Santiago Sanchez-Pages

An Experimental Study of Truth-Telling in a Sender-Receiver Game ⁄

A recent experimental study of Cai and Wang on strategic information transmission games reveals that subjects tend to transmit more information than predicted by the standard equilibrium analysis. To evidence that this overcommunication phenomenon can be explained in some situations in terms of a tension between normative social behavior and incentives for lying, we show that in a simple sender-receiver game subjects incurring in costs to punish liars tell the truth more often than predicted by the equilibrium analysis whereas subjects that do not punish liars after receiving a deceptive message play equilibrium strategies. Thus, we can partition the subject pool into two groups, one group of subjects with preferences for truth-telling and another group taking into account only economic incentives.

THE EFFECT OF WITHIN-GROUP INEQUALITY IN A CONFLICT AGAINST A UNITARY THREAT

Abstract A group of agents must defend their individual income from an external threat by pooling their efforts against it. The winner of this confrontation is determined by a contest success function where members’ efforts display a varying degree of complementarity. Individual effort is costly and its cost follows a convex isoelastic function. We investigate how the success of the group in the conflict and its members’ utilities vary with the degree of within-group inequality. We show that there is a natural relationship between the group’s probability of victory and the Atkinson index of inequality. If members’ efforts are complementary or the cost function convex enough, more egalitarianism within the group increases the likelihood of victory against the external threat. The opposite holds when members’ efforts are substitutes and the cost linear enough.

Do Personality Traits Affect Productivity? Evidence from the Laboratory

While survey data supports a strong relationship between personality and labour market outcomes, the exact mechanisms behind this association remain unexplored. We take advantage of a controlled laboratory set-up to explore whether this relationship operates through productivity. Using a real-effort task, we analyse the impact of the Big Five personality traits on performance. We find that more neurotic subjects perform worse, and that more conscientious individuals perform better. These findings suggest that at least part of the effect of personality on labour market outcomes operates through productivity. In addition, we find evidence that gender and university major affect this relationship.

