nep-knm New Economics Papers
on Knowledge Management and Knowledge Economy
Issue of 2006‒01‒01
thirty-six papers chosen by

  1. Bounded Rationality, Cognitive Maps, and Trial and Error Learning By Richard R. Nelson
  2. Thinking Ahead: The Decision Problem By Patrick Bolton; Antoine Faure-Grimaud
  3. Metamimetic Games : Modeling Metadynamics in Social Cognition By David Chavalarias
  4. The Influence of Managerial and Organizational Determinants of Horizontal Knowledge Exchange on Competence Building and Competence Leveraging By Mom, T.J.M.; Bosch, F.A.J. van den; Volberda, H.W.
  5. Does the time inconsistency problem make flexible exchange rates look worse than you think? By Roc Armenter; Martin Bodenstein
  6. Lost in Translation - Empirical Evidence for Liability of Foreignness as Barriers to Knowledge Spillovers By Tobias Schmidt; Wolfgang Sofka
  7. Informational Complexity and the Flow of Knowledge across social boundaries By Olav Sorenson; Jan W. Rivkin; Lee Fleming
  8. Monetary policy with imperfect knowledge By Athanasios Orphanides; John C. Williams
  9. Beyond macro variables: consumer confidence index and household expenditure in Hungary By Gabor Vadas
  10. Information Quality and Stock Returns Revisited By Frode Brevik; Stefano d'Addona
  11. Establishing credibility: evolving perceptions of the European Central Bank By Linda S. Goldberg; Michael W. Klein
  12. A complex network approach to urban growth By Claes Andersson; Koen Frenken; Alexander Hellervik
  13. Optimal welfare-to-work programs By Nicola Pavoni; Giovanni L. Violante
  14. Technology innovation and market turbulence: a dotcom example By Zhu Wang
  15. Community-campus partnerships for economic development: community perspectives By Anna Afshar
  16. How Management Consulting Firms Influence Building and Leveraging of Clients? Competences: Towards a conceptual framework By Baaij, M.G.; Bosch, F.A.J. van den; Volberda, H.W.
  17. A more complete conceptual framework for financing of small and medium enterprises By Udell, Gregory F.; Berger, Allen N.
  18. What%u2019s Psychology Worth? A Field Experiment in the Consumer Credit Market By Marianne Bertrand; Dean Karlin; Sendhil Mullainathan; Eldar Shafir; Jonathan Zinman
  19. Behavioral Incentives, Equilibrium Endemic Disease, and Health Management Policy for Farmed Animals By Hennessy, David A.
  20. Communicating with a Team of Experts By Dezsö Szalay; Ramon Arean
  21. How to Preserve a Fortune: An Experimental Comparison of Foundations and Direct Transfers to the Heir By Werner Güth; Kurt-Dieter Koschmieder; M. Vittoria Levati; Ev Martin
  22. Strategic Aspects of Hegemony By Robert E. Goodin; Werner Güth; Duncan Snidal
  23. Market Information and Price Instability : An Insight into Vegetable Markets in Senegal By Hélène David-Benz; Idrissa Wade; Johny Egg
  24. Robustly Optimal Monetary Policy with Near Rational Expectations By Michael Woodford
  25. Affect as a Source of Motivation in the Workplace: A New Model of Labor Supply, and New Field Evidence on Income Targeting and the Goal Gradient By Lorenz Goette; David Huffman
  26. The Geography of Internet Adoption by Retailers By Jesse W.J. Weltevreden; Oedzge A.L.C. Atzema; Koen Frenken; Karlijn de Kruijf; Frank G. van Oort
  27. (Un)Reliable Concessions in Static and Dynamic Bargaining Experiments By Sven Fischer; Luis G. Gonzalez; Werner Güth
  28. Localized Learning and Social Capital: The Geography Effect in Technological and Institutional Dynamics By Mark Lorenzen
  29. Routines and Communities of Practice in Public Environmental Procurement Processes By Katarina, Larsson; Svane, Örjan
  30. The culture of market oriented organisations By Kasper,Hans
  31. Brown-von Neumann-Nash Dynamics: The Continuous Strategy Case By Josef Hofbauer; Jörg Oechssler; Frank Riedel
  33. The Component Fairness Solution for Cycle- Free Graph Games By Herings,P. Jean-Jacques; Laan,Gerard,van der; Talman,Dolf
  34. "Buying a pig in a poke": An experimental study of unconditional veto power By Werner Güth; M. Vittoria Levati; Axel Ockenfels; Torsten Weiland
  35. Is formal lifelong learning a profitable investment for all of life ? How age, education level, and flexibility of provision affect rates of return to adult education in Colombia By Blom, Andreas; Sohnesen, Thomas Pave
  36. Firms as clubs in Walrasian markets with private information : technical appendix By Edward Simpson Prescott; Robert M. Townsend

  1. By: Richard R. Nelson
    Abstract: The term "bounded rationality" is meant to connote the reasoning capabilities of an actor who, on the one hand, has a goal to achieve and an at least partially formed theory as to how to achieve it, and on the other hand, that the theory is somewhat crude, likely will be revised in the course of the effort, and that success is far from assured. This article presents a theory of how trial and error learning interacts with theory modification in the course of problem solving under bounded rationality. The empirical focus is on efforts to advance a technology, especially medical practice, but the analysis is quite general. A central question explored is what makes progress in a field hard or easy.
