A theory of reference-dependent behavior

Extensive field and experimental evidence in a variety of environments show that behavior depends on a reference point. This paper provides an axiomatic characterization of this dependence. We proceed by imposing gradually more structure on both choice correspondences and preference relations, requiring increasingly higher levels of rationality, and freeing the decision-maker from certain types of inconsistencies. The appropriate degree of behavioral structure will depend on the phenomenon that is to be modeled. Lastly, we provide two applications of our work: one to model the status-quo bias, and another to model addictive behavior.

Externalities and interdependent growth: Theory and evidence

I formulate and estimate a model of externalities within countriesand technological interdependence across countries. I find that externalreturns to scale to physical capital within countries are 8 percent; thata 10 percent increase of total factor productivity of a country's neighborsraises its total factor productivity by 6 percent; and that a 2 percentannual growth rate of labor productivity can be explained as an endogenousresponse to an exogenous 0.2 percent annual growth rate of total factorproductivity in the steady--state.

Reinitialization of evolutionary clocks during sublethal environmental stress in some invertebrates

This paper describes the influence of high environmental stress on evolutionary trends in some selected Mesozoic ammonite lineages and some protists. During extinction periods, many ammonoids are affected by drastic simplifications of their shell geometry, ornamentation and suture line. We observe that relatively tightly coiled ammonites can give rise to highly evolute forms or uncoiled heteromorphs with simple ornamentation and almost ceratitic suture line-a phenomenon called "proteromorphosis". Such simplifications often correspond to a reappearance of ancestral geometries (primitive ornamentation, evolute coiling or uncoiling) which suggest that the evolutionary clock of these organisms can be reinitialized by extreme, sublethal, environmental stress such as giant volcanism (including its consequences on diverse pollutions and on climatic changes) and major regressive events. (c) 2006 Elsevier B.V. All rights reserved.

Parental altruism under imperfect information: Theory and evidence

Can we reconcile the predictions of the altruism model of the familywith the evidence on intervivos transfers in the US? This paper expandsthe altruism model by introducing e ?ort of the child and by relaxingthe assumption of perfect information of the parent about the labormarket opportunities of the child. First, I solve and simulate a modelof altruism under imperfect information. Second, I use cross-sectionaldata to test a prediction of the model: Are parental transfers especiallyresponsive to the income variations of children who are very attached tothe labor market? The results suggest that imperfect information accountsfor several patterns of intergenerational transfers in the US.

Emergence of Cooperation on Static and Dynamic Networks

Game theory is a branch of applied mathematics used to analyze situation where two or more agents are interacting. Originally it was developed as a model for conflicts and collaborations between rational and intelligent individuals. Now it finds applications in social sciences, eco- nomics, biology (particularly evolutionary biology and ecology), engineering, political science, international relations, computer science, and philosophy. Networks are an abstract representation of interactions, dependencies or relationships. Net- works are extensively used in all the fields mentioned above and in many more. Many useful informations about a system can be discovered by analyzing the current state of a network representation of such system. In this work we will apply some of the methods of game theory to populations of agents that are interconnected. A population is in fact represented by a network of players where one can only interact with another if there is a connection between them. In the first part of this work we will show that the structure of the underlying network has a strong influence on the strategies that the players will decide to adopt to maximize their utility. We will then introduce a supplementary degree of freedom by allowing the structure of the population to be modified along the simulations. This modification allows the players to modify the structure of their environment to optimize the utility that they can obtain.

Stochastic evolution of rules for playing normal form games

The evolution of boundedly rational rules for playing normal form games is studied within stationary environments ofstochastically changing games. Rules are viewed as algorithms prescribing strategies for the different normal formgames that arise. It is shown that many of the folk results of evolutionary game theory typically obtained witha fixed game and fixed strategies carry over to the present case. The results are also related to recent experimentson rules and games.

The growth and diffusion of knowlegde and the theory of the firm

We analyze the implications of a market imperfection related to the inability to establish intellectual property rights, that we label {\it unverifiable communication}. Employees are able to collude with external parties selling ``knowledge capital'' of the firm. The firm organizer engages in strategic interaction simultaneously with employees and competitors, as she introduces endogenous transaction costs in the market for information between those agents. Incentive schemes and communication costs are the key strategic variables used by the firm to induce frictions in collusive markets. Unverifiable communication introduces severe allocative distortions, both at internal product development and at intended sale of information (technology transfer). We derive implications of the model for observable decisions like characteristics of the employment relationship (full employment, incompatibility with other jobs), firms' preferences over cluster characteristics for location decisions, optimal size at entry, in--house development vs sale strategies for innovations and industry evolution.

A search theory of money and commerce with Neoclassical production

This paper advances a highly tractable model with search theoretic foundations for money and neoclassical growth. In the model, manufacturingand commerce are distinct and separate activities. In manufacturing,goods are efficiently produced combining capital and labor. In commerce,goods are exchanged in bilateral meetings. The model is applied to studythe effects of inßation on capital accumulation and welfare. With realisticparameters, inflation has large negative effects on welfare even though itraises capital and output. In contrast, with cash-in-advance, a deviceinformally motivated with bilateral trading, inflation depresses capitaland output and has a negligible effect on welfare.

Mycorrhizal ecology and evolution: the past, the present, and the future.

