chinese exchange student from peking university not first time to us, but first time as a student ...
TRANSCRIPT
Self-introduction
Chinese Exchange student from Peking University Not first time to US, But first time as a
student Please point out my problems not only
during this presentation but daily life Hope to become friends with all of you
Yu Shi 9/27/12 Econ 400M
About Topic
Special Style: Socialist market economy To make most of the market, lots of state-owned
businesses are privatized Definition of a state-owned business
› owned by the government, but is run by an individual› most of the profit should be given to the government,
and the government handles with the entire deficit, while the manager has no economics responsibility
› What the manager can do?
Yu Shi 9/27/12 Econ 400M
Coordination Game -- Basic
Players? Strategies?
› Government› Manager
Legal? Illegal?
How many times? What do they know?
Yu Shi 9/27/12 Econ 400M
Coordination Game – Pay-offs Promising situation (the basic profit
reflects on a pay-off of +2). Not in a key industry as energy or
resources etc. the manager is not good at operating a
company, and treasures leisure more than the output by working (the extra profit the manager can make by working hard is +0.5, which should be added to the government’s pay-off; while giving up the leisure ends up with a -1 for the manager).
Yu Shi 9/27/12 Econ 400M
Coordination Game – Pay-offs The government never know what
the manager is doing. The buyer knows exactly the true
value of the business. The government sells the business
based on the profit reported. The government are willing to see
the business running in a more efficient way (the pay-off for government is +2).
Yu Shi 9/27/12 Econ 400M
Coordination Game – Pay-offs The buyer of a company will replace the
manager (pay-off is -1for manager if being fired) unless he works hard and reports all profit.
Specially, for the case (S&R, privatize), the manager’s pay-off is added by 2
If the manager cheats on reporting the profit, he may be put into jail if being caught (with pay-off of -5 for NS&NR, and -7 for S&NR). The government’s reputation may be affected (a pay-off of -3).
Yu Shi 9/27/12 Econ 400M
Coordination Game III
Yu Shi 9/27/12 Econ 400M
GovernmentPrivatize Not
Privatize
Manager NS&NR (-6, -1) (4, 0)NS&R (-1, 4) (2, 2)S&NR (-8, -1) (3.5, 0)S&R (3, 5) (1, 2.5)
Experiment Game 20 people; 10 pairs. Make sure everyone fully understand
the information The game is stopped if the column
player chooses left, or automatically stopped if it is player for more than 20 rounds
Stop the experiment when the data is large enough.
Yu Shi 9/27/12 Econ 400M
Column
Left Right
Row Top (-6, -1) (4, 0)
Up (-1, 4) (2, 2)
Bottom (-8, -1) (3.5, 0)
Down (3, 5) (1, 2.5)
Prediction I
If both of the row and column players are risk lovers, in the first round, the output is going to be (top, left).
If both of the row and column players are risk averters, in the first round the output is going to be (bottom, right).
ColumnLeft Right
Row Top (-6, -1) (4, 0)Up (-1, 4) (2, 2)
Bottom (-8, -1) (3.5, 0)Down (3, 5) (1, 2.5)
Prediction II
If the row player is a risk lover while the column player is a risk averter, they are going to end up with “Top, Right” until the game is automatically stopped.
If the row player is a risk averter while the column player is a risk lover, they are going to end up with “Bottom, Left” (PD).
ColumnLeft Right
Row Top (-6, -1) (4, 0)Up (-1, 4) (2, 2)
Bottom (-8, -1) (3.5, 0)Down (3, 5) (1, 2.5)
Prediction III
Usually government will not be a risk lover, thus the game will always end up with a NE, but may not with PD in some cases.
Policy Suggestion?
ColumnLeft Right
Row Top (-6, -1) (4, 0)Up (-1, 4) (2, 2)
Bottom (-8, -1) (3.5, 0)Down (3, 5) (1, 2.5)
Sequential Game I
Government moves first:
Yu Shi 9/27/12 Econ 400M
S&NRPrivatize
Not Privatize
Government
NS&NRNS&R
(-1, -6)
(4, -1)
(0, 4)
S&R(-1, -8)
The Manager
The Manager
NS&NR
S&R
(5, 3)
(2, 2)
(0, 3.5)
(2.5, 1)
NS&R
S&NR
The GovernmentPrivatiz
eNot
Privatize
The Manage
r
NS&NR (-6, -1) (4, 0)NS&R (-1, 4) (2, 2)S&NR (-8, -1) (3.5, 0)S&R (3, 5) (1, 2.5)
Sequential Game II
Manager moves first:
Yu Shi 9/27/12 Econ 400M
P
NPGovernment
(1, 2)
(-1, 4)
The Manager
NS&NR
S&R
NS&R
S&NR
P
NPGovernment
(-6, -1)
(-2, 0)
P
NPGovernment
(-8, -1)
(-4.5, 0)PNPGovernme
nt
(3, 5)
(1, 2.5)
The GovernmentPrivatiz
eNot
Privatize
The Manage
r
NS&NR (-6, -1) (4, 0)NS&R (-1, 4) (2, 2)S&NR (-8, -1) (3.5, 0)S&R (3, 5) (1, 2.5)
What if it is a company of an important industry?
Lose efficiency!
Policy suggestion?Yu Shi 9/27/12 Econ 400M
The Government
P NP
The Manager
NS&NR (-6, -5) (4, 0)
NS&R (-1, 0) (2, 2)
S&NR (-8, -5) (3.5, 0)
S&R (3, 1) (1, 2.5)
Reference Hung-Gay Fung, Donald Kummer and Jinjian Shen, 2006 “China’s
Privatization Reforms: Progress and Challenges”, The Chinese Economy, vol. 39, no. 2, pp. 5–25.
Russell W. Cooper, Douglas V. DeJong, Robert Forsythe and Thomas W. Ross. 1990. “Selection Criteria in Coordination Games: Some Experimental Results”, The American Economic Review, Vol. 80, No. 1. pp. 218-233
Stephen Philion, “Workers' Democracy vs. Privatization in China”, Socialism and Democracy, Volume 21, Issue 2, 2007
Avinash Dixit and Susan Skeaty. 1999. Games of Strategy, W. W. Norton & Company, Inc. pp.83-151
Russell W. Cooper. 1999. Coordination Games. Cambridge University Press. pp. 1-18
Q&A
Thank you!
Yu Shi 9/27/12 Econ 400M