The Image of Australia. Perceptions of the Australian Economy from the Eighteenth to the Twentieth Century

Recent institutionalist and post-Keynesian work on business cycles continues with the traditional institutionalist supposition that financial bubbles drive cycles; however there has been a growing sense in the literature that household consumption, not business investment, has become the key variable. This paper will show how this is a change from historical institutional theory and it will then discuss how this change pushes income distribution toward a more central role in explaining current cycle dynamics. Specifically, this paper argues that much of the economic growth over the last two decades can be attributed to the top two quintiles borrowing more and the current slow growth can be attributed to high quintile households increasing their consumption while middle income households are continuing to deleverage.     

The Limitations of Buyer-Option Contracts in Solving the Holdup Problem

In a recent article, Lyon and Rasmusen (2004) argue that buyer-optioncontracts are more effective at solving the holdup problem thanhas been previously recognized. This article examines the robustnessof that claim to changes in the bargaining game they analyzeand to changes in the nature of the trade between the buyerand seller. I find that the possibility of renegotiation ina model of cooperative investment (Che and Hausch 1999) doesgenerate a holdup problem if the players discount the futureand the bargaining game is sufficiently long. This change inthe bargaining game does not resurrect the holdup problem inthe basic product complexity model (of Hart and Moore 1999).However, if the good to be traded must be supplied continuallyrather than only one time, then the holdup problem reemerges(even with buyer-option contracts) for some parameter values.     

Black‐Scholes‐Merton revisited under stochastic dividend yields

European options are priced in a framework à la Black‐Scholes‐Merton, which is extended to incorporate stochastic dividend yield under a stochastic mean–reverting market price of risk. Explicit formulas are obtained for call and put prices and their Greek parameters. Some well‐known properties of the Black‐Scholes‐Merton formula fail to hold in this setting. For example, the delta of the call can be negative and even greater than one in absolute terms. Moreover, call prices can be a decreasing function of the underlying volatility although the latter is constant. Finally, and most importantly, option prices highly depend on the features of the market price of risk, which does not need to be specified at all in the standard Black‐Scholes‐Merton setting. The results are simulated in order to assess the economic impact of assuming that the dividend yield is deterministic when it is actually stochastic, as well as to assess the economic importance of the features of the market price of risk. © 2006 Wiley Periodicals, Inc. Jrl Fut Mark 26:703–732, 2006     

A Mathematical Programming Approach for Procurement Using Activity Based Costing

Activity Based Costing and Management are important topics in today's management accounting literature. While there has been much attention paid in the Activity Based Costing literature to customer profitability analysis, process improvement and product design, there has been far less notice taken of purchasing. In this paper we develop an Activity Based Costing approach for the determination of procurement strategies. Vendor selection using an Activity Based Costing approach is choosing the combination of suppliers for a given product group that minimizes the total costs associated with the purchasing strategy. To this end we develop a mathematical programming model where decisions involve the selection of vendors and the determination of order quantities. The system computes the total cost of ownership, thereby increasing the objectivity in the selection process and giving the opportunity for various kinds of sensitivity analysis.     

Existence of competitive equilibrium when incomes may be zero

Summary In a pure exchange economy, there exists a price vector which is a quasi-equilibrium (Debreu 1962), but this may not be a competitive equilibrium if some individuals' demand functions are discontinuous because their incomes may be zero. We show nonetheless, in a pure exchange economy with free disposal, that there is asequence of prices approaching the quasi-equilibrium along which total excess demands tend to a non-positive limit.Comments on earlier drafts from K. J. Arrow, D. Duffie, H. E. Scarf, and D. Schmeidler are gratefully acknowledged.     

Competition Policy and Innovation

The question addressed by the paper is whether standard proceduresand widely accepted insights of competition policy remain validwhen one deals with potentially anti-competitive conduct ininnovative industries. The question of appropriateness arisesbecause competition in these industries displays features thatare radically different from those encountered in traditionalsectors of the economy. Competition is for the market ratherthan in the market, dynamic aspects of competition matter morethan allocative aspects, intellectual property rights (IPR)reinforce network effects present in knowledge-based industries.The paper examines why these differences matter with respectto market delineation, assessment of intensity of competition,and predatory conduct. It also raises the question as to whatextent competition law limits the innovators' rights not tolicense their inventions to others, especially when they correspondto essential facilities. It explores the problem created byexcessive protection as well as the hold-up problem that arisesin a context of sequential innovations. It examines the antitrustposition in regard to the treatment of collaborative arrangementsamong holders of IPRs, such as cross-licences, patent-pools,and joint-standard settings. Finally, it presents a discussionon a possible role of competition law in shaping intellectualproperty laws in order to benefit from the complementarity betweenintellectual protection and antitrust rules.     

The Effect of Leverage on Bidding Behavior: Theory and Evidence from the FCC Auctions

This is an exploration of how bidding behavior of firms in variousauctions is affected by their capital structure. The theoreticalmodel considers a first-price sealed bid and an English auction.We find that as debt levels increase, firms tend to reduce theirbids. The lower bids give the competition incentives to reducetheir bids as well. These results are investigated empiricallyusing data from the 1994–1995 FCC spectrum auctions. Consistentwith the theoretical model, higher debt levels of the biddingfirm and of the competition tend to lead to lower bids. Additionaldeterminants of bidding behavior in these auctions are alsoanalyzed.