Copyright (c) 2009 Berkeley Electronic Press All rights reserved. http://www.bepress.com/bejte Recent documents in The B.E. Journal of Theoretical Economics en-us Mon, 09 Nov 2009 14:30:14 PST 3600 http://www.bepress.com/bejte/vol9/iss1/art35 http://www.bepress.com/bejte/vol9/iss1/art35 Mon, 19 Oct 2009 15:59:26 PDT A regulator imposes a universal service obligation (USO) on a vertically integrated firm that owns an essential network. The regulator has imperfect information about the network's fixed cost. Network access is provided to licensed competitors. The USO consists in a constraint on market coverage and is compensated through a mix of public funds and transfers from entrants. We first use a basic adverse selection model to show that, because of informational rents, a sufficiently high shadow cost of public funds can lead to a lower coverage with the USO than without it. We then show that this result tends to be robust in various realistic extensions of the basic model. Jean-Christophe Poudou D82 K23 L43 L51 http://www.bepress.com/bejte/vol9/iss1/art34 http://www.bepress.com/bejte/vol9/iss1/art34 Fri, 16 Oct 2009 12:51:32 PDT Traditional trade theory maintains that international economic integration always yields potential welfare benefits. This result can however be maintained only in a world bereft of its institutional and cultural dimensions. In this paper we show that, once institutional factors are introduced, integration may be detrimental to welfare. Exploiting a game theoretical approach, we consider the integration between two societies that only differ in their institutional structures. Two important results are derived. First, intercommunity integration may trigger the demise of the erstwhile internal arrangements. Second, the collapse of the domestic institutional equilibrium can lead to a loss of welfare for the community as a whole. Marianna Belloc D02 F15 F16 O17 http://www.bepress.com/bejte/vol9/iss1/art33 http://www.bepress.com/bejte/vol9/iss1/art33 Wed, 30 Sep 2009 16:09:58 PDT This paper considers a simple adaptive learning rule in Bayesian games with binary actions where players employ threshold strategies. Global convergence results are given for supermodular games and potential games. If there is a unique equilibrium, players' strategies converge almost surely to it. Even if there is not, in potential games and in the two-player case in supermodular games, any limit point of the learning process must be an equilibrium. In particular, if equilibria are isolated, the learning process converges to one of them almost surely. Alan Beggs C72 D83 http://www.bepress.com/bejte/vol9/iss1/art32 http://www.bepress.com/bejte/vol9/iss1/art32 Mon, 28 Sep 2009 15:27:37 PDT This paper analyzes the delegation of contracting capacity in a moral hazard environment with sequential production in a project which involves a principal and two agents. The agent in charge of the final production can obtain soft information about the other agent's effort choice by investing in monitoring. I investigate the circumstances under which it is optimal for the principal to use a centralized organization in which she designs the contracts with both agents or to use a decentralized organization in which she contracts with only one agent, and delegates the power to contract with the other agent. It is shown that in this setting a decentralized organization can be superior to a centralized organization. This is because the principal is better off under monitoring and the incentives for an agent to invest in monitoring can be higher in a decentralized organization. The circumstances under which this is true are related to monitoring costs and the importance of each agent for production. The results explain the recent application of the design-build method in public procurement. Bernd Theilen D23 D82 L14 L22. http://www.bepress.com/bejte/vol9/iss1/art31 http://www.bepress.com/bejte/vol9/iss1/art31 Sun, 27 Sep 2009 07:24:27 PDT I generalize Gul and Pesendorfer's (2001) model of temptation to a multi-period framework where preferences are defined over menus of menus rather than over menus of terminal consumptions. This extension can be applied to model preemptive temptations, self-deception, and biased perceptions of subjective uncertainty. Igor Kopylov D80 D81 http://www.bepress.com/bejte/vol9/iss1/art30 http://www.bepress.com/bejte/vol9/iss1/art30 Sun, 27 Sep 2009 07:24:23 PDT Networks of social and economic interactions are often influenced by unobserved structures among the nodes. Based on a simple model of how an unobserved community structure generates networks of interactions, we axiomatize a method of detecting the latent community structures from network data. The method is based on maximum likelihood estimation. Jernej Copic D85 A14 C10 C45 http://www.bepress.com/bejte/vol9/iss1/art29 http://www.bepress.com/bejte/vol9/iss1/art29 Sun, 27 Sep 2009 07:24:17 PDT Using up to nine different ways to represent homogeneous technologies with decreasing returns to scale, this article presents and proves identities between those different representations of such technologies, outlining the homogeneity properties of each representation. These identities, which allow to shift from one representation of a technology to another -- and which are summarized in a matrix of identities -- can be useful since they provide a tool to obtain explicit functional forms for homogeneous technologies. They can also be useful to simplify computational procedures when different representations of a technology are needed. Finally, the article also refers explicitly to some aspects of producer theory that are often neglected or treated in a marginal way in the literature, such as the inverse supply, the non conditional cost and the inverse input demands functions. Miguel Espinosa D20 D21 D24 http://www.bepress.com/bejte/vol9/iss1/art28 http://www.bepress.com/bejte/vol9/iss1/art28 Tue, 08 Sep 2009 15:57:30 PDT For a symmetric two-stage game, where firms first choose capacities, then compete in prices, Kreps and Scheinkman (Bell Journal of Economics, 1983, 14(2), pp. 326-337) prove that under efficient rationing the Nash equilibrium coincides with the Cournot equilibrium. We extend the model to include asymmetric costs and provide new results showing that the capacity choice game is dominance-solvable, just like the Cournot game. Further, we provide a simple sufficient condition, under which the dominance-solvable result extends to proportional rationing. The results provide new insights into the robustness of Cournot coincidence under alternate demand rationing schemes. Jason J. Lepore D21 D43 L11 L13 http://www.bepress.com/bejte/vol9/iss1/art27 http://www.bepress.com/bejte/vol9/iss1/art27 Tue, 25 Aug 2009 00:17:04 PDT I present a stochastic version of Tirole's (1996) collective reputation model. In equilibrium, group behavior is persistent due to complementarity between the current incentives of group members and the group's reputation, which depends on its history. A group can maintain a strong reputation even as conditions become unfavorable, but an improvement in the environment may not help a group with a poor reputation. I also connect the model to the theory of statistical discrimination and show that the same mechanism can explain why discrimination might persist over time. Jonathan Levin C73 J71 L14 http://www.bepress.com/bejte/vol9/iss1/art26 http://www.bepress.com/bejte/vol9/iss1/art26 Fri, 31 Jul 2009 09:45:47 PDT We utilize the analytical construct of a stochastic supply function to provide an aggregate representation of a finite collection of standard deterministic supply functions. We introduce a consistency postulate for a stochastic supply function that may be satisfied even if no underlying deterministic supply function is rationalizable in terms of profit maximization. Our consistency postulate is nonetheless equivalent to a stochastic expansion of supply inequality, which summarizes the predictive content of the traditional theory of competitive supply. A number of key results in the deterministic theory follow as special cases from this equivalence. In particular, it yields a probabilistic version of the law of supply, which implies the traditional specification. Our analysis thus provides a necessary and sufficient axiomatic foundation for a de-coupling of the predictive content of the classical theory of competitive firm behavior from its a priori roots in profit maximization, while subsuming the traditional theory as a special case. Indraneel Dasgupta D21 L21 L30