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Articles 31 - 54 of 54
Full-Text Articles in Social and Behavioral Sciences
Review Of Competition, Commitment, And Welfare By Kotaro Suzumura, Eric Bennett Rasmusen
Review Of Competition, Commitment, And Welfare By Kotaro Suzumura, Eric Bennett Rasmusen
Eric Bennett Rasmusen
A short review of a book on oligopoly theory.
Review Of Game Theory And The Social Contract: Volume 1, Playing Fair By Ken Binmore, Eric Bennett Rasmusen
Review Of Game Theory And The Social Contract: Volume 1, Playing Fair By Ken Binmore, Eric Bennett Rasmusen
Eric Bennett Rasmusen
A review of Binmore's book using game theory in setting up foundations for constitutional theory.
Predictable And Unpredictable Error In Tort Awards: The Effect Of Plaintiff Self Selection And Signalling, Eric Bennett Rasmusen
Predictable And Unpredictable Error In Tort Awards: The Effect Of Plaintiff Self Selection And Signalling, Eric Bennett Rasmusen
Eric Bennett Rasmusen
If a tort plaintiff can predict that the court will overestimate damages he is more likely to bring a case, but if the court is aware of this, it may wish to adjust its awards accordingly. In general, court error implies that the court should adjust for regression to the mean, moderating extreme awards whether they be high or low. Predictable error, however, tends to make a downwards adjustment optimal and unpredictable error an upwards adjustment, because of plaintiff selection and signalling.
How Optimal Penalties Change With The Amount Of Harm, Eric Bennett Rasmusen
How Optimal Penalties Change With The Amount Of Harm, Eric Bennett Rasmusen
Eric Bennett Rasmusen
Intuition tells us that the optimal penalty and court care should rise smoothly with the harm to the victim. A formal model is constructed to see if this intuition can be justified, but it appears not to be generally true: sometimes the optimal penalty and court care increase discontinuously with harm, even under reasonable assumptions on the relationship between the penalty and the amount of crime. One reason why criminal penalties are not maximal is that even if they are fines, without real costs, the efficient level of court care will still allow them to sometimes be mistakenly inflicted on …
Judicial Legitimacy: An Interpretation As A Repeated Game, Eric Bennett Rasmusen
Judicial Legitimacy: An Interpretation As A Repeated Game, Eric Bennett Rasmusen
Eric Bennett Rasmusen
If society wishes to maintain an independent judiciary, it faces the problem of how to restrain judges from indulging their personal whims. One restraint is the desire of judges to influence future judges. To do so, they may have to maintain their own or the system's legitimacy by restraining their own behavior. This situation is usefully viewed as an equilibrium of an infinitely repeated game.
Cheap Bribes And The Corruption Ban: A Coordination Game Among Rational Legislators, Eric Bennett Rasmusen, J. Mark Ramseyer
Cheap Bribes And The Corruption Ban: A Coordination Game Among Rational Legislators, Eric Bennett Rasmusen, J. Mark Ramseyer
Eric Bennett Rasmusen
Legislators in modern democracies (a) accept bribes that are small compared to value of the statutes they pass and (b) allow bans against bribery to be enforced. In our model of bribery, rational legislators accept bribes smaller not only than the benefit the briber receives but than the costs the legislators incur in accepting the bribes. Rather than risk this outcome, the legislators may be willing to suppress bribery altogether. The size of legislatures, the quality of voter information, the nature of party organization, and the structure of committees will all influence the frequency and size of bribes.
Mutual Versus Unilateral Mistake In Contracts, Eric Bennett Rasmusen, Ian Ayres
Mutual Versus Unilateral Mistake In Contracts, Eric Bennett Rasmusen, Ian Ayres
Eric Bennett Rasmusen
Courts sometimes allow contracts to be voidable because of mistakes in their basic assumptions. The common wisdom is that rescission is more likely to be granted if the mistake is mutual rather than unilateral---an incorrect belief common to both parties, not just to one. Rescission for mistake can be justified as a way to avoid inefficient transactions and to reduce the costs of collecting information on whether a mistake has been made. These reasons do not justify a general rule distinguishing between mutual and unilateral mistake.
