Evolutionary Stability in the Investment-Opportunism-Retaliation Game

Can economically efficient outcomes be obtained and sustained in the absence of externally enforced property rights? We study the evolutionary properties of a game that exhibits two well-defined Nash equilibria: one generates an inefficient outcome while the other set generates an efficient outcome supported by the potential for retaliation. Although standard forward-looking refinements eliminate the efficient equilibrium, neither equilibrium type satisfies strict evolutionary stability criteria. However, both types of equilibrium define strategies that are neutrally stable, which makes them vulnerable to drift in dynamic environments. We conduct computer simulation experiments in which players learn adaptively via a tournament selection mechanism called sophisticated experimentation. Our simulations demonstrate that while the system spends a disproportionately high proportion of time in the inefficient equilibrium set, the efficient equilibrium is pervasive as the system drifts back and forth between the equilibrium sets, never settling on one or the other.     

Dissertation abstract: Reputational benefits of altruism and altruistic punishment

Recent studies in experimental economics have shown that many people have other-regarding preferences, potentially including preferences for altruism, reciprocity, and fairness. It is useful to investigate why people possess such preferences and what functional purpose they might serve outside the laboratory, because evolutionary and social learning perspectives both predict that cooperative sentiments should only exist if they bring benefits that outweigh the costs of other-regarding behavior. Theories of costly signaling suggest that altruistic acts may function (with or without intention) as signals of unobservable qualities such as resources or cooperative intent, and altruists may benefit (possibly unintentionally) from the advertisement of such qualities. After reviewing the theories that could potentially account for the evolution of altruism (Chapter 1), I test some predictions about cooperation derived from costly signaling theory. In Chapter 2, I show that participants in experimental public goods games were more cooperative when they had cues that they could benefit from having a good reputation, and that there was apparently some competition to be the most generous group member. Furthermore, in subsequent trust games, people tended to trust high public goods contributors more than low contributors. Chapter 3 failed to find evidence that granting high status to people makes them more likely to contribute to public goods or punish free-riders, but there was suggestive evidence that physical proximity to the experimenter affected contributions and punishment. In Chapter 4, I found that people tended to trust others who were willing to incur costs to punish those who free-ride on group cooperation provided that such punishment was justified, and men were more punitive than women. In Chapter 5, I show that women find altruistic men more desirable than neutral men for long-term relationships. Together, these results suggest that humans do treat altruism as a signal of willingness to be cooperative. These findings are discussed with respect to the adaptive design of cooperative sentiments as well as the current debate over group selection. Dissertation: Department of Psychology, Neuroscience & Behaviour, McMaster University, Hamilton, Ontarion Currently: Post-Doc, Department of Neurobiology & Behavior, Cornell University     

Bogotá's Left Turn: Counter-Neoliberalization in Colombia

For the political left, decentralization has increased both the appeal and the importance of governing the city, and yet sharp constraints limit the left's transformative potential when it controls that level of government alone. Bogotá is an important case in point under the recent mayoral administration of Gustavo Petro (2012–15), a demobilized guerrilla leader who sought to implement a series of urban policy reforms that together represent one of the most substantively radical and intellectually coherent attempts to challenge neoliberalism in all of Latin America. Focusing on the four policy arenas through which Petro hoped to transform the city (environment, housing, transport, and trash collection), the article documents the veto power of the firms whose privileges he threatened, as well as the tools through which they derailed reform. In contrast to the failure of his political economy agenda, Petro was indeed able to enact a number of progressive social policy reforms precisely because they did not threaten the profitability of the city's entrenched growth machine.     

Disclosure and the cost of equity in international cross-listing

In this paper, we examine the relationship between disclosure level and the cost of equity capital for a sample of international firms cross-listing on the New York Stock Exchange. Increased disclosure has the potential to reduce information asymmetry, reduce the cost of financing and increase analyst following. Using an international asset pricing model, we find that listing firms experience a decrease in both disclosure risk and systematic risk while matching firms do not. Further, we find that the magnitude of the decrease is related to three types of disclosure: accounting standards; analyst following; and exchange/regulatory investor protection. Our results suggest that increased disclosure through accounting standards is beneficial to investors and that disclosure can be accomplished through information intermediaries, e.g., analyst following. For firms with the lowest levels of disclosure prior to cross-listing, all three types of disclosure appear to be valuable.

Bilateralism and Regionalism in Japanese and U.S. Trade and Direct Foreign Investment Patterns

We apply a modified "gravity model" incorporating measures of factor endowments to analyze Japanese and U.S. bilateral trade flows and direct foreign investment positions with a sample of around 100 countries for the period 1985–1990. Country features that our analysis takes into account are population, income, the land–labor ratio, the average level of education, and region. We find that features of a country associated with more trade with either Japan or the United States also tend to be associated with more direct foreign investment (DFI) from Japan or the United States. U.S. economic relations with Japan and Western Europe provide an important exception. Despite U.S. concern about its trade deficit with Japan, we find Japan to be much more open to the United States, not only as a source of imports, but also as a destination for U.S. exports than most countries in Western Europe. Taking other factors into account, however, Western Europe is more open to U.S. direct foreign investment. We also find that a country′s level of education tends to increase significantly U.S. interaction of all types with that country, even after correcting for per capita income. Education does not play a significant role in Japanese trade patterns. As factor endowment theory would predict, the United States tends to trade more with densely populated countries, while Japan tends to import more from sparsely populated countries. Even after taking into account population, income, factor endowments, and region, there is a substantial degree of "bilateralism" in Japanese and U.S. economic relationships in that the residual correlation among exports, imports, and outward direct foreign investment is much larger than would be the case if these magnitudes were independent across countries. J. Japan. Int. Econ. December 1994, 8(4), pp. 478–510. Boston University, Boston, Massachusetts 02215; and National Bureau of Economic Research, Cambridge, Massachusetts 02138.     

An Examination of ERR and Asset Allocation in Public Pension Plans

In this paper, we examine the usefulness of expected rates of return (ERR) for public pension plans. Specifically, we test the correlation between the expected rate of return on plan assets and asset allocation. We also examine the predictive power of ERR on the actual returns of the pension assets. We find that the correlation between expected return and the percentage of assets that are equity securities is relatively weak. Further, we find that the percentage of assets that are equity securities is a much better predictor of actual returns than the disclosed expected return in public pension plans. These results provide evidence to support SFAS No. 87 , which requires the disclosure of plan assets and against recently promulgated SFAS No. 132 , which eliminates this disclosure requirement. The evidence also supports GASB 25'sStatement of Net Plan Assets .     

The demography of micro-states

There are two types of micro-states, islands and mainland ones. Except for a few islands very close to the coast, most of the insular micro-states are demographically very different from the rest of the Third World. Their death-rates are lower, their birth-rates lower, and the propensity of their populations to migrate to developed countries higher. It is argued here that these differences are based on other social and economic differences, which can be summarized by saying that such states are more Westernized. They were part of the European maritime system at a time when the West did not have the economic strength to penetrate continental areas to the same extent. On the whole they retained colonial links longer.