Contributions in Merlin

This paper questions the need for reinforcement learning or control theory when optimising behaviour. We show that it is fairly simple to teach an agent complicated and adaptive behaviours using a free-energy formulation of perception. In this formulation, agents adjust their internal states and sampling of the environment to minimize their free-energy. Such agents learn causal structure in the environment and sample it in an adaptive and self-supervised fashion. This results in behavioural policies that reproduce those optimised by reinforcement learning and dynamic programming. Critically, we do not need to invoke the notion of reward, value or utility. We illustrate these points by solving a benchmark problem in dynamic programming; namely the mountain-car problem, using active perception or inference under the free-energy principle. The ensuing proof-of-concept may be important because the free-energy formulation furnishes a unified account of both action and perception and may speak to a reappraisal of the role of dopamine in the brain.

Procurement auctions carry substantial risk when the value of the project is highly uncertain and known only to insiders. This paper reports the results from a series of experiments comparing the performance of three auction formats in such complex and risky settings. In the experiment, every bidder knows the private value for the project but only a single insider bidder knows the common-value part. In addition to the standard second-price and English auctions we test the “qualifying auction,” a two-stage format commonly used in the sale of complex and risky assets. The qualifying auction has a fully “revealing” equilibrium that implements the revenue-maximizing outcome but it also has an uninformative “babbling” equilibrium in which bidders place arbitrarily high bids in the first stage. In the experiments, the latter equilibrium has more drawing power, which causes the qualifying auction to perform worse than the English auction and only slightly better than a sealed-bid second-price auction. Compared to the two other formats, the English auction is roughly 40% more efficient, yields 50% more revenues, avoids windfall profits for the insider, while protecting uninformed bidders from losses.

Since the fall of the Soviet Union it has been necessary for Russia to form a coalition with at least one of the transit countries Belarus and Ukraine in order to be able to ship gas to western Europe. This paper models the gas transit game using a cooperative module to determine the bargaining power of the three countries. The bargaining power is dependent on the coalition that is achieved. In the non-cooperative module, the three countries involved decide whether or not to cooperate, with Russia using side payments to induce cooperation. On the basis of published demand and cost estimates, the predicted Nash equilibrium is the cooperative one resulting in the grand coalition. Predicted gas quantities correspond quite closely to actual 2004 and forecast 2010 and 2030 figures. The completion of the North Transgas pipeline will benefit Russia, to the detriment of the others, particularly Ukraine.

Die Schweizer Lebensversicherer sehen sich in der Folge der demografischen Entwicklung, des tiefen Zinsniveaus und der Liberalisierung der Versicherungsmärkte mit neuen Herausforderungen konfrontiert. Stark von dieser Entwicklung betroffen, ist das Rentengeschäft. Aufgrund der steigenden Lebenserwartung und der tiefen nominalen Zinssätze sind in den letzten Jahre die Umwandlungssätze für neue Renten laufend gesunken, und bei den laufenden Renten mussten die Lebensversicherer zu Lasten der aktiven Versicherten regelmässig Nachreservierungen vornehmen, um den erwarteten Verpflichtungen gerecht zu werden. Es stellt sich die Frage, ob dies auch künftig ohne weiteres möglich sein wird, denn die Gerechtigkeit der Lastenverteilung zwischen den Generationen wird damit zunehmend strapaziert. Erschwerend kommt hinzu, dass auf dem Lebensversicherungsmarkt in der Folge des gestiegenen Wettbewerbdrucks die Marktnachfrage vermehrt den Preis für die Risikoübernahme bestimmt. Damit verlieren die auf Sicherheit basierenden Prämienkalkulationsprinzipien zunehmend an Bedeutung, während die sinkenden Margen auf die Rentabilität dieses Geschäftes drücken. Im vorliegenden Dissertationsprojekt wird die Möglichkeit untersucht, wie durch einen Paradigmawechsel in Richtung Risiko-Intermediation das Langleberisikos einer Lebensversicherung mit Vorteil an den Kapitalmarkt zediert werden kann. Besprochen werden insbesondere die Erfassung, die Bewertung und die Verbriefung des Langlebe- und Zinsrisikos aus dem Rentengeschäft einer Lebensversicherung.

Reducing the externalities from energy use is crucial for sustainability. There are basically four ways to reduce externalities from energy use: increasing technical efficiency (“energy input per unit energy service”), increasing economic efficiency (“internalising external costs”), using “clean” energy sources with few externalities, or sufficiency (“identifying ‘optimal’ energy service levels”). A combination of those strategies is most promising for sustainable energy systems. However, the debate on sustainable energy is dominated by efficiency and clean energy strategies, while sufficiency plays a minor role. Efficiency and clean energy face several problems, though. Thus,the current debate should be complemented with a critical discussion of sufficiency. In this paper, I develop a concept of sufficiency, which is adequate for liberal societies. I focus on ethical foundations for sufficiency, as the discussion of such is missing or cursory only in the existing literature. I first show that many examples of sufficiency can be understood as (economic) efficiency, but that the two concepts do not coincide. I then show that sufficiency based on moralization of actions can be understood as implementation of the boundary conditions for social justice that come with notions of liberal societies, in particular the duty not to harm other people. By this, to increase sufficiency becomes a duty beyond individual taste. I further illustrate this in the context of the adverse effects of climate change as externalities from energy use.

