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University of Edinburgh

1. Kerr, Steven. Economics and stuff.

Degree: PhD, 2019, University of Edinburgh

This thesis consists of four self-contained works that are organised by chapter. They are arranged roughly in the chronological order that I worked on them. I provide a short abstract for each below. Chapter 1: The dating game In this chapter, I examine a game-theoretic model of heterosexual courtship. Male-female pairs are randomly matched and decide whether to make romantic advances towards each other. They receive payoffs that depend on the utility from a romantic match, and the costs of rejection and unwanted advances/harassment. The game has three interesting Nash equilibria: the M↔I equilibrium where males always play the initiator role and females never do, the F↔I equilibrium where females always play the initiator role and males never do, and a completely mixed equilibrium where both males and females play initiator probabilistically. The former two equilibria are evolutionary stable; the latter is not. I argue that the M↔I equilibrium is most likely to describe reality. On the other hand, I show that the F↔I equilibrium is optimal from the social welfare point of view if females are are on average more selective than males. I review evidence that indicates that this is indeed the case. Using data from a speed dating experiment, I estimate that a counterfactual F↔I equilibrium sees a 51% reduction in the incidence of unwanted advances/harassment compared to a counterfactual M↔I equilibrium. The natural policy recommendation from this work is a movement from a cultural norm where males predominantly initiate romantic advances, to one where females do. In particular, this would minimise the social cost of unwanted advances/sexual harassment. Most the theoretical work in this chapter was completed as part of my MSc dissertation at the University of Edinburgh. The new content added during my PhD is the empirical analysis and the extensions section. Chapter 2: General equilibrium theory with incomplete information: the wisdom of crowds and efficient markets In this chapter, I study general equilibrium theory with incomplete information. When agents are not fully informed, they can end up purchasing a bundle of goods that is far from optimal. General equilibrium theory falls short of providing a satisfactory explanation of the ability of real markets to deliver good outcomes under these circumstances. I introduce the wisdom of crowds as a corrective for suboptimal individual behaviour. The wisdom of crowds refers to the empirically observed ability of crowds to show collective intelligence even when their constituent individuals do not. I show that when crowds are wise, aggregate demand, aggregate production and prices all approach their ex-post Pareto efficient levels. In a neighbourhood of equilibrium, prices follow a martingale process, providing a general equilibrium derivation of the efficient market hypothesis. A spot market that opens after the resolution of uncertainty delivers an outcome that is ex-post Pareto efficient. This is achieved without any contingent commodities or securities, and agents who act…

Subjects/Keywords: game theory model; male-female pairs; Nash equilibria; M?I equilibrium; F?I equilibrium; general equilibrium theory; wisdom of crowds; collective intelligence; Pareto efficient levels; affirmative action; homophily

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APA (6th Edition):

Kerr, S. (2019). Economics and stuff. (Doctoral Dissertation). University of Edinburgh. Retrieved from http://hdl.handle.net/1842/36626

Chicago Manual of Style (16th Edition):

Kerr, Steven. “Economics and stuff.” 2019. Doctoral Dissertation, University of Edinburgh. Accessed September 26, 2020. http://hdl.handle.net/1842/36626.

MLA Handbook (7th Edition):

Kerr, Steven. “Economics and stuff.” 2019. Web. 26 Sep 2020.

Vancouver:

Kerr S. Economics and stuff. [Internet] [Doctoral dissertation]. University of Edinburgh; 2019. [cited 2020 Sep 26]. Available from: http://hdl.handle.net/1842/36626.

Council of Science Editors:

Kerr S. Economics and stuff. [Doctoral Dissertation]. University of Edinburgh; 2019. Available from: http://hdl.handle.net/1842/36626

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