In the Hamadryas baboon, males are substantially larger than females. A troop of baboons is subdivided into a number of ‘one-male groups’, consisting of one adult male and one or more females with their young. The male prevents any of ‘his’ females from moving too far from him. Kummer (1971) performed the following experiment. Two males, A and B, previously unknown to each other, were placed in a large enclosure. Male A was free to move about the enclosure, but male B was shut in a small cage, from which he could observe A but not interfere. A female, unknown to both males, was then placed in the enclosure. Within 20 minutes male A had persuaded the female to accept his ownership. Male B was then released into the open enclosure. Instead of challenging male A , B avoided any contact, accepting A’s ownership.

Evolution and the Theory of Games

https://web.stanford.edu/~johntayl/Papers/ISOM+revised+(EER).pdf

Low inflation, pass-through, and the pricing power of firms

For some, it is an article of faith that governmentowned firms must be less efficient or, at least, less profitable than privately owned firms. Maxim Boycko et al. (1996) argue that politicians cause government-owned firms to employ excess labor inputs. Anne O. Krueger (1990) suggests that such firms may be pressured to hire politically connected people rather than those best qualified to perform desired tasks. More generally, government-owned firms are thought to forgo maximum profit in the pursuit of social and political objectives, such as wealth redistribution. In addition, the residual cash flow claims of these firms are not readily transferable like the shares of a private corporation. This impairs residual claimant incentives to monitor managers and, ultimately, degrades firm performance. As a consequence, one expects government-owned firms to be technically less efficient and, therefore, less profitable than private firms. The implication is that in competitive markets without significant externalities private ownership is the superior organizational form. The view that government firms are inherently less efficient than private ones, however, remains controversial among economists. John Vickers and George Yarrow (1991), among others, point out that agency problems arise in private firms as well as public ones. In most large private corporations managers own little of the stock. Because monitoring managers is costly, a divergence arises between their objectives and those of private shareholders. Private shareholders typically hold a small stake in any one firm and it may not pay any shareholder to bear the cost of monitoring management. It follows from this discussion that whether government firms are more or less efficient than private firms is primarily an empirical issue. To date the body of empirical evidence is mixed. In this paper, we report further empirical evidence on the relative efficiency of public and private enterprises. We build on previous work by studying larger samples over longer time periods and by allowing for additional factors that influence firm performance. In particular, our analysis controls for time-series variation in the general level of economic activity that may otherwise confound performance comparisons between government and private firms. 2 We approach the issue in two different ways. First, using accounting numbers, we conduct a large-sample cross-sectional comparison of government-owned and privately owned corporations. This comparison is similar in design to that of Boardman and Vining (1989), but our sample is three times the size of theirs and includes three

State-Owned and Privately Owned Firms: An Empirical Analysis of Profitability, Leverage, and Labor Intensity

A substantial number of people exhibit social preferences, which means they are not solely motivated by material self-interest but also care positively or negatively for the material payoffs of relevant reference agents. We show empirically that economists fail to understand fundamental economic questions when they disregard social preferences, in particular, that without taking social preferences into account, it is not possible to understand adequately (i) effects of competition on market outcomes, (ii) laws governing cooperation and collective action, (iii) effects and the determinants of material incentives, (iv) which contracts and property rights arrangements are optimal, and (v) important forces shaping social norms and market failures.

/pdf/why-social-preferences-matter-the-impact-of-non-selfish-5g6wozlwk1.pdf

Why Social Preferences Matter - The Impact of Non-Selfish Motives on Competition, Cooperation and Incentives

Over the past decades financial investment of non-financial businesses has been rising and accumulation of capital goods has been declining. The first part of the paper offers a novel theory to explain this phenomenon. Financialization, the shareholder revolution and the development of a market for corporate control have shifted power to shareholders and thus changed management priorities, leading to a reduction in the desired growth rate. In the second part the link between accumulation and financialization is tested econometrically by means of a time series analysis of aggregate business investment for USA, UK, France, and Germany. Extensive test of robustness are performed. For the first three countries evidence that confirms the negative effect of financialization on accumulation is found. (author's abstract)

