On the Role of Non-equilibrium Focal Points as Coordination Devices

Considering a pure coordination game with a large number of equivalent equilibria, we argue, first, that a focal point that is itself not a Nash equilibrium and is Pareto dominated by all Nash equilibria, may attract the players' choices. Second, we argue that such a non-equilibrium focal point may act as an equilibrium selection device that the players use to coordinate on a closely related small subset of Nash equilibria. We present theoretical as well as experimental support for these two new roles of focal points as coordination devices.Coordination game, Focal point, Nash equilibrium, Equilibrium selection, Coordination device

Gift Exchange and the Separation of Ownership and Control

Numerous gift exchange experiments have found a positive relationship between employers' wage offers and workers' effort levels. In (almost) all these experiments the employer both owns and controls the firm. Yet in reality many firms are characterized by the separation of ownership and control. In this paper we explore to what extent this affects the wage-effort relationship observed. We compare the standard bilateral gift exchange game between an owner-manager and a worker with two trilateral ones where the firm is owned by a shareholder and controlled by a manager. The wage-effort relationship we observe is the same in all three situations. Most strikingly, workers still reward higher wages with higher effort levels, even when the manager responsible for choosing the wage does not share in the firm's profits at all. The results of a fourth treatment in which the wage is exogenously given suggest that workers feel reciprocal towards the firm as a whole; both ownership and control are important for the gift exchange relationship

Regional allocation of public funds: an evaluation index

When different levels of government coexist in the same country, it is often imperative to implement an 'objective' system for transferring funds automatically among them. With the method presented in this paper one may address the question of how the relative need of public services, and therefore the allocation of funds, may be estimated for different communities. It is based on the idea of comparing the access to the public services in every community, through the use of a statistical treatment in which a set of indicators are aggregated into an indicator of need, which is used to allocate funds in order to reach 'equal access'. The method is then applied to the case of Spain.