nep-mic New Economics Papers
on Microeconomics
Issue of 2011‒05‒24
seventeen papers chosen by
Vaishnavi Srivathsan
Indian Institute of Technology

  1. Do Practice Rounds Bias Experimental Auction Results? By Corrigan, Jay R.; Rousu, Matthew C.
  2. From Posteriors to Priors via Cycles: An Addendum By Martin Hellwig
  3. A vehicle routing model with split delivery and stop nodes By Leonardo Berbotto; Sergio García; Francisco J. Nogales
  4. The Value of Human Capital Wealth By Julian di Giovanni; Akito Matsumoto
  5. Separation of Ownership and Control: Delegation as a Commitment Device By Aristotelis Boukouras
  6. Commodity Storage under Backwardation: Does the Working Curve Still Work? By Joseph, Kishore; Irwin, Scott H.; Garcia, Philip
  7. Impacts of the Boom-Bust Cycle on the Effectiveness of Policies for Moderating the Consequences of Sprawl on Residential Development By Kim, SeungGyu; Cho, Seong-Hoon; Lambert, Dayton M.; Roberts, Roland K.
  8. First in Class? The Performance of Latent Class Model By Chen, Min; Lupi, Frank
  9. âOrder This, Not Thatâ: Does Nutrition Information on Restaurant Menus Influence Food Choice? By Ellison, Brenna; Davis, David; Lusk, Jayson
  10. The ENSO Impact on Predicting World Cocoa Prices By Ubilava, David; Helmers, C. Gustav
  11. Risk and Incentives: A Not-So-Tenuous Trade-off By Kirwan, Barrett E.; Paulson, Nicholas D.
  12. Approximate Judgement Aggregation By Ilan Nehama
  13. Testing for Volatility Changes in Grain Markets By Wu, Feng
  14. Market Liberalization, Regulatory Uncertainty, and Firm Investment By Florian Baumann; Tim Friehe
  15. What determines annuity demand at retirement? By Giuseppe Cappelletti; Giovanni Guazzarotti; Pietro Tommasino
  16. Consumer Risk Reactions to Food Product-Harm Crises Over Time: Evidence From Cross-Cultural Field Studies By Kalogeras, Nikos; Pennings, Joost M.E.; van Ittersum, Koert
  17. Governance in the health sector: a strategy for measuring determinants and performance By Savedoff, William D.

  1. By: Corrigan, Jay R.; Rousu, Matthew C.
    Keywords: Consumer/Household Economics,
    Date: 2011
  2. By: Martin Hellwig (Max Planck Institute for Research on Collective Goods, Bonn)
    Abstract: Rodrigues-Neto (2009) has shown that a given specification of posteriors of different players in an incomplete-information setting is compatible with a common prior if and only if the posteriors satisfy the so-called cycle equations. This note shows that, if, for any player, any element of the partition of the this player has a nonempty intersection with any element of the partition of any other player, then it suffices to verify the cycle equations for all cycles of length 4 or less.
    Keywords: Belief systems, consistency, common priors, cycle equations
    JEL: D43 K21 L13 L41 C72 D81 K42 C91 D62 H23
    Date: 2011–05
  3. By: Leonardo Berbotto; Sergio García; Francisco J. Nogales
    Abstract: In this work, a new variant of the Capacitated Vehicle Routing Problem (CVRP) is presented where the vehicles cannot perform any route leg longer than a given length L (although the routes can be longer). Thus, once a route leg length is close to L, the vehicle must go to a stop node to end the leg or return to the depot. We introduce this condition in a variation of the CVRP, the Split Delivery Vehicle Routing Problem, where multiple visits to a customer by different vehicles are allowed. We present two formulations for this problem which we call Split Delivery Vehicle Routing Problem with Stop Nodes: a vehicle flow formulation and a commodity flow formulation. Because of the complexity of this problem, a heuristic approach is developed. We compare its performance with and without the stop nodes
    Keywords: Split delivery vehicle routing problem, Stop node, Granular neighborhood, Tabu search
    Date: 2011–04
  4. By: Julian di Giovanni; Akito Matsumoto
    Abstract: The value of human capital wealth and its return process are important to quantify in order to study consumption behavior and portfolio allocation. This paper introduces a new approach to measure the value of an economy's total human capital wealth. By assuming that the consumption to wealth ratio is constant, we exploit aggregate consumption data to recover total wealth, and then use household non-human capital wealth data to recover the value of human capital wealth as a residual. Using U.S. data over the period 1952-2007, we find that human capital is approximately three-quarters of total wealth in the aggregate economy, and that this ratio is remarkably stable over time. Applying our methodology to a group of OECD countries yields similar results. We estimate the cointegrating relationship between our estimated measure of human wealth and labor compensation (income) to show that our consumption-based approach estimate of human capital is linked to one based on a labor-income approach. We next calculate the returns to human capital and find them to be as high as equity returns on average but much less volatile; positively correlated with returns on real estate and consumption growth, but negatively correlated to equity returns. Finally, we show that both human capital and equity returns are predictable by human capital's dividend to price ratio.
