Strategic Interaction and Conventions

The scope of the paper is the literature that employs coordination games to study social norms and conventions from the viewpoint of game theory and cognitive psychology. We claim that those two alternative approaches are complementary, as they provide different insights to explain how people converge to a unique system of self-fulfilling expectations in presence of multiple, equally viable, conventions. While game theory explains the emergence of conventions relying on efficiency and risk considerations, the psychological view is more concerned with frame and labeling effects. The interaction between these alternative (and, sometimes, competing) effects leads to the result that coordination failures may well occur and, even when coordination takes place, there is no guarantee that the convention eventually established will be the most efficient.

Choice of Flexible Production Technologies Under Strategic Delegation

This work analyzes a managerial delegation model in which firms can choose between a flexible production technology which allows them to produce two different products and a dedicated production technology which limits production to only one product. We analyze whether the incentives to adopt the flexible technology are smaller or greater in a managerial delegation model than under strict profit maximization. We obtain that the asymmetric equilibrium in which only one firm adopts the flexible technology can be sustained under strategic delegation but not under strict profit maximization when products are substitutes. We extend the analysis to consider welfare implications.

Cost-Saving production technologies and strategic delegation

This work analyzes a managerial delegation model in which firms that produce a differentiated good can choose between two production technologies: a low marginal cost technology and a high marginal cost technology. For the former to be adopted more investment is needed than for the latter. By giving managers of firms an incentive scheme based on a linear combination of profit and sales revenue, we find that Bertrand competition provides a stronger incentive to adopt the cost-saving technology than the strict profit maximization case. However, the results may be reversed under Cournot competition. We show that if the degree of product substitutability is sufficiently low (high), the incentive to adopt the cost-saving technology is larger under strict profit maximization (strategic delegation).

On the strategic equivalence of multiple-choice test scoring rules

A disadvantage of multiple-choice tests is that students have incentives to guess. To discourage guessing, it is common to use scoring rules that either penalize wrong answers or reward omissions. These scoring rules are considered equivalent in psychometrics, although experimental evidence has not always been consistent with this claim. We model students' decisions and show, first, that equivalence holds only under risk neutrality and, second, that the two rules can be modified so that they become equivalent even under risk aversion. This paper presents the results of a field experiment in which we analyze the decisions of subjects taking multiple-choice exams. The evidence suggests that differences between scoring rules are due to risk aversion as theory predicts. We also find that the number of omitted items depends on the scoring rule, knowledge, gender and other covariates.

Strategic Behavior and Collusion: An Application to the Spanish Electricity Market

The paper has two major contributions to the theory of repeated games. First, we build a supergame oligopoly model where firms compete in supply functions, we show how collusion sustainability is affected by the presence of a convex cost function, the magnitude of both the slope of demand market, and the number of rivals. Then, we compare the results with those of the traditional Cournot reversion under the same structural characteristics. We find how depending on the number of firms and the slope of the linear demand, collusion sustainability is easier under supply function than under Cournot competition. The conclusions of the models are simulated with data from the Spanish wholesale electricity market to predict lower bounds of the discount factors.

Morals in business organizations: an approach based on strategic value and strength for business management

[EN] In the last decades, the topic of business ethics has attracted great interest at the academic and professional levels. Nowadays business ethics is being increasingly implemented as a necessary discipline in universities’ study plans on business management. Moreover, its importance is also evident according to the worldwide increase of organizations and/or institutions that have implemented ethics systems. However, some approaches thoroughly do not consider the importance and the need of an ethical behaviour and are still guiding the actions and the way of thinking of many academics and professionals led to consider that the only responsibility of business is limited just to profit maximization.

Strategic Votes and Sincere Counterfactuals

The Random Utility Model (RUM) of voting behavior can account for strategic voting by making use of proxy indicators that measure voter incentives to vote strategically. The contribution of this paper is to propose a new method to estimate the RUM in the presence of strategic voters, without having to construct proxy measures of strategic voting incentives. Our method can be used to infer the counterfactual sincere vote of those who vote strategically and provides an estimate of the size of strategic voting. We illustrate the procedure using post-electoral survey data from Spain. Our calculations indicate that strategic voting in Spain is about 2.19 per cent

Uncertain Information Structures and Backward Induction

In everyday economic interactions, it is not clear whether sequential choices are visible or not to other participants: agents might be deluded about opponents'capacity to acquire,interpret or keep track of data, or might simply unexpectedly forget what they previously observed (but not chose). Following this idea, this paper drops the assumption that the information structure of extensive-form games is commonly known; that is, it introduces uncertainty into players' capacity to observe each others' past choices. Using this approach, our main result provides the following epistemic characterisation: if players (i) are rational,(ii) have strong belief in both opponents' rationality and opponents' capacity to observe others' choices, and (iii) have common belief in both opponents' future rationality and op-ponents' future capacity to observe others' choices, then the backward induction outcome obtains. Consequently, we do not require perfect information, and players observing each others' choices is often irrelevant from a strategic point of view. The analysis extends {from generic games with perfect information to games with not necessarily perfect information{the work by Battigalli and Siniscalchi (2002) and Perea (2014), who provide different sufficient epistemic conditions for the backward induction outcome.

International Support of Climate Change Policies in Developing Countries: Strategic, Moral and Fairness Aspects

33 p.

A Unifying model of strategic network formation

Documento de trabajo