David K. Levine

Debt Constrained Asset Markets

We develop a theory of general equilibrium with endogenous debt limits in the form of individual rationality constraints similar to those in the dynamic consistency literature. If an agent defaults on a contract, he can be excluded from future contingent claims markets trading and can have his assets seized. He cannot be excluded from spot markets trading, however, and he has some private endowments that cannot be seized. All information is publicly held and common knowledge, and there is a complete set of contingent claims markets. Since there is complete information, an agent cannot enter into a contract in which he would have an incentive to default in some state. In general there is only partial insurance: variations in consumption may be imperfectly correlated across agents; interest rates may be lower than they would be without constraints; and equilibria may be Pareto ranked.

The Folk Theorem with Imperfect Public Information

The authors study repeated games in which players observe a public outcome that imperfectly signals the actions played. They provide conditions guaranteeing that any feasible, individually rational payoff vector of the stage game can arise as a perfect equilibrium of the repeated game with sufficiently little discounting. The central condition requires that there exist action profiles with the property that, for any two players, no two deviations--one by either player--give rise to the same probability distribution over public outcomes. The results apply to principal-agent, partnership, oligopoly, and mechanism-design models, and to one-shot games with transferable utilities. Copyright 1994 by The Econometric Society.

Reputation and Equilibrium Selection in Games with a Patient Player

A single, long-run player plays a simultaneous-move stage game against a sequence of opponents who only play once, but observe all previous play. If there is a positive prior probability that the long-run player will always play the pure strategy he would most like to commit himself to (his Stackleberg strategy), then his payoff in any Nash equilibrium exceeds a bound that converges to the Stackleberg payoff as his discount factor approaches one. When the stage game is not simultaneous move, this result must be modified to account for the possibility that distinct strategies of the long-run player are observationally equivalent. Copyright 1989 by The Econometric Society.

Self-Confirming Equilibrium

In a self-confining equilibrium, each players strategy is a best response to his beliefs about the play of his opponents and each players beliefs are correct along the equilibrium path of play. Thus, if a self-confirming equilibrium occurs repeatedly, no player ever observes play that contradicts his beliefs, even though beliefs about play at off-path information sets need not be correct. The authors characterize the ways in which self-confirming equilibria and Nash equilibria can differ and provide conditions under which self-confirming equilibria correspond to standard solution concepts. Copyright 1993 by The Econometric Society.

The Case Against Intellectual Property

According to a common argument, the presence of strong intellectual property rights spurs innovation, which then leads to fiercer competition, higher economic growth and increasing benefits for the average consumers. We argue that, in the case of intellectual property rights, this has lead to misconceptions and abuses. Current legislation on intellectual property confuses the protection of property rights on objects in which ideas are embodied with the attribution of monopoly power on the idea itself and, furthermore, with restrictions on the usage of such goods on the part of the buyers. This implies that both patent and copyright laws should be dramatically altered. To back up our claim we provide theoretical arguments, even for the most extreme case in which goods are produced at a positive fixed cost and zero marginal cost.

Maintaining a Reputation When Strategies Are Imperfectly Observed

This paper studies reputation effects in games with a single long-run player whose choice of stage-game strategy is imperfectly observed by his opponents. We obtain lower and upper bounds on the long-run players payoff in any Nash equilibrium of the game. If the long-run players stage-game strategy is statistically identified by the observed outcomes, then for generic payoffs the upper and lower bounds both converge, as the discount factor tends to 1, to the long-run players Stackelberg payoff, which is the most he could obtain by publicly committing himself to any strategy.

Subgame-Perfect Equilibria of Finite- and Infinite-Horizon Games

Abstract We show that subgame-perfect equilibria of infinite-horizon games arise as limits, as the horizon grows long and epsilon small, of subgame-perfect epsilon-equilibria of games which are truncated after a finite horizon. A number of applications show that this result provides a useful technique for analyzing the existence and uniqueness of infinite-horizon equilibria. We extend our result to the sequential equilibrium concept.

Identification of genetic susceptibility loci for colorectal tumors in a genome-wide meta-analysis

BACKGROUND & AIMS Heritable factors contribute to the development of colorectal cancer. Identifying the genetic loci associated with colorectal tumor formation could elucidate the mechanisms of pathogenesis. METHODS We conducted a genome-wide association study that included 14 studies, 12,696 cases of colorectal tumors (11,870 cancer, 826 adenoma), and 15,113 controls of European descent. The 10 most statistically significant, previously unreported findings were followed up in 6 studies; these included 3056 colorectal tumor cases (2098 cancer, 958 adenoma) and 6658 controls of European and Asian descent. RESULTS Based on the combined analysis, we identified a locus that reached the conventional genome-wide significance level at less than 5.0 × 10(-8): an intergenic region on chromosome 2q32.3, close to nucleic acid binding protein 1 (most significant single nucleotide polymorphism: rs11903757; odds ratio [OR], 1.15 per risk allele; P = 3.7 × 10(-8)). We also found evidence for 3 additional loci with P values less than 5.0 × 10(-7): a locus within the laminin gamma 1 gene on chromosome 1q25.3 (rs10911251; OR, 1.10 per risk allele; P = 9.5 × 10(-8)), a locus within the cyclin D2 gene on chromosome 12p13.32 (rs3217810 per risk allele; OR, 0.84; P = 5.9 × 10(-8)), and a locus in the T-box 3 gene on chromosome 12q24.21 (rs59336; OR, 0.91 per risk allele; P = 3.7 × 10(-7)). CONCLUSIONS In a large genome-wide association study, we associated polymorphisms close to nucleic acid binding protein 1 (which encodes a DNA-binding protein involved in DNA repair) with colorectal tumor risk. We also provided evidence for an association between colorectal tumor risk and polymorphisms in laminin gamma 1 (this is the second gene in the laminin family to be associated with colorectal cancers), cyclin D2 (which encodes for cyclin D2), and T-box 3 (which encodes a T-box transcription factor and is a target of Wnt signaling to β-catenin). The roles of these genes and their products in cancer pathogenesis warrant further investigation.

The Paradox of Voter Participation? A Laboratory Study

It is widely believed that rational choice theory is grossly inconsistent with empirical observations about voter turnout. We report the results of an experiment designed to test the voter turnout predictions of the rational choice Palfrey–Rosenthal model of participation with asymmetric information. We find that the three main comparative statics predictions are observed in the data: the size effect, whereby turnout goes down in larger electorates; the competition effect, whereby turnout is higher in elections that are expected to be close; and the underdog effect, whereby voters supporting the less popular alternative have higher turnout rates. We also compare the quantitative magnitudes of turnout to the predictions of Nash equilibrium. We find that there is undervoting for small electorates and overvoting for large electorates, relative to Nash equilibrium. These deviations from Nash equilibrium are consistent with the logit version of Quantal Response Equilibrium, which provides a good fit to the data, and can also account for significant voter turnout in very large elections.

Liquidity Constrained Markets versus Debt Constrained Markets

This paper compares two different models in a common environment. The first model has liquidity constraints in that consumers save a single asset that they cannot sell short. The second model has debt constraints in that consumers cannot borrow so much that they would want to default, but is otherwise a standard complete markets model. Both models share the features that individuals are unable to completely insure against idiosyncratic shocks and that interest rates are lower than subjective discount rates. In a stochastic environment, the two models have quite different dynamic properties, with the debt constrained model exhibiting simple stochastic steady states, while the liquidity constrained model has greater persistence of shocks.