Statement of the Financial Economists Roundtable: Bank Capital as a Substitute for Prudential Regulation

The Financial CHOICE Act recently passed by the House proposes to create an “off‐ramp” that would allow banks to escape burdensome prudential regulation if the ratio of their equity capital to their total assets is 10% or more. The Financial Economists Roundtable supports this idea as a means of reducing regulatory costs, but believes some additional safeguards are needed. A capital ratio of 10% may not be high enough to discourage banks from excessive risk taking. A solution is to have two capital requirements for banks choosing the off‐ramp: one absolute (as proposed in the act) and one risk‐based. The FER believes that many banks will prefer this regime to the current burdensome prudential regulation, especially if regulators simplify the setting of risk weights and make them more rule‐based. Regulators setting minimum capital requirements should consider not only a bank’s stand‐alone risk, but also the systemic risk posed by banks, as well as the tendency of accounting measures of income and assets to overstate the economic value of banks’ equity capital. The Financial Choice Act would also eliminate useful elements of ongoing supervision and regulation, not all of which can be addressed by higher capital alone. Furthermore, to facilitate regulatory learning about risks, off‐ramped banks should continue to report the data that regulators use for stress tests, even if they are no longer subjected to the discipline of stress tests. Finally, the act is viewed as too permissive in its treatment of off‐ramped banks that get into trouble. To prevent gaming of regulation, FERC recommends that off‐ramped banks that subsequently fall below the minimum requirements should be required to raise new capital immediately.     

Consumer willingness to pay for in-flight service and comfort levels: A choice experiment

In the competitive aviation market as a result of the emergence of low cost carriers, charter airlines have had to reconsider their approach to service provision. Specifically, the reduction in service and comfort levels offered by the low cost airlines provides charter carriers with an opportunity to differentiate their product based on the quality of the offering. To consider this strategic option we employ an on-line choice experiment to examine consumer choices with respect to the bundle of services on offer when deciding to purchase a flight. With these data we use the Bayesian methods to estimate a mixed logit specification. Our results reveal that in principle passengers are willing to pay a relatively large amount for enhanced service quality.     

Social Capital,political empowerment and social difference: a mixed-methods study of an ecotourism project in the rural Volta region of Ghana

Abstract

Claims abound regarding the empowering possibilities of community-based natural resources management (CBNRM). Social capital is seen as a key element towards that end, yet there is a paucity of critical research testing these connections. This study examines two aspects of social capital (cognitive and structural) in a community-based ecotourism (CBE) project in Ghana as they relate to social difference (notably gender and ethnicity) and political empowerment (i.e., access to political involvement, and political efficacy). Quantitative results highlight specific gendered and ethnic differences in political empowerment and social capital that, when combined with qualitative analysis, reveal how those inequities in ecotourism may be rooted in socio/cultural norms. In addition, a novel contribution from this study is that political empowerment seems to be partly mediated by peoples’ access to social capital. This suggests that, regardless of one’s gender and ethnicity, social capital helps to empower individuals. We conclude by describing what an intervention could look like in the context of this CBE project when informed by qualitative feminist as well as quantitative social capital analysis. Doing so we illustrate how a mixed-methods approach to the study of social capital and empowerment may offer important insights towards more equitable CBE.Abbreviations: CBE: Community Based Ecotourism; CBNRM: Community Based Natural Resources Management; NCRC: Nature Conservation Research Centre; FPE: Feminist Political Ecology; PCA: Principal Component Analysis; ANOVA: Analysis of Variance     

Exploring the forms of dysfunctional customer behaviour: A study of differences in servicescape and customer disaffection with service

Abstract

Although wide agreement exists between scholars and marketing practitioners concerning the prevalence of dysfunctional customer behaviour, to date empirical research into this phenomenon is lacking. This article aims to identify empirically grounded categories of dysfunctional customer behaviours and examine the extent to which customers' perceptions of physical servicescape environments, social facets of servicescape, and customer disaffection with service differ for each category. Based on a quantitative sample of 380 consumer perpetrators, cluster analysis reveals three clusters of dysfunctional customer behaviour forms labelled ‘petty norm infringements’, ‘felonious norm infringements’, and ‘belligerent norm infringements’. Subsequent variance analysis assesses the perceived differences between perceived physical servicescape, social servicescape, and customer disaffection for each identified form cluster. Specifically, the study findings reveal statistically significant differences between the forms of dysfunctional customer behaviour that are perpetrated across different service environments. The article concludes with a discussion of the implications of the study for theorists and practitioners.     