    Keywords: Household Wealth, Human Capital, Wealth Effect
    JEL: E21 E24 G10
    Date: 2011–03
  5. By: Aristotelis Boukouras (Georg-August-University Göttingen)
    Abstract: This paper provides a theoretical model for explaining the separation of ownership and control in firms. An entrepreneur hires a worker, whose effort is necessary for running a project. The worker\'s effort determines the probability that the project will be completed on time, but the worker receives some unobservable benefit by continuing his employment in the project. Thus, motivating the worker requires an efficiency wage which is inflated by the private benefit. The entrepreneur would pay out a smaller wage if he could commit to terminate the project if a delay occurs, but this threat is not credible, because the project has positive continuation value. We show that hiring a manager can solve this time-inconsistency issue and reduce the efficiency wage. We extend the model to include managerial moral hazard and we examine the conditions under which separation of ownership and control is more likely to happen. The model is consistent with many of the findings of the empirical literature, while it generates some new predictions too.
    Keywords: control structure; delegation; efficiency wage; entrepreneur; managerial contract; moral hazard; organizational hierarchy; private benefits; separation of owner-ship and control; time-inconsistency
    JEL: D86 G34 J31 L22 L26
    Date: 2011–05–10
  6. By: Joseph, Kishore; Irwin, Scott H.; Garcia, Philip
    Abstract: We investigate storage in the presence of backwardation and the existence of the Working curve for CBOT corn, soybeans, and wheat markets and the KCBOT wheat market using recent data, 1990-2010. Incorporating Telserâs concept of the cost of carry, we employ two measures of the spreadâthe percent of full carry for futures-futures and futures-spot (maximum) spreads which are adjusted for interest and storage rates. Both spreads are calculated relative to the next nearby futures contract and are matched with closest weekly deliverable stock information available at the delivery locations for the contracts. Our findings indicate that storage at a loss is pervasive both in terms of the percent of observations that exhibited storage at a loss, and the magnitude of the stockholdings for those observations. The evidence for the importance of convenience yield in the Working curve is a little less systematic, with strongest support emerging in the KCBOT wheat market, CBOT wheat and corn in Toledo/Maumee, corn in Chicago, and soybeans at almost all locations.
    Keywords: Storage, backwardation, CBOT, KCBOT, corn, soybean, wheat., Agribusiness, Demand and Price Analysis,
  7. By: Kim, SeungGyu; Cho, Seong-Hoon; Lambert, Dayton M.; Roberts, Roland K.
    Keywords: urban sprawl, spatial discrete-choice model, Land Economics/Use,
    Date: 2011
  8. By: Chen, Min; Lupi, Frank
    Abstract: Researchers have been using the latent class model (LCM) to value recreational activities for years. Then the reliability of this model becomes an issue. We conduct Monte Carlo simulations to test if the latent class model is able to recover the truth. The simulation results show that LCM does a better job on recovering population average values than recovering underlying population segments.
    Keywords: Monte Carlo Simulations, Latent Class Model, Environmental Economics and Policy,
    Date: 2011
  9. By: Ellison, Brenna; Davis, David; Lusk, Jayson
    Keywords: Consumer/Household Economics, Marketing,
    Date: 2011
  10. By: Ubilava, David; Helmers, C. Gustav
    Abstract: Cocoa beans are produced in equatorial and sub-equatorial regions of West Africa, Southeast Asia and South America. These are also the regions most affected by El Nino Southern Oscillation (ENSO) -- a climatic anomaly affecting temperature and precipitation in many parts of the world. Thus, ENSO, has a potential of affecting cocoa production and, subsequently, prices on the world market. This study investigates the benefits of using a measure of ENSO variable in world cocoa price forecasting through the application of a smooth transition autoregression (STAR) modeling framework to monthly data to examine potentially nonlinear dynamics of ENSO and cocoa prices. The results indicate that the nonlinear models appear to outperform linear models in terms of out-of-sample forecasting accuracy. Furthermore, the results of this study indicate evidence of Granger causality between ENSO and cocoa prices.
