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Cartel

Cartel

A cartel is a group of legally independent producers whose goal it is to fix prices, to limit supply and to limit competition. Cartels are prohibited by antitrust laws in most countries; however, they continue to exist nationally and internationally, formally and informally. Note that a single entity that holds a monopoly by this definition cannot be a cartel, though it may be guilty of abusing said monopoly in other ways. As such, it is inaccurate to describe (for example) Microsoft or AT&T as cartels. In general, cartels are economically unstable in that there is a great incentive for members to cheat and to sell more than the quotas set by the cartel (see also game theory). This has caused many cartels that attempt to set product prices to be unsuccessful in the long term. Empirical studies of 20th century cartels have determined that the mean duration of discovered cartels is from 5 to 8 years. However, once a cartel is broken, the incentives to form the cartel return and the cartel may be re-formed. Publicly-known cartels that do not follow this cycle include the De Beers diamond cartel, and by some accounts, the Organization of Petroleum Exporting Countries (OPEC). Price fixing is often practiced internationally. When the agreement to control price is sanctioned by a multilateral treaty or protected by national sovereignty, no antitrust actions may be initiated. Examples of such price fixing include oil whose price is controlled by OPEC. Also international airline tickets have prices fixed by agreement with the IATA, a practice for which there is a specific exception in antitrust law. International price fixing by private entities can be prosecuted under the antitrust laws of more than 100 countries. Examples of prosecuted international cartels are lysine, citric acid, graphite electrodes, and bulk vitamins. (source: http://agecon.lib.umn.edu/cgi-bin/pdf_view.pl?paperid=5488&ftype=.pdf) See also Phoebus cartel. De Beers has long controlled diamond production and prices from its stronghold in South Africa. Recently they have been implicated in sectarian violence in several African countries, including Sierra Leone and Cote d'Ivoire. As its name suggests, OPEC is organised by sovereign states. It cannot be held to antitrust enforcement in other jurisdictions by virtue of the doctrine of state immunity under public international law. However, members of the group do frequently break rank to increase production quotas. De Beers has faced strong criticism recently (see articles on blood diamonds), and may be expected to face competition from synthetic diamonds in the next few years. Many trade organizations, especially in industries dominated by only a few major companies, have been accused of being fronts for cartels: :People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices. :Adam Smith, The Wealth of Nations, 1776 Exactly the same applies to trade unions, which usually act like cartels (being a group of producers) with similar benefits and drawbacks. An example of a new international cartel is the one created by the members of the Asian Racing Federation and documented in the Good Neighbour Policy signed on September 1, 2003.

External links

- [http://www.let.leidenuniv.nl/history/rtg/cartels/ International Cartel History Site] Category:Commercial crimes Category:Anti-competitive behaviour
- ja:カルテル

Price fixing

Most agreements between business competitors regarding the pricing of a product are considered price fixing and are illegal in many countries. Methods of price fixing can include;
- Agreements to sell at a common target price.
- Agreements to set a common minimum price.
- Agreements to buy at a specified maximum price.
- Agreements to adhere to a price book or list price.
- Agreements to engage in cooperative price advertising.
- Agreements to standardize credit terms offered to purchasers.
- Agreements to use uniform trade-in allowances.
- Agreements to limit discounts.
- Agreements to discontinue free service or to fix any other element of prices.
- Agreements to adhere to previously announced prices and terms of sale.
- Agreements establishing uniform costs and markups.
- Agreements imposing mandatory surcharges.
- Agreements to reduce output or sales.
- Agreements to share markets, territories, or customers. In the United States and Canada, unlike many countries, price fixing can be prosecuted as a felony. Under U.S. law, price fixing is only illegal if it is intentional and comes about via communication and specific agreement between firms. It is not illegal for a firm to copy the price movements of a de facto market leader (called price leadership). This has frequently been seen to be the case in the markets for breakfast cereals and cigarettes. Bid rigging is considered a form of price fixing and is illegal in the United States. Price fixing is often practiced internationally. When the agreement to control price is sanctioned by a multilateral treaty or is entered by sovereign nations, as opposed to individual firms, the cartel may be protected from lawsuits and criminal antitrust prosecution. This explains, for example, why OPEC, the global oil cartel, has not been prosecuted or successfully sued under U.S. antitrust law. Also international airline tickets have prices fixed by agreement with the IATA, a practice for which there is a specific exemption in antitrust law. The US Department of Justice Antitrust Division is responsible for upholding US price fixing laws. (See also Sherman Antitrust Act). As of 2004 under US law corporatios may be fined up to $100 million for criminal price fixing; individuals can be charged and sentenced to prison sentences of up to 10 years for price-fixing violations. The Federal Trade Commission can prosecute firms for price fixing as a civil matter. In October 2005, the Korean company Samsung pleaded guilty to conspiring with other companies, including Infineon and Hynix Semiconductor, to fix the price of dynamic random access memory (DRAM) chips. Samsung was the third company to be charged in connection with the international cartel and was slapped with a $300M fine, the second largest antitrust penalty in US history. In October 2004, four executives from Infineon, a German chip maker, recieved reduced sentences of 4 to 6 months in federal prison and $250,000 in fines after agreeing to aid the DoJ with their ongoing investigation of the conspiracy. International price fixing by private entities can be prosecuted under the antitrust laws of many countries. Examples of prosecuted international cartels are those that controlled the prices and output of lysine, citric acid, graphite electrodes, and bulk vitamins. [http://agecon.lib.umn.edu/cgi-bin/pdf_view.pl?paperid=5488&ftype=.pdf]

External links

- [http://www.joystiq.com/entry/1234000990068106/ SONY Accused of Price Fixing in the UK - Nov. 15, 2005]
- [http://www.usdoj.gov/opa/pr/2005/October/05_at_540.html US Department of Justice Website, Samsung Pleads Guilty to Price Fixing - Oct. 5, 2005]
- [http://www.usdoj.gov/atr/public/press_releases/2004/206631.htm US Department of Justice Website, Infineon Pleads Guilty to Price Fixing - Oct. 2004]
- [http://ag.state.nv.us/agpress/2002/02_0930b.pdf Antitrust settlement in Nevada price-fixing case]
- [http://www.techcentralstation.com/040803M.html In Defense of Price Fixing by Sean Gabb]
- [http://www.tutor2u.net/newsmanager/templates/?a=831&z=15 Examples of how the OFT has addressed price-fixing in the UK] Category:Pricing Category:Commercial crimes Category:Anti-competitive behaviour

Supply

Supply has a number of meanings:
- In economics, supply is the aggregate amount of any material good that can be called into being at a certain price point; it one half of the equation of supply and demand. In classical economic theory, a curve representing supply is one of the factors that produce price.
- In the Westminster System, supply refers to the annual budget for the government. Failure of the supply bill is the equivalent of the failure of a Motion of Confidence and causes new elections and the potential selection of a new Prime Minister: see appropriation bill, loss of supply.
- In military affairs, supplies are the matériel which a military unit needs to fulfil its mission.
- In business administration, supply chain management is the mustering of the materials needed for a business enterprise to function.

Competition

Competition is the act of striving against another force for the purpose of achieving dominance or attaining a reward or goal, or out of a biological imperative such as survival. Competition is a term widely used in several fields, including biochemistry, ecology, economics, business, politics, and sports. Competition may be between two or more forces, life forms, agents, systems, individuals, or groups, depending on the context in which the term is used. Competition may yield various results to the participants, including both intrinsic and extrinsic rewards. Some, such as survival advantages, including favorable territory, are intrinsic biological factors that occur as a result of ecological competition between organisms. Others, such as business dominance and political power, involve competition between humans. In addition, extrinsic symbols, such as trophies, plaques, ribbons, prizes, or laudations, may be given to the winner(s). Such symbolic rewards are commonly used wherever the rewards inherent in the competition are primarily intrinsic, such as at human sporting and academic competitions. In general, the rewards range widely but usually help reinforce the advantage that one participant has over the other participant(s).

