Reputation in Auctions: Theory, and Evidence from eBay

Employing a procedure suggested by a simple theoretical model of auctions in which bidders and sellers have observable and heterogenous reputations for default, we examine the effect of reputation on price in a data set drawn from the online auction site eBay. Our main empirical result is that seller's, but not bidder's, reputation has an economically and statistically significant effect on price.     

Learning through Simultaneous Play: Evidence from Penny Auctions

This paper contributes to the emerging empirical literature on penny auctions, a particular type of all‐pay auctions. We focus on the potential learning effects that bidders may experience over time but also (and particularly) across auctions as a result of their auction participation. Using detailed bid‐level information, we find that, similarly to earlier literature, bidders suffer from a sunk cost fallacy, whereby their probability of dropping out of an auction is decreasing in the number of bids they have already placed in that auction. Although we do find that learning through repeated participation alleviates the sunk cost fallacy, participation in simultaneous penny auctions emerges as a much more effective learning mechanism, ultimately contributing toward bidders earning higher individual surpluses.     

Auctions with different rates of patience: Evidence from the resale shoe market

Bids and asks are examined over time using auction data from a continuous auction of authentic deadstock sneakers. A theoretical analysis of a double auction over time shows that if buyers and sellers have different rates of patience, then a buyer (respectively, seller) who is patient will be more likely to set a lower initial bid (respectively, higher initial ask). This causes an increase in the unfulfilled bid–ask spread over time. These results are tested using data collected from the StockX website for two specific deadstock sneakers. Results show that the unfulfilled bid–ask spread is positively correlated with time.     

Making More from Less: Strategic Demand Reduction in the FCC Spectrum Auctions

When multiple items are sold through the use of simultaneous ascending-bid auctions, bidders can find it in their mutual interests to reduce their aggregate demand for the items while prices are still low relative to the bidders' valuations. The FCC's first broadband PCS auction provides examples of how such mutual reductions might be arranged even when the bidders are not allowed to communicate with one another outside of the auction arena.     

The Buyer's Option in Multi-Unit Ascending Auctions: The Case of Wine Auctions at Drouot

This paper studies multi-unit ascending (English) auctions with a buyer's option. The buyer's option gives the winner of an auction the right to purchase any number of units at the winning price. We develop a theoretical model and derive the optimal strategies for the bidders. The model predicts various behavioral implications (e.g., the winner never exercises the option, the price declines…) that are tested using a unique data set on wine auctions held at the Paris-based auction house Drouot. We also analyze why the buyer's option is used. Estimating the model in a structural econometric way, and using counterfactual comparisons, we find that the buyer's option does not affect the seller's revenue (relative to a system where the units are auctioned sequentially without the option). Drouot, however, saves a lot of time with the option and this effect represents a considerable amount of money. The time-saving effect seems thus to be the primary purpose of the buyer's option.     

Trade-offs and Synergies: Horizontalization and legitimacy in the Swiss wastewater sector

Recent public sector reforms have led to horizontalization, where public service providers have increased autonomy from the state. Such changes lead to queries about democratic responsiveness (input legitimacy), democratic procedures and efficacy (throughput legitimacy) and effectiveness (output legitimacy). The following question thus emerges: how and why does horizontalization affect input, output and throughput legitimacy? This inquiry is addressed by analysing two Swiss wastewater service providers with differing degrees of horizontalization. The analysis indicates that horizontalization leads to more synergies than trade-offs between the legitimacy dimensions. Particularly, input and throughput legitimacy can play a pivotal role in attaining citizens’ acceptance.     

Laboratory Experimental Testbeds: Application to the PCS Auction

The paper reviews the uses of laboratory experimental economics methods in the background research and implementation of the Personal Communication Systems auctions held by the Federal Communications Commission. The applications began during the rule making process with the testing of broad rules that might be implemented. Data from experiments were systematically used. The methods were used again in the software development process where several important contributions were made. Finally, experiences gained from the study of experimental auction processes were used in the actual management of the first auctions and in interpreting auction performance.     

