M Equilibrium: A Theory of Beliefs and Choices in Games

We introduce a set-valued solution concept, M equilibrium, to capture empirical regularities from over half a century of game theory experiments. We show M equilibrium serves as a meta theory for various models that hitherto were considered unrelated. M equilibrium is empirically robust and, despite being set-valued, falsifiable. Results from a series of experiments that compare M equilibrium to leading behavioral game theory models demonstrate its virtues in predicting observed choices and stated beliefs. Data from experimental games with a unique pure-strategy Nash equilibrium and multiple M equilibria exhibit coordination problems that could not be anticipated through the lens of existing models. (JEL C72, C90, D83)

Empirical regularities investigation of rock mass discharge by explosion on the free surface of a pit bench

Minimizing the discharge of blasted rock mass into the developed space of the pit is a very relevant area for study, as it allows to increase the processability of work and reduce the cost of mining. The article presents the results of experimental industrial explosions, during which the study of this issue was conducted. The main purpose of the work was to establish the key factors affecting the volume of rock mass discharge to the pit haulage berm. During the analysis of the world experience of research on this topic, the key factors affecting the formation of collapse and discharge – natural and technological – are identified. The method of conducting experiments and collecting data for analyzing the influence of technological parameters of location, charging and initiation of wells on the volume of rock mass discharge is described. It is established that the main discharge to the pit haulage berm is formed by the volume of rock mass limited by the prism of the slope angle. With a sufficient rock mass displacement from the edge of the bench crest towards the center of the block, only the wells of the 1st and 2nd rows participate in the discharge formation. Empirical dependences of the total volume of rock mass discharge on the length of the block along the bench crest, the specific consumption of explosives, the size of a rock piece P50 and the rate of rock breaking are obtained. The obtained results can be used to design the parameters of the drilling and blasting operations (DBO), as well as to predict and evaluate the possible consequences of a mass explosion in similar mining and geological conditions.

Levels of structural change

We investigate structural change in the PR China during a period of particularly rapid growth 1998-2014. For this, we utilize sectoral data from the World Input-Output Database and firm-level data from the Chinese Industrial Enterprise Database. Starting with correlation laws known from the literature (Fabricant’s laws), we investigate which empirical regularities hold at the sectoral level and show that many of these correlations cannot be recovered at the firm level. For a more detailed analysis, we propose a multi-level framework, which is validated empirically. For this, we perform a robust regression, since various input variables at the firm-level as well as the residuals of exploratory OLS regressions are found to be heavy-tailed. We conclude that Fabricant’s laws and other regularities are primarily characteristics of the sectoral level which rely on aspects like infrastructure, technology level, innovation capabilities, and the knowledge base of the relevant labor force. We illustrate our analysis by showing the development of some of the larger sectors in detail and offer some policy implications in the context of development economics, evolutionary economics, and industrial organization.

The Ritual of Capitalization

For more than a century, political economists have sought to understand the nature of capital. The prevailing wisdom is that there must be something ‘real’ — some productive capacity — that underpins capitalized values. This thinking, I argue, is a mistake. Building on Jonathan Nitzan and Shimshon Bichler’s theory of capital as power, I argue that capitalization is an ideology. It is a quantitative ritual for converting earnings into present value. Although the ritual is arbitrary, it gives rise to astonishing empirical regularities, reviewed here.

Fair and Square: A Retention Model of Managerial Compensation

We propose a model of how the retention motive shapes managerial compensation contracts. Once employed, a risk-averse manager acquires imperfectly portable skills whose value is stochastic because of industry-wide demand shocks. The manager’s actions are uncontractible, and the perceived fairness of the compensation contract affects the manager’s motivation. If the volatility of profits is sufficiently large and outside offers are sufficiently likely, the equilibrium contract combines a salary with an own-firm stock option. The model’s predictions are consistent with empirical regularities concerning contractual shape, the magnitude of variable pay, the lack of indexation, and the prevalence of discretionary severance pay. This paper was accepted by Axel Ockenfels, behavioral economics and decision analysis.

