Price,quality, and reputation: evidence from an online field experiment

We examine the link between price, quality, seller claims, and seller reputation in Internet auctions. After purchasing actual baseball cards and having them professionally graded, we find that some buyers in the online graded market are misled by incredible claims of quality. They pay higher prices but do not receive better quality and, in fact, are defrauded more often. Online seller reputation is effective for identifying good‐faith sellers. But conditional on completed auctions, reputable sellers do not provide better quality. Evidence also suggests that high‐claim sellers target less‐experienced buyers. We attribute these patterns to two loopholes in the eBay rating system. We benefited from the comments of Austan Goolsbee, Raphael Thomadsen, John Shea, Dan Vincent, David Reiley, Larry Ausubel, Peter Cramton, V. Joseph Hotz, Jeff Smith, Jimmy Chan, Vincent Crawford, Mark Duggan, and attendees at numerous seminars and conferences. We are particularly grateful to Seth Sanders and John List for their constructive advice at the early stage of the research, to Timothy Bresnahan, Rachel Kranton, and Thomas Hubbard for their detailed suggestions in reshaping earlier versions, and to Editor Ariel Pakes and two anonymous referees for their careful readings. Special thanks to eight friends who acted as our agents in purchasing baseball cards in retail markets, and to numerous sports card store owners who shared their insights on the sportscard industry. Excellent research assistance from Randy Alexander Moore and Krzysztof Fizyta is gratefully acknowledged. Any remaining errors are ours.     

Corporate restructuring in Japan: Who monitors the monitor?

Peek and Rosengren [Peek, J., Rosengren, E., 2005. Unnatural selection: Perverse incentives and the misallocation of credit in Japan. American Economic Review 95, 1144–1166] showed that, when the bubble economy era ended, regulatory forbearance and perverse incentives allowed Japanese banks to engage extensively in evergreening. This is the first comprehensive study to empirically analyze the economics of private debt restructurings of financially distressed companies in Japan, where the corporate monitoring mechanism is not market based but large-stakeholder based – typically, banks and affiliated companies. These stakeholders are expected to efficiently resolve potential bankruptcy or collapse with better information resulting from long-term relationships with the distressed firms. Our study, however, finds that private restructurings led by them failed because of delays in implementing fundamental solutions. Forbearance in addressing the needs of distressed firms demonstrates the weakness of such stakeholders in instituting discipline, hence the need for a system to “monitor the monitor”.     

Voice matters in a dictator game

We conducted a laboratory experiment to study the effects of communication in a dictator game, while maintaining subjects’ anonymity. In the experiment, the recipient has an opportunity to state a payoff-irrelevant request for his/her share before the dictator dictates his/her offer. We found that the independence hypothesis that voice does not matter is rejected. In particular, if the request is for less than half of the pie, the dictator’s offer increases as the recipient’s request increases. Additionally, there is no dictator who is other-regarding and, at the same time, does not react to the recipient’s request.

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Electronic Supplementary Material  The online version of this article () contains supplementary material, which is available to authorized users.      

Can Allowing to Trade Permits Enhance Welfare in Mixed Oligopoly?

We compare the effects of tradable emission permits (TEP) and non-tradable emission permits (NTEP) in a mixed oligopoly, where public firms and private firms compete in a product market. If all technologies and initial endowments of emission permits are symmetric among public and private firms and if the emission constraint is exogenous and binding, social welfare is greater (resp. smaller) under TEP than under NTEP when the weight of social welfare in each public firm's objective function and the degree of convexity of the production cost function and that of the abatement cost function are small (resp. large).     

A characterization of quasi-concave functions

This paper provides a simple and short proof that the following two properties are equivalent under ▽f(x) ≠ 0: (A) ▽f(x) h = 0 implies h^T▽²f(x) h ? 0 for any x; (B) f(x¹) ? f(x⁰) implies f(tx¹ + (1?t)x⁰) ?f(x⁰) for 0? t ? 1.     

Correlated performance of firms in a transaction network

The correlation of firms’ performance on a transaction network is studied by analyzing financial and transaction data. Statistically significant correlation coefficients are obtained as evidence for the firm interactions. The firm interactions are taken into account in the basic equation of firm activity. Forty percent of residuals are explained by considering the firm interactions. The overall structure of the transaction network, i.e., the connectivity of industry sectors, is analyzed.     

