A dominance solvable global game with strategic substitutes

Global games emerged as an approach to equilibrium selection. For a general setting with supermodular payoffs, unique selection of equilibrium has been obtained through iterative elimination of strictly dominated strategies. For the case of global games with strategic substitutes, uniqueness of equilibrium has not been proved by iterative elimination of strictly dominated strategies, making the equilibrium less appealing. In this work we provide a condition for dominance solvability in a simple three-player binary-action global game with strategic substitutes. This opens an unexplored research agenda on the study of global games with strategic substitutes.     

Instagram and YouTube bloggers promote it,why should I buy? How credibility and parasocial interaction influence purchase intentions

Nowadays social network influencers play an important role in marketing by introducing products to their audience. In this article, we investigate the persuasion cues related to beauty and fashion influencers present on YouTube and Instagram. More precisely, we investigate how the para-social interaction (PSI) the audience creates with the online influencer, along with their perceived credibility, are related to the purchase intention and how they are, in turn, related to the social and physical attractiveness and attitude homophily. We base our research on four beauty influencers popular in France and control our results by the age of the participants and by the influencer. We find that attitude homophily is positively related to PSI but, surprisingly, the physical attractiveness shows negative relationship or no evidence of relationship. Both credibility of the influencers and PSI exhibit significant and positive relationships to purchase intention.     

Place attachment,host–tourist interactions,and residents’ attitudes towards tourism development: the case of Boa Vista Island in Cape Verde

A clear understanding of residents’ attitudes towards tourism development and its determinants is a crucial pillar for designing tourism development strategies to promote sustainable development. The literature on the influence of host–tourist interactions and place attachment on residents’ attitudes towards tourism development in developing countries is still scarce. To extend knowledge in this field, this study aims at developing and testing a structural model to examine direct and indirect causal effects of place attachment, host–tourist interaction, and perceived positive and negative tourism impacts on the residents’ attitudes towards tourism development in an island tourism destination – Boa Vista Island in Cape Verde. Results suggest that the residents’ attitudes are positively affected by place attachment, host–tourist interaction, and perceived positive impacts; and negatively affected by perceived negative impacts. Host–tourist interaction emerges as the strongest (direct and indirect) determinant of the residents’ attitudes towards tourism development. Moreover, although both positive and negative perceptions of tourism impacts have significant impacts on the residents’ attitudes, the influence of the former is stronger than that of the latter. The paper ends with relevant theoretical and practical implications to promote positive residents’ attitudes towards tourism development in Boa Vista.     

Stability of international environmental agreements under isoelastic utility

There is now a growing consensus that ratifying International Environmental Agreements (IEAs) is the most effective way to tackle transboundary pollution problems. While the social benefit function (SBF) critically affects emission choices as well as decisions to ratify IEAs, the related economic literature has mainly concentrated on scenarios where the marginal SBF is linear. Using climatic data, I find that the linear marginal SBF case does not match data and isoelastic SBFs fit data better. In the more realistic, but not yet explored, context of isoelastic SBFs, I reconsider incentives to ratify IEAs. My analysis gives rise to novel conclusions. For instance, changes in the scale of damages do not affect the level of cooperation. When the scale of damages is small, variations of the SBF parameter reveal that large coalitions including the coalition of all countries are stable, but only when the potential gain from cooperation is sufficiently high.     

Judgment aggregation in search for the truth

We analyze the problem of aggregating judgments over multiple issues from the perspective of whether aggregate judgments manage to efficiently use all voters' private information. While new in judgment aggregation theory, this perspective is familiar in a different body of literature about voting between two alternatives where voters' disagreements stem from conflicts of information rather than of interest. Combining the two bodies of literature, we consider a simple judgment aggregation problem and model the private information underlying voters' judgments. Assuming that voters share a preference for true collective judgments, we analyze the resulting strategic incentives and determine which voting rules efficiently use all private information. We find that in certain, but not all cases a quota rule should be used, which decides on each issue according to whether the proportion of ‘yes’ votes exceeds a particular quota.     

Decision-making in incomplete markets with ambiguity—a case study of a gas field acquisition

We apply utility indifference pricing to solve a contingent claim problem, valuing a connected pair of gas fields where the underlying process is not standard Geometric Brownian Motion and the assumption of complete markets is not fulfilled. First, empirical data are often characterized by time-varying volatility and fat tails; therefore, we use Gaussian generalized autoregressive score (GAS) and GARCH models, extending them to Student’s t-GARCH and t-GAS. Second, an important risk (reservoir size) is not hedgeable. As a result, markets are incomplete which makes preference free pricing impossible and thus standard option pricing methodology inapplicable. Therefore, we parametrize the investor’s risk preference and use utility indifference pricing techniques. We use Least Squares Monte Carlo simulations as a dimension reduction technique in solving the resulting stochastic dynamic programming problems. Moreover, an investor often only has an approximate idea of the true probabilistic model underlying variables, making model ambiguity a relevant problem. We show empirically how model ambiguity affects project values, and importantly, how option values change as model ambiguity gets resolved in later phases of the projects. We show that traditional valuation approaches will consistently underestimate the value of project flexibility and in general lead to overly conservative investment decisions in the presence of time-dependent stochastic structures.     

Kuhn’s Theorem for extensive form Ellsberg games

We propose the notions of mixed and behavioral Ellsberg strategies for extensive form games and prove that these strategies are outcome-equivalent if and only if mixed Ellsberg strategies satisfy a certain rectangularity condition. In addition, we show that not only the profile of Ellsberg strategies must be appropriately chosen but also the extensive form must satisfy further restrictions beyond those implied by perfect recall in order to ensure that each player will respect his ex ante strategy choice with the evolution of play.     

Interregional trade network analysis for road freight transport in Greece

This paper suggests a flexible decision support framework for the strategic planning of a freight transport hub network in Greece. The proposed methodology treats practical aspects related to the optimal number, location and geographical covering of hubs, through the network analysis of interregional trade, based on original survey data for road freight flows during 2004–2012. The results offer insights into the hierarchical structure of the network and related investment priorities, as the hub role of a prefecture is found to be strongly influenced by high population densities and manufacturing specialization, and its location along highway corridors.     

Delivery leadtime and channel structure decisions for make-to-order duopoly under different game scenarios

We develop game-theoretic models to explore the quoted delivery leadtime, price, and channel structure decisions for a make-to-order duopoly system under three game scenarios. Under the integrated-manufacturer first scenario, we find that (i) decentralization of the supply chain increases quoted leadtime; and (ii) both manufacturers may choose different channel structures under symmetric duopoly. By comparing with the symmetric scenario and the retailer first scenario, we find that a manufacturer facing a decentralized rival adopts decentralization when leadtime sensitivity, leadtime cost, and price elasticity are very small; the effect of decentralization on quoted leadtime largely depends on game scenario.     

Optimizing station location and fleet composition for a high-speed rail line

This paper proposes a new strategic planning model for high-speed rail ventures. It is a mixed-integer optimization model that applies to a given line and focuses on two key strategic decisions: station location and fleet composition. Our purpose is to improve on previous station location models by including fleet composition decisions. In the new model, we additionally take into account in an approximate fashion the interrelationships between strategic and subsequent tactical decisions, regarding line planning, train scheduling and fleet assignment issues. The usefulness of the model is demonstrated for a case study involving a planned Lisbon-Oporto high-speed rail line.