone models and catalytic superprocesses

We study optimal buying and selling strategies in target zone models. In these models, the price is modelled by a diffusion process which is reflected at one or more barriers. Such models arise, for example, when a currency exchange rate is kept above a certain threshold due to central bank interventions. We consider the optimal portfolio liquidation problem for an investor for whom prices are optimal at the barrier and who creates temporary price impact. This problem is formulated as the minimization of a cost–risk functional over strategies that only trade when the price process is located at the barrier. We solve the corresponding singular stochastic control problem by means of a scaling limit of critical branching particle systems, which is known as a catalytic superprocess. In this setting, the catalyst is given by the barriers of the price process. For the cases in which the unaffected price process is a reflected arithmetic or geometric Brownian motion with drift, we moreover give a detailed financial justification of our cost functional by means of an approximation with discrete-time models.     

The value of information: The case of signal-dependent opportunity sets

We generalize the economic decision problem considered by Blackwell (1953) in which a decision-maker chooses an action after observing a signal correlated to the state of nature. Unlike Blackwell's case where the feasible set is fixed, in our framework the feasible set of actions depends on the signal and the information system. We argue that such a framework has more significance to economic models. As was demonstrated by Hirshleifer (1971) in such cases, contrary to Blackwell's well-known result, more information may be disadvantageous. We derive conditions for this general model which guarantee that more information is beneficial.