economics

JProf. Dr. Lars Metzger, TU Dortmund

Invader Strategies in the War of Attrition with Private Information

Abstract I Paper

Second price allpay auctions (wars of attritions) have an evolutionarily stable equilibrium in pure strategies if valuations are private information. I show that for any level of uncertainty there exists a pure deviation strategy close to the equilibrium strategy such that for some valuations the equilibrium strategy has a selective disadvantage against the deviation if the population mainly plays the deviation strategy. There is no deviation strategy with this destabilizing property for all valuations if the distribution of valuations has a monotonic hazard rate. I argue that in the Bayesian game studied here, a mass deviation can be caused by the entry of a small group of agents. Numeric calculations indicate that the closer the deviation strategy to the equilibrium strategy, the less valuations are destabilizing. I show that the equilibrium strategy does not satisfy continuous stability.

Sebastian Otten RUB

Individuelle und aggregierte Kosten von Sprachbarrieren

Abstract I Paper

Linguistic distance, i.e. the dissimilarity between languages, is an important factor influencing international economic transactions such as migration or international trade flows. Linguistic distance imposes costs for acquiring a second language and, higher linguistic distance between countries rises hurdles for e.g. language acquisition of immigrants, or induces higher costs for international transactions. We introduce a new measure of linguistic distance based on recent research by the German Max Planck Institute of Evolutionary Anthropology. The Levenshtein distance is an easily computed and transparent approach of including linguistic distance into econometric applications. We show its merits in two different applications. First, the effect of linguistic distance in the language acquisition of immigrants is analyzed using data from the 2000 U.S. Census, the German Socio-Economic Panel, and the National Immigrant Survey of Spain. Across countries, the linguistic distance reduces reported language skills of immigrants. Second, using data of international trade flows covering 178 countries and 52 years in a standard gravity model, it is shown that linguistic distance has a strong negative influence on bilateral trade volumes.