Efficient Recapitalization

We analyze government interventions to recapitalize a banking sector that restricts lending to firms because of debt overhang. We find that the efficient recapitalization program injects capital against preferred stock plus warrants and conditions implementation on sufficient bank participation. Preferred stock plus warrants reduces opportunistic participation by banks that do not require recapitalization, although conditional implementation limits free riding by banks that benefit from lower credit risk because of other banks’ participation. Efficient recapitalization is profitable if the benefits of lower aggregate credit risk exceed the cost of implicit transfers to bank debt holders.     

CAPITAL–LABOUR SUBSTITUTION AND ENDOGENOUS FLUCTUATIONS: A MONOPOLISTIC COMPETITION APPROACH WITH VARIABLE MARKUP*

This paper analyses an overlapping generations model with endogenous product diversity where strategic interactions between producers are introduced; it examines how they affect the stability properties of the steady state. Because of free entry, strategic interactions between producers imply a new dynamic feature, markup variability, promoting indeterminacy and endogenous cycles. Indeed, in contrast to the model without strategic interaction, endogenous fluctuations can occur when the substitution between the production factors, capital and labour, is not too weak, but in accordance with empirical estimates.     

Proprietary Costs and the Disclosure of Information About Customers

In deciding how much information about their firms’ customers to disclose, managers face a trade off between the benefits of reducing information asymmetry with capital market participants and the costs of aiding competitors by revealing proprietary information. This paper investigates the determinants of managers’ choices to disclose information about their firms’ customers using a comprehensive data set of customer‐information disclosures over the period 1976–2006. We find robust evidence in support of the hypothesis that proprietary costs are an important factor in firms’ disclosure choices regarding information about large customers.     

Marginal Subsidies in Tullock Contests

In a general Tullock contest, we examine a situation where a limited resource can be used to provide marginal subsidies to either player (weak or strong), or to increase the prize directly. We show that to maximize total effort, subsidizing the weak/strong player is preferred when the contest is sufficiently accurate/inaccurate. This result generalizes to n‐player lottery contests. In a lottery contest (Tullock contest with ), we derive the optimal scheme for a full range of resource: when the resource is small, it is optimal to only subsidize the weak player; when it is large, both players should be subsidized simultaneously.     

Consumer Reaction to Nutritional Labels on Food Products

In order to design the most useful instruments of consumer protection, it is necessary to understand how consumers perceive and use such instruments. Often, basic consumer rights are considered more extensively in the design of consumer protection policies than basic patterns of consumer behavior and motivation. We are more likely to make information on labels complete as viewed by the expert than useful in the normal behavior of the consumer. This study is devoted to discovering how consumers perceive nutritional labels on food products. It draws conclusions about their meaning and usefulness to consumers.     

Securitization and Bank Performance

Using predominantly precrisis U.S. commercial bank data, this paper employs a propensity score matching approach to analyze whether individual banks did improve their performance through securitization. On average, our results show that securitizing banks tend to be more profitable institutions, with higher credit risk exposure. Despite a more diversified funding structure, they face higher funding costs. We also find that securitizing banks tend to hold larger and less diversified loan portfolios, have less liquidity, and hold less capital. However, our analysis does not provide evidence to suggest that securitization had an impact upon bank performance.     

ASPECTS OF THE ECONOMICS OF LANDOWNERSHIP

There will be an increasing demand for additional capital as the pattern of landownership changes. In the past it was easier t o acquire on the death of a landowner a large block of land but as this land becomes broken up and becomes less homogeneous as far as landownership is concerned, this will give rise t o many social and economic problems. Undoubtedly the dead hand of the past lies heavily on the present and future pattern of British agriculture. There is a need for a change in attitude towards the new class of landowners, and for research on the implication of continuing policies that were initiated in times when there was reaction against landownership held by a few privileged individuals. It is hkely that if attention is not paid to these aspects we are likely to see landownership being transferred to institutional bodies. The past system of landownership on a personal basis will be replaced by various institutional arrangements on a very impersonal basis. Owner-occupiers (particularly those above 600 S.M.D.) faced with increasing charges for purchasing and servicing of landlord responsibilities will be forced to intensify their production and may demand greater support from government sources. It is suggested that as an immediate measure in addition to collecting information on a net farm income basis, data should be collected on the networth of individual farm businesses as well as of the industry as a whole. Non-agriculutural presswes en on land values need tc be considered. In the marginal areas part-time farming, together with tourism, or integration with other pursuits such as afforestation, appear to be sound enough proposals in general, but difficult to implement for the individual. More research work is required to assist us to deal with this problem of change of landownership and its interaction on the competing demands for capital.     

An Emerging Model for Purchase and Consumption of Non-Prescription Drugs

This paper presents the results of exploratory surveys which describe the behavior of the buyer and consumer of over-the-counter (OTC) drugs. The results are summarized in a simple decision model which describes the information search process under various conditions of symptom severity, user satisfaction and brand familiarity. Implications are discussed for regulating problem consumption. In particular, advertising and labeling regulations seem unlikely to reduce patterns of heavy usage observed in the research. Problems arising from the self medication process must be examined in a broader context of health care behavior.