How to measure competition in an economy in transition

This paper attempts to find a robust method of measuring competition when firms' operational activities are subject to frictions. The first part theoretically tests the indicative quality of two competition measures, the price‐cost margin (PCM) and the profit elasticity, in a model of monopolistic competition. The second part studies the empirical performance of the indices for a panel of Ukrainian manufacturing firms. This study offers a new approach to measuring profit elasticity that relies on structural estimation of a production function. The estimation methodology retrieves a productivity index that is adjusted to imperfect competition. The proposed method of measuring profit elasticity is found to be robust to frictions, but the PCM and traditional profit elasticity are biased, especially when the intensity of competition is low. Empirical findings show that competition exhibits a significantly positive correlation with aggregate productivity performance, while its impact on firm productivity is nonlinear.     

Selecting container port via a fuzzy ANP-based approach: A case study in the Marmara Region,Turkey

In this case study, a real world problem of a production firm in the Marmara Region, Turkey was considered. In the current situation, the firm works with different third-party logistics firms and uses different ports each time. However, they have some quality problems and decided to work with a logistics firm by using the most convenient port alternative. A number of conflicting qualitative and quantitative criteria exist for evaluating alternative ports. Qualitative criteria are often accompanied by ambiguities and vagueness. To cope with this problem, the fuzzy analytic network process (FANP) method is used in this study. First, we defined the region specific criteria consisting of the twenty sub-criteria under the six main criteria clusters that influence the selection of container port. Then seven alternative container ports located in the Marmara Sea were determined. The results showed that the most convenient district for the container port is Istanbul District, which is one of the biggest economical centers in Eastern Europe.     

Liquidity risk and arbitrage pricing theory

Classical theories of financial markets assume an infinitely liquid market and that all traders act as price takers. This theory is a good approximation for highly liquid stocks, although even there it does not apply well for large traders or for modelling transaction costs. We extend the classical approach by formulating a new model that takes into account illiquidities. Our approach hypothesizes a stochastic supply curve for a securitys price as a function of trade size. This leads to a new definition of a self-financing trading strategy, additional restrictions on hedging strategies, and some interesting mathematical issues.Received: 1 November 2003, Mathematics Subject Classification: 60G44, 60H05, 90A09JEL Classification: G11, G12, G13Umut Çetin: This work was performed while Dr. Çetin was at the Center for Applied Mathematics, Cornell UniversityPhilip Protter: Supported in part by NSF grant DMS-0202958 and NSA grant MDA-904-03-1-0092 The authors wish to thank M. Warachka and Kiseop Lee for helpful comments, as well as the anonymous referee and Associate Editor for numerous helpful suggestions, which have made this a much improved paper.     

MODELING LIQUIDITY EFFECTS IN DISCRETE TIME

We study optimal portfolio choices for an agent with the aim of maximizing utility from terminal wealth within a market with liquidity costs. Under some mild conditions, we show the existence of optimal portfolios and that the marginal utility of the optimal terminal wealth serves as a change of measure to turn the marginal price process of the optimal strategy into a martingale. Finally, we illustrate our results numerically in a Cox–Ross–Rubinstein binomial model with liquidity costs and find the reservation ask prices for simple European put options.     

Can tourism be a key sector in reducing income inequality? An empirical investigation for Turkey

The aim of the study is to investigate the nexus between tourism and income inequality by employing the Autoregressive Distributed Lag (ARDL) test cover the period 1974–2015 in Turkey. Findings indicated that the variables are cointegrated and an increase in tourism has a positive effect on income inequality, while economic growth and trade openness have a negative effect both in the long-run and short-run. Results also denote that tourism will decrease income inequality with the expansion of tourism activities and the spread of tourism throughout society. In other words, the tourism-related Kuznets Curve hypothesis is valid for Turkey.     

The Chilean Anti-cartel Experience: Accomplishments and Challenges

Review of Industrial Organization - We evaluate the Chilean law and enforcement record in the area of cartels. We identify the high probability of cartel detection, severe sanctions for detected...     

Assessing Productivity Gains from International Trade in a Small Open Economy

Empirical evidence suggests that exporter firms tend to charge higher markups than non-exporters due to trade barriers. The exporters’ markup premium, however, may disappear in a special case, namely when the home country is small relative to its trade partners and trade barriers are low. This can be because competition is more intense in the large export destination than in the small home country, so that firms are able to set higher markups for locally sold products but not for exports. This paper provides empirical evidence on the validity of this special case by estimating markups for firms in Luxembourg who generally export to larger countries. The estimated negative markup premium for exporters has important implications for the productivity measurement. In a sufficiently small open economy, exporters’ productivity may be biased downward, when the firm-level markup variation is not controlled for in the productivity estimation. The bias in the productivity estimates further leads to the inaccurate conclusion that openness to international trade lowers allocative efficiency.     

Effects of Demographic Characteristics of Logistics Firms on Their Performance and Job Satisfaction of Their Employees

This study investigates the effects of demographic factors of the logistics firms＇ employees （gender, age, education level, experience level, and department） on their job satisfaction and the effects of demographic factors of the logistics firms （company type, capital nature, and company experience level） on their performance of logistics activities about information technologies, interior relationship, and transportation based on the scale developed by the same authors and the sample of 39 logistics firms selected randomly in the city of Mersin and Adana in Turkey. According to findings, none of the demographic factors of the employees does aft~ct their job satisfaction. In terms of the demographic factors of the logistics firms, their experience level in the field is found to be significant in their logistics activities about information technology. In general, as the firm＇s experience increases, they perform better on information technology.     

Trading volume,return variability and short-term momentum

We propose short-term averages of daily stock-level trading volume and return variability as proxies for latent corporate news flow. Conditioning momentum strategies on these two proxies give a significant boost to winner-minus-loser alphas. Regardless of the portfolio formation and holding periods, price drift is larger after elevated levels of volume and variability, supporting the view that prices underreact to news. This pattern is not driven by micro-cap stocks and it is robust to corrections for systematic risk factors and stock characteristics such as liquidity and credit quality.     

Insider trading in an equilibrium model with default: a passage from reduced-form to structural modelling

We study, in the framework of Back [Rev. Financial Stud. 5(3), 387–409 (1992)], an equilibrium model for the pricing of a defaultable zero coupon bond issued by a firm. The market consists of a risk-neutral informed agent, noise traders, and a market maker who sets the price using the total order. When the insider does not trade, the default time possesses a default intensity in the market’s view as in reduced-form credit risk models. However, we show that, in equilibrium, the modelling becomes structural in the sense that the default time becomes the first time that some continuous observation process falls below a certain barrier. Interestingly, the firm value is still not observable. We also establish the no expected trade theorem that the insider’s trades are inconspicuous.