Pub Date : 2021-08-02DOI: 10.1146/ANNUREV-ECONOMICS-072720-042303
R. Gradwohl, E. Kalai
This review focuses on properties related to the robustness and stability of Nash equilibria in games with a large number of players. Somewhat surprisingly, these equilibria become substantially more robust and stable as the number of players increases. We illustrate the relevant phenomena through a binary-action game with strategic substitutes, framed as a game of social isolation in a pandemic environment.
{"title":"Large Games: Robustness and Stability","authors":"R. Gradwohl, E. Kalai","doi":"10.1146/ANNUREV-ECONOMICS-072720-042303","DOIUrl":"https://doi.org/10.1146/ANNUREV-ECONOMICS-072720-042303","url":null,"abstract":"This review focuses on properties related to the robustness and stability of Nash equilibria in games with a large number of players. Somewhat surprisingly, these equilibria become substantially more robust and stable as the number of players increases. We illustrate the relevant phenomena through a binary-action game with strategic substitutes, framed as a game of social isolation in a pandemic environment.","PeriodicalId":47891,"journal":{"name":"Annual Review of Economics","volume":" ","pages":""},"PeriodicalIF":5.6,"publicationDate":"2021-08-02","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"43847197","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2021-06-01DOI: 10.1146/ANNUREV-ECONOMICS-090820-110736
Joel Watson
This article describes the emerging game-theoretic framework for modeling long-term contractual relationships with moral hazard. The framework combines self-enforcement and external enforcement, accommodating alternative assumptions regarding how actively the parties initially set and renegotiate the terms of their contract. A progression of theoretical components is reviewed, building from the recursive formulation of equilibrium continuation values in repeated games. A principal-agent setting serves as a running example.
{"title":"Theoretical Foundations of Relational Incentive Contracts","authors":"Joel Watson","doi":"10.1146/ANNUREV-ECONOMICS-090820-110736","DOIUrl":"https://doi.org/10.1146/ANNUREV-ECONOMICS-090820-110736","url":null,"abstract":"This article describes the emerging game-theoretic framework for modeling long-term contractual relationships with moral hazard. The framework combines self-enforcement and external enforcement, accommodating alternative assumptions regarding how actively the parties initially set and renegotiate the terms of their contract. A progression of theoretical components is reviewed, building from the recursive formulation of equilibrium continuation values in repeated games. A principal-agent setting serves as a running example.","PeriodicalId":47891,"journal":{"name":"Annual Review of Economics","volume":" ","pages":""},"PeriodicalIF":5.6,"publicationDate":"2021-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"48836854","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2021-06-01DOI: 10.1146/ANNUREV-ECONOMICS-032621-030422
J. Tirole
Undoubtedly one of the best economists of his generation, Emmanuel Farhi transformed the theories of taxation, macroeconomics, and international finance. This essay describes his itinerary and his research style and attempts to pay tribute to his immense contribution to economics.
{"title":"Emmanuel Farhi, Economist Par Excellence","authors":"J. Tirole","doi":"10.1146/ANNUREV-ECONOMICS-032621-030422","DOIUrl":"https://doi.org/10.1146/ANNUREV-ECONOMICS-032621-030422","url":null,"abstract":"Undoubtedly one of the best economists of his generation, Emmanuel Farhi transformed the theories of taxation, macroeconomics, and international finance. This essay describes his itinerary and his research style and attempts to pay tribute to his immense contribution to economics.","PeriodicalId":47891,"journal":{"name":"Annual Review of Economics","volume":" ","pages":""},"PeriodicalIF":5.6,"publicationDate":"2021-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"48928702","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2021-05-26DOI: 10.1146/ANNUREV-ECONOMICS-091520-082042
Xavier Jaravel
Does inflation vary across the income distribution? This article reviews the growing literature on inflation inequality, describing recent advances and opportunities for further research in four areas. First, new price index theory facilitates the study of inflation inequality. Second, new data show that inflation rates decline with household income in the United States. Accurate measurement requires granular price and expenditure data because of aggregation bias. Third, new evidence quantifies the impacts of innovation and trade on inflation inequality. Contrary to common wisdom, empirical estimates show that the direction of innovation is a significant driver of inflation inequality in the United States, whereas trade has similar price effects across the income distribution. Fourth, inflation inequality and non-homotheticities have important policy implications. They transform cost-benefit analysis, optimal taxation, the effectiveness of stabilization policies, and our understanding of secular macroeconomic trends—including structural change, the decline in the labor share and interest rates, and labor market polarization.
