On durable goods markets with entry and adverse selection

Abstract. We investigate the nature of trading and sorting induced by the dynamic price mechanism in a competitive durable good market with adverse selection and exogenous entry of traders over time. The model is a dynamic version of Akerlof (1970) . Identical cohorts of durable goods, whose quality is known only to potential sellers, enter the market over time. We show that there exists a cyclical equilibrium where all goods are traded within a finite number of periods after entry. Market failure is reflected in the length of waiting time before trade. The model also provides an explanation of market fluctuations. JEL classification: D82 A propos des marchés de biens durables quand il y a entrée de nouveaux commerçants et sélection adverse. Les auteurs analysent la nature du commerce et du triage engendrés par le mécanisme dynamique des prix dans un marché concurrentiel de biens durables quand il y a sélection adverse et entrée exogène de nouveaux commerçants dans le temps. Ce modèle est une version dynamique du modèle d’ Akerlof (1970) . Des cohortes identiques de biens durables, dont la qualité est connue seulement des vendeurs potentiels, arrivent sur le marché dans le temps. Il semble qu’il y ait plus de commerce actif que ce qui est prévu par un modèle statique. En particulier, on montre qu’il existe un équilibre cyclique où tous les biens sont transigés à l’intérieur d’un nombre fini de périodes après leur arrivage et que, à chaque phase du cycle, l’éventail de qualité des biens transigés s’accroît. Les commerçants qui transigent des produits de plus haute qualité attendent plus longtemps et l’imperfection du marché se traduit par la longueur de temps d’attente avant la transaction. Le modèle fournit aussi une explication des fluctuations du marché.     

Entrepreneurship and Unemployment in the UK

The influence of industrial structure, more specifically of entrepreneurship, is investigated on the level of unemployment in the UK. The question is to what extent entrepreneurship, i.e., business ownership can reduce the level of unemployment. The alleged differences between the managed and the entrepreneurial economy will be discussed as well as the links between entrepreneurship and unemployment. It will be concluded that the UK is a relative outlier when using a simple model of the relationship between unemployment and the rate of business ownership. The model is calibrated using recent data of some 23 OECD countries. It underestimates the decrease in unemployment in the UK in the period 1982–1990. Some arguments are brought forward why this might be the case.     

Reporting Discretion and Private Information Communication through Earnings

We model a two-period pure exchange economy where a risk averse manager, who has private information regarding future earnings, is required to issue an earnings report to investors at the end of each period. While the manager is prohibited from directly disclosing her private information, she is allowed to bias reported earnings in the first period, subject to GAAP rules that require that a specified proportion of the bias be reversed subsequently. We show there is a minimum threshold of reversal, such that, when the proportion of required reversal is above this threshold, the manager smooths income and communicates her private information through reported earnings. Consequently, the market attaches greater weight to reported earnings than under a regime that allows no discretion. When the required reversal is below the minimum threshold, the manager increases reported earnings without limit and the equilibrium degenerates. When the manager is not endowed with any private information, the market unravels the "true" earnings and price is unaffected by earnings management. Our results underscore the importance of both allowing and restricting reporting discretion through formal mechanisms.     

The quality and effectiveness of marketing strategy: Effects of functional and dysfunctional conflict in intraorganizational relationships

By examining only dysfunctional conflict and ignoring functional conflict, empirical research in marketing has presented only part of the story. This research offers the first systematic look at the antecedents and consequences of both functionaland dysfunctional conflict in intraorganiational relationships. The authors develop and empirically test a causal model for key organizational antecedents of new product strategy quality and market performance. They find that dysfunctional conflict in the decision-making process has deleterious consequences for quality of strategy and market performance, whereas functional conflict improves both quality of strategy and performance. Specifically, organizational design characteristics such as formalization, interdepartmental interconnectedness, low communication barriers, and team spirit improve new product performance by enhancing functional conflict, whereas centralization and high communication barriers lower new product performance by increasing dysfunctional conflict. A post hoc test for common method bias or variance suggests that bias or variance alone cannot explain these findings. His general research interests focus on strategic issues relating to internal relationships, market learning, and organizational context of marketing strategy. His research has been published in theJournal of Marketing, Journal of Business Research, Journal of Advertising Research, Journal of Advertising, andJournal of Services Marketing, among others. His general research interests focus on strategic issues relating to relationship marketing, firm performance, sustainable competitive advantage, timing of market entry, and information technology. His past research has been published in theJournal of Marketing, Journal of Business Research, Journal of Services Marketing, andMarketing Education Review, among others. His research interests are in the areas of marketing research methods, structural equations modeling, cellular automata theories and methods, and Taoist methodologies for marketing strategy. His research has been published in theJournal of Marketing, Journal of Marketing Research, andJournal of the Academy of Marketing Science, among others.     

Economic Reform and Macroeconomic Policy in New Zealand

In 1984 the Labour government in New Zealand began a wide-ranging process of reform with the objective of achieving a sustainable improvement in economic performance. The breadth and rapidity with which deregulation, tax reform, and privatisation were implemented has attracted widespread interest. The expected improvement in macroeconomic performance, however, has not yet been realised.
This article describes some background to the policy shift, and focuses on macroeconomic aspects of the reforms. It argues that while many improvements in microeconomic resource allocation have been made, the interaction between monetary, fiscal and wages policies has contributed substantially to the present high cost of structural change in New Zealand.