Personal constructs: Their use in the marketing of intangible services

Marketing services requires identification of consumer's perceptions of salient attributes for positioning. Personal constructs (Kelly 1963) are at the core of consumers' determination of the degree to which attributes exist within phenomenon. Using Kelly's notion of personal constructs, this paper proposes a conceptual framework from which intangible attributes can be “tagged” to tangible signs.     

The capital gain lock-in effect and perfect substitutes

This paper analyses the effect of investors' accrued capital gains on optimal portfolio composition and equilibrium returns under the assumption that investors are able to re-balance with perfect substitute securities. No-dominance arguments are used to show that pricing differences because of accrued capital gains do not arise among securities which are perfect substitutes. These arguments are insufficient, however, to prevent pricing differences because of accrued capital gains among securities which are not perfect substitutes. Trading rules are developed which outline the conditions necessary for the realisation of accrued capital gains and the deferral of capital losses. These trading rules also provide guidance on which securities investors should sell, given their tax basis, when re-balancing their portfolios.     

Leading indicators of inflation in market economies

Inflation rates are cyclical in major market-oriented economies. Recently Geoffrey H. Moore and Stanley Kaish applied the well-known leading indicator approach to the development of a leading index of inflation cycles for the United States. Their index was based on measures of tightness in the labor market, and a measure of tightness in total credit markets, along with a measure of changes in industrial commodity prices. They found that this composite index reflects changes in inflation rate cycles reasonably well, and that it was more reliable than any of the three components taken alone. The present study broadens their study by attempting to duplicate the leading inflation index for forecasting changes in inflation rates in Canada, the United Kingdom, West Germany, France, Italy, and Japan. In general we find that the leading index is useful in anticipating changes in inflation rates in all these countries with the exception of France and Italy. As such we find that the forecasting properties of this index are often as promising in other countries as they have been in the U.S. Where they are not we conclude that there is a need for further research.     

Seigniorage: What is it and who gets it?

Seigniorage: Was ist das und wer bekommt es? - Aus fiskalischer Sicht handelt es sich bei „Seigniorage“ um die Einkünfte der Regierung aus der Schaffung von Geld, aus der Sicht der Geldtheorie um die Kosten des privaten Sektors für die Geldhaltung. Nachdem in diesem Artikel die Konten der Regierung und der Zentralbank in ein allgemeines Buchungssystem integriert worden sind, ergibt sich, da\ die Regierungseinnahmen aus „Seigniorage“ entscheidend von den institutionellen und operationalen Einzelheiten bei der Schaffung der monet?ren Basis abh?ngen. Eine Zentralbank mit ausreichender operationaler Unabh?ngigkeit wird in der Lage sein, den Umfang der „Seigniorage“, der der Regierung bei gegebenen Wachstumsraten der Geldmenge zuflie?t, zu beeinflussen. Das in dem Artikel vorgestellte Buchungssystem wird auf deutsche Verh?ltnisse angewandt. Die Analyse enth?lt Implikationen sowohl für die gegenw?rtige Praxis des EWS als auch für die geplante Schaffung einer Europ?ischen Zentralbank. Le seigneuriage: Qu’est-ce que c’est et qui est-ce qui le re?oit? — De point de vue fiscal, le seigneuriage est le revenu du gouvernement résultant de la frappe de la monnaie, de point de vue de la théorie monétaire il s’agit des co?ts du secteur privé qui résultent de la préférence pour la liquidité. Après avoir intégré le compte du gouvernement et celui de la banque centrale dans un cadre général de comptabilité, on a généralement constaté que le volume du seigneuriage dépend des détails institutionnels et opérationnels de la création de la base monétaire. Une banque centrale d’une indépendance suffisante sera en mesure d’influencer le montant du seigneuriage destiné au gouvernement, si les taux de croissance de la masse monétaire sont donnés. Le cadre de comptabilité est appliqué aux données de la RFA. L’analyse a des conséquences pour les opérations actuelles du Système Monétaire Européen ainsi que la création d’une Banque Centrale Européenne. Seignorage: ?qué es y quién se beneficia de él? — Desde el punto de vista fiscal, seignorage es el ingreso del gobierno por la creación de dinero; desde el punto de vista de la teoria monetaria es el costo incurrido por el sector privado al mantener dinero. Después de haber integrado las cuentas del gobierno y del banco central a las cuentas nacionales, se obtiene el resultado general que el ingreso del gobierno por seignorage depende en forma crítica de los detalles institucionales y operacionales de la creación de la base monetaria. Un banco central con un grado de independencia operacional suficiente estará en condiciones de influenciar el volúmen de seignorage imputable al gobierno, dada la tasa de crecimiento del dinero. El enfoque contable es aplicado a datos para Alemania. El análisis tiene implicaciones para la práctica actual del Sistema Monetario Europeo y también para el futuro banco central europeo.     

