Austrian Economics and Public Choice

The Review of Austrian Economics -     

The Informational Role of Stock and Option Volume

This article analyzes the intraday interdependence of orderflows and price movements for actively traded NYSE stocks andtheir Chicago Board Options Exchange (CBOE)-traded options.Stock net trade volume (buyer-initiated volume minus seller-initiatedvolume) has strong predictive ability for stock and option quoterevisions, but option net trade volume has no incremental predictiveability. This suggests that informed investors initiate tradesin the stock market but not in the option market. On the otherhand, both stock and option quote revisions have predictiveability for each other. Thus, while information in the stockmarket is contained in both quote revisions and trades, informationin the option market is contained only in quote revisions.     

Production restructuring in the textiles and clothing industries

This article analyses the processes of restructuring in the textiles and clothing industries in a locality. Particular attention here is focused on new technology, labour flexibility, sub-contracting patterns and skill factors. The extent to which the process of restructuring involves a conscious and deliberate move to new patterns of work organization is considered.     

The Impact of Environmental Contamination on Condo Prices: A Hybrid Repeat-Sale/Hedonic Approach

We extend the literature on the impact of externalities using an approach based on a hybrid of hedonic and repeat-sales methods. The externality in question is groundwater contamination in Scottsdale, Arizona. The use of condominium sales allows us to assume that major physical characteristics remain unchanged, but location parameters may be altered by urban growth and development as well as contamination. We find an economically significant discount for properties located in the contaminated area. Interestingly, it does not appear until several years after the contamination becomes publicly known, and it seems to have disappeared before the end of the study period.     

Military Shooter Video Games and the Ontopolitics of Derivative Wars and Arms Culture

The “military shooter” (MS) video game is the latest in a long line of video games that immerse the player in a fantasy world. Although the MS video game was once regarded as excessively violent, it has now become socially acceptable, as the virtues of military life have become incorporated in popular culture. That transition has taken place in part because the military has begun to work closely with the producers of MS video games, such as the “Call of Duty” series, to imagine and prepare for future military threats, both on virtual battlefields and on actual terrain. The increasing use of highly paid corporate mercenaries in actual war zones has also influenced game play by introducing players to the potential for large financial rewards by becoming experts in virtual combat. Thus, MS video games incorporate players not only into the technological domain of modern warfare but also into the economic domain of fighting war for profit. In the post 9/11 era, warfare has increasingly become a strategy of risk management, in which the battlefield is less a physical space than a semiotic landscape of conflicting loyalties and financial incentives. The MS shooter game is conditioning the soldiers of the future to fight in this shadowy world that lies between the virtual and the real. All of these changes have political ramifications. In the long run, constant exposure to these games is creating a subculture that is not only immersed in an armament culture but also increasingly allied with current patterns of geopolitical domination and subordination.     

Aspekte einer Neugestaltung des Rechtes der Versicherungsvermittlung

The current fundamental reform of the German insurance law cannot and will not stop short of the law of insurance mediation. Up to now Sec. 43 to 48 Versicherungsvertragsgesetz (VVG = German Insurance Act) govern only one type of insurance intermediary known as insurance agent. The act only sets up rules to which extent the insurance agent has authority to bind the insurer. In the way the law is construed by the courts it differs in many aspects from the written law. Thus it is suggested to define the generic term ?insurance intermediary“ in the act as well as the subcategories ?insurance broker“ and ?insurance agent“, whereby the term ?insurance agent“ also includes the field staff employed by an insurer. In connection with the diffi-cult distinction between insurance brokers and insurance agents it remains questionable on which type of intermediary the rules regulating the relationship between agents and insurants and thereby protecting the potential customers should be applied accordingly. This controversial and in practice significant question should be explicitly decided by the legislator for reasons of legal certainty. In so far Sec. 43a of the Austrian Insurance Act could act as a model function. Regarding the insurance agents’ authority to receive (Empfangsvertretungsmacht des Versicherungsvertreters) for the insurer propositions exist to explicitly declare Sec. 43 No.l VVG, which grants the agent the authority to receive when accepting a contractual offer for the insurer, as mandatory. This suggestion would be in accordance with the current case law. Furthermore the wording of Sec. 43 No.l VVG should be altered so that the insurants’ pre-contractual risk-notifications, which the prevailing opinion already regards as being included, is explicitly mentioned. In principle Sec. 43 No.2 WG, which grants the agent the authority to receive notifications and representations for the duration of the insurance contract, should be declared as mandatory, too. Exempted should be the authority to receive for dispositions regarding the entitlements to benefits from (life) insurance contracts and the right to receive the insured sum. Sec. 44 WG, which strongly restricts the attribution of the agent’s knowledge to the insurer, is unconvincing, especially from a legal policy point of view. Therefore it is to be cancelled without substitution. Finally the legislator should refrain from codifying the customary liability based on the principles of reliance.     

Marketing in the emerging era of build-to-order manufacturing

Build-to-order (BTO) and lean manufacturing processes are changing the paradigms under which businesses-to-business marketers operate. For example, BTO processes allow marketers to customize products to a greater degree, creating a competitive advantage over traditional manufacturing. Business-to-business (B2B) marketers who take advantage of the operational efficiencies and effectiveness that emerge from BTO are outperforming firms that utilize traditional manufacturing processes in multiple industries, such as office furniture, personal computers, and windows. This paper examines the long-term impact of the adoption of build-to-order manufacturing strategies on the marketing function and identifies marketing strategies associated with successful BTO companies. Throughout, the paper highlights managerial implications and proposes directions for future research.     

Analysis of marginally specified semi-nonparametric models for clustered binary data

Generalized linear mixed models are widely used for analyzing clustered data. If the primary interest is in regression parameters, one can proceed alternatively, through the marginal mean model approach. In the present study, a joint model consisting of a marginal mean model and a cluster-specific conditional mean model is considered. This model is useful when both time-independent and time-dependent covariates are available. Furthermore our model is semi-parametric, as we assume a flexible, smooth semi-nonparametric density of the cluster-specific effects. This semi-nonparametric density-based approach outperforms the approach based on normality assumption with respect to some important features of 'between-cluster variation'. We employ a full likelihood-based approach and apply the Monte Carlo EM algorithm to analyze the model. A simulation study is carried out to demonstrate the consistency of the approach. Finally, we apply this to a study of long-term illness data.     

China's New Role in the International Financial Architecture

The rise of China is challenging the international financial architecture in a number of ways. This paper highlights three that are of critical importance: the challenge of absorbing massive Chinese savings; the incorporation of China into a cohesive global financial safety net; and the organisation of China's participation in funding the demand for international investment projects. The global financial architecture needs to be reformed. But what role should China play? The paper defines the options open to China and the opportunities and barriers it will face. We argue that China can work with the established economic powers in reforming the existing architecture. At the same time, China seeks cooperation in building new institutions and organisations that fill gaps in the existing arrangements. But no matter how international financial diplomacy plays out in the near term, deep financial and economic reform at home will alone deliver China a central role in the international financial architecture. Domestic reform could also attend to some of the challenges that currently plague China's impact on the system. The success or failure of these domestic reforms will be at the crux of the strength or fragility of the international financial architecture in the years ahead.