Pub Date : 2021-01-14DOI: 10.1093/OSO/9780198863175.003.0004
Marlies Ahlert
Classical game theory analyses strategic interactions under extreme idealisations. It assumes cognitively unconstrained players with common knowledge concerning game forms, preferences, and rationality. Such ideal theory is highly relevant for human self-understanding as a rational being or what Selten called ‘rationology’. Yet, ideal theory is highly irrelevant for real actors who are in Selten’s sense boundedly rational. Starting from essential features of real bargaining problems, elements of Selten’s ‘micro-psychological’ and Raiffa’s ‘telescopic’ behavioural bargaining theory are introduced. From this, an outline of a workable rationality approach to bargaining emerges. It suggests relying on telescopic elements from Raiffa’s model to provide general outcome orientation and on insights from Selten’s aspiration adaptation model of individual decision making to develop process-sensitive action advice. A bird’s eye view of a prominent recent case of ‘bargaining in the shadow of the courts’ shows a surprisingly good fit of outcomes with the implications of Raiffa’s telescopic approach while remaining compatible with a Seltenian process. Though due to a lack of specific information because the micro-foundations for the telescopic theory cannot be provided, it is at least clear how further case studies and experiments might be put to work here.
{"title":"Game Theory and the Law","authors":"Marlies Ahlert","doi":"10.1093/OSO/9780198863175.003.0004","DOIUrl":"https://doi.org/10.1093/OSO/9780198863175.003.0004","url":null,"abstract":"Classical game theory analyses strategic interactions under extreme idealisations. It assumes cognitively unconstrained players with common knowledge concerning game forms, preferences, and rationality. Such ideal theory is highly relevant for human self-understanding as a rational being or what Selten called ‘rationology’. Yet, ideal theory is highly irrelevant for real actors who are in Selten’s sense boundedly rational. Starting from essential features of real bargaining problems, elements of Selten’s ‘micro-psychological’ and Raiffa’s ‘telescopic’ behavioural bargaining theory are introduced. From this, an outline of a workable rationality approach to bargaining emerges. It suggests relying on telescopic elements from Raiffa’s model to provide general outcome orientation and on insights from Selten’s aspiration adaptation model of individual decision making to develop process-sensitive action advice. A bird’s eye view of a prominent recent case of ‘bargaining in the shadow of the courts’ shows a surprisingly good fit of outcomes with the implications of Raiffa’s telescopic approach while remaining compatible with a Seltenian process. Though due to a lack of specific information because the micro-foundations for the telescopic theory cannot be provided, it is at least clear how further case studies and experiments might be put to work here.","PeriodicalId":130127,"journal":{"name":"Theories of Choice","volume":"64 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-01-14","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"124756783","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2021-01-14DOI: 10.1093/oso/9780198863175.003.0002
C. Engel
Behavioural law and economics applies the conceptual tools of behavioural economics to the analysis of legal problems and legal intervention. These models, and the experiments to test them, assume an institution-free state of nature. In modern societies, the law’s subjects never see this state of nature. However, a rich arrangement of informal and formal institutions creates generalised trust. If individuals are sufficiently confident that nothing too detrimental will happen, they are freed up to interact with strangers as if they were in a state of nature. This willingness dramatically reduces transaction cost and enables division of labour. If generalised trust can be assumed, simple economic models are appropriate, but they must be behavioural, since otherwise individuals would not want to run the risk of interaction.
{"title":"The Proper Scope of Behavioural Law and Economics","authors":"C. Engel","doi":"10.1093/oso/9780198863175.003.0002","DOIUrl":"https://doi.org/10.1093/oso/9780198863175.003.0002","url":null,"abstract":"Behavioural law and economics applies the conceptual tools of behavioural economics to the analysis of legal problems and legal intervention. These models, and the experiments to test them, assume an institution-free state of nature. In modern societies, the law’s subjects never see this state of nature. However, a rich arrangement of informal and formal institutions creates generalised trust. If individuals are sufficiently confident that nothing too detrimental will happen, they are freed up to interact with strangers as if they were in a state of nature. This willingness dramatically reduces transaction cost and enables division of labour. If generalised trust can be assumed, simple economic models are appropriate, but they must be behavioural, since otherwise individuals would not want to run the risk of interaction.","PeriodicalId":130127,"journal":{"name":"Theories of Choice","volume":"6 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-01-14","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"124595546","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2021-01-14DOI: 10.1093/oso/9780198863175.003.0010
A. Engert
The chapter provides an introduction to the social science of ‘collective intelligence’, the aggregation of individual judgments for purposes of collective decision making. It starts from the basic logic of the Condorcet jury theorem and summarises the main determinants of the accuracy of collective cognition. The recent research has focused on developing and refining formal aggregation methods beyond majority voting. The chapter presents the main findings on the two general approaches, surveying and prediction markets. It then contrasts these techniques with informal deliberation as a basic and prevalent aggregation mechanism. One conclusion is that while deliberation is prone to herding and can distort collective judgment, it is also more versatile and robust than formal mechanisms.
