UNCERTAINTY AND THE THEORY OF MARK-UP PRICING

This paper examines the role of demand uncertainty in influencing a firm's mark-up pricing decision. With no uncertainty the marginalist approach represents this mark-up as inversely and solely determined by the elasticity of demand. Here it is shown that the introduction of uncertainty does not alter this simple dependency for a risk neutral firm. For a risk averse firm, however, the mark-up is shown to depend on a range of factors, including the level of fixed and variable costs and the level of expected demand. It is argued that such variability of margin is more in keeping with observed behaviour.     

UNCERTAINTY AND THE POSITIVE THEORY OF THE PUBLIC ENTERPRISE*

This paper extends the analysis of Rees (1984a) of a public enterprise pursuing a size-related objective in the face of uncertain demand to a situation where its managers may be risk neutral or risk averse and where the public enterprise may produce more than one output. The optimal pricing policy of the public enterprise is analysed and the importance of not only the expected profit constraint but also the attitude to risk of the public enterprise in determining its relative prices is demonstrated.     

TIME‐VARYING UNCERTAINTY AND THE CREDIT CHANNEL

We extend the Carlstrom and Fuerst (American Economic Review, 1997, 87, pp. 893–910) agency cost model of business cycles by including time‐varying uncertainty in the technology shocks that affect capital production. We first demonstrate that standard linearization methods can be used to solve the model yet second moments enter the economy's equilibrium policy functions. We then demonstrate that an increase in uncertainty causes, ceteris paribus, a fall in investment supply. We also show that persistence of uncertainty affects both quantitatively and qualitatively the behaviour of the economy.     

THE MISSING LINK BETWEEN INFLATION UNCERTAINTY AND INTEREST RATES

In the literature, there is no consensus about the direction of the effects of inflation uncertainty on interest rates. This paper states that such a result may stem from differentiation in the sources of the uncertainties and analyzes the effects of different types of inflation uncertainties on a set of interest rates for the UK within an interest rate rule framework. Three types of inflation uncertainties – impulse uncertainty, structural uncertainty and steady‐state uncertainty – are derived by using a time‐varying parameter model with a Generalized Autoregressive Conditional Heteroskedasticity specification. It is shown that the impulse uncertainty is positively and the structural uncertainty is negatively correlated with the interest rates. Moreover, these two uncertainties are important to explain short‐term interest rates for the period of inflation targeting era. However, this time, the impulse uncertainty is negatively and the structural uncertainty is positively correlated with the overnight interbank interest rates, which is consistent with the general characteristic of the inflation targeting regimes. Lastly, the evidence concerning the effect of the steady‐state inflation uncertainty on interest rates is not conclusive.     

BACKGROUND RISK AND THE THEORY OF THE COMPETITIVE FIRM UNDER UNCERTAINTY*

This paper examines the optimal production decision of a firm under output price risk á la Sandmo when the firm also faces a dependent background risk. It is shown that standard risk aversion plus a non-negative association between the output price risk and the background risk are sufficient to ensure a reduction in the firms optimal output upon introduction of the background risk. The paper investigates the impact of a deterministic transformation of the background risk on the firms optimal production decision. It is shown that decreasing absolute risk aversion in Ross' sense is among the sufficient conditions that generate an unambiguous negative comparative static result.     

THE POLITICS OF PRECOMMITMENT WITH ELECTORAL UNCERTAINTY AND TRANSACTION COSTS

Despite the lack of legal channels through which binding commitments can be made by the government, economic and political factors enable it to affect future outcomes. In practice, large transaction costs are associated with any significant change of policy, and therefore the current government can adopt policies so that certain outcomes are more likely to be realized by its successor. In this paper it is argued that transaction costs combined with electoral uncertainty are likely to drive the current government to adopt a policy which is extreme relative to the preferences of the existing political parties. This policy is adopted in order to ensure that due to transaction costs, the future government will not depart radically from the most preferred policy of the current government. If the current policy is likely to affect the election outcome, then, in addition to the above considerations, the electorate attitudes would have to be taken into account by the government. Hence, the current government confronts two factors in choosing its policies: the behavior of the future government and the behavior of the electorate. The interplay between the two factors determines the choice of the current policy.     

ANARCHY, UNCERTAINTY, AND THE EMERGENCE OF PROPERTY RIGHTS

This paper investigates whether Lockean first claimer property rights should be expected to emerge in anarchy. Individuals behind a veil of uncertainty about their future wealth decide independently whether to commit to using fcrce. Neither the contractarian hypothesis that a thicker veil of uncertainty supports more co-operation nor Demsetz's hypothesis that well-defined property rights emerge as the value of the externality from not having private property increases is unambiguously implied by the model.     

