Varieties of paternalism and the heterogeneity of utility structures

A principal source of interest in behavioral economics has been its advertised contributions to policies aimed at ‘nudging’ people away from allegedly natural but self-defeating behavior toward patterns of response thought more likely to improve their welfare. This has occasioned controversies among economists and philosophers around the normative limits of paternalism, especially by technical policy advisors. One recent suggestion has been that ‘boosting,’ in which interventions aim to enhance people’s general cognitive skills and representational repertoires instead of manipulating their choice environments behind their backs, avoids the main normative challenges. A limitation in most of this literature is that it has focused on relatively sweeping policy recommendations and consequently on strong polar alternatives of general paternalism and strict laissez faire. We review a real instance, drawn from a consulting project we conducted for an investment bank, of a proposed intervention that is more typical of the kind that economists are more often actually called upon to offer. In this example, the sophistication of current tools for preference attribution, combined with philosophical externalism about the semantics of preferences that makes it less plausible to attribute their literal self-conscious representation to people as propositional attitude content becomes more tightly refined, blocks applicability of the distinction between nudging and boosting. This seems to call for irreducible, context-specific ethical judgment in assessing the appropriateness of the forms of paternalism that economists must actually wrestle with in going about their everyday business.     

The Gravity of Intermediate Goods

Review of Industrial Organization - One of the puzzles of the gravity literature is the persistent effect of distance on trade flows, despite the dramatic fall in trade costs during the last few...     

B Corp Certification and Its Impact on Organizations Over Time

Journal of Business Ethics - This study explores the impact of B Corp certification and its associated impact assessment on four case studies of small and medium-sized Brazilian companies certified...     

To Bundle or Not to Bundle: Firms’ Choices under Pure Bundling

We examine the economic implications of pure bundling under the settings of monopoly and duopoly. We show that under monopoly and pure bundling of goods with independent demands, the bundled price is strictly less than the sum of the unbundled prices. In the setting of duopoly and Nash prices, we examine whether bundling can be used as a tool to deter entry. In contrast to the findings of previous studies, we show that with low entry costs, entry is deterred by unbundled as opposed to bundled sales. With high entry costs, however, the incumbent chooses to bundle.     

PORTFOLIO MANAGEMENT WITH CONSTRAINTS

The traditional portfolio selection problem concerns an agent whose objective is to maximize the expected utility of terminal wealth over some horizon. This basic problem can be modified by adding constraints. In this paper we investigate the portfolio selection problem for an investor who desires to outperform some benchmark index with a certain confidence level. The benchmark is chosen to reflect some particular investment objective and it can be either deterministic or stochastic. The optimal strategy for this class of problems can lead to nonconvex constraints raising issues of existence and uniqueness. We solve this optimal portfolio selection problem and investigate the procedure for both deterministic and stochastic benchmarks.     

Do rice prices follow a random walk? Evidence from Markov switching unit root tests for Asian markets

This study revisits the issue of mean reversion in the import rice prices of six Asian countries over the period between 1995 and 2015. Augmented Dickey Fuller tests with a conventional linear regression model support the presence of a unit root in the levels of the price data. However, when regressions allow for Markov switching in coefficients and variances to capture periodic shifts in levels and volatilities, there is strong evidence against the unit‐root null hypothesis in favor of stationarity over much of the observation period.     

Quota prices as indicators of comparative advantage in supply‐managed industries

The Canadian dairy, egg, broiler, and turkey industries operate under supply management, a policy regime that sets product prices and allocates production among provinces and ultimately among farms through quotas. The Canadian Farm Products Agencies Act requires that comparative advantage be used to guide the allocation of new quota when increases in consumer demand necessitate increased production. This requirement, however, has not been met in practice. We develop a proposal by Meilke to use quota prices as measures of comparative advantage. We evaluate the quota price approach and other proposed methods, from a Hayekian and Coasean market process perspective. We conclude that quota prices offer an economically justifiable indicator of provincial comparative advantage. We develop an individual‐level general equilibrium model of quota exchange to illustrate the informational content of quota prices as indicators of comparative advantage. We also discuss potential practical challenges of using quota prices as indicators of comparative advantage.     

The effectiveness of fear appeals in ‘green’ advertising: An analysis of creative,consumer, and source variables*

This study focused on the effectiveness of fear appeal messages used to arouse a threat in green advertising. An experiment recruited 175 participants to test the influence of the advertising appeal (fear vs. non-fear appeal), source (for-profit vs. non-profit organizations), and involvement with the environment on attitude toward the ad (A_ad), attitude toward the product (A_p) and purchase intention (PI). Results revealed that a fear appeal in a green ad negatively affected A_ad and A_p and that participants who were highly involved with the environment were more likely to have positive attitudes toward the green ad and advertised green product as well as a stronger intent to purchase it. The source type in the green ad did not affect ad effectiveness and involvement with the environment did not moderate the effects of either appeal or source.