Conflict as a Part of the Bargaining Process

This paper explores the role of conflict as a bargaining tool. It first presents a simple bargaining model with one-sided incomplete information. Parties can choose the scope of the confrontation they may want to engage in: A limited conflict that only introduces delay, or an absolute conflict that terminates the game. The outcomes of both types of confrontation are driven by the relative strength of the parties that is only known to one of them. Therefore, the non-final conflict conveys information about the eventual outcome of the absolute one. In this framework, it is shown that confrontation has a double-edged effect: It may paradoxically open the door to agreement when the uninformed party is so optimistic that no agreement is feasible. But it can also create inefficiency when agreement is possible but the informed agent has an incentive to improve her bargaining position by fighting. The second part of the paper performs a duration analysis on a sample of colonial and imperial wars fought between 1817 and 1988. The results offer evidence illustrating the use of conflict in negotiations.Since Nash�s seminal contribution, the bargaining problem has been traditionally summarized by the set of feasible utility possibilities and a threat point. The latter is meant to be the outcome in case of disagreement, a ground floor payoff they receive in the hypothetical non-cooperative game that would follow. Its influence stops here: How the surplus of cooperation is finally shared is totally independent of the forces that determine the location of the threat point. In the last years, several authors have tried to reformulate this approach by giving more structure to agreements by incorporating information about how disagreement is actually solved. This is the central issue in Bester and Warneryd (1998), Esteban and Sakovics (2000), Fearon (1996), Grossman (1994), Horowitz (1993) and Powell (1996). These models obtain agreements in the shadow of conflict (war, redistribution by force...) that are influenced by the relative power of the parties. With the exception of Esteban and Sakovics (2000), all these papers depict conflict as a costly lottery: Either one party or the other wins and captures the surplus. Thus, invoking conflict is a gameending move, an alternative to the bargaining process. On the contrary, casual observation shows that the main reason behind the end of conflicts is not the total collapse of one of the parties but agreement on stopping hostilities: India and Pakistan do not use nuclear weapons, they only engage in skirmishes; Pepsi and Coca-cola do not engage in worldwide price wars, but only national; family arguments do not necessarily imply divorce... That is, conflict is not mainly a �fight to the finish� but a part of the bargaining process. To illustrate this point consider the following example: Suppose that two agents have incomplete information on the strength of their opponent in case of conflict, and that both parties are strong but believe that they are facing a weak opponent. Then, the perceived threat-point will be out of the bargaining set and the result of the negotiation, following the papers above, would be a conflict fought to the finish. However, notice that if parties can engage in a conflict of limited scope that does not entail the end of the game, it may convey information about relative strengths and create a range of possible agreements. Hence, in this paper, following the pioneering work of Clausewitz (1832) and more recently Wagner (2000), we propose a taxonomy of conflicts (wars, strikes or revolutions) into REAL and ABSOLUTE conflicts and explore the consequences of incorporating them in a bargaining model with one-sided offers and one-sided incomplete information. In economically familiar terms, absolute conflicts have an ex-post interpretation: they are fought when one party losses completely the hope of reaching an agreement through ordinary methods. So it tries to make the opponent defenseless in order to impose its most preferred outcome without opposition. On the other side, real conflicts (that receive this name because, as argued in Wagner (2000), few strikes or wars we should observe if their consequences were always the defeat of one of the parties) have and ex-ante interpretation: they are fought before normal bargaining because they can help to improve the position in negotiation by revealing information about the true relative power of the parties. Therefore, it is the possibility of ending the conflict in a settlement what differentiates them. From a formal point of view, revelation of information through conflict introduces a novelty in the models of bargaining with incomplete information: In these models, parties have incentives to misrepresent information. This fact usually leads to very complex models and multiple equilibria. However, the result of a conflict is not subject to manipulation because its outcome depends on the true relative strengths of the parties. The only strategic variable is the decision of invoking it or not, and bluffing the other party becomes a very difficult task. Following Wagner, conflict �is an experiment that allows parties to test competing hypothesis about the outcome of an absolute conflict�. Our paper has two parts: In the first part we develop a bargaining model that takes into account the issues discussed above. In the second, we test the implications of the model with real data on wars and strikes. In the model we propose two impatient and risk-neutral players have to decide how to share a cake one dollar worth. One of the parties knows the true realization of the relative strength and therefore the outcome of the absolute conflict. Each period, this party makes an offer to the other, who can accept or reject. Agreement makes the game end but disagreement triggers a �battle�. Although it is won by one of the parties, this real conflict does not entail the end of the game. However, it has two other effects: possible agreement is delayed one period and it conveys information because the outcome of the battle is related to the realization of the relative strengths. Then, each battle makes the uniformed party to learn about the true disagreement payoffs in case of conflict. We obtain the following results: Agreement may be immediate if the loss of the cake due to absolute conflict is sufficiently high and players are impatient enough. Then, players may prefer to settle as soon as possible in order to avoid such unfavorable outcome. On the other side, we also show that the creation of surplus is a necessary and sufficient condition for agreement. That is, once agreement is possible, the informed party has no incentives to take the chance of improving its position. Therefore, the number of battles (or the duration of the real conflict) depends decisively on the gap between the perceived and the real disagreement payoffs, because if the uniformed party is excessively optimistic it may take several periods to bring the disagreement point inside the bargaining set. This result has a clear implication regarding real-life conflicts: Given that they are a way of learning for the parties, they are more likely to end the more they last. Then, we pursue a hazard rate approach using duration data. The hazard rate is the conditional probability that an event that has lasted t period ended at period t + 1. Our theory would predict that this hazard rate must be increasing in time. We test this hypothesis first with data on Extrasystemic wars from 1816 to 1991. This wars are fought between a state and a non-state entity. They include mainly imperialistic and colonial wars. They are appropriated for our study because they are clear asymmetric situations (moreover, these conflicts have not been analyzed in this fashion so far). We obtain clear evidences that these type of conflicts show increasing hazard rates supporting our theory. In the second case we deal with U.S. data on strikes and holdouts. A holdout is an impasse; a period of time after the collective contract has expired where workers keep working at the same conditions. They have been pointed out as informational devices by Gu and Kuhn (1998) and we postulate that they are real conflicts whereas strikes can be think as absolute conflict. Consistently with our hypothesis, strikes are more likely to occur if a holdout has not occurred previously and, if it did, they last more the shorter the holdout. This gives support to our analysis and suggest that we observe conflict in real world because sometimes they are necessary for obtaining an agreement. To understand why conflicts occur may be helpful to avoid them

