Itai Arieli Babichenko and Yakov. 2011. “Average Testing and the Efficient Boundary”. Publisher's Version Abstract
We propose a simple adaptive procedure for playing strategic games: average testing. In this procedure each player sticks to her current strategy if it yields a payoff that exceeds her average payoff by at least some fixed epsilon > 0; otherwise she chooses a strategy at random. We consider generic two-person games where both players play according to the average testing procedure on blocks of k-periods. We demonstrate that for all k large enough, the pair of time-average payoffs converges (almost surely) to the 3epsilon-Pareto efficient boundary.
Uriel Procaccia Maya Bar-Hillel. 2011. “Behavioral Economics and the Law (in Hebrew)”. Publisher's Version
Maya Bar-Hillel Ziv Carmon Moty Amar, Dan Ariely and Chezy Ofir. 2011. “Brand Names Act Like Marketing Placebos”. Publisher's Version Abstract
This research illustrates the power of reputation, such as that embodied in brand names, demonstrating that names can enhance objective product efficacy. Study participants facing a glaring light were asked to read printed words as accurately and as quickly as they could, receiving compensation proportional to their performance. Those wearing sunglasses tagged Ray-Ban made fewer errors, yet read more quickly, than those wearing the identical pair of sunglasses when tagged Mango (a less prestigious brand). Similarly, ear-muffs blocked noise more effectively, and chamomile tea improved mental focus more, when otherwise identical target products carried more reputable names.
The traditional premise of criminal law is that criminals who are convicted of similar crimes under similar circumstances ought to be subject to identical sentences. This article provides an efficiency-based rationale for discriminatory sentencing, i.e., establishes circumstances under which identical crimes ought to be subject to differential sentencing. We also establish the relevance of this finding to the practices of sentencing and, in particular, to the Sentencing Guidelines. Most significantly, we establish that the model can explain why celebrities, leaders, or recidivists ought to be subject to harsher sanctions than others. Discriminatory sentencing is optimal when criminals confer positive externalities on each other. If a criminal A who imposes (non-reciprocal) large positive externalities on criminal B is punished sufficiently harshly, B would expect A not to commit the crime and consequently, he would expect not to benefit from the positive externalities conferred on him by A. Given that B's expected benefits are lower, the sanctions sufficient to deter B are also lower than the ones imposed on A. The result can be easily extended to the case of reciprocal externalities. Assume that a criminal A imposes positive externalities on B and B imposes identical positive externalities on A. If A is subject to a sufficiently harsh sanction and B knows this, B would expect A not to perform the crime and therefore would expect not to benefit from the positive externalities otherwise conferred on B. Consequently, a more lenient sanction than the sanction imposed on A would be sufficient to deter B.
Edna Ullmann-Margalit. 2011. “Considerateness”. Publisher's Version Abstract
A stranger entering the store ahead of you may hold the door open so it does not slam in your face, or your daughter may tidy up the kitchen when she realizes that you are very tired: both act out of considerateness. In acting considerately one takes others into consideration. The considerate act aims at contributing to the wellbeing of somebody else at a low cost to oneself.Focusing on the extreme poles of the spectrum of human relationships, I argue that considerateness is the foundation upon which our relationships are to be organized in both the thin, anonymous context of the public space and the thick, intimate context of the family.The first part of the paper, sections I “III, explores the idea that considerateness is the minimum that we owe to one another in the public space. By acting considerately toward strangers we show respect to that which we share as people, namely, to our common humanity. The second part, sections IV “VIII, explores the idea that the family is constituted on a foundation of considerateness. Referring to the particular distribution of domestic burdens and benefits adopted by each family as its family deal,  I argue that the considerate family deal embodies a distinct, family-oriented notion of fairness.The third part, sections IX “XV, takes up the notion of family fairness, contrasting it with justice. In particular I take issue with Susan Okin's notion of the just family. Driving a wedge between justice and fairness, I propose an idea of family fairness that is partial and sympathetic rather than impartial and empathic, particular and internal rather than generalizable, and based on ongoing comparisons of preferences among family members. I conclude by characterizing the good family as the not-unjust family that is considerate and fair.
Two agents independently choose mixed m-recall strategies that take actions in finite action spaces A1 and A2. The strategies induce a random play, a1,a2,..., where at assumes values in A1 X A2. An M-recall observer observes the play. The goal of the agents is to make the observer believe that the play is similar to a sequence of i.i.d. random actions whose distribution is Q in Delta(A1 X A2). For nearly every t, the following event should occur with probability close to one: "the distribution of a_t+M given at a_t,..,a_t+M is close to Q." We provide a sufficient and necessary condition on m, M, and Q under which this goal can be achieved (for large m). This work is a step in the direction of establishing a folk theorem for repeated games with bounded recall. It tries to tackle the difficulty in computing the individually rational levels (IRL) in the bounded recall setting. Our result implies, for example, that in some games the IRL in the bounded recall game is bounded away below the IRL in the stage game, even when all the players have the same recall capacity.