The Nature and the Determinants of Labor Market Transitions in Former Socialist Economies: Evidence from Bulgaria

To generate stylized facts on transitions between different labor market states during early transition, panel data for a sample of the registered unemployed in Bulgaria were collected. We find that about 60 percent of the unemployed are long-term unemployed. From logit regressions we find that women who had higher education and had not received unemployment benefits are more likely to be reemployed. For men, these factors are not significant, although participation in a training program is significant.     

A Pacific free trade area

Great Britain's desire to join the Common Market has given a fresh impetus to the plans of a Pacific-Asiatic free trade area. Members of PAFTA are to be Japan, the United States, Canada, Australia, and New Zealand. By means of an economic integration of these nations, particularly Japan is interested in stabilising its position in the world economy and not to stand completely outside regional unions. Already last year, INTERECONOMICS published a critical comment to the PAFTA plans written by the Australian professor, H. W. Arndt. In view of the manifold problems and the economic disadvantages to be anticipated, he declared against an Australian participation in this project. In the following article, Professor Kojima, the initiator of the Pacific integration plans, takes a different point of view.     

Rational expectations and non-neutrality of money

Zusammenfassung Rationale Erwartungen und Nicht-Neutralit?t des Geldes. - In diesem Aufsatz zeigt der Verfasser, da\ eher die Nicht-Neutralit?t des Geldes als die Neutralit?t die Regel und nicht die Ausnahme ist, wenn vollst?ndige Informationen vorliegen und Erwartungen rational gebildet werden. Er kommt zu diesem Ergebnis, indem er drei wohlbekannte Modelle untersucht und beweist, da\ die Ergebnisse auf der Modifikation einer einzigen Voraussetzung beruhen, d.h., da\ die Modelle und deren Ergebnisse nicht robust sind. In dem Lucas-Modell von 1972 ist es der Substitutionseffekt, der wichtig ist. Dem Modell von Barro fügt der Autor die Annahme hinzu, da\ die zeitlich aufeinanderfolgenden Geldbest?nde voneinander statistisch abh?ngig sind. Im Lucas-Modell von 1973 nimmt der Autor an, da\ Nachfrageverschiebungen einer Chi-Quadrat-Verteilung folgen und nicht normal verteilt sind. In diesem Falle beeinflussen nicht nur unvorhergesehene, sondern auch bekannte Nachfrage?nderungen die Produktionsentwicklung.

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Résumé Expectatives rationnelles et la non-neutralité de la monnaie. - Dans cet article l’auteur démontre que la non-neutralité au lieu de la neutralité de la monnaie est la règle et pas l’exception si les informations sont parfaites et si les expectatives sont formées rationnellement. II arrive à ce résultat en analysant trois modèles bien connus et en démontrant comment les conclusions dépendent de la modification d’une seule supposition. En cette manière il démontre que les conclusions gagnées par d’autres auteurs ne sont pas robustes. Dans le Lucas modèle de 1972 c’est un effet de substitution qui est important. La supposition que les balances monétaires sont statistiquement dépendantes au cours du temps est ajoutée au modèle de Barro. Dans le Lucas modèle de 1973, l’auteur suppose que les changements de la demande sont caractérisés par la distribution X² et pas par la distribution normale. Dans ce cas il n’y a pas seulement les changements de demande imprévus mais aussi des changements connus qui Effectuent la production réelle.

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Resumen Expectativa racional y dinero no neutral. - En este trabajo el autor muestra que la no neutralidad y no la neutralidad es la regla más bien que la exceptión bajo condiciones de información perfecta y de expectativas rationales. Esta meta es alcanzada analizando tres modelos bien conocidos y mostrando cómo las conclusiones dependen de la modificatión de una sola premisa. De este modo se demuestra que las conclusiones de otros autores no resultan robustas. En el modelo de Lucas de 1972 se destaca el efecto de substitutión. Al modelo de Barro se le a?ade la influencia del tiempo sobre la demanda de dinero. En el modelo de Lucas de 1973 el autor supone que los cambios de demanda están distribuidos de manera X² y no normalmente. En este caso no sólo los cambios de demanda no anticipados sino también los anticipados afectan la productión real.