Fairness and the employment contract: North American regions versus Germany

Substantial evidence shows that North Americans are generallymore accepting of the market than Europeans and attribute marketoutcomes to a larger degree to effort or skill. Thus, NorthAmericans might be more accepting of layoffs and pay cuts thanGermans, and Germans might be more sensitive to the proceduresand conditions under which pay cuts and layoffs occur. The empiricalresults from our quasi-experiment are largely in line with thesehypotheses. The results may help to explain and be explainedby the different labour market institutions in the differentregions.     

Management compensation and earnings-based covenants as signaling devices in credit markets

A firm seeks to raise capital in credit markets to fund risky operating activities. The firm has private information about the future cash flows from such activities. Firm owners delegate operating decisions to a manager who privately learns further information about the distribution of those cash flows subsequent to contracting, but before taking actions. Those actions include the selection of which operating activities to pursue and how much hidden effort to exert. At issue initially after introducing the problem is the efficient design of the manager's compensation as a device for signaling private information to lenders as well as for inducing operating decisions. Our results provide conditions under which a Bayesian Nash separating equilibrium satisfying the Cho–Kreps intuitive criterion exists. Broadly speaking, these results suggest that contracts that resolve internal adverse selection and moral hazard problems may serve as signaling devices in efficiently resolving information asymmetries with external parties. Next, we show how earnings-based debt covenants and the selection of conservative accounting methods may eliminate signaling costs altogether.     

Greater curvature antral flattening: A radiologic sign of NSAID-related gastropathy

We have occasionally encountered patients on nonsteroidal antiinflammatory drugs (NSAIDs) in whom double contrast barium studies revealed persistent flattening and stiffening of the distal greater curvature of the stomach. We therefore performed a study to determine the frequency of this finding in patients with NSAID-related gastropathy. Twenty-one cases of erosive gastritis, gastric ulcers, and/or gastric scarring associated with a known history of NSAID use were reviewed by two radiologists who made a joint decision regarding the presence or absence of greater curvature antral flattening. This finding was seen radiographically in five of the 21 patients (24%). Four of the five patients with antral flattening had associated erosions or ulcers in the gastric antrum. The remaining patient had antral flattening as an isolated finding. Our experience suggests that flattening of the greater curvature of the distal antrum, particularly if associated with erosive gastritis or gastric ulcers, is a useful radiologic sign of NSAID-related gastropathy.     

Relationships between municipal bond rates,underwriter margins and market yields

Expressions are given relating municipal bond coupon rates to underwrite profit margins and the market yield. These expressions are applied to the examination of net interest rates, net present value and the cost of capital of serial bond issues. The conditions which must be satisfied so that a decrease in net interest rate corresponds to an increase in net present value (hence a decrease in the cost of capital to the issuer) are presented.     

A model for screening and classifying potential accounting majors

This study is concerned with developing an explicit methodology with which to screen potential admission into Bowling Green State University's (BGSU hereafter) accounting program. Rather than predicting success in a specific accounting course, the researchers predict success in the accounting program at BGSU. Discriminant analysis was conducted in conjunction with a split sample approach, wherein the model was specified and the parameters estimated on part of the split sample. Then this model was utilized to classify student success or failure on the remaining part of the split sample. The classification results were promising with 85.2% of the students correctly classified.     

Intertemporal separability in overlapping-generations models

In a pure exchange overlapping-generations model with many goods, but a single consumer with preferences separable between two periods of life, there are (generically) finitely many equilibria in which money has no value. If money has value, then (generically) there is at most one dimension of indeterminacy. This property does not generalize to a model with many consumers and general preferences. It is shown why a separable representative consumer implies such strong conclusions. It is also shown that the absence of income effects leads to similar results.     

Regularity in overlapping generations exchange economies

In this paper we develop a regularity theory for stationary overlapping generations economies. We show that generically there is an odd number of steady states in which a non-zero amount of nominal debt (fiat money) is passed from generation to generation and an odd number in which there is no nominal debt. We are also interested in non-steady state perfect foresight paths. As a first step in this direction we analyze the behavior of paths near a steady state. We show that generically they are given by a second order difference equation that satisfies strong regularity properties. Economic theory alone imposes little restriction on those paths: With n goods and consumers who live for m periods, for example, the only restriction on the set of paths converging to the steady state is that they form a manifold of dimension no less than one, no more than 2nm.     

CROSS-SUBSIDISATION OF RURAL AREAS VIA UTILITY PRICING POLICIES*

Public utilities which apply roughly uniform prices to all consumers often engage in cross-subsidisation — charging prices which are below cost for consumers in low population density areas but above cost for consumers in high density areas. The distributional and allocative implications of this practice are examined and it is concluded that some cross-subsidisation may be justifiable on welfare grounds even where no externalities exist. There is, however, little empirical evidence released by utilities to enable assessment of the efficiency of their practices. If nothing else, we highlight the need for greater public disclosure of pricing practices by public utilities.