Sizes and levels of competition

Competition may also exist at different sizes; some competitions may be between two members of a species, while other competitions can involve entire species. In an example in economics, a competition between two local stores would be considered small compared to competition between several mega-giants. As a result, the consequences of the competition would also vary- the larger the competition, the larger the effect. In addition, the level of competition can also vary. At some levels, competition can be informal and be more for pride or fun. However, other competitions can be extreme and bitter; for example, some human wars have erupted because of the intense competition between two nations or nationalities.

Consequences of competition

nationalities Competition can result in both beneficial and detrimental results. For example, inter-species competition, including between humans, is the driving force of adaptation and ultimately, evolution. Social darwinists claim that competition also serves as a mechanism for determining the best-suited group, politically, economically, and ecologically, however this belief is very questionable. However, competition can also have negative consequences, particularly on the human species. Potential detrimental effects include the injury of other organisms and the drain of valuable resources and energy for competition. In addition, human competition may also require large amounts of money (such as in political elections, international sports competitions, and advertising wars) and can also lead to the compromising of ethical standards in order to gain an advantage in the competition. For example, several athletes have been caught using banned steroids in professional sports in order to boost their own chances of success or victory. Finally, competitive striving can also be harmful for the participants. Examples include athletes that injure themselves because they exceed the physical tolerances of their bodies, and companies that pursue unprofitable paths while engaging in competitive rivalries.

Competition in different fields

Economics and business competition

Seen as the pillar of capitalism in that it may stimulate innovation, encourage efficiency, or drive down prices, competition is touted as the foundation upon which capitalism is justified. According to microeconomic theory, no system of resource allocation is more efficient than pure competition. Competition, according to the theory, causes commercial firms to develop new products, services, and technologies. This gives consumers greater selection and better products. The greater selection typically causes lower prices for the products compared to what the price would be if there was no competition (monopoly) or little competition (oligopoly). However, competition may also lead to wasted (duplicated) effort and to increased costs (and prices) in some circumstances. Similarly, the psychological effects of competition may result in harm as well as good. Three levels of economic competition have been classified. The most narrow form is direct competition (also called category competition or brand competition), where products that perform the same function compete against each other. For example, a brand of pick-up trucks competes with several different brands of pick-up trucks. Sometimes two companies are rivals and one adds new products to their line so that each company distributes the same thing and they compete. The next form is substitute competition, where products that are close substitutes for one another compete. For example, butter competes with margarine, mayonnaise, and other various sauces and spreads. The broadest form of competition is typically called budget competition. Included in this category is anything that the consumer might want to spend their available money on. For example, a family that has $20,000 available may choose to spend it on many different items, which can all be seen as competing with each other for the family's available money. Competition does not necessarily have to be between companies. For example, business writers sometimes refer to "internal competition". This is competition within companies. The idea was first introduced by Alfred Sloan at General Motors in the 1920s. Sloan deliberately created areas of overlap between divisions of the company so that each division would be competing with the other divisions. For example, the Chevy division would compete with the Pontiac division for some market segments. Also, in 1931, Proctor and Gamble initiated a deliberate system of internal brand versus brand rivalry. The company was organized around different brands, with each brand allocated resources, including a dedicated group of employees willing to champion the brand. Each brand manager was given responsibility for the success or failure of the brand and was compensated accordingly. This form of competition thus pitted a brand against another brand. Finally, most businesses also encourage competition between individual employees. An example of this is a contest between sales representatives. The sales representative with the highest sales (or the best improvement in sales) over the a period of time would gain benefits from the employer. It should also be noted that business and economical competition in most countries is often limited or restricted. Competition often is subject to legal restrictions, which usually provide for fair and equal business competition. Such laws may include the banning of monopolies and price gouging. Depending on the respective economic policy, the pure competition is to a greater or lesser extent regulated by competition policy and competition law. Competition between countries is quite subtle to detect, but is quite evident in the World economy, where countries like the US, Japan, the European Union and the East Asian Tigers each try to outdo the other in the quest for economic supremacy in the global market, harkening to the concept of Kiasuism.Such competition is evident by the policies undertaken by these countries to educate the future workforce. For example, East Asian economies like Singapore, Japan and South Korea tend to emphasize education by allocating a large portion of the budget to this sector, and by implementing programmes such as gifted education, which some detractors criticise as indicative of academic elitism.

Competition in biology and ecology

Competition is also present in biology, and more specifically, ecology. Competition between members of a species is the driving force of evolution and natural selection- the competition for resources, such as food, water, territory, and sunlight, results in the ultimate survival and dominance of the variation of the species best suited for survival. According to Darwin's Theory of Evolution, this intraspecies competition results in the organisms best suited for survival producing the most offspring. As a result, the species would evolve over time and adapt to the environment in which the organisms lived. Competition is also present between species. First, a limited amount of resources are available, and several species may depend on these resources. Thus, each of the species competes with the others to gain the resources. As a result, several species less suited to compete for the resources may either adapt or die out. In addition, competition is also prominent in predator-prey relationships. Both the predator and prey are competing against one another for survival; the predator is seeking food, and the prey is seeking to survive.

Competition in politics

Competition is also found in politics. In democracies, an election is a competition for an elected office. In other words, two or more candidates strive and compete against one another to attain a position of power. The winner gains the seat of the elected office for a set amount of time, when another election is usually held to determine the next holder of the office. In addition, there is inevitable competition inside a government. Because several offices are appointed, potential candidates compete against the others in order to gain the particular office. Departments may also compete for a limited amount of resources, such as for funding. Finally, where there are party systems, elected leaders of different parties will ultimately compete against the other party for laws, funding, and power. Finally, competition is also imminent between governments. Each country or nationality struggles for world dominance, power, or military strength. For example, the United States competed against the Soviet Union in the Cold War for world power, and the two also struggled over the different types of government (in this case, representative democracy and communism). The result of this type of competition often leads to worldwide tensions and may sometimes erupt into warfare.

Sports competition

While some sports, such as fishing, have been viewed as primarily recreational, most sports are considered competitive. The majority involve the competition between two or more persons, (or animals and/or mechanical devices typically controlled by humans as in horse racing or auto racing). For example, in a game of basketball, two teams compete against one another to determine who can score the most points. While there is no set reward for the winning team, many players gain an internal sense of pride. In addition, extrinsic rewards may also be given. Athletes, besides competing against other humans, also compete against nature in sports such as kayaking or mountain climbing, where the goal is to reach a destination, with only natural barriers impeding the process. While professional sports have been usually viewed as intense and extremely competitive, recreational sports, which are often less intense, are considered a healthy option for the competitive urges in humans. Sport provides a relatively safe venue for converting unbridled competition into harmless competition, because sports competition is not unrestrained. On the contrary, the competitions are governed by codified rules ageed upon by the participants. Violating these rules is considered to be unfair competition. Sports, in addition, is also considered artificial and not natural competition; for example, competing for control of a ball or defending territory on a playing field is not an innate biologal factor in humans. Athletes in sports like gymnastics and competitive diving actually compete against a conceptual ideal of a perfect performance, which incorporates measurable criteria and standards that are translated into numerical ratings and scores. Sports competition is generally broken down into three categories: individual sports, such as archery, dual sports, such as doubles tennis, or team sports competition, such as soccer. While most sports competitions are recreation, there exists several major and minor professional sports leagues throughout the world, and the Olympic Games, held every four years, is a pinnacle of sports competition.

Competition in education

Competition is also very evident in education. On a global scale, national education systems, intending to bring out the best in the next generation, encourage competitiveness among students by scholarships. Countries like Singapore and the United Kingdom have a gifted education programme which caters to gifted students, prompting charges of academic elitism. Upon receipt of their academic results, students tend to compare their grades to see who is better. For severe cases, the pressure to perform in some countries is so high that it results in stigmatisation of intellectually deficient students or even suicide as consequence of failing the exams, Japan being a prime example (see Education in Japan). This resulted in critical revaluation of examinations as a whole by educationists (see Exam). Competitions also make up a large proponent of extracurricular activities that students partake in. Such competitions include TVO's broadcasted Reach for the Top competition, FIRST Robotics and the University of Toronto Space Design Contest.