Advertising, Innovation, and Economic Growth

This paper analyzes the implications of advertising for firm dynamics and economic growth through its interaction with R&D. We develop a model of endogenous growth with firm heterogeneity that incorporates advertising decisions and calibrate it to match several empirical regularities across firm size. Our model provides microfoundations for the empirically observed negative relationship between both firm R&D intensity and growth and firm size. In the calibrated model, about half of the deviation from proportional firm growth is attributed to our novel advertising channel. In addition, R&D and advertising are substitutes, a prediction for which we find evidence in the data. (JEL D22, E23, H25, L25, M37, O32)

Intergenerational Class Mobility in Industrial and Post-Industrial Societies: Towards a General Theory

A large body of often rather complex findings on intergenerational social mobility has by now come into existence but theoretical development has not kept pace. In this paper, focusing specifically on class mobility in European nations and the US, we aim, first of all, to identify the main empirical regularities that have emerged from research, making the now standard distinction between absolute and relative mobility. Next, we review existing theories of mobility, which in fact antedate a good deal of this research, and note the main shortcomings that have become evident in these theories, but also elements of them that might still be built upon. We then set out our own theory of intergenerational class mobility and seek to show how it can account for the empirical regularities previously described, while also pointing both to additional evidence that supports it and to ways in which it is open to further empirical test. Finally, we consider some more general implications of the theory and, on this basis, venture some – conditional – predictions on the future of class mobility in more advanced societies. We do not suppose that our theory is in any sense a ‘final’ one but believe that it improves our understanding of research findings in the field as they currently stand and that further research aimed at its critical evaluation would prove profitable.

The impact of the SARS-CoV-2 pandemic on financial markets: a seismologic approach

This work investigates financial volatility cascades generated by SARS-CoV-2 related news using concepts developed in the field of seismology. We analyze the impact of socio-economic and political announcements, as well as of financial stimulus disclosures, on the reference stock markets of the United States, United Kingdom, Spain, France, Germany and Italy. We quantify market efficiency in processing SARS-CoV-2 related news by means of the observed Omori power-law exponents and we relate these empirical regularities to investors’ behavior through the lens of a stylized Agent-Based financial market model. The analysis reveals that financial markets may underreact to the announcements by taking a finite time to re-adjust prices, thus moving against the efficient market hypothesis. We observe that this empirical regularity can be related to the speculative behavior of market participants, whose willingness to switch toward better performing investment strategies, as well as their degree of reactivity to price trend or mispricing, can induce long-lasting volatility cascades.

Main empirical regularities of the phosphorus geochemistry in the hypergenesis

Research subject. The study investigates the distribution of phosphorus (as percentages of P2O5 and P) and 4 phosphorus modules introduced by the authors - phosphorus-titanium FTM (P2O5/TiO2), phosphorus-calcium FCM (P2O5/CaO), phos-phorus-iron FIM (P2O5/Fe2O3) and phosphorus-general-iron FGiM (P2O5/(Fe2O3 + FeO)) - in the main types of sedimentary rocks, such as psammites, pelites, carbonates, silicites, in volcanic-sedimentary rocks (tuffoids), as well as in soils, sediments and such specific rocks as nodules and weathering crusts. Methods. On the basis of a large data bank (several tens of thousands of silicate analyses), new clarks of phosphorus were calculated. Clark estimates were based on average median contents for all the above-mentioned rock groups. For the first time, lithochemistry methods were successfully applied to characterize the composition of phosphorites. Correlation analysis was used to identify forms of phosphorus in rocks. Only the most reliable linear correlation coefficients of phosphorus and phosphorus modules with rock-forming components were considered significant - with a significance level no greater than 0.01 and 0.05.Results and conclusions. In some cases, new estimates of clarks differed markedly from the estimates of our predecessors. For a number of objects, clarks were determined for the first time. Interpretation of the revealed relationships allowed us to identify the following main correlations and corresponding forms of phosphorus in sedimentary rocks and their analogues (soils and sediments): positive correlation with CaO - phosphorus in the form of accessory apatite or francolite dominated; positive correlation with Fe2O3 - phosphorus sorbed on iron hydroxides dominates; positive correlation with MgO - phosphorus dominated in the composition of smectite or chlorite, initially sorbed on the clay substance of precipitation; positive correlation with TiO2 - phosphate sorbed on leucoxene, dominates. Thus, in addition to the previously known calcium and iron hydroxide, a titanium geochemical barrier for phosphorus was first identified.