Business Groups and Trade in East Asia: Part 2, Product Variety

We analyze the impact of market structure on the trade performance of South Korea, Taiwan and Japan. Korea has many large, vertically-integrated business groups known as chaebol, whereas business groups in Taiwan are smaller and more specialized in the production of intermediate inputs. We test the hypothesis that the greater vertical integration in Korea results in less product variety than for Taiwan, by constructing indexes product variety and ""product mix"" in their exports to the United States. It is found that Taiwan tends to export a greater variety of products to the U.S. than Korea, and this holds across all industries. In addition, Taiwan exports relatively more high-priced intermediate inputs, whereas Korea exports relatively more high-priced final goods. A comparison with Japan is also presented, and we find that that Japan has greater product variety in its sales to the U.S. than either Taiwan or Korea

What happens if you single out? An experiment

We present an experiment investigating the effects of singling out an individual on trust and trustworthiness. We find that (a) trustworthiness falls if there is a singled out subject; (b) non-singled out subjects discriminate against the singled out subject when they are not responsible of the distinct status of this person; (c) under a negative frame, the singled out subject returns significantly less; (d) under a positive frame, the singled out subject behaves bimodally, either selecting very low or very high return rates. Overall, singling out induces a negligible effect on trust but is potentially disruptive for trustworthiness

Studying strategies and types of players:Experiments, logics and cognitive models

How do people reason about their opponent in turn-taking games? Often, people do not make the decisions that game theory would prescribe. We present a logic that can play a key role in understanding how people make their decisions, by delineating all plausible reasoning strategies in a systematic manner. This in turn makes it possible to construct a corresponding set of computational models in a cognitive architecture. These models can be run and fitted to the participants’ data in terms of decisions, response times, and answers to questions. We validate these claims on the basis of an earlier game-theoretic experiment about the turn-taking game “Marble Drop with Surprising Opponent”, in which the opponent often starts with a seemingly irrational move. We explore two ways of segregating the participants into reasonable “player types”. The first way is based on latent class analysis, which divides the players into three classes according to their first decisions in the game: Random players, Learners, and Expected players, who make decisions consistent with forward induction. The second way is based on participants’ answers to a question about their opponent, classified according to levels of theory of mind: zero-order, first-order and second-order. It turns out that increasing levels of decisions and theory of mind both correspond to increasing success as measured by monetary awards and increasing decision times. Next, we use the logical language to express different kinds of strategies that people apply when reasoning about their opponent and making decisions in turn-taking games, as well as the ‘reasoning types’ reflected in their behavior. Then, we translate the logical formulas into computational cognitive models in the PRIMs architecture. Finally, we run two of the resulting models, corresponding to the strategy of only being interested in one’s own payoff and to the myopic strategy, in which one can only look ahead to a limited number of nodes. It turns out that the participant data fit to the own-payoff strategy, not the myopic one. The article closes the circle from experiments via logic and cognitive modelling back to predictions about new experiments

Communication, leadership and coordination failure

We investigate the limits of communication and leadership in avoiding coordination failure in minimum effort games. Our environment is challenging, with low benefits of coordination relative to the effort cost. We consider two leader types: cheap-talk leader-communicators who suggest an effort level, and first-mover leaders who lead by example. Both types of leadership have some ability to increase effort in groups with no history, but are insufficient in groups with a history of low effort. Using the strategy method for followers’ responses, we attribute the persistence of coordination failure to the presence of followers who do not follow the leader