RETESTING THE UNCERTAINTY EFFECT USING LOTTERIES WITH REAL PRODUCTS AND MONEY

In the current study, several experiments re‐examine the uncertainty effect using lotteries that include real products, monetary outcomes and electronic gift cards in a between‐subjects design. The study also takes the selling position into consideration, in addition to the buying position considered by all previous works on the uncertainty effect. The results indicate that for all types of lotteries, the bids are higher than the bids for the worst possible realization. These findings are consistent with the internality axiom and do not support the uncertainty effect.     

中国城乡居民消费的二元特征与跨期不确定性分析

改革开放以来,我国城乡居民收入差距过大,城乡消费的不平衡性和不确定性等因素造成了城乡居民消费上的显著差距。文章立足以上情况,对我国转型期间城乡居民消费的二元结构和跨期不确定性进行分析,并给出一定的对策。     

MARKET STRUCTURE, PROGRAM DIVERSITY, AND RADIO AUDIENCE SIZE

This paper examines the relationships among radio station listenership, the number of program formats, and the number of stations. These relationships are statistically significant and consistent with theory, but the interrelationships are numerically small. The results imply that proposals by the federal Communications Commission and Congress to relax ownership restrictions must induce substantial changes in station numbers in order to noticeably increase programming diversity. Merely modest changes in these numbers will have only small diversity effects. The paper's results also imply that merely mandating the number of formats in a market may not be in the interests of listeners.     

THE 1992 RESEARCH ASSESSMENT EXERCISE: OUTCOME,OUTPUTS AND INPUTS IN ECONOMICS AND ECONOMETRICS*

This paper presents the results of a statistical analysis of the University Funding Council's 1992 Research Assessment Exercise (RAE92), focusing here on the Economics and Econometrics Unit of Assessment. The data collected to support the RAE92 provide information about the inputs and outputs of the research process across all institutions of higher education in the UK. The paper has two primary aims: firstly, to provide information to the economics profession in order to aid self-appraisal at the departmental level by providing quantitative data on research inputs and outputs relating to all 60 departments of economics assessed in the RAE92; and secondly, to investigate the extent to which variations between departments in their research ratings can be ‘explained’(in a statistical sense) by various quantitative research indicators constructed from the RAE92 database. The information suggests that research indicators constructed from the RAE92 database provide potentially valuable information about research activity in economics and econometrics in the UK.     

PRICE CONSTRAINTS,FORWARD MARKETS AND THE COMPETITIVE FIRM UNDER PRICE UNCERTAINTY*

This article proposes a model of the competitive firm simultaneously facing price constraints and forward markets under price uncertainty. The incorporation of a forward market is shown to be very important because a risk-averse firm will set its production decision to the forward price regardless of its attitude toward risk. In addition, we show that risk aversion is a sufficient condition for a decrease in risk to reduce the amount hedged when risk is reduced through a mean-preserving price squeeze.     

IMPACT OF EXCHANGE RATE UNCERTAINTY ON COMMODITY TRADE BETWEEN THE US AND AUSTRALIA*

Exchange rate volatility is said to have negative or positive effect on trade flows. Previous studies that considered the impact of exchange rate uncertainty on the trade flows of Australia employed trade data either between Australia and rest of the world or between Australia and her few major trading partners. They were unable to discover any significant impact. In this paper when we disaggregate trade data by commodity between Australia and one of her major trading partners, the US, we find exchange rate volatility to have short‐run effects on trade flows of most industries. However, the short‐run effects last into long run, only in limited cases, though more in export commodities than import ones.     

FUTURE POLICY UNCERTAINTY, EFFORT, AND THE RESPONSIVENESS OF OUTPUT TO MARKET SIGNALS

This paper analyses the consequences of future policy uncertainty on the allocation of effort in an economy undergoing reforms. We demonstrate that uncertainty regarding future tax policies may reduce present effort, and will also reduce the responsiveness of output to productivity shocks and other market signals. The discussion has relevance for cases in which privatization will make present managers of firms the future owners and residual claimants to future output. An expectation that the purchasing price of the firm will have a positive relationship to present output will induce the manager to reduce contemporaneous effort, and uncertainty regarding the relationship will also depress present managerial effort.