On dictatorship, economic development and stability

This paper aims to account for varying economic performances and political stability under dictatorship. We argue that economic welfare and social order are the contemporary relevant factors of political regimes' stability. Societies with low natural level of social order tend to tolerate predatory behavior from dictators in exchange of a provision of civil peace. The fear of anarchy may explain why populations are locked in the worst dictatorships. In contrast, in societies enjoying a relative natural civil peace, dictatorship is less likely to be predatory because low economic welfare may destabilize it.

Approval voting ion dichotomous preferences

The aim of this paper is to find normative foundations of Approval Voting. In order to show that Approval Voting is the only social choice function that satisfies anonymity, neutrality, strategy-proofness and strict monotonicity we rely on an intermediate result which relates strategy-proofness of a social choice function to the properties of Independence of Irrelevant Alternatives and monotonicity of the corresponding social welfare function. Afterwards we characterize Approval Voting by means of strict symmetry, neutrality and strict monotonicity and relate this result to May's Theorem. Finally, we show that it is possible to substitute the property of strict monotonicity by the one efficiency of in the second characterization.

Collusion and fights in an experiment with price-setting firms and production in advance

We present results from 50-round market experiments in which firms decide repeatedly both on price and quantity of a completely perishable good. Each firm has capacity to serve the whole market. The stage game does not have an equilibrium in pure strategies. We run experiments for markets with two and three identical firms. Firms tend to cooperate to avoid fights, but when they fight bankruptcies are rather frequent. On average, pricing behavior is closer to that for pure quantity than for pure price competition and price and efficiency levels are higher for two than for three firms. Consumer surplus increases with the number of firms, but unsold production leads to higher efficiency losses with more firms. Over time prices tend to the highest possible one for markets both with two and three firms.

Scoring rules on dichotomous preferences

In this paper, we study individual incentives to report preferences truthfully for the special case when individuals have dichotomous preferences on the set of alternatives and preferences are aggregated in form of scoring rules. In particular, we show that (a) the Borda Count coincides with Approval Voting on the dichotomous preference domain, (b) the Borda Count is the only strategy-proof scoring rule on the dichotomous preference domain, and (c) if at least three individuals participate in the election, then the dichotomous preference domain is the unique maximal rich domain under which the Borda Count is strategy-proof.

Fair and efficient student placement with couples

We study situations of allocating positions or jobs to students or workers based on priorities. An example is the assignment of medical students to hospital residencies on the basis of one or several entrance exams. For markets without couples, e.g., for ``undergraduate student placement,'' acyclicity is a necessary and sufficient condition for the existence of a fair and efficient placement mechanism (Ergin, 2002). We show that in the presence of couples, which introduces complementarities into the students' preferences, acyclicity is still necessary, but not sufficient (Theorem 4.1). A second necessary condition (Theorem 4.2) is ``priority-togetherness'' of couples. A priority structure that satisfies both necessary conditions is called pt-acyclic. For student placement problems where all quotas are equal to one we characterize pt-acyclicity (Lemma 5.1) and show that it is a sufficient condition for the existence of a fair and efficient placement mechanism (Theorem 5.1). If in addition to pt-acyclicity we require ``reallocation-'' and ``vacancy-fairness'' for couples, the so-called dictator-bidictator placement mechanism is the unique fair and efficient placement mechanism (Theorem 5.2). Finally, for general student placement problems, we show that pt-acyclicity may not be sufficient for the existence of a fair and efficient placement mechanism (Examples 5.4, 5.5, and 5.6). We identify a sufficient condition such that the so-called sequential placement mechanism produces a fair and efficient allocation (Theorem 5.3).

On the design of peer punishment experiments

We discuss how technologies of peer punishment might bias the results that are observed in experiments. A crucial parameter is the “fine-to-fee” ratio, which describes by how much the punished subjects income is reduced relatively to the fee the punishing subject has to pay to inflict punishment. We show that a punishment technology commonly used in experiments embeds a variable fine-to-fee ratio and show that it confounds the empirical findings about why, whom, and how much subjects punish.

Does illegal immigration empower rightist parties?