The ability to detect a change, to accurately assess the magnitude of the change, and to react to that change in a commensurate fashion are of critical importance in many decision domains. Thus, it is important to understand the factors that systematically affect people's reactions to change. In this article we document a novel effect: Decision makers' reactions to a change (e.g., a visual change, a technology change) were systematically affected by the type of categorizations they encountered in an unrelated prior task (e.g., the response categories associated with a survey question). We found that prior exposure to narrow, as opposed to broad, categorizations improved decision makers' ability to detect change and led to stronger reactions to a given change. These differential reactions occurred because the prior categorizations, even though unrelated, altered the extent to which the subsequently presented change was perceived as either a relatively large change or a relatively small one.
Noam Bar-Shai, Tamar Keasar and Avi Shmida. 2011. “Do Solitary Bees Count to Five?”. Publisher's Version Abstract
Efficient foragers avoid returning to food sources that they had previously depleted. Bombus terrestris bumblebees use a counting-like strategy to leave Alcea setosa flowers just after visiting all of their five nectaries. We tested whether a similar strategy is employed by solitary Eucera sp. bees that also forage on A. setosa. Analyses of 261 video-recorded flower visits showed that the bees most commonly probed five nectaries, but occasionally (in 7.8% of visits) continued to a nectary they had already visited. Probing durations that preceded flower departures were generally shorter than probings that were followed by an additional nectary visit in the same flower. Assuming that probing durations correlate with nectar volumes, this suggests that flower departure frequencies increased after probing of low-rewarding nectaries. The flowers' spatial attributes were not used as departure cues, but the bees may have left flowers in response to scent marks on previously visited nectaries. We conclude that Eucera females do not exhibit numerical competence as a mechanism for efficient patch use, but rather a combination of a reward-based leaving rule and scent-marking. The bees' foraging pattern is compatible with Waage's (1979, Journal of Animal Ecology, 48, 353-371) patch departure rule, which states that the tendency to leave a foraging patch increases with time, and decreases when food items are encountered. Thus, Eucera resemble bumblebees in avoiding most revisits to already-visited nectaries, but use a different foraging strategy to do so. This difference may reflect lower learning capabilities of solitary bee species compared to social ones.
We develop an elasticity index of a strategic game. The index measures the robustness of the set of rational outcomes of a game. The elasticity index of a game is the maximal ratio between the change of the rational outcomes and the size of an infinitesimal perturbation. The perturbation is on the players' knowledge of the game.The elasticity of a strategic game is a nonnegative number. A small elasticity is indicative of the robustness of the rational outcomes (for example, if there is only one player the elasticity is 0), and a large elasticity is indicative of non-robustness. For example, the elasticity of the (normalized) n-stage finitely repeated prisoner's dilemma is at least exponential in n, as is the elasticity of the n-stage centipede game and the n-ranged traveler's dilemma. The concept of elasticity enables us to look from a different perspective at Neyman's (1999) repeated games when the number of repetitions is not commonly known, and Aumann's (1992) demonstration of the effect of irrationality perturbations.
This paper investigates the effect of compensation of corporate personnel on their investment innew technologies. We focus on a specific corporate activity, namely corporate venture capital(CVC), describing minority equity investment by established-firms in entrepreneurial ventures.The setting offers an opportunity to compare corporate investors to investment experts, theindependent venture capitalists (IVCs). On average, we observe a performance gap betweencorporate investors and their independent counterparts. Interestingly, the performance gap issensitive to CVCs' compensation scheme: it is the largest when CVC personnel are awardedperformance pay. Not only do we study the association between incentives and performancebut we also document a direct relationship between incentives and the actions managersundertake. For example, we observe disparity between the number of participants in venturecapital syndicates that involve a corporate investor, and those that consist solely of IVCs. Thedisparity shrinks substantially, however, for a subset of CVCs that compensate their personnelusing performance pay. We find a parallel pattern when analyzing the relationship betweencompensation and another investment practice, staging of investment. To conclude, the paperinvestigates the three elements of the principal-agent framework, thus providing direct evidencethat compensation schemes (incentives) shape investment practices (managerial action), andultimately investors¡¦ outcome (performance).
