Autocratic rule in ethnically-diverse societies

An autocrat who is politically insecure may not invest in income-enhancing goods like education, roads, the rule of law, etc. The novelty of this paper is to argue that ethnic diversity and discrimination exacerbate an autocrat's fear of the negative effect of high income or income-enhancing investments like public education on his political survival. I show that in such ethnically-diverse societies, kleptocrats may be better off with a bigger share of a smaller national income than they are with a smaller share of a bigger national income. I discuss applications and limitations of my results.

Socially-Tolerable Discrimination

History is replete with overt discrimination on the basis of race, gender, age, citizenship, ethnicity, marital status, academic performance, health status, volume of market transactions, religion, sexual orientation, etc. However, these forms of discrimination are not equally tolerable. For example, discrimination based on immutable or prohibitively unalterable characteristics such as race, gender, or ethnicity is much less acceptable. Why? I develop a simple rent-seeking model of conflict which is driven by either racial (gender or ethnic) discrimination or generational discrimination (i.e., young versus old). When the conflicts are mutually exclusive, I find that racial discrimination is socially intolerable for a much wider range of parameter values relative to generational discrimination. When they are not mutually exclusive, I find that racial discrimination can be socially intolerable while generational discrimination is socially tolerable. The converse is not true. My results are not driven by a stronger intrinsic aversion to discrimination on the basis of immutable characteristics. I am able to explain why some forms of discrimination (e.g., racism) are much less tolerable than other forms of discrimination (e.g., age discrimination) without making any value judgements about either form of discrimination.conflict, contest, discrimination, race, generation, rent-seeking

Intentions and Social Interactions

In psychological games, higher-order beliefs, emotions, and motives - in addition to actions - affect players’ payoffs. Suppose you are tolerated as opposed to being genuinely accepted by your peers and “friends”. In particular, suppose you are invited to a party, movie, dinner, etc not because your company is desired but because the inviter would feel guilty if she did not invite you. In all of these cases, it is conceivable that the intention behind the action will matter and hence will affect your payoffs. I model intentions in a dynamic psychological game under incomplete information. I find a complex social interaction in this game. In particular, a player may stick to a strategy of accepting every invitation with the goal of discouraging insincere invitations. This may lead one to erroneously infer that this player is eagerly waiting for an invitation, when indeed his behavior is driven more by strategic considerations than by an excessive desire for social acceptance. I discuss how being tolerated but not being truly accepted can explain the rejection of mutually beneficial trades, the choice of identity, social exclusion, marital divorce, and its implication for political correctness and affirmative action.guilt, intentions, psychological game, second-order beliefs, social interaction

Guilt aversion and insincerity-induced disutility

Suppose you are invited to a party, movie, dinner, etc not because your company is desired but because the inviter would feel guilty if she did not invite you. Furthermore, suppose the inviter extends an insincere invitation hoping that you will reject it and thereby assuage his guilt. I characterize the perfect Bayesian psychological equilibria of this social interaction. I discuss the implications of insincerity aversion for the acquisition of information, the likelihood of cooperation, political correctness, choice of identity, psychological forward induction, and models with interdependent preference types. Note: This paper was previously circulated under the titles "intentions and social interaction" and "a psychological game with the interdependent preference types." The current version is a SIGNIFICANTLY revised version and supersedes both earlier versions.

Socially-Tolerable Discrimination

History is replete with overt discrimination of various forms. However, these forms of discrimination are not equally tolerable. For example, discrimination based on immutable or prohibitively unalterable characteristics such as race or gender is much less acceptable. Why? I develop a simple model of conflict which is driven by either racial (gender) discrimination or generational discrimination (i.e., young versus old). I show that there exist parameters of the model where racial (gender) discrimination leads to conflict but generational discrimination does not.

A psychological game with interdependent preference types

Suppose you are invited to a party, movie, dinner, etc not because your company is desired but because the inviter would feel guilty if she did not invite you. Interestingly, this social interaction is, under certain conditions a game with interdependent preferences types combined with either (i) a psychological game, or (ii) a standard Bayesian game. I find a complex social interaction in this game. In particular, there exists a unique equilibrium in which a player may stick to a strategy of accepting every invitation with the goal of discouraging insincere invitations. This may lead one to erroneously infer that this player is eagerly waiting for an invitation, when indeed his behavior is driven more by strategic considerations than by an excessive desire for social acceptance.

Misery loves company: social influence and the supply/pricing decision of a popular restaurant

In a model with social influence, Becker (1991) offers an explanation for why popular restaurants with excess demand do not raise their prices. He also offers an explanation for why such restaurants do not increase supply but admits his explanation may be weak. Becker does not provide a formal analysis of why supply is not increased. In this paper, I present a formal analysis of Becker's argument based on a different kind of social influence. I also offer an alternative explanation of why some restaurants are popular and others are not. Finally, while Becker (1991) includes market demand and the gap between market demand and supply as separate arguements in the customers' demand function to explan why supply and price are not increased. I only include the gap between demand and supply in the customers' utility function to explain both puzzles.cost of failure; excess demand; social influence

Socially-Tolerable Discrimination

History is replete with overt discrimination on the basis of race, gender, age, citizenship, ethnicity, marital status, academic performance, health status, volume of market transactions, religion, sexual orientation, etc. However, these forms of discrimination are not equally tolerable. For example, discrimination based on immutable or prohibitively unalterable characteristics such as race, gender, or ethnicity is much less acceptable. Why? I develop a simple rent-seeking model of conflict which is driven by either racial (gender or ethnic) discrimination or generational discrimination (i.e., young versus old). When the conflicts are mutually exclusive, I find that racial discrimination is socially intolerable for a much wider range of parameter values relative to generational discrimination. When they are not mutually exclusive, I find that racial discrimination can be socially intolerable while generational discrimination is socially tolerable. The converse is not true. My results are not driven by a stronger intrinsic aversion to discrimination on the basis of immutable characteristics. I am able to explain why some forms of discrimination (e.g., racism) are much less tolerable than other forms of discrimination (e.g., age discrimination) without making any value judgements about either form of discrimination.conflict, contest, discrimination, race, generation, rent-seeking

American Idol: Should it be a Singing Contest or a Popularity Contest?

In the very popular FOX TV reality show, American Idol, the judges, who are presumably experts in evaluating singing effort, have no voting power when the field is narrowed to the top twenty-four contestants. It is only the votes of viewers that count. In the 2007 season of the show, one of the judges, Simon Cowell, threatened to quit the show if a contestant, Sanjaya Malakar, who was clearly a low-ability contestant, won the competition. He was concerned that the show was becoming a popularity contest instead of a singing contest. Is this a problem? Not necessarily. I show that, under certain conditions, making success in the contest dependent on a contestant’s popularity and not solely on her singing ability or performance, could paradoxically increase aggregate singing effort. It may be optimal to give the entire voting power to the viewers whose evaluation of singing effort or ability is noisier.American Idol, contests, tournaments