The Evolution of Social Norms and Individual Preferences

Why does an altruistically inclined player behave altruistically in some contexts and egoistically or spitefully in others? This article provides an economic explanation to this question. The basic argument is centered on the idea that social norms shape our preferences through a process of cultural learning. In particular, we claim that, in contexts with a stable norm of reciprocity, an altruistic player can respond in kind to egoistic or spiteful players by behaving either egoistically or spitefully when confronting them and yet continue to be an altruistic player. This is why, instead of studying the evolution of preferences as such, in this work we analyze the evolution of social norms that indirectly determine individual preferences and behavior. Such a study requires that we distinguish between players' behavioral preferences, or those individuals show with their behavior, and players' intrinsic preferences, or those they inherently support or favor. We argue that, whereas the former can change through the evolution of social norms, in this case a reciprocity norm, the latter are not subject to evolutionary pressures and, therefore, we assume them to be given.Social norms, reciprocity, endogenous preferences, asymmetric evolutionary game

Cost-Benefit Estimation of Cadaveric Kidney Transplantation, the Case of a Developing Country

In this paper we estimate cost savings for the health-care system and quality of life improvement for patients from an increase in the number of kidney transplants in Chile. To do so, we compare the present value of dialysis and transplantation costs and quality of life in a 20-year horizon. We used Markov models and, in addition, introduce some degree of uncertainty in the value of some of the parameters that build up the model and, using Montecarlo simulations, estimate confidence intervals for our results. Our estimates suggest that an additional kidney transplant has an expected savings value of US$28,000 for the health-care system. If quality of life improvement is also considered, expected savings rise to US$ 102,000. These results imply that, increasing donation rate by one donor per million people would turn into an estimated cost saving of US$827,000 per year, or near US$ 3 million per year if the effect in the quality of life is considered. These results demonstrate that kidney transplants, along with a better quality of life for patients are a cost saving decision in developing countries.Cost-benefit analysis, kidney transplantation, quality adjusted life years, markov models

Global Games with Strategic Substitutes

In this paper we use a non cooperative equilibrium selection approach as a notion of stability in link formation games. Specifically, we follow the global games approach first introduced by Carlsson and van Damme (1993), to study the robustness of the set of Nash equilibria for a class of link formation games in strategic form with supermodular payo. functions. Interestingly, the equilibrium selected is in conflict with those predicted by the traditional cooperative refinements. Moreover, we get a conflict between stability and e.ciency even when no such conflict exists with the cooperative refinements. We discuss some practical issues that these di.erent theoretical approaches raise in reality. The paper also provides an extension of the global game theory that can be applied beyond network literature.Games, Networks, Equilibrium Selection.

Stability and Equilibrium Selection in a Link Formation Game

In this paper we use a non cooperative equilibrium selection approach as a notion of stability in link formation games. Specifically, we follow the global games approach first introduced by Carlsson and van Damme (1993), to study the robustness of the set of Nash equilibria for a class of link formation games in strategic form with supermodular payoff functions. Interestingly, the equilibrium selected is in conflict with those predicted by the traditional cooperative refinements. Moreover, we get a conflict between stability and efficiency even when no such conflict exists with the cooperative refinements. We discuss some practical issues that these different theoretical approaches raise in reality. The paper also provides an extension of the global game theory that can be applied beyond network literature.Global Games, Equilibrium Selection, Networks.

Network Structure in a Link-formation Game: An Experimental Study

Network formation is frequently modeled using link-formation games and typically present a multiplicity of Nash equilibria. Cooperative refinements - such as strong or coalitional proof Nash equilibria - have been the standard tool used for equilibrium selection in these games. Non-cooperative refinements derived from the theory of global games have shown also that, for a class of payoff functions, multiplicity of equilibria disappears when the game is perturbed by introducing small amounts of incomplete information. We conducted a laboratory study evaluating the predictive power of each of these refinements in an illustrative link-formation game. Compared with cooperative game solutions, the global game approach did significantly better at predicting the strategies played by individuals in the experiment.Networks, global games, cooperative games, equilibrium selection, experimental economics

Auctions with Resale Market and Asymmetric Information

In this paper we study the role of resale opportunities in secondary markets over the bidding process in first and second price auctions. This trade opportunity arises owing to the presence of two factors. On the one hand, after receiving the object, the winner obtains new information about the object’s value and on the other hand, the winner may suffer a liquidity shock that force him to sell the object regardless of his valuation. The buyer in the secondary market, however, does not know if the good is being sold because the new information reveals bad news regarding the object’s valuation, or because a liquidity shock affected the seller. Our results show that revenue equivalence still holds, and bids are usually lower than those observed in the absence of liquidity shocks.Auctions, resale market, adverse selection

The Role of Social Networks on Regulation in the Telecommunication Industry

This paper studies the welfare implications of equilibrium behavior in a market characterized by competition between two interconnected telecommunication firms, subject to constraints: the customers belong to a social network. It also shows that social networks matter because equilibrium prices and welfare critically depend on how people are socially related. Next, the model is used to study effectiveness of alternative regulatory schemes. The standard regulated environement, in which the authority defines interconnection ac cess charges as being equal to marginal costs and final prices are left to the market, is considered as a benchmark. Then, we focus on the performance of two different regulatory interventions. First, access prices are set below marginal costs to foster competition. Second, switching costs are reduced to intensify competition. The results show that the second strategy is more efective to obtain equilibrium prices closer to Ramsey's level.Access charges, social networks, random regular graphs

Modeling the evolution of herbicide resistance in weed species with a complex life cycle

A growing number of weed species have evolved resistance to herbicides in recent years, which causes an immense financial burden to farmers. An increasingly popular method of weed control is the adoption of crops that are resistant to specific herbicides, which allows farmers to apply the herbicide during the growing season without harming the crop. If such crops are planted in the presence of closely related weed species, it is possible that resistance genes could transfer from the crop species to feral populations of the wild species via gene flow and become stably introgressed under ongoing selective pressure by the herbicide. We use a density-dependent matrix model to evaluate the effect of planting such crops on the evolution of herbicide resistance under a range of management scenarios. Our model expands on previous simulation studies by considering weed species with a more complex life cycle (perennial, rhizomatous weed species), studying the effect of environmental variation in herbicide effectiveness, and evaluating the role of common simplifying genetic assumptions on resistance evolution. Our model predictions are qualitatively similar to previous modeling studies using species with a simpler life cycle, which is, crop rotation in combination with rotation of herbicide site of action effectively controls weed populations and slows the evolution of herbicide resistance. We find that ignoring the effect of environmental variation can lead to an over- or under-prediction of the speed of resistance evolution. The effect of environmental variation in herbicide effectiveness depends on the resistance allele frequency in the weed population at the beginning of the simulation. Finally, we find that degree of dominance and ploidy level have a much larger effect on the predicted speed of resistance evolution compared to the rate of gene flow. Includes 5 supplemental file