Recent debates have centred on the normative influence epistemic peerage should have on the regulation of beliefs in cases of disagreement. A dominant position in this debate is that acknowledging an epistemic peer's possession of a belief contrary to one's own ought, in itself, to lead to the revision of one's doxastic commitments. In what follows I aim to challenge and rethink the notion of peerage underlying the disagreement debate and thus reveal that the traditional view of peerage rests upon an idealized conception of similarly between disagreeing parities, and thus to show that the normative constraints derived from it are equally idealized. Constructively, I will suggest a commonsensical solution to the disagreement problem based on what I propose as a soft, more moderate conception of peerage.
We develop a measure for quantifying rank order of visitation in complex sequences of male-phase versus female-phase flowers. The measure shows whether female flowers are visited before male flowers which enhances plant fitness. We apply the new method to bumble bee visitation in Digitalus purpurea and Echium vulgare and discuss our results in relation to the evolution of protandry in insect pollinated plant species.
We find a herding tendency among both amateur and professional investors and conclude that the propensity to herd is lower in the professionals. These results are obtained both when we consider herding into individual stocks and herding into stocks in general. Herding depends on the firm's systematic risk and size, and the professionals are less sensitive to these variables. The differences between the amateurs and the professionals may be attributable to the latter's superior financial training. Most of the results are consistent with the theory that herding is information-based. We also find that the herding behavior of the two groups is a persistent phenomenon, and that it is positively and significantly correlated with stock market returns' volatility. Finally, herding, mainly by amateurs, causes market volatility in the Granger causality sense.
We provide a new characterization of implementability of reduced form mechanisms in terms of straightforward second-order stochastic dominance. In addition, we present a simple proof of Matthews' (1984) conjecture, proved by Border (1991), on implementability.
{Since its inception, psychology has studied position effects. But the position was a temporal one in sequential presentation, and the dependent variables related to memory and learning. This paper attempts to survey position effects when position is spatial (namely
Amir Ban Linial and Nati. 2011. “Market Share Indicates Quality”. Publisher's Version Abstract
Market share and quality, or customer satisfaction, go hand in hand. Yet the inference that higher'' market share indicates higher quality is seldom made. The skepticism is in part fueled by elitism,'' the association of mass popularity with lower quality, and by cynicism, ascribing market'' leadership to an entrenched position. We find that though such skepticism is often justified, it is'' correct to make a Bayesian inference that the product with the higher market share has the better'' quality under rather tame assumptions.
In matching markets the number of blocking pairs is often used as a criterion to compare matchings. We argue that this criterion is lacking an economic interpretation: In many circumstances it will neither reflect the expected extent of partner changes, nor will it capture the satisfaction of the players with the matching. As an alternative, we set up two principles which single out a particularly "disruptive" subcollection of blocking pairs. We propose to take the cardinality of that subset as a measure to compare matchings. This cardinality has an economic interpretation: The subset is a justified objection against the given matching according to a bargaining set characterization of the set of stable matchings. We prove multiple properties relevant for a workable measure of comparison.
Maskin and Riley (2003) and Lebrun (2006) prove that the Bayes-Nash equilibrium of first-price auctions is unique. This uniqueness requires the assumption that a buyer never bids above his value. We demonstrate that, in asymmetric first-price auctions (with or without a minimum bid), the relaxation of this assumption results in additional equilibria that are "substantial." Although in each of these additional equilibria no buyer wins with a bids above his value, the allocation of the object and the selling price may vary among the equilibria. Furthermore, we show that such phenomena can only occur under asymmetry in the distributions of values.
Maya Bar-Hillel. 2011. “New Unconscious, The”. Publisher's Version Abstract
Recent research in psychology, especially that called "The New Unconscious", is discovering strange and unintuitive phenomena, some of which raise interesting challenges for the law. This paper discusses some of these challenges. For example, if much of our mental life occurs out of our awareness and control, and yet is subject to easy external manipulation, what implications does this have for holding defendants responsible for their deeds? For that matter, what implications does this have for trusting judges to judge and act as they should, and would, if their own mental processes were fully conscious and controlled? Some provocative ideas are suggested, such as how to make prison terms shorter and more deterring at the same time; assisting judges in overcoming inconsistency and biases; etc.
"Very small but cumulated decreases in food intake may be sufficient to have significant effects, even erasing obesity over a period of years" (Rozin et al., 2011). In two studies, one a lab study and the other a real-world study, we examine the effect of manipulating the position of different foods on a restaurant menu. Items placed at the beginning or the end of the list of their category options were up to twice as popular as when they were placed in the center of the list. Given this effect, placing healthier menu items at the top or bottom of item lists and less healthy ones in their center (e.g., sugared drinks vs. calorie-free drinks) should result in some increase in favor of healthier food choices.