    Keywords: Bounded Rationality, Search, Progress
    Date: 2005–12–21
  2. By: Patrick Bolton; Antoine Faure-Grimaud
    Abstract: We propose a model of bounded rationality based on time-costs of deliberating current and future decisions. We model an individual decision maker’s thinking process as a thought-experiment that takes time and let the decision maker “think ahead” about future decision problems in yet unrealized states of nature. By formulating an intertemporal, state-contingent, planning problem, which may involve costly deliberation in every state of nature, and by letting the decision-maker deliberate ahead of the realization of a state, we attempt to capture the basic idea that individuals generally do not think through a complete action-plan. Instead, individuals prioritize their thinking and leave deliberations on less important decisions to the time or event when they arise.
    JEL: D81 D84 C61
    Date: 2005–12
  3. By: David Chavalarias (CREA - Centre de recherche en épistémologie appliquée - CNRS : UMR7656 - Polytechnique - X)
    Abstract: Imitation is fundamental in the understanding of social system dynamics. But the diversity of imitation rules employed by modelers proves that the modeling of mimetic processes cannot avoid the traditional problem of endogenization of all the choices, including the one of the mimetic rules. Starting from the remark that human reflexive capacities are the ground for a new class of mimetic rules, I propose a formal framework, metamimetic games, that enable to endogenize the distribution of imitation rules while being human specific. The corresponding concepts of equilibrium - counterfactually stable state - and attractor are introduced. Finally, I give an interpretation of social differentiation in terms of cultural co-evolution among a set of possible motivations, which departs from the traditional view of optimization indexed to criteria that exist prior to the activity of agents.
    Keywords: Social cognition, imitation, cultural co-evolution, differentiation, reflexivity, metacognition, stochastic game theory, endogenous distributions, metamimetic games, counterfactual equilibrium.
    Date: 2005–12–18
  4. By: Mom, T.J.M.; Bosch, F.A.J. van den; Volberda, H.W. (Erasmus Research Institute of Management (ERIM), RSM Erasmus University)
    Abstract: Both in theory as in practice insight is limited about how firms in dynamic environments could organize to manage concurrently both the strategic processes of competence building and competence leveraging. To contribute to this issue, a conceptual framework is developed which considers the ability to exchange knowledge across organization units as a prerequisite for firms to achieve both the goals of competence building and leveraging. The framework shows how several important managerial and organizational determinants, associated with cross-unit knowledge exchange, may stimulate competence-building processes and how they may stimulate competence-leveraging processes. The conceptual framework will be illustrated by two case studies in different contexts of Novartis, one of the leading European life-science companies. These two contexts of respectively ?organization-enabled? and ?web-enabled? knowledge exchange appear to be complementary. The conceptual framework and cases provide insight into (1) possibilities about how firms could organize to deal with the tension between competence building and leveraging processes, and (2) how managing the determinants of horizontal knowledge exchange can contribute to changing a firm?s actual mixture of competence building/leveraging processes into a more desired strategic mixture.
    Keywords: Competence Building;Competence Leveraging;Exploration & Exploitation;Horizontal Knowledge Flows;Novartis;
    Date: 2005–12–19
  5. By: Roc Armenter; Martin Bodenstein
    Abstract: Lack of commitment in monetary policy leads to the well known Barro-Gordon inflation bias. In this paper, we argue that two phenomena associated with the time inconsistency problem have been overlooked in the exchange rate debate. We show that, absent commitment, independent monetary policy can also induce expectation traps-that is, welfare-ranked multiple equilibria-and perverse policy responses to real shocks-that is, an equilibrium policy response that is welfare inferior to policy inaction. Both possibilities imply higher macroeconomic volatility under flexible exchange rates than under fixed exchange rates.
