Optimal low-price guarantees with anchoring

Many low-price guarantees are offered by small local firms who compete against much larger rivals. The prices of these larger rivals are often set nationally and thus are independent of local market conditions. Our objective in this paper is to explain why small firms in such environments might nevertheless adopt low-price guarantees. We characterize when offering a low-price guarantee is profitable, and assess which form it should take (i.e.,?conditional on offering a low-price guarantee, should the small firm offer to match or beat its larger competitor??s prices). We also assess the implications thereof (i.e., do the low-price guarantees benefit or harm the small firm??s customers).     

On the use of low-price guarantees to discourage price cutting

This paper formulates a novel test to assess whether, and to what extent, firms might be using low-price guarantees to discourage their rivals from cutting prices. The test is based on a comparison of paired observations of advertised prices that are set by competing firms at the same point in time on similar items, where one price is set by a firm that has a low-price guarantee and the other by a firm that does not have a low-price guarantee. Using data on retail tire prices, we find that the majority of paired observations involving firms that have price-matching guarantees are consistent with what one would expect if firms were using them to discourage price cutting, whereas the majority of paired observations involving firms that have price-beating guarantees are not. This suggests that price-matching and price-beating guarantees may be serving different purposes. The evidence also suggests that guarantees that apply to advertised prices only may be serving different purposes than guarantees that apply to both advertised and selling prices.     

Catching-Up Investment without Regulatory Commitment

This paper analyses a regulated firms incentives to undertake catching-up investments when the firm has private information about the initial technology and the regulator is unable to commit himself to incentive contracts prior to the firms investment decision. In the absence of commitment power, the firm takes into account that the investment decision may serve as a signal to the regulator about the firms initial technology. Any pure strategy equilibrium of the signaling game is shown to be pooling in the sense that the efficient type mimics the inefficient type by investing. By not following this strategy, the efficient type reveals its efficiency to the regulator, who responds by inducing the firm to produce without rents. Restricting attention to undefeated pooling equilibria, the level of investment is shown to be lower than the first-best level.     

Sequential capacity and price choices in a duopoly model with demand uncertainty

The paper is a revised version of chapter V of my thesis (Hviid, 1987). I would like to thank Huw Dixon, Clive Fraser, Birgit Grodal, Norman Ireland, Michael Teit Nielsen, Kevin Roberts, Peter Skott, and Bente Villadsen for helpful comments and discussion, and a referee for helpful suggestions. An earlier version was presented at the Universities of Aarhus, Copenhagen, Essex and Warwick. I am grateful to participants for many helpful suggestions and comments. The usual disclaimer applies. Financial support from The Danish Social Science Research Council is gratefully acknowledged.     

Technology transfer as a learning and developmental process: an analysis of Norwegian programmes on technology transfer

This paper focuses on understanding technology transfer. The point of departure is to construct a model for transfer of technology based on organizational theory. The model identifies the transfer as a socio-technical learning and developmental process (TLD process). Technology is understood as a social construction where human choice and values determine the outcome. A successful transfer of new technology depends on a socio-technical change process, where the success is reached when the local company profitably integrates technology in its day-to-day operation.The TLD model is used as the basis for an empirical analysis of Norwegian programmes on technology transfer. This work is introduced by giving an overview of the literature evaluating the programmes. This literature, strongly influenced by qualitative methodology, does not give much insight into the basic elements of the TLD process. Therefore, the next step in the research is to investigate the models for the programmes in operation.The main conclusion is that no programme design is consciousiy based on understanding technology transfer as a socio-technical learning and developmental process. Firstly, technology is usually considered as a material artefact and not as a carrier of knowledge and cultural values. Secondiy, the traditional developmental model is bureaucratic and top-down. The intention is to furnish companies with technology and not to let the potential use of new technology be integrated into a planned learning and developmental process.The key point in this paper is to advocate that policymakers and managers of technology transfer programmes redesign their programmes to incorporate the important and necessary learning and developmental processes. If this is taken seriousiy, it will be possible to take full advantage of technology transfer as an important element in technology policy.     

Benefit shifting: The case of sickness insurance for the unemployed

This study describes the probability of transition from unemployment with unemployment insurance (UI) to sickness insurance (SI), using a proportional hazard duration model and a large register-based dataset. The combination of limited UI duration and the fact that SI rights do not depend on remaining UI, creates an incentive to use SI to effectively extend UI. The separate effects of elapsed unemployment duration and of UI duration on hazard rates are identified through a reform of the UI system. The estimated hazard rate for transition from unemployment to SI increases sharply the last months before UI exhaustion. The spikes are larger for diagnosis for mental illness, and vary across individuals, but are present for all groups and all diagnoses.     

The external networking behaviour of public managers - the missing link of weak ties

There has been an increasing focus on managerial external networking behaviour within public administration. While most previous quantitative research has analysed such behaviour one dimensionally, we suggest a two-dimensional conceptualization based on the concepts of weak and strong ties. Utilizing measures resembling previous research, we explore the utility of the approach in an exploratory study of Danish local government. Our findings suggest that the two dimensions of external networking behaviour are distinct. We discuss our approach compared to previous approaches and argue that a conceptualization based on the distinction between strong and weak ties provides a promising framework for future research.     

Estimating Loan‐to‐Value Distributions

We estimate a model of house prices, combined loan‐to‐value ratios (CLTVs) and trade and foreclosure behavior. House prices are only observed for traded properties and trades are endogenous, creating sample‐selection problems for existing approaches to estimating CLTVs. We use a Bayesian filtering procedure to recover the price path for individual properties and produce selection‐corrected estimates of historical CLTV distributions. Estimating our model with transactions of residential properties in Alameda, California, we find that 35% of single‐family homes are underwater, compared to 19% estimated by existing approaches. Our results reduce the index revision problem and have applications for pricing mortgage‐backed securities.     

The Transnational State and the Infrastructure Push

In 2010, the G20, in cooperation with major international organisations, launched a comprehensive effort – here labelled the infrastructure push – to promote infrastructure investments around the world. Using selected transnationalised elements from historical materialism, this is explained as a transnational state initiative to secure general material conditions for capitalist growth in a manner that is profoundly shaped by power relations. The infrastructure problem was allowed to grow during neoliberalism because of the hegemony of finance; the push is a result of and reflects a weakening of finance and strengthening of industrial interests in the transnational power bloc, as well as a strengthening of the emerging economies. This potential hegemonic project has gained the support of the global labour movement, while also has been subject to serious criticism from civil society organisations, speaking for the most vulnerable subaltern social forces. The empirical analysis also shows that the transnational state in this policy area works as a flexible, networked cooperation of G20 states and leading international organisations in ongoing dialogue with non-state actors, especially transnational business. In this cooperation, the international organisations have a relatively autonomous role in line with a historical materialist understanding of state apparatuses.     

Improved likelihood ratio tests for cointegration rank in the VAR model

We suggest improved tests for cointegration rank in the vector autoregressive (VAR) model and develop asymptotic distribution theory and local power results. The tests are (quasi-)likelihood ratio tests based on a Gaussian likelihood, but as usual the asymptotic results do not require normally distributed innovations. Our tests differ from existing tests in two respects. First, instead of basing our tests on the conditional (with respect to the initial observations) likelihood, we follow the recent unit root literature and base our tests on the full likelihood as in, e.g., Elliott et al. (1996). Second, our tests incorporate a “sign” restriction which generalizes the one-sided unit root test. We show that the asymptotic local power of the proposed tests dominates that of existing cointegration rank tests.