Hybrid estimators for small diffusion processes based on reduced data

We deal with the Bayes type estimators and the maximum likelihood type estimators of both drift and volatility parameters for small diffusion processes defined by stochastic differential equations with small perturbations from high frequency data. From the viewpoint of numerical analysis, initial Bayes type estimators for both drift and volatility parameters based on reduced data are required, and adaptive maximum likelihood type estimators with the initial Bayes type estimators, which are called hybrid estimators, are proposed. The asymptotic properties of the initial Bayes type estimators based on reduced data are derived and it is shown that the hybrid estimators have asymptotic normality and convergence of moments. Furthermore, a concrete example and simulation results are given.     

Platform market competition with endogenous side decisions

This paper develops a framework to analyze platform competition in two‐sided markets in which agents endogenously decide on which side of a platform to join. We characterize the equilibrium pricing structure and perform a comparative statics analysis on how the distribution of agents’ preferences affects the platforms’ profits. We also show that the market equilibrium under profit‐maximizing platforms leads to the first best social surplus, which illustrates the importance of the price mechanism to induce more balanced participation across the two sides. This framework can be applied to analyze market competition for “rental” or “sharing” platforms. In addition, we extend our analysis to consider an initial investment stage, which makes participants the owner of some durable goods to rent out.     

Informational size and the incentive compatible coarse core in quasilinear economies

In this paper we show that in quasilinear economies the incentive compatible coarse core is non-empty if agents are informationally small in the sense of McLean and Postlewaite (2002) and the strict core in each state is non-empty.     

Neutrality of buyer and seller commissions to auction house profit

This paper presents an examination of optimal revenue management of a monopoly auction house through which a seller sells goods via a second‐price auction. The house charges commissions to both the buyer and seller. Results demonstrate that a continuum of combinations of optimal buyer and seller commission rates exists, all of which yield the same expected profit of the house. Additionally, we discuss several possible factors that lead to the prevailing custom of zero buyer commission, such as commission aversion of buyers, the house's incentive to maximize the hammer price, and seller and buyer preferences for apparently lowered commission rates.     

HEDGING AND THE COMPETITIVE FIRM UNDER AMBIGUOUS PRICE AND BACKGROUND RISK

This paper examines the optimal production and hedging decisions of the competitive firm that possesses smooth ambiguity preferences and faces ambiguous price and background risk. The separation theorem holds in that the firm's optimal output level depends neither on the firm's attitude towards ambiguity nor on the incident to the underlying ambiguity. We derive necessary and sufficient conditions under which the full‐hedging theorem holds and thus options are not used. When these conditions are violated, we show that the firm optimally uses options for hedging purposes if ambiguity is introduced to the price and background risk by means of mean‐preserving spreads. We as such show that options play a role as a hedging instrument over and above that of futures.     

Is individual environmental consciousness one of the determinants in transport mode choice?

This article models negative impact on the environment as one of the attributes of transport mode. By this modelling, we are able to examine whether individual environmental consciousness of this impact plays a significant role in his/her choice of transport mode. A survey data from Saito and Onohara Area in Northern Osaka of Japan is used to estimate the model with the Heteroscedastic Extreme Value specification. Both of the estimated and simulated results imply that individual environmental consciousness does influence his/her decision on transport mode choice in the sample. Furthermore, the likelihood ratio tests indicate that both the utility and scale parameters are not equivalent across sub-samples of university commuters, research-facility commuters and residents. The results of the comparison across sub-samples suggest that sometimes we may learn more from sub-dividing a whole sample into several sub-samples if we could distinguish them by their characteristics.     

Corporate social responsibility and strategic relationships

We analyze a delegation game relevant to the conduct of corporate social responsibility (CSR) in which the firm’s owner offers the manager a contract consisting of firm profit and social welfare. We derive three results that distinctly differ from existing findings. First, CSR decisions are strategic complements for firms. Second, with simultaneous CSR decisions, the equilibrium price is equal to marginal cost, despite the fact that firms compete in a Cournot duopoly. Finally, with sequential CSR decisions, unlike the follower firm, the leader firm never exhibits CSR. However, the follower firm can enjoy a profit equal to that derived by the leader in a Cournot–Stackelberg game.     

Asymmetric Payoffs and Spatial Competition

We investigate the location choice of two firms whose objectives are the weighted average of their own profit and social welfare, in which they simultaneously decide their locations before setting their prices. The purpose of this paper is to examine whether the asymmetric locations are influenced by the asymmetry of the firms’ objectives or by the asymmetry of firms’ marginal costs. We show that, when both firms have the same marginal cost, the equilibrium locations are always symmetric even in the case of the asymmetric objectives. On the other hand, the cost differences lead the asymmetric locations in equilibrium. That is, the asymmetric locations are a result of the cost asymmetry, but not the asymmetry of the firms’ objectives. We also demonstrate that the pursuit of profit by the cost-inefficient firm may increase consumer surplus.     

Cumulative offer process is order-independent

This note shows that in the matching-with contracts model, the outcome of the cumulative offer process is order-independent if every hospital has a choice function that satisfies the bilateral substitutability condition and the irrelevance of rejected contracts condition.     

Stocks,flows, and some exchange rate dynamics for the currency substitution model

The paper argues that the treatment of stocks and flows in portfolio balance models of exchange rate determination is inadequate, and that this hampers the analysis of exchange rate dynamics. A proposed resolution is reworked into the currency substitution model. In addition to providing explicit solutions for the spot rate of exchange depreciation under different expectational hypotheses, an attempt is made to clarify the dynamic properties of the model. Inter alia, it is shown how exchange rate overshooting is possible without having to assume market frictions; how a deteriorating current account deficit can coexist with an appreciating exchange rate; and, more generally, how portfolio induced jumps in the exchange rate are linked to balance of payments flow influences on the evolution of the exchange rate.