Competition for status acquisition in public good games

This paper examines the role of status acquisition as a motive for giving in voluntary contri- butions to public goods. In particular, every donor's status is given by the difference between his contribution and that of the other donor. Specifically, I show that contributors give more than in standard models where status is not considered, and their donation is increasing in the value they assign to status. In addition, players'contributions are increasing in the value that their opponents assign to status, reflecting donors' intense competition to gain social status. Furthermore, I consider contributors'equilibrium strategies both in simultaneous and sequen- tial contribution mechanisms. Then, I compare total contributions in both of these mechanisms. I find that the simultaneous contribution order generates higher total contributions than the sequential mechanism only when donors are sufficiently homogeneous in the value they assign to status. Otherwise, the sequential mechanism generates the highest contributions. Updated 6-03-09.Public goods games, Status acquisition, Competition.

Social Comparisons as a device for cooperation in simultaneous-move games

This paper analyzes the effects of players' relative comparisons in complete information simultaneous-move games. In particular, every individual is assumed to evaluate the kindness she infers from other players'choices by comparing these choices with respect to a given refer- ence level. Specifically, this paper identifies under what conditions the introduction of relative comparisons leads players to be more cooperative than in standard game-theoretic models. I show that this result holds under certain conditions on the specific reference point that players use in their relative comparisons, and on whether players'relative comparisons leads them to regard each others' actions as more strategic complementary or substitutable. The model is then applied to different examples in public good games which enhance the intuition behind the results. Finally, I show that some existing models in the literature of intentions-based reciprocity and social status acquisition can be rationalized as special cases.Relative comparisons, Reference points, Simultaneous-move games, Kindness, Strategic complementarities.

Signaling Concerns about Fairness: Cooperation under Uncertain Social Preferences

This paper investigates incomplete information and signaling about players?inequity aversion in the simultaneous and sequential-move prisoner?s dilemma game. We first evaluate the role of incomplete information according to: (1) whether uncertainty helps select the effcient equilibrium outcome, and (2) whether more cooperation can be sustained under incomplete than under complete information. We then examine the possibility of information transmission among individuals in a signaling game. A separating equilibrium can be supported in which players with high concerns about fairness bear the cost of cooperating in order to reveal their type to opponents, thus promoting cooperation in subsequent periods. We also fi?nd a pooling equilibrium in which a player unconcerned about inequity aversion initially cooperates in order to mislead the uninformed player. This misleading strategy induces cooperation from the uninformed player in the subsequent stage of the game, moment at which the unconcerned player takes the opportunity to defect. This "backstabbing" equilibrium helps explain frequently observed behavior in ?finitely-repeated experiments.Prisoner?s Dilemma; Inequity aversion; Incomplete Information; Signaling

Unobserved Capacity Constraints and Entry Deterrence

This paper examines entry deterrence and signaling when an incumbent firm experiences a capacity constraint, arising from either her productive efficiency or the high market demand she faces. In both cases, we demonstrate that separating and pooling equilibria can be sustained. Our results show that if the costs that constrained and unconstrained incumbents face when expanding their facilities are substantially different, the separating equilibrium can be supported under large parameter values. In this case, information is perfectly transmitted to the entrant. If, in contrast, both types of incumbent face similar expansion costs, a policy reducing expansion costs can help move the industry from a pooling equilibrium to the separating equilibrium with associated efficient entry. Nonetheless, our results show that if this policy is overemphasized entry patterns remain unaffected, suggesting a potential disadvantage of policies that significantly reduce firms’ expansion costs.Business expansion; Signaling; Entry Deterrence

Keeping Negotiations in the Dark: Environmental Agreements under Incomplete Information

This paper investigates the role of uncertainty as a tool to support cooperation in international environmental agreements. We consider two layers of uncertainty. Under unilateral uncertainty treaties become successful with positive probability in the signaling game, even under parameter conditions for which no agreement is reached under complete information. Under bilateral uncertainty, a separating equilibrium emerges where the leader participates in the treaty only when its environmental concerns are high. We show that the agreement is signed for larger sets of parameter values under unilateral uncertainty. We then show that further layers of uncertainty might enhance social welfare.Signaling games; Unilaterial uncertainty; Bilateral uncertainty; Non-binding negotiations