(Don't) Make My Vote Count

Proponents of proportional electoral rules often argue that majority rule depresses turnout and may lower welfare due to the ‘tyranny of the majority’ problem. The present paper studies the impact of electoral rules on turnout and social welfare. We analyze a model of instrumental voting where citizens have private information over their individual cost of voting and over the alternative they prefer. The electoral rule used to select the winning alternative is a combination of majority rule and proportional rule. Results show that the above arguments against majority rule do not hold in this set up. Social welfare and turnout increase with the weight that the electoral rule gives to majority rule in a close election, while they are independent of the electoral rule when the expected size of the minority tends to zero. However, more proportional rules can increase turnout within the minority group; this effect is stronger the smaller the minority group. We provide a general version of the competition effect, i.e. that turnout in close elections is higher than in biased elections, independently of the systems adopted in the two cases.

Rivalry, Exclusion, and Coalitions

This paper analyzes a model where groups can attain exclusive ownership of a resource by means of a contest. We show that more concave production technologies and more egalitarianism within groups induce higher levels of social conflict. We then study endogenous coalition formation. Under cooperative exploitation of the resource, the grand coalition is the efficient partition but there exists a strong tendency toward bipartisan conflicts. Under noncooperative exploitation, conflict can ex ante Pareto dominate peaceful access and it becomes more difficult to support the grand coalition as a stable structure.

Do Personality Traits Affect Productivity? Evidence from the Lab

While survey data supports a strong relationship between personality and labor market outcomes, the exact mechanisms behind this association remain unexplored. In this paper, we take advantage of a controlled laboratory set-up to test whether this relationship operates through productivity, and isolate this mechanism from other channels such as bargaining ability or self-selection into jobs. Using a gender neutral real-effort task, we analyse the impact of the Big Five personality traits on performance. We find that more neurotic subjects perform worse, and that more conscientious individuals perform better. These findings are in line with previous survey studies and suggest that at least part of the effect of personality on labor market outcomes operates through productivity. In addition, we find evidence that gender and university major affect the impact of the Big Five personality traits on performance.

The Emergence of Institutions

Abstract This paper analyses how institutions aimed at coordinating economic interactions may emerge. Starting from a hypothetical state of nature, agents can delegate the task of enforcing cooperation to one of them in exchange for a proper compensation. Both individual and collective commitment problems stand in the way of institution formation. These problems imply first that a potentially efficient institution may fail to emerge and also that if it emerges, it may do so inefficiently. We show that big and untrustworthy societies are more likely to support institutions whereas their emergence is more difficult in small and trusting societies, but if institutions do emerge, they tend to be more inefficient in the former type of societies. Finally, we show that the threat of secession by a subset of agents may alleviate the latter problem.

Immigration, Conflict, and Redistribution

In this paper, we analyze how the possibility of conflict between natives and immigrants shapes income redistribution in developed democracies. This possibility can generate income redistribution towards immigrants even if they have no voting rights. We show that the threat of conflict between natives and immigrants lowers vertical income redistribution (from the rich to the poor) as the level of immigration increases. The opposite holds for horizontal income redistribution (from natives to immigrants), which increases with the level of immigration. Income inequality weakens the negative effect of immigration on vertical redistribution, but it also reduces horizontal redistribution. These theoretical predictions are consistent with the results of our empirical analysis on data from 29 European countries: larger immigrant populations are associated with more redistribution towards immigrants and lower vertical redistribution.

Gender differences and stereotypes in strategic reasoning

Both authors acknowledge financial support from the Spanish Ministry for Science and Innovation research grant ECO2012-33243 and from the Generalitat de Catalunya grant 2009SGR1051.