The study of competition

Competition has been studied in several fields, including psychology, sociology, and anthropology. Social psychologists, for instance, study the nature of competition. They investigate the natural urge of competition and its circumstances. They also study group dynamics to detect how competition emerges and what its effects are. Sociologists, meanwhile, study the effects of competition on society as a whole. In addition, anthropologists study the history and prehistory of competition in various cultures. They also investigate how competition manifested itself in various cultural settings in the past, and how competition has developed over time.

Competitiveness

Many philosophers and psychologists have identified a trait in most living organisms that drive the particular organism to compete. This trait, called competitiveness, is viewed as an innate biological trait that coexists along with the urge for survival. Competitiveness, or the inclination to compete, though, has become synonymous with aggressiveness and ambitiousness in the English language.

Antitrust

:Antitrust is also the name for a movie, see Antitrust (film) Antitrust or competition laws are laws which prohibit anti-competitive or unfair business practices. The term "antitrust" derives from the U.S. law which was originally formulated to combat "business trusts", now more commonly known as cartels.

Divisions

Most antitrust activity affects the following areas:
- Bid rigging
- Monopolization and oligopolization
- Price fixing
- Tying
- Vendor lock-in
- Business
- Competition
- Predatory pricing

History

Alabama became the first U.S. state to enact an antitrust law on February 23, 1883. The United States federal government passed the Sherman Antitrust Act in 1890, although it was not put to use for several more years. Several large conglomerates such as the Northern Securities Company, the Standard Oil company, and the American Tobacco Company were found to be illegal trusts, and broken up by the courts. More recently, large American companies AT&T and Microsoft have been sued by the U.S. government for antitrust violations. Most western countries have antitrust or competition laws of some form. The European Union has its own competition law.

Arguments in favor of antitrust laws

By introducing antitrust legislation, consumers should benefit from reduced prices, better product diversity, and thus more choice. Furthermore, as the market power of large cartels is reduced, they are forced to pay more attention to the needs and wishes of individual customers. Large companies with huge cash reserves and large lines of credit can stifle competition by engaging in predatory pricing; that is, by selling their products and services at a loss for a time, in order to force their smaller competitors out of business. With no competition, they are then free to consolidate control of the industry and charge whatever prices they wish. At this point, there is also little motivation for investing in further technological research, since there are no competitors left to gain an advantage over. High barriers to entry such as large upfront investment requirements in infrastructure and exclusive agreements with distributors, customers, and wholesalers ensure that it will be difficult for any new competitors to enter the market, and that if any do, the trust will have ample advance warning and time in which to either buy the competitor out, or engage in its own research and return to predatory pricing long enough to force the competitor out of business.

Criticisms of antitrust

Coercive monopolies are in a privileged position to reap economic benefits by restricting output and raising prices, without fear of competition. However, Thomas Woods asserts that the industries most frequently accused of holding a coercive monopoly position in the late nineteenth century were neither restricting output nor raising prices. The Results of "Predatory pricing": Commodity Prices from 1880-1890 During the 1880s output of monopolistic industries grew seven times faster than the overall economy, while prices in these industries were generally falling—even faster than the 7% rate of decline that occurred in the economy as a whole. Free market economist Milton Friedman states that he initially agreed with the underlying principles of antitrust laws (breaking up monopolies and oligopolies and promoting more competition), but came to the conclusion that they do more harm than good and that therefore they should not exist. Critics also argue that the empirical evidence shows that "predatory pricing" does not work in practice, and is better defeated by a truly free market than by anti-trust laws (see Criticism of the theory of predatory pricing). Thomas Sowell argues that even if a superior business drives out a competitor, it doesn't follow that competition has ended: :In short, the financial demise of a competitor is not the same as getting rid of competition. The courts have long paid lip service to the distinction that economists make between competition — a set of economic conditions — and existing competitors, though it is hard to see how much difference that has made in judicial decisions. Too often, it seems, if you have hurt competitors, then you have hurt competition, as far as the judges are concerned.[http://www.forbes.com/forbes/1999/0503/6309089a.html] Alan Greenspan argues that the very existence of antitrust laws discourages businessmen from being productive for society, out of fear that their business actions will be determined illegal and dismantled by government. In his essay entitled Antitrust, he says: "No one will ever know what new products, processes, machines, and cost-saving mergers failed to come into existence, killed by the Sherman Act before they were born. No one can ever compute the price that all of us have paid for that Act which, by inducing less effective use of capital, has kept our standard of living lower than would otherwise have been possible." [http://www.polyconomics.com/searchbase/06-12-98.html]

External links

Governmental

- [http://www.usdoj.gov/atr/ United States Department of Justice Antitrust Division homepage]
- [http://www.ftc.gov/ftc/antitrust.htm United States Federal Trade Commission: Antitrust and Competition division]
- [http://europa.eu.int/comm/competition/antitrust/ Official European Union Antitrust site]

Academic

- [http://www.cei.org/pdf/1615.pdf Antitrust Policy As Corporate Welfare by Clyde Wayne Crews Jr] "It is hoped that policymakers will come to recognize that government cannot protect the public from monopoly power, because it is the source of such power."
- [http://straylight.law.cornell.edu/topics/antitrust.html Cornell University review of antitrust law]
- [http://www.mises.org/journals/rae/pdf/rae6_2_3.pdf The Protectionist Roots of Antitrust by Donald J. Boudreaux and Thomas J. DiLorenzo] "antitrust was a protectionist institution from the very beginning; there never was a "golden age of antitrust" besieged by rampant cartelization"

Other

- [http://www.antitrustinstitute.org/ The American Antitrust Institute]
- [http://www.antitrust.de/ German antitrust law]
- [http://www.quebecoislibre.org/000219-13.htm Antitrust Laws Should Be Abolished] by Edward W. Younkins, 19 February 2000.
- [http://www.polyconomics.com/searchbase/06-12-98.html Criticism of Antitrust] by Alan Greenspan
- [http://www.ntu.org/main/press.php?PressID=344&org_name=NTUF Antitrust Law: Affirmative Action for Uncompetitive Businesses] by Mark Schmidt, National Taxpayers Union Foundation, Policy Paper 132, 11 Dec 2000.
- [http://www.abanet.org/antitrust/source/ The Antitrust Source], monthly analysis of antitrust issues by the American Bar Association
- [http://www.econlib.org/library/Enc/Antitrust.html Antitrust] by Fred S. McChesney - "The popular view that cartels and monopolies were rampant at the turn of the century now seems incorrect to most economists."

References

# Thomas E. Woods, Jr., Ph.D (2004). The Politically Incorrect Guide to American History, 99. # [http://www.cato.org/pubs/policy_report/v21n2/friedman.html The Business Community's Suicidal Impulse by Milton Friedman] A criticism of antitrust laws and cases by the Nobel economist Category:Business law Category:Commercial crimes ja:反トラスト法

Law

:This article is about law in society. For other possible meanings, see law (disambiguation). Law (a loanword from Old Norse lag), in politics and jurisprudence, is a set of rules or norms of conduct which mandate, proscribe or permit specified relationships among people and organizations, provide methods for ensuring the impartial treatment of such people, and provide punishments of/for those who do not follow the established rules of conduct. Law is typically administered through a system of courts, in which judges hear disputes between parties and apply a set of rules in order to provide an outcome that is just and fair. The manner in which law is administered is known as a legal system, which typically has developed through tradition in each country. Legal practitioners, most often, must be professionally trained in the law before they are permitted to advocate for a party in a court of law, draft legal documents, or give legal advice.

Legal traditions

There are generally four broad legal traditions that are practiced in the world today.

