Domestic politics and international relations are often inextricably entangled, but existing theories (particularly “state-centric” theories) do not adequately account for these linkages. When national leaders must win ratification (formal or informal) from their constituents for an international agreement, their negotiating behavior reflects the simultaneous imperatives of both a domestic political game and an international game. Using illustrations from Western economic summitry, the Panama Canal and Versailles Treaty negotiations, IMF stabilization programs, the European Community, and many other diplomatic contexts, this article offers a theory of ratification. It addresses the role of domestic preferences and coalitions, domestic political institutions and practices, the strategies and tactics of negotiators, uncertainty, the domestic reverberation of international pressures, and the interests of the chief negotiator. This theory of “two-level games” may also be applicable to many other political phenomena, such as dependency, legislative committees, and multiparty coalitions.

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Diplomacy and domestic politics: the logic of two-level games

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Convex Analysisの二,三の進展について

In this book, Andrew Harvey sets out to provide a unified and comprehensive theory of structural time series models. Unlike the traditional ARIMA models, structural time series models consist explicitly of unobserved components, such as trends and seasonals, which have a direct interpretation. As a result the model selection methodology associated with structural models is much closer to econometric methodology. The link with econometrics is made even closer by the natural way in which the models can be extended to include explanatory variables and to cope with multivariate time series. From the technical point of view, state space models and the Kalman filter play a key role in the statistical treatment of structural time series models. The book includes a detailed treatment of the Kalman filter. This technique was originally developed in control engineering, but is becoming increasingly important in fields such as economics and operations research. This book is concerned primarily with modelling economic and social time series, and with addressing the special problems which the treatment of such series poses. The properties of the models and the methodological techniques used to select them are illustrated with various applications. These range from the modellling of trends and cycles in US macroeconomic time series to to an evaluation of the effects of seat belt legislation in the UK.

Forecasting, Structural Time Series Models and the Kalman Filter

Games in which one party conveys private information to a second through messages typically admit large numbers of sequential equilibria, as the second party may entertain a wealth of beliefs in response to out-of-equilibrium messages. By restricting those out-of equilibrium beliefs, one can sometimes eliminate many unintuitive equilibria. We present a number of formal restrictions of this sort, investigate their behavior in specific examples, and relate these restrictions to Kohlberg and Mertens` notion of stability.

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Signaling Games and Stable Equilibria

Firms are organizations that represent social knowledge of coordination and learning. But why should their boundaries demarcate quantitative shifts in the knowledge and capability of their members? Should not knowledge reside also in a network of interacting firms? This line of questioning presents the challenge to state an alternative view to the “theory of the firm,” a theory that has moved from Coase's early treatment of what firms do to a concern with ownership, incentives, and self-interest. We return to Coase's original insight in understanding the cost and benefits of a firm but based on a view that individuals are characterized by an “unsocial sociality.” Does the perception of opportunism generate the need to integrate market transactions into the firm, or do boundaries of the firm lead to the attribution of opportunism? This basic dichotomy between self-interest and the longing to belong is the behavioral underpinning to the superiority of firms over markets in resolving a fundamental dilemma: p...

What Firms Do? Coordination, Identity, and Learning

This paper develops a model of strategic communication, in which a better-informed Sender (S) sends a possibly noisy signal to a Receiver (R), who then takes an action that determines the welfare of both. We characterize the set of Bayesian Nash equilibria under standard assumptions, and show that equilibrium signaling always takes a strikingly simple form, in which S partitions the support of the (scalar) variable that represents his private information and introduces noise into his signal by reporting, in effect, only which element of the partition his observation actually lies in. We show under further assumptions that before S observes his private information, the equilibrium whose partition has the greatest number of elements is Pareto-superior to all other equilibria, and that if agents coordinate on this equilibrium, R's equilibrium expected utility rises when agents' preferences become more similar. Since R bases his choice of action on rational expectations, this establishes a sense in which equilibrium signaling is more informative when agents' preferences are more similar.

Strategic Information Transmission

Strategic information transmission

Competitive adjustment processes in labor markets with perfect information but heterogeneous firms and workers are studied. Generalizing results of Shapley and Shubik [7], and of Crawford and Knoer [1], we show that equilibrium in such markets exists and is stable, in spite of workers' discrete choices among jobs, provided that all workers are gross substitutes from each firm's standpoint. We also generalize Gale and Shapley's [3] result that the equilibrium to which the adjustment process converges is biased in favor of agents on the side of the market that makes offers, beyond the class of economies to which it was extended by Crawford and Knoer [1]. Finally, we use our techniques to establish the existence of equilibrium in a wider class of markets, and some sensible comparative statics results about the effects of adding agents to the market are obtained. THE ARROW-DEBREU THEORY of general economic equilibrium has long been recognized as a powerful and elegant tool for the analysis of resource allocation in market economies. Not all markets fit equally well into the Arrow-Debreu framework, however. Consider, for example, the labor market-or the housing market, which provides an equally good example for most of our purposes. Essential features of the labor market are pervasive uncertainty about market opportunities on the part of participants, extensive heterogeneity, in the sense that job satisfaction and productivity generally differ (and are expected to differ) interactively and significantly across workers and jobs, and large set-up costs and returns to specialization that typically limit workers to one job. All of these features can be fitted formally into the Arrow-Debreu framework. State-contingent general equilibrium theory, for example, provides a starting point for studying the effects of uncertainty. But this analysis has been made richer and its explanatory power broadened by the examination of equilibrium with incomplete markets, search theory, and market signaling theory. The purpose of this paper is to attempt some improvements in another dimension: we study the outcome of competitive sorting processes in markets where complete heterogeneity prevails (or may prevail). To do this, we take as given the implications of set-up costs and returns to specialization by assuming that, while firms can hire any number of workers, workers can take at most one job. We also return to the simplification of perfect information. In the customary view of competitive markets, agents take market prices as given and respond noncooperatively to them. In this framework equilibrium cannot exist in general unless the goods traded in each market are truly homogeneous; heterogeneity therefore generally requires a very large number of markets. And since these markets are necessarily extremely thin-in many cases containing only a single agent on each side-the traditional stories supporting the plausibility of price-taking behavior are quite strained.

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Job matching, coalition formation, and gross substitutes

This paper reports experiments designed to study strategic sophistication, the extent to which behavior in games reflects attempts to predict others' decisions, taking their incentives into account. We studied subjects' initial responses to normal-form games with various patterns of iterated dominance and unique pure-strategy equilibria without dominance, using a computer interface that allowed them to search for hidden payoff information, while recording their searches. Monitoring subjects' information searches along with their decisions allows us to better understand how their decisions are determined, and subjects' deviations from the search patterns suggested by equilibrium analysis help to predict their deviations from equilibrium decisions.

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Cognition and Behavior in Normal‐Form Games: An Experimental Study

https://econweb.ucsd.edu/~jandreoni/Econ264/papers/Crawford%20JET%201998.pdf

Vincent P. Crawford

Papers

Strategic Information Transmission

Strategic information transmission

Job matching, coalition formation, and gross substitutes

Cognition and Behavior in Normal‐Form Games: An Experimental Study

A Survey of Experiments on Communication via Cheap Talk