Capacity Commitment versus Flexibility

We show how technological flexibility choices and equilibrium configurations (both simultaneous and sequential duopoly) depend on six industry characteristics. Low market volatility combined with intermediate market size favors inflexible technologies; large values of either volatility or size favor flexible technologies; low or intermediate values of both favor the coexistence of flexible and inflexible technologies. The possibility of a flexibility trap exists in industries of low volatility and intermediate size. Entry prevention can sometimes be achieved by inflexible technologies or flexible technologies, depending on the industry characteristics.     

Valuation, optimal asset allocation and retirement incentives of pension plans

We provide a framework in which we link the valuation and assetallocation policies of defined benefits plans with the lifetimemarginal productivity schedule of the worker and the pensionplan formula. In turn, we examine the retirement policies thatare implied by the primitives of the model and the value ofpension obligations. Our model provides an explicit valuationformula for a stylized defined benefits plan. The optimal assetallocation policies consist of the replicating portfolio independentof the pension liabilities. We show that the worker with retirewhen the ratio of pension benefits to current wages reachesa critical value which depends on the parameters of the pensionplan and the discount rate. Using numerical techniques we analyzethe feedback effect of retirement policies on the valuationof plans and on the asset allocation decisions.     

The economics of land transfer and title insurance

In the presence of uncertainty over the title of land (due to fraud or error), a legal system can protect either the current (innocent) owner, or a previous owner who claims title. The predominant system in the United States generally awards title to the latter in the event of legitimate claim. Thus, current owners frequently purchase title insurance to provide indemnification in the event of a loss. In contrast, the Torrens system awards title to the current owner, but provides for indemnification of any legitimate claimants. We evaluate these two systems and argue that if transaction costs are low, both promote efficient assignment of title (according to the Coase Theorem), but if transaction costs are high, the Torrens system is more likely to award title to the party that values it the most (namely, the current possessor).     

A conceptual framework of anonymity in Group Support Systems

As the development and use of automated systems for collaborative work grows, the need for a better understanding of these systems becomes more important. Our focus is on one type of system, a Group Support System (GSS) and, in particular, on one important aspect of a GSS—anonymity. A conceptual framework for the study of anonymity in a GSS is presented, which describes the general classes of variables and their relationships. These variables include the factors that influence anonymity in a GSS, types of anonymity, and the effects of anonymity on a message sender, receiver, group process, and outcome. Each of these variables is discussed with working propositions presented for important group process and outcome measures. The objectives of this article are to highlight the importance and complexity of anonymity, to act as a guide for empirical investigations of anonymity, and to influence future GSS development and use.     

Saving Accounts versus Stocks and Bonds in Household Portfolio Allocation

We study the structure of household portfolios of financial wealth by analyzing both the determinants of total financial wealth and the choice between risky (stocks and bonds) and riskfree assets (saving accounts). The econometric specification is a generalized trivariate Tobit model, estimated on a cross section of 3,077 households in the Netherlands in 1988. We account for endogeneity of financial wealth and for selectivity due to nonreporting. Results show that the level of financial wealth and the marginal tax rate are major determinants of the allocation between riskfree and risky assets.     

Classification and aggregation: An application to industrial classification in cps data

In this paper we offer a method for deciding how to aggregate a set of elementary industries. The method is then applied to the problem of estimating a wage equation that allows for industry-specific effects. Our method explicitly formalizes the trade-off between goodness-of-fit and parsimony implicit in an aggregation problem. By varying the parameter of the assumed loss function, one obtains a whole sequence of aggregation levels. Further, the resulting sequence is consistent; that is, groupings formed at one level of aggregation will never be undone when one aggregates further.     

EFFECTS OF THE FARMER SUPPORT PROGRAMME AND CHANGES IN MARKETING POLICIES ON MAIZE PRODUCTION IN SOUTH AFRICA

This article analyses the effects of action aimed at narrowing the gap between South Africa's ‘two agricultures’, specifically the effects of the Farmer Support Programme (FSP) on structural aspects of maize production under different marketing policies. This is done by assembling a sectoral linear programming model of the South African summer-rainfall grain-producing area. The emphasis is on the inclusion of supply, demand and production risk. Results show that the effects of a successful FSP on specific interest groups, e.g. consumers of a specific product, or producers in a specific region, depend on the marketing policy followed, as well as on the effectiveness of the FSP. The analysis accentuates the interrelationships in South African crop production and illustrates how past policies ignored regional comparative advantages, distorted regional development and affected social welfare.     

On the Role of Futures Trading in Spot Market Fluctuations: Perpetrator of Volatility or Victim of Regret?

We examine the role of index futures trading in spot market volatility. We use the exponential generalized autoregressive conditional heteroskedasticity (EGARCH) approach to measure volatility, analyze causality and feedback relations between volatilities in the spot and futures markets, and test various hypotheses in the context of a multivariate model that incorporates other macrostate variables. Our empirical results suggest index futures trading may not be blamed for the observed volatility in the spot market. Rather, we find stronger and more consistent support for the alternative posture that volatility in the futures market is an outgrowth of a turbulent cash market. We use the regret (cognitive dissonance) theory to explain our results.