Alternative approaches for the reformulation of economics

Journal of Economic Interaction and Coordination -     

How limiting deceptive practices harms consumers

There are two competing sellers of an experience good, one offers high quality, one low. The low‐quality seller can engage in deceptive advertising, potentially fooling a buyer into thinking the product is better than it is. Although deceptive advertising might seem to harm the buyer, we show that he could be better off when the low‐quality seller can engage in deceptive advertising than not. We characterize the optimal deterrence rule that a regulatory agency seeking to punish deceptive practices should adopt. We show that greater protection against deceptive practices does not necessarily improve the buyer welfare.     

The dynamic of innovation networks: a switching model on technological change

In this paper, we introduce an agent-based model where heterogeneous firms compare and modify their innovation strategies, so generating an evolving network structure. By implementing dynamic behavioral switching via a fitness mechanism based on agents’ performance, companies can endogenously modify their tactics for technological change and switch among three groups: stand-alone innovators, collaborative innovators and imitators. On the one hand, we study the properties of the emerging networks and we show that they reproduce the stylized facts of innovation networks. Moreover, we focus the analysis on the impact of these three innovation categories on the macro economic aggregate, finding that collaborative companies are those having the highest positive impact on the economic system. On the other hand, we use the model to study the effect of different economic innovation policies in increasing macroeconomic performance.     

The dark side of competition: Modeling status games

Though “teams” are supposed to work together for the benefit of the firm, suboptimal outcomes may emerge when individuals within a team are more concerned with their own status and outcomes relative to their “teammates,” behaving as if they are competitors. Using a version of the stag hunt coordination game, we develop hypotheses regarding the role of status and competitiveness on coordination on Pareto optimal solutions. We test these hypotheses using three studies, with manipulations for both role and status. Status is found to play a significant role, resulting in suboptimal outcomes for competitors but not teammates.     

Termination clauses in partnerships

We show that when designing a partnership agreement partner firms may prefer not to specify how to allocate the commonly owned assets should there be an early termination of the contract. By not including such a clause, firms induce litigation before a Court with positive probability. Firms create this ex-post inefficiency in order to increase the levels of non-contractible investments, i.e. increase the ex-ante efficiency. The absence of an asset allocation clause works as a “discipline device” that mitigates the hold-up problem within the partnership. In our set-up, no other contract but that without an asset allocation clause can credibly create an ex-post inefficiency.     

A systems approach to forecast agricultural land transformation and soil environmental risk from economic,policy, and cultural scenarios in the north central United States (2012–2062)

Grassland conversion to row-crop production in the north central United States has been a growing threat to socio-economic and environmental sustainability for producers, conservationists, and policy-makers alike. We used a system dynamics model of the region to forecast agriculturally driven land transformation through mid-twenty-first century. The base-case scenario projection showed that farmland area continued to increase, from under 200,000?km² to over 230,000?km². Unmitigated, the soil environmental risk (SER) of such changes reached conservative estimates of Dust Bowl-era externalities. Systems analyses show that reducing livestock production costs, doubling conservation compliance requirements, and livestock–cropping integration had the largest impact on grassland conservation and mitigating SER. The largest SER effects came from eliminating conservation incentives or raising cultivation incentives, despite improvements in reduced tillage and enhanced agronomy. Several system archetypes were identified within the policy scenarios: ‘fixes that backfire’ and ‘success-to-the-successful’. For scenarios creating favourable impacts, time delays caused some behaviours to worsen before positive gains were realized. If implemented, patience and persistence to ensure that these scenarios reach their full potential will be necessary. Our scenarios provide quantitative forecasts around measures for sustainable intensification. These projections can aid regional stakeholders in enhancing discussions currently taking place about sustainable agriculture in the region.     

通用电气有一个不错的主意

通用电气公司使用因特网后，在其保底线外又增加了１６亿美元的收入。这是一种意外收获，还是一种开始？     

Taming financial systemic risk: models,instruments and early warning indicators

Journal of Economic Interaction and Coordination -     

Heterogeneity in risk aversion and risk sharing regressions

Heterogeneity in risk attitudes, if not properly accounted for, may induce a bias on the income coefficient of standard consumption insurance regressions. We show that, extending the theoretical analysis and empirical findings in Schulhofer‐Wohl (Journal of Political Economy, 2011, 119, 925–958), the sign of the bias is ambiguous, and depends on cycle‐related variables and on the covariances of both aggregate and idiosyncratic risk with individual risk aversion.     

Here today,gone tomorrow: Can dynamic incentives make microfinance more flexible?

This paper presents a model of microfinance lending to individuals that uses dynamic incentives, in the form of access to additional loans, to discourage borrowers from strategic default, or the unwillingness to repay a loan once a positive outcome is realized. We propose an improvement on contracts currently used by microfinance institutions (MFIs) by endogenizing the default penalty, while constraining the MFI to maintain sustainable lending operations. Furthermore, accounting for the risks that the poor face by including a negative economic shock, we show that under certain circumstances, the punishment for default need not be a lifetime without loans.