Inflation and output dynamics in a model with labor market search and capital accumulation

In a sticky-price model with labor market search and habit persistence, Walsh (2005) shows that inertia in the interest rate policy helps to reconcile the inflation and output persistence with empirical observations for the US economy. We show that this finding is sensitive with regard to the introduction of capital formation. While we are able to replicate the findings for the inflation inertia in a model with capital adjustment costs and variable capacity utilization, the output response to an interest shock is found to be too large and no longer hump-shaped in this case. In addition we find that the response of output to a technology shock can only be reconciled with empirical findings if either the adjustment of the utilization rate is very costly or there is only a modest amount of nominal rigidity in the economy.     

Kapitalmarktbasierte Ermittlung des Kapitalkostensatzes für Zwecke der Entgeltregulierung

Zusammenfassung Die Ermittlung des Kapitalkostensatzes ist für entgeltregulierte Unternehmungen insofern von besonderer Bedeutung, als die im Rahmen einer kostenorientierten Entgeltregulierung festgesetzten Entgelte ma?geblich von diesem Kostentreiber abh?ngen. Der Beitrag analysiert ausgehend von den Zielsetzungen und Besonderheiten der Entgeltregulierung die Methodik der Ermittlung des gewogenen Kapitalkostensatzes regulierter Unternehmungen auf Basis des CAPM, da diese Methode international in Regulierungsverfahren weit verbreitet ist, im Fokus der aktuellen Diskussion in Deutschland steht und damit am ehesten als Basis für eine konsensf?hige Methode geeignet erscheint. Dabei wird insbesondere auf die Bestimmung der einzelnen Parameter des Kapitalkostensatzes, auf Fragen der Kapitalstruktur sowie auf die Berücksichtigung von Ertragsteuern eingegangen. Es wird gezeigt, wie die konkrete Anwendung der Methode von den Zielen der Regulierung abh?ngt und das von der regulierten Unternehmung zu tragende Risiko beeinflusst.

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Capital market-based assessment of the cost of capital for the purposes of rate-regulation

Summary The assessment of the cost of capital is of paramount importance for rate-regulated firms, as the rates of regulated services depend crucially from this cost driver. The paper uses objectives and peculiarities of rate regulation as a starting point. Based thereupon, it analyses methodical issues related to the assessment of the weighted average cost of capital for regulated firms with the CAPM, as this method is widely used in regulatory hearings worldwide and as it is at the center of the current academic debate and subject of recent expert opinions regarding the assessment of the cost of capital for rate-regulated firms in Germany. The focus of the paper is on assessing the individual input parameters of cost of equity and cost of debt, on issues concerning the capital structure as well as on accounting for corporate income taxes. It is shown how the method applied depends on the objectives of regulation and which impact it has on the risk that the regulated firm is exposed to.

     

Die Grundlagen der Mechanismus-Design-Theorie

Der Nobelpreis für Wirtschaftswissenschaften 2007 wurde an Leonid Hurwicz, Eric S. Maskin und Roger B. Myerson für Ihre grundlegenden Beitr?ge zur Mechanismus-Design-Theorie vergeben. Worin liegt der Erfolg der Mechanismus-Design-Theorie begründet? Was sind ihre Perspektiven?     

Editorial

Ohne Zusammenfassung     

The visible hand: finger ratio (2D:4D) and competitive bidding

In an experiment using two-bidder first-price sealed bid auctions with symmetric independent private values and 400 subjects, we scan also the right hand of each subject. We study how the ratio of the length of the index and ring fingers (2D:4D) of the right hand, a measure of prenatal hormone exposure, is correlated with bidding behavior and total profits. 2D:4D has been reported to predict competitiveness in sports competition (Manning and Taylor in Evol. Hum. Behav. 22:61–69, 2001, and H?nekopp et al. in Horm. Behav. 49:545–549, 2006), risk aversion in lottery tasks (Dreber and Hoffman in Portfolio selection in utero. Stockholm School of Economics, 2007; Garbarino et al. in J. Risk Uncertain. 42:1–26, 2011), and the average profitability of high-frequency traders in financial markets (Coates et al. in Proc. Natl. Acad. Sci. 106:623–628, 2009). We do not find any significant correlation between 2D:4D on either bidding or profits. However, there might be racial differences in the correlation between 2D:4D and bidding and profits.     

Imitators and optimizers in Cournot oligopoly

We analyze a symmetric n-firm Cournot oligopoly with a heterogeneous population of optimizers and imitators. Imitators mimic the output decision of the most successful firms of the previous round à la Vega-Redondo, F., [1997. The evolution of Walrasian behavior. Econometrica 65, 375–384]. Optimizers play a myopic best response to the opponents’ previous output. Firms make mistakes and deviate from their decision rules with a small probability. Applying stochastic stability analysis, we find that the long run distribution converges to a recurrent set of states in which imitators are better off than are optimizers.     

Incentives for subjects in internet experiments

Providing incentives to subjects in internet experiments can be tricky. One simple method is a high score (as in computer games). We test whether high scores provide adequate incentives in comparison to the usual performance based incentives. We find significant differences.     

Economic natural selection in Bertrand and Cournot settings

We study economic natural selection in classical oligopoly settings. When underlying pure strategies consist of a finite number of prices, convex monotonic dynamics always converge under a weak condition to the smallest price in the support of the initial state that exceeds marginal cost. When underlying pure strategies consist of a finite number of quantities, monotonic dynamics always converge under a specific condition to a quantity equal or similar to classical Cournot equilibrium.