Preemptive Bidding in Takeover Auctions: An Experimental Study

This paper presents the results of an experimental study on jump bidding in takeover auctions with entry costs. It provides support for signaling hypothesis behind jump bidding and analyzes how the size of the entry costs affects the bidders' behavior and their expected profits. It also shows that jump bidding allows the reallocation of the surplus from the seller to the first bidder but has little effect on the social surplus and the profits of the second bidder. Copyright © 2013 John Wiley & Sons, Ltd.     

Spillovers from universities: Evidence from the land-grant program

This paper estimates the short- and long-run effects of universities on geographic clustering of economic activity, labor market composition and local productivity and presents evidence of local spillovers from universities. I treat the designation of land-grant universities in the 1860s as a natural experiment after controlling for the confounding factors with a combination of synthetic control methods and event-study analyses. Three key results are obtained. First, the designation increased local population density by 6 percent within 10 years and 45 percent in 80 years. Second, the designation did not change the relative size of local manufacturing sector. Third, the designation enhanced local manufacturing output per worker by $2136 (1840 dollars; 57 percent) in 80 years while the short-run effects were negligible. This positive effect on the productivity in non-education sectors suggests the existence of local spillovers from universities. Over an 80-year horizon, my results indicate that the increase in manufacturing productivity reflects both the impact of direct spillovers from universities and general agglomeration economies that arise from the increase in population.     

Seasonality in asset returns: Evidence from the gold market

In this paper we test monthly mean daily returns to gold over the period January 1975 to December 1984 against three definitions of seasonality. Weak evidence exists for seasonality under the second of the three definitions. However, this is not prima facie evidence of market inefficiency, as the pattern is consistent with seasonality in Eurodollar interest rates reported by other authors. Differences in the time pattern of returns between on- and off-shore rates raises further questions.     

Efficiency in Banking: Empirical Evidence from the Czech Republic

The paper examines the cost efficiency of the Czech-banking system in the 1990s by applying the distribution free approach model. Reported results indicate that foreign banks were on average more efficient than the other banks, although their efficiency was comparable with the ‘good’ small banks’ efficiency in early years of their operation. Based on the estimated results it is argued that early privatisation of state-owned commercial banks and more liberal policy towards foreign banks in the early stage of transition would have enhanced the efficiency in the banking system. Anita Taci - The views and opinions are those of the author and not necessarily those of the EBRD.     

Risk-shifting: Evidence from the 2007 credit crisis

I find empirical evidence that financially distressed firms increase investment risk. I exploit a natural experiment where the treated firms must refinance long-term debt during the 2007–2008 credit crisis. When focusing on firms where the incentive to risk-shift is theoretically greater, such as financially vulnerable firms and those with better governance, I find the increase in investment risk is most prevalent among firms that are the most financially vulnerable and when executives benefit from increased risk. Contrary to previous empirical papers that did not find causal evidence of risk-shifting, these results suggest that the risk-shifting does occur when firms are financially distressed.     

On the Sub-optimality of Entry Fees in Auctions With Entry

We study a variation of Myerson’s (1981) model in which we allow for uncertainty about the number of bidders. In our set-up, an appropriate reserve price in a standard auction maximizes the auctioneer’s expected revenue. However, entry fees can be optimal only under some special conditions. Basically, there must be some homogeneity in bidders’ beliefs about the number of bidders and the auctioneer must know, to some extent, these beliefs.     

Fiscal Federalism in Transition: Evidence from Ukraine

Effects of fiscal federalism on redistribution and economic growth are analyzed for Ukraine, a country with large regional differences. Since there is virtually no such empirical literature, except a study of the German case, and since there are several potential flaws, the results must be interpreted in a very tentative way. We find that this relatively poor, disorganized country with little democracy has effectively redistributed income from relatively wealthy to relatively poor regions and thus promoted regional economic convergence, and even dampened the recession in both types of regions. We also find that the evidence does not reject the view that relatively poor regions used the transfers in a growth-conducive fashion, and the paper argues that the findings may have implications beyond the case of Ukraine. But the analysis is tricky, uncertain, and merely a small step to an interesting research issue.     

