The effect of low-wage import competition on U.S. inflationary pressure

The effect of import competition from low-wage countries on U.S. inflationary pressure is estimated using a new methodology that identifies the causal response of prices to comparative advantage-induced supply shocks in these nations. The results of a panel covering 325 manufacturing industries from 1997 to 2006 show that imports from nine low-wage countries are associated with strong downward pressure on prices. When these nations capture a 1% share of the U.S. sector, the sector's producer prices decrease by 2.35%. Because import competition also influences the skewness of the distribution of price changes, it is likely to have impacted U.S. equilibrium inflation.     

Exchange rate pass-through into import prices revisited: What drives it?

A large sample of developed and emerging economies is utilized to investigate import exchange rate pass-through. Panel models reveal that various economic aspects of the destination country can explain about one third of the total variation in pass-through elasticities and the remaining variation comes largely in the form of unobserved country-specific effects. Inflation, exchange rate volatility, openness and relative wealth play a clear role as drivers of emerging markets’ pass-through whereas the output gap and protectionism appear influential more generally. Nonlinearity regarding large-versus-small changes in the exchange rate is quite pervasive. Our evidence challenges the widely-held view that pass-through has been universally falling in developed markets and that it is higher for emerging markets. The economic drivers are shown to play a role as out-of-sample predictors of pass-through. The findings confirm pricing-to-market theories and have implications for the optimal conduct of monetary policy.     

A reflection on analytical work in marketing: Three points of consensus

This article presents three points of consensus about game-theoretic work in marketing: First, equilibrium analysis is necessary for studying situations that have strategic interactions. In many cases, empirical examination of these strategic scenarios is difficult or impossible, at least without the guidance of an equilibrium model. Second, more general models are not necessarily ??better,?? because institutional details matter. Thus, the appropriate compromise between generality and specificity depends on the scope of the research question. Finally, there should be a two-way road between theory and empirics??theory is necessary to interpret empirical results, while empirical findings should guide theoretical modeling choices.     

Memory and Anticipation

The introduction of memory imperfections into models of economic decision making creates a natural role for anticipatory emotions. Their combination has striking behavioural implications. The paper first shows that agents can rationally select apparently dominated strategies. We consider Newcomb's Paradox and the Prisoners' Dilemma. We provide a resolution for Newcomb's Paradox and argue it requires the decision maker to ascribe only a tiny weight to anticipatory emotions. For some ranges of parameters, it is possible to obtain cooperation in the Prisoners' Dilemma with probability arbitrarily close to unity. The second half of the paper provides a theory of reminders.     

Discrete choice models of firms’ strategic decisions

This paper outlines the methods and applications related to the nascent area of empirical discrete games in marketing. Many key strategic decisions firms make involve discrete choices such as deciding the location of a new store, determining where in product space to position a product, or what options to offer in a service contract. These decisions are fairly complex and typically involve the consideration of a number of demand, cost, and competitive factors. What makes these discrete choices particularly interesting (and challenging to analyze) is that they are interrelated with the choices of other firms because firms take into account the actions of their competitors when making their own decisions. We describe the basic problem of dealing with interrelated discrete choices in a game-theoretic framework and present the various estimation methods available. A discussion of the existing applications and future research opportunities concludes the article.     

Subsidizing unit donations: matches,rebates, and discounts compared

Experimental Economics - An influential result in the literature on charitable giving is that matching subsidies dominate rebate subsidies in raising funds. We investigate whether this result...