{"title":"Collective Intelligence","authors":"A. Engert","doi":"10.1093/oso/9780198863175.003.0010","DOIUrl":"https://doi.org/10.1093/oso/9780198863175.003.0010","url":null,"abstract":"The chapter provides an introduction to the social science of ‘collective intelligence’, the aggregation of individual judgments for purposes of collective decision making. It starts from the basic logic of the Condorcet jury theorem and summarises the main determinants of the accuracy of collective cognition. The recent research has focused on developing and refining formal aggregation methods beyond majority voting. The chapter presents the main findings on the two general approaches, surveying and prediction markets. It then contrasts these techniques with informal deliberation as a basic and prevalent aggregation mechanism. One conclusion is that while deliberation is prone to herding and can distort collective judgment, it is also more versatile and robust than formal mechanisms.","PeriodicalId":130127,"journal":{"name":"Theories of Choice","volume":"71 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-01-14","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"122885155","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2021-01-14DOI: 10.1093/oso/9780198863175.003.0012
L. Enriques, A. Romano
This chapter shows how network theory can improve our understanding of institutional investors’ voting behaviour and, more generally, their role in corporate governance. The standard idea is that institutional investors compete against each other on relative performance and hence might not cast informed votes, due to rational apathy and rational reticence. In other words, institutional investors have incentives to free-ride instead of ‘cooperating’ and casting informed votes. We show that connections of various kinds among institutional investors, whether from formal networks, geographical proximity, or common ownership, and among institutional investors and other agents, such as proxy advisors, contribute to shaping institutional investors’ incentives to vote ‘actively’. They also create intricate competition dynamics: competition takes place not only among institutional investors (and their asset managers) but also at the level of their employees and among ‘cliques’ of institutional investors. Employees, who strive for better jobs, are motivated to obtain more information on portfolio companies than may be strictly justified from their employer institution’s perspective, and to circulate it within their network. Cliques of institutional investors compete against each other. Because there are good reasons to believe that cliques of cooperators outperform cliques of non-cooperators, the network-level competition might increase the incentives of institutional investors to collect information. These dynamics can enhance institutional investors’ engagement in portfolio companies and also shed light on some current policy issues such as the antitrust effects of common ownership and mandatory disclosures of institutional investors’ voting.
{"title":"Institutional Investor Voting Behaviour","authors":"L. Enriques, A. Romano","doi":"10.1093/oso/9780198863175.003.0012","DOIUrl":"https://doi.org/10.1093/oso/9780198863175.003.0012","url":null,"abstract":"This chapter shows how network theory can improve our understanding of institutional investors’ voting behaviour and, more generally, their role in corporate governance. The standard idea is that institutional investors compete against each other on relative performance and hence might not cast informed votes, due to rational apathy and rational reticence. In other words, institutional investors have incentives to free-ride instead of ‘cooperating’ and casting informed votes. We show that connections of various kinds among institutional investors, whether from formal networks, geographical proximity, or common ownership, and among institutional investors and other agents, such as proxy advisors, contribute to shaping institutional investors’ incentives to vote ‘actively’. They also create intricate competition dynamics: competition takes place not only among institutional investors (and their asset managers) but also at the level of their employees and among ‘cliques’ of institutional investors. Employees, who strive for better jobs, are motivated to obtain more information on portfolio companies than may be strictly justified from their employer institution’s perspective, and to circulate it within their network. Cliques of institutional investors compete against each other. Because there are good reasons to believe that cliques of cooperators outperform cliques of non-cooperators, the network-level competition might increase the incentives of institutional investors to collect information. These dynamics can enhance institutional investors’ engagement in portfolio companies and also shed light on some current policy issues such as the antitrust effects of common ownership and mandatory disclosures of institutional investors’ voting.","PeriodicalId":130127,"journal":{"name":"Theories of Choice","volume":"41 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-01-14","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"116317121","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2021-01-14DOI: 10.1093/oso/9780198863175.003.0007
Anne-Lise Sibony
This chapter takes up two difficult questions: ‘does the law contain one or more theories of choice?’ and, if it does, ‘is there a meta-theory to tell us which theory of choice to use in which cases?’ Even if one retains a loose definition of what counts as a ‘theory of choice’, there are reasons to be sceptical about the enterprise of mapping out theories of choice underpinning the law. This is because the supply of such theories is both abundant and incomplete while the demand is generally weak. Consumer protection, which purports to protect ‘consumer choice’, would seem to be a designated area of law to look for theories of (consumer) choice. However, an enquiry into legislative work on consumer protection reveals paradoxical efforts to confirm the theory that consumers do well with information rather than investigate alternative theories. It also appears that consumer law embeds several different conflicting theories of consumer choice without any sign of a meta-theory indicating which theory applies to which cases. In addition, where there is a theory of consumer harm justifying legislative intervention, it seems to matter little that we do not have a theory for how consumer choice is distorted. In short, the legislative appetite for theories of choice seems limited. Legal scholarship offers a different picture. A space has emerged in which to discuss theories of choice within legal analysis, which is still in the process of being shaped. Tentatively, it is suggested that the legal literature offers a contrast between deep and narrow discussions of theories of choice, and wide and shallow ones.
