Bargaining for power and information : an experimental and theoretical analysis of the interaction between institutions, externalities and adverse selection

Bargaining is the building block of many economic interactions, ranging from bilateral to multilateral encounters and from situations in which the actors are individuals to negotiations between firms or countries. In all these settings, economists have been intrigued for a long time by the fact that some projects, trades or agreements are not realized even though they are mutually beneficial. On the one hand, this has been explained by incomplete information. A firm may not be willing to offer a wage that is acceptable to a qualified worker, because it knows that there are also unqualified workers and cannot distinguish between the two types. This phenomenon is known as adverse selection. On the other hand, it has been argued that even with complete information, the presence of externalities may impede efficient outcomes. To see this, consider the example of climate change. If a subset of countries agrees to curb emissions, non-participant regions benefit from the signatories’ efforts without incurring costs. These free riding opportunities give rise to incentives to strategically improve ones bargaining power that work against the formation of a global agreement. This thesis is concerned with extending our understanding of both factors, adverse selection and externalities. The findings are based on empirical evidence from original laboratory experiments as well as game theoretic modeling. On a very general note, it is demonstrated that the institutions through which agents interact matter to a large extent. Insights are provided about which institutions we should expect to perform better than others, at least in terms of aggregate welfare. Chapters 1 and 2 focus on the problem of adverse selection. Effective operation of markets and other institutions often depends on good information transmission properties. In terms of the example introduced above, a firm is only willing to offer high wages if it receives enough positive signals about the worker’s quality during the application and wage bargaining process. In Chapter 1, it will be shown that repeated interaction coupled with time costs facilitates information transmission. By making the wage bargaining process costly for the worker, the firm is able to obtain more accurate information about the worker’s type. The cost could be pure time cost from delaying agreement or cost of effort arising from a multi-step interviewing process. In Chapter 2, I abstract from time cost and show that communication can play a similar role. The simple fact that a worker states to be of high quality may be informative. In Chapter 3, the focus is on a different source of inefficiency. Agents strive for bargaining power and thus may be motivated by incentives that are at odds with the socially efficient outcome. I have already mentioned the example of climate change. Other examples are coalitions within committees that are formed to secure voting power to block outcomes or groups that commit to different technological standards although a single standard would be optimal (e.g. the format war between HD and BlueRay). It will be shown that such inefficiencies are directly linked to the presence of externalities and a certain degree of irreversibility in actions. I now discuss the three articles in more detail. In Chapter 1, Olivier Bochet and I study a simple bilateral bargaining institution that eliminates trade failures arising from incomplete information. In this setting, a buyer makes offers to a seller in order to acquire a good. Whenever an offer is rejected by the seller, the buyer may submit a further offer. Bargaining is costly, because both parties suffer a (small) time cost after any rejection. The difficulties arise, because the good can be of low or high quality and the quality of the good is only known to the seller. Indeed, without the possibility to make repeated offers, it is too risky for the buyer to offer prices that allow for trade of high quality goods. When allowing for repeated offers, however, at equilibrium both types of goods trade with probability one. We provide an experimental test of these predictions. Buyers gather information about sellers using specific price offers and rates of trade are high, much as the model’s qualitative predictions. We also observe a persistent over-delay before trade occurs, and this mitigates efficiency substantially. Possible channels for over-delay are identified in the form of two behavioral assumptions missing from the standard model, loss aversion (buyers) and haggling (sellers), which reconcile the data with the theoretical predictions. Chapter 2 also studies adverse selection, but interaction between buyers and sellers now takes place within a market rather than isolated pairs. Remarkably, in a market it suffices to let agents communicate in a very simple manner to mitigate trade failures. The key insight is that better informed agents (sellers) are willing to truthfully reveal their private information, because by doing so they are able to reduce search frictions and attract more buyers. Behavior observed in the experimental sessions closely follows the theoretical predictions. As a consequence, costless and non-binding communication (cheap talk) significantly raises rates of trade and welfare. Previous experiments have documented that cheap talk alleviates inefficiencies due to asymmetric information. These findings are explained by pro-social preferences and lie aversion. I use appropriate control treatments to show that such consideration play only a minor role in our market. Instead, the experiment highlights the ability to organize markets as a new channel through which communication can facilitate trade in the presence of private information. In Chapter 3, I theoretically explore coalition formation via multilateral bargaining under complete information. The environment studied is extremely rich in the sense that the model allows for all kinds of externalities. This is achieved by using so-called partition functions, which pin down a coalitional worth for each possible coalition in each possible coalition structure. It is found that although binding agreements can be written, efficiency is not guaranteed, because the negotiation process is inherently non-cooperative. The prospects of cooperation are shown to crucially depend on i) the degree to which players can renegotiate and gradually build up agreements and ii) the absence of a certain type of externalities that can loosely be described as incentives to free ride. Moreover, the willingness to concede bargaining power is identified as a novel reason for gradualism. Another key contribution of the study is that it identifies a strong connection between the Core, one of the most important concepts in cooperative game theory, and the set of environments for which efficiency is attained even without renegotiation.

