What is going on in the oil market?

Conclusion In this article, we propose a consistent view on the recent oil-price history based on fundamental data and economic theory. We sum up: After the turn of the century three major stylized shocks have hit market. First, the demand curve has shifted fight outwards, mainly driven, as extensively reported in the media, by sustained growth in China and other Asian Countries. Second, supply disruptions in countries with low extraction costs (Iraq and Venezuela) have shifted the supply curve to the left. Third, we show that speculators adjust their inventories in order to take advantage of predictable price fluctuations and play themselves a major role in the price formation. Optimal storage theory implies that aggregate inventories are negatively related to the oil price and positively to the volatility of supply and demand shocks. We provide evidence that the political events in the last years have increased volatility and induced the inventory curve to shift right outwards. We analyze in a graphical framework the interaction of all these shocks and conclude that speculators have caused the oil price to overshoot in the short run its long-run fundamental value. However, this is not at all attributable to market failure or the harmfulness of speculators. In fact, the opposite is true. Speculators have in general a dampening effect on the oil price. The record oil price in the very recent history is partly a consequence of speculators maintaining or building-up inventories to cope with the supply and demand shocks to come. Hence, high prices represent a short-term toll for future price stability. It follows from our analysis that the oil price is expected to fall towards its long-term mean, provided that no further shocks hit the economy and, critically, the oil supply. As we saw, this prediction is consistent with the observed prices in the futures markets. Also in terms of future price volatility, the outlook is rather upbeat. The increased inventory levels held by speculators will cushion the spot market against fluctuations in natural supply and demand and limit the degree to which the currently high underlying volatility will translate into higher price volatility. We would like to thank Manuel Ammann, Bernd Brommundt, Stephan Kessler, Ralf Seiz, Michael Verhofen, Hemrich von Wyss, and two anonymous referees for helpful comments We are particularly indebted to Sergej Peisotchenko at United Energy System (UES) of Russia and Jan Gjerde at Shell for clearing us up on technical aspects of oil production     

Late and multiple bidding in second price Internet auctions: Theory and evidence concerning different rules for ending an auction

In second price Internet auctions with a fixed end time, such as those on eBay, many bidders submit their bids in the closing minutes or seconds of an auction. We propose an internet auction model, in which very late bids have a positive probability of not being successfully submitted, and show that late bidding in a fixed deadline auction can occur at equilibrium in auctions both with private values and with uncertain, dependent values. Late bidding may also arise out of equilibrium, as a best reply to incremental bidding. However, the strategic advantages of late bidding are severely attenuated in auctions that apply an automatic extension rule such as auctions conducted on Amazon. Field data show that there is more late bidding on eBay than on Amazon, and this difference grows with experience. We also study the incidence of multiple bidding, and its relation to late bidding.     

Teaching versus research: A multi-tasking approach to multi-department universities

We study the possible implications of incentive schemes as a tool to promote efficiency in the management of universities. In this paper, we show that by designing internal financial rules which create yardstick competition for research funds, a multi-department university may induce better teaching quality and research, as compared to the performance of independent departments.     

JOB MOBILITY IN BRITAIN: ARE THE SCOTS DIFFERENT? EVIDENCE FROM THE BHPS†

The Scottish extension‐sample of the British Household Panel Study (BHPS) is used to shed light on differences in job mobility patterns in England and Scotland for both men and women. Based on probit estimates of the overall mobility rate, a new decomposition technique is applied to distinguish between explained and unexplained differences. Furthermore, exploiting data on the number of job changes, a zero inflated Poisson model is estimated to provide information on possible differences in the expected number of job changes. Overall, there is evidence that suggests significant differences in mobility patterns south and north of the Borders; however, this is confined to men. Yet, whether this suffices to justify a heterogeneous regional labour market remains to be seen.     

The impact of productivity adjusted deviations from PPP on the U.S. inbound FDI: Evidence from Japan, U.K. and Germany

In this paper, we investigate the degree to which productivity adjusted deviations from PPP influence the U.S. inbound FDI. Our results show a significant negative relationship between productivity adjusted misalignments and the U.S. inbound FDI from Germany and the United Kingdom in the short-run, and a positive relationship in the long-run. Hence, indicating that a positive misalignment—undervalued U.S. dollar—leads to a decrease in the U.S. inbound FDI in the short-run and to an increase in the long-run. No significant evidence is found for Japan. Interestingly, unadjusted real exchange rate changes show no statistically significant relationship with respect to the U.S. inbound FDI. The authors thank the reviewers for their insightful comments.     

Firm wage differentiation in Eastern GermanyA non-parametric analysis of the wage spread

In Eastern Germany, wage differentiation between firms has clearly grown, parallel to individual wage differentials. Nevertheless, the wage spread between firms is still much less than in Western Germany. In this paper, a non‐parametric decomposition is used to analyze the difference between the wages spread in the two parts of Germany. Only part of the difference can be explained by different economic structures in Eastern Germany. By far, the greater part of the difference in the wage spread between firms in the two parts of the country is due to the fact that differences in wages paid by firms of the same type in Eastern Germany are much less than those of their counterparts in Western Germany. A striking result of the analysis is that the gap in the wage variance between Eastern and Western Germany is increasing.     

THE EFFECTS OF PRESENTATION FORMAT ON THE EFFECTIVENESS AND EFFICIENCY OF AUDITORS‘ ANALYTICAL REVIEW JUDGMENTS

Modern audit practice has focused increasing attention on the use of analytical review procedures to improve the effectiveness and efficiency of audits. To assist in this endeavour, one branch of analytical review research has investigated the judgment processes that auditors' use in analytical review and the development of decision aids to improve these processes. Several recent papers have considered how alternative presentations of financial and operating data, specifically graphs versus tables, may affect the effectiveness of auditors' analytical review judgments. However, the results have been mixed. This study investigated the expectation that there would be effectiveness and efficiency performance advantages for auditors receiving graphically presented data over those receiving tabular presented data in an analytical review setting. This paper reports on the results of an experiment that examined the impact of graphs versus tables on the effectiveness of sales account balance prediction, confidence in this prediction and the setting of a noninvestigation region, and the relative time efficiency with which these tasks were completed, for an analytical review of sales for a retailing client. The study found mixed results for the accuracy of the sales account balance predictions of the graphical and tabular treatment groups, with no difference found when a regression model estimate of the ‘correct’ prediction was used and greater accuracy for the graphical group when the actual audited sales account balance was used as the accuracy benchmark. No significant differences between treatment groups was found for their confidence in their sales account balance predictions and the width of the noninvestigation regions set. However, a significant time advantage was found for the graphical group. These findings suggest that there may a useful role for the use of graphs as decision aids in income statement related analytical review procedures in improving audit efficiency without sacrificing audit effectiveness.     

Foreign investment as a factor in Asian Pacific integration

The Asian Pacific countries do not only show unparalled growth dynamics, they are also in the process of growing ever closer together. There is already talk of the creation of a new economic bloc. The following article analyses private direct investment in the Asian Pacific area, an element in the economic integration of the region which has been paid little attention until now. This article is based on a study completed in November 1991 for the Federal Ministry of Economic Affairs. The study has now been published in German and is available on request from the authors: Axel Borrmann and Rolf Jungnickel: Auslandsinvestitionen im asiatisch-pazifischen Integrationsprozess, HWWA-Report No. 102, Hamburg 1992.