Lobbying When The Decisionmaker Can Acquire Independent Information, Eric Bennett Rasmusen
Lobbying When The Decisionmaker Can Acquire Independent Information, Eric Bennett Rasmusen
Eric Bennett Rasmusen
Politicians trade off the cost of acquiring and processing information against the benefit of being re-elected. Lobbyists and protesters may possess private information upon which politicians would like to rely without the effort of verification. If the politician does not try to verify, however, the lobbyist or protester has no incentive to be truthful. This is modelled as a game in which the lobbyist lobbies to show his conviction that the electorate is on his side. In equilibrium, sometimes the politician investigates, and sometimes the information is false. The lobbyists and the electorate benefit from the possibility of lobbying when …
An Income-Satiation Model Of Efficiency Wages, Eric Bennett Rasmusen
An Income-Satiation Model Of Efficiency Wages, Eric Bennett Rasmusen
Eric Bennett Rasmusen
Efficiency wages are wages that exceed a worker's reservation wage. A standard explanation for such wages is ``bonding'': by increasing the worker's fear of discharge, high wages increase the worker's cost from punishment. A neglected alternative is ``satiation'': by decreasing the worker's marginal utility of income, the high wage decreases the benefit from misbehavior. Satiation, unlike bonding, applies even in a one- period model, but it relies on the misbehavior having a monetary benefit and on at least part of the punishment being nonmonetary.
Defining The Mean-Preserving Spread: 3-Pt Versus 4-Pt, Eric Bennett Rasmusen, Emmanuel Petrakis
Defining The Mean-Preserving Spread: 3-Pt Versus 4-Pt, Eric Bennett Rasmusen, Emmanuel Petrakis
Eric Bennett Rasmusen
The standard way to define a mean-preserving spread is in terms of changes in the probability at four points of a distribution (Rothschild and Stiglitz [1970]). Our alternative definition is in terms of changes in the probability at just three points. Any 4-pt mean- preserving spread can be constructed from two 3-pt mean-preserving spreads, and any 3-pt mean-preserving spread can be constructed from two 4-pt mean- preserving spreads. The 3-pt definition is simpler and more often applicable. It also permits easy rectification of a mistake in the Rothschild-Stiglitz proof that adding a mean- preserving spread is equivalent to other measures …
Managerial Conservatism And Rational Information Acquisition, Eric Bennett Rasmusen
Managerial Conservatism And Rational Information Acquisition, Eric Bennett Rasmusen
Eric Bennett Rasmusen
Conservative managerial behavior can be rational and profit- maximizing. If the valuation of innovations contains white noise and the status quo would be preferred to random innovation, then any innovation that does not appear to be substantially better than the status quo should be rejected. The more successful the firm, the higher the threshold for accepting innovation should be, and the greater the conservative bias. Other things equal, more successful firms will spend less on research, adopt fewer innovations, and be less likely to advance the industry 's best practice.
Are Equilibrium Strategies Unaffected By Incentives?, Eric Bennett Rasmusen, Jack Hirshleifer
Are Equilibrium Strategies Unaffected By Incentives?, Eric Bennett Rasmusen, Jack Hirshleifer
Eric Bennett Rasmusen
Tsebelis proposed that in games such as the"Police Game"that have only a mixed strategy equilibrium, changing a player's payoff parameters will not affect his behavior. Care must be taken not to push this reasoning too far
The Strategy Of Sovereign Debt Renegotiations, Eric Bennett Rasmusen
The Strategy Of Sovereign Debt Renegotiations, Eric Bennett Rasmusen
Eric Bennett Rasmusen
The standard economic theory of perfect competition assumes that there are many buyers and many sellers, all possessing the same information, so that no one can act strategically. This standard theory is clearly not appropriate for analyzing debt renegotiation, where buyer and seller are bound to deal with each other and information is asymmetric. Game theory is a set of techniques developed to analyze economic situations that, like games, involve few players and strategic behavior. This theory has been greatly developed in the past fifteen years, and is useful for understanding some of the paradoxes of debt regenotiation.
Game Theory In Finance, Eric Bennett Rasmusen
Game Theory In Finance, Eric Bennett Rasmusen
Eric Bennett Rasmusen
A short survey of the use of game theory in finance.
Comment On Tullock, Hechter, And Wildavsky, Eric Bennett Rasmusen
Comment On Tullock, Hechter, And Wildavsky, Eric Bennett Rasmusen
Eric Bennett Rasmusen
Game theory has been criticized as neglecting key aspects of individual behavior and as relying too heavily on special assumptions. It can, in fact, handle individual heterogeneity if the modeller is willing to carefully specify how people are different, but to the extent that such things as heterogeneity and culture are important, the desire for a single unified model is impossible to satisfy. At the same time, game theory's approach is very useful for building specialized models.
Naked Exclusion, Eric Bennett Rasmusen, J. Mark Ramseyer, John Wiley
Naked Exclusion, Eric Bennett Rasmusen, J. Mark Ramseyer, John Wiley
Eric Bennett Rasmusen
Ordinarily, a monopoly cannot increase its profits by asking customers to sign agreements not to deal with potential competitors. If, however, there are 100 customers and the minimum efficient scale requires serving 15, the monopoly need only lock up 86 customers to forestall entry. If each customer believes that the others will sign, each also believes that no rival seller will enter. Hence, an individual customer loses nothing by signing the exclusionary agreement and will indeed sign. Thus, naked exclusion can be profitable.
