The Role of Expectation in Job Search and Firm Size Effect on Wages

One of the most puzzling facts in economics is the firm size-wage effect. After controlling for the observable characteristics of workers (age, gender, education, residence etc.), firms (industry, occupation, work conditions etc.) and negotiation effect (unionization), one still finds that the sheer size of a firm increases the wage, contrary to the one-good one-price doctrine. We provide a simple dynamic game model of wage determination to give a new rationale to the firm size-wage effect. We think that the wages are not market clearing prices but strategies by firms. Firms choose wages to control workers' search behavior. The essential feature of the model is that a large firm's history of wages is observable to all the current and future workers, while a small firm is not visible and only its current offer is observable. Therefore a small firm is expected to be a myopic low-wage payer, and its workers search and quit often. A large firm can prevent search if it maintained a high wage throughout the past, thus making workers expect high future wages. In this way, the firm size determines the worker expectations of its future wages, which changes the quit rate and equilibrium wages. To give additional support to our theoretical result, we test a new aspect of firm size-wage effect. Since the effect on wage levels are extensively studied, we derive two main hypotheses on wage gains after job changes. (H1) The proportion of firms that are larger than the previous employer increases the wage gain. (H2) The size of the previous employer decreases the wage gain. The firm size distribution effect (H1) is a new test. We obtain supports for both. Thus we conclude that the wages are strategies and affected by how workers utilize the firm size information in changing jobs. (297 words.)

"Voluntarily Separable Prisoner's Dilemma with Reference Letters"

We consider voluntarily separable repeated Prisoner's Dilemma in which a pair of players meet randomly and repeatedly play Prisoner's Dilemma only by mutual agreement. Fujiwara-Greve and Okuno-Fujiwara (2007) consider the case that once a partnership is dissolved there is no information flow to other partnerships. We consider the case that players can issue a reference letter to the partner if they entered cooperation periods, but the content of a letter is not verifiable. We show that the sheer existence of a letter shortens the trust-building periods of new matches and thus improves efficiency in equilibrium.

Voluntarily Separable Repeated Prisoner’s Dilemma.

Abstract: In Fujiwara-Greve and Okuno-Fujiwara (2009), an evolutionary stability concept was defined by allowing mutations of any strategy. However, in human societies, not all strategies are likely to be tried out when a player considers what happens in the future. In this paper we introduce the "shared belief" of potential continuation strategies, generated and passed on in a society, and mutations are restricted only among best responses against the shared belief. We show that a myopic strategy becomes a part of a bimorphic equilibrium under a shared belief and contributes to a higher payoff than ordinary neutrally stable distributions'

"Social Norms and Voluntary Cooperations"(in Japanese)

Unlike the ordinary repeated games, in the real world, people can run away after cheating. In this paper we construct a social game, in which players can repeat Prisoners' Dilemma only if both players agree to continue the partnership. We investigate how a social sanction prevents moral hazard in such a voluntary relationship. We have three conclusions. First, it is possible to enforce voluntary long-term cooperation by trust-building. Second, the trust-building periods can be shortened under diverse strategy distributions. Third, if there is a reference letter system which conveys information that a partnership ended by an unavoidable cause, then the trust-building periods can be shortened as well.

Cooperation in Repeated Prisoner’s Dilemma with Outside Options

経済学 / EconomicsIn many repeated interactions, repetition is not guaranteed but instead must be agreed upon. We formulate a model of voluntary repetition by introducing outside　options to a repeated Prisoner’s Dilemma and investigate how the structure of outside options affects the sustainability of mutual cooperation. When the outside　option is deterministic and greater than the value of mutual defection, the lower bound of the discount factors that sustain repeated cooperation is greater than the　one for ordinary repeated Prisoner’s Dilemma, making cooperation more difficult. However,stochastic outside options with the same mean may reduce the lower　bound of discount factors as compared to the deterministic case. This is possible when the stochasticity of the options increases the value of the cooperation phase　more than the value of the punishment phase. Necessary and sufficient conditions for this positive effect are given under various option structures.JEL Classification Codes: C73http://www.grips.ac.jp/list/jp/facultyinfo/yasuda_yosuke