    Keywords: Cocoa Prices, El Nino Southern Oscillation, Out-of-Sample Forecasting, Smooth Transition Autoregression, Demand and Price Analysis, Environmental Economics and Policy, Research Methods/ Statistical Methods, C32, Q11, Q54,
    Date: 2011
  11. By: Kirwan, Barrett E.; Paulson, Nicholas D.
    Keywords: Risk and Uncertainty,
    Date: 2011
  12. By: Ilan Nehama (The Hebrew University of Jerusalem, Israel)
    Abstract: In this paper we analyze judgement aggregation problems in which a group of agents independently votes on a set of complex propositions that has some interdependency constraint between them (e.g., transitivity when describing preferences). We consider the issue of judgement aggregation from the perspective of approximation. That is, we generalize the previous results by studying approximate judgement aggregation. We relax the main two constraints assumed in the current literature, Consistency and Independence and consider mechanisms that only approximately satisfy these constraints, that is, satisfy them up to a small portion of the inputs. The main question we raise is whether the relaxation of these notions significantly alters the class of satisfying aggregation mechanisms. The recent works for preference aggregation of Kalai, Mossel, and Keller fit into this framework. The main result of this paper is that, as in the case of preference aggregation, in the case of a subclass of a natural class of aggregation problems termed `truth-functional agendas', the set of satisfying aggregation mechanisms does not extend non-trivially when relaxing the constraints. Our proof techniques involve boolean Fourier transform and analysis of voter influences for voting protocols. The question we raise for Approximate Aggregation can be stated using terms of Property Testing. For instance, as a corollary from our result we get a generalization of the classic result for property testing of linearity of boolean functions.
    Keywords: approximate aggregation, discursive dilemma, truth-functional agendas, inconsistency index, dependency index, computational social choice
    Date: 2011–05–01
  13. By: Wu, Feng
    Abstract: We use newly nonparametric volatility measures and break techniques to estimate common breaks across grain futures over the recent ten years. Our results show one structural change in realized volatilities occurred in 2006 for corn and in 2007 for soybean. But the date difference between them cannot be negligible. We disaggregate the realized volatilities into a continuous component and a jump part and found the source of structural beak in realized volatilities is from jumps.
    Keywords: structural change, grain, volatility measures, Financial Economics,
    Date: 2011
  14. By: Florian Baumann (Department of Economics, Eberhard Karls University Tübingen, Germany); Tim Friehe (Department of Economics, University of Konstanz, Germany)
    Abstract: Motivated by the German postal market, this paper analyzes the effects of regulatory uncertainty about labor costs for investment into a liberalized market. We distinguish between the external investment margin (market entry) and the internal investment margin (technology) and establish that regulatory uncertainty affects these margins differently, encouraging market entry but discouraging investment at the internal margin. As a consequence, the impact of regulatory uncertainty on competition in liberalized markets is the result of these two countervailing forces.
    Keywords: regulatory uncertainty, investment, market entry, minimum wage
    JEL: D43 J38 L13
    Date: 2011–05–05
  15. By: Giuseppe Cappelletti (Bank of Italy); Giovanni Guazzarotti (Bank of Italy); Pietro Tommasino (Bank of Italy)
    Abstract: In most advanced countries, future retirees will have to rely less on social security schemes and more on private pension plans, which mostly leave to the worker the choice between ashing-in or annuitizing pension wealth at retirement. Therefore, a better understanding of the determinants of the demand for annuities will soon become a priority. Research in this field has been hampered by lack of data (due to current market thinness) and by difficulties in disentagling demand from supply-side effects. In this paper, we avoid these problems resorting to ad hoc survey data from Italy. Our results highlight the importance of wealth, impatience, education and (to a lesser extent) financial literacy in shaping annuity demand.
    Keywords: annuities, retirement, life cycle model
    JEL: D91 G23 H55 J26
    Date: 2011–04
  16. By: Kalogeras, Nikos; Pennings, Joost M.E.; van Ittersum, Koert
    Keywords: Consumer/Household Economics, Risk and Uncertainty,
    Date: 2011
  17. By: Savedoff, William D.
    Abstract: Many different strategies have been proposed to improve the delivery of health care services, from capacity building to establishing new payment mechanisms. Recent attention has also asked whether improvements in the way health care services are governed could make a difference. These approaches ask which factors -- such as rules and institutions -- influence the behavior of the system in ways that are associated with better performance and outcomes. This paper reviews the concept of governance as it is used in the literature on private firms, public administration, international development and health. It distinguishes between indicators that measure governance determinants from those that measure governance performance in order to propose a framework that is analytically coherent and empirically useful. The framework shows how these indicators can be used to test hypotheses about which governance forms are more useful for improving health system performance. The paper concludes by proposing specific measures of governance determinants and performance and describes the instruments available to collect and interpret them.
    Keywords: Health Monitoring&Evaluation,Governance Indicators,National Governance,Health Systems Development&Reform,Health Economics&Finance
    Date: 2011–05–01

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