Can Incomplete Information Lead to Under-exploitation in the Commons

This paper analyzes the protection of a common pool resource (CPR) through the manage- ment of information. Speci?cally, we examine an entry deterrence model between an incumbent perfectly informed about the initial stock of a CPR and an uninformed potential entrant. In our model, the appropriation of the CPR by the incumbent reduces both players?future pro?ts from exploiting the resource. In the case of complete information, we show that the incumbent operating in a high-stock common pool overexploits the CPR during the ?rst period since it does not internalize the negative external e¤ect that its ?rst-period exploitation imposes on the en- trant?s future pro?ts. This ine¢ ciency, however, is absent when the common totally regenerates across periods. Under incomplete information, we identify an additional form of ine¢ ciency. In particular, the incumbent operating in a low-stock CPR underexploits the resource in order to signal the low available stock to potential entrants, deterring entry. When the common fully regenerates, we show that such underexploitation becomes more signi?cant since the low-stock incumbent aims to protect its larger monopoly pro?ts.Common Pool Resources; Signaling games; Externalities

The Informative Role of Subsidies

This paper investigates the effect of monopoly subsidies on entry deterrence. We consider a potential entrant who observes two signals: the subsidy set by the regulator and the output level produced by the incumbent firm. We show that not only an informative equilibrium can be supported, where information about the incumbent's costs is conveyed to the entrant, but also an uninformative equilibrium, where the actions of regulator and incumbent conceal the monopolist's type, thus deterring entry. While the regulator?s role can support entry-deterrence practices, we demonstrate that his presence is nonetheless welfare improving. Furthermore, we compare equilibrium welfare relative to two benchmarks: complete information environments, and standard entry-deterrence games where the regulator is absent.Entry deterrence; Signaling; Monopoly subsidies

Social comparisons and Reference points in Game-theoretic models

This thesis analyzes how players' relative evaluation of the actions other agents choose affects individuals' strategic behavior, both in simultaneous and sequential-move games. First, in "The importance of foregone options: generalizing social comparisons in sequential-move games" (joint work with Ana Espinola-Arredondo), we examine a tractable theoretical model in which every individual compares other players' actions with respect to their foregone choices. We analyze the equilibrium prediction in complete information sequential-move games, and compare it with that of standard games where players are not concerned about unchosen alternatives. We show that, without relying on interpersonal payoff comparisons (i.e., assuming strictly individualistic preferences), our model predicts higher cooperation among the players than standard game-theoretic models. In addition, our framework embodies different behavioral models, such as those on social status acquisition as special cases. Finally, we confirm our results in different economic applications.In "Social comparisons as a cooperating device in simultaneous-move games", I extend the above setting to simultaneous-move games. Specifically, I identify under what conditions introducing relative comparisons into players' preferences leads them to be more cooperative than in standard game-theoretic models. I show that this result holds under certain conditions on the reference point that players use in their relative comparisons (which determines when a particular action by other agent is considered kind or not) and on whether players' actions become more strategic complementary or substitutable. The model is then applied to different examples in public good games which confirm the intuition behind the results.Finally, in "Competition for status acquisition in public good games" I apply the above models of social comparisons to the context of status acquisition through contributions to public goods. I show that the simultaneous contribution order generates higher total contributions than the sequential mechanism only when donors are sufficiently homogeneous in the value they assign to status. Otherwise, the sequential mechanism generates the highest contributions

Environmental Protection Agencies: Measuring the Welfare Benefits from Regulation under Different Information Contexts

This paper evaluates the welfare benefits of introducing environmental regulation in a market that is subject to the threat of entry. We consider complete and incomplete information settings, where potential entrants use the regulator’s tax policy and the incumbent’s output decisions in order to infer the incumbent’s cost structure. When the regulator is absent, we show that firms? entry-deterring practices increase pollution relative to complete information. Hence, under certain conditions, environmental regulation becomes more beneficial in incomplete than in complete information contexts. Our results, therefore, identify under which cases an under-or over-estimation of the welfare benefits of environmental regulation arises from ignoring the information setting in which firms interact. We also examine how this estimation error increases as firms become more symmetric in their production costs.Entry deterrence; Signaling; Emission fees; Welfare Benefits

When does Disinformation Promote Successful Treaties

This paper analyzes the negotiation of a non-binding treaty where agents are uninformed about each others?ability to comply with the terms of the agreement. We show that the presence of incomplete information allows the treaty to become successful under larger set of parameter conditions than under complete information. The paper also examines the welfare properties of our equilibrium results, showing a welfare improvement relative to complete information under certain conditions. Finally, we extend our analysis to settings where countries?types are correlated, ?nding that the equilibrium outcome where information is conveyed can be supported under larger conditions, whereas equilibria where information is concealed are sustained under a more restrictive set of parameter values.Signaling games; Information transmission; non-binding negotiations; Correlated types