Civil law

The Civilian system of law is a codified law that sets out a comprehensive system of rules that are applied and interpreted by judges. It is by and large the most commonly practiced system of law in the world, with almost 60 % of the world's population living in a country ruled on the civilian system. The most important difference to common law is that normally, only legislative enactments are considered to be legally binding, but not precedent cases. However, as a practical matter, courts normally follow their previous decisions. Furthermore, in some civil law systems (e.g. in Germany), the writings of legal scholars have considerable influence on the courts. In most jurisdictions the core areas of private law are codified in the form of a civil code, but in some, like Scotland it remains uncodified. The civil law system has its origins in Roman law, which was adopted by scholars and courts from the late middle ages onwards. Most modern systems go back to the 19th century codification movement. The civil codes of many, particularly Latin countries and former French and Spanish colonies closely trail the Code de Napoléon in some fashion. However, this is not true for most Central and Eastern European, Scandinavian and East Asian countries. Notably, the German BGB was developed from Roman law with reference to German legal tradition. The importance of the Code Napoléon should also not be overemphasized as it covers only the core areas of private law, while other codes and statutes govern fields such as corporate law, administrative law, tax law and constitutional law.

Common law

The Common law is an Anglo-Saxon legal tradition, based on unwritten laws developed through judicial decisions that create binding precedent. The common law system is currently in practice in Australia, Canada (excluding Quebec), United Kingdom, and the United States (excluding Louisiana). In addition to these countries several others have adapted the common law system into a mixed system. For example, India and Nigera operate largely on a common law system but incorporate a good deal of customary law and religious law.

Customary law

Customary law are systems of law that has evolved largely on their own within a given country and have been adapted to meet the needs of the particular culture. Note that customary law may also be relevant within jurisdictions following another legal tradition in fields or subfields of law where no legislative enactment exists. For example, in Austria, scholars of private law often claim that customary law continues to exist, whereas public law scholars dispute this claim. (In any case, it is hard to find any practically relevant examples.)

Religious law

Many countries base their system of law on religious tenants. The most dominant system of this form of law is Muslim law (or "Sharia") which is a codified law that is found within the Koran. These laws deal primarily with the personal rights and dispute resolution between individuals. It is used in some Middle Eastern nations; such as in the Iran and Saudi Arabia. On a smaller level there are still regions of the world that practice canon law, which is followed by Catholics and Anglicans, and a similar legal system is used by the Eastern Orthodox Church. The same can be said for Jewish law (halakha or halacha), which is followed by Orthodox and Conservative Jews, in substantially different forms.

Bodies of law

In the broadest sense, bodies of law can be subdivided on the basis of who the parties to an action are. It is frequent that practiced fields of law overlap into several of these bodies of law.

Private law

The area of private law in a legal system concerns law that oversees disputes between private individuals. This area is, to a large extent, the most comprehensive area of law, dealing with all non-criminal harm one person does to another.

Public law

The area of public law, in a general sense, is the law in a given legal system that concerns disputes between the government and private individuals residing within the country. The state can bring actions against people for criminal acts, as well as breach of regulatory laws. Equally, individuals can bring actions against the government for harm it has done. This includes grounds on the basis of a breach of regulations, legislate on matters beyond their competence, or violation of an individuals rights. These last two points are often protected under a countries’ constitution.

Procedural law

Procedural law concerns the areas of law that regulate how all actions are dealt with. This includes who can have access to the court system, how complaints are submitted, and what are the rights of the parties involved. Procedural law is often known as "adjective" law as it is the law that concern how other laws are to be applied. Typically, this is broadly covered by a government’s civil and criminal procedure rules. But equally this includes the law of evidence which determines what means are used to prove facts, as well as, the law regarding remedies.

International law

International law governs the relations between states, or between citizens of different states, or international organizations. Its two primary sources are customary law and treaties.

Philosophy of law

Philosophy of law is a branch of philosophy and jurisprudence which studies basic questions about law and legal systems, such as "what is the law?", "what are the criteria for legal validity?", "what is the relationship between law and morality?", and many other similar questions. In the western tradition there are several schools of thought on the philosophical basis of law. First, there is natural law, which attempts to describe law as an inherent quality in humans that is derived from natures. Second, there is the positivism which believes that law is a purely human-made construct that society uses to maintain social order. Third, there is legal realism which believes that law is an arbitrary set of rules that are largely established through the tastes and preferences of judges.

Anthropology of law

:See main discussion at Honour Law has an anthropological dimension. It has been recognized from Montesquieu to the present that law is shaped by the kind of society in which it is practised. One continuum into which various societies can be placed contrasts the "culture of law" with the "culture of honour". In order to have a culture of law, people must dwell in a society where a government exists whose authority is hard to evade and generally recognised as legitimate. People take their grievances before the government and its agents, who arbitrate disputes and enforce penalties. This behaviour is contrasted with the culture of honour, where respect for persons and groups stems from fear of the revenge they may exact if their person, property, or prerogatives are not respected. Cultures of law must be maintained. They can be eroded by declining respect for the law, achieved either by weak government unable to wield its authority, or by burdensome restrictions that attempt to forbid behaviour prevalent in the culture or in some subculture of the society. When a culture of law declines, there is a possibility that an culture of honor will arise in its place.
History

Practice of law
Practice of law is typically overseen by either a government organization or independent regulating body such as a bar association or barrister society. To practice law – i.e. appear in front of a judge on behalf of someone, draft legal documents, etc. – the practitioner must be certified by the regulating body. This usually entails a two or three year program at a university’s faculty of law or a law school, followed by an entrance examination (eg. bar admissions). Once accredited, a legal practitioners will often work in law firm, as well as in government, a private corporation, or even work as sole practitioner. A significant component to the practice of law in the common law tradition involves legal research in order to determine the current state of the law. This usually entails exploring case reporters, legal periodicals, and legislation.
See also

- Law topics overview
- List of areas of law
- List of legal topics
- List of legal terms
- List of jurists
- List of legal abbreviations
- List of case law lists
- List of law firms
Further reading

- Cheyenne Way: Conflict & Case Law in Primitive Jurisprudence, Karl N. Llewellyn and E. Adamson Hoebel, University of Oklahoma Press, 1983, trade paperback, 374 pages, ISBN 0806118555
- The Bilingual LSP Dictionary. Principles and Practice for Legal language, Sandro Nielsen, Gunter Narr Verlag 1994.
- [http://browse.addall.com/Browse/Author/2088479-1 Other books by Karl N. Llewellyn]
- David, René, and John E. C. Brierley. Major Legal Systems in the World Today: An Introduction to the Comparative Study of Law. 3d ed. London: Stevens, 1985 (ISBN 0420473408).
External links

- [http://www.legalmatch.com LegalMatch] Legal Resource
- [http://ausicl.com The Australian Institute of Comparative Legal Systems]
- [http://www.lpig.org Law and Policy Institutions]
- [http://www.llbee.com/news.php?p=news Laws External Education- Legal News By Subject]
- [http://www.4lawschool.com 4LawSchool- Legal Reference]
- [http://ww3.definitions-legal.com:8567/ Law, Legal Definitions & Reference]
- [http://www.ericdigests.org/1996-3/law.htm Essentials of Law-Related Education. ERIC Digest.]
- [http://www.law.cornell.edu LII - Topical overviews, US Supreme Court decisions, US Code (Acts of Congress)]
- [http://www.worldlii.org WorldLII - The World Legal Information Institute]
- [http://www.lawmoose.com LawMoose Legal Reference Library]
- [http://legallinks.jenkinslaw.org Legal Research Links]
- [http://www.findlaw.com FindLaw]
- [http://ausicl.com The Australian Institute of Comparative Legal Systems]
- [http://www.nolo.com/glossary.cfm Everybody's Legal Glossary] - From Nolo
- [http://www.alllaw.com/ AllLaw]
- [http://legal.wikicities.com/ WikiCities Legal Site]
- Stanford Encyclopedia of Philosophy:
- [http://plato.stanford.edu/entries/law-ideology/ Law and Ideology]
- [http://plato.stanford.edu/entries/law-language/ Law and Language]
- [http://en.jurispedia.org/ The shared law] in Jurispedia
- [http://www.avocatura.com Romanian Law]
- [http://www.thedailylaw.com Daily Law news]
- [http://members.fortunecity.com/victorcauchi/lex/lexindex.htm Laws of Malta] Chapter summaries and a general Glossary of definitions.
- [http://LawyerIntl.com LawyerIntl.com] Legal Resource and Law Dictionary
- [http://LawGuru.com LawGuru.com] Legal Portal
- [http://forumprawne.org Prawo i porady prawne] - web discussion board about Polish law Category:Core issues in ethics ja:法 (法学) simple:Law th:กฎหมาย

