Amended final-offer arbitration over an uncertain value: A comparison with CA and FOA

Arbitration is increasingly employed to resolve disputes. Two arbitration mechanisms, conventional arbitration (CA) and final-offer arbitration (FOA) are commonly utilized, but previous theoretical and empirical research has found that they are unsatisfactory. Several alternative mechanisms have been proposed, but ultimately laboratory research has found that they do not offer an improvement. An exception is amended final-offer arbitration (AFOA), which not only has desirable theoretical properties but also has been demonstrated to outperform FOA in the laboratory. This study provides a direct laboratory comparison of AFOA with CA. Also, by utilizing an environment with an uncertain payoff to one of the parties, this study tests the robustness of AFOA’s performance relative to FOA. The results indicate that AFOA does outperform FOA, but that AFOA is only weakly better than CA. JEL Classification C7, C9, J5, K4     

Information Disclosure as Environmental Regulation: A Theoretical Analysis

Governments around the world are beginning to embrace a new form of environmental regulation – mandatory disclosure of information. While information disclosure programs appear to have an impact on subsequent firm behavior – often resulting in lower levels of pollution – little is known about the costs and benefits of these programs and whether or not they enhance social welfare. This paper presents a simple bargaining model where mandatory information disclosure is used to overcome a lack of information on the part of the public. We characterize the conditions under which information disclosure will lead to a reduction in emissions, and ultimately, the conditions under which it will enhance social welfare. Several extensions of the model are briefly explored, including the effect of two sources of pollution – only one of which is subject to information disclosure. This paper was prepared while V. Santhakumar was a Visiting Scholar at the Vanderbilt Center for Environmental Management Studies, Vanderbilt University.     

Indigenous livelihoods, slash-and-burn agriculture, and carbon stocks in Eastern Panama

Improved crop–fallow systems in the humid tropics can simultaneously sequester atmospheric carbon emissions and contribute to sustainable livelihoods of rural populations. A study with an indigenous community in eastern Panama revealed a considerable biophysical potential for carbon offsets in small-scale slash-and-burn agriculture through longer fallow periods, improved fallow management, secondary forest development, and agricultural intensification. Based on soil and biomass carbon measurements, estimated annual sequestration rates amount to 0.3−3.7 t C ha^− 1 yr^− 1. Despite such potential, the economic benefits of initiatives aimed at sequestration of carbon in the community are likely to be rather unequally distributed within the community. Heterogeneity in livelihood strategies and uneven asset endowments among households – factors often overlooked in the ongoing carbon and sustainable development debate – are expected to strongly affect household participation. Indeed, only the better-endowed households that have also managed to diversify into more lucrative farm and non-farm activities are likely to be able to participate in and thus benefit from improved crop–fallow systems that capture carbon. Economic, ethical, institutional, and technical concerns need to be taken into account when designing community carbon management and investment plans.     

Commodity price cycles and heterogeneous speculators: a STAR–GARCH model

We propose an empirical commodity market model with heterogeneous speculators. While the power of trend-extrapolating chartists is constant over time, the symmetric impact of stabilizing fundamentalists adjusts endogenously according to market circumstances: Using monthly data for various commodities such as cotton, sugar or zinc, our STAR–GARCH model indicates that their influence positively depends on the distance between the commodity price and its long-run equilibrium value. Fundamentalists seem to become more and more convinced that mean reversion will set in as the mispricing enlarges. Commodity price cycles may thus emerge due to the nonlinear interplay between different trader types. The paper represents the authors’ personal opinion and does not necessarily reflect the views of the Deutsche Bundesbank.     

Application of logistic analysis to the history of physics

Recently, two analyses have tried to put technological progress in a larger context. One interpretation hypothesizes that technological progress is likely to continue at increasingly higher rates of change. Another interpretation, which includes data from the beginning of the universe to the present, suggests that the universe is approaching a transition point in a logistic development of complexity. This logistic development is similar to the way ideas or products diffuse in a population, i.e., the rate of discovery in a field of knowledge is proportional to the amount discovered and the amount to be discovered. To test a part of this hypothesis, a leading indicator field (fundamental physics) was identified and the events in the history of this field were analyzed. Twelve subfields were identified and grouped into six stages. Each stage seemed to demonstrate a logistic-like development. By analyzing both the median time of development and the characteristic time of development of these stages, the overall development of this one field was found to suggest logistic development. These data seem to indicate that development in fundamental physics is slowing down, with at least one subfield beyond string physics yet to be developed. The data tend to support the hypothesis that a knowledge field can develop logistically.     

