Game Theory & Behavioral Economics

Game theory is in play in almost every situation that we see in life. Provide an example of a game that happens in life and provide insight into if the results are efficient if not how can we make it efficient.

What type of behavioral economic errors are people making in their decision making if applicable? How do news, marketing, and misinformation contribute to these errors?

For Week 8 you will find two topics. Select one topic, then post and concisely defend your view. You may post to both topics, but are required to only select one for your initial post. Be careful to identify the positive reasons for your normative position. Read and respond to your fellow student’s postings at will. The topics to choose from are:

Select a Government Regulation. Identify a particular government regulation of your choosing that in your opinion has either been successful or a failure. Briefly state the original purpose of this regulation and whether it has changed over time. Then, concisely defend your view on whether you favor the expansion or reduction of the enforcing regulatory agency.
Anti-trust Measures. Identify a particular market that has experienced government anti-trust efforts or you think should have antitrust efforts. Analyze what type of market structure was in existence at the time of the anti-trust measures or is in currently. Then justify whether the market justified(s) the intervention.

The Law of Demand says that output increases when price falls, all else equal. That is, demand curves slope downward. But sometimes we see the price of a good rise when output increases. For example, lithium is used in rechargeable batteries for computers, phones, other electronic goods, and even certain cars. Demand for lithium was low as recently as the early 2000s. Since then, both the price of lithium and the production of lithium have more than doubled.

What could explain the simultaneous increases in the price of lithium and the production of lithium? Use supply and demand curves to explain your answer. (Hint: Price and equilibrium quantity have both increased. Would a shift in the demand curve or a shift in the supply curve lead to this result?)

You will each be responsible for giving two presentations this semester.  The presentations should be between five and ten minutes long, and the topics will be of your own choosing.  Along with each presentation, please submit a 1-2 page paper that summarizes your topic.  I will return these to you with comments and a grade for your efforts.  Please take these presentations seriously as we will often use them as starting point for our class discussions.

Country chosen: France

Identify current economic and social policy in your country, including social welfare programs (ex: Social Security, medical care programs, workers compensation, etc.).  Find areas of the economy or social welfare that your country needs to improve and what do you believe is the problem.  Identify policies learned in class that may help the current situation in your country, explain how these policies can help the current situation.  Make strong arguments.

The following are minimum requirements for the written portion:
1.    The Country Study must be Typed double space. (APA Format preferred, MLA optional). 
2.    Every Project must have a References page as requested in APA
3.    Write it ALL in your OWN words, DO NOT COPY / PASTE anything, your grade will be severely penalized if you do so.  When copy/pasting data, graphs or other, make sure to cite correctly, follow APA format.
4.    Usual recommendation is 1-2 sources per page you write.
5.    The use of Wikipedia and/or any other internet blog, question-answer website as a source in not acceptable.

Write a paper on a topic you choose and present it to the class. Any topic related to the course is fine: typical papers focus on a particular industry, firm, technology, innovation or type of innovation. The analysis may be largely descriptive (like the cases we discuss in class), include models (like the ones in the slides and the corresponding readings), and/or involve econometric methods and hypothesis tests.

Grading Rubric for the Paper:

Papers receive deductions for shortcomings in the following areas. The maximum point deduction in each case is listed in ():

1. (15) Length: The title page plus text must be no less than 8 and no more than 12 pages (double-spaced with 12-point Calibri or Times New Roman font and 1-inch margins (the default in MS Word) all around. Do not exceed 25 lines of text per page. The entire paper cannot exceed 20 pages (including everything: the title page, text, references, figures and tables). Each table or figure must be on a separate page. Everyone should earn all 15 of these points; please ensure you meet these restrictions.

2. (15) Research: Cite at least five peer reviewed academic journal articles from the Econlit and/or ABI/Inform databases: each of the five counts for 3 percentage points. Both databases are available through the library, and both permit restricting attention to peer reviewed journal articles. For Econlit, select Publication Type: Journal Article. For ABI/Inform, check Peer reviewed and Scholarly journals. For Econ 165, at least three of the five must be included in the Econlit database. Use bold font to highlight the academic sources in your references section (to distinguish them from other sources you cite). Make sure your bolded sources are peer reviewed; I assign a grade of 0 to any bolded source that is not peer reviewed. You might not find articles that discuss your firm, industry or topic directly, but there are almost certainly ones that provide insights you can use (articles on firms, business models, dynamics, innovations, strategies, policies and/or sources of competitive advantage like the ones you focus on). To select articles from high quality journals, it might be useful to consult information on how often articles in particular journals get cited. A good source is Laband, David N. On the Use and Abuse of Economics Journal Rankings Economic Journal 123:570 (August 2013): F233-F254. List each article in the references and cite it somewhere in the text. I assign a grade of 0 to any peer reviewed articles that do not meet this condition. In general, every source you list in the references section must be cited somewhere in the text and vice versa: do not list any sources you do not cite, and do not cite any sources you do not list. If a source is not important enough to warrant citing somewhere in the body of the paper, it does not belong in the references.