Learning by (limited) forward looking players

We present a model of adaptive economic agents who are k periods forward looking. Agents in our model are randomly matched to interact in finitely repeated games. They form beliefs by learning from past behavior of others and then best respond to these beliefs looking k periods ahead. We establish almost sure convergence of our stochastic process and characterize absorbing sets. These can be very different from the predictions in both the fully rational model and the adaptive, but myopic case. In particular we find that also Non-Nash outcomes can be sustained whenever they satisfy a "local" efficiency condition. We then characterize stochastically stable states in a class of 2. ×. 2 games and show that under certain conditions the efficient action in Prisoner's Dilemma games and coordination games can be singled out as uniquely stochastically stable. We show that our results are consistent with typical patterns observed in experiments on finitely repeated Prisoner's Dilemma games and in particular can explain what is commonly called the "endgame effect" and the "restart effect". Finally, if populations are composed of some myopic and some forward looking agents, parameter constellations exist such that either might obtain higher average payoffs

Leave and let leave: A sufficient condition to explain the evolutionary emergence of cooperation

The option to leave your current partner in response to his behavior, also known as conditional dissociation, is a mechanism that has been shown to promote the emergence and stability of cooperation in many social interactions. This mechanism, nevertheless, has always been studied in combination with other factors that are known to support cooperation by themselves. In this paper, we isolate the effect of conditional dissociation on the evolution of cooperation and show that this mechanism is enough to sustain a significant level of cooperation if the expected lifetime of individuals is sufficiently longACCESS (EU, 12-120610), SIMULPAST (MICINN, CSD2010-00034) and SPPORT (JCyL, VA056A12-2). L.R.I. Spanish Ministry of Education for grant JC2009-0026

Learning in Network Games

We report the findings of experiments designed to study how people learn in network games. Network games offer new opportunities to identify learning rules, since on networks (compared to e.g. random matching) more rules differ in terms of their information requirements. Our experimental design enables us to observe both which actions participants choose and which information they consult before making their choices. We use these data to estimate learning types using finite mixture models. Monitoring information requests turns out to be crucial, as estimates based on choices alone show substantial biases. We also find that learning depends on network position. Participants in more complex environments (with more network neighbours) tend to resort to simpler rules compared to those with only one network neighbour

Comparative Analysis of Expressed Sequence Tag (EST) Libraries in the Seagrass Zostera marina Subjected to Temperature Stress

Global warming is associated with increasing stress and mortality on temperate seagrass beds, in particular during periods of high sea surface temperatures during summer months, adding to existing anthropogenic impacts, such as eutrophication and habitat destruction. We compare several expressed sequence tag (EST) in the ecologically important seagrass Zostera marina (eelgrass) to elucidate the molecular genetic basis of adaptation to environmental extremes. We compared the tentative unigene (TUG) frequencies of libraries derived from leaf and meristematic tissue from a control situation with two experimentally imposed temperature stress conditions and found that TUG composition is markedly different among these conditions (all P < 0.0001). Under heat stress, we find that 63 TUGs are differentially expressed (d.e.) at 25°C compared with lower, no-stress condition temperatures (4°C and 17°C). Approximately one-third of d.e. eelgrass genes were characteristic for the stress response of the terrestrial plant model Arabidopsis thaliana. The changes in gene expression suggest complex photosynthetic adjustments among light-harvesting complexes, reaction center subunits of photosystem I and II, and components of the dark reaction. Heat shock encoding proteins and reactive oxygen scavengers also were identified, but their overall frequency was too low to perform statistical tests. In all conditions, the most abundant transcript (3–15%) was a putative metallothionein gene with unknown function. We also find evidence that heat stress may translate to enhanced infection by protists. A total of 210 TUGs contain one or more microsatellites as potential candidates for gene-linked genetic markers. Data are publicly available in a user-friendly database at http://www.uni-muenster.de/Evolution/ebb/Services/zostera