    Keywords: Foreign exchange rates ; Equilibrium (Economics) ; Monetary policy
    Date: 2005
  6. By: Tobias Schmidt (ZEW Mannheim); Wolfgang Sofka (ZEW Mannheim)
    Abstract: Entering host country networks of knowledge flows (new competencies, innovative technologies, and lead-market knowledge) is a major rationale of multinational firms for investing abroad. Foreign firms find it difficult to overcome cultural and social barriers which make their foreign engagements more strenuous and error prone (liability of foreignness). In our analysis we break down the complex mechanisms behind knowledge spillovers and identify conceptual links with liability of foreignness. We hypothesise that liability of foreignness acts as a filter for foreign firms, restricting their access to host country knowledge. We use a broad sample of roughly 1,000 firms in Germany to empirically test the existence of liabilities of foreignness in leveraging knowledge spillovers. Our particular setting allows us to distinguish between upstream (suppliers, academia) and downstream (customers) liabilities of foreignness. We find that multinational firms can compete on an equal footing with host country rivals when it comes to generating impulses for innovations from suppliers and academia. They are significantly challenged by liabilities of foreignness, though, where customers are involved. We suggest that the frictional losses from a lack of social and cultural embeddedness (liability of foreignness) in the host country are especially relevant when promising lead customers have to be identified and their tacit and often unarticulated impulses have to be transferred, understood and prioritised.
    JEL: L
    Date: 2005–12–21
  7. By: Olav Sorenson; Jan W. Rivkin; Lee Fleming
    Abstract: Scholars from a variety of backgrounds – economists, sociologists, strategists, and students of technology management – have sought a better understanding of why some knowledge disperses widely while other knowledge does not. In this quest, some researchers have focused on the characteristics of the knowledge itself (e.g., Polanyi, 1966; Reed and DeFillippi, 1990; Zander and Kogut, 1995) while others have emphasized the social networks that constrain and enable the flow of knowledge (e.g., Coleman et al., 1957; Davis and Greve, 1997). This chapter examines the interplay between these two factors. Specifically, we consider how the complexity of knowledge and the density of social relations jointly influence the movement of knowledge. Imagine a social network composed of patches of dense connections with sparse interstices between them. The dense patches might reflect firms, for instance, or geographic regions or technical communities. When does knowledge diffuse within these dense patches circumscribed by social boundaries but not beyond them? Synthesizing social network theory with a view of knowledge transfer as a search process, we argue that knowledge inequality across social boundaries should reach its peak when the underlying knowledge is of moderate complexity. To test this hypothesis, we analyze patent data and compare citation rates across three types of social boundaries: within versus outside the firm, geographically near to versus far from the inventor, and internal versus external to the technological class. In all three cases, the disparity in knowledge diffusion across these borders is greatest for knowledge of an intermediate level of complexity.
    Keywords: evolutionary economics, informational complexity, knowledge flow, social boundaries
    Date: 2005–09
  8. By: Athanasios Orphanides; John C. Williams
    Abstract: We examine the performance and robustness of monetary policy rules when the central bank and the public have imperfect knowledge of the economy and continuously update their estimates of model parameters. We find that versions of the Taylor rule calibrated to perform well under rational expectations with perfect knowledge perform very poorly when agents are learning and the central bank faces uncertainty regarding natural rates. In contrast, difference rules, in which the change in the interest rate is determined by the inflation rate and the change in the unemployment rate, perform well when knowledge is both perfect and imperfect.
    Date: 2005
  9. By: Gabor Vadas (Magyar Nemzeti Bank)
    Abstract: One of the most important aspects of consumer surveys is the computation of the consumer confidence index, which aims to provide accurate figures on the financial position and outlook of households as well as their intention concerning future consumption and savings. . Although the motion of the consumer confidence index is of interest to both policymakers and economic forecasters, it is not obvious whether the sub-questions included in the surveys and the published composite index derived from such questions can measure exactly what survey makers are curious to know. In this study we examine the properties and forecasting capability of the Hungarian consumer confidence index published by GKI Economic Research Plc. We argue that some questions are unable to measure what they theoretically should. However, others are useful in forecasting the consumption expenditure of Hungarian households. Our results suggest that, in addition to macro variables, the consumer confidence index contains information over and above macro variables.
    Keywords: consumer confidence index, consumption, forecast
    JEL: D1 E21 E27
    Date: 2005–12–19
  10. By: Frode Brevik; Stefano d'Addona
    Abstract: Building on Veronesi (2000), we investigate the relationship between the quality of information on the state of the economy and the equity risk premium. We analyze the driving forces of the premium in a regime-switching setup where agents have Epstein-Zin preferences, finding a remarkably rich relation between the required risk premium and the quality of information available to investors. In particular, relaxing the strict relationship between investors' elasticity of intertemporal substitution (EIS) and their degree of risk aversion (RA) embedded in a power utility function enables us to demonstrate how the required equity premium is determined by their interplay. As conjectured in the existing literature, we demonstrate that investors with a high EIS will require less excess returns for holding stocks if they are provided with better information on the state of the economy. More interestingly, and not predicted in the literature, we find that this will also hold for investors with a moderate EIS if they are sufficiently risk averse.
