Information, Coordination, and the Industrialization of Countries

The industrialization process of a country is often plagued by a failure to coordinate investment decisions. Using the Global Games approach we can solve this coordination problem and eliminate the problem of multiple equilibria. We show how appropriate information provision enhances efficiency. We discuss extensions of the model and argue that subsidies may be a property of a signalling equilibrium to overcome credibility problems in information provision. In addition we point out possible problems with overreaction to public information. Furthermore, we suggest a new focus for development policy

Determinants and Effects of Reserve Prices in Hattrick Auctions

We use a unique hand collected data set of 6,258 auctions from the online football manager game Hattrick to study determinants and effects of reserve prices. We find that chosen reserve prices exhibit both very sophisticated and suboptimal behavior by the sellers. On the one hand, reserve prices are adjusted remarkably nuanced to the resulting sales price pattern. However, reserve prices are too clustered at zero and at multiples of e 50,000 as to be consistent with fully rational behavior. We recover the value distribution and simulate the loss in expected revenue from suboptimal reserve prices. Finally, we find evidence for the sunk cost fallacy as there is a substantial positive effect on the reserve price when the player has been acquired previously

Free Riding in the Lab and in the Field

We run a public good experiment in the field and in the lab with (partly) the same subjects. The field experiment is a true natural field experiment as subjects do not know that they are exposed to an experimental variation. We can show that subjects' behavior in the classic lab public good experiment correlates with their behavior in the structurally comparable public good treatment in the field but not with behavior in any of two control treatments we ran in the field. This effect is also economically significant. We conclude that a) the classic lab public good experiment captures important aspects of structurally equivalent real life situations and b) that behavior in lab and field at least in our setting is driven by the same underlying forces

Commitment in R&D Tournaments via Strategic Delegation to Overoptimistic Managers

This paper shows that it is profitable for a firm to hire an overoptimistic manager to commit to a certain investment strategy in an R&D tournament situation. In the unique symmetric equilibrium, all firms delegate to overoptimistic managers, where the optimal degree of overoptimism depends on the riskiness of the tournament. In these situations a manager’s type may serve as a substitute for delegation via contracts. By delegating to overoptimistic managers, firms can escape the rat race nature of R&D tournaments.Strategic Delegation; Overoptimism; Tournaments

Two modes of gas flow in a single barred galaxy

We investigate stationary gas flows in a fixed, rotating barred potential. The gas is assumed to be isothermal with an effective sound speed c_s, and the equations of motion are solved with smoothed particle hydrodynamics (SPH). Since the thermal energy in cloud random motions is negligible compared to the orbital kinetic energy, no dependence of the flow on c_s is expected. However, this is not the case when shocks are involved. For low values of c_s an open, off-axis shock flow forms that is characteristic for potentials with an inner Lindblad resonance (ILR). Through this shock the gas streams inwards from x_1 to x_2-orbits. At high sound speeds the gas arranges itself in a different, on-axis shock flow pattern. In this case, there is no gas on x_2-orbits, demonstrating that the gas can behave as if there were no ILR. The critical effective sound speed dividing the two regimes is in the range of values observed in the Milky Way. We give a heuristic explanation for this effect. A possible consequence is that star formation may change the structure of the flow by which it was initiated. Low-mass galaxies should predominantly be in the on-axis regime. A brief comparison of our SPH results with those from a grid-based hydrodynamic code is also given.Comment: 12 pages, Latex. 9 figures (gif). Submitted to MNRAS. Also available with figures as ps-file at http://www.astro.unibas.ch/dynamics/papers.htm

Information, Coordination, and the Industrialization of Countries

The industrialization process of a country is often plagued by a failure to coordinate investment decisions. Using the Global Games approach we can solve this coordination problem and eliminate the problem of multiple equilibria. We show how appropriate information provision enhances efficiency. We discuss extensions of the model and argue that subsidies may be a property of a signalling equilibrium to overcome credibility problems in information provision. In addition we point out possible problems with overreaction to public information. Furthermore, we suggest a new focus for development policy.Information; Coordination; Industrialization; Development; Global Games; Equilibrium Refinements; Big Push

A Model of Strategic Delegation in Contests between Groups

We analyze a contest between two groups where group members have differing valuations for the contested rent. Generically the pivotal group member with the median valuation of the rent will not act himself but will want to send a group member that has preferences different to her own into the contest. The delegation can be either to more or less 'radical' group members. The direction of delegation depends on the order of moves and the relative 'aggressiveness' of the group medians. We show that almost certainly very asymmetric equilibria arise, even if the median group members value the rent (almost) equally. Delegation can lead to a social improvement in terms of resources spent in the contest.strategic delegation, contests, rent seeking, political economy, arms races, distributional conflict

Free-Riding in the Lab and in the Field

To investigate the external validity of laboratory results, we combine a public good experiment with three treatments in a field experiment. One treatment offers the opportunity to free-ride, the other two are placebo treatments. We compare results within subjects. In the free-riding treatment, subjects who contribute little in the lab are less productive. This effect is quantitatively as important as the effect of ability. The correlation between lab and field disappears in the two placebo treatments. We conclude that we can use lab experiments to learn about behavior in situations that share the game form but not necessarily the frame.field and lab experiments, external validity, public goods, team production

Free Riding in the Lab and in the Field

We run a public good experiment in the field and in the lab with (partly) the same subjects. The field experiment is a true natural field experiment as subjects do not know that they are exposed to an experimental variation. We can show that subjects' behavior in the classic lab public good experiment correlates with their behavior in the structurally comparable public good treatment in the field but not with behavior in any of two control treatments we ran in the field. This effect is also economically significant. We conclude that a) the classic lab public good experiment captures important aspects of structurally equivalent real life situations and b) that behavior in lab and field at least in our setting is driven by the same underlying forces.Field and Lab Experiments; External Validity; Public Goods; Team Production

Gas Dynamics and Large-Scale Morphology of the Milky Way Galaxy

We present a new model for the gas dynamics in the galactic disk inside the Sun's orbit. Quasi-equilibrium flow solutions are determined in the gravitational potential of the deprojected COBE NIR bar and disk, complemented by a central cusp and, in some models, an outer halo. These models generically lead to four-armed spiral structure between corotation of the bar and the solar circle; their large-scale morphology is not sensitive to the precise value of the bar's pattern speed, to the orientation of the bar with respect to the observer, and to whether or not the spiral arms carry mass. Our best model provides a coherent interpretation of many observed gas dynamical features. Its four-armed spiral structure outside corotation reproduces quantitatively the directions to the five main spiral arm tangents at |l|<=60deg observed in a variety of tracers. The 3-kpc-arm is identified with one of the model arms emanating from the ends of the bar, extending into the corotation region. The model features an inner gas disk with a cusped orbit shock transition to an x_2 orbit disk of radius R~150pc. The bar's corotation radius is fairly well--constrained at R_c=3.5 +/- 0.5 kpc. The best value for the orientation angle of the bar is probably 20-25deg, but the uncertainty is large since no detailed quantitative fit to all features in the observed lv-diagrams is yet possible. The Galactic terminal velocity curve from HI and CO observations out to l=+/-45deg (=5 kpc) is approximately described by a maximal disk model with constant mass-to-light ratio for the NIR bulge and disk.Comment: 24 pages, 16 figures, Latex, to appear in MNRAS. Available with full resolution figures at http://www.astro.unibas.ch/galaxies/papers.htm