Inferring repeated-game strategies from actions: evidence from trust game experiments

Summary. Combining a strategy model, an inference procedure and a new experimental design, we map sequences of observed actions in repeated games to unobserved strategies that reflect decision-makers’ plans. We demonstrate the method by studying two institutional settings with distinct theoretical predictions. We find that almost all strategies inferred are best responses to one of the inferred strategies of other players, and in one of the settings almost all of the inferred strategies, which include triggers to punish non-cooperators, are consistent with equilibrium strategies. By developing a method to infer unobserved repeated-game strategies from actions, we take a step toward making game theory a more applied tool, bridging a gap between theory and observed behavior.Received: 23 December 2002, Revised: 19 April 2005, JEL Classification Numbers: C72, C80, C90.The authors are indebted for discussions with Ray Battalio, David Cooper, Robin Dubin, John Duffy, Ellen Garbarino, Susan Helper, Margaret Meyer, John Miller, Jim Rebitzer, Mari Rege, Al Roth, and John Van Huyck. The authors also benefited from discussants at economic department seminars at Case Western Reserve, McMaster and McGill University, University of Pittsburgh, SUNY-Stony Brook, and Texas A&M, and participants at the 2002 European Winter Meeting of the Econometric Society. We are grateful for the financial support provided by the Department of Economics at the University of Pittsburgh and Case Western Reserve University.     

Australian Audit Committees — Do They Meet Best Practice Guidelines?

The paper reports the results of a study of Australia's largest 250 companies' audit committees in two years (1998 and 2001). The audit committees were scrutinised on the bases of audit committee independence and the frequency of meetings. Australia's audit committees did not score highly on either criterion and most companies fell short of best practice guidelines. Further, it was puzzling and of concern that Australian audit committees appear to have deteriorated in terms of independence and frequency of meetings between 1998 and 2001.     

Economic Comparison of Alternative Tillage Systems under Risk.

Stochastic dominance efficiency criteria are used to rank the net farm return distributions for four different tillage systems under six different farm scenarios. Pairwise comparisons of tillage systems are carried over incremental upper and lower risk-aversion coefficient (RAC) bounds identified for each farm scenario, based on the size and spread of the outcome distributions to identify regions where dominance may switch between tillage systems. Ridge-till systems are generally the dominant tillage system for all farm scenarios considered. No-till systems on clay loam soils are more dominant in the risk-preferring range and less dominant in the risk-averse range, which relates to the relatively larger range of net return values and smaller mean net return values generated by this tillage system. Conversely, the moldboard plow and chisel plow systems are more dominant in risk-aversion intervals and less dominant in the risk-preferring intervals for clay loam soils. In sandy soil scenarios, the ridge-till and no-till systems are dominant over the two fall tillage systems for all farm sizes, indicating that these tillage systems are more competitive with conventional tillage systems in lighter soil type situations. A sensitivity analysis between moldboard plow and no-till systems indicates that no-till would dominate in risk-preferring intervals, and an increase in no-till net farm returns of 16 per acre would change dominance in favor of no-till in risk-averse interval space. On a utilisé les critères d'efficacitéà dominance stochastique pour classer les divers niveaux de recettes agricoles nettes dans quatre systèmes différents de travail du sol, selon six scénarios d'exploitation. Des comparaisons en paires des systèmes de travail ont été faites en regard de tranches croissantes des limites supérieures et inférieures du coefficient d'aversion du risque (CER), établies pour chaque scénario d'après l'importance et l'étendue des distributions du rendement, dans le but d'identifier les régions où la dominance serait susceptible de passer d'un système de travail à l'autre. Le système de travail sur billons était en général le système dominant dans tous les scénarios d'exploitation examinés. La culture sans travail du sol sur loam argileux était plus dominante dans les intervalles d'acceptation du resque et moins dominante dans les intervalles d'aversion du resque, cequi s'explique au fait que ce système de travail donne lieu à une fourchette relativement plus large, mais aussi à une moyenne plus faible du revenu net. À l'inverse, le labour à la charrue classique et au chisel dominait davantage dans les intervalles d'aversion du risque. Dans les sols sableux, le travail sur billons et la culture sans labour l'emportaient sur les deux autres régimes dans toutes les tailles d'exploitation, ce qui porte à croire que, dans les sols plus légers, ces régimes sont plus concurrentiels avec les systèmes classiques. L'analyse de sensibilité entre le labour à la charrue et les systèmes sans travail du sol montre que ces derniers dominent dans les intervalles d'acceptation du risque et qu'un accroissement du revenu agricole net de 16 /acre ferait glisser la dominance vers les intervalles d'aversion du risque.     

How Does a Development Moratorium Affect Development Timing Choices and Land Values?

This paper investigates how a development moratorium affects choices of development timing and land values in a framework where both the value of developed property evolves stochastically and the development costs are fully irreversible. We assume that a regulator initially announces that land is not allowed to be developed during a finite period of time in the future. A developer, thus, must decide whether to develop land before the timing ordinance is imposed, or after it expires. The development moratorium reduces the developer’s option value from waiting and, thus, accelerates development. We also use simulation analysis to demonstrate how the other factors that relate to the demand and supply conditions of the real estate market affect this accelerating effect.     

Managers’ Corporate Entrepreneurial Actions and Job Satisfaction

Through the development and extension of theories and scholars’ subsequent empirical analyses of significant, theoretically grounded research questions, the knowledge about corporate entrepreneurship (CE) and its successful use continues to advance. Moreover, the literature suggests important relationships between the corporate environment, managers’ entrepreneurial behavior and successful implementation of corporate entrepreneurship actions. In an attempt to test some of those relationships, we describe an empirical study of 523 managers that examines the relationships among the antecedents to managers’ entrepreneurial behavior, a decision to implement entrepreneurial actions, and resulting job satisfaction and reinforcement practices.     

Probability theory in fuzzy sample spaces

This paper tries to develop a neat and comprehensive probability theory for sample spaces where the events are fuzzy subsets of The investigations are focussed on the discussion how to equip those sample spaces with suitable -algebras and metrics. In the end we can point out a unified concept of random elements in the sample spaces under consideration which is linked with compatible metrics to express random errors. The result is supported by presenting a strong law of large numbers, a central limit theorem and a Glivenko-Cantelli theorem for these kinds of random elements, formulated simultaneously w.r.t. the selected metrics. As a by-product the line of reasoning, which is followed within the paper, enables us to generalize as well as to bring together already known results and concepts from literature.Acknowledgement. The author would like to thank the participants of the 23rd Linz Seminar on Fuzzy Set Theory for the intensive discussion of the paper. Especially he is indebted to Professors Diamond and Höhle whose remarks have helped to get deeper insights into the subject. Additionally, the author is grateful to one anonymous referee for careful reading and valuable proposals which have led to an improvement of the first draft.This paper was presented at the 23rd Linz Seminar on Fuzzy Set Theory, Linz, Austria, February 5–9, 2002.     

On estimating the mean of the selected normal population under the LINEX loss function

Following Parsian and Farsipour (1999), we consider the problem of estimating the mean of the selected normal population, from two normal populations with unknown means and common known variance, under the LINEX loss function. Some admissibility results for a subclass of equivariant estimators are derived and a sufficient condition for the inadmissibility of an arbitrary equivariant estimator is provided. As a consequence, several of the estimators proposed by Parsian and Farsipour (1999) are shown to be inadmissible and better estimators are obtained. Received January 2001/Revised May 2002