    JEL: E32 E37 G10 G12
    Date: 2005–12
  11. By: Linda S. Goldberg; Michael W. Klein
    Abstract: The perceptions of a central bank's inflation aversion may reflect institutional structure or, more dynamically, the history of its policy decisions. In this paper, we present a novel empirical framework that uses high-frequency data to test for persistent variation in market perceptions of central bank inflation aversion. The first years of the European Central Bank (ECB) provide a natural experiment for this model. Tests of the effect of news announcements on the slope of yield curves in the euro area and on the euro-dollar exchange rate suggest that the market's perception of the policy stance of the ECB evolved significantly during the first six years of the Bank's operation, with a belief in its inflation aversion increasing in the wake of its monetary tightening. In contrast, tests based on the response of the slope of the U.S. yield curve to news offer no comparable evidence of any change in market perceptions of the inflation aversion of the Federal Reserve.
    Keywords: Banks and banking, Central ; Inflation (Finance) ; Monetary policy ; European Central Bank
    Date: 2005
  12. By: Claes Andersson; Koen Frenken; Alexander Hellervik
    Abstract: The economic geography can be viewed as a large and growing network of interacting activities. This fundamental network structure and the large size of such systems makes complex networks an attractive model for its analysis. In this paper we propose the use of complex networks for geographical modeling and demonstrate how such an application can be combined with a cellular model to produce output that is consistent with large scale regularities such as power laws and fractality. Complex networks can provide a stringent framework for growth dynamic modeling where concepts from e.g. spatial interaction models and multiplicative growth models can be combined with the flexible representation of land and behavior found in cellular automata and agent-based models. In addition, there exists a large body of theory for the analysis of complex networks that have direct applications for urban geographic problems. The intended use of such models is twofold: i) to address the problem of how the empirically observed hierarchical structure of settlements can be explained as a stationary property of a stochastic evolutionary process rather than as equilibrium points in a dynamics, and, ii) to improve the prediction quality of applied urban modeling.
    Keywords: evolutionary economics, complex networks, urban growth
    Date: 2005–02
  13. By: Nicola Pavoni; Giovanni L. Violante
    Abstract: A Welfare-to-Work (WTW) program is a mix of government expenditures on “passive” (unemployment insurance, social assistance) and “active” (job search monitoring, training, wage taxes/subsidies) labor market policies targeted to the unemployed. This paper provides a dynamic principal-agent framework suitable for analyzing the optimal sequence and duration of the different WTW policies, and the dynamic pattern of payments along the unemployment spell and of taxes/subsidies upon re-employment. First, we show that the optimal program endogenously generates an absorbing policy of last resort (that we call “social assistance”) characterized by a constant lifetime payment and no active participation by the agent. Second, human capital depreciation is a necessary condition for policy transitions to be part of an optimal WTW program. Whenever training is not optimally provided, we show that the typical sequence of policies is quite simple: the program starts with standard unemployment insurance, then switches into monitored search and, finally, into social assistance. Only the presence of an optimal training activity may generate richer transition patterns. Third, the optimal benefits are generally decreasing or constant during unemployment, but they must increase after a successful spell of training. In a calibration exercise based on the U.S. labor market and on the evidence from several evaluation studies, we use our model to analyze quantitatively the features of the optimal WTW program for the U.S. economy. With respect to the existing U.S. system, the optimal WTW scheme delivers sizeable welfare gains, by providing more insurance to skilled workers and more incentives to unskilled workers.
    Date: 2005
  14. By: Zhu Wang
    Abstract: This paper explains market turbulence, such as the recent dotcom boom/bust cycle, as equilibrium industry dynamics triggered by technology innovation. When a major technology innovation arrives, a wave of new firms enter the market implementing the innovation for profits. However, if the innovation complements existing technology, some new entrants will later be forced out as more and more incumbent firms succeed in adopting the innovation. It is shown that the diffusion of Internet technology among traditional brick-and-mortar firms is indeed the driving force behind the rise and fall of dotcoms as well as the sustained growth of e-commerce. Empirical evidence from retail and banking industries supports the theoretical findings.
    Date: 2005
  15. By: Anna Afshar
    Abstract: Formal collaborations between community groups and academic institutions to promote economic development have increased substantially over the past 10 years. The bulk of research on community-campus partnerships has focused on the experiences of institutions of higher learning and the foundations that have funded the collaborations, leaving a gap in our understanding of community experiences. This report draws on a variety of sources, including first-person interviews and academic literature, to bring out community perspectives on what makes for successful partnerships. The conclusions are presented as practical suggestions for community groups and campuses seeking to optimize partnerships. Four case studies describe lessons learned by participating community groups.
    Keywords: Community development ; Universities and colleges
    Date: 2005
  16. By: Baaij, M.G.; Bosch, F.A.J. van den; Volberda, H.W. (Erasmus Research Institute of Management (ERIM), RSM Erasmus University)
    Abstract: The focus in research upon resources, dynamic capabilities and competences has challenged firms to apply these concepts to improve their competitive position. Management consulting firms may assist clients in these efforts. However, the roles that management consulting firms fulfill in these processes can differ considerably and are under-researched. Therefore, insight in these different roles and the impact of these roles on clients? competitive positioning in their industries is required. The purpose of this paper is to develop a conceptual framework that highlights the importance of distinguishing both roles and the implications for management consulting firms and for their clients. We illustrate the framework by elaborating on the relationship between both roles and the strategic renewal context of client firms. We conclude by pointing out the increasing importance of the competence leverage role of management consulting firms and how this development might contribute to a more hypercompetitive context for their clients.
