Jörgen Weibull

We analyze a principal-agent model with moral hazard where the principal is risk neutral and the agent is risk averse or risk neutral. The agents' actions determine the probability distribution over outcomes, where some probability distributions require more effort than others. We analyze a family of effort disutility functions with arguably desirable properties. For a canonical class of such functions and arbitrary outcome spaces, the model is explicitly solvable. Optimal contracts combine debt with a monotonic sharing rule for the surplus created. When the agent is risk neutral, the contract is a pure debt contract. For agents with unit degree of relative risk aversion, the surplus is divided in fixed shares

Theorem 1 in Alger and Weibull (Games and Economic Behavior, 2016) consists of two statements. The first establishes that Homo moralis with the right degree of morality is evolutionarily stable. The second statement is a claim about sufficient conditions for other goal functions to be evolutionarily unstable. However, the proof given for that claim presumes that all relevant sets are non-empty, while the hypothesis of the theorem does not guarantee that. We here prove instability under a stronger hypothesis that guarantees existence, and we also establish a new and closely related result. As a by-product, we also obtain an extension of Theorem 1 in Alger and Weibull (Econometrica, 2013).

In recent years many parliaments have become fragmented and polarized, with difficulties to form government. Traditional party alliances have changed, new parties have been established, and some of these are shunned by the traditional parties. Fragile minority governments are formed and break up. We propose a game-theoretic framework for analysis of political power in parliaments for situations when party affilations change and new coalitions are formed. More speciffically, we use and modify tools from cooperative game theory, in particular Myerson (1977) and Alonso-Meijide and Carreras (2011). The analytical framework is applied to the current Swedish parliament

We consider a rationally inattentive screener who evaluates a pool of candidates composed of distinct and observable social categories. There is heterogeneity across categories in the costs of being screened, the degree of bias faced in the screening process, and the costs of investment in skills. Candidates choose how much effort to invest before being screened, with a payoff in a post-screening market that depends on the screening outcome. We characterize equilibrium in this model, and use it to unify and extend several strands in the literature on categorical inequality, including statistical discrimination, prejudice, and social capital.

This paper studies a spatial competition game between two firms that sell a homogeneous good at some pre-determined fixed price. A population of consumers is spread out over the real line, and the two firms simultaneously choose location in this same space. When buying from one of the firms, consumers incur the fixed price plus some transportation costs, which are increasing with their distance to the firm. Under the assumption that each consumer is ready to buy one unit of the good whatever the locations of the firms, firms converge to the median location: there is “minimal differentiation”. In this article, we relax this assumption and assume that there is an upper limit to the distance a consumer is ready to cover to buy the good. We show that the game always has at least one Nash equilibrium in pure strategy. Under this more general assumption, the “minimal differentiation principle” no longer holds in general. At equilibrium, firms choose “minimal”, “intermediate” or “full” differentiation, depending on this critical distance a consumer is ready to cover and on the shape of the distribution of consumers’ locations.

A rationally inattentive screener evaluates a heterogeneous pool of candidates, aiming to let only high-productivity candidates pass. Candidates belong to distinct and observable social categories. There is heterogenity across categories along multiple dimensions, including the costs of investment in skills, the costs of being screened, and the degree of bias faced in the screening process. Candidates choose how much effort to invest in skill development before being screened, with a payoff in a post-screening market that depends on the screening outcome. We characterize equilibrium behavior in this model, and use it to unify and extend several strands in the literature on categorical inequality, including statistical discrimination, prejudice, and social capital.

How much and when should we limit economic and social activity to ensure that the health-care system is not overwhelmed during an epidemic? We study a setting where ICU resources are constrained while suppression is costly (e.g., limiting economic interaction). Providing a fully analytical solution we show that the common wisdom of “flattening the curve”, where suppression measures are continuously taken to hold down the spread throughout the epidemic, is suboptimal. Instead, the optimal suppression is discountinuous. The epidemic should be left unregulated in a first phase and when the ICU constraint is approaching society should quickly lock down (a discontinuity). After the lockdown regulation should gradually be lifted, holding the rate of infected constant thus respecting the ICU resources while not unnecessarily limiting economic activity. In a final phase, regulation is lifted. We call this strategy “filling the box”.

Recent theoretical work suggests that a form of Kantian morality has evolutionary foundations. To investigate the relative importance of Kantian morality and social preferences, we run laboratory experiments on strategic interaction in social dilemmas. Using a structural model, we estimate social preferences and morality concerns both at the individual level and the aggregate level. We observe considerable heterogeneity in social preferences and Kantian morality. A finite mixture analysis shows that the subject pool is well described as consisting of two types. One exhibits a combination of inequity aversion and Kantian morality, while the other combines spite and Kantian morality.

The literature on the evolution of preferences of individuals in strategic interactions is vast and diverse. We organize the discussion around the following question: Supposing that material outcomes drive evolutionary success, under what circumstances does evolution promote Homo oeconomicus, defined as material self-interest, and when does it instead lead to other preferences? The literature suggests that Homo oeconomicus is favored by evolution only when individuals' preferences are their private information and the population is large and well-mixed so that individuals with rare mutant preferences almost never get to interact with each other. If rare mutants instead interact more often (say, due to local dispersion), evolution instead favors a certain generalization of Homo oeconomicus including a Kantian concern. If individuals interact under complete information about preferences, evolution destabilizes Homo oeconomicus in virtually all games.

We experimentally investigate behavior and beliefs in a sequential prisoner’s dilemma. Each subject had to choose an action as first-mover and a conditional action as secondmover. All subjects also had to state their beliefs about others’ second-mover choices. Using the elicited beliefs, we use a novel and intuitively appealing hit-rate appraoch to compare the explanatory power of a few current models of social and moral preferences. The data show clear differences in explanatory power between the preference models, both without and with control for the number of free parameters. The best-performing models explain about 80% of observed behavior. We also compare the results with a conventional maximum-likelihood method, and conclude that results by and large agree. We finally use the estimated preference parameters to identify biases in subjects’ expectations. We find a consensus bias (whereby subjects believe others behave like themselves) and a slight optimism (whereby subjects overestimate probabilities for favorable outcomes).