Copyright (c) 2010 All rights reserved. http://works.bepress.com/ezambran Recent documents in Eduardo Zambrano en-us Wed, 21 Jul 2010 13:18:11 PDT 3600 http://works.bepress.com/ezambran/14 http://works.bepress.com/ezambran/14 Thu, 01 Oct 2009 11:27:52 PDT Talcot Parsons suggested in 1963 that there are basically three kinds of authority: utilitarian authority, coercive authority, and persuasive authority. In this paper, I show that the models developed by Gibbons and Rutten (1997), Hirshleifer (1991), Skaperdas (1992), Akerlof (1976) and Basu (1986) can be viewed as models where issues such as authority, power, influence and ideology, in the sense of Parsons, can be formally discussed. I also show the existence of an interesting difficulty in providing a contractarian interpretation of the State under the Parsonian view of governmental authority discussed in this paper. Eduardo Zambrano Articles http://works.bepress.com/ezambran/12 http://works.bepress.com/ezambran/12 Thu, 24 Sep 2009 12:07:53 PDT I show that the predictive content of the hypothesis of subjective expected utility maximization critically depends on what the analyst knows about the details of the problem a particular decision maker faces. When the analyst does not know anything about the agent's payoffs or beliefs and can only observe the sequence of actions taken by the decision maker any arbitrary sequence of actions can be implemented as the choice of an agent that solves some intertemporal utility maximization problem under uncertainty. Eduardo Zambrano Articles http://works.bepress.com/ezambran/13 http://works.bepress.com/ezambran/13 Thu, 24 Sep 2009 12:07:53 PDT Authority is a relation that exists between individuals, in which one does as indicated by another what he or she would not do in the absence of such indication. With this as background, the article presents the ‘premodern’ notions of authority developed by Plato, Aristotle, Machiavelli, and Weber; and then the perspective given by Arendt, according to which these notions are grounded in an ontological tradition whose time has passed. This leads to the point of view of Lukes, according to which it is unavoidable that multiple perspectives exist in the understanding of authority. These perspectives are associated with the different degrees of solidity that one can give to social composites such as culture, language, social groups, and individuals themselves. The article then presents the perspectives of Friedman, Flathman, Raz, and Zambrano. They reveal that the authority relation is as solid as the beliefs that justify individual choices that, at the interpreted level, are labeled as ‘ruling’ and ‘following.’ The article concludes by pointing out how our understanding of the authority relation may change as a consequence of recent developments in the cognitive science literature, as pioneered by Varela, regarding the nonexistence of a solid, centralized, unitary self. Eduardo Zambrano Articles http://works.bepress.com/ezambran/11 http://works.bepress.com/ezambran/11 Thu, 24 Sep 2009 12:07:52 PDT Suppose we know the utility function of a risk averse decision maker who values a risky prospect X at a price CE. Based on this information alone I develop upper bounds for the tails of the probabilistic belief about X of the decision maker. In the paper I also illustrate how to use these expected utility bounds in a variety of applications, which include the estimation of risk measures from observed data, option valuation, and the study of credit risk. Eduardo Zambrano Articles http://works.bepress.com/ezambran/10 http://works.bepress.com/ezambran/10 Thu, 24 Sep 2009 12:07:52 PDT In this paper I study the El Farol problem, a deterministic, boundedly rational, multi-agent model of a resource subject to congestion externalities that was initially studied computationally by Arthur (1994). I represent the interaction as a game, compute the set of Nash equilibria in mixed strategies of this game, and show analytically how the method of inductive inference employed by the agents in Arthur’s computer simulation leads the empirical distribution of aggregate attendance to be like those in the set of Nash equilibria of the game. This set contains only completely mixed strategy profiles, which explains why aggregate attendance appears random in the computer simulation even though its set-up is completely deterministic. Eduardo Zambrano Articles http://works.bepress.com/ezambran/8 http://works.bepress.com/ezambran/8 Thu, 24 Sep 2009 12:07:51 PDT In this paper I present conditions, not involving common knowledge of rationality, that lead to (correlated) rationalizability. The basic observation is that, if the actual world belongs to a set of states where the set Z of action profiles is played, everyone is rational and it is mutual knowledge that the action profiles played are in Z, then the actions played at the actual world are rationalizable actions. Alternatively, if at the actual world the support of the conjecture of player i is Di, there is mutual knowledge of: (i) the game being played, (ii) that the players are rational, and (iii) that for every i the support of the conjecture of player i is contained in Di, then every strategy in the support of the conjectures is rationalizable. The results do not require common knowledge of anything and are valid for games with any number of players. Eduardo Zambrano Articles http://works.bepress.com/ezambran/9 http://works.bepress.com/ezambran/9 Thu, 24 Sep 2009 12:07:51 PDT Eduardo Zambrano Articles http://works.bepress.com/ezambran/7 http://works.bepress.com/ezambran/7 Tue, 22 Sep 2009 16:47:52 PDT When evaluating the rationality of a player in a game one has to examine counterfactuals such as "what would happen if the player were to do what he does not do?" In this paper I develop a model of a normal form game where counterfactuals of this sort are evaluated as in the philosophical literature (cf. Lewis, 1973; Stalnaker, 1968). According to this method one evaluates a statement like ``what would the player believe if he were to do what he does not do'' at the world that is closest to the actual world where the