Incentive

In economics, an incentive is any factor (financial or non-financial) that provides a motive for a particular course of action, or counts as a reason for preferring one choice to the alternatives. Since human beings are purposeful creatures, the study of incentive structures is central to the study of all economic activity (both in terms of individual decision-making and in terms of co-operation and competition within a larger institutional structure). Economic analysis, then, of the differences between societies (and between different organizations within a society) largely amounts to characterizing the differences in incentive structures faced by individuals involved in these collective efforts. Incentives can be classified according to the different ways in which they motivate agents to take a particular course of action. One common and useful taxonomy divides incentives into three broad classes: # Remunerative incentives (or financial incentives) are said to exist where an agent can expect some form of material reward — especially money — in exchange for acting in a particular way. # Moral incentives are said to exist where a particular choice is widely regarded as the right thing to do, or as particularly admirable, or where the failure to act in a certain way is condemned as indecent. A person acting on a moral incentive can expect a sense of self-esteem, and approval or even admiration from her community; a person acting against a moral incentive can expect a sense of guilt, and condemnation or even ostracism from the community. # Coercive incentives are said to exist where a person can expect that the failure to act in a particular way will result in physical force being used against her (or her loved ones) by others in the community — for example, by inflicting pain in punishment, or by imprisoning her, or by confiscating or destroying her possessions. (There is another common usage in which incentive is contrasted with coercion, as when economic moralists contrast incentive-driven work—such as entrepreneurship, employment, or volunteering motivated by remunerative, moral, or personal incentives—with coerced work—such as slavery or serfdom, where work is motivated by the threat or use of violence. In this usage, the category of "coercive incentives" is excluded. For the purposes of this article, however, "incentive" is used in the broader sense defined above.) These categories do not, by any means, exhaust every possible form of incentive that an individual person may have. In particular, they do not encompass the many other forms of incentive—which may be roughly grouped together under the heading of personal incentives—which motivate an individual person through her tastes, desires, sense of duty, pride, personal drives to artistic creation or to achieve remarkable feats, and so on. The reason for setting these sorts of incentives to one side is not that they are less important to understanding human action—after all, social incentive structures can only exist in virtue of the effect that social arrangements have on the motives and actions of individual people. Rather, personal incentives are set apart from these other forms of incentive because the distinction above was made for the purpose of understanding and contrasting the social incentive structures established by different forms of social interaction. Personal incentives are essential to understanding why a specific person acts the way she does, but social analysis has to take into account the situation faced by any individual in a given position within a given society—which means mainly examining the practices, rules, and norms established at a social, rather than a personal, level. It's also worth noting that these categories are not necessarily exclusive; one and the same situation may, in its different aspects, carry incentives that come under any or all of these categories. In modern American society, for example, economic prosperity and social esteem are often closely intertwined; and when the people in a culture tend to admire those who are economically successful, or to view those who are not with a certain amount of contempt (see also: classism, Protestant work ethic), the prospect of (for example) getting or losing a job carries not only the obvious remunerative incentives (in terms of the effect on the pocketbook) but also substantial moral incentives (such as honor and respect from others for those who hold down steady work, and disapproval or even humiliation for those who don't or can't).

Incentive in economics

The study of economics in modern societies is mostly concerned with remunerative incentives rather than moral or coercive incentives — not because the latter two are unimportant, but rather because remunerative incentives are the main form of incentives employed in the world of business, whereas moral and coercive incentives are more characteristic of the sorts of decisions studied by political science and sociology. A classic example of the economic analysis of incentive structures is the famous Walrasian chart of supply and demand curves: economic theory predicts that the market will tend to move towards the equilibrium price because everyone in the market has a remunerative incentive to do so: by lowering a price formerly set above the equilibrium a firm can attract more customers and make more money; by raising a price formerly set below the equilibrium a customer is more able to obtain the good or service that she wants in the quantity she desires. Similarly, the study of the effects of monopoly or perfect competition on market prices can be seen as an analysis of the different remunerative incentive structures created by different market conditions: in a monopolistic market, monopoly profits give the monopolistic firm a significant incentive to set prices above equilibrium; whereas in conditions of perfect competition there is no remunerative incentive for a customer to accept a good at a higher price than the equilibrium price (and thus there is an intense incentive for firms to sell at the equilibrium — customers have no incentive at all to buy at above the equilibrium price, so firms that set prices above the equilibrium will make no money at all).

Incentive Problems

Incentive structures, however, are notoriously more tricky than they might appear to people who set them up. Human beings are both finite and creative; that means that the people offering incentives are often unable to predict all of the ways that people will respond to them. Thus, imperfect knowledge and unintended consequences can often make incentives much more complex than the people offering them originally expected, and can lead either to unexpected windfalls or to disasters produced by unintentionally perverse incentives. For example, decision-makers in for-profit firms often have to decide what incentives they will offer to employees and managers, in order to encourage them to act in ways that will lead to greater success for the firm. But many corporate policies — especially of the "extreme incentive" variant popular during the 1990s — that aimed to encourage productivity have, in some cases, led to spectacular failures as a result of unintended consequences. For example, stock options were intended to boost CEO productivity by offering a remunerative incentive (profits from soaring stock prices) for CEOs to improve company performance. But CEOs could get profits from soaring stock prices either (1) by making sound decisions and reaping the rewards of a long-term price increase, or (2) by fudging or fabricating accounting information to give the illusion of economic success, and reaping profits from the short-term price increase by selling before the truth came out and prices tanked. The perverse incentives created by the availability of option (2) have been blamed for many of the falsified earnings reports and public statements in the late 1990s and early 2000s. Similarly, throughout the 1990s and 2000s, many corporations have sought to increase individual incentives by increasing the sizes of bonuses (to the point where they exceed salaries, sometimes by a factor as high as 10) for star performers while also laying off large proportions of their workforce, hoping to cultivate fear factor-related gains. The most extreme version of this is "forced ranking", a scheme by which workers are annually ranked and a set proportion (between 10 and 15%, usually) automatically fired. The results of these programs are mixed, but in extreme cases, usually negative. While competition among firms has often beneficial results, lowering prices and encouraging innovation, competition within firms has almost uniformly negative results. Designed to encourage production, extreme incentive schemes actually create a cut-throat working environment where office politics dominate and actually overshadow the productive goals of the company. An example of this is the now-deceased Enron corporation. According to David Callahan's The Cheating Culture, the environment at that company was so cut-throat (as a result of extreme incentive management) that employees feared leaving their computer terminals, worried that co-workers might steal information for their own purposes. Category:Microeconomics Category:Motivation

Quota

A quota is a prescribed number or share of something. In common language, especially in business, a quota is a time-measured goal for production or achievement. An assembly line worker might have a quota for the number of products made; a salesperson might have a quota to meet for weekly sales; a police officer might have a quota for tickets issued or arrests made. In trade, a quota is a form of protectionism used to restrict the import of something to a specific quantity (Sawyer & Sprinkle, International Economics, 2nd Edition , 2003, p 157). The number of cars imported from Japan may have a quota of 50,000 vehicles per annum to protect auto manufacturers in the United States. In proportional representation, a quota is a lowerbound on the number of votes needed to be elected. There are a number of such schemes:
- Droop quota
- Hagenbach-Bischoff quota
- Hare quota
- Imperiali quota
- Ross quota In computing:
- disk quota In affirmative action:
- Racial quota In immigration:
- Emergency Quota Act In IMF
- [http://www.imf.org/external/np/exr/facts/quotas.htm IMF Quotas]

Game theory

:You may also be interested in: Games in general, a band named Game Theory, or Combinatorial game theory (used to study games like Nim, Chess, and Go). Game theory is a branch of applied mathematics that studies strategic situations where players choose different actions in an attempt to maximize their returns. First developed as a tool for understanding economic behavior, game theory is now used in many diverse academic fields, ranging from biology to philosophy. Game theory saw substantial growth during the Cold War because of its application to military strategy, most notably to the concept of mutually assured destruction. Beginning in the 1970s, game theory has been applied to animal behavior, including species' development by natural selection. Because of interesting games like the Prisoner's dilemma, where mutual self-interest hurts everyone, game theory has been used in ethics and philosophy. Finally, game theory has recently drawn attention from computer scientists because of its use in artificial intelligence and cybernetics. In addition to its academic interest, game theory has received attention in popular culture. An important figure in game theory, John Nash was the subject of the 2001 film A Beautiful Mind. Several game shows have adopted game theoretic situations, including Friend or Foe and Deal or No Deal. Although similar to decision theory, game theory studies decisions that are made in an environment where various players interact. In other words, game theory studies choice of optimal behavior when costs and benefits of each option are not fixed, but depend upon the choices of other individuals.

