Aggregation of multiple prior opinions

Experts are asked to provide their advice in a situation of uncertainty. They adopt the decision maker?s utility function, but each has a potentially different set of prior probabilities, and so does the decision maker. The decision maker and the experts maximize the minimal expected utility with respect to their sets of priors. We show that a natural Pareto condition is equivalent to the existence of a set Λ of probability vectors over the experts, interpreted as possible allocations of weights to the experts, such that (i) the decision maker?s set of priors is precisely all the weighted-averages of priors, where an expert?s prior is taken from her set and the weight vector is taken from Λ; (ii) the decision maker?s valuation of an act is the minimal weighted valuation, over all weight vectors in Λ, of the experts? valuations.     

The role of securitization in mortgage renegotiation

We study the effects of securitization on renegotiation of distressed residential mortgages over the current financial crisis. Unlike prior studies, we employ unique data that directly observe lender renegotiation actions and cover more than 60% of the U.S. mortgage market. Exploiting within-servicer variation in these data, we find that bank-held loans are 26–36% more likely to be renegotiated than comparable securitized mortgages (4.2–5.7% in absolute terms). Also, modifications of bank-held loans are more efficient: conditional on a modification, bank-held loans have 9% lower post-modification default rates (3.5% in absolute terms). Our findings support the view that frictions introduced by securitization create a significant challenge to effective renegotiation of residential loans. We also provide evidence supporting the affordability focus of recent policy actions, such as the Home Affordability Modification Program.     

Bargaining In International Trade Under Exchange-Rate Uncertainty

This paper examines the implications of various contracting alternatives between exporting and importing firms on the volume of international transactions. the contracts that we study are determined in a bargaining situation under exchange-rate uncertainty. First we look at contracts which entail an ex ante commitment on price and quantity of exports without the possibility of renegotiation ex post. Second, spot contracts, i.e., the price and the quantity of exports are negotiated after the exchange the rate is known. A third type of contracts consists of ex ante commitment and ex post renegotiation.     

Infinite Histories and Steady Orbits in Repeated Games

We study a model of repeated games with the following features: (a) Infinite histories. The game has been played since days of yore, or is so perceived by the players: (b) Turing machines with memory. Since regular Turing machines coincide with bounded recall strategies (in the presence of infinite histories), we endow them with "external" memory; (c) Nonstrategic players. The players ignore complicated strategic considerations and speculations about them. Instead, each player uses his/her machine to update some statistics regarding the others′ behaviour, and chooses a best response to observed behaviour. Relying on these assumptions, we define a solution concept for the one shot game, called steady orbit. The (closure of the) set of steady orbit payoffs strictly includes the convex hull of the Nash equilibria payoffs and is strictly included in the correlated equilibria payoffs. Assumptions (a)–(c) above are independent to a large extent. In particular, one may define steady orbits without explicitly dealing with histories or machines.     

The determinants of bond call premia: A signalling approach

A signalling model is presented that provides an additional explanation for the determination of call premia on corporate bonds. It is shown that firms may signal their exclusive information about their probability of default by the choice of their call premia. Stockholders of safer firms (i.e., those that have a lower probability of bankruptcy) have a higher incentive for providing a low call premium. This occurs because the call option will be valuable only if the firm survives by the first call date. This event, however, is more likely for the safer firm. The safer firm will therefore be more willing to sacrifice some current revenues (or equivalently, to provide a higher coupon than it would otherwise have to pay in order to sell the bond at par) by determining a lower call premium. The model therefore predicts a negative correlation between safety and call premia, a correlation that has been empirically confirmed by Fischer, Heinkel, and Zechner (1989). This correlation provides support to the signalling theory vis-à-vis the alternative explanation of taxes determining the call premia. Another contribution of this model is that it ties the call premium decision with expectations of future interest rates. Such expectations are considered important by practitioners, but were rarely considered in previous research.     

Determinants of Israeli Judicial Discretion in Issuing Injunctions against Strikers

The study examines all cases (1990–7) in Israel in which employers petitioned the labour court to issue an injunction against striking workers, and identifies how judges use their discretion in deciding the petition. The findings indicate that, judicial rhetoric to the contrary, the labour court limits its considerations almost solely to the parties' formal compliance with the legal rule. The implications of these findings for the relationship of the legal and industrial relations systems are discussed, particularly with reference to the dual task of labour law: to govern the industrial relations system, and to facilitate its autonomy.     

Bonding and Bridging Associational Social Capital and the Financial Performance of Local Authorities in Israel

Abstract

This study explores whether bridging and bonding social capital differ in their impacts on government performance at the local level and the extent to which these impacts vary between localities exhibiting differing socioeconomic resources. The study is based on an analysis of 256 local authorities in Israel. The findings show that bridging and bonding social capital do differ in their respective effects on government performance and that the nature of the relationship of each type of capital with government performance varies by the community's socioeconomic profile. Poor communities with high densities of bridging social capital were characterized by lower deficits as a percentage of total municipal budgets, more accurate expenditure forecasts and greater spending on services per capita.     

When marketing and innovation interact: The case of born-global firms

Previous research on born-global firms (BGs) has emphasized their strong dependency on establishing a competitive positioning from the early days of their existence. While many researchers emphasized BGs’ innovativeness as a driver of their competitiveness, the capabilities underlying BGs’ innovativeness are still under-researched, specifically, marketing, and innovation-related capabilities. Based on a preliminary stage of in-depth interviews with senior managers, we identified three capabilities, market intelligence generation, marketing adaptability, and team cohesion, that underscore the interaction between innovation and marketing. We then performed a SEM analysis based on data collected from 127 BGs. Our findings indicate that marketing intelligence and team cohesion directly and positively impact BGs’ innovativeness. Marketing adaptability was found to be moderated by environmental conditions—economic development and technological development. When economic development is high, salesforce adaptability enhances BGs’ innovativeness, while product adaptability or communication adaptability decreases BGs’ innovativeness. When technological development is high, product adaptability enhances BGs’ innovativeness, while salesforce adaptability decreases BGs’ innovativeness.     

The demand for regulation of financial disclosures: The case of the insurance industry

Policyholders and other claimants in insurance companies are interested in “solidity,” i.e., the ability of insurers to meet their claims obligations in both the short run and the long run. Insurance regulators exist in order to represent the interests of consumers. Great emphasis is placed by the regulators of the market on the mandatory and uniform disclosure of relevant financial and operating aspects of insurers. This paper employs simple gametheoretic techniques to address two aspects of the general issue of the desirability of establishing a regulator to assess the solidity of insurers. First, why would uniform information about insurers be desirable? Given that uniformity is desirable, it could be achieved by voluntary agreement of insurers or via regulation. The second issue is how that uniformity is to be achieved; that is, what is the value of a regulator in achieving uniformity? Insurance provides an interesting instance of the general problem. A key determinant is the structure of costs and benefits of securing voluntary agreements across firms.     

INFORMATION ASYMMETRY AND THE UNDERPRICING OF INITIAL PUBLIC OFFERINGS: FURTHER EMPIRICAL EVIDENCE

Information Asymmetry is usually assumed in most explanations of the underpricing of initial public offerings (IPOs). In Baron's (1982) model, the underwriter is better informed than the issuing firm concerning the demand for the IPO. The greater uncertainty associated with the demand will lead to a greater underpricing due to the enhanced value of the underwriter's expertise. In the case that the issuer is also an informed investment banker, Baron's hypothesis predicts no underpricing. Our results based on Canadian investment bankers do not support Baron's hypothesis.