SMARTDIAB: a communication and information technology approach for the intelligent monitoring, management and follow-up of type 1 diabetes patients

SMARTDIAB is a platform designed to support the monitoring, management, and treatment of patients with type 1 diabetes mellitus (T1DM), by combining state-of-the-art approaches in the fields of database (DB) technologies, communications, simulation algorithms, and data mining. SMARTDIAB consists mainly of two units: 1) the patient unit (PU); and 2) the patient management unit (PMU), which communicate with each other for data exchange. The PMU can be accessed by the PU through the internet using devices, such as PCs/laptops with direct internet access or mobile phones via a Wi-Fi/General Packet Radio Service access network. The PU consists of an insulin pump for subcutaneous insulin infusion to the patient and a continuous glucose measurement system. The aforementioned devices running a user-friendly application gather patient's related information and transmit it to the PMU. The PMU consists of a diabetes data management system (DDMS), a decision support system (DSS) that provides risk assessment for long-term diabetes complications, and an insulin infusion advisory system (IIAS), which reside on a Web server. The DDMS can be accessed from both medical personnel and patients, with appropriate security access rights and front-end interfaces. The DDMS, apart from being used for data storage/retrieval, provides also advanced tools for the intelligent processing of the patient's data, supporting the physician in decision making, regarding the patient's treatment. The IIAS is used to close the loop between the insulin pump and the continuous glucose monitoring system, by providing the pump with the appropriate insulin infusion rate in order to keep the patient's glucose levels within predefined limits. The pilot version of the SMARTDIAB has already been implemented, while the platform's evaluation in clinical environment is being in progress.

Overview of literature and information on "khat-related" mortality: a call for recognition of the issue and further research

During the past 20 years or so, more has become known about the properties of khat, its pharmacology, physiological and psychological effects on humans. However, at the same time its reputation of social and recreational use in traditional contexts has hindered the dissemination of knowledge about its detrimental effects in terms of mortality. This paper focuses on this particular deficit and adds to the knowledge-base by reviewing the scant literature that does exist on mortality associated with the trade and use of khat. We sought all peer-reviewed papers relating to deaths associated with khat. From an initial list of 111, we identified 15 items meeting our selection criteria. Examination of these revealed 61 further relevant items. These were supplemented with published reports, newspaper and other media reports. A conceptual framework was then developed for classifying mortality associated with each stage of the plant's journey from its cultivation, transportation, consumption, to its effects on the human body. The model is demonstrated with concrete examples drawn from the above sources. These highlight a number of issues for which more substantive statistical data are needed, including population-based studies of the physiological and psychological determinants of khat-related fatalities. Khat-consuming communities, and health professionals charged with their care should be more aware of the physiological and psychological effects of khat, together with the risks for morbidity and mortality associated with its use. There is also a need for information to be collected at international and national levels on other causes of death associated with khat cultivation, transportation, and trade. Both these dimensions need to be understood.

