Elizabeth Hoffman

Pre-meeting discussions and the possibility of coalition-breaking procedures in majority rule committees

The concept of a coalition is fundamental to many formal and informal models of group decision processes. It finds its way into discussions which report impressionistic accounts of political decisions. It underlies most of cooperative game theory. And, it is at the heart of legal theories which justify institutions (such as sunshine laws)1 which in the name of social policy limit the activities of some individuals or groups. However, in spite of its widespread popularity the ·usefulness of the concept is still open to question. Coalitions are not always operationally defined and models which do not reify coalitions predict outcomes as well as those which do.

Are joint bidding and competitive common value auction markets compatible?—some evidence from offshore oil auctions☆

Abstract In this paper we consider whether joint bidding for oil leases in U.S. Department of the Interior Outer Continental Shelf (OCS) auctions has been compatible with the maintenance of competition in these auctions. In 1975 eight major oil companies were banned from being co-bidders on any joint bids, apparently due to concern that joint bidding was fostering collusion. Focusing on eight major companies, five of which were banned from joint bidding in 1975, we present evidence which strongly suggests that joint bidding was consistent with more competitive rather than less competitive behavior.

The North American Fur Trade: Bargaining to a Joint Profit Maximum under Incomplete Information, 1804–1821

We examine bargaining between the Northwest Company and the Hudsons Bay Company using recent models of bargaining under incomplete information. Two previously undisturbed bodies of correspondence are analyzed: letters between the two companies and letters between the Hudsons Bay Company and its London committee. Through merger the companies achieved a joint maximum, but the lengthy and costly bargaining process dissipated much of the potential gain through depletion of animal stocks. Achievement of a joint maximum was hindered by incomplete information, commitment to a strategy which led to bargaining breakdowns, delineation of each partys rights under law, and environmental changes.

Testing Informational Assumptions in Common Value Bidding Models

This paper provides an example of a means of linking mathematical theory, laboratory experiments, and standard empirical w ork. Theory, by necessity, abstracts from the naturally occurring world, and exp eriments designed to test theory must incorporate the same abstractions. On the other hand, empirical tests are generally performed on naturally occurring data, which may not reflect those same abstractions. Given this possible divergence, naturally occurring data should be tested for consistency with theoretical assum ptions whenever possible. On the basis of standard symmetric bidding theory, thi s paper reports on a preliminary version of such a test for offshore oil bidding data. Copyright 1986 by The editors of the Scandinavian Journal of Economics.

Testing the continuity of individual bid density functions: Some further results

Abstract This brief paper analyzes the bidding behavior in OCS oil auctions of six individual bidders (using solo bids only) and of a consortium bidder over the period 1963–1979. Included are bidders that bid over the entire period, one that bids for only a short time at the beginning, and one that first makes such bids in 1970. Our findings strongly support those reported in an earlier paper for five bidders and a brief, three-auction sample period: bidders commonly utilize multiple bids of single dollar values within a given auction. The strength of the present results – for three of the seven bidders, over 30% of the bids made fell into this category – further buttresses our conjecture that the use of continuous bid functions is inappropriate for modelling offshore oil lease auctions.

Social distance and other-regarding behavior in dictator games

A surprisingly large amount of otherregarding behavior is the common finding of experiments on bargaining, public goods, and trust. Elizabeth Hoffman et al. ( hereafter, HMS ) ( 1996 ) have provided an insightful analysis of why experimental results deviate from game theoretic predictions in dictator games. The authors conclude that individuals’ dispositional knowledge about social norms and reciprocity is activated by decreasing social distance even though the dictator game explicitly excludes reciprocal sanctioning possibilities by experimental design. We challenge this conclusion. While HMS (p. 654) define social distance to be ‘‘the degree of reciprocity that subjects believe exist within a social interaction,’’ we argue that social distance influences otherregardedness independent of any norms of social exchange. When social distance decreases, the ‘‘other’’ is no longer some unknown individual from some anonymous crowd but becomes an ‘‘identifiable victim’’ (Thomas C. Schelling 1968). In order to discriminate between reciprocity-based and identifiabilitybased other-regardedness, we also used the dictator game and varied the degree of social distance. An anonymous treatment is com-

Expert systems and economic policy analysis: an application to OCS auction leasing

In this paper we argue that expert systems can be powerful tools for modelling microeconomic systems, including both individual decision making and the coordination of individual agents in a resource allocation mechanism. Using the fact that expert systems are essentially computerized versions of decision processes, we illustrate how they can be viewed as generalized process models of decision-making. We argue that the expert system approach is beneficial because it allows a policy analyst to explore the implication of policy alternatives without having to incur the generally prohibitive cost of field implementation studies. Further, enables the incorporation and updating of decision strategies and qualitative information, which human experts typically use but which is not amenable to pure mathematical modelling.One particular microeconomic system we suggest could be modelled as an expert system is the OCS offshore oil lease auction process. Moreover, we argue that constructing such an expert system model would require the development of two integrated expert systems: one for the auction process and subsequent resource allocation and the other to model the individual bidding behavior of the auction participants. We set out the structure of the auction expert system in some detail and discuss rules of thumb used by bidders inferred from our empirical research on past OCS auctions.Such an expert system of an auction leasing process could provide benefits to both bidders (e.g., oil companies) and the auctioneer (e.g., the Department of the Interior) as well. Bidders, by trying different strategies against different hypothesized strategies by their opponents could use such an integrated expert system to improve their bidding performances. The auctioneer, on the other hand, could test the efficiency of various proposed auction institutions under different assumptions about bidding behavior. In some circumstances, it might be desirable to even automate the auction process with a network coordinating the expert systems used by the individual firms and a computerized auctioneer.

Development, use, and verification of expert systems in modelling microeconomic systems

Decision Support Systems (DSS) and Expert Systems (ES) have potential application in widely diverse arenas. In the present paper, we consider their application and testing in the field of economics. We begin by outlining the structure of a micro- economic system following Smith [1982]. It is readily apparent that the rule and information flow structures of such micro- economic systems are excellent candidates for expert system modelling. Taking the framework one step further, we argue that the ES approach also fits well for modelling the behavior of economic agents or “experts” who repeatedly face similar decisions problems. We detail the suggested approach by outlining an example of an auction bidding mechanism and of the participating economic agents or “bidders.”

The Enduring Power of Coase

By many measures, Ronald Coase has been among the most influential economists of the past 60 years. Why is this so? We suggest that Coase’s work has enduring appeal to and insight for social scientists in part because it addresses the biggest and most important social problems: How do we solve governance and coordination problems when limited information, common resource issues, and public good issues produce conflicts among several people at once? Any scholar who works on issues of corporate or common-pool governance, pollution, allocation of seats on legislative committees, regulation of systemic risk in financial markets, provision of military forces, patent thickets, creation of optimal communications networks, regulation of decreasing cost industries, or compensation of corporate officers can see his or her work stemming from several of Coase’s original insights. Just as John Nash’s work reshaped economic theory, almost every field of economics and political science is shaped by Coasean insights.