Implementation, elimination of weakly dominated strategies and evolutionary dynamics

This paper is concerned with the realism of mechanisms that implement social choice functions in the traditional sense. Will agents actually play the equilibrium assumed by the analysis? As an example, we study the convergence and stability properties of Sj\"ostr\"om's (1994) mechanism, on the assumption that boundedly rational players find their way to equilibrium using monotonic learning dynamics and also with fictitious play. This mechanism implements most social choice functions in economic environments using as a solution concept the iterated elimination of weakly dominated strategies (only one round of deletion of weakly dominated strategies is needed). There are, however, many sets of Nash equilibria whose payoffs may be very different from those desired by the social choice function. With monotonic dynamics we show that many equilibria in all the sets of equilibria we describe are the limit points of trajectories that have completely mixed initial conditions. The initial conditions that lead to these equilibria need not be very close to the limiting point. Furthermore, even if the dynamics converge to the ``right'' set of equilibria, it still can converge to quite a poor outcome in welfare terms. With fictitious play, if the agents have completely mixed prior beliefs, beliefs and play converge to the outcome the planner wants to implement.Implementation, bounded rationality, evolutionary dynamics, mechanisms

IMPLEMENTATION, ELIMINATION OF WEAKLY DOMINATED STRATEGIES AND EVOLUTIONARY DYNAMICS

This paper studies convergence and stability properties of Sjöström's (1994) mechanism, under the assumption that boundedly rational players find their way to equilibrium using monotonic learning dynamics and best-reply dynamics. This mechanism implements most social choice functions in economic environments using as a solution concept one round of deletion of weakly dominated strategies and one round of deletion of strictly dominated strategies. However, there are other sets of Nash equilibria, whose payoffs may be very different from those desired by the social choice function. With monotonic dynamics, all these sets of equilibria contain limit points of the learning dynamics. Furthermore, even if the dynamics converge to the "right" set of equilibria (i.e. the one which contains the solution of the mechanism), it may converge to an equilibrium which is worse in welfare terms. In contrast with this result, any interior solution of the best-reply dynamics converges to the equilibrium whose outcome the planner desires.Implementation Theory, Evolutionary Dynamics

A proposal for a world database on transport infrastructure regulation

The paper presents the structure and the concepts at the basis of a database on world transport infrastructure regulation, to be launched. The database will be built promoting a “soft” survey on the world regulatory practices, to be filled by scholars and experts on a voluntary basis. The goal of the database is to stimulate research on best practices and interaction among regulators, regulated and scholars. The work is still under construction. The database structure is ready and the survey is already launched, but incomplete. This paper is a preliminary document which provides a detailed description of the aims and of the database structure, in order to circulate the project and collect suggestions from the academic community. The structure of the paper is as follows. After a presentation of the aims of the work, section 2 provides a literature review on existing databases. Section 3 details the project, describing the characteristics of the survey, the strengths and weaknesses of the approach, the network to be activated. Section 4 is giving more details on the actual structure of the database and of the corresponding survey. Section 5 gives notice of the first results obtained with a preliminary survey and a preliminary review of literature on some selected countries. Conclusions will outline the next steps of the research.transport; regulation; investment; infrastructure; database; survey

Social Preferences and Strategic Uncertainty: An Experiment on Markets and Contracts

This paper reports experimental evidence on a stylized labor market. The experiment is designed as a sequence of three phases. In the rst two phases, P1 and P2; agents face simple games, which we use to estimate subjects social and reciprocity concerns, together with their beliefs. In the last phase, P3; four principals, who face four teams of two agents, compete by o¤ering agents a contract from a xed menu. Then, each agent selects one of the available contracts (i.e. he "chooses to work" for a principal). Production is determined by the outcome of a simple effort game induced by the chosen contract. We nd that (heterogeneous) social preferences are signi cant determinants of choices in all phases of the experiment. Since the available contracts display a trade-of between fairness and strategic uncertainty, we observe that the latter is a much stronger determinant of choices, for both principals and agents. Finally, we also see that social preferences explain, to a large extent, matching between principals and agents, since agents display a marked propensity to work for principals with similar social preferences

Social Preferences and Strategic Uncertainty: An Experiment on Markets and Contracts

This paper reports experimental evidence on a stylized labor market. The experiment is designed as a sequence of three phases. In the rst two phases, P1 and P2; agents face simple games, which we use to estimate subjects social and reciprocity concerns, together with their beliefs. In the last phase, P3; four principals, who face four teams of two agents, compete by o¤ering agents a contract from a xed menu. Then, each agent selects one of the available contracts (i.e. he "chooses to work" for a principal). Production is determined by the outcome of a simple effort game induced by the chosen contract. We nd that (heterogeneous) social preferences are signi cant determinants of choices in all phases of the experiment. Since the available contracts display a trade-of between fairness and strategic uncertainty, we observe that the latter is a much stronger determinant of choices, for both principals and agents. Finally, we also see that social preferences explain, to a large extent, matching between principals and agents, since agents display a marked propensity to work for principals with similar social preferences

An experiment on markets and contracts : do social preferences determine corporate culture?