Representation of games

The games studied by game theory are well-defined mathematical objects. A game consists of a set of players, a set of moves (or strategies) available to those players, and a specification of payoffs for each combination of strategies. There are two ways of representing games that are common in the literature.

Normal form

The normal (or strategic form) game is a matrix which shows the players, strategies, and payoffs (see the example to the right). Here there are two players; one chooses the row and the other chooses the column. Each player has two strategies, which are specified by the number of rows and the number of columns. The payoffs are provided in the interior. The first number is the payoff received by the row player (Player 1 in our example); the second is the payoff for the column player (Player 2 in our example). Suppose that Player 1 plays top and that Player 2 plays left. Then Player 1 gets 4, and Player 2 gets 3. When a game is presented in normal form, it is presumed that each player acts simultaneously or, at least, without knowing the actions of the other. If players have some information about the choices of other players, the game is usually presented in extensive form.

Extensive form

matrix Extensive form games attempt to capture games with some important order. Games here are presented as trees (as pictured to the left). Here each vertex (or node) represents a point of choice for a player. The player is specified by a number listed by the vertex. The lines out of the vertex represent a possible action for that player. The payoffs are specified at the bottom of the tree. In the game pictured here, there are two players. Player 1 moves first and chooses either F or U. Player 2 sees Player 1s move and then chooses A or R. Suppose that Player 1 chooses U and then Player 2 chooses A, then Player 1 gets 8 and Player 2 gets 2. Extensive form games can also capture simultaneous-move games as well. Either a dotted line or circle is drawn around two different vertices to represent them as being part of the same information set (i.e., the players do not know at which point they are).
Types of games

