Markovian equilibrium in a class of stochastic games: existence theorems for discounted and undiscounted models

Summary We study a strategic version of the neoclassical growth model under possible production uncertainty. For a general specification of the problem, we establish (i) the existence of stationary Markov equilibria in pure strategies for the discounted game, and (ii) the convergence, under a boundedness condition, of discounted equilibrium strategies to a pure strategy stationary Markovian equilibrium of the undiscounted game as the discount factor tends to unity. The same techniques can be used to prove that such convergence also obtains in all finitestate, finite-action stochastic games satisfying a certain full communicability condition. These results are of special interest since there are well known examples in the literature in which the limit of discounted equilibria fails to be an equilibrium of the undiscounted game.We are grateful to Marcus Berliant, M. Ali Khan, Mukul Majumdar, and an anonymous referee for helpful suggestions, and to Bonnie Huck for technical assistance. The first author acknowledges research support from the Columbia University Council for the Social Sciences.     

Farsighted network formation

This paper studies a model of dynamic network formation when individuals are farsighted: players evaluate the desirability of a “current” move in terms of its consequences on the entire discounted stream of payoffs. We define a concept of equilibrium which takes into account farsighted behavior of agents and allows for limited cooperation amongst agents. We show that an equilibrium process of network formation exists. We also show that there are valuation structures in which no equilibrium strategy profile can sustain efficient networks. We then provide sufficient conditions under which the equilibrium process will yield efficient outcomes.     

The Managerial Lineages of Neoliberalism

Managerialism is often depicted as a key practice of neoliberalism yet relatively little has been written by scholars of neoliberalism about the actual relationship between managerialism and neoliberalism. Usually subsumed under a functional reading of neoliberalism, managerialism has too often been understood simply as a means for neoliberal ends (i.e. to promote market rule or competition). This paper challenges this perspective on the grounds that it conflates practices that stem from two different historical lineages. As we show, managerial governance not only has a very different history than neoliberal theory, but it also rests on different principles. Its development can be traced back to the US defence sector in the 1950s and the pivotal role of the RAND Corporation. On the basis of this historical perspective, we argue for the need to analyse managerialism on its own terms and make the case for considering the rise of managerial science as a paradigmatic shift in governance. In doing so, we show how managerial governance represented a radical rupture from previous management practices and show how it profoundly reshaped how we have come to understand governance.     

Do Potential Skilled Emigrants Care about Political Stability at Home?

In this paper, we consider the role of political stability in the source country as a potential reason for skilled emigration. We control for all prospective source country characteristics, and yet skilled emigration is seen to be driven by a relatively better situation of political stability in the home country. Our research clearly shows that government stability, socioeconomic conditions, investment profiles, democratic accountability, internal conflict, and ethnic tensions in source nations have significant impacts on the rate of skilled emigration for a sample of developed and developing countries. The results retain robustness even for a subset of only developing nations.     

Traffic evacuation time under nonhomogeneous conditions

During many manmade and natural crises such as terrorist threats, floods, hazardous chemical and gas leaks, emergency personnel need to estimate the time in which people can evacuate from the affected urban area. Knowing an estimated evacuation time for a given crisis, emergency personnel can plan and prepare accordingly with the understanding that the actual evacuation time will take longer. Given the urban area to be evacuated, street widths exiting the area's perimeter, the area's population density, average vehicle occupancy, transport mode share and crawl speed, an estimation of traffic evacuation time can be derived. Peak-hour traffic data collected at three, midblock, Mumbai sites of varying geometric features and traffic composition were used in calibrating a model that estimates peak-hour traffic flow rates. Model validation revealed a correlation coefficient of +0.98 between observed and predicted peak-hour flow rates. A methodology is developed that estimates traffic evacuation time using the model.     

Dominant markets,staggered openings,and price discovery

This study examines information incorporation and price discovery in closely related markets that witness staggered openings. A theoretical model is presented. In this framework, one market, termed dominant, is the venue where most of the price discovery occurs, and the other is termed secondary. The model predicts heightened volatility and order flow in each market when it opens first compared with when it opens second. The effects are predicted to be more pronounced in the dominant market, and is linked to the process of information incorporation. Tests conducted using futures on crude oil (dominant) and gasoline (secondary), two related markets that witness staggered openings, reveal findings consistent with the model's predictions. © 2010 Wiley Periodicals, Inc. Jrl Fut Mark     

Coming to the Nuisance: An Economic Analysis from an Incomplete Contracts Perspective

We construct a model in which an investment opportunity arisesfor a first mover before it knows the identity of a second moverand in which joint location results in a negative externality.Contracts are inherently incomplete since the first mover cannotbargain over its ex ante investment decision with the anonymoussecond mover. Given this departure from the setting of the Coasetheorem, the allocation of property rights over the externalityhas real effects on social welfare. We investigate the relativeefficiency of property rights regimes used in practice: injunctions,damages, the ruling in the Spur Industries case, etc. The firstbest can be obtained by allocating property rights (in particularthe right to sue for damages) to the second mover. Allocatingproperty rights to the first mover, as a "coming to the nuisance"rule entails, leads to overinvestment. In contrast to conventionalwisdom, this inefficiency persists even if a monopoly landownercontrols all the land on which the parties may locate.     

Long‐run price competition

We generalize the standard repeated‐games model of dynamic oligopolistic competition to allow for consumers who are long‐lived and forward looking. Each period leaves some residual demand to future periods and pricing in one period affects consumers' expectations about future prices. We analyze this setting for an indivisible durable good with price‐setting firms and overlapping cohorts of consumers. The model nests the repeated‐game model and the Coasian durable‐goods model as its two extreme cases. The analysis is mostly focused on constant‐price collusion but conditions for collusive recurrent sales are also identified.