Integrating partitioned prices via computational estimation

This paper introduces computational estimation to the literature on consumers’ numerical cognition. Computational estimation involves simplifying an arithmetic problem via mathematical procedures to produce an approximate answer. Employing calculation knowledge and approximation together, consumers are likely to use computational estimation as it is relatively accurate while saving cognitive effort compared to calculating values. Three studies applied to partitioned prices in the form of a base price and a percentage discount, demonstrate that when faced with this numeric integration task, the strategy consumers undertake is dependent on the characteristics of the numerals with discounts that are round or close to round being associated with greater use of computational estimation. Further, when employing computational estimation, consumers arrive at more accurate, and lower, price estimates in which they place more confidence than when using alternative an integration strategy. As a result, discounts that are near a round value are preferred to those that are not; a result that is dependent upon the use of computational estimation.     

Sample bias in contingent valuation: A comparison of the correction methods

Abstract

This article compares various methods for correcting contingent valuation aggregate benefits when the sample is known to be biased. A sample is defined as the population, and response rates are simulated on the basis of a measure of salience. The simulated response rates suffer from nonresponse bias and selection bias. Coefficient and benefit estimates that result from weighting and self‐selection correction approaches are compared with the true coefficient and benefit estimates. Our results indicate that at both low and high response rates the standard approach leads to bias, and either correction approach will reduce the bias in coefficient and benefit estimates.     

The Audit Report under Going Concern Uncertainties: An Empirical Analysis

This study explores the value of the audit report in the context of the going concern qualification (GCQ) decision along the joint dimensions of auditor competence and independence. Likelihood of company failure, auditor switch rates, the self-fulfilling prophecy argument and audit firm size are analysed as variables potentially affecting the value of the audit report in a GCQ situation. This study focuses on the outcomes of such decisions: the presence or absence of a GCQ, for a large sample of UK quoted companies over the decade 1977–86. Our results suggest that, unless the likelihood of failure is very high, the probability of a GCQ is very low. We find some evidence in support of an association between the presence of a GCQ and auditor switching but no support for the self-fulfilling prophecy argument. In addition, smaller UK audit firms do not appear to exhibit lower GCQ rates than do large firms. There is some evidence that the issues of auditor competence and independence may be a cause for concern in this context in the UK.     

Reviews

Retirement Communities: An American Original, by Michael E. Hunt, Allan G. Feldt, Robert W. Morans, Leon A. Pastalan, and Kathleen L. Vakalo. New York: Haworth Press. 1984. ISBN 0–86656–267–2. 278 pp. $29.95.

Senior Settlers: Social Integration in Retirement Communities, by Nancy J. Osgood. New York: Praeger Publishers, 1982. ISBN 0–03–059792–7. 296 pp. $29.95.

Life After Work: Retirement, Leisure, Recreation, and the Elderly, ed. Nancy J. Osgood. New York: Praeger Publishers. 1982. ISBN 0–03–060437–0. 372 pp. $32.95.

Work and Retirement, by Stanley Parker. London: George Allen & Unwin. 1982. ISBN 0–04–658238‐X. 203 pp. $9.95 paper, $28.50, cloth.

Adults and Their Leisure: The Need for Lifelong Learning, by John R. Verduin, Jr., and Douglas N. McEwen. Springfield, Ill: Charles C. Thomas. 1984. ISBN 0–398–04985–8. 170 pp. $17.50.     

Preemption in a real option game with a first mover advantage and player-specific uncertainty

In this paper a two-player real option game with a first-mover advantage is analyzed, where payoffs are driven by a player-specific stochastic state variable. It is shown that there exists an equilibrium which has qualitatively different properties from those in standard real option games driven by common stochastic shocks. The properties of the equilibrium are four-fold: (i) preemption does not necessarily occur, (ii) if preemption takes place, the rent-equalization property holds, (iii) for almost all sample paths it is clear ex-ante which player invests first, and (iv) it is possible that both players invest simultaneously, even if that is not optimal. It is argued from simulations that real option games with a common one-dimensional shock do not provide a good approximation for games with player-specific uncertainty, even if these are highly correlated.     

The impact of relative residence times on the distribution of heavy drinkers in highly distinct environments

Alcohol consumption is a function of social dynamics, environmental contexts, individuals' preferences and family history. Empirical surveys have focused primarily on identification of risk factors for high-level drinking but have done little to clarify the underlying mechanisms at work. Also, there have been few attempts to apply nonlinear dynamics to the study of these mechanisms and processes at the population level. A simple framework where drinking is modeled as a socially contagious process in low- and high-risk connected environments is introduced. Individuals are classified as light, moderate (assumed mobile), and heavy drinkers. Moderate drinkers provide the link between both environments, that is, they are assumed to be the only individuals drinking in both settings. The focus here is on the effect of moderate drinkers, measured by the proportion of their time spent in “low-” versus “high-” risk drinking environments, on the distