This paper theoretically studies the emergence of a sanctioning institution in a selfish and wealth-diverse group where the provision of a public good is realized only once. In particular, we present ...a public goods game where players are given the opportunity to implement a sanctioning institution by hiring an external enforcer which sanctions free-riding behavior. However, the enforcer's effectiveness will not be guaranteed and will depend on the level of effort he exerts to chase these opportunistic attitudes. Whether the sanctioning institution is implemented or not is a task delegated to a government concerned in its persistence, who will represent the interests of a social class with a particular level of wealth. The emergence of the sanctioning institution will depend on a set of institutional and technological parameters, the wealth distribution in the society and the identity of the social class whose interests are represented by the government. Given these exogenous variables, the sanctioning institution will emerge more easily if the government represents the social class with the lowest opportunity cost in the provision of a public good. If implemented, the sanctioning institution can achieve a positive provision of such good if the society counts with a relatively high quality in its sanctioning institutions and high social return of the public good. The case of heterogeneous valuations of the public good will also be proved to show symmetric results.
Coordinated punishment occurs when punishment decisions are complements; i.e., this punishment device requires a specific number of punishers to be effective; otherwise, no damage will be inflicted ...on the target. While societies often rely on this punishment device, its benefits are unclear compared with uncoordinated punishment, where punishment decisions are substitutes. We argue that coordinated punishment can prevent the free-riding of punishers and show, both theoretically and experimentally, that this may be beneficial for cooperation in a team investment game, compared with uncoordinated punishment.
This note presents a new result on incomplete contracts. We show that if the different degrees of relation-specificity of the partnerts' investments determines their ex post bargaining position (what ...Williamson (1985) calls “the fundamental transformationâ€), it will appear a potential coordination failure. Under plausible conditions, the parties will coordinate in the more inefficient but less risky equilibrium, that is, in the risk-dominant equilibrium in the sense of Harsanyi and Selten (1988).
We consider a model where each individual (or ethnic minority) is embedded in a network of relationships and decides whether or not she wants to be assimilated to the majority norm. Each individual ...wants her behavior to agree with her personal ideal action or norm but also wants her behavior to be as close as possible to the average assimilation behavior of her peers. We show that there is always convergence to a steady-state and characterize it. We also show that different assimilation norms may emerge in steady state depending on the structure of the network. We then consider the role of cultural and government leaders in the assimilation process of ethnic minorities and an optimal tax/subsidy policy which aim is to reach a certain level of assimilation in the population.
Fershtman and Seidmann (1993) showed that the presence of an irrevocable endogenous commitment with a fixed deadline results in the so called deadline effect. We examine the robustness of this result ...to the presence of a much more general class of commitments: partially revocable commitments.
Coordinated punishment requires a specific number of punishers to be effective (otherwise, no damage is inflicted on the target) but it also exhibits returns to scale. While societies often rely on ...this punishment device, its benefits are unclear compared with uncoordinated punishment, where punishment decisions are substitutes. We argue that coordinated punishment can prevent the free-riding of punishers and show, both theoretically and experimentally, that this may be beneficial for cooperation in a team investment game, compared with uncoordinated punishment. Nevertheless, efficiency is not enhanced since punishment is more extensively used when it is coordinated.
We consider a model where each individual (or ethnic minority) is embedded in a network of relationships and decides whether or not she wants to be assimilated to the majority norm. Each individual ...wants her behavior to agree with her personal ideal action or norm but also wants her behavior to be as close as possible to the average assimilation behavior of her peers. We show that there is always convergence to a steady-state and characterize it. We also show that different assimilation norms may emerge in steady state depending on the structure of the network. We then consider an optimal tax/subsidy policy which aim is to reach a certain level of assimilation in the population. We believe that our model sheds light on how the pressure from peers, communities and families affect the long-run assimilation decisions of ethnic minorities.
This paper contributes to explain the persistence of differences in levels of entrepreneurship within and across countries. We analyse in a dynamic setting the mutual relationship among the ...distribution of preferences for entrepreneurship in the population, public administration efficiency, and entrepreneurial productivity when preferences and productivity evolve over time. Individuals with entrepreneurial preferences start their own business, while the other individuals join the public and traditional sectors. In each generation, individuals vote on the taxes the entrepreneurs will pay. Under a balanced public budget, the collected taxes are used to pay the civil servants' wages. The effort of civil servants captures the effort made to generate an efficient normative and regulatory environment, and it will affect the probability of success of entrepreneurship. The dynamic of entrepreneurial productivity is determined by the relative proportion of entrepreneurial and non-entrepreneurial individuals among generations. We show that an economy can reach two different long-run equilibria: a traditional equilibrium, with a low proportion of entrepreneurs, low productivity, high taxes and an ineffcient Administration and an entrepreneurial equilibrium with a high proportion of entrepreneurs, a higher productivity and lower taxes but enough to implement an efficient Administration. Our main result is that the equilibrium achieved completely depends on the tax policy followed by the different generations. If decisions are made by majority voting in a myopic way, then the initial conditions of the society become crucial. This result explains persistence: an economy evolves around similar levels of entrepreneurship unless some reforms are implemented.
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