The microfoundations of rules vs. discretion

Using anN-person model, I explore the microfoundations of benevolent rules-dominant situations (of which the familiar time inconsistency models are examples). I show that under discretion the citizens confront a prisoner's dilemma, and I discuss the similar dilemmas embedded in the time inconsistency models. I then suggest new solutions to benevolent rules dominance: suboptimality can be avoided by accepting the discretionary regime and applying to the citizen population the standard remedies to the prisoner's dilemma. I received valuable comments from C. de Bartolome, T. Cowen, S. Fischer, B. Hillier, A. Irigoin, R. Kroszner, B. O'Flaherty, J. Ordover, H. Polemarchakis, R. Radner, A. Schotter, L. Svensson, L.H. White, three anonymous referees, and the participants of a summer luncheon at the Public Choice Center, George Mason University.     

The Capital Structure of Firms Subject to Price Regulation: Evidence from the Insurance Industry

Automobile and workers' compensation insurance are relatively homogeneous products sold under varying regulatory systems among the states. This paper investigates how price regulation affects the capital structure decisions of profit-maximizing insurers who sell insurance in both competitive and/or regulated markets. Specifically, we test the hypothesis that insurers subject to price regulation will choose to hold less capital. In addition, we hypothesize insurers subject to more stringent regulatory pricing constraints will choose even higher degrees of leverage because the benefits of holding additional amounts of capital are suppressed. We conduct empirical tests using cross-sectional data on insurers and find evidence consistent with both hypotheses. These findings have important implications for insurance price and solvency regulation. Stricter price regulation increases the default risk (i.e., reduces the financial quality) of insurance contracts purchased by individuals and firms.     

Reverse Mortgages and Prepayment Risk

This paper presents a detailed assessment of the Connecticut Housing Finance Authority (CHFA) reverse annuity mortgage (RAM) program. Because of the size and payment history of the program, the analysis provides an empirical framework on which to develop and assess other home equity conversion (HEC) programs. The program offers insights into the economic impact of these programs and the factors affecting prepayment. The program issued 765 annuities over five years, and 240 of these loans have terminated payments. The annuity payments had a demonstrable financial impact on the elderly participants, with an 88% average annual income increase. Prepayment rates varied across borrower and loan characteristics. The rates were most sensitive to marital status and were heavily affected by the age of the borrower and the term of the loan. Although default risk exists, the evidence indicates a low probability of the loan value exceeding the house value.     

Covenants not to Compete, Labor Mobility, and Industry Dynamics

Conventional wisdom among legal scholars is that contractual restrictions on employee mobility affect turnover and led to the overtaking of Massachusetts' Route 128 by Silicon Valley. We study a model of employee mobility in the spirit of Pakes and Nitzan to see when this can be the case. We show that, in fact, with certain frictions taken into account, a model of employee mobility can not only replicate the overtaking by Silicon Valley, but it can also help to explain Route 128s early dominance. Further, the model explains the relative success of firms that start as, or generate, spin-outs.     

The capital gain lock-in effect with short sales constraints

This paper develops a post-tax asset pricing model under the assumption that investors cannot defer the taxation of capital gains by costlessly short selling tax exempt perfect substitute securities. Contrary to existing literature, it is demonstrated that trading rules of immediate realization of losses and voluntary deferral of gains may not be optimal. Further, equilibrium prices are shown to be higher for stocks held by investors with large accrued capital gains and lower for stocks held by investors with small accrued capital gains or losses.