When Does One Bad Apple Spoil the Barrel? An Evolutionary Analysis of Collective Action

This paper studies collective-action games in which the production of a public good requires teamwork. A leading example is a threshold game in which provision requires the voluntary participation of m out of n players. Quantal-response strategy revisions allow play to move between equilibria in which a team successfully provides, and an equilibrium in which the collective action fails. A full characterization of long-run play reveals the determinants of success; these include the correlation between players' costs of provision and their valuations for the good. The addition of an extra "bad apple" player can "spoil the barrel" by destabilizing successful teams and so offers a rationale for limiting the pool of possible contributors.     

Spending,saving, or investing? Risk management in sixteenth‐century Dutch households1

In the past one of the main challenges to households was that of coping with adversity. War, plague, famine, and flood were a constant threat, and could reduce what little improvements families had made in productivity. Economic growth therefore required a means of absorbing external adversities. To see how well late medieval households coped with adversity, this investigation focuses on the households of a small town and its surroundings in early modern Holland. Our findings reveal that several severe external shocks around 1500 had little effect on the general level or distribution of wealth, which suggests that certain forms of insurance may have protected the population. The results show that households increasingly invested in capital markets rather than employing such techniques as scattered holdings and hoarding. This fact indicates that such investment played a vital role in a household's risk aversion strategy. The change from unproductive to more productive risk‐aversion strategies also provides some clues about progress with respect to insurance during Holland's financial revolution.     

Private,Social, and Self‐Insurance for Long‐Term Care in the Presence of Family Help

We study the political determination of the level of social long‐term care insurance when voters can top up with private insurance, saving and family help. Agents differ in income, probability of becoming dependent and of receiving family help, and amount of family help received. Social insurance redistributes across income and risk levels, while private insurance is actuarially fair. The income‐to‐dependency probability ratio of agents determines whether they prefer social or private insurance. Family support crowds out the demand for both social and, especially, private insurance, as strong prospects of family help drive the demand for private insurance to zero. The availability of private insurance decreases the demand for social insurance but need not decrease its majority‐chosen level. A majority of voters would oppose banning private insurance.     

Efficient Allocation of Radio Spectrum

Legislative reforms in Anglo‐American countries require governments to account for efficient spectrum usage subject to interference control. New spectrum governance regimes promote flexible and competitive usage but the broadcasting industry remains exempt from reforms, at a significant cost to society. The need to liberalize broadcast spectrum cannot be overstated, but how should we select among alternative deregulatory regimes? In a simple stylized model we formalize the welfare effects of allocating licenses for using bandwidth on broadcast spectrum. We provide optimality conditions for entry, spectrum usage, and congestion levels under different market conditions, which allows us to justify the selection of specific governance arrangements.     

Cognitive Ability and the Stock Reallocations of Retirees during the Great Recession

Retirees are increasingly responsible for managing their retirement savings. The ability to manage these assets efficiently can have an important impact on retirement well‐being. Lower levels of cognitive ability in old age can reduce an investor's ability to control emotional responses to a loss. Greater sensitivity to loss may increase preferences for safety following a market decline, resulting in allocations away from stocks that are associated with long‐term underperformance. We investigate whether cognitive ability is related to stock reallocations among retirees during the Great Recession. Using the Health and Retirement Study, we find that cognitive ability is negatively related to allocations away from stock. Compared to those with the lowest levels of cognitive ability, respondents with higher cognitive ability are 40% less likely to reduce their stock allocation by 50% or more. These results suggest that the quality of investment decisions in old age may be compromised by cognitive decline.