3. (10) Evidence-based writing: Make evidence-based arguments, and cite sources to back up your facts and assertions. Assume your reader is:

1. Familiar with firms/industries/innovations in general, but unfamiliar with the one(s) you are focusing on (unless we discussed them in class).
2. An extreme skeptic who wont believe anything you say unless it is supported by facts.
3. Easily confused and annoyed by all imprecise statements (so you need to be as clear and precise as possible in every single sentence).
4. Someone with an abnormal level of passion for using economic terminology correctly.

Do your claims and conclusions follow logically from your assumptions, data, and analysis? How good is the information/data you employ? How useful is it for addressing the main goals of the paper? How careful and thoughtful is the analysis? Focused and deep contributions are usually more insightful than broad overviews. How sophisticated are the techniques? Have you used (and explained) any complex measures or techniques? If a critical reader might not accept your conclusions, have you anticipated possible objections and attempted to address them as well as possible?

Replace adjectives and adverbs with facts to avoid writing like a tabloid journalist. For example, replace a sentence like Recently, Industry X has become known for incredibly fast moving companies that require constant innovation to survive with something more fact-based/verifiable like Over the past 3 years, the 7 firms in Industry X who failed to improve their computation speeds by at least 70% exited the industry and were liquidated this shows that firms who failed to innovate did not survive. If facts are not available, at least cite a source to back up your claim: According to Jones (2007), industry X is known for . Be as precise as possible with facts, dates, sources, etc.

Be particularly cautious when discussing the future; virtually all predictions about uncertain outcomes are wrong or at least incomplete or inaccurate in important ways. Avoid asserting that something will happen unless there is virtually no chance that it will not. In other cases, qualify the claim and provide evidence or external support. For example, you might say the event is projected to occur by Smith (2016) or perhaps something like if present trends continue, then although in the latter case you should also consider why present trends might not continue. In general, be clear about the basis of any projections, and assume the reader will be skeptical; anticipate and address doubts. Recognize that virtually all forecasts about technology adoption, future sales, market shares, innovation, etc. are wrong. If your topic warrants considering the future, then it is normally best to focus on facts in most of the paper and assign forecasts and speculation about what the future might hold to a separate section right before the conclusion. 

4. (10) Links to course content: Have you made links to economic concepts, frameworks, techniques, and theories we have discussed in class or that you have encountered elsewhere?

1. Use terms precisely. For example, do not refer to a firm as a monopoly if it has a 50% market share. It might be a dominant firm in this case, but it is not a monopoly. Do not refer to disruptive innovation if you really mean architectural innovation or some other type of innovation. Take the time to check the definitions of any terms you employ.

2. Many papers include a five forces analysis. This is fine, but a complete analysis of an innovative firm or industry typically has to go beyond a five forces analysis. Be sure to consider the relevance of other concepts we discussed in class: complementors, resources, capabilities, dynamic capabilities, industry dynamics, strategic behavior, types of innovation, methods for appropriating returns, platform strategies and factors impacting platform success, interactions with the legal system, public policy, etc.

3. In this category, I also consider the novelty of the paper in light of existing work: Are the motivating questions important? Are the results interesting? Does the paper go beyond summarizing the work of others?

5. (5) The title: Your title must accurately (but briefly) convey the focus and content of your paper. Be as precise and as clear as possible, and make sure every word is necessary. Use 18-point font, upper-case letters to begin words, and do not underline. Also on the title page (in regular font), include your name, institutional affiliation, and the date. In a footnote to your name, provide your email address.

6. (10) The abstract: On the title page, include an abstract of 90-100 words (no more and no less; provide the word count). Most readers read only the abstract, so write the abstract with such readers in mind. Try to summarize the entire paper: briefly motivate the topic and summarize the method as necessary, and then provide the main results. Provide as much information as you can in the space you have (facts, dates, precise findings, etc.).

7. (10) The introduction: Most readers who get past the abstract read only the introduction. Given this, your introduction must be well written, brief, and precise. Get to the point; do not withhold critical information. Your introduction must include the following components, in order. Write one or two paragraphs on each (preferably one), and do not exceed three pages (shorter is better):

a. Motivation: Explain why your topic is worth studying and state your goal(s).

b. Method: Describe your approach and justify it. Part of this normally involves anticipating the sections that follow: First, I summarize the history of the industry from 1900-present in order to. Second, I conduct a five-forces analysis of the current market in order to. Third, Each item can then be a separate section in the body of the paper.

c. Contribution: Discuss your contribution to the literature and the body of knowledge pertaining to your topic. Cite prior work (academic work in particular) to help summarize existing knowledge. What is new in your work? Do any decisions or recommendations emerge from your work?

