Product Differentiation by Competing Vertical Hierarchies

We revisit the choice of product differentiation in the Hotelling model, by assuming that competing firms are vertically separated, and that retailers choose products' characteristics. The “principle of differentiation” does not hold because retailers with private information about their marginal costs produce less differentiated products in order to increase their information rents. Hence, information asymmetry within vertical hierarchies may increase social welfare by inducing them to sell products that appeal to a larger number of consumers. We show that the socially optimal level of transparency between manufacturers and retailers depends on the weight assigned to consumers' surplus and trades off two effects: higher transparency reduces price distortion but induces retailers to produce excessively similar products.     

Family succession and firm performance: Evidence from Italian family firms

This article contributes to the growing empirical literature on family firms by studying the impact of the founder–chief executive officer (CEO) succession in a sample of Italian firms. We contrast firms that continue to be managed within the family by the heirs to the founders with firms in which the management is passed on to outsiders. Family successions, that is, successions by the founder's heirs, are further analyzed by assessing the impact of the sectoral intensity of competition on the post-succession performance. This analysis also addresses the endogeneity in the timing of the CEO succession by controlling for a pure mean-reversion effect in the firm's performance. We find that the maintenance of management within the family has a negative impact on the firm's performance, and this effect is largely borne by the good performers, especially in the more competitive sectors. These results indicate that there is no inherent superiority of the family-firm structure and emphasize the importance of conducting an analysis of governance in a variety of institutional settings.     

Mutual Fund Stock‐Picking Skill: New Evidence from Valuation‐ versus Liquidity‐Motivated Trading

We propose a novel Trade Motivation Matrix that allows differentiating funds’ valuation‐motivated (VM) and liquidity‐motivated (LM) trades on single trade level. It thus enables analyses of stock‐picking skill on three levels: trade, stock, and fund. On trade level, we find significant outperformance of VM buys and significant underperformance of VM sells, indicating manager stock‐picking skills, especially during illiquid market periods. VM trades outperform LM trades, confirming negative performance effects due to flow risk, especially when market liquidity is low. On stock level, collective VM buying explains high future stock returns while collective VM selling is related to future losses, indicating wisdom of the crowd. On fund level, higher trading discretion, measured by a higher degree of VM trading, is observed for smaller, older funds holding higher cash buffers. Finally, higher trading discretion is related to higher future fund alpha, especially during illiquid times.     

RELATIONAL GOODS, MONITORING AND NON-PECUNIARY COMPENSATIONS IN THE NONPROFIT SECTOR: THE CASE OF THE ITALIAN SOCIAL SERVICES

ABSTRACT ** :  This paper investigates the nonprofit wage gap suggesting a theoretical framework where, like in Akerlof (1984) , effort correlates not only with wages, but also with non-monetary compensations. These take the form of relational goods by-produced in the delivery of particular services. By paying higher non-pecuniary compensations, the nonprofit sector attracts intrinsically similarly skilled, but more motivated workers, able to provide in fact a similar (or potentially higher) level of effort than their counterparts in the forprofit sector. On an empirical ground, the paper provides a number of econometric tests that confirm the main predictions of the model in Italy's case. It adds to the available empirical literature by introducing in the analysis direct measures of non-pecuniary compensations and job satisfaction.     

On the global acceptance of IAS/IFRS accounting standards: The logic and implications of the principles-based system

The widespread acceptance of International Accounting Standards (IAS)/International Financial Reporting Standards (IFRS) makes it timely to examine their technical determinants as well as their implications for the accounting profession and the process of accounting harmonization. In this respect, we suggest that the principles-based approach to the standards and its inner flexibility enables the application of IAS/IFRS to countries with diverse accounting traditions and varying institutional conditions. Furthermore, the principles-based approach involves major changes in the expertise held by accountants and, hence, in their educational background, training programs, and in the organizational and business models of accounting firms. Finally, we submit that the standards set by the IAS/IFRS constitute a step forward in the process of accounting harmonization, although there is still far to go in the comparability of accounting measures across countries and regions.     

Forming priors for DSGE models (and how it affects the assessment of nominal rigidities)

We discuss prior elicitation for the parameters of dynamic stochastic general equilibrium (DSGE) models, and provide a method for constructing prior distributions for a subset of these parameters from beliefs about steady-state relationships and second moments of the endogenous variables. The empirical application documents how the specification of the prior distribution affects our assessment of the relative importance of price and wage rigidities in a New Keynesian DSGE model.     

Socio-Economic Impact of Super Typhoon Harurot in San Mariano, Isabela, the Philippines

This paper reports on the socio-economic effects and coping mechanisms of farm households affected by super typhoon Imbudo in San Mariano, Isabela, the Philippines. Estimations of economic losses are given based on 150 interviews among the rural population. The relative loss per crop as part of the annual household income for yellow corn, banana, and rice were 64%, 24%, and 27%, respectively. Unexpectedly, most farm households did not change their agricultural strategies and continued with “business as usual” (78%). The main explanation for this lack of adaptation is found in the cultural and societal structure of farm households and their traders. This paper concludes with a short-term and long-term vulnerability and resilience analysis for the households, the socio-agricultural system, and the ecological system.     

Incorporating biometric data in models of consumer choice

The use of neuro-physiological data in models of consumer choice is gaining popularity. This article presents some of the benefits of using psycho-physiological data in analyzing consumer valuation and choice. Eye-tracking, facial expressions, and electroencephalography (EEG) data were used to construct three non-conventional choice models, namely, eye-tracking, emotion and brain model. The predictive performance of the non-conventional models was compared to a baseline model, which was based entirely on conventional data. While the emotion and brain models proved to be as good as conventional data in explaining and predicting consumer choice, the eye-tracking model generated superior predictions. Moreover, we document a significant increase in predictive power when biometric data from different sources were combined into a mixed model. Finally, we utilize a machine learning technique to sparse the data and enhance out-of-sample prediction, thus showcasing the compatibility of biometric data with well-established statistical and econometric methods.     

Ranking participants in tournaments by means of rating functions

In this paper we bring a novel approach to the theory of tournament rankings. We combine two different theories that are widely used to establish rankings of populations after a given tournament. First, we use the statistical approach of paired comparison analysis to define the performance of a player in a natural way. Then, we determine a ranking (and rating) of the players in the given tournament. Finally, we show, among other properties, that the new ranking method is the unique one satisfying a natural consistency requirement.     

Technology shocks, structural breaks and the effects on the business cycle

It is shown that time-series of US productivity and hours are apparently affected by a structural break in the late 60s. Moreover, the importance of technology shocks over the business cycle has sharply decreased after the break.