Evolutionary dynamics of Lewis signaling games: signaling systems vs. partial pooling

Transfer of information between senders and receivers, of one kind or another, is essential to all life. David Lewis introduced a game theoretic model of the simplest case, where one sender and one receiver have pure common interest. How hard or easy is it for evolution to achieve information transfer in Lewis signaling?. The answers involve surprising subtleties. We discuss some if these in terms of evolutionary dynamics in both finite and infinite populations, with and without mutation

Optimal Regulation of Private Production Contracts with Environmental Externalities

We address the problem of optimal regulation of an industry where the production of a polluting output is contracted with independent agents. The provision of inputs is divided between the principal and the agent such that the production externality results from their joint actions. The main result shows that in the three-tier hierarchy (regulator-firm-agent) involving a double-sided moral hazard, the equivalence across regulatory schemes generally obtains. The only task for the regulator is to determine the optimal total fiscal revenue in each state of nature because any sharing of the regulatory burden between the firm and the agent generates the same solution. The equivalence principle is upset only when the effects of regulation on the endogenous organizational choices are explicitly taken into account. Copyright Kluwer Academic Publishers 2004regulation, pollution, principal–agent relationship, moral hazard,