The economics of a good party: Social mechanics and the legitimization of art/culture

Putting value on cultural goods is a messy business. Cultural value is not just an economic act but instead part of an intense social process of valorization and legitimization. Art/culture is socially consumed and socially aware. Economic value is determined by intangible (and ephemeral) social value formed from and within specific contexts by particular people, the “scene”, so to speak. What are the mechanisms by which the social dynamics of art/culture impact its economic legitimacy? This article looks at how art/culture attains market value, focusing on the social contexts by which culture is produced, evaluated and distributed.     

Effects of information format and similarity among alternatives on consumer choice processes

This study explores how similarity among alternatives and a new information format, branching, affect consumer choice processes. A branching format organizes real, physically present objects by attribute levels. Thirty-six female consumers made six choices from sets of products in a laboratory setting and provided concurrent verbal protocols. Compared to a brand format, a branching format elicited fewer comparisons, had no effect on cognitive effort other than comparisons, and had no effect on intention to choose the best. Compared to the similar set, the dissimilar set elicited more comparisons, lower levels of other measures of cognitive effort, and less intention to choose the best. These effects of similarity and information format were consistent across the two product classes tested. However, the effects of information format and similarity on comparisons differed from their effects on other measures of cognitive effort. She received her Ph.D. from Columbia University. Her research on consumer choice processes has been published in Advances in Consumer Research and Psychology and Marketing.     

Aviation Policy: Past and Present

Airline deregulation has been a symbol of the trend toward less expansive government over the past quarter century. The move from economic regulation to deregulation has delivered on its efficiency promises. There have been significant benefits to consumers in terms of lower prices and more convenient schedules. However, airline competition, particularly at hub airports, remains imperfect. The nature of these imperfections is explained better by models of oligopolistic behavior than by the contestability theory. Paradoxically for this industry, the terrorist attack of September 11, 2001, has ushered in an expanded role of government in aviation policy. This expanded role does not reinstate government intervention in airline economic decisions. Rather, it provides financial stabilization (bailout and loan guarantees) of the industry in the short run and long-term structural change in aviation security.     

Audit Reports in Australia during the Global Financial Crisis

The Global Financial Crisis reduced economic growth, impacted equity and credit markets, and increased business risk. To the extent that this increased risk translates into greater uncertainty of companies’ ability to continue as going concerns, this should be reflected in audit reports. This paper investigates how the crisis impacted auditor reporting in Australia by examining the period 2005–2009. It finds that the main reason for audit report modification is going concern and that modification rates increased from 12% in 2005–2007 to 18% in 2008 and 22% in 2009. Serious audit report qualification rates remain around 3%.     

Management Guidance Pre‐ and Post‐Restatement

We examine whether the quality of restating firms’ management guidance differs in periods before and after restatement announcements. While characteristics of restating firms and the consequences of restatement have been a central topic in accounting and auditing research, the quality of management guidance around restatements is less well understood. We consider two competing characterizations of the link between management forecast accuracy and bias and restatement (an event that tends to signal poor financial controls): “Forecast–Opportunism Explanation” and “Forecast–Ability Explanation”. Under the Forecast–Opportunism Explanation, pre‐restatement weaknesses in financial controls enable managers to manipulate earnings toward forecasts and to meet or exceed opportunistically biased forecasts, and the post‐restatement strengthening of financial controls constrains opportunistic behavior. Under the Forecast–Ability Explanation, pre‐restatement weaknesses in financial controls impede managers’ ability to issue accurate forecasts, and post‐restatement improvements remove impediments so that the accuracy of forecasts improves; forecast bias remains unaffected. Evidence indicates that before a restatement, restating firms’ forecasts are more accurate and relatively more downwardly biased than control firms’ forecasts. Post‐restatement, restating firms have less accurate and less downwardly biased management guidance. Our overall results are consistent with the Forecast–Opportunism Explanation.