We discuss a unified theory of directed technological change and technology adoption that can shed light on the causes of persistent productivity differences across countries. In our model, new technologies are designed in advanced countries and diffuse endogenously to less developed countries. Our framework is rich enough to highlight three broad reasons for productivity differences: inappropriate technologies, policy-induced barriers to technology adoption, and within-country misallocations across sectors due to policy distortions. We also discuss the effects of two aspects of globalization, trade in goods and migration, on the wealth of nations through their impact on the direction of technical progress. By doing so, we illustrate some of the equalizing and unequalizing forces of globalization.

Watching television is a widespread activity that takes up a large amount of leisure time in many people’s lives. Television and other mass media play a leading role in transmitting information to voters and in shaping their political attitudes. This contrasts with the paucity of economic research on television consumption. This dissertation presents a comprehensive economic analysis of television consumption and empirically investigates the determinants of TV viewing and its effects on individual well-being and behavior. In Chapter 2, the theoretical foundation is laid out, and television consumption is integrated into a modern economic framework that goes beyond standard rational choice theory. Additionally, the determinants of TV consumption are investigated at individual as well as at institutional levels. Chapters 3 and 4 provide empirical investigations into the consequences of television consumption. The results reveal beneficial as well as unfavorable impacts of TV consumption. Chapter 3 provides evidence that some individuals, due to television’s immediate gratification at low immediate marginal costs, are induced to spend more time consuming TV than they would actually prefer, and their utility is thus reduced. Long hours of TV consumption are associated with lower life satisfaction. The negative effects are especially strong among people with high opportunity costs of time and in countries with a large number of TV channels. Chapter 4 conveys that television consumption also serves an important informational need, especially for people not attracted by more cognitively demanding media, such as newspapers. When local TV is available, people with low and intermediate education consume more news and increase participation in elections in Switzerland. The importance of television is furthermore established by its effects on election campaigns: when local TV is available, political parties react to its presence by putting up more candidates in the highly visible Council of States elections. Chapter 5 presents the conclusions. Zusammenfassung Fernsehkonsum ist eine weit verbreitete Aktivität, die einen Grossteil der Freizeit vieler Leute einnimmt. Fernsehen und andere Massenmedien spielen auch eine wichtige Rolle um Wähler zu informieren und ihre Meinungsbildung zu unterstützen. Dennoch gibt es bisher kaum ökonomische Forschung zu Fernsehkonsum. Diese Dissertation unternimmt eine umfassende ökonomische Analyse von Fernsehkonsum und untersucht empirisch seine Determinanten und seine Auswirkungen auf individuelles Verhalten und Wohlbefinden. Kapitel 2 legt das theoretische Fundament und integriert Fernsehkonsum in ein modernes ökonomisches Framework, das über die Standardtheorie und den Rationalansatz hinausgeht. Des Weiteren werden die Determinanten von Fernsehkonsum auf individueller und institutioneller Ebene untersucht. In Kapitel 3 und 4 werden die Auswirkungen von Fernsehkonsum empirisch analysiert. Die Resultate weisen sowohl nutzbringende als auch nachteilige Folgen nach. Kapitel 3 zeigt auf, dass der unmittelbare Konsumgenuss des Fernsehens bei gleichzeitig geringen marginalen Kosten einige Leute dazu verleitet, mehr Zeit vor dem Fernseher zu verbringen, als sie eigentlich möchten und deshalb ihr Nutzen verringert wird. Viel vor dem Fernseher verbrachte Zeit ist mit geringer Lebenszufriedenheit verbunden. Leute mit hohen Zeitopportunitätskosten und Leute in Ländern mit einer grossen Auswahl an Fernsehsendern sind vermehrt von diesen negativen Effekten betroffen. Kapitel 4 legt dar, dass Fernsehen auch eine wichtige Informationsfunktion wahrnimmt, und dies hauptsächlich für Personen, welche kognitiv anspruchsvollere Medien weniger attraktiv finden. Wenn in der Schweiz Zugang zu lokalen Fernsehsendern besteht, so schauen Leute mit niedrigerer und mittlerer Bildung öfter Nachrichten und nehmen vermehrt an Wahlen teil. Die Wichtigkeit des Fernsehens zeigt sich auch darin, dass die Politiker auf seine Präsenz reagieren und die Parteien mehr Ständeratskandidaten aufstellen wenn es lokale Fernsehsender gibt. Kapitel 5 legt die Schlussfolgerungen dar.

The phenomenon of empathy entails the ability to share the affective experiences of others. In recent years social neuroscience made considerable progress in revealing the mechanisms that enable a person to feel what another is feeling. The present review provides an in-depth and critical discussion of these findings. Consistent evidence shows that sharing the emotions of others is associated with activation in neural structures that are also active during the first-hand experience of that emotion. Part of the neural activation shared between self- and other-related experiences seems to be rather automatically activated. However, recent studies also show that empathy is a highly flexible phenomenon, and that vicarious responses are malleable with respect to a number of factors--such as contextual appraisal, the interpersonal relationship between empathizer and other, or the perspective adopted during observation of the other. Future investigations are needed to provide more detailed insights into these factors and their neural underpinnings. Questions such as whether individual differences in empathy can be explained by stable personality traits, whether we can train ourselves to be more empathic, and how empathy relates to prosocial behavior are of utmost relevance for both science and society.

This article reviews the economic literature on the economic and social costs of terrorism with a special emphasis on the consequences on the tourism industry. Several studies find a negative and economically important effect of terrorism on tourism demand. The studies also highlight dif-ferences in the consequences of different types of terror attacks, causality, the temporal patterns of the impact as well as interdependencies between different countries’ tourism industries and their terrorist campaigns. Further, the paper briefly discusses studies on the consequences on foreign direct investment, consumption, savings and investment, international trade, overall eco-nomic development and on subjective life satisfaction.