The main goal of this paper is to analyze the political outcome in countries where the relevant issue in elections is the control of immigration. In particular we explore the consequences on the political outcome of the fact that parties are either ideological or opportunistic with respect to this issue. In order to do that we use a simple two-party political competition model in which the issues over which parties take positions are the level of border enforcement and the way it has to be ?nanced. We show that an ideological rather than a pure opportunistic behavior gives parties an advantage to win the election. In particular, in most of the cases we consider we ?nd that rightist parties have an advantage to win in countries where the relevant issue in election is illegal immigration. This result may help us to understand the recent success of anti-immigrant and rightist parties in several countries.

Fairness under uncertainty with indivisibilities

I analyze an economy with uncertainty in which a set of indivisible objects and a certain amount of money is to be distributed among agents. The set of intertemporally fair social choice functions based on envy-freeness and Pareto efficiency is characterized. I give a necessary and sufficient condition for its non-emptiness and propose a mechanism that implements the set of intertemporally fair allocations in Bayes-Nash equilibrium. Implementation at the ex ante stage is considered, too. I also generalize the existence result obtained with envy-freeness using a broader fairness concept, introducing the aspiration function.

Optimal enforcement policy and firms' emissions and compliance with environmental taxes

In a market where firms with different characteristics decide upon both the level of emissions and their reports, we study the optimal audit policy for an enforcement agency whose objective is to minimize the level of emissions. We show that it is optimal to devote the resources primarily to the easiest-to-monitor firms and to those firms that value pollution the less. Moreover, unless the budget for monitoring is very large, there are always firms that do not comply with the environmental objective and others that do comply; but all of them evade the environmental taxes.

Sharing the surplus: a just and efficient proposal for environments with externalities

Economic activities, both on the macro and micro level, often entail wide-spread externalities. This in turn leads to disputes regarding the compensation levels to the various parties affected. We propose a general, yet simple, method of deciding upon the distribution of the gains (costs) of cooperation in the presence of externalities. This method is shown to be the unique one satisfying several desirable properties. Furthermore, we illustrate the use of this method to resolve the sharing of benefits generated by international climate control agreements.

Human capital as a factor of growth and employment at the regional level. The case of Spain

We use statistical techniques to quantify the effects of school attainment on individual wages, participation rates and employment probabilities in Spain, and to measure the contribution of education to labour productivity at the regional level. These estimates are then combined with data on private and public expenditure on education and with information on taxes and social benefits to construct measures of the private and social returns to schooling, to explore the effects of public policies on private incentives to invest in human capital, and to analyse the long-term effects of schooling on public finances. The results are used, together with estimates of the returns to alternative assets, to draw some tentative conclusions regarding the adequacy of the aggregate investment patterns observed in the regions of Spain, and to identify changes in the design of national and EU cohesion and growth policies that may help enhance their effectiveness.

Forming efficient networks

In this paper, we suggest a simple sequential mechanism whose subgame perfect equilibria give rise to efficient networks. Moreover, the payoffs received by the agents coincide with their Shapley value in an appropriately defined cooperative game.

Competition and well-being

We study the effects of competition in a context in which people's actions can not be contractually fixed. We find that in such an environment the very presence of competition does neither increase efficiency nor does it yield any payoff gains for the short side of the market. We also find that competition has a strong negative impact on social well-being, the disposition towards others, and individually experienced well-being, the emotional state, of those on the long side of the market. We conjecture that this limits the possibilities of satisfactory interaction in the future and, hence, has negative implications for efficiency in the longer-run

Unconstrained optimization with MINTOOLKIT for GNU octave

The paper documents MINTOOLKIT for GNU Octave. MINTOOLKIT provides functions for minimization and numeric differentiation. The main algorithms are BFGS, LBFGS, and simulated annealing. Examples are given.

A change would do you good . . . An experimental study on how to overcome coordination failure in organizations

Many organizations suffer poor performance because individuals within the organization fail to coordinate on efficient patterns of behavior. Using controlled laboratory experiments, we study how financial incentives can be used to find a way out of such performance traps. Our experiments are set in a corporate environment where subjects' payoffs depend on coordinating at high effort levels; the underlying game being played repeatedly by employees is a weak-link game. In an initial phase, the benefits of coordination are low relative to the cost of increased effort. Play in this initial phase typically converges to an inefficient outcome with employees failing to coordinate at high effort levels. The experimental design then explores the effects of varying the financial incentives to coordinate at a higher effort level. We find that an increase in the benefits of coordination leads to improved coordination, but, surprisingly, large increases have no more impact than small increases. Once subj