Merger policy in innovative industries

We analyze optimal merger policy in R&D-intensive industries with product innovation aiming to improve the quality of products. Our results suggest that a permissive merger policy is rarely optimal in high-tech industries when the antitrust authority considers a welfare standard that balances the impact of mergers on consumers’ surplus and firms’ profits. In particular, relative to a benchmark where the effects from R&D are absent, we show that the optimal merger policy should not be substantially more permissive in the presence of those effects from R&D.     

Community-Based Tradable Permits for Localized Pollution

This paper considers the assignment of tradable permits—representing property rights of an environmental good—to community members who are harmed by pollution generated by firms. These community members can in turn sell permits to polluters according to their personal preferences. For a special case with a sole household, market transactions between the household and polluters achieve an efficient pollution level. However, for a group of households, the decentralized market solution fails to yield social efficiency because of competitive consumption of the environmental goods. We design a revenue-sharing mechanism akin to unitization, under which market transactions also achieve efficient resource allocation. Importantly, in some cases, efficiency can be achieved even when regulators are ignorant of the private valuation of the environmental good.     

BidPacket: trading bandwidth in public spaces

Smart devices such as smartphones and tablets are used extensively in public spaces for the transmission and reception of content in the form of text, photos and streaming videos. Since the bandwidth provided for wireless access is limited in public areas, it becomes an issue for users to gain access to the bandwidth they need at the right times. While an omniscient controller could assign bandwidth to each device on the basis of their needs and overall availability, imperfect information about the instantaneous state of the wifi access patterns and needs of users make for a very inefficient allocation of such bandwidth. This paper provides a solution for bandwidth allocation by creating a market among users of smart devices so that they can bid for extra bandwidth when they need it and sell it when they don’t. They do so by using a virtual currency that is conserved so that each device owner maximizes his own utility. This utility function is composed of both the benefit accrued from accessing bandwidth and the loss of the currency incurred in bidding for such bandwidth. Extensive simulations show that this market-based method outperforms an omniscient model when demand is uncertain, while minimizing bandwidth consumption.     

Assessment of Russian aviation development for long-term prospects with the regard for Arctic developing: reproductive and technological aspects

The article considers the conditions of developing the aviation industry for long-term prospects taking into account factors such as changes in purchasing aviation equipment, progress in developing the Russian aviation market, and works for reconstructing and modernizing transport infrastructure in the Russian Arctic. The author aims to coordinate the Government programs for developing new aviation equipment and equipment for air transport via the program of Arctic Exploration and Development, as it is necessary to integrate various cycle flows with regard to high-tech capital.     

Measuring the effects of preservation on farm profits in a continuous treatment setting

Despite billions of dollars of public appropriations to state purchase of development rights (PDR) programmes, there has been limited evaluation of the effects of these investments on the economic performance of preserved farms. This article estimates dose-response functions to evaluate the effects of enrolment in New Jersey’s PDR programme on farm profitability. The generalized propensity score method in a continuous treatment setting is used to address selection bias arising from voluntary programme participation. Treatment effects are measured across treatment levels to determine whether farm profitability is affected differently across levels of programme participation. Our findings reveal that, relative to unpreserved farms, profit per acre tends to increase along lower treatment levels. The profit per acre of preserved farms in the 1–40% treatment range is, on average, $407 higher than that of unpreserved farms in the full sample. Positive profit differentials averaging between $317 and $472 per acre are also observed in the 1–20%, 1–40% and 1–60% treatment quintiles in the farming occupation sample. We do not observe statistically significant profitability differentials when treatment effects are averaged across all positive treatment values.     

Financial functional analysis: a conceptual framework for understanding the changing financial system

The financial system is currently undergoing a revolution brought about by e-finance, digital convergence, new market entrants and government-encouraged competition. New market entrants such as Apple, Alibaba, Facebook and Google come from industries such as IT, retail, social media and telecoms, and, therefore, do not fit comfortably within traditional financial institutional structures. A functional perspective might provide more practical insights into this revolution; however, the functional perspective has had a limited impact. This paper will investigate the benefits and limitations of financial functional analysis; probe the underpinning principles of sociology’s structural functional analysis; revisit Merton and Bodie’s (1995) six core financial functions in relation to new entrants in the financial landscape; and, finally, argue that in the new financial environment, functional analysis provides a more coherent and explanatory framework of the financial system for students and practitioners alike.     

Two-stage DEA: <Emphasis Type="Italic">caveat emptor</Emphasis>

This paper examines the wide-spread practice where data envelopment analysis (DEA) efficiency estimates are regressed on some environmental variables in a second-stage analysis. In the literature, only two statistical models have been proposed in which second-stage regressions are well-defined and meaningful. In the model considered by Simar and Wilson (J Prod Anal 13:49–78, 2007), truncated regression provides consistent estimation in the second stage, where as in the model proposed by Banker and Natarajan (Oper Res 56: 48–58, 2008a), ordinary least squares (OLS) provides consistent estimation. This paper examines, compares, and contrasts the very different assumptions underlying these two models, and makes clear that second-stage OLS estimation is consistent only under very peculiar and unusual assumptions on the data-generating process that limit its applicability. In addition, we show that in either case, bootstrap methods provide the only feasible means for inference in the second stage. We also comment on ad hoc specifications of second-stage regression equations that ignore the part of the data-generating process that yields data used to obtain the initial DEA estimates.     

A proposal for a more objective measure of de facto constitutional constraints

In this paper we propose two new indicators of de facto constitutional constraints. The indicators are based on the presence or the absence of easily observable political events. This makes the proposed measures relatively objective and easy to verify relative to the most widely used indicators of de jure and de facto constitutions. This paper describes the indicators and demonstrates their usefulness for research on economic development.     

Richard H. Thaler — Wirtschaftsnobelpreisträger 2017

Richard H. Thaler was awarded this year’s Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel “for his contributions to behavioural economics”. He studied systematic departures of human behaviour from the standard “homo oeconomicus” assumption. His famous work on boundedly rational behaviour considers both cognitive limitations and limited self-control. The cognitive limitations he studied are in particular the endowment effect, i.e. the observation that individuals assign a higher value to an object if they possess it, and mental accounting, a collection of theories regarding how individuals think about money. Furthermore, he provided path-breaking evidence on the nature of social preferences, which laid the groundwork for the development of several widely used economic theories incorporating altruism, fairness and reciprocity.