{"title":"Did You Say ‘Theories of Choice’?","authors":"Anne-Lise Sibony","doi":"10.1093/oso/9780198863175.003.0007","DOIUrl":"https://doi.org/10.1093/oso/9780198863175.003.0007","url":null,"abstract":"This chapter takes up two difficult questions: ‘does the law contain one or more theories of choice?’ and, if it does, ‘is there a meta-theory to tell us which theory of choice to use in which cases?’ Even if one retains a loose definition of what counts as a ‘theory of choice’, there are reasons to be sceptical about the enterprise of mapping out theories of choice underpinning the law. This is because the supply of such theories is both abundant and incomplete while the demand is generally weak. Consumer protection, which purports to protect ‘consumer choice’, would seem to be a designated area of law to look for theories of (consumer) choice. However, an enquiry into legislative work on consumer protection reveals paradoxical efforts to confirm the theory that consumers do well with information rather than investigate alternative theories. It also appears that consumer law embeds several different conflicting theories of consumer choice without any sign of a meta-theory indicating which theory applies to which cases. In addition, where there is a theory of consumer harm justifying legislative intervention, it seems to matter little that we do not have a theory for how consumer choice is distorted. In short, the legislative appetite for theories of choice seems limited. Legal scholarship offers a different picture. A space has emerged in which to discuss theories of choice within legal analysis, which is still in the process of being shaped. Tentatively, it is suggested that the legal literature offers a contrast between deep and narrow discussions of theories of choice, and wide and shallow ones.","PeriodicalId":130127,"journal":{"name":"Theories of Choice","volume":"126 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-01-14","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"125776606","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2019-11-21DOI: 10.1093/oso/9780190643027.003.0002
M. Adler
The social welfare function (‘SWF’) framework is a methodology for assessing governmental policies that originates in theoretical welfare economics and is now widely used in various economic literatures. The framework translates the possible outcomes of policy choice into patterns of well-being among the population of interest, represented by interpersonally comparable well-being numbers. Policies are then ranked in light of some rule for ordering these well-being patterns (such as a utilitarian or prioritarian rule), taking account of the probability that a given policy will lead to a given outcome. This chapter presents the SWF framework, illustrates how it can be used for regulatory policy analysis, and compares the methodology to cost-benefit analysis (‘CBA’), currently the dominant policy-analytic tool in governmental practice. CBA eschews interpersonal comparisons and, instead, translates policy impacts on each person into a monetary equivalent relative to the status quo; these monetary equivalents are then added up. While CBA and the SWF framework are broadly similar in being consequentialist and welfarist, and in adopting a preference view of well-being, they employ distinct analytic structures for integrating information about preferences and possible outcomes to arrive at an assessment of the various policies that government might adopt. As the chapter demonstrates, the structural differences between the SWF framework and CBA can yield significant divergence at the level of policy recommendation.
{"title":"The Social Welfare Function","authors":"M. Adler","doi":"10.1093/oso/9780190643027.003.0002","DOIUrl":"https://doi.org/10.1093/oso/9780190643027.003.0002","url":null,"abstract":"The social welfare function (‘SWF’) framework is a methodology for assessing governmental policies that originates in theoretical welfare economics and is now widely used in various economic literatures. The framework translates the possible outcomes of policy choice into patterns of well-being among the population of interest, represented by interpersonally comparable well-being numbers. Policies are then ranked in light of some rule for ordering these well-being patterns (such as a utilitarian or prioritarian rule), taking account of the probability that a given policy will lead to a given outcome. This chapter presents the SWF framework, illustrates how it can be used for regulatory policy analysis, and compares the methodology to cost-benefit analysis (‘CBA’), currently the dominant policy-analytic tool in governmental practice. CBA eschews interpersonal comparisons and, instead, translates policy impacts on each person into a monetary equivalent relative to the status quo; these monetary equivalents are then added up. While CBA and the SWF framework are broadly similar in being consequentialist and welfarist, and in adopting a preference view of well-being, they employ distinct analytic structures for integrating information about preferences and possible outcomes to arrive at an assessment of the various policies that government might adopt. As the chapter demonstrates, the structural differences between the SWF framework and CBA can yield significant divergence at the level of policy recommendation.","PeriodicalId":130127,"journal":{"name":"Theories of Choice","volume":"8 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-11-21","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"134052613","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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