    Keywords: Competence Building and Leveraging;Management Consulting;Strategic Renewal;Exploitation & Exploration;Knowledge Broker;
    Date: 2005–12–19
  17. By: Udell, Gregory F.; Berger, Allen N.
    Abstract: The authors propose a more complete conceptual framework for analysis of credit availability for small and medium enterprises (SMEs). In this framework, lending technologies are the key conduit through which government policies and national financial structures affect credit availability. They emphasize a causal chain from policy to financial structures which affect the feasibility and profitability of different lending technologies. These technologies, in turn, have important effects on SME credit availability. Financial structures include the presence of different financial institution types and the conditions under which they operate. Lending technologies include several transactions technologies, plus relationship lending. The authors argue that the framework implicit in most of the literature is oversimplified, neglects key elements of the chain, and often yields misleading conclusions. A common oversimplification is the treatment of transactions technologies as a homogeneous group, unsuitable for serving informationally opaque SMEs, and a frequent misleading conclusion is that large institutions are disadv antaged in lending to opaque SMEs.
    Keywords: Banks & Banking Reform,Financial Intermediation,Investment and Investment Climate,Economic Theory & Research,Financial Crisis Management & Restructuring
    Date: 2005–12–01
  18. By: Marianne Bertrand; Dean Karlin; Sendhil Mullainathan; Eldar Shafir; Jonathan Zinman
    Abstract: Numerous laboratory studies find that minor nuances of presentation and description change behavior in ways that are inconsistent with standard economic models. How much do these context effect matter in natural settings, when consumers make large, real decisions and have the opportunity to learn from experience? We report on a field experiment designed to address this question. A South African lender sent letters offering incumbent clients large, short-term loans at randomly chosen interest rates. The letters also contained independently randomized psychological "features" that were motivated by specific types of frames and cues shown to be powerful in the lab, but which, from a normative perspective, ought to have no impact. Consistent with standard economics, the interest rate significantly affected loan take-up. Inconsistent with standard economics, some of the psychological features also significantly affected take-up. The average effect of a psychological manipulation was equivalent to a one half percentage point change in the monthly interest rate. Interestingly, the psychological features appear to have greater impact in the context of less advantageous offers and persist across different income and education levels. In short, even in a market setting with large stakes and experienced customers, subtle psychological features appear to be powerful drivers of behavior. The findings pose a challenge for the social sciences: they suggest that psychological nuance matters but may be inherently difficult to predict given the impact of context. Successful incorporation of psychological features into field studies is likely to prove a vital, but nontrivial, addition to the formation of more general theories on when, why, and how frames and cues influence important decisions.
    JEL: C93 D12 D14 D21 D81
    Date: 2005–12
  19. By: Hennessy, David A.
    Abstract: We develop a dynamic capital valuation model in which each farm can take an action with farm-varying cost to increase the probability of not contracting a disease. In the presence of infection externalities, circumstances are identified under which multiple equilibria exist and where the one involving the most extensive set of action takers is socially optimal. It is suggested that costly capital markets are one factor in determining the extent of endemic disease in a region. The introduction of frictions, such as dealing with a cumbersome veterinary public health bureaucracy, can enhance social welfare by encouraging precautionary biosecurity actions. Some technical innovations can reduce social welfare. The model is also extended to study a voluntary herd depopulation scheme. Moral hazard in the biosecurity action will dampen the scheme’s welfare effect.
    Keywords: biosecurity, continuous time, multiple equilibria, Nash behavior, reinfection.
    Date: 2005–12–21
  20. By: Dezsö Szalay; Ramon Arean
    Abstract: This paper combines theories of communication with theories of expertise and teams. Facing a team of experts, who must be given incentives to acquire information and to communicate it truthfully, how can and how should the leader communicate with the team members ? We characterize all the possibilities of using the information generated efficiently, and provide a complete welfare ranking of all equilibria. The welfare ranking is shown to depend one for one on the structure of the cost of information acquisition. We discuss applications to task assignment, and to noisy and costly communication.
    Keywords: information acquisition; communication; cheap talk; multiple agents; expertise
    JEL: D82
    Date: 2005–11
  21. By: Werner Güth; Kurt-Dieter Koschmieder; M. Vittoria Levati; Ev Martin
    Abstract: Direct transfers allow heirs to freely use what has been passed on to them. Bequeathers who do not trust their descendants to make proper use of the fortune may prefer investing it in a safe foundation, thereby limiting their descendants' autonomy. In our study we compare experimentally these two institutional arrangements. Although bequeather and descendant have specific personal interests, they agree in their concern for preserving the fortune. Our results show that bequeathers tend to trust their descendant. When transfers to the descendant are less efficient than investments in a foundation, due to, e.g., inheritance taxation, overall bequests decrease significantly.
