Consumer Ethics in the European Union: A Comparison of Northern and Southern Views

There is a growing interest in understanding consumer ethical actions in relation to their dealings with firms. This paper examines whether there are differences between Northern and Southern European Union (EU) consumers' perceptions of ethical consumer behaviour using Muncy and Vitell's (1992) Consumer Ethics Scale (CES). The study samples 962 university students across four Northern EU countries (Germany, Denmark, Scotland, The Netherlands) and four Southern EU countries (Portugal, Spain, Italy, Greece). Some differences are identified between the two samples, which might question the ability of organisations to consider the EU as one homogeneous market.     

Backward integration and collusion in a duopoly model with asymmetric costs

This paper formalizes the idea that input transactions might be used to implement side payments among colluding firms. A model is proposed to analyze the effect of backward integration on collusive outcomes in a downstream duopoly with asymmetric marginal costs. Vertical integration expands the set of collusive outcomes that are sustainable for a given realization of the discount factor. This is an additional effect of vertical integration that antitrust authorities should consider. Side payments implemented by input sales are more relevant the larger the difference in marginal costs, since they allow for the shifting of production towards the relatively more efficient firms, while maintaining firms’ incentives to collude. A price of the input above that posted by an alternative source or sales of the input below cost may be observed, depending on the realization of downstream firms’ costs.      

Equilibrium play and best response to (stated) beliefs in normal form games

We report experimental results on a series of ten one-shot two-person 3×3 normal form games with unique equilibrium in pure strategies played by non-economists. In contrast to previous experiments in which game theory predictions fail dramatically, a majority of actions taken coincided with the equilibrium prediction (70.2%) and were best-responses to subjects' stated beliefs (67.2%). In constant-sum games, 78% of actions taken were predicted by the equilibrium model, outperforming simple K-level reasoning models. We discuss how non-trivial game characteristics related to risk aversion, efficiency concerns and social preferences may affect the predictive value of different models in simple normal form games.     

The Evolution of Industrial Earnings Inequality in Mexico and Brazil

Industrial data are used to derive estimates of the pattern of change in wage inequality in Mexico and Brazil. Using the group decomposition of Theil's T -statistic, the paper presents monthly changes in the dispersion of industrial wages for Brazil (1976 through 1995) and for Mexico (1968 through 1998). Both countries show increases in wage dispersion over time, and a strong negative correlation is found with the rate of real economic growth. Other things equal, the later Brazilian heterodox stabilization plans seem to have reduced inequality in the short run.     

The effects of offshoring on wages: a meta-analysis

Review of World Economics - Offshoring, either as FDI or offshore outsourcing, is a phenomenon of increasing importance that has been widely studied in the economics literature. Studies analysing...     

Raising the bar (11)

This editorial summarizes the papers published in issue 14(2) so as to raise the bar in applied spatial economic research and highlight new trends. The first paper deals with past and current challenges for regional science research. The second paper investigates whether people living in deprived neighbourhoods have less chance of succeeding in a job application. The third paper finds evidence that real estate firms can avoid price competition when market shares of their allies increase in the vicinity. The fourth paper is methodological: it considers a spatial autoregressive (SAR) model with heterogeneous coefficients and extensively analyzes the impact of this extension on the direct and indirect effects estimates. The fifth paper proposes an innovative method to estimate the elements of the spatial weight matrix in a spatial econometric model. The final paper is econometric–theoretical: it proposes a new generalized method of moments (GMM) estimator of the coefficients of a SAR model if the error terms are heteroskedastic of an unknown form.     

Simulation-based estimation of state-dependent project volatility

Project volatility is an essential parameter for real options analysis, and it may also be useful for risk analysis. Many volatility estimation procedures only consider the volatility in the first year of the project. Others consider that different years may have different values of the project volatility. This article takes into account that volatility may change not only with time but also with the state of the project. Two possible definitions for the project volatility are considered, the log-variance and the variance of the project value, and two simulation-based procedures are proposed for estimating state-dependent volatility: two-level simulation and one-and-a-half-level simulation. Computational experiments show that both procedures perform better than the method proposed by Copeland and Antikarov and that the one-and-a-half-level simulation procedure leads to the most accurate estimations of project volatility.     

Social norms,cooperation and inequality

This paper analyzes the outcomes that can be supported by social norms in a society of infinitely lived and patient agents that are randomly matched in pairs every period to play a given game. I find that any mutually beneficial outcome can be supported by a self-enforcing social norm under both perfect information and a simple local information system. These Folk Theorem results explain not only how social norms can provide incentives that support cooperation in a community, providing support to the concepts of social capital and corporate culture, but also how they can support inequality and discrimination.I am grateful to David Levine for invaluable guidance and ideas. I also thank Anna Aizer, Hongbin Cai, Walter Cont, Ernesto Dal Bó, Jean-Laurent Rosenthal, Federico Weinschelbaun, William Zame, anonymous referees and seminar participants at Universidad de Buenos Aires, UCLA, Universidad T. Di Tella, Harvard Business School and Stockholm School of Economics for very useful comments and discussions