Expected Log-Utility Maximization Under Incomplete Information and with Cox-Process Observations

We consider the portfolio optimization problem for the criterion of maximization of expected terminal log-utility. The underlying market model is a regime-switching diffusion model where the regime is determined by an unobservable factor process forming a finite state Markov process. The main novelty is due to the fact that prices are observed and the portfolio is rebalanced only at random times corresponding to a Cox process where the intensity is driven by the unobserved Markovian factor process as well. This leads to a more realistic modeling for many practical situations, like in markets with liquidity restrictions; on the other hand it considerably complicates the problem to the point that traditional methodologies cannot be directly applied. The approach presented here is specific to the log-utility. For power utilities a different approach is presented in the companion paper (Fujimoto et al. in Appl Math Optim 67(1):33–72, 2013).     

Tiebout's tale in spatial economies: Entrepreneurship, self-selection, and efficiency

This paper establishes the existence and efficiency of equilibrium in a local public goods economy with spatial structures by formalizing Hamilton's [Hamilton, B.W., 1975. Zoning and property taxation in a system of local governments Urban Studies 12, 205–211] elaboration of Tiebout's [Tiebout, C., 1956. A pure theory of local public expenditures. Journal of Political Economy 64, 416–424] tale. We use a well-known equilibrium concept from Rothschild and Stiglitz [Rothschild, M., Stiglitz, J.E., 1976. Equilibrium in competitive insurance markets: an essay on the economics of imperfect information. Quarterly Journal of Economics 40, 629–649] in a market with asymmetric information, and show that Hamilton's zoning policy plays an essential role in proving the existence and efficiency of equilibrium. We use an idealized large economy following Ellickson, Grodal, Scotchmer and Zame [Ellickson, B., Grodal, B., Scotchmer, S., Zame, W.R., 1999. Clubs and the market, Econometrica 67, 1185–1217] and Allouch, Conley and Wooders [Allouch, N., Conley, J.P., Wooders, M.H., The Tiebout Hypothesis: On the Existence of Pareto Efficient Competitive Equilibria, (2004), mimeograph]. Our theorem is directly applicable to the existence and efficiency of a discrete spatial approximation of mono- or multi-centric city equilibria in an urban economy with commuting time costs, even if we allow the existence of multiple qualities of (collective) residences, when externalities due to traffic congestion are not present.     

Can Small Class Policy Close the Gap? An Empirical Analysis of Class Size Effects in Japan

Can smaller classes lead to better educational outcomes and greater equality in achievement? We estimate the causal effects of class size on achievement tests by using discontinuous changes in class size under the Japanese public compulsory education system. We employ a value‐added model that uses achievement tests conducted at two different times during the same school year. Our results show that a reduction in class size has significantly positive effects on Japanese language test scores in the sixth grade, especially at schools in wealthy areas. However, we find no evidence that a universal small class policy closes the achievement gap among schools.     

The Relationship Between Bank Risk and Earnings Management: Evidence from Japan

Using stock price data drawn from the 1990s in Japan, this paper empirically shows that bank risk is negatively associated with discretionary accruals, indicating that investors misinterpreted high reported earnings as favorable information about bank financial health. We also show that the negative relationship was very powerful prior to the major bank failures in late 1997 and 1998, but it diminished subsequent to the failures. We conclude that investors started to anticipate potential manipulation of financial reports by bank managers more rationally after the major bank failures.     

Sequential formation of alliances in survival contests

We consider a sequential formation of alliances à la Bloch (1996) and Okada (1996), followed by a two‐stage contest in which alliances first compete with each other, and then the members in the winning alliance compete again for an indivisible prize. In contrast to Konishi and Pan (2019a), which adopted an open‐membership game as the alliance formation process, alliances are allowed to limit their memberships (excludable alliances). We show that if members’ efforts are strongly complementary to each other, there will be exactly two asymmetric alliances: the larger alliance is formed first and then the remaining players form the smaller one. This result contrasts with the one under open membership, where moderate complementarity is necessary to support a two‐alliance structure. It is also in stark contrast with Bloch, Sánchez‐Pagés, and Soubeyran (2006), which shows that a grand coalition is formed in the same game if the prize is divisible and a binding contract can be used to avoid further conflicts after an alliance wins the prize.     

The Perceptual Gaps Between Companies’ and University Students’ Views on Fundamental Competencies

This study examines the gap between the competencies that companies expect of university students and those that university students believe companies are seeking. We find that a gap exists between companies’ and students’ evaluations of the competencies required in the workplace. Surprisingly, companies’ and students’ priorities related to competencies are different. Our results show that both companies and students highly value versatile personal competencies as essential skills for employees. Teamwork skills are not a top priority for companies although students value them highest of the various attributes. Gaps also exist between the two groups regarding their evaluation of personality traits. These findings contribute to the development of appropriate curricula for universities and career education.     

Pure Strategy Nash Equilibrium in a Group Formation Game with Positive Externalities

This paper identifies a domain of payoff functions inno spillovernoncooperative games withPositive externalitywhich admit a pure strategy Nash equilibrium. Since in general a Nash equilibrium may fail to exist, in order to guarantee the existence of an equilibrium, we impose two additional assumptions,AnonymityandOrder preservation. The proof of our main result is carried out by constructing, for a given gameG, a potential function Ψ over the set of strategy profiles in such a way that the maximum of Ψ yields a Nash equilibrium in pure strategies ofG.Journal of Economics LiteratureClassification Numbers: C72, D62, H73.