A communication and information technology infrastructure for real time monitoring and management of type 1 diabetes patients

This paper is focused on the integration of state-of-the-art technologies in the fields of telecommunications, simulation algorithms, and data mining in order to develop a Type 1 diabetes patient's semi to fully-automated monitoring and management system. The main components of the system are a glucose measurement device, an insulin delivery system (insulin injection or insulin pumps), a mobile phone for the GPRS network, and a PDA or laptop for the Internet. In the medical environment, appropriate infrastructure for storage, analysis and visualizing of patients' data has been implemented to facilitate treatment design by health care experts.

Geocenter coordinates estimated from GNSS data as viewed by perturbation theory

Time series of geocenter coordinates were determined with data of two global navigation satellite systems (GNSSs), namely the U.S. GPS (Global Positioning System) and the Russian GLONASS (Global’naya Nawigatsionnaya Sputnikowaya Sistema). The data was recorded in the years 2008–2011 by a global network of 92 permanently observing GPS/GLONASS receivers. Two types of daily solutions were generated independently for each GNSS, one including the estimation of geocenter coordinates and one without these parameters. A fair agreement for GPS and GLONASS was found in the geocenter x- and y-coordinate series. Our tests, however, clearly reveal artifacts in the z-component determined with the GLONASS data. Large periodic excursions in the GLONASS geocenter z-coordinates of about 40 cm peak-to-peak are related to the maximum elevation angles of the Sun above/below the orbital planes of the satellite system and thus have a period of about 4 months (third of a year). A detailed analysis revealed that the artifacts are almost uniquely governed by the differences of the estimates of direct solar radiation pressure (SRP) in the two solution series (with and without geocenter estimation). A simple formula is derived, describing the relation between the geocenter z-coordinate and the corresponding parameter of the SRP. The effect can be explained by first-order perturbation theory of celestial mechanics. The theory also predicts a heavy impact on the GNSS-derived geocenter if once-per-revolution SRP parameters are estimated in the direction of the satellite’s solar panel axis. Specific experiments using GPS observations revealed that this is indeed the case. Although the main focus of this article is on GNSS, the theory developed is applicable to all satellite observing techniques. We applied the theory to satellite laser ranging (SLR) solutions using LAGEOS. It turns out that the correlation between geocenter and SRP parameters is not a critical issue for the SLR solutions. The reasons are threefold: The direct SRP is about a factor of 30–40 smaller for typical geodetic SLR satellites than for GNSS satellites, allowing it in most cases to not solve for SRP parameters (ruling out the correlation between these parameters and the geocenter coordinates); the orbital arc length of 7 days (which is typically used in SLR analysis) contains more than 50 revolutions of the LAGEOS satellites as compared to about two revolutions of GNSS satellites for the daily arcs used in GNSS analysis; the orbit geometry is not as critical for LAGEOS as for GNSS satellites, because the elevation angle of the Sun w.r.t. the orbital plane is usually significantly changing over 7 days.

