Internal rationality, imperfect market knowledge and asset prices

We present a decision theoretic framework in which agents are learning about market behavior and that provides microfoundations for models of adaptive learning. Agents are ‘internally rational’, i.e., maximize discounted expected utility under uncertainty given dynamically consistent subjective beliefs about the future, but agents may not be ‘externally rational’, i.e., may not know the true stochastic process for payoff relevant variables beyond their control. This includes future market outcomes and fundamentals. We apply this approach to a simple asset pricing model and show that the equilibrium stock price is then determined by investors? expectations of the price and dividend in the next period, rather than by expectations of the discounted sum of dividends. As a result, learning about price behavior affects market outcomes, while learning about the discounted sum of dividends is irrelevant for equilibrium prices. Stock prices equal the discounted sum of dividends only after making very strong assumptions about agents? market knowledge.     

Verbesserung der Materialeffizienz von kleinen und mittleren Unternehmen

Mit einem Impulsprogramm zur Verbesserung der Materialeffizienz von kleinen und mittelst?ndischen Unternehmen will die Bundesregierung die Ressourcenproduktivit?t in Deutschland erh?hen. Franz-Georg Simon und Klaus Dosch zeigen, dass noch erhebliche Potenziale zur effizienteren Nutzung der Ressourcen vorhanden sind. Das Impulsprogramm allein reicht jedoch nicht aus, um die ?kologisch notwendigen, aber auch ehrgeizigen Nachhaltigkeitsziele der Bundesregierung zu erfüllen.     

The future of European integration: Visions, challenges, perspectives

In the last five years the European Union has developed at a speed unknown since its beginnings in the Fifties. As a result, the EU is participating in the last three reserves of the European nation state's sovereignty: the currency, the judiciary and the military. The achievements already made, not only enlargement, make the reform of the structures of the Union a necessity. Its institutions must be tailored to these achievements, not just arithmetically adjusted to the increasing number of Member States. MEP, former President of the European Parliament, Brussels, Belgium, and Strasbourg, France. The article is based on a speech given at the Symposium “Challenges for the European Future”, Hamburg, 28 October 2000.     

RISK AND ILLEGAL TRADE

In many countries illegal imports have reached a considerable share of all national imports. Therefore, we have to investigate the economic effects resulting from smuggling. This paper explains this phenomenon by means of the managers' different individual attitudes towards risk and their different estimation of the exposure costs of illegal trade. It could be shown that this basis of smuggling is also an important aspect for a national economy, since the relative prices are affected by the risk and cost estimations of the trade firms.     

Analysing Farm‐specific Payments for Norway using the Agrispace Model

Norway maintains a complex system of activity or type specific coupled payments which account for a large share of farm income. Most of the payment rates are negatively related to farm size and are higher in remote areas compared to central regions. We present and use a newly developed recursive‐dynamic multi‐commodity model (Agrispace) with CES production functions depicting regional farm clusters derived from the full farm population. Using this model, we simulate impacts of current and alternative subsidy policies on production, prices, input use, income and farm structural change. Mapping cluster results to each farm along with behavioural rules allows estimation of individual profits and farm exits. Our results indicate that, in the short run, the current policy regime seems to support the policy objective of maintaining a variety of farms in all parts of Norway. In the long run, farm structural change is less affected by a policy reform that leaves total support levels unchanged.