{"title":"Inflation Inequality: Measurement, Causes, and Policy Implications","authors":"Xavier Jaravel","doi":"10.1146/ANNUREV-ECONOMICS-091520-082042","DOIUrl":"https://doi.org/10.1146/ANNUREV-ECONOMICS-091520-082042","url":null,"abstract":"Does inflation vary across the income distribution? This article reviews the growing literature on inflation inequality, describing recent advances and opportunities for further research in four areas. First, new price index theory facilitates the study of inflation inequality. Second, new data show that inflation rates decline with household income in the United States. Accurate measurement requires granular price and expenditure data because of aggregation bias. Third, new evidence quantifies the impacts of innovation and trade on inflation inequality. Contrary to common wisdom, empirical estimates show that the direction of innovation is a significant driver of inflation inequality in the United States, whereas trade has similar price effects across the income distribution. Fourth, inflation inequality and non-homotheticities have important policy implications. They transform cost-benefit analysis, optimal taxation, the effectiveness of stabilization policies, and our understanding of secular macroeconomic trends—including structural change, the decline in the labor share and interest rates, and labor market polarization.","PeriodicalId":47891,"journal":{"name":"Annual Review of Economics","volume":" ","pages":""},"PeriodicalIF":5.6,"publicationDate":"2021-05-26","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"46222560","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2021-05-24DOI: 10.1146/ANNUREV-ECONOMICS-082120-122900
David McAdams
Infectious diseases, ideas, new products, and other infectants spread in epidemic fashion through social contact. The COVID-19 pandemic, the proliferation of fake news, and the rise of antimicrobial resistance have thrust economic epidemiology into the forefront of public policy debate and reinvigorated the field. Focusing for concreteness on disease-causing pathogens, this review provides a taxonomy of economic-epidemic models, emphasizing both the biology/immunology of the disease and the economics of the social context. An economic epidemic is one whose diffusion through the agent population is generated by agents’ endogenous behavior. I highlight properties of the equilibrium epidemic trajectory and discuss ways in which public health authorities can change the game for the better by ( a) imposing restrictions on agent activity to reduce the harm done during a viral outbreak and ( b) enabling diagnostic-informed interventions to slow or even reverse the rise of antibiotic resistance.
{"title":"The Blossoming of Economic Epidemiology","authors":"David McAdams","doi":"10.1146/ANNUREV-ECONOMICS-082120-122900","DOIUrl":"https://doi.org/10.1146/ANNUREV-ECONOMICS-082120-122900","url":null,"abstract":"Infectious diseases, ideas, new products, and other infectants spread in epidemic fashion through social contact. The COVID-19 pandemic, the proliferation of fake news, and the rise of antimicrobial resistance have thrust economic epidemiology into the forefront of public policy debate and reinvigorated the field. Focusing for concreteness on disease-causing pathogens, this review provides a taxonomy of economic-epidemic models, emphasizing both the biology/immunology of the disease and the economics of the social context. An economic epidemic is one whose diffusion through the agent population is generated by agents’ endogenous behavior. I highlight properties of the equilibrium epidemic trajectory and discuss ways in which public health authorities can change the game for the better by ( a) imposing restrictions on agent activity to reduce the harm done during a viral outbreak and ( b) enabling diagnostic-informed interventions to slow or even reverse the rise of antibiotic resistance.","PeriodicalId":47891,"journal":{"name":"Annual Review of Economics","volume":" ","pages":""},"PeriodicalIF":5.6,"publicationDate":"2021-05-24","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"43243467","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2020-08-03DOI: 10.1146/annurev-economics-082019-031419
Kaivan Munshi
The frictions that restrict migration are among the largest sources of inefficiency in the global economy. The first step in designing policies to address these frictions is to understand the funda...