The German business and information technologies project

The Business and Information Technologies (BIT) project strives to reveal new insights into how modern IT impacts organizational structures and business practices using empirical methods. Due to its international scope, it allows for inter-country comparison of empirical results. Germany — represented by the European School of Management and Technologies (ESMT) and the Institute of Information Systems at Humboldt-Universität zu Berlin — joined the BIT project in 2006. This report presents the result of the first survey conducted in Germany during November–December 2006. The key results are as follows: • The most widely adopted technologies and systems in Germany are websites, wireless hardware and software, groupware/productivity tools, and enterprise resource planning (ERP) systems. The biggest potential for growth exists for collaboration and portal tools, content management systems, business process modelling, and business intelligence applications. A number of technological solutions have not yet been adopted by many organizations but also bear some potential, in particular identity management solutions, Radio Frequency Identification (RFID), biometrics, and third-party authentication and verification. • IT security remains on the top of the agenda for most enterprises: budget spending was increasing in the last 3 years. • The workplace and work requirements are changing. IT is used to monitor employees' performance in Germany, but less heavily compared to the United States (Karmarkar and Mangal, 2007).1 The demand for IT skills is increasing at all corporate levels. Executives are asking for more and better structured information and this, in turn, triggers the appearance of new decision-making tools and online technologies on the market. • The internal organization of companies in Germany is underway: organizations are becoming flatter, even though the trend is not as pronounced as in the United States (Karmarkar and Mangal, 2007), and the geographical scope of their operations is increasing. Modern IT plays an important role in enabling this development, e.g. telecommuting, teleconferencing, and other web-based collaboration formats are becoming increasingly popular in the corporate context. • The degree to which outsourcing is being pursued is quite limited with little change expected. IT services, payroll, and market research are the most widely outsourced business functions. This corresponds to the results from other countries. • Up to now, the adoption of e-business technologies has had a rather limited effect on marketing functions. Companies tend to extract synergies from traditional printed media and on-line advertising. • The adoption of e-business has not had a major impact on marketing capabilities and strategy yet. Traditional methods of customer segmentation are still dominating. The corporate identity of most organizations does not change significantly when going online. • Online sales channel are mainly viewed as a complement to the traditional distribution means. • Technology adoption has caused production and organizational costs to decrease. However, the costs of technology acquisition and maintenance as well as consultancy and internal communication costs have increased.

Mitigating the syndromes of desertification: The requirements for transdisciplinary research and information exchange

In developing meaningful mitigation strategies to combat desertification, it is important to address the complex constellation of desertification under different bio-physical, social, demographic, political and economic conditions. In particular, desertification can be described as a cluster of key processes of global change which together form a typical syndrome. A critical reflection on the potential of research to help mitigate desertification will be a useful first step, before addressing the requirements for research partnerships between institutions at local levels and beyond. A practical example from Eritrea, an ecoregion which has been plagued by desertification for many centuries, is given at the end of the paper. It illustrates options for generating the necessary data and developing useful information in order to enhance the impact of research on sustainable development.

Circulation dynamics and its influence on European and Mediterranean January-April climate over the past half millennium: results and insights from instrumental data, documentary evidence and coupled climate models

We use long instrumental temperature series together with available field reconstructions of sea-level pressure (SLP) and three-dimensional climate model simulations to analyze relations between temperature anomalies and atmospheric circulation patterns over much of Europe and the Mediterranean for the late winter/early spring (January–April, JFMA) season. A Canonical Correlation Analysis (CCA) investigates interannual to interdecadal covariability between a new gridded SLP field reconstruction and seven long instrumental temperature series covering the past 250 years. We then present and discuss prominent atmospheric circulation patterns related to anomalous warm and cold JFMA conditions within different European areas spanning the period 1760–2007. Next, using a data assimilation technique, we link gridded SLP data with a climate model (EC-Bilt-Clio) for a better dynamical understanding of the relationship between large scale circulation and European climate. We thus present an alternative approach to reconstruct climate for the pre-instrumental period based on the assimilated model simulations. Furthermore, we present an independent method to extend the dynamic circulation analysis for anomalously cold European JFMA conditions back to the sixteenth century. To this end, we use documentary records that are spatially representative for the long instrumental records and derive, through modern analogs, large-scale SLP, surface temperature and precipitation fields. The skill of the analog method is tested in the virtual world of two three-dimensional climate simulations (ECHO-G and HadCM3). This endeavor offers new possibilities to both constrain climate model into a reconstruction mode (through the assimilation approach) and to better asses documentary data in a quantitative way.

dGEMRIC and subsequent T1 mapping of the hip at 1.5 Tesla: normative data on zonal and radial distribution in asymptomatic volunteers

To characterize the zonal distribution of three-dimensional (3D) T1 mapping in the hip joint of asymptomatic adult volunteers.