Economic Integration Workshop

Game Theory and Applications in Problems of International Economics

The University of Helsinki, hosted the fifth workshop of the Europaeum Research Project Group on European Economic Integration.

Programme

Friday, October 27

ARRIVALS

Opening:
Professor Otto Toivanen, Director of HECER

Session I: Fundamentals of Game Theory
Chair: Otto Toivanen

• Lina Mallozzi, Universita''di Napoli Federico II:
  Conflict and cooperation in symmetric potential games
• Somdeb Lahiri, Institute for Financial Management and Research,Chennai: Market Equilibrium for Bundle Auctions and the Matching Core of Nonnegative TU Games
• Hannu Vartiainen, Yrjö Jahnsson Foundation: Cognitive equilibrium

Session II: Applied Game Theory
Chair: Klaus Kultti

• Andrey Garnaev, St Petersburg State University: A corruption game
• Jaime Luque, Universidade Nova de Lisboa:On the formation of jurisdictions with heterogeneous agents
• Klaus Kultti, University of Helsinki and HECER:
  About the seller’s tendency to cluster

Saturday October 28

Session III: Political Economy Chair: Frantisek Turnovec

• Pavol Prievozník, Charles University, Prague: Estimation of voters’ transition rates between the Czech parliamentary elections from 1992 to 2006
• Mika Widgren, Turku School of Economics and University of Helsinki: The European Commission appointment, preferences, and institutional relations
• Frantisek Turnovec, Charles University, Prague:Duality of power in the European Parliament

Session IV: International Trade
Chair: Gianpaolo Rossini

• Monika Mrazova, Balliol College,University of Oxford:Is the WTO’s article XXIV a free trade barrier?
• Jose de Sousa, University of Paris 1: Does the single currency affect FDI? A gravitylike approach
• Gianpaolo Rossini, University Bologna: Partial versus total disintegration of exporting firms

Session V: Public Policy
Chair: Tapio Palokangas

• Karen Croxson, Balliol College,University of Oxford:Leading to the Right Equilibrium
• Lenka Gregorova, Charles University, Prague:Fiscal centralization and decentralization game
• Martin Gregor, Charles University, Prague: Weakest link local public goods: strategic delegation in decentralization and centralization
• Petr Hedbavny, Charles University, Prague: Do we need independent statistical and forecasting authority? The case of pension system

Report on 5th Europaeum Economics Workshop

* Click here to download the Report of the proceedings.

In October 2006 we had the pleasure of attending the 5th Europaeum Economics Workshop in Helsinki. It proved to be an invaluable experience in many respects, giving both of us the opportunity to attend a variety of insightful presentations as well as to present work of our own.

Monika Mrazova presented a paper co-authored with Professor David Vines, Balliol College, Oxford, and Professor Ben Zissimos, Vanderbilt University, entitled, Is the WTO Article XXIV bad? This paper examines customs union (CU) formation under WTO. Considering the explosion of the number of regional trade agreements in the past two decades and the expansion for example, due to the recent EU Enlargement, the study of CU formation is a new topic with literature on regionalism now well developed. The paper asks whether the insights of the coalition formation literature still hold under the WTO rules that preclude Customs Union members from raising their common external tariff. Introducing Article XXIV in an established framework, the paper goes on to show that the WTO rules might facilitate free trade as the equilibrium outcome, but, at the same time, and counter-intuitively, when free trade is not reached, world welfare might be worsened compared to CU formation absent Article XXIV.

Karen Croxson presented an application of game theory to the topic of leadership. Whilst political scientists, philosophers, psychologists, anthropologists, sociologists, and historians have all considered the matter of leadership extensively, economists have been conspicuously quiet on this important topic. Her paper, Leading to the Right Equilibrium, investigates leadership as a potential solution to the problem of moral hazard in team production (Holmstrom, 1982). Holmstrom showed how, in theory, members of a team making unobservable inputs to a collective effort will free-ride on each others contributions, resulting in suboptimally low overall production. And yet team-based activity is an enduring feature of the real world, suggesting that Holmstrom''s conclusion might be overly pessimistic. The paper presented at the Workshop considers how merely appointing someone to move first--¬creating a leader in a simple sense -might alleviate problems of equilibrium selection. It is shown that introducing a first mover may slacken the constraint on threshold ambitiousness, enabling coordination on the good equilibrium in cases where otherwise production lapses. We both were delighted to receive encouraging and helpful feedback on our talks from the Helsinki participants, both through discussions during our presentations, as well as over coffee in scheduled break times and in some cases, participants were kind enough to email further comments well after our return to Oxford.

It was equally rewarding to attend the presentations given by others at the Workshop. This allowed us to become acquainted with some work being pursued at other universities within the Europaeum network. Especially relevant to Karen’s work was a paper presented by Lina Mallozzi from the Universita'' di Napoli Federico II on Conflict and cooperation in symmetric potential games, while Monika found particularly useful Mika Widgren’s presentation of his joint paper with Stefan Napel from the University of Hamburg on The European Commission-Appointment, Prefences and Institutional Relations. This paper analyses the appointment of the European Commission as a strategic game between members of the European Parliament and the Council and was particularly pertinent to Monika’s interest in Political Economy of Regional Integration Agreements.

The Workshop as a whole was a timely and rewarding experience for us both. Furthermore, it seemed very clearly to provide a much-needed forum for both senior staff and young doctoral students from leading European university institutions to meet, exchange ideas, and sow the seeds for potential collaborations. We particularly appreciated the opportunity to discuss projects transcending national perspectives. We were introduced to many interesting strands of game theory research and left with an enlarged sense of pan-European research.

Apart from providing intellectual stimulation, the workshop proved to be a great social event and a memorable first introduction to Finland for us both. We wish particularly to acknowledge the warm welcome given to us by the Helsinki organisers who were careful to arrange a generous social program outside the workshop sessions. On the Friday night, all attendees were able to continue the day’s discussions over a wonderful Finnish meal; a truly special event.

So once again we thank the Europaeum network for inviting us to Helsinki for the 5th Economics workshop and, in particular, its organisers for all their hard work in accommodating us during our stay. We look forward to being involved in future Europaeum events.

Authors: Karen Croxson and Monika Mrazova
December 18, 2006, Oxford