This paper reports experimental evidence on a stylized labor market. The experiment is designed as a sequence of three treatments. In the last treatment, TR3, four principals, who face four teams of two agents, compete by offering the agents a contract from a fixed menu. In this menu, each contract is the optimal solution of a (complete information) mechanism design problem where principals face agents’ who have social (i.e. interdependent) distributional preferences a’ la Fehr and Schmidt [19] with a specific parametrization. Each agent selects one of the available contracts offered by the principals (i.e. he “chooses to work” for a principal). Production is determined by the outcome of a simple effort game induced by the chosen contract. In the first two treatments, TR1 and TR2, we estimate individual social preference parameters and beliefs in the effort game, respectively. We find that social preferences are significant determinants of the matching process between labor supply and demand in the market stage, as well as principals’ and agents’ contract and effort decisions. In addition, we also see that social preferences explain the matching process in the labor market, as agents display a higher propensity to choose to work for a principal with similar distributional preferences.

Social Preferences and Strategic Uncertainty: An Experiment on Markets and Contracts

This paper reports experimental evidence on a stylized labor market. The experiment is designed as a sequence of three phases. In the first two phases, P1 and P2; agents face simple games, which we use to estimate subjects' social and reciprocity concerns, together with their beliefs. In the last phase, P3; four principals, who face four teams of two agents, compete by offering agents a contract from a fixed menu. Then, each agent selects one of the available contracts (i.e. he "chooses to work" for a principal). Production is determined by the outcome of a simple effort game induced by the chosen contract. We find that (heterogeneous) social preferences are significant determinants of choices in all phases of the experiment. Since the available contracts display a trade-off between fairness and strategic uncertainty, we observe that the latter is a much stronger determinant of choices, for both principals and agents. Finally, we also see that social preferences explain, to a large extent, matching between principals and agents, since agents display a marked propensity to work for principals with similar social preferences.social preferences; team incentives; mechanism design; experimental economics

A Wasserstein distance based multiobjective evolutionary algorithm for the risk aware optimization of sensor placement

Abstract In this paper we propose a new algorithm for the identification of optimal "sensing spots", within a network, for monitoring the spread of "effects" triggered by "events". This problem is referred to as "Optimal Sensor Placement" and many real-world problems fit into this general framework. In this paper sensor placement (SP) (i.e., location of sensors at some nodes) for the early detection of contaminants in water distribution networks (WDNs) will be used as a running example. Usually, we have to manage a trade-off between different objective functions, so that we are faced with a multi objective optimization problem. (MOP). The best trade-off between the objectives can be defined in terms of Pareto optimality. In this paper we model the sensor placement problem as a multi objective optimization problem with boolean decision variables and propose a Multi Objective Evolutionary Algorithm (MOEA) for approximating and analyzing the Pareto set. The evaluation of the objective functions requires the execution of a simulation model: to organize the simulation results in a computationally efficient way we propose a data structure collecting simulation outcomes for every SP which is particularly suitable for visualization of the dynamics of contaminant concentration and evolutionary optimization. This data structure enables the definition of information spaces, in which a candidate placement can be represented as a matrix or, in probabilistic terms as a histogram. The introduction of a distance between histograms, namely the Wasserstein (WST) distance, enables to derive new genetic operators, indicators of the quality of the Pareto set and criteria to choose among the Pareto solutions. The new algorithm MOEA/WST has been tested on two benchmark water distribution networks and a real world network. Preliminary results are compared with NSGA-II and show a better performance, in terms of hypervolume and coverage, in particular for relatively large networks and low generation counts

Probabilistic measures of edge criticality in graphs: a study in water distribution networks

AbstractThe issue of vulnerability and robustness in networks have been addressed by several methods. The goal is to identify which are the critical components (i.e., nodes/edges) whose failure impairs the functioning of the network and how much this impacts the ensuing increase in vulnerability. In this paper we consider the drop in the network robustness as measured by the increase in vulnerability of the perturbed network and compare it with the original one. Traditional robustness metrics are based on centrality measures, the loss of efficiency and spectral analysis. The approach proposed in this paper sees the graph as a set of probability distributions and computes, specifically the probability distribution of its node to node distances and computes an index of vulnerability through the distance between the node-to-node distributions associated to original network and the one obtained by the removal of nodes and edges. Two such distances are proposed for this analysis: Jensen–Shannon and Wasserstein, based respectively on information theory and optimal transport theory, which are shown to offer a different characterization of vulnerability. Extensive computational results, including two real-world water distribution networks, are reported comparing the new approach to the traditional metrics. This modelling and algorithmic framework can also support the analysis of other networked infrastructures among which power grids, gas distribution and transit networks