"This paper aims to show that the market selection hypothesis in finance is not solely driven by the competitiveness of such markets, as was originally claimed by Alchian [1] and Friedman [4]. Within a standard intertemporal General Equilibrium framework, we allow for an agentnto have enough influence on financial markets to strategically affect prices of assets traded. We then show that, as in Sandroni [15], the agent’ long-run consumption will vanish if she makes less accurate predictions than the market, and maintain her market power otherwise. We conclude thatnthe Darwinian justification to this market selection is not the only explanation for the eventualndomination of agents making the most accurate predictions. Rather, we claim that the origin of market selection, and in turn of the common prior assumption in asset pricing, is associated withnthe ability to foresee accurately market uncertainty."
"This paper extends the convergence result on Bayesian learning in Kalai and Lehrern(1993a, 1993b) to a class of games where players have a payoff function continuous for the product topology. Provided that 1) every player maximizes her expected payoff against her own beliefs, 2) every player updates her beliefs in a Bayesian manner, and 3) prior beliefs other players’ strategies have a grain of truth, we show that after some finite time the equilibrium outcome of the above game is arbitrarily close to a Nash equilibrium. Those assumptions are shown to be tight."
Typical of the AIDS epidemics is that governments in developing countries under-invest in drugs production because of the possible appearance of a curative vaccine. We design a financialntool allowing to hedge against this event. We show that the introduction of this asset increases social welfare, as well as the number of patients treated and the provision of public good.
Elicitation methods in decision making under risk allow a researcher to infer thensubjective utilities of outcomes as well as the subjective weights of probabilities from observed preferences of an individual. An optimally efficient elicitation method is proposed, which takes into account the inevitable distortion of preferences by random errors and minimizesnthe effect of such errors on the inferred utility and probability weighting functions. Under mildnassumptions, the optimally efficient method for eliciting utilities (weights) of many outcomes (probabilities) is the following three-stage procedure. First, a probability is elicited whose subjective weight is one half. Second, an individual's utility function is elicited through the midpoint chaining certainty equivalent method employing the probability elicited at the first stagenas an input. Finally, an individual's probability weighting function is elicited through the probability equivalent method.
In dieser Arbeit werden die Auswirkungen des Frauenstimmrechts auf die Staatsausgaben in den Kantonen der Schweiz untersucht. Anhand dieser institutionell bedingten Veränderung des Elektorats studieren wir den Zusammenhang zwischen repräsentierten Bürgerpräferenzen und dem Ergebnis des politischen Prozesses. Da Frauen imnDurchschnitt einkommensärmer sind als Männer, steigt mit ihrer Beteiligung gemässnTheorien zur Grösse des Staatshaushaltes die Nachfrage nach staatlichen Leistungen.nEntgegen der Hypothese schätzen wir jedoch eine dämpfende Wirkung des Frauenstimmrechts auf die Entwicklung der Gesamtausgaben. Die zeitlich unterschiedliche Einführung des Rechts erlaubt dabei die Berücksichtigung allgemeiner Trends in Wirtschaft und Gesellschaft. Als Erklärungsversuche diskutieren wir die Möglichkeit fiskalischnkonservativer Frauen und einer Wechselwirkung des Frauenstimmrechts mit denndirektdemokratischen Institutionen.
"Alienation to politics weakens political competition and can undermine the acceptance and legitimacy of democracy as a political system. Governance andnrepresentation problems at the local level cause part of citizens’ lack of power andnpolitical alienation. Citizens have local power if they can process so that its outcomes are closer to their preferences and if they feel to be effective in the political sphere. In order to increase citizens’ local power, we emphasize the role of institutions of local governance. Local democratic governance is concerned about the relationship between citizens and local governmentninstitutions, political representatives and officials. This relationship is fundamentally shaped by the federal structure of a nation’s government and by the scope and depth of citizens’ participation possibilities in the political process. "
In imperfectly discriminating contests the contestants contribute effort to win a prize but the highest contributed effort does not necessarily secure a win. The contest success function (CSF) is the technology that translates an individual's effort into his or her probability of winning. This paper provides an axiomatization of CSF when there is the possibility of a draw (the sum of winning probabilities across all contestants is non-additive).
Firms are central to many theories of the labor market. However, the actual degree to which firms shape the structure of wages is still not well understood. This paper investigates (i) the importance of firms in explaining wage differences across individuals and industries, and (ii) how the nature of interfirm mobility - job-to-job vs. job-unemployment-job - affects the relative importance of firms and workers in wage determination. Results indicate that (i) firms are much more important in explaining the variance of average wages across industries rather than across individuals, and (ii) using job-to-job transitions to identify the firm's contribution to the wage rate reduces the importance of firm wage policies in explaining wage differences by as much as 50%.
This paper studies how changes in the two key parameters of unemployment insurance-the benefit replacement rate (RR) and the potential benefit duration (PBD)-affect the duration of unemployment. To identify such an effect we exploit a policy change introduced in 1989 by the Austrian government, which affected various unemployed workers differently: a first group experienced an increase in RR; a second group experienced an extension of PBD; a third group experienced both a higher RR and a longer PBD; and a fourth group experienced no change in the policy parameters. We find that unemployed workers react to the disincentives by an increase in unemployment duration, and our empirical results are consistent with the predictions of job search theory. We use our parameter estimates to split up the total costs to unemployment insurance funds into costs due to changes in the unemployment insurance system with unchanged behaviour and costs due to behavioural responses of unemployed workers. Our results indicate that costs due to behavioural responses are substantial.
"The optimal contest architecture for symmetric imperfectly discriminating contests isnshown to be generically the two-stage tournament (rather than the one-stage contest). In the first stage the contestants compete in several parallel divisions for the right to participate in the secondnstage. In the second stage the short-listed finalists compete for the prize. Given a sufficient number of contestants, the two-stage tournament is either strictly better or at least as good as the one-stage contest for maximizing an individual’s effort, for maximizing the aggregate effort andnfor minimizing the standard deviation of effort. For maximizing an individual’s effort it is generally optimal to have only two finalists in the second stage. For maximizing the aggregate effort or minimizing the standard deviation of effort the optimal number of finalists in the second stage depends on the discriminating power of the contest success function."
