An Experimental Study on the Effects of Communication, Credibility, and Clustering in Network Games

We examine how pre-play communication and clustering affect play in a challenging hybrid experimental game on networks. Free-form chat is impressively effective in achieving the non-equilibrium efficient outcome, but restricted communication has little effect. We support this result with a model about the credibility of cheap-talk messages. We also offer a model of message diffusion that correctly predicts more rapid diffusion without clustering. We show an interaction effect of network structure and communication technologies. A remarkable result is that restricted communication is quite effective in a network Stag Hunt, but not in our extended game.

Models of regional competitiveness: priority influencing factors

This study examines the conceptual background to specific aspects of competitiveness and examines one of the fundamental models for improving regional competitiveness. Regional competitiveness is an important factor of achieving economic growth and increasing the well-being. It plays a decisive role in enhancing the productivity and the economic performance of state and business enterprises and can also be used as a measure for the success of these enterprises as well as the proxy for their degree of openness to national and international competition and foreign trade. Furthermore, we present a theory of the movement of labour capital between regions and countries. Moreover, we show that factor allocation deviates from the most efficient outcome when the market is not working.

Social Connectivity, Media Bias, and Correlation Neglect*

A biased newspaper aims to persuade voters to vote for the government. Voters are uncertain about the government’s competence. Each voter receives the newspaper’s report as well as independent private signals about the competence. Voters then exchange messages containing this information on social media and form posterior beliefs, neglecting correlation among messages. We show that greater social connectivity increases the probability of an efficient voting outcome if the prior favours the government; otherwise, efficiency decreases. The probability of an efficient outcome remains strictly below one even when connectivity becomes large, implying a failure of the Condorcet jury theorem.

On the Choice of Liability Rules

Legal assignment of liabilities for losses arising out of interactions involving negative externalities usually depend on which of the interacting parties are negligent and which are not. It has been established in the literature that, if negligence is defined as failure to take some cost-justified precaution then there is no liability rule which can always lead to an efficient outcome. The objective of this paper is to try and understand if it is still possible to make pairwise comparisons between rules on the basis of efficiency and to use such a method to explain/evaluate choices from a given set of rules. We focus on a set of five of the most widely analyzed rules (no liability, strict liability, negligence, negligence with the defense of contributory negligence and strict liability with the defense of contributory negligence), and use a binary relation according to which a rule in the set is considered to be at least as efficient as another if and only if the set of applications for which it is inefficient is a subset of the set of applications for which the other one is inefficient. We show that, with respect to the above mentioned relation, pairwise comparisons between rules in this set fail. The paper, thus, demonstrates that an efficiency based explanation for any choice from these five rules is not consistent with the notion of negligence defined as failure to take some cost-justified precaution.

Coordinating Revenue Incentive Policies in the Caribbean

The pervasive use of tax incentives is costly for the Caribbean countries, yet the benefits seem limited. Better policy coordination at the regional level is needed to help overcome the collective action problems and generate more revenue to support the much-needed infrastructure investment. Using the region’s Citizenship-by-Investment (CBI) programs as an example, we also show that a price-quantity coordination mechanism can help achieve an efficient outcome with greater CBI incomes for member countries.

A SUNSPOT-BASED THEORY OF UNCONVENTIONAL MONETARY POLICY

This paper is about the effectiveness of qualitative easing, a form of unconventional monetary policy that changes the risk composition of the central bank balance sheet. We construct a general equilibrium model where agents have rational expectations, and there is a complete set of financial securities, but where some agents are unable to participate in financial markets. We show that a change in the risk composition of the central bank’s balance sheet affects equilibrium asset prices and economic activity. We prove that, in our model, a policy in which the central bank stabilizes non-fundamental fluctuations in the stock market is self-financing and leads to a Pareto efficient outcome.

Dynamically Efficient Royalties for Standard-Essential Patents

ABSTRACT Some economists have argued that a reasonable royalty for a standard-essential patent should be based on the patent’s ex ante incremental value. Others have argued that a patent’s ex ante incremental value is insufficient, that a reasonable royalty is more akin to the prize in a winner-takes-all tournament, and that it should reflect the R&D costs associated with both the winning technology and unsuccessful alternative technologies. The results presented in this paper are favourable to the latter view, but with the additional qualification that a reasonable royalty ought to cover the costs of only those R&D efforts—successful or not—that are efficiency enhancing from an ex ante perspective. The notion of ex ante incremental value is core to identifying these efforts and hence to determining what the dynamically efficient outcome is. A reasonable royalty is one that induces this dynamically efficient outcome (i.e. a dynamically efficient level of R&D), balancing the costs incurred by innovators with the benefits that go to implementers and/or consumers. As such, a reasonable royalty is significantly higher than a technology’s ex ante incremental value. High ‘winner’ margins are offset by losses incurred by ‘losers’, leaving a significant proportion of the total net value generated by R&D to implementers and consumers.

Endogenous Authority and Enforcement in Public Goods Games

This paper investigates theoretically and experimentally the social benefits and cost to have an endogenous punishment-enforcing authority in public goods game. An authority is chosen among members of a society via an imperfectly discriminating contest prior to a public goods game. Once chosen the authority has a large degree of discretion to inflict punishment. Our theoretical result shows that an efficiency gain from having the endogenous authority always comes with a social cost from competing for being the authority. The larger the society is, however, the bigger the efficiency gain and the smaller the rent dissipation. The completely efficient outcome can be approximated as the size of society tends to infinity. The experimental results confirm that the presence of endogenous authority for a given group size increases the public goods contributions and the efficiency gain is significantly bigger in a larger group.

Rawls, Taxation and Calabresi & Melamed’s Rules

The paper identifies a new rule in the tax discourse – the versatility rule. Calabresi and Melamed’s landmark article contributed to the legal discussion despite paying relatively little attention to taxation. This paper analyzes income tax, Calabresi and Melamed’s rules and Rawls’ theory, and examines whether Calabresi and Melamed’s pioneering work on liability, property and inalienability rules can be integrated into income tax discourse (and other legitimate property expropriations); and claims that these rules assist in understanding the essence of taxation. The question is analyzed from the Rawlsian perspective since his concern with the “least advantaged” and inequality in society poses a serious global challenge. The paper offers a unique analysis by showing that in the tax field all rules protect the same entitlement at the same time against the same entity – the government. This concurrent implementation of Calabresi and Melamed’s rules in taxation can only take place when taxation is understood as both “giving” and “taking”. Although the paper aims at increasing distributive goals, it appears that efficient outcome is its byproduct. Integrating Calabresi and Melamed’s rules into the tax discourse via Rawls’ theory not only elucidates the versatility rule but also blurs the distinction between the protection and transfer rules, and highlights the reciprocity of the duty and right to pay taxes. Since Calabresi and Melamed’s classical work, many scholars have significantly modified the existing rules and developed new ones, such as the Solomonic entitlement and the pliability rule, though no one has thus far proposed a scenario in which all remedies simultaneously apply against the same entity.