Spatial and Racial Patterning of Real Estate Broker Listings in New York City

It has been well documented that Black homeseekers face discrimination in the housing market in the form of racial steering and other institutional policies and practices that are critical in limiting housing access. Less is known about the mechanisms that operate on the other side of real estate transactions to perpetuate racially segregated neighborhoods. We investigated whether White and Black brokers face segregation in the housing market. That is, to what extent do White and Black brokers differentially market property listings in neighborhoods of varying racial composition? Using real estate listings extracted from the websites of two of the largest New York City real estate brokerages, we examined whether Black and White brokers market properties primarily in Black and White neighborhoods, respectively; and whether, controlling for gender and experience level, Black brokers had a lower average price per square foot than White brokers. Results showed that Black brokers overwhelmingly marketed properties in Black neighborhoods, with fewer listings in White areas. Black brokers also marketed properties with an average price per square foot that was $197 lower than White brokers. Black brokers who worked in offices in Black neighborhoods had the lowest asking price of all brokers. Taken together, Black and White real estate brokers control a bifurcated market in NYC, perpetuating residential segregation and Black–White income and wealth disparities.     

Service sabotage: The dark side of service dynamics

While many aspects of services research assume that employees are largely compliant to management prescribed service standards, a number of recent studies have highlighted the deliberate sabotage by service workers as a key issue. We contend that service sabotage is important not simply because of the pervasiveness of such behaviors, but also because of the impact that such acts can have on firm growth and profitability. Consequently, we seek to achieve three inter-linked objectives in this article. First, we highlight how service saboteurs harm customers’ service experiences and negatively affect the performance of the firm. Second, in order to assist managers in recognizing these behaviors, we identify the most common types of service saboteurs and forms of sabotage. Specifically, we classify and describe four main types of service saboteurs: Thrill Seekers, Apathetics, Customer Revengers, and Money Grabbers. Finally, and most importantly, we provide a series of suggestions regarding how managers might effectively address service sabotage in their firms. These include gathering information and exploiting existing data to establish the extent and nature of sabotage, recruiting the right quality of service staff, training and rewarding employees, enriching and empowering employees, developing a service culture, and initiating better monitoring systems and procedures.     

Relationship, Contribution, and Resource Constrains: Determinants of Distributive Justice in Individual Preferences and Negotiated Agreements

This laboratory study investigated the impact of relationship, relative levels of perceived contribution, and resource constraints on individuals' allocation preferences and dyads' negotiated allocations. Dyads of female undergraduates – either strangers or roommates – were given performance feedback that one member produced the majority of the resources available to the dyad; the members of the dyad faced relatively scarce or abundant resources. Subjects indicated their individual allocation preferences and then negotiated the distribution of resources as a pair. Results indicate that all three factors are important predictors of the norms of distributive justice met by the individually preferred and dyadically negotiated allocations. Results also suggest that the degree of agreement between the norms implied by individually preferred allocations and dyadic agreements affect strangers' satisfaction with outcomes to a greater extent than roommates'.     

On the Rate of Convergence of Continuous-Time Fictitious Play

This paper shows, first, that continuous-time fictitious play converges (in both payoff and strategy terms) uniformly at ratet ^{− 1}in any finite two-person zero-sum game. The proof is, in essence, a simple Lyapunov-function argument. The convergence of discrete-time fictitious play is a straightforward corollary of this result. The paper also shows that continuous-time fictitious play converges in all finite weighted-potential games. In this case, the convergence is not uniform. It is conjectured, however, that any given continuous-time fictitious play of a finite weighted-potential game converges (in both payoff and strategy terms) at ratet ^{− 1}.Journal of Economic LiteratureClassification Numbers: C6, C7.