    Keywords: Autonomous foundations, inheritance, efficiency, trust
    JEL: C72 C92 D31 H41
    Date: 2005–11
  22. By: Robert E. Goodin; Werner Güth; Duncan Snidal
    Abstract: Hegemony is a central feature of contemporary international politics but it remains seriously under-theorized. We draw on cooperative game theory to represent and analyze different aspects of hegemony. After developing a general conception of hegemony, we analyze the circumstances under which a Hegemon needs assistance from allies, examine when prospective allies have incentives to cooperate with or challenge Hegemon and evaluate the prospects for exploitation by Hegemon. Throughout, we connect the analytic analysis to the existing theories of international hegemony and illustrate the models with real world examples.
    Date: 2005–10
  23. By: Hélène David-Benz (CIRAD ; CA ; Montpellier, France); Idrissa Wade (INRA ; UMR MOISA ; Montpellier, France); Johny Egg (INRA ; UMR MOISA ; Montpellier, France)
    Abstract: Market gardening has been increasing fast in Senegal. But farmers face high marketing risks: daily price fluctuations exceed an average 20% for some products, seasonality is strong, anticipation based on prices leads to cyclic movements. Farmers and market operators have found various forms of coordination to manage uncertainty. “Coxers” are specifically dedicated to information gathering, either in rural or wholesale urban markets or to transport negotiation. Paid per unit handled, they limit their own risk, whereas they reduce uncertainty for their partners. In other cases, interlinked transactions permit to provide inputs to producers despite the deficient credit market; meanwhile, it secures merchants access to product. As it is the case in many other countries, information provided by MIS is of little help to Senegalese market gardeners. The updated and more targeted access to information through MANOBI services allows producers to improve their negotiation capacity. But it does not modify the existing coordination features, given that they are not only determined by needs in information (but also by social links, access to credit, payment modalities, transport facilities…).
    Keywords: Horticulture, Price analysis, Market instability, Information, Transaction costs
    JEL: D23 D82 O17 Q13
    Date: 2005–12–19
  24. By: Michael Woodford
    Abstract: The paper considers optimal monetary stabilization policy in a forward-looking model, when the central bank recognizes that private-sector expectations need not be precisely model-consistent, and wishes to choose a policy that will be as good as possible in the case of any beliefs that are close enough to model-consistency. The proposed method offers a way of avoiding the assumption that the central bank can count on private-sector expectations coinciding precisely with whatever it plans to do, while at the same time also avoiding the equally unpalatable assumption that the central bank can precisely model private-sector learning and optimize in reliance upon a precise law of motion for expectations. The main qualitative conclusions of the rational-expectations analysis of optimal policy carry over to the weaker assumption of near-rational expectations. It is found that commitment continues to be important for optimal policy, that the optimal long-run inflation target is unaffected by the degree of potential distortion of beliefs, and that optimal policy is even more history-dependent than if rational expectations are assumed.
    JEL: D81 D84 E52
    Date: 2005–12
  25. By: Lorenz Goette (University of Zurich, CEPR and IZA Bonn); David Huffman (IZA Bonn)
    Abstract: In this chapter we propose a new, dual-process model of labor supply, which incorporates both cognitive and affective aspects of decision-making. Consistent with evidence from neuroscience, the worker may experience conflicting cognitive and affective motivations during the workday. In particular, the affective system values effort more highly as long the worker’s performance is below a personal goal, or income target, and becomes increasingly aroused as the goal approaches. As a result, affect can distort effort decisions relative to a fully cognitive benchmark, in a way that is consistent with evidence on loss aversion, and with the so-called goal-gradient effect, a tendency for animals and humans to increase effort as a goal approaches. In contrast to a standard model of labor supply, our model can predict a goal gradient, and predicts that workers may actually lower total daily effort in response to a temporary increase in the wage. Also, within-day windfall gains may have an impact on a worker's effort profile over the workday. The second part of the chapter tests this latter prediction using data from two bicycle messenger firms. At both firms, a windfall gain in the morning has the predicted impact. A lucky messenger works harder than other messengers over the first part of the afternoon, and the difference is increasing, consistent with a goal gradient. Later in the afternoon, a lucky messenger works significantly less hard than the others, consistent with having surpassed a personal earnings goal earlier in the day and having less affective motivation.