限制移民的摩擦是全球经济效率低下的最大根源之一。设计解决这些摩擦的政策的第一步是了解其基本原理。
{"title":"Social Networks and Migration","authors":"Kaivan Munshi","doi":"10.1146/annurev-economics-082019-031419","DOIUrl":"https://doi.org/10.1146/annurev-economics-082019-031419","url":null,"abstract":"The frictions that restrict migration are among the largest sources of inefficiency in the global economy. The first step in designing policies to address these frictions is to understand the funda...","PeriodicalId":47891,"journal":{"name":"Annual Review of Economics","volume":"12 1","pages":"503-524"},"PeriodicalIF":5.6,"publicationDate":"2020-08-03","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.1146/annurev-economics-082019-031419","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"48730244","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2020-08-03DOI: 10.1146/annurev-economics-091819-124829
Pierre-Olivier Weill
I review the recent literature that applies search-and-matching theory to the study of over-the-counter financial markets. I formulate and solve a simple model to illustrate the typical assumptions...
{"title":"The Search Theory of Over-the-Counter Markets","authors":"Pierre-Olivier Weill","doi":"10.1146/annurev-economics-091819-124829","DOIUrl":"https://doi.org/10.1146/annurev-economics-091819-124829","url":null,"abstract":"I review the recent literature that applies search-and-matching theory to the study of over-the-counter financial markets. I formulate and solve a simple model to illustrate the typical assumptions...","PeriodicalId":47891,"journal":{"name":"Annual Review of Economics","volume":"12 1","pages":"747-773"},"PeriodicalIF":5.6,"publicationDate":"2020-08-03","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.1146/annurev-economics-091819-124829","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"44921257","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2020-08-03DOI: 10.1146/annurev-economics-081919-042544
G. Chamberlain
This review uses the empirical analysis of portfolio choice to illustrate econometric issues that arise in decision problems. Subjective expected utility (SEU) can provide normative guidance to an ...
{"title":"Robust Decision Theory and Econometrics","authors":"G. Chamberlain","doi":"10.1146/annurev-economics-081919-042544","DOIUrl":"https://doi.org/10.1146/annurev-economics-081919-042544","url":null,"abstract":"This review uses the empirical analysis of portfolio choice to illustrate econometric issues that arise in decision problems. Subjective expected utility (SEU) can provide normative guidance to an ...","PeriodicalId":47891,"journal":{"name":"Annual Review of Economics","volume":"12 1","pages":"239-271"},"PeriodicalIF":5.6,"publicationDate":"2020-08-03","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.1146/annurev-economics-081919-042544","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"42327809","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2020-08-03DOI: 10.1146/annurev-economics-091619-032800
G. Charness, Yan Chen
The issue of one's identity has loomed large recently and has unfortunately been used more and more as a wedge to separate subgroups. It is important to understand the ramifications of identity, bo...
{"title":"Social Identity, Group Behavior, and Teams","authors":"G. Charness, Yan Chen","doi":"10.1146/annurev-economics-091619-032800","DOIUrl":"https://doi.org/10.1146/annurev-economics-091619-032800","url":null,"abstract":"The issue of one's identity has loomed large recently and has unfortunately been used more and more as a wedge to separate subgroups. It is important to understand the ramifications of identity, bo...","PeriodicalId":47891,"journal":{"name":"Annual Review of Economics","volume":"12 1","pages":"691-713"},"PeriodicalIF":5.6,"publicationDate":"2020-08-03","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.1146/annurev-economics-091619-032800","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"47906397","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2020-08-03DOI: 10.1146/ANNUREV-ECONOMICS-080217-053245
Garance Genicot, Debraj Ray
This article reviews the literature on aspirations in economics, with a particular focus on socially determined aspirations. The core theory builds on two fundamental principles: (a) Aspirations ca...
{"title":"Aspirations and Economic Behavior","authors":"Garance Genicot, Debraj Ray","doi":"10.1146/ANNUREV-ECONOMICS-080217-053245","DOIUrl":"https://doi.org/10.1146/ANNUREV-ECONOMICS-080217-053245","url":null,"abstract":"This article reviews the literature on aspirations in economics, with a particular focus on socially determined aspirations. The core theory builds on two fundamental principles: (a) Aspirations ca...","PeriodicalId":47891,"journal":{"name":"Annual Review of Economics","volume":"12 1","pages":"715-746"},"PeriodicalIF":5.6,"publicationDate":"2020-08-03","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.1146/ANNUREV-ECONOMICS-080217-053245","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"48995957","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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