The Efficiency Gains from Deregulation

We analyze the efficiency gains from deregulating monopolies using an equilibrium rent seeking model. McCormick, Shughart and Tollison (1984) argue that the initial effort to establish regulation dissipates the monopoly profit, limiting the gain from deregulation to the efficiency cost of monopoly. We establish conditions under which this proposition holds; in particular, the initial rent seekers must fail to anticipate the possibility of deregulation. Additionally, through application of the standard rent seeking model, we establish that the potential welfare gains exceed the cost of achieving deregulation. Our results provide support for policies aimed at eliminating monopoly and other types of economic distortion.     

Die Fernsehberichterstattung über die Arbeitslosigkeit und ihr Einfluss auf wahlrelevante Vorstellungen der Bevölkerung — eine Zeitreihenanalyse 1994–1998

There is a considerable amount of evidence suggesting that voters’ political preferences are influenced by domestic economic conditions. This paper examines the assumption that the connection between a specific economic development — unemployment — and the public’s voting preferences are mediated by the way in which television news cover unemployment. Using a time series analysis approach (August 1994–September 1998), it is shown that the media follow negative conditions in the labor market more closely than they follow positive conditions. Although television coverage fails to exert a direct effect on voting preferences for mainstream and radical parties, it does affect voting intentions independently and indirectly through its impact on the public’s perceptions of candidates, party competences and the perceived importance of unemployment as a national problem.     

On Some Exponential-Integral Functionals of Bessel Processes

This paper studies the moments of some exponential-integral functionals of Bessel processes, which are of interest in some questions of mathematical finance, including the valuation of perpetuities and Asian options.     

Policy Ineffectiveness or Offsetting Behavior? An Analysis of Vehicle Safety Inspections

Over 60 million registered motor vehicles in 20 states are subject to mandatory periodic safety inspection. The effect of safety inspection on roadway casualties has been estimated by several studies, with mixed results. We present a unique test of inspection effectiveness by analyzing the policy's impact on old cars in use and on repair industry revenue. Our results indicate that inspection has no significant impact on old cars or repair industry revenue, which implies that inspection does not improve the mechanical condition of vehicles. Unlike studies that examine casualties, our tests allow us to distinguish between policy ineffectiveness and Peltzman-type offsetting behavior as sources of inspection failure.     

Shareholder Wealth Effects of European Domestic and Cross‐border Takeover Bids

This paper analyses the short‐term wealth effects of large intra‐European takeover bids. We find announcement effects of 9% for the target firms compared to a statistically significant announcement effect of only 0.7% for the bidders. The type of takeover bid has a large impact on the short‐term wealth effects with hostile takeovers triggering substantially larger price reactions than friendly operations. When a UK firm is involved, the abnormal returns are higher than those of bids involving both a Continental European target and bidder. There is strong evidence that the means of payment in an offer has an impact on the share price. A high market‐to‐book ratio of the target leads to a higher bid premium, but triggers a negative price reaction for the bidding firm. We also investigate whether the predominant reason for takeovers is synergies, agency problems or managerial hubris. Our results suggest that synergies are the prime motivation for bids and that targets and bidders share the wealth gains.