Regulatory and environmental effects on public transit efficiency: a mixed DEA-SFA approach

This paper assesses the impact of regulatory and environmental factors and statistical noise on the efficiency of public transit systems within a DEA-based framework. Using a panel of Italian companies, we implement a DEA-SFA mixed approach based on [H.O. Fried et al. (2002) Journal of Productivity Analysis, 17(1–2), 157–174] to decompose DEA inefficiency measures into three components: exogenous effects, managerial inefficiency and stochastic events. Besides providing evidence on the determinants of input-specific efficiency differentials across companies, the results point out that managerial skills play a minor role, and emphasize the relevance of regulatory policies aimed at replacing cost-plus subsidization with high-powered incentive contracts as well as improving environmental conditions of public transit networks.      

KIDNEY TRANSPLANTS AND THE SHORTAGE OF DONORS: IS A MARKET THE ANSWER?

This article examines the problem of kidney shortages for transplant in the United States. Following a study by Kaserman and Barnett, we reexamine the viability of allowing a market for cadaveric kidneys and estimate the implied equilibrium price based on our survey responses. In sharp contrast to the findings of Kaserman and Barnett, we estimate that a market equilibrium price for cadaveric kidneys may be prohibitively high. Consequently, we support other policy alternatives to increase supply, particularly presumed consent and mandated choice. Our findings also highlight the importance of obtaining data through experiments, rather than a survey, to estimate the impact of financial incentives. ( JEL I18, I12, I00)     

The establishment-size wage premium: evidence from European countries

This study examines the magnitude and determinants of the establishment-size wage premium in five European countries using a unique harmonised matched employer–employee data set (the 1995 European Structure of Earnings Survey). This data set enables to test the validity of various traditional explanations of the size wage gap (i.e. the labour quality hypothesis, the theory of compensating wage differentials, the role of monitoring and institutions) and of more recent hypotheses (i.e. size differences in job stability and in the concentration of skilled workers). We find some support for traditional explanations, but there remains a significant wage premium for workers employed in large establishments. Further results indicate that the magnitude of this premium fluctuates substantially across countries and appears to be negatively correlated with the degree of corporatism.     

Estimating exchange rate dynamics with diffusion processes: an application to Greek EMU data

Recently various exchange rate models capturing the dynamics during the transition from an exchange rate arrangement of floating rates into a currency union have been derived. Technically, these stochastic equilibrium models are diffusion processes which have to be estimated by discretely sampled observations. Using daily exchange rate data prior to the Greek EMU-entrance on 1 January 2001, we develop a rigorous estimation procedure. Our estimates point to an increasing interventionist economic policy in the run-up to the Greek EMU entrance. A comparison of this econometric indication with policy information provided (ex-post) by the Bank of Greece (BoG) in its Annual Report 2000 reveals that the BoG indeed pursued such an active policy stance (so-called institutional frontloading strategies).      

Evaluating the Validity of Self-Reported Deviant Behavior Using Vignette Analyses

In this paper, the validity of vignette analyses of various forms of deviant behavior in the presence of opportunities is analyzed on the basis of ideas derived from cognitive psychology. Abelson’s Script Theory together with insights into human memory of visual and verbal information, allow the assumption that vignette analyses using visual stimuli are valid measures of deviant behavior in particular. The study includes an empirical examination of these ideas (n = 450). Nonparticipant observations and vignette analyses with visual and verbal material were carried out with regard to three forms of deviant behavior occurring in the presence of opportunities presenting themselves in everyday life. Observed and self-reported frequencies of deviant behavior or deviant intentions were counted and cross-tabulated. Log-linear analyses with dummy coding using observation data as reference category were run. Data analyses yielded the result that frequencies of deviant behavior were related to the techniques of data collection under consideration. Especially vignette analyses of the return of ‘lost letters’ that use both visual and verbal stimuli overestimate ‘actual’ (i.e. observed) return rates. This result is discussed with regard to the underlying methodological assumptions as well as its implications.