Symmetric and asymmetric
A symmetric game is a game where the payoffs for playing a particular strategy depend only on the other strategies employed, not on who is playing them. If the identities of the players can be changed without changing the payoff to the strategies, then a game is symmetric. Many of the commonly studied 2x2 games are symmetric. The standard representations of Chicken, the Prisoner's Dilemma, and the Stag hunt are all symmetric games. Most commonly studied asymmetric games are games where there are not identical strategy sets for both players. For instance, the Ultimatum game and similar the Dictator game have different strategies for each player. It is possible, however, for a game to have identical strategies for both players, yet be asymmetric. For example, the game pictured to the right is asymmetric despite having identical strategy sets for both players.
Zero sum and non-zero sum
In zero-sum games the total benefit to all players in the game, for every combination of strategies, always adds to zero (or more informally put, a player benefits only at the expense of others). Poker exemplifies a zero-sum game, because one wins exactly the amount one's opponents lose. Other zero sum games include Matching pennies and most classical board games including Go and Chess. Many games studied by game theorists (including the famous Prisoner's Dilemma) are non-zero-sum games, because some outcomes have net results greater or less than zero. Informally, in non-zero-sum games, a gain by one player does not necessarily correspond with a loss by another. It is possible to transform any game into a zero-sum game by adding an additional dummy player (often called "the board"), whose losses compensate the players' net winnings.
Simultaneous and sequential
Simultaneous games are games where both players move simultaneously, or if they do not move simultaneously, the later players are unaware of the earlier players' actions (making them effectively simultaneous). Sequential games (or dynamic games) are games where later players have some knowledge about earlier actions. This need not be perfect knowledge about every action of earlier players; it might be very little information. For instance, a player may know that an earlier player did not perform one particular action, while she does not know which of the other available actions the first player actually performed. The difference between simultaneous and sequential games is captured in the different representations discussed above. Normal form is used to represent simultaneous games, and extensive form is used to represent sequential ones.
Perfect information and imperfect information
extensive form An important subset of sequential games consists of games of perfect information. A game is one of perfect information if all players know the moves previously made by all other players. Thus, only sequential games can be games of perfect information, since in simultaneous games not every player knows the actions of the others. Most games studied in game theory are imperfect information games, although some interesting games are games of perfect information, including the Ultimatum Game and Centipede Game. Many popular games are games of perfect information including Chess, Go, and Mancala. Perfect information is often confused with complete information, which is a similar concept. Complete information requires that every player know the strategies and payoffs of the other players but not necessarily the actions.
Infinitely long games
For obvious reasons, games as studied by economists and real-world game players are generally finished in a finite number of moves. Pure mathematicians are not so constrained, and set theorists in particular study games that last for infinitely many moves, with the winner (or other payoff) not known until after all those moves are completed. The focus of attention is usually not so much on what is the best way to play such a game, but simply on whether one or the other player has a winning strategy. (It can be proved, using the axiom of choice, that there are games—even with perfect information, and where the only outcomes are "win" or "lose"—for which neither player has a winning strategy.) The existence of such strategies, for cleverly designed games, has important consequences in descriptive set theory.
Uses of game theory
Games in one form or another are widely used in many different academic disciplines.
Economics and business
Economists have used game theory to analyze a wide array of economic phenomena, including auctions, bargaining, duopolies and oligopolies, social network formation, and voting systems. This research usually focuses on particular sets of strategies known as equilibria in games. These "solution concepts" are usually based on what is required by norms of rationality. The most famous of these is the Nash equilibrium. A set of strategies is a Nash equilibrium if each represents a best response to the other strategies. So, if all the players are playing the strategies in a Nash equilibrium, they have no incentive to deviate, since their strategy is the best they can do given what others are doing. The payoffs of the game are generally taken to represent the utility of individual players. Often in modeling situations the payoffs represent money, which presumably corresponds to an individual's utility. This assumption, however, can be faulty. A prototypical paper on game theory in economics begins by presenting a game that is an abstraction of some particular economic situation. One or more solution concepts are chosen, and the author demonstrates which strategy sets in the presented game are equilibria of the appropriate type. Naturally one might wonder to what use should this information be put. Economists and business professors suggest two primary uses.
Descriptive
utility The first use is to inform us about how actual human populations behave. Some scholars believe that by finding the equilibria of games they can predict how actual human populations will behave when confronted with situations analogous to the game being studied. This particular view of game theory has come under recent criticism. First, it is criticized because the assumptions made by game theorists are often violated. Game theorists may assume players always act rationally to maximize their wins (the Homo economicus model), but real humans often act either irrationally, or act rationally to maximize the wins of some larger group of people (altruism). Game theorists respond by comparing their assumptions to those used in physics. Thus while their assumptions do not always hold, they can treat game theory as a reasonable scientific ideal akin to the models used by physicists. However, additional criticism of this use of game theory has been levied because some experiments have demonstrated that individuals do not play equilibrium strategies. For instance, in the Centipede game, Guess 2/3 of the average game, and the Dictator game, people regularly do not play Nash equilibria. There is an ongoing debate regarding the importance of these experiments. Alternatively, some authors claim that Nash equilibria do not provide predictions for human populations, but rather provide an explanation for why populations that play Nash equilibria remain in that state. However, the question of how populations reach those points remains open. Some game theorists have turned to evolutionary game theory in order to resolve these worries. These models presume either no rationality or bounded rationality on the part of players. Despite the name, evolutionary game theory does not necessarily presume natural selection in the biological sense. Evolutionary game theory includes both biological as well as cultural evolution and also models of individual learning (for example, fictitious play dynamics).
Normative
On the other hand, some scholars see game theory not as a predictive tool for the behavior of human beings, but as a suggestion for how people ought to behave. Since a Nash equilibrium of a game constitutes one's best response to the actions of the other players, playing a strategy that is part of a Nash equilibrium seems appropriate. However, this use for game theory has also come under criticism. First, in some cases it is appropriate to play a non-equilibrium strategy if one expects others to play non-equilibrium strategies as well. For an example, see Guess 2/3 of the average. Second, the Prisoner's Dilemma presents another potential counterexample. In the Prisoner's Dilemma, each player pursuing his own self-interest leads both players to be worse off than had they not pursued their own self-interests. Some scholars believe that this demonstrates the failure of game theory as a recommendation for behavior.
Biology
Unlike economics, the payoffs for games in biology are often interpreted as corresponding to fitness. In addition, the focus has been less on equilibria that correspond to a notion of rationality, but rather on ones that would be maintained by evolutionary forces. The most well-known equilibrium in biology is know as the Evolutionary stable strategy or (ESS), and was first introduced by John Maynard Smith (described in his 1982 book). Although its initial motivation did not involve any of the mental requirements of the Nash equilibrium, every ESS is a Nash equilibrium. In biology, game theory has been used to understand many different phenomena. It was first used to explain the evolution (and stability) of the approximate 1:1 sex ratios. Ronald Fisher (1930) suggested that the 1:1 sex ratios are a result of evolutionary forces acting on individuals who could be seen as trying to maximize their number of grandchildren. Additionally, biologists have used evolutionary game theory and the ESS to explain the emergence of animal communication (Maynard Smith & Harper, 2003). The analysis of signaling games and other communication games has provided some insight into the evolution of communication among animals. Finally, biologists have used the Hawk-Dove game (also known as Chicken) to analyze fighting behavior and territoriality.
Computer science and logic
Game theory has come to play an increasingly important role in logic and in computer science. Several logical theories have a basis in game semantics. In addition, computer scientists have used games to model interactive computations. Computability logic attempts to develop a comprehensive formal theory (logic) of interactive computational tasks and resources, formalizing these entities as games between a computing agent and its environment.
Philosophy
Game theory has been put to several uses in philosophy. Responding to two papers by W.V.O. Quine (1960, 1967), David Lewis (1969) used game theory to develop a philosophical account of convention. In so doing, he provided the first analysis of common knowledge and employed it in analyzing play in coordination games. In addition, he first suggested that one can understand meaning in terms of signaling games. This later suggestion has been pursued by several philosophers since Lewis (Skyrms 1996, Grim et al. 2004). In ethics, some authors have attempted to pursue the project, begun by Thomas Hobbes, of deriving morality from self-interest. Since games like the Prisoner's Dilemma present an apparent conflict between morality and self-interest, explaining why cooperation is required by self-interest is an important component of this project. This general strategy is a component of the general social contract view in political philosophy (for examples, see Gauthier 1987 and Kavka 1986). Finally, other authors have attempted to use evolutionary game theory in order to explain the emergence of human attitudes about morality and corresponding animal behaviors. These authors look at several games including the Prisoner's Dilemma, Stag hunt, and the Nash bargaining game as providing an explanation for the emergence of attitudes about morality (see, e.g., Skyrms 1996, 2004; Sober and Wilson 1999).
History of game theory
The first known discussion of game theory occurred in a letter written by James Waldegrave in 1713. In this letter, Waldegrave provides a minimax mixed strategy solution to a two-person version of the card game le Her. It was not until the publication of Antoine Augustin Cournot's Researches into the Mathematical Principles of the Theory of Wealth in 1838 that a general game theoretic analysis was pursued. In this work Cournot considers a duopoly and presents a solution that is a restricted version of the Nash equilibrium. Although Cournot's analysis is more general than Waldegrave's, game theory did not really exist as a unique field until John von Neumann published a series of papers in 1928. These results were later expanded in the 1944 book The Theory of Games and Economic Behavior by von Neumann and Oskar Morgenstern. This profound work contains the method for finding optimal solutions for two-person zero-sum games. During this time period, work on game theory was primarily focused on cooperative game theory, which analyzes optimal strategies for groups of individuals, presuming that they can enforce agreements between them about proper strategies. In 1950, the first discussion of the Prisoner's dilemma appeared, and an experiment was undertaken on this game at the RAND corporation. Around this same time, John Nash developed a definition of an "optimum" strategy for multiplayer games where no such optimum was previously defined, known as Nash equilibrium. This equilibrium is sufficiently general, allowing for the analysis of non-cooperative games in addition to cooperative ones. Game theory experienced a flurry of activity in the 1950s, during which time the concepts of the core, the extensive form game, fictitious play, repeated games, and the Shapley value were developed. In addition, the first applications of Game theory to philosophy and political science occurred during this time. In 1965, Reinhard Selten introduced his solution concept of subgame perfect equilibria, which further refined the Nash equilibrium (later he would introduce trembling hand perfection as well). In 1967, John Harsanyi developed the concepts of complete information and Bayesian games. He, along with John Nash and Reinhard Selten, won The Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel (also known as The Nobel Prize in Economics) in 1994. In the 1970s, game theory was extensively applied in biology, largely as a result of the work of John Maynard Smith and his evolutionary stable strategy. In addition, the concepts of correlated equilibrium, trembling hand perfection, and common knowledge were introduced and analyzed. In 2005, the game theorists Thomas Schelling and Robert Aumann won the Nobel Prize in Economics. Schelling worked on dynamic models, early examples of evolutionary game theory. Aumann contributed more to the equilibrium school, developing an equilibrium coarsening correlated equilibrium and developing extensive analysis of the assumption of common knowledge.
Notes
# [http://www.gametheory.net GameTheory.net] has an extensive list of [http://www.gametheory.net/popular/ references to game theory in popular culture]. # Some scholars would consider certain asymmetric games as examples of these games as well. However, the most common payoffs for each of these games are symmetric. # Experimental work in game theory goes by many names, experimental economics, behavioral economics, and behavioral game theory are several. For a recent discussion on this field see Camerer 2003. # For a more detailed discussion of the use of Game Theory in ethics see the Stanford Encyclopedia of Philosophy's entry [http://plato.stanford.edu/entries/game-ethics/ game theory and ethics]. # Although common knowledge was first discussed by the philosopher David Lewis in his disertation (and later book) Convention in the late 1960s, it was not widely considered by economists until Robert Aumann's work in the 1970s.
References
;Textbooks and general reference texts
- Gibbons, Robert (1992) Game Theory for Applied Economists, Princeton University Press ISBN 0691003955 (readable; suitable for advanced undergraduates. Published in Europe by Harvester Wheatsheaf (London) with the title A primer in game theory)
- Ginits, Herbert (2000) Game Theory Evolving Princeton University Press ISBN 0691009430
- Osborne, Martin and Ariel Rubinstein: A Course in Game Theory, MIT Press, 1994, ISBN 0-262-65040-1 (modern introduction at the introductory graduate level)
- Fudenberg, Drew and Jean Tirole: Game Theory, MIT Press, 1991, ISBN 0262061414 (the definitive reference text) ;Historically important texts
- Fisher, Ronald (1930) The Genetical Theory of Natural Selection Clarendon Press, Oxford.
- Luce, Duncan and Howard Raiffa Games and Decisions: Introduction and Critical Survey Dover ISBN 0486659437
- Maynard Smith, John Evolution and the Theory of Games, Cambridge University Press 1982
- Morgenstern, Oskar and John von Neumann (1947) The Theory of Games and Economic Behavior Princeton University Press
- Nash, John (1950) "Equilibrium points in n-person games" Proceedings of the National Academy of the USA 36(1):48-49.
- Poundstone, William Prisoner's Dilemma: John Von Neumann, Game Theory and the Puzzle of the Bomb, ISBN 038541580X ;Other print references
- Camerer, Colin (2003) Behavioral Game Theory Princeton University Press ISBN 0691090394
- Gauthier, David (1987) Morals by Agreement Oxford University Press ISBN 0198249926
- Grim, Patrick, Trina Kokalis, Ali Alai-Tafti, Nicholas Kilb, and Paul St Denis (2004) "Making meaning happen." Journal of Experimental & Theoretical Artificial Intelligence 16(4): 209-243.
- Kavka, Gregory (1986) Hobbesian Moral and Political Theory Princeton University Press. ISBN 069102765X
- Lewis, David (1969) Convention: A Philosophical Study
- Maynard Smith, J. and Harper, D. (2003) Animal Signals. Oxford University Press. ISBN 0198526857
- Quine, W.v.O (1967) "Truth by Convention" in Philosophica Essays for A.N. Whitehead Russel and Russel Publishers. ISBN 0846209705
- Quine, W.v.O (1960) "Carnap and Logical Truth" Synthese 12(4):350-374.
- Skyrms, Brian (1996) Evolution of the Social Contract Cambridge University Press. ISBN 0521555833
- Skyrms, Brian (2004) The Stag Hunt and the Evolution of Social Structure Cambridge University Press. ISBN 0521533929.
- Sober, Elliot and David Sloan Wilson (1999) Unto Others: The Evolution and Psychology of Unselfish Behavior Harvard University Press. ISBN 0674930479 ;Websites
- Paul Walker, [http://william-king.www.drexel.edu/top/class/histf.html An Outline of the History of Game Theory].
- Alvin Roth: [http://www.economics.harvard.edu/~aroth/alroth.html Game Theory and Experimental Economics page] - Comprehensive list of links to game theory information on the Web
- Mike Shor: [http://www.gametheory.net Game Theory .net] - Lecture notes, interactive illustrations and other information.
- Jim Ratliff's [http://virtualperfection.com/gametheory/ Graduate Course in Game Theory] (lecture notes).
- [http://homepages.cwi.nl/~robu/ Valentin Robu]'s [http://homepages.cwi.nl/~robu/aamas/aamas_demo.html software tool] for simulation of bilateral negotiation (bargaining)
- [http://www.csc.villanova.edu/~japaridz Giorgi Japaridze]: [http://www.csc.villanova.edu/~japaridz/CL/gsoll.html Game Semantics or Linear Logic?] - Discussion of games in logic, and links.
- Don Ross: [http://plato.stanford.edu/entries/game-theory/ Review Of Game Theory].
- Bruno Verbeek and Christopher Morris: [http://plato.stanford.edu/entries/game-ethics/ Game Theory and Ethics]
- Chris Yiu's [http://www.yiu.co.uk/gametheory/ Game Theory Lounge]
- tutor2u [http://www.tutor2u.net/newsmanager/templates/?a=840&z=1 Student notes and a presentation on Game Theory]
- Elmer G. Wiens: [http://www.egwald.com/operationsresearch/gameintroduction.php Game Theory] - Introduction, worked examples, play online two-person zero-sum games.
- [http://www.socialcapitalgateway.org/eng-gametheory.htm Web sites on game theory and social interactions]
- Category:Artificial intelligence ja:ゲーム理論

