|By:||Avi Weiss (Bar-Ilan University)
The theory of money typically ignores the fact that the mode of market interaction arises endogenously, and simply assumes a decentralized, bilateral exchange process. However, endogenizing the organization of trade is critical for understanding the conditions that lend themselves to the development of money as a mode of exchange. To study this, we develop a “travelling game” to study the spontaneous emergence of different systems of exchange theoretically and experimentally. Players located on separate “islands” can either stay and trade on their island, or pay a cost to trade elsewhere. Earnings rise with the frequency of trade but fall with the frequency of travel. Decentralized and centralized markets can both emerge in equilibrium. The latter maximize consumption frequencies and are socially efficient; the former minimize travel cost and require the use of a medium of exchange. In the laboratory, a centralized market more frequently emerges when subjects perform diversified economic tasks, and when they interact in large groups and cannot be sure whether they will meet the same counterpart in later periods. The experiment shows that to understand the emergence of monetary systems it is important to amend the theory of money such that the market structure is endogenized.
|Keywords:||endogenous institutions, macroeconomic experiments, matching, coordination, markets, money.|
|By:||Denise Laroze (University of Essex)
David Hugh-Jones (University of East Anglia)
Arndt Leininger (Hertie School of Governance)
Bargaining and coalition building is a central part of modern politics. Typically, game-theoretic models cannot predict a unique equilibrium. One possibility is that coalitions are formed on the basis of social identity loyalty to a gender, ethnic or political in-group. We test the effect of gender, race and ideological distance on coalition formation in a majority-rule bargaining experiment. Despite the absence of any incentives to do so, we find that ideological distance significantly affects offers made to potential coalition partners. As a result, coalitions tend to be ideologically coherent, even though there is no ideological policy output. We conclude that social identity considerations can determine equilibria in coalition formation.
|Keywords:||coalition formation, laboratory experiments, Baron and Ferejon model, legislative bargaining, social identity|
We study in the laboratory the impact of private information revelation on the selection of partners when forming individual networks. Our experiment combines a “network game" and a “public-good game". In the network game, individuals decide with whom to form a link with, while in the public-good game they decide whether or not to contribute. The variations in our treatments allow us to identify the effect of revealing one´s name on the probability of link formation. Our main result suggests that privacy mechanisms affect partner selection and the consequent structure of the network: when individuals reveal their real name, their individual networks are smaller but their profits are higher. This indicates that the privacy costs of revealing personal information are compensated by more productive links.
|Keywords:||privacy,social networks,public goods,trust|
|By:||Áureo de Paula (Institute for Fiscal Studies and University College London)|
In this article I provide a (selective) review of the recent econometric literature on networks. I start with a discussion of developments in the econometrics of group interactions. I subsequently provide a description of statistical and econometric models for network formation and approaches for the joint determination of networks and interactions mediated through those networks. Finally, I give a very brief discussion of measurement issues in both outcomes and networks. My focus is on identification and computational issues, but estimation aspects are also discussed.