Chaim Fershtman

Discrimination in a Segmented Society: An Experimental Approach

An experimental approach is used to study ethnic discrimination within the Israeli Jewish society. Our experiment indicates that the segmented structure of Israeli society manifests itself in a consistent pattern of mistrust. In a trust game that we studied, money transferred to players of Eastern ethnic origin (Sephardic Jew) was significantly less than that transferred to players of Western origin (Ashkenazic Jew).

Dynamic Duopolistic Competition with Sticky Prices

The authors study duopolistic competition in a homogeneous good through time under the assumption that its current desirability is an exponentially-weighted function of accumulated past consumption. This implies that the current price of the good does not decline by as much to accommodate any given level of current consumption. Our an alysis is conducted in terms of a differential game. It is found that the equilibrium price corresponding to the open-loop Nash equilibriu m strategies approaches the static Cournot equilibrium price while th e equilibrium price corresponding to the closed-loop Nash equilibrium strategies, which are subgame perfect, approaches a price below it. Copyright 1987 by The Econometric Society.

Observable Contracts: Strategic Delegation and Cooperation

The role of commitments in noncooperative games is well acknowledged and documented. One way to achieve commitments is by letting delegates represent the players of a game. In this paper, the authors study a delegation game in which the players can use agents strategically to play on their behalf and the contracts they sign with them are common knowledge. They show that, in such cases, every Pareto optimal outcome of the game can become the unique subgame perfect Nash equilibrium of the delegation game. The authors demonstrate this result by discussing the Cournot-type duopolistic game. Copyright 1991 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

Social status and economic performance:: A survey

This survey combines ideas and results from sociology and economics, recognizing that economic decisions are often shaped by social concerns and influences. Based on the sociological literature, we define social status and describe its measurement. We then describe the role of social status in economic analysis of saving and consumption, wages and economic growth. We review recent work on status determination in equilibrium, including evolutionary models. We conclude with some remarks on the need for further interaction between sociology and economics. (This abstract was borrowed from another version of this item.)

Managerial incentives as a strategic variable in duopolistic environment

Abstract The paper investigates two interrelated problems. The first is the output choice of a firm in which decisions are made cooperatively by managers who might have conflicting objectives. The second is the managerial incentives scheme as a strategic choice of owners who wish to maximize profits. Using an example in which a duopolistic market is studied, the paper shows that giving managers incentives that combine profit and sales maximization might be the dominant strategy for the owners.

The Interdependence between Ownership Status and Market Structure: The Case of Privatization

One of the common justifications for privatization policy is the assertion that private firms are more efficient and thus potentially more profitable. The analysis of privatization policy, however, cannot be complete without specific attention to the market structure in which the firm operates and in particular to the interdependence between the ownership status and market structure. I examine a dupolistic market and demonstrate that a partly nationalized firm might realize higher profits than its private, profit-maximizing, competitor. The degree of nationalization also affects the interaction between an incumbent firm and a potential entrant. Using A. K. Dixits framework, I consider the implications of privatization on the attractiveness of entry, the possibility of deterring entry, and the incumbent position as a natural monopoly. It is shown that it is possible that a firm is not a natural monopoly while being private but that alteration of its ownership status can transform it to a natural monopoly. Such an analysis establishes my main claim that ownership status may affect the market structure in which firms operate.

Social rewards, externalities and stable preferences

This paper examines the role of social rewards as a corrective mechanism for activities which generate externalities. The focus of this paper is the circumstances under which sicial rewards provide effective and feasible incentive mechanism that may replace laws and regulations.

The importance of the agenda in bargaining

Abstract This paper discusses a multi-issue bargaining game in which the players set up an agenda and negotiate on the issues sequentially according to this agenda. We demonstrate that the agenda might play an important role in the bargaining and discuss the relationship between the agenda and the final outcome of the bargaining game. Assuming that players have conflicting evaluations regarding the importance of the issues under negotiation, we identify the type of agenda each player prefers. We also show that in such cases the outcome of the bargaining game need not to be efficient. By demonstrating the strategic use of the agenda the paper explains the phenomenon of “bargaining on the agenda”.

Strategic Delegation: An Experiment

We examine the effects of strategic delegation in a simple ultimatum game experiment. Specifically, we show that when the proposer uses a delegate, his share increases. Since in such a case the proposer does not use the delegate as a commitment device, this effect identifies an additional explanation of the delegation phenomenon. This result holds when delegation is mandatory or optional. We also show that unobserved delegation by the responder reduces his share as his delegate is perceived to be more willing to accept tough offers. Copyright 2001 by the RAND Corporation.

Cross Licensing of Complementary Technologies

Abstract We consider the case where the introduction of a new product requires the development of two distinct complementary technologies. A firm can seek to either develop both technologies, or one of them and engage in a cross licensing with another firm that has developed the complementary technology. We focus on the interdependence between the innovation race and the cross licensing game, i.e., how the potential continuation of the race affects the cross licensing terms and how the possibility of cross licensing affects the pace of the innovation race.