Financialisation and the slowdown of accumulation

We provide a new explanation for why firms pay for general training in a competitive labor market. If firms are unable to tailor individual wages to ability, for informational or institutional reasons, they will pay for general training in order to attract better quality workers. The market provision of training may well exceed the first best level. Our explanation relies on wage compression within skill categories, while imperfect competition based explanations for firm subsidised general training rely on wage compression across skill categories.

https://papers.ssrn.com/sol3/Delivery.cfm/SSRN_ID382920_code030228590.pdf?abstractid=382920&mirid=1

Wage Differentiation via Subsidised General Training

We propose a simple model of wage dispersion arising from oligopsonistic competition in the labor market. Our model has workers who are equally able but who have heterogeneous preferences for non-wage characteristics, while employers have heterogeneous productivity characteristics. We completely and explicitly solve for the equilibrium wage distribution and show that "inside" and "outside" forces interact in wage determination. This interaction generates spillover effects of minimum wages in a manner which is consistent with the empirical evidence.

Oligopsony and the Distribution of Wages

We study dynamic moral hazard where principal and agent are symmetrically uncertain about job difficulty. Since effort is unobserved, shirking leads the principal to believe that the job is hard, increasing the agent's continuation value. So deterring shirking requires steeper incentives, which induce the agent to over-work today, since he can quit if the principal believes that the job is easy. With continuous effort choices, no interior effort is implementable in the first period. The agent's continuation value function is non-differentiable and convex, since the principal makes the agent indifferent between his discrete (participation) choices in the second period. The problem can be solved if the agent's participation decision is made continuous, or if there are long-term commitments, and we provide conditions for the first order approach to work. However, the impossibility result recurs in other agency models that combine discrete and continuous choices.

https://www.ucl.ac.uk/~uctpvbh/ratchet-continuum-dp.pdf

The Ratchet Effect Re-examined: A Learning Perspective

We study perfect information games with an innite horizon played by an arbitrary number of players. This class of games includes innitely repeated perfect information games, repeated games with asynchronous moves, games with long and short run players, games with overlapping generations of players, and canonical non-cooperative models of bargaining. We consider two restrictions on equilibria. An equilibrium is puriable if close by behavior is consistent with equilibrium when agents’ payos at each node are perturbed additively and independently. An equilibrium has bounded recall if there exists K such that at most one player’s strategy depends on what happened more than K periods earlier. We show that only Markov equilibria have bounded memory and are puriable. Thus if a game has at most one long-run player, all puriable equilibria are Markov.

/pdf/a-foundation-for-markov-equilibria-in-infinite-horizon-26dveuaz1c.pdf

A Foundation for Markov Equilibria in Infinite Horizon Perfect Information Games

We examine how trust is sustained in large societies with random matching, when records of past transgressions are retained for a finite length of time To incentivize trustworthiness, defaulters should be punished by temporary exclusion However, it is profitable to trust defaulters who are on the verge of rehabilitation With perfect bounded information, defaulter exclusion unravels and trust cannot be sustained, in any purifiable equilibrium A coarse information structure, that pools recent defaulters with those nearing rehabilitation, endogenously generates adverse selection, sustaining punishments Equilibria where defaulters are trusted with positive probability improve efficiency, by raising the proportion of likely re-offenders in the pool of defaulters

/pdf/community-enforcement-of-trust-with-bounded-memory-31eweufmoa.pdf

Venkataraman Bhaskar

Papers

Wage Differentiation via Subsidised General Training

Oligopsony and the Distribution of Wages

The Ratchet Effect Re-examined: A Learning Perspective

A Foundation for Markov Equilibria in Infinite Horizon Perfect Information Games

Community Enforcement of Trust with Bounded Memory