Long term

Long term, in economics, is the period of time required for economic agents to reallocate resources, and generally reestablish equilibrium. The actual length of this period varies widely depending on circumstantial context.

De Beers

The De Beers Group is a Johannesburg- and London-based diamond mining and trading corporation. It has historically held a near-total monopoly in the diamond trade, although recent Israeli interests have captured 20% of the market. In 1994 De Beers was charged by the United States Justice Department with antitrust violations for conspiring to fix prices for industrial diamonds. On 14 July 2004 De Beers pleaded guilty to the charges and paid a $10 million fine. The plea has enabled De Beers to trade directly in the United States diamond market after years of acting through intermediaries. The US diamond market is the largest in the world, purchasing approximately $500 million in industrial stones and $60 billion in diamond jewelry annually. Using its monopoly, De Beers has created an artificial scarcity of diamonds, thus keeping prices high. The modern tradition of diamonds as a part of engagement in many cultures has been largely created by De Beers through an amazingly effective advertising campaign started in 1938. The "A Diamond is Forever" campaign not only convinced the public that the only suitable gift for engagement is a diamond, but also served to limit the market in used diamonds. [http://www.edwardjayepstein.com/diamond.htm] De Beers distributes diamonds to favored customers (called sightholders) by selecting batches of diamonds themselves and offering them "as is". Following the distressing use of diamond revenues by African revolutionaries engaged in diamond smuggling (conflict diamonds, also known as blood diamonds), De Beers now sells only diamonds mined from their own mines, most of which are in South Africa and Botswana. Currently, De Beers is involved in a joint venture that is developing a diamond prospect in Canada.

History

De Beers was founded on 13 March 1888 by Cecil John Rhodes. In the 20th century the Oppenheimer family became the major shareholders. Sir Ernest Oppenheimer, his son Harry Oppenheimer and his grandson Nicky Oppenheimer have been chairmen of the company. Also see Alex Oppenheimer, heir and relative. The company's name comes from Johannes Nicholas de Beer and Diederik Arnoldus de Beer, two Afrikaner farmers on whose farm, called Vooruitzicht, near the confluence of the Orange River and the Vaal River, diamonds were discovered. The brothers were not able to protect the farm from the ensuing diamond rush, and sold it for £6300. Two diamond mines formed on the site, known as the "Big Hole" or Premier mine. Although the brothers did not become the owners of the mines, one of the mines was named after them. Cecil Rhodes and Charles Rudd gained control of both the De Beers mine and the Kimberley, South Africa mine and merged them, forming De Beers Consolidated Mines Limited. Because of South Africa's labor demand in the mid to late 19th century, De Beers constructed the first private prisons in South Africa, which the state filled. De Beers provided the funds to incarcerate the prisoners and also paid the state to allow the company to use the prisoners for prison labor. By the end of the 19th century, De Beers was using over 10,000 prison laborers daily. The majority of the prisoners were incarcerated because of strict apartheid laws, similar to the Pass Law which was enacted in 1952.[http://www.iss.co.za/Pubs/Monographs/No64/Chap2.html]

Marketing

De Beers has proactively promoted diamonds as being symbolic of eternity and love, and therefore the ideal jewel for an engagement or wedding ring. Their famously successful advertising campaigns have included measures such as:
- showing diamonds as wedding gifts in popular romance films
- publishing stories in magazines and newspapers which would emphasize the romantic value of diamonds and associate them with celebrities
- employing fashion designers and other trendsetters to promote the trend on radio and, later, television
- enlisting the British Royal Family to directly promote diamonds This campaign was described by De Beers' PR agency N.W. Ayer & Son as "a new form of advertising which has been widely imitated ever since" with "no brand name to be impressed on the public mind. There was simply an idea—the eternal emotional value surrounding the diamond." Indeed, the campaign succeeded in reviving the American diamond market, which had been weakened by "competitive luxuries", and in opening new markets where none had existed before. In Japan, for example, diamonds were successfully promoted as a western symbol of status, which coincided with Japan's cultural opening after World War II. Japan, which had no diamond tradition before the De Beers campaign, is today the second largest market for retail diamonds. The slogan "A Diamond is Forever," invented by Ayer, is one of the most successful slogans in marketing history. Its purpose is to prevent the creation of a secondary market by dissuading women from selling the diamonds they have received and by discouraging them from buying diamonds which other women have owned. The consequence of this is that retailers can sell diamonds at a high price without competition from a secondary market, and it allows De Beers to maintain control of the diamond trade at wholesale level. This was incorporated in the James Bond film Diamonds are Forever where De Beers is directly cited.

Retail joint venture

In 2001, De Beers launched a joint venture with French luxury goods company