Reflecting inequality of claims in gains and losses

We consider the problem of dividing a resource among a group of agents who have conflicting claims on it. We follow the axiomatic approach and investigate the class of rules satisfying claims-inequality and claims-order preservation in gains and losses. We show that these axioms single out the proportional rule when there are more than three agents. This result confirms the central role of this rule and furthers our understanding of it in claims problems.     

On myopia as rationale for social security

It has been argued that “paternalistically motivated forced savings constitutes an important, and to some the most important, rationale for social security retirement systems.” This paper revisits the role played by myopia in generating a theoretical rationale for pay-as-you-go (PAYG) social security in dynamically efficient economies. If the competing asset is linear storage and myopic agents are allowed to borrow against future pension benefits, there is no welfare-rationale for PAYG pensions. Sufficiently strong myopia may justify such pensions only if agents cannot borrow against their future pension, but then they are at a zero-saving corner. With enough myopia, co-existence of positive optimal pensions and positive private saving is possible if the return to saving declines with saving, as in a model with a neoclassical technology.     

Liberal constitutionalism,constitutional liberalism and democracy

The tension that is often seen to exist between the ideals of liberalism and of democracy is examined in this paper in light of the distinction between two liberal outlooks at constitutional regimes, namely, on the one side, a liberal constitutionalism that focuses on the need to provide institutional safeguards of individual liberty as private autonomy and, on the other hand, a constitutional liberalism that focuses on the need to respect the freedom of individuals to choose the constitutional environment in which they wish to live. It is argued that a liberalism that consistently extends its fundamental ideal of individual sovereignty to the level of constitutional choice can be reconciled with the basic democratic ideal of citizen sovereignty.     

Flows of people,flows of ideas,and the inequality of nations

The present paper examines a neglected determinant of aggregate productivity: temporary cross-border flows of people. We hypothesize that interaction between people from different nations facilitates the international diffusion of ideas, thus stimulating aggregate productivity. In order to assess the causal impact of people flows on productivity, we construct an instrument for people flows. By analogy to the trade/growth literature, this instrument is derived from a fitted gravity equation involving geographic determinants of bilateral travel flows. Our cross-section analysis reveal that greater international interaction leads to higher productivity; a very similar result, qualitatively as well as quantitatively, is obtained when we employ dynamic panel data methods for the purpose of identification.     

Sustaining cooperation in laboratory public goods experiments: a selective survey of the literature

I survey the literature post Ledyard (Handbook of Experimental Economics, ed. by J. Kagel, A. Roth, Chap. 2, Princeton, Princeton University Press, 1995) on three related issues in linear public goods experiments: (1) conditional cooperation; (2) the role of costly monetary punishments in sustaining cooperation and (3) the sustenance of cooperation via means other than such punishments. Many participants in laboratory public goods experiments are “conditional cooperators” whose contributions to the public good are positively correlated with their beliefs about the average group contribution. Conditional cooperators are often able to sustain high contributions to the public good through costly monetary punishment of free-riders but also by other mechanisms such as expressions of disapproval, advice giving and assortative matching.     

Good standing and cooperation

Indirect reciprocity is generally considered one of the leading mechanisms to explain how cooperation may emerge by natural selection. The basic intuition is that establishing a reputation of being a helpful individual increases the probability of being in turn helped. Two models have been proposed to describe how indirect reciprocity may work: the standing model (Sugden 1986/2004 in The economics of rights, cooperation and welfare. Blackwell, Oxford.) and the image-scoring model (Nowak and Sigmund 1998a in Nature 393:573–577, b in J Theoretical Biol 194:561–574). Although there is evidence that the former model would perform better under a wide set of circumstances, it is often maintained that it requires individuals with an implausibly large capacity of processing recursive information. In this paper, I argue that this is not actually the case. I further emphasize that even if the hypothesis of indirect reciprocity is unable to give a fair account of the ecological bases of cooperation, it has inspired a deal of research precious to social sciences.     

Prune or cut down: salience and Sugden’s <Emphasis Type="Italic">The Economics of Rights</Emphasis>, <Emphasis Type="Italic">Co</Emphasis>-<Emphasis Type="Italic">operation and Welfare</Emphasis>

In The Economics of Rights, Co-operation and Welfare (1986), Robert Sugden follows the tradition from Thomas Schelling and David Lewis in ascribing a central role to the notion of salience within his theory of convention. However, against this, Bruno Verbeek (Instrumental rationality and moral philosophy, Kluwer, Dordrecht, 2002) has argued that an empirically adequate notion of salience may not be incorporated into a generic account of convention without circularity obtains. This paper examines Verbeek’s argument against a background of experimental as well as theoretical work on coordination problems. It finds that the argument fails to consider at least two candidate theories of salience that may be incorporated into the theory of convention without circularity: cognitive hierarchy theory that iterates Sugden’s notion of psychological salience and Schelling salience. Thus, in the end Verbeek’s criticism of the role ascribed to salience in theories of convention may be dismissed, though its discussion draws a fruitful perspective.     

Second chance offers versus sequential auctions: theory and behavior

Second chance offers in online marketplaces involve a seller conducting an auction for a single object and then using information from the auction to offer a losing bidder a take-it-or-leave-it price for another unit. We theoretically and experimentally investigate this practice and compare it to two sequential auctions. We show that the equilibrium bidding strategy in the second chance offer mechanism only exists in mixed strategies, and we observe that this mechanism generates more profit for the auctioneer than two sequential auctions. We also observe virtually no rejections of profitable offers in the ultimatum bargaining stage.