hypothetical deviation occurs. I show that in this model common knowledge of rationality need not lead to rationalizability. I also present assumptions that allow rationalizability to follow from common knowledge of rationality. These assumptions suggest that rationalizability may not rely on weaker assumptions about belief consistency than Nash equilibrium. Eduardo Zambrano Articles http://works.bepress.com/ezambran/6 http://works.bepress.com/ezambran/6 Tue, 22 Sep 2009 16:47:51 PDT Proebsting's Paradox is an argument that appears to show that the betting rule known as the Kelly criterion can lead a bettor to risk an arbitrarily high proportion of his wealth on the outcome of a single event. In this paper I show that a large class of betting criteria, including fractional Kelly, also suffer from the same shortcoming and use standard tools from microeconomic theory to explain why this is so. I also derive a new criterion, dubbed the doubly conservative criterion, that is immune to the problem identified above. Immunity stems from the bettor's attitudes towards capital preservation and from him becoming rapidly pessimistic about his chances of winning the better odds he is offered. Eduardo Zambrano Articles http://works.bepress.com/ezambran/5 http://works.bepress.com/ezambran/5 Tue, 22 Sep 2009 16:47:51 PDT In this paper I provide a framework in which to formalize the seminal work of Elinor Ostrom on the study of public economies, a prominent theoretical construct aimed to provide answers to the following questions: (a) Why some societies are able to solve their collective action problems and others are not? and (b) Why societies choose the particular institutions they choose from a vast array of possible choices? Eduardo Zambrano Articles http://works.bepress.com/ezambran/2 http://works.bepress.com/ezambran/2 Tue, 22 Sep 2009 16:47:50 PDT Consider a two player game that is to be played once. The players receive information that they use to help them predict the choices made by each other. A decision rule for each player captures how each player uses the information received in making their choices. Priors in this context are probability distributions over the information that may be received and over the decision rules that their opponents may use. I investigate the existence of prior beliefs for each player that satisfy the following properties: (R) they do not rule out their opponent using a rational decision rule, (K) they do not rule out the existence of information that would reveal the choice made by the opponent, and (SU) they do not rule out strategic uncertainty - a belief diversity condition. In this paper I show that for a large class of games there are no prior beliefs that satisfy properties (R), (K), and (SU). In the paper I discuss the implications of this result, in particular regarding whether one should expect a Nash equilibrium to arise in a game that is to be played once. Eduardo Zambrano Articles http://works.bepress.com/ezambran/3 http://works.bepress.com/ezambran/3 Tue, 22 Sep 2009 16:47:50 PDT Numeraire choice is often deemed a problem of purely analytical convenience. In this paper I show that there is more to numeraire selection than meets the eye for the formulation of monetary policy in countries with weak fiscal institutions. I show how (a) improper numeraire choice can dramatically overstate or understate Central Bank profits and (b) how this can threaten the ability of a Central Bank to keep inflation under control. I show point (a) in the context of Monte Carlo experiments calibrated for the Venezuelan economy and point (b) in an infinitely lived representative agent model that illustrates the problem of joint determination of the ideal level of foreign currency reserves and of the desired level of transfers of Central Bank profits to the Treasury when the objective is to eliminate the possibility of a hyperinflation. Eduardo Zambrano Articles http://works.bepress.com/ezambran/4 http://works.bepress.com/ezambran/4 Tue, 22 Sep 2009 16:47:50 PDT What if it could be possible to convince a completely non-neoclassical economist of the importance of Central Bank independence? The profession currently favors arguments in favor of Central Bank independence that are based on the seminal work by Barro and Gordon (1983 a,b), a model with naturally strong neoclassical assumptions. As a consequence of this, the argument in favor of Central Bank independence routinely given by economists is often not bought by those who question the validity of the neoclassical assumptions. In this paper I argue that Central Bank independence can be beneficial for society even when the economy is entirely non-neoclassical, that is, when workers are all unionized, firms are completely cartelized and inflation arises as the result of distributive struggles among capitalists and workers. This is so because it is the time-inconsistency issue, and not the structure of the economy, that which generates the inflation bias that Central Bank independence is set to eliminate. Eduardo Zambrano Articles http://works.bepress.com/ezambran/1 http://works.bepress.com/ezambran/1 Tue, 22 Sep 2009 16:47:49 PDT This paper proposes a simple mechanism for evaluating the relevance of credibility problems in politics. If parties are capable of making credible policy promises, we will not expect them to systematically adopt platforms that entail large probabilities of losing an election. This is because the adoption of very extreme platforms has the effect of shifting expected policies away from their ideal points. Parties who lack the capacity of making credible commitments, in turn, are unable to affect voters' expectations of the policies they will adopt upon reaching office. We test these predictions on a panel of US states by studying the relationship between the preferences of party constituents and enacted policies. We estimate this relationship using an econometric methodology that fully accounts for the possibility of multiple equilibria and find that its slope is in general not positive, a result that is inconsistent with the existence of a commitment technology. Francisco Rodriguez Articles