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We augment a standard bilateral gift-exchange game to allow employees to communicate their gratitude for, or disapproval toward, the wage assigned to them by their manager. This provides employees with a means of reciprocation or emotion expression toward the employee which is not available in a standard gift-exchange game and may substitute for the higher-than-equilibrium efforts commonly seen in this environment. We find that employees express gratitude or disapproval according to the wage received, but these messages are not a substitute for monetary reciprocation as the relationship between wages and effort is unchanged. These results suggest that employees view the messages as a form of emotional expression independent from rewarding or punishing managers. Average wage levels are little affected by allowing messages, although wages do fall more over time in the absence of messages and individual managers’ wage choices are affected by the messages they receive.

This study first replicates, then perturbs, the centipede game as implemented by McKelvey and Palfrey (1992). It is thus both a replication study and an original research study. We use controlled laboratory experiments, with computer interfaces for each treatment, anonymous round-robin matching among the subjects across rounds, multiple (10) rounds within each treatment, and incremental changes between adjacent treatments allowing for an assessment of effects at the margin of different game configurations. We find unraveling to the subgame perfect equilibrium somewhat faster than did McKelvey and Palfrey (1992), when using their exact design. Perturbations to that design show that setting non-taker payoffs to zero induces earlier unraveling, as does the use of higher stakes (as in Murphy, Rapoport, and Parco (2006), and Rapoport, Stein, Parco, and Nicholas (2003), respectively). Other, subsequent perturbations show: that there is at most a subtle effect associated with using a 10-second timer with a default move, relative to untimed active moves; and that clock format versus tree format has a minimal effect in common information, unchanging payoff-parameterization environments. We verify the robustness of some key past findings in real-time games. We also explore in a common information environment, the effect of design features previously used in independent private values settings; here we find new evidence that features which might modulate information acquisition and/or processing in an independent private values setting may not restrict behavior in a common information setting.

The relationship between airports and airlines is very interesting from an economics perspective, and analysis of this relationship is wide open for new research endeavors. For instance, airport and airline interactions can be viewed as a zero-sum game of deciding, say, airport landing charges, while at the same time both entities have an incentive making a joint effort to enhance their ability to generate passenger demand and to contribute to growing regional economies. Within this theoretical framework, their relationship consists of not only a binary choice of conflict or cooperation, but also suggests the possibility of complex mixtures of conflict and cooperation. While understanding the interdependence of airports and airlines is an important issue in transportation economics, research examining the complexity of airport and airline relationships is relatively new to the field. This chapter contributes to this research area, in part, by introducing one very interesting example of an airport and airline relationship that considers an element of conflict and cooperation. Specifically, this chapter examines the economic consequences of a risk sharing contract. Analysis of the risk sharing contract recognizes the relevance of microeconomic theories, such as contract theory and principal–agent theory and reveals how these concepts can be applied to traditional transport economics. Predictions of risk sharing between airlines and airports using these theories are derived using numerical examples. Findings reveal that the risk-sharing agreement based on the Noto Airport Load Factor Guarantee Mechanism (LFGM) contract enables the airport side and the airline side not only to share the monetary consequences of demand fluctuation, but also to secure air flights from a local airport to Tokyo, to jointly enhance their various demand-inducing efforts, and to increase their utilities in order to meet the common target they set in the contract. With the LFGM contract, both sides have consistently maintained the air transport network in a relatively low demand area for more than 10 years without significant outside financial assistance. The findings from this chapter also contribute to better understanding the complex relationships among aviation entities, to the recognition of importance and potential to design properly the airport and airline contract, and to the advancement of economic and public policy analysis of this sector.

The relationship between airline and airport is complex, fascinating, and wide open for new research endeavors. In Volume 6 of the series, we conducted the analyses of risk-sharing contract between airline and airport from numerical risk balance assessment and incomplete contract theory perspectives based on an interesting real example of risk-sharing contracts, the Noto Airport Load Factor Guarantee Mechanism (LFGM) contract in Japan.

In this chapter, we further advance the analyses of risk-sharing contracts, based on the real example of Noto LFGM contract, from the perspectives of game theory and principal-agent theory. The risk-sharing arrangements, such as LFGM contract, are relevant to the rapidly changing business environment in Asia’s aviation industries.

