Up in the Air: GTE's Experience in the MTA Auction for Personal Communication Services Licenses

In late 1994, GTE, one of the largest telecommunications firms in the world, entered an auction for the rights to provide personal communications services (PCS) using the electromagnetic spectrum. The administering agency, the Federal Communications Commission, adopted a novel multiple-round format for the PCS auction. The format presented GTE with a complex bidding problem. This article describes how the GTE bidding team answered the following question: Given its budget and valuations and the information available about rival bidders, how should GTE bid to achieve the best attainable outcome?     

Earning the “Write to Speak”: Sell‐Side Analysts and Their Struggle to Be Heard

This paper explores the ways in which sell‐side (SS) financial analysts seek to position themselves advantageously within the wider field of investment advice in spite of widespread skepticism over the value that their forecasts and recommendations add to investment decisions. The field of investment advice has been characterized in recent years by a number of regulatory and technological changes that have forced SS analysts to reconstitute the ways in which they influence the investment decisions of buy‐side (BS) actors. Faced with existential threats, SS analysts have responded to the disruptive impact of technology and regulation by struggling hard to ensure that their services are still valued by fund managers. Key to this ongoing process is the recalibration of professional expertise, which previous research has alluded to but not explored in detail. Central to the persistence of SS analysts in processes of investment decision making are activities revolving around the production and use of analyst reports which, our findings indicate, are less valuable for their informational content than their role as “relational devices,” ascribing legitimacy to SS analysts and earning them an entry ticket to more substantive, value‐adding interactions with companies and BS actors. We also show that economic considerations in the area of investment advice are influenced by social ties, the motivations of various actors in the field, and their relative position vis‐à‐vis other actors. More generally, we contribute to the literature on professional projects by showing how professional groups are constantly engaged in attempts to reposition themselves in the social space, but that field‐level changes can restrict the outcomes of these strategies to mitigation rather than advancement for the professionals concerned.     

Public policy for reducing tax evasion: implications of the Yule–Simpson paradox

The current study exhibits a new implication of the Yule–Simpson paradox with public policy repercussions. We construct Laffer curves of local property tax collection based on aggregated data and group division to residential land uses in Jerusalem. Results indicate that based on aggregated (dis-aggregated) data, the location of owner-occupiers and renters who pay a relatively high rate tariff will be on the upward-sloping (downward-sloping) part of the Laffer curve. Consequently, statistical test outcomes support Laffer’s controversial claim that for the few upper-brackets taxpayers, an efficient collection is associated with tax reduction rather than tax increase.     

Do family farms really converge to a uniform size? The role of unobserved farm efficiency*

We analyse the growth of family farms in Israeli cooperative villages during a period of economic turmoil. We use instrumental variables to account for the endogeneity of initial farm size, and correct for selectivity as a result of farm survival. We also include a technical efficiency index, derived from the estimation of a stochastic frontier production model, as an explanatory variable. Our aim is to check whether ignoring efficiency could have been the reason for convergence results obtained elsewhere in the literature. We found that technical efficiency is an important determinant of farm growth, and that not controlling for technical efficiency could seriously bias the results. In particular, larger farms are found to grow faster over time, while without controlling for technical efficiency the farm growth process seemed to be independent of initial farm size. The increasing polarisation of farm sizes in Israel has ramifications for the inefficiencies induced by the historical quota system, for the political power of the farm sector and for the social stability of farm communities.     

The usefulness of inaccurate models: Towards an understanding of the emergence of financial risk management

Is the growth of modern financial risk management a result of the accuracy and reliability of risk models? This paper argues that the remarkable success of today’s financial risk management methods should be attributed primarily to their communicative and organizational usefulness and less to the accuracy of the results they produced. This paper traces the intertwined historical paths of financial risk management and financial derivatives markets. Spanning from the late 1960s to the early 1990s, the paper analyses the social, political and organizational factors that underpinned the exponential success of one of today’s leading risk management methodologies, the applications based on the Black–Scholes–Merton options pricing model. Using primary documents and interviews, the paper shows how financial risk management became part of central market practices and gained reputation among the different organisational market participants (trading firms, the options clearinghouse and the securities regulator). Ultimately, the events in the aftermath of the market crash of October 1987 showed that the practical usefulness of financial risk management methods overshadowed the fact that when financial risk management was critically needed the risk model was inaccurate.     

The welfare costs of unreliable water service

Throughout the developing world, many water distribution systems are unreliable. As a result, it becomes necessary for each household to store its own water as a hedge against this uncertainty. Since arrivals of water are not synchronized across households, serious distributional inefficiencies arise. We develop a model describing the optimal intertemporal depletion of each household's private water storage if it is uncertain when water will next arrive to replenish supplies. The model is calibrated using survey data from Mexico City, a city where many households store water in sealed rooftop tanks known as tinacos. The calibrated model is used to evaluate the potential welfare gains that would occur if alternative modes of water provision were implemented. We estimate that most of the potential distributional inefficiencies can be eliminated simply by making the frequency of deliveries the same across households which now face haphazard deliveries. This would require neither costly investments in infrastructure nor price increases.     

MBTI Personality Types of Project Managers and Their Success: A Field Survey

This paper describes a survey of 280 project managers that reveals both their personality types (via Myers‐Briggs personality inventory) and their success in project management. The results show that a project manager's personality is better suited for functioning with partial data and under ambiguity than the rest of the population. These traits were found for both women and men. The conclusion is that project managers (females and males) have a unique personality‐type distribution that distinguishes them from the general population. The findings can contribute to better understanding the traits that characterize the project management population, and their relationship to project success.     

Auctions and Regulation: Reengineering of Regulatory Mechanisms**

The FCC auctions, beginning in July 1994, were a watershed event in what may be best called reengineering regulation. It was the first time a new market mechanism, in the form of an auction, had been developed especially to replace traditional administrative procedures for regulating access to a natural resource. The spectrum auctions, and the soon to follow trading in SO₂ emission rights were the two initial instances in which game theory, and more specifically auction theory, played an essential role in the design of an market-based allocation process. The FCC developed a novel auction format for the spectrum auctions. The replacing of administrative regulatory processes with market mechanisms is a major innovation in regulation, or perhaps more accurately, deregulation.     

Resale Price Maintenance Post Leegin: A Model of RPM Incentives

The prominent Babies R Us decision (McDonough et al. v. Toys R Us, Inc., 2009) was the first to explore the economic consequences of resale price maintenance after the Supreme Court’s Leegin decision. Previously, litigation concerned the presence or absence of an agreement; but that changed with the new jurisprudence which instead emphasized the restraint’s direct anti-competitive effects. While the district court’s decision in the Babies R Us case rested on the factual circumstances of the case, it did not have before it an economic model through which those facts could be integrated. This paper offers such a model, the predicates of which are drawn from the case. The conclusions derived from the model are entirely consistent with the court’s decision     

From risks to second-order dangers in financial markets: Unintended consequences of risk management systems

This article, along with this special symposium, engages with the lasting significance of Neil Smith's Uneven Development: Nature, Capital, and the Production of Space 25 years after its publication. Few books have made such productive contributions to expanding the horizons of political economy, particularly the spatiality of political economy, as has Uneven Development. This introductory article explores some of these aspects of the book's significance for the readership of New Political Economy; it remarks on the lasting if not growing significance of Smith's intellectual and political contributions two and a half decades after one of his, and the discipline of geography's, crowning achievements. At the same time it foreshadows ways in which the text can continue to push our understanding of the interconnections among nature, capital and the production of space.