    Keywords: affect, emotion, labor supply, loss aversion, income targeting, goal gradient
    JEL: J22 L2 B49
    Date: 2005–12
  26. By: Jesse W.J. Weltevreden; Oedzge A.L.C. Atzema; Koen Frenken; Karlijn de Kruijf; Frank G. van Oort
    Abstract: Up till now, the literature on Internet adoption by retailers paid little attention to spatial variables. Using data on 27,000 retail outlets in the Netherlands, we investigate the geographical diffusion of Internet adoption by Dutch retailers. More precise, we examine to what extent retail Internet adoption differs between shopping centers, cities, and regions, while controlling for product and organizational variables. Results of the linear and multinomial logistic regressions suggest that shops at city centers are more likely to adopt the Internet than shops located at shopping centers at the bottom of the retail hierarchy. Furthermore, shops in large cities have a higher probability to adopt the Internet than shops in small cities. On the regional level, the likelihood of Internet adoption is higher for shops in core regions than for retail outlets in the periphery. In conclusion, geography seems to matter for retail Internet adoption.
    Keywords: evolutionary economics, internet adoption, retailing
    Date: 2005–09
  27. By: Sven Fischer; Luis G. Gonzalez; Werner Güth
    Abstract: A two-persons bargaining problem often consists of initially incompatible demands that can be unilaterally reduced by sequential concessions. In a 2 x 2 x 2 - factorial design we distinguish between reliable and unreliable concessions, between a static and dynamic settings and between symmetric and asymmetric initial demands. Whereas reliable concessions change the threat point, unreliable concessions do not. In the dynamic setting each player's concession can be conditional on the previous history of play; in the static setting a player's concessions for all bargaining trials are determined at the beginning of the game. In all situations conflict is triggered if neither gives in, or if a maximum number of trials is reached without a feasible agreement. Although our results indicate that conflict is more likely if concessions are reliable, the overall effciency of both institutions is similar.
    Keywords: concession bargaining, behavioral economics
    Date: 2005–12
  28. By: Mark Lorenzen
    Abstract: Providing a concise working definition of social capital, this conceptual paper analyses why social capital is important for learning and economic development, why it has a regional dimension, and how it is created. It argues that with the rise of the Knowledge Economy, social capital is becoming valuable because it organizes markets, lowering business firms’ costs of coordinating and allowing them to flexibly connect and reconnect. Thus, it serves as a social framework for localized learning in both breadth and depth. The paper suggests that a range of social phenomena such as altruism, trust, participation, and inclusion, are created when a matrix of various social relations is combined with particular normative and cognitive social institutions that facilitate cooperation and reciprocity. Such a matrix of social relations, plus facilitating institutions, is what the paper defines as “social capital”. The paper further suggests that social capital is formed at the regional (rather than national or international) level, because it is at this level we find the densest matrices of social relations. The paper also offers a discussion of how regional policies may be suited for promoting social capital.
    Keywords: Social capital; knowledge economy; regional dimension
    JEL: D83 Z13
    Date: 2005
  29. By: Katarina, Larsson (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology); Svane, Örjan (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology)
    Abstract: Environmental procurement has received increasing attention as a policy tool promoting change towards sustainable consumption and production. The successful implementation of public environmental procurement policy requires the establishment of new routines for user-producer-supplier relationships that enable the integration of environmental aspects. The aim of the study is to analyse the roles of different communities of practice and learning patterns in environmental procurement processes. Building on experiences from the procurement of ecological food and sustainable construction in Stockholm, the paper identifies learning patterns and codes of practice when environmental criteria are introduced into existing routines for economic and technical specifications in public procurement processes.
    Keywords: Public environmental procurement; routines and codes of practice; procedural and declarative knowledge; vertical and horizontal learning; City of Stockholm
    JEL: D83 Q28 Q55
    Date: 2005–12–28
  30. By: Kasper,Hans (METEOR)
    Abstract: This paper investigates the relationship between corporate culture and market orientation using a different methodology to those usually found done in empirical studies on this topic. Conventionally, one or two key informants provide information on the firm’s marketing practices in large scale quantitative cross-sectional studies; these few respondents provide their opinion on the firm’s actual marketing practices which are then considered as a reliable representation of both the (whole) firm’s culture and its market orientation. We have taken a different approach. Firstly, we chose to do multiple case studies in stead of cross sectional research. These case studies were small scale and qualitative; next a large(r) scale quantitative study was done within those organisations. Secondly, all employees in an organisation were invited to participate in the study: only then is it possible to measure culture as the shared beliefs in the company. Corporate culture itself as well as the marketing practices have been investigated as two separate constructs in our case studies. Both are measured via employee perceptions. Thirdly, we are looking at the possible configuration of market orientation and corporate culture. Almost all of the propositions generated are supported. The degree of openness appeared to be crucial to an organisation’s market orientation. Moreover, such a culture is also resultsoriented, employee-oriented and professional. It also has a balanced position on the two other dimensions: pragmatic/normative and loose/tight control. From the marketing perspective, the essential building blocks of a market oriented culture include: the internal cooperation, internal communication, drive to be the best, lack of pursuing self interest, learning from mistakes and from experiences in the market place, clarity about customer needs and better relative quality than competitors’. Because market orientation and corporate culture were measured as two distinct constructs, this study offers new insights in both domains as to what organisations should change to be(come) market oriented.
