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A note on the continuity of incentive schedules
In: Reprint series / Institute for International Economic Studies 410
On the continuity of optimal income-tax schedules
In: Seminar paper / Institute for International Economic Studies 338
Debt-financed transfers, public consumption and public investment in an open economy
In: Seminar paper 330
Kinship, Incentives, and Evolution
In: American economic review, Band 100, Heft 4, S. 1725-1758
ISSN: 1944-7981
We analyze how family ties affect incentives, with focus on the strategic interaction between two mutually altruistic siblings. The siblings exert effort to produce output under uncertainty, and they may transfer output to each other. With equally altruistic siblings, their equilibrium effort is nonmonotonic in the common degree of altruism, and it depends on the harshness of the environment. We define a notion of local evolutionary stability of degrees of sibling altruism and show that this degree is lower than the kinship-relatedness factor. Numerical simulations show how family ties vary with the environment, and how this affects economic outcomes. (JEL D13, D64, J12, Z13)
Corrigendum: Language, Meaning, and Games: A Model of Communication, Coordination, and Evolution
In: American economic review, Band 99, Heft 5, S. 2277-2277
ISSN: 1944-7981
Language, Meaning, and Games: A Model of Communication, Coordination, and Evolution
In: American economic review, Band 98, Heft 4, S. 1292-1311
ISSN: 1944-7981
Language is a powerful coordination device. We generalize the cheap-talk approach to pre-play communication by way of introducing a meaning correspondence between messages and actions, and by postulating two axioms met by natural languages. Players have a lexicographic preference, second to material payoffs, against deviating from the meaning correspondence. Under two-sided communication in generic and symmetric n × n-coordination games, a Nash equilibrium component in such a lexicographic communication game is evolutionarily stable if and only if it results in the unique Pareto efficient outcome of the underlying game. We extend the analysis to one-sided communication in arbitrary finite two-player games. (JEL C72, C73, Z13)
Crime, punishment and social norms
We analyze the interplay between economic incentives and social norms when individuals decide whether or not to engage in criminal activity. More specifically, we assume that there is a social norm against criminal activity and that deviations from the norm result in feelings of guilt or shame. The intensity of these feelings is here endogenous in the sense that they are stronger when the population fraction obeying the norm is larger. As a consequence, a gradual reduction of the sanctions against criminal activity, or of the taxation of legal incomes, may weaken the social norm against crime. Due to the potential multiplicity of equilibria in our model, such a gradual change may even induce a discontinuous increase in the crime rate. We show that law enforcement policies may have dramatic and permanent efects on the crime rate, and lead to hysteresis. We also define political equilibrium under majority rule and show how a majority of individuals, who feel no guilt or shame from violating the law, in political equilibrium can exploit a minority who do have such feelings.
BASE
Political Equilibrium in Representative Democracy
It is shown in this paper that the Median Voter Theorem lacks robustness in the sense that if voters have (even the slightest) preferences for the competing candidates, beside preferences for their current policy proposals, then no policy in the neighbourhood of the median voter's preferred policy constitutes an equilibrium (in pure strategies). This suggests that this classical theorem does not apply to representative democracy. Indeed, if voters do have candidate preferences, and these are strong enough, the policy-motivated candidates will, in general, adopt differing policy positions in equilibrium, and, under certain qualifications, the equilibrium outcome will be (close ti) a particular utilitarian optimum. More specifically, in a discretized model the policy outcome will lie between the preferred policy of the most popular candidate and this utilitarian optimum.
BASE
Altruism and Time Consistency: The Economics of Fait Accompli
In: Journal of political economy, Band 96, Heft 6, S. 1165-1182
ISSN: 1537-534X
Balanced-Budget Redistribution as Political Equilibrium
This paper considers balanced-budget redistribution between socioeconomic groups of individuals as the outcome of electoral competition between two political parties. Equilibrium is unique in the present model, and a sufficient condition for existence is given, requiring that there be sufficient "stochastic heterogeneity" with respect to party preferences in the electorate. The validity of Hotelling's "principle of minimum differentiation", as well as of "Director's law", is examined under alternative hypotheses concerning administrative costs and voters' possibilities of "exit" adn "voice" in the election process. The policy strategy of expected-plurality maximization is contrasted with the strategy of maximizing the parobability of gaining a plurality. Incomes are fixed and known, so lump-sum taxation is feasible. However, constraints on tax/transfer differentitation between individuals are permitted in the analysis.
BASE
Paternalism, buyers' and sellers' market
In: Mathematical social sciences, Band 6, Heft 2, S. 153-169
Political polarization
Failures of government policies often provoke opposite reactions from citizens; some call for a reversal of the policy while others favor its continuation in stronger form. We offer an explanation of such polarization, based on a natural bimodality of preferences in political and economic contexts, and consistent with Bayesian rationality.
BASE
Political polarization
Failures of government policies often provoke opposite reactions from citizens; some call for a reversal of the policy, whereas others favor its continuation in stronger form. We offer an explanation of such polarization, based on a natural bimodality of preferences in political and economic contexts and consistent with Bayesian rationality.
BASE
Robustness to strategic uncertainty in the Nash demand game
In: Mathematical social sciences, Band 91, S. 1-5