IPO Pricing in “Hot” Market Conditions: Who Leaves Money on the Table?

This paper explores the impact of investor sentiment on IPO pricing. Using a model in which the aftermarket price of IPO shares depends on the information about the intrinsic value of the company and investor sentiment, I show that IPOs can be overpriced and still exhibit positive initial return. A sample of recent French offerings with a fraction of the shares reserved for individual investors supports the predictions of the model. Individual investors' demand is positively related to market conditions. Moreover, large individual investors' demand leads to high IPO prices, large initial returns, and poor long‐run performance.     

Growth Dynamics in the Biomedical/Biotechnology System

This article aims to understand the dynamics of growth in the biomedical/biotechnology system that consists of a variety of actors ranging from universities, medical supplies firms, and drug research firms, to clinical service suppliers. Based on a comparative study made in Ohio and in Sweden, we have analyzed three main factors: technology competencies, technology transfer, and networking capabilities. Our findings show a set of differences that can be grouped into two categories, viz. management and agglomeration externalities. Differences in management appear at three points: the resources allocated to technological competence development, managerial skills in the technology transfer phase, and the use of technology councils. Ohio seems to offer a better environment for starting up new firms and enabling these firms to successfully commercialize their technological assets. The agglomeration externalities that make a difference between the two regions might be grouped into two categories: increasing returns arising from network externalities and the advantages of networking with a variety of supporting organizations in the system.     

Fair Income Tax

In a model where agents have unequal skills and heterogeneous preferences over consumption and leisure, we look for the optimal tax on the basis of efficiency and fairness principles and under incentive-compatibility constraints. The fairness principles considered here are: (1) a weak version of the Pigou–Dalton transfer principle; (2) a condition precluding redistribution when all agents have the same skills. With such principles we construct and justify specific social preferences and derive a simple criterion for the evaluation of income tax schedules. Namely, the lower the greatest average tax rate over the range of low incomes, the better. We show that, as a consequence, the optimal tax should give the greatest subsidies to the working poor (the agents having the lowest skill and choosing the largest labour time).     

Disease‐Specific Moral Hazard and Optimal Health Insurance Design for Physician Services

This article analyzes disease‐specific moral hazard effects in the demand for physician office visits and explores whether optimal insurance for physician services should be designed to have disease‐specific cost sharing. Generalized method of moments is implemented to address the endogeneity of private health insurance, and the nonnegativity and the discreteness of physician services use. The results indicate that the moral hazard effect varies considerably across disease‐specific specialist care. The strongest moral hazard (for no‐condition related specialist visits) is almost twice the moral hazard effect of the weakest (for chronic condition related specialist visits). Although the findings indicate some variation in the moral hazard effect across disease‐specific general practitioner visits, the variation is less considerable. The main policy implication is that optimal insurance for physician services should be designed to have differential cost sharing based on disease status rather than to have uniform cost sharing.     

Agrarian Change under Globalization: Markets and Insecurity in Turkish Agriculture

This paper argues that deepening commodification in Turkish agriculture has changed the lives of farmers in significant ways. Global circuits have swept away the accustomed networks of information, production and marketing which had been largely established and maintained by comprehensive governmental support policies. New institutions have come into the picture establishing the links between small producers and larger markets. With state policy strengthening the domination of the market, prices and demand patterns fluctuate widely leaving small producers vulnerable to market forces and raising the level of risk and insecurity. This situation brings about a rapid de‐ruralization of the population in most regions of the country. In the fertile coastal strip of the southern and western provinces, however, commercial opportunities introduced by global circuits have led to a thriving market in products, land, and labour. Farming of vegetables and fruits for domestic and European markets dominate agricultural production. Seasonal employment, in tourism and in labour‐intensive crops, supplement household incomes, permitting the rural population to remain in the countryside.     

An experimental test of observational learning under imperfect information

Summary. Nearly all observational learning models assume that individuals can observe all the decisions that have previously been made. In reality, such perfect information is rarely available. To explore the difference between observational learning under perfect and imperfect information, this paper takes an experimental look at a situation in which individuals learn by observing the behavior of their immediate predecessors. Our experimental design uses the procedures of Çelen and Kariv [9] and is based on the theory of Çelen and Kariv [10]. We find that imitation is much less frequent when subjects have imperfect information, even less frequent than the theory predicts. Further, while we find strong evidence that under perfect information a form of generalized Bayesian behavior adequately explains behavior in the laboratory, under imperfect information behavior is not consistent even with this generalization of Bayesian behavior.Received: 29 January 2002, Revised: 12 May 2004, JEL Classification Numbers: C92, D8. Correspondence to: Boaçhan ÇelenWe completed most of this paper when we were both graduate students at New York University. This research was supported by the Center for Experimental Social Sciences (C.E.S.S.) and the C.V. Starr Center for Applied Economics at New York University. We are grateful to Andrew Schotter for his guidance and to an anonymous referee for his comments. We benefited from the expositional suggestions of William Baumol. We also acknowledge helpful discussions of Colin Camerer, Liran Einav, Xavier Gabaix, Douglas Gale, Charles Holt, David Laibson, and Matthew Rabin. We also benefited from suggestions by the participants of the 2002 International ESA Meeting and seminars at several universities.     

Environmental Quality,Medical Care Demand and Environmental Tax Interactions

Assuming that improvements in environmental quality lead to lower demand for medical care, it has been shown that general-equilibrium interactions with the tax-distorted labor market reduce the benefits from such improvements, and thus lower the second-best optimal environmental tax. This paper provides some insights on how the link between environmental quality, individual’s health capital, and the demand for medical care affects the analysis of pollution taxes. The paper develops structural conditions under which improvements in environmental quality decrease/increase the demand for medical care and discusses their implications for environmental tax interactions.      

Downside business confidence spillovers in Europe: evidence from causality-in-risk tests

This paper employs an extreme risk spillovers test to investigate the bilateral business confidence spillovers between Greece, Italy, Spain, Portugal, France, and Germany. After controlling for domestic economic developments in each country and common international factors, downside risk spillovers are detected as a causal feedback between Spain and Portugal and unilaterally from Spain to Italy. Extremely low business sentiments in France, Germany, and Greece are mostly due to the common adverse economic environment and to each country’s own domestic economic developments.