Extending The Economic Theory Of Regulation: The Form Of Policy, Eric Bennett Rasmusen, Mark Zupan
Extending The Economic Theory Of Regulation: The Form Of Policy, Eric Bennett Rasmusen, Mark Zupan
Eric Bennett Rasmusen
The mutually beneficial connection between industries and the governments that regulate them is the subject of a large literature led by Stigler (1971). What has not been studied is how firms choose their desired policies from the set including entry barriers, price floors, subsidies, and demand stimulation. We take as given that government and incumbents form the supply and demand for regulation and explore the choice of political product.
Recent Developments In The Economics Of Exclusionary Contracts, Eric Bennett Rasmusen
Recent Developments In The Economics Of Exclusionary Contracts, Eric Bennett Rasmusen
Eric Bennett Rasmusen
A short survey of ideas on exclusive-dealing contracts.
Diseconomies Of Scale In Employment Contracts, Eric Bennett Rasmusen, Todd Zenger
Diseconomies Of Scale In Employment Contracts, Eric Bennett Rasmusen, Todd Zenger
Eric Bennett Rasmusen
We find that small teams can write more efficient incentive contracts than large teams when agents choose individual effort levels but the principal observes only the joint output. This result is helpful in understanding organizational diseconomies of scale and is consistent with both existing evidence and our own analysis of data from the Current Population Survey. Our modelling approach, similar to classical hypothesis testing, is of interest because we need not derive the optimal contract to show the advantage of small teams.
Cooperation In A Repeated Prisoner's Dilemma With Ostracism, Eric Bennett Rasmusen, David Hirshleifer
Cooperation In A Repeated Prisoner's Dilemma With Ostracism, Eric Bennett Rasmusen, David Hirshleifer
Eric Bennett Rasmusen
The unique Nash equilibrium of the finitely repeated n-person Prisoners' Dilemma calls for defection in all rounds. One way to enforce cooperation in groups is ostracism: players who defect are expelled. If the group's members prefer not to diminish its size, ostracism hurts the legitimate members of the group as well as the outcast, putting the credibility of the threat in doubt. Nonetheless, we show that ostracism can be effective in promoting cooperation with either finite or infinite rounds of play. The model can be applied to games other than the Prisoners' Dilemma, and ostracism can enforce inefficient as well …
Product Quality With Information Dissemination And Switching Costs, Eric Bennett Rasmusen
Product Quality With Information Dissemination And Switching Costs, Eric Bennett Rasmusen
Eric Bennett Rasmusen
Klein and Leffler (1981) construct a model in which expected future prices exceed marginal costs so that sellers are willing to maintain high quality for the sake of future profits. How profits are dissapated under free entry, and whether there is a continuum of equilibria, are questions not fully resolved. I contstruct a formal model simpler than any now existing in which free entry and exogenous fixed costs uniquely determine the price of output and the amount sold per firm.
Stock Banks And Mutual Banks, Eric Bennett Rasmusen
Stock Banks And Mutual Banks, Eric Bennett Rasmusen
Eric Bennett Rasmusen
Because mutual banks do not allow shareholders to discipline bad managers and so have higher costs, they have been disappearing since bank entry deregulation in the 1980's. They were common before regulation in the 1930's, and are more common in the 19th century. I propose that this is because of the absence of deposit insurance. Depositors wanted safety more than low operating costs, and a mutual manager, in a cushy job he could not lose except by bankrupting his firm, would also value safety.
Entry For Buyout, Eric Bennett Rasmusen
Entry For Buyout, Eric Bennett Rasmusen
Eric Bennett Rasmusen
Entry into a monopolized industry may be profitable if the entrant is bought out even if it would be unprofitable to enter for continuing operation. The stronger is duopoly competition, the greater is the incentive for buyout, so an incumbent's toughness in produce-market competition may be his own undoing. Evidence from the 1890's shows examples of entry for buyout.
Moral Hazard In Risk-Averse Teams, Eric Bennett Rasmusen
Moral Hazard In Risk-Averse Teams, Eric Bennett Rasmusen
Eric Bennett Rasmusen
Holmstrom (1982) has shown that a non-budget- balancing contract induces a team of risk- neutral agents to choose the first- best effort levels. This is not generally true when agents are risk averse. Furthermore, a"massacre" contract, which punishes all but one agent when the outcome is low, can attain the first best over a wider range of parameters than any other budget-balancing contract.