We conduct a two-stage game analysis. The first phase is the contract negotiation phase and the second phase is the effort-making phase after signing the contract. We show that the two parties can attain a Pareto optimal utility level by bargaining a simple linear risk-sharing contract in the contract negotiation phase based on the equilibrium effort levels in the effort-making phase.

Economic integration is an agreement among countries in a geographical region or unification of economic policies between different states aiming to reduce and ultimately remove tariff and non-tariff barriers on trade. The fruit of globalization is the tremendous rise of economic integration as globalization loosens barriers among the nations through reduction in cross-border duties and eases trade policies. Trumponomics is defined as the economic policies of US President Donald Trump that prefers high import tariff to bring “America First.” There is a debate among the researchers about the choice between free trade and protection or imposition of tariff. Some of them prefer free trade because during the start of the great depression, the world economy experienced a huge shift toward protectionism. Choice between no-tariff and tariff represents a prisoner’s dilemma situation whereby each player’s best response is to employ tariffs. This results in a sub-optimal outcome for all where the total volume of world trade falls, which is a Nash solution. The present chapter deals with theoretical discussions on trade war and throws light on the developing country’s choice between non-protectionism supported by globalization and Trump’s protectionism.

The purpose of this research is to reveal the specific features of the behaviour of market players in the collaboration of universities and business structures in the context of the digital economy's development. The traditional processes of collaboration of science and business are compared to the partnership under the conditions of open science.

This research is based on the totality of concepts and theories, founded on the theory of non-linearity of innovations, which allows defining them as a bilateral process that is open to other players. The list of market players, which participate in the process of collaboration, and the character of their interaction are considered from the position of the triple innovation spiral. The specifics of the collaboration of scientific and business structures are considered from the position of knowledge exchange, and the means of their organisation – from the position of the theory of university-industry collaboration. This methodology allows determining the key aspects of collaboration as a process of knowledge exchange and systematising the range of tools and channels of innovation transfer. The evolutionary game theory is used for the empirical evaluation of the specifics of the market players' behaviour in the process of collaboration. The context of the support of the digital economy is considered within the concepts of open innovations, organisation of scientific digital networks and Open Science. The methods used allow for the systemic reflection of the processes related to the behaviour of market players in the collaboration of universities and business structures and the determination of the key advantages that are achieved by them for the support of the digital economy.

It is determined that the digital economy is a result of innovative development and its trigger at the same time. Based on this, the behaviour of market players uses digital potential, on the one hand, and creates conditions for its support, on the other hand. Collaboration is one of the formal tools of the transfer of innovations, which partially covers the interaction with such tools and channels as intellectual property, academic spin-offs, research mobility and labour mobility. Based on the theory of the triple spiral of innovative development, it is stated that business structures and universities are the key elements of innovations. Their interaction is increased by the influence of the government policy and allows creating effective forms of collaboration, which facilitate the knowledge exchange within the system. At this, the business performs the functions of investing and provision of collaboration, universities implement the key processes connected to fundamental research, and government expands the innovative capabilities, stimulating the growth of competitiveness and resolution of social problems. The important problems of the market players' behaviour in the process of scientific and research collaboration are the organisation of the process of knowledge exchange, which is related to intellectual rights, and the difference between the goals of market players at the initial stages of cooperation. Resolution of the above problems allows raising the level of mutual trust and facilitates the processes of knowledge exchange.

We systematise the tools and channels of collaboration of universities and business structures, substantiate the principles and terms of the market players' behaviour in the process of knowledge exchange, and determine the role of each player. In the context of modern tendencies of the digital economy's development, we determine the specifics of the market players' behaviour in the context of using digital technologies and providing a high level of openness of the scientific and production partnership.

Evidence suggests that, in the presence of imperfect market institutions, individuals devote resources to the establishment of reliable connections to attenuate the frictions that reduce trading and insurance opportunities. In this chapter, the author surveys the relevant literature on strategic formation of networks and use it to study this particular economic situation. A simple model is built to show that the investment in strong ties often, though not always, produces stable configurations that manage to improve upon the imperfections of market institutions.