8. (5) The conclusion: Most readers who get through the introduction skip right to the conclusion. Given this, your conclusion should not assume the reader has read the body of the paper. Summarize your results and conclusions in a paragraph or two, and then briefly discuss some limitations of your results (such as your analysis makes an important simplifying assumption, or useful data is missing) and describe some possible extensions. Numbered lists are often useful: I find that four key characteristics of Firm X are responsible for its growth during 2010-2017. First, Second, Third, Fourth, The conclusion should be at most two pages long.

9. (10) Organization and writing: Include page numbers. Use section and subsection headings as appropriate. Section headings should be in bold 14-point font and numbered. Subsection headings should be in bold but in the regular font size. Work on paragraph and sentence structure, use words correctly, and replace complex words and phrases with simple ones wherever possible.

Use present tense and a first-person perspective, and be as brief as possible. Say “I find that…” rather than I found that or This paper finds that or My research has allowed me to conclude that Eliminate irrelevant words to shorten sentences: Say I focus on mergers rather than I will focus special attention on mergers and say I begin by rather than Before digging deeper into this case it is necessary to begin by.

a. If your paper focuses on reviewing a set of papers, it is often useful to follow the introduction by summarizing the historical development of the literature leading up to the papers you focus on with an emphasis on findings that are relevant for your topic.

b. In an industry study, it is often useful to follow the introduction with a summary of the historical development of the industry with an emphasis on facts that are relevant for your paper. In a firm study, it is often useful to provide an overview of the industry.

c. If your paper includes a theoretical model, carefully describe your notation, the structure of the model, and its solution. Develop your main claims or hypotheses.

d. If you analyze data using statistical techniques, discuss your sources and other information, summarize any sample data you use in tables (provide means, standard deviations, medians, mins, maxes, numbers of observations, etc.), and discuss any problems with your data or other information. Then describe your methods. For example, if you run a regression, you should present the regression equation, describe its components, and summarize how each variable is measured. If you examine trends, explain how you do so. If you interview industry participants, describe the questions.

10. (5) Visuals: Include at least one table and one figure created by you (not copied from another source). Missing one of these warrants a 50% deduction on this component. Tables and figures should be numbered, titled, labeled, large enough to see (with font sizes like those in the main text), readable in black and white, and the key insights from them should be discussed and interpreted in the text. Visuals not discussed in the text receive a grade of 0. Include only the information you need to refer to in the tables/figures. Ideal tables/figures are as self-contained as possible: explain terms, write out abbreviations, etc., to help the reader and minimize the need for the reader to go back and forth between the text and the tables/figures. Provide tables and figures at the end of the paper. Each table or figure must be on a separate page.

11. (5) Citations: Acknowledge your sources with minimal interference in the flow of the text. Economists essentially use the Chicago Author-Date system (http://www.chicagomanualofstyle.org/tools_citationguide/citation-guide-2.html), although in the case of journal articles or other short documents, page numbers are included only in the references and not in the text (unless you are quoting the source).

Most of the papers listed on the syllabus can serve as examples; Galasso and Schankerman Patents and Cumulative Innovation: Causal Evidence from the Courts Quarterly Journal of Economics 130:1 (February 2015): 317-69 (available through the library) is particularly good.

Some specifics:

a. List all references at the end of the text on a separate page in alphabetical order by the first authors last name. Use regular font size and include spaces between references.

b. When citing references in the text, use Author (Year), and embed citations in the natural flow of the sentence as much as possible: “Smith (2008) finds that….” For two or three authors, list all: Smith, Jones and Hu (2008) find that If there are four or more authors, use et al.: “Smith et al. (2008) find that….” No need for page numbers unless you are quoting, in which case they are necessary: Smith (2008, pg. 3) writes The 10-Ks do not provide all of the relevant information.

c. Minimize the use of footnotes: reserve them for listing several references at once, citing web pages that are too long to imbed in the text, or for lines of argument that digress from the main argument in the text. Use footnotes rather than endnotes. Place all footnote superscripts at the end of sentences after the period.

d. If you rely on a single source (or group of sources) for a large number of the facts, try to avoid citing it (or them) multiple times. A useful strategy: cite the source the first time you refer to it and let the reader know at that point that you intent to rely on that source for all similar facts in the rest of the section (or even the entire paper). For example, suppose you rely on a firms annual reports (the 10-Ks) for almost all of the financial data you report in the paper. The first time you present a financial outcome, include a footnote that reads something like Except where noted, all financial data provided in this paper is obtained from ACME Moving Companys 10-Ks from 1999-2010.