Herding in Open-end Funds: Evidence from China

This paper aims to detect the herding of Chinese open-end fund managers and examine the role that structural features of their industry play in their herding. The herding behaviour is investigated by employing the cross-sectional absolute deviation (CSAD) model, drawing on the Chinese open-end fund market for the 2007–2020 period. Our findings suggest that the presence of herding has been confirmed in all other types of funds except for income funds, with their herding being mainly driven by non-fundamental factors. Most types of funds show more pronounced herding when the market is rising and the fund flow is positive. Up markets foster positive fund flows, which promote herding to a certain extent. The structural characteristics of fund networks of common asset holdings produce an impact on the fund herding. Herding is observed in the network with larger centrality index and the disassortative network. Moreover, we also find that herding in most types of funds is more pronounced under conditions of high volatility and high economic policy uncertainty, and the fund herding tends to grow inversely with fund-size.     

Discrimination in rental markets: Evidence from Norway

This paper examines discrimination in the rental housing market. We analyze a rich data set on rental contracts from Norway. We find that tenants born abroad pay a statistically significant and economically important premium for their dwelling units after controlling for a comprehensive set of apartment, individual and contract specific covariates. Moreover, we find that the premium is largest for tenants of African origin. Finally, Norwegians whose parents were born abroad also face a statistically significant and economically important rental premium that is directly comparable to the premium paid by tenants born abroad.     

Loss from the chasing of MAX stocks: Evidence from China

We evaluate the implications of the MAX effect in the Chinese financial market. First, the MAX effect prevails in China: A zero-cost MAX strategy, which goes long (short) stocks with the highest (lowest) maximum daily return in the prior month, generates significant losses over the full sample period. Second, further analysis on firm characteristics confirms that the MAX stocks exhibit lottery-like features, and the (negative) performance of the MAX strategy varies over time and is related to investor sentiment. Third, the MAX effect gets weaker after the introduction of short-selling in 2010. Finally, we document that there exists a reversed MAX effect among mutual funds, because a similarly implemented MAX strategy generates significant positive risk-adjusted returns among equity funds in China.     

Failure Prediction: Evidence from Korea

This study is an attempt to construct and test a distress classification model for Korean companies. Utilizing a sample of 34 distressed firms from the recent 1990-1993 period and a matched (by industry and year) sample of non-failed firms, we observe the classification accuracy of two models. Both models utilize measures of firm size, asset turnover, solvency and leverage with one model available for testing only on publicly traded companies and one model applicable to all public and private entities. We observe excellent classification accuracy based on data from the first two years prior to distress. And, although the accuracy drops off after t -2, the models still provide effective early warnings of distress in many cases. The results of this study are of particular relevance in the current financial market scenario of increased deregulation and greater individual financial institution decision making. It is somewhat ironic for us to be proposing the use of a financial distress early-warning model given the current robust economic growth and low bankruptcy rate in Korea. But, the financial problems in Japan are a sobering reminder that high growth can be followed by financial excesses, increased business failures and large loan losses.     

Risk aversion in the supply chain: Evidence from replenishment decisions

This study investigates the impact of individual risk aversion on replenishment decisions in a multi-echelon supply chain, and explores whether this impact is affected by experiential learning. The methodology applied is that of observational studies, while the multi-echelon supply chain is modeled through the classical Beer Game. Participants in the study are purchasing and supply chain professionals. Results suggest that risk aversion leads to higher orders, Risk aversion persists even after experience of the game has been gained.     

Odds-setting efficiency in gambling markets: Evidence from the PGA TOUR

This paper describes the gambling market for PGA TOUR events for the 2002 season. The extent to which the odds predict the outcome is examined, illustrating how much information is captured in the odds and whether there are any identifiable biases in the odds. The overall implied profit to the casino is calculated as well as the returns to several naive betting strategies. By splitting the sample based on whether or not Tiger Woods is in the tournament, a “Tiger Woods effect” or a “thin market versus thick market effect” can be examined. On the whole, efficient markets propositions hold up, but the overwhelming share of the variation in the tournament outcome remains unexplained.