1406 I. 1407 II. 1408 III. 1410 IV. 1411 V. 1413 VI. 1416 VII. 1418 1418 References 1419 SUMMARY: Almost all land plants form symbiotic associations with mycorrhizal fungi. These below-ground fungi play a key role in terrestrial ecosystems as they regulate nutrient and carbon cycles, and influence soil structure and ecosystem multifunctionality. Up to 80% of plant N and P is provided by mycorrhizal fungi and many plant species depend on these symbionts for growth and survival. Estimates suggest that there are c. 50 000 fungal species that form mycorrhizal associations with c. 250 000 plant species. The development of high-throughput molecular tools has helped us to better understand the biology, evolution, and biodiversity of mycorrhizal associations. Nuclear genome assemblies and gene annotations of 33 mycorrhizal fungal species are now available providing fascinating opportunities to deepen our understanding of the mycorrhizal lifestyle, the metabolic capabilities of these plant symbionts, the molecular dialogue between symbionts, and evolutionary adaptations across a range of mycorrhizal associations. Large-scale molecular surveys have provided novel insights into the diversity, spatial and temporal dynamics of mycorrhizal fungal communities. At the ecological level, network theory makes it possible to analyze interactions between plant-fungal partners as complex underground multi-species networks. Our analysis suggests that nestedness, modularity and specificity of mycorrhizal networks vary and depend on mycorrhizal type. Mechanistic models explaining partner choice, resource exchange, and coevolution in mycorrhizal associations have been developed and are being tested. This review ends with major frontiers for further research.

Social security in theory and practice (I): Facts and political theories

166 countries have some kind of public old age pension. What economic forcescreate and sustain old age Social Security as a public program? We document some of the internationally and historically common features of Social Security programs including explicit and implicit taxes on labor supply, pay-as-you-go features, intergenerational redistribution, benefits which areincreasing functions of lifetime earnings and not means-tested. We partition theories of Social Security into three groups: "political", "efficiency" and "narrative" theories. We explore three political theories in this paper: the majority rational voting model (with its two versions: "the elderly as the leaders of a winning coalition with the poor" and the "once and for all election" model), the "time-intensive model of political competition" and the "taxpayer protection model". Each of the explanations is compared with the international and historical facts. A companion paper explores the "efficiency" and "narrative" theories, and derives implicationsof all the theories for replacing the typical pay-as-you-go system with a forced savings plan.

Parental altruism under imperfect information: Theory and evidence

Can we reconcile the predictions of the altruism model of the family withthe evidence on parental monetary transfers in the US? This paper providesa new assessment of this question. I expand the altruism model by introducingeffort of the child and by relaxing the assumption of perfect informationof the parent about the labor market opportunities of the child. First,I solve and simulate a model of altruism and labor supply under imperfectinformation. Second, I use cross-sectional data to test the following prediction of the model: Are parental transfers especially responsive tothe income variations of children who are very attached to the labor market? The results of the analysis suggest that imperfect informationaccounts for many of the patterns of intergenerational transfers in theUS.

Indentifying human capital externalities: Theory with an application to US cities

The identification of aggregate human capital externalities is still not fully understood. The existing (Mincerian) approach confounds positive externalities with wage changes due to a downward sloping demand curve for human capital. As a result, it yields positive externalities even when wages equal marginal social products. We propose an approach that identifies human capital externalities whether or not aggregate demand for human capital slopes downward. Another advantage of our approach is that it does not require estimates of the individual return to human capital. Applications to US cities and states between 1970 and 1990 yield no evidence of significant average -schooling externalities.

On the structural difference between the evolutionary approach of Young and that of Kandori, Mailath and Rob

We provide robust examples of symmetric two-player coordination games in normal form that reveal that equilibrium selection bythe evolutionary model of Young (1993) is essentially different from equilibrium selection by the evolutionary model of Kandori, Mailath and Rob (1993).

A positive theory of geographic mobility and social insurance

This paper presents a tractable dynamic general equilibrium model thatcan explain cross-country empirical regularities in geographical mobility,unemployment and labor market institutions. Rational agents vote overunemployment insurance (UI), taking the dynamic distortionary effects ofinsurance on the performance of the labor market into consideration.Agents with higher cost of moving, i.e., more attached to their currentlocation, prefer more generous UI. The key assumption is that an agent'sattachment to a location increases the longer she has resided there. UIreduces the incentive for labor mobility and increases, therefore, thefraction of attached agents and the political support for UI. The mainresult is that this self-reinforcing mechanism can give rise to multiplesteady-states-one 'European' steady-state featuring high unemployment,low geographical mobility and high unemployment insurance, and one'American' steady-state featuring low unemployment, high mobility andlow unemployment insurance.

Endogeneous matching in university-industry collaboration: Theory and empirical evidence from the UK

We develop a two-sided matching model to analyze collaboration between heterogeneousacademics and firms. We predict a positive assortative matching in terms of both scientificability and affinity for type of research, but negative assortative in terms of ability on one sideand affinity in the other. In addition, the most able and most applied academics and the mostable and most basic firms shall collaborate rather than stay independent. Our predictionsreceive strong support from the analysis of the teams of academics and firms that proposeresearch projects to the UK's Engineering and Physical Sciences Research Council.