    Keywords: Strategy;
    Date: 2005
  31. By: Josef Hofbauer; Jörg Oechssler; Frank Riedel
    Abstract: In John Nash’s proofs for the existence of (Nash) equilibria based on Brouwer’s theorem, an iteration mapping is used. A continuous—time analogue of the same mapping has been studied even earlier by Brown and von Neumann. This differential equation has recently been suggested as a plausible boundedly rational learning process in games. In the current paper we study this Brown—von Neumann—Nash dynamics for the case of continuous strategy spaces. We show that for continuous payoff functions, the set of rest points of the dynamics coincides with the set of Nash equilibria of the underlying game. We also study the asymptotic stability properties of rest points. While strict Nash equilibria may be unstable, we identify suffcient conditions for local and global asymptotic stability which use concepts developed in evolutionary game theory.
    Keywords: learning in games, evolutionary stability, BNN
    JEL: C70 C72
    Date: 2005–12
  32. By: Jordi Pons Novell; Daniel A. Tirado Fabregat
    Abstract: This comparative study looks at the international impact of leading economics journals published in Spain, Italy, France and Germany. It also aims to establish whether they play a similar role in any of these 4 countries. For this purpose data were collected on the number of times that articles published in these journals are cited in international journals on the ISI Journals lists. The study focused on the number and characteristics of the citations received during the period 1996-2004 by articles published between 1995 and 1999 in a limited number of Spanish, Italian, French and German journals. The international impact of the Spanish journals was found to be similar in size and characteristics to that of the Italian publications. However, it differed sharply from the impact of the highest-ranking French and German journals. These last received a higher volume of citations, some of which also showed very different qualitative characteristics.
    Date: 2005–12
  33. By: Herings,P. Jean-Jacques; Laan,Gerard,van der; Talman,Dolf (METEOR)
    Abstract: In this paper we study cooperative games with limited cooperation possibilities, representedby an undirected cycle-free communication graph. Players in the game can cooperate if andonly if they are connected in the graph, i.e. they can communicate with one another. Weintroduce a new single-valued solution concept, the component fairness solution. Our solution is characterized by component efficiency and component fairness. The interpretationof component fairness is that deleting a link between two players yields for both resultingcomponents the same average change in payoff, where the average is taken over the players in the component. Component fairness replaces the axiom of fairness characterizing the Myerson value, where the players whose link is deleted face the same loss in payoff. Thecomponent fairness solution is always in the core of the restricted game in case the gameis superadditive and can be easily computed as the average of n specific marginal vectors,where n is the number of players. We also show that the component fairness solution canbe generated by a specific distribution of the Harsanyi-dividends.
    Keywords: operations research and management science;
    Date: 2005
  34. By: Werner Güth; M. Vittoria Levati; Axel Ockenfels; Torsten Weiland
    Abstract: We study an ultimatum experiment in which the responder does not know the offer when accepting or rejecting. Unconditional veto power leads to acceptances, although proposers are significantly greedier than in standard ultimatum games, and this is anticipated by responders.
    Keywords: Ultimatum, Dictator, Fairness, Veto power
    JEL: C92 C72
    Date: 2005–11
  35. By: Blom, Andreas; Sohnesen, Thomas Pave
    Abstract: Lifelong learning is increasingly being recognized as a primary factor for knowledge diffusion and productivity growth. However, little economic evidence exists on the economic value of lifelong learning for the individual, especially in developing countries. This paper contributes to remedy this shortfall. It investigates one aspect of lifelong learning: returns to formal education across ages. In the absence of long-term longitudinal data, the paper estimates rates of return for simulated re-entry into the education system. The estimations use the method of internal rate of return and are based on observed education-age-earnings profiles from the Colombian national household survey. It finds that rates of return to all levels of education are only slightly smaller for 35 year olds than for young people, thus confirming the profitability of investment in adult education. Tertiary education continues to attract a positive return until late in life, 45-50 years, whereas the economic value of re-entering primary and secondary education is positive up till the age of 40-45. So, formal lifelong learning seems to remain a profitable investment for at least half of life. But lack of part-time work, high tuition fees, and prolonged study time reduce the return. The findings suggest that adult formal education initiatives should focus on the 20 to 40 year olds and be designed flexibly to allow learners to work part time.
    Keywords: Access & Equity in Basic Education,Teaching and Learning,Gender and Education,Primary Education,Tertiary Education
    Date: 2005–12–01
  36. By: Edward Simpson Prescott; Robert M. Townsend
    Abstract: This paper proves the Welfare Theorems and the existence of a competitive equilibrium for the club economies with private information in Prescott and Townsend (2005). The proofs cover lottery economies with a finite number of goods and without free disposal. A mapping based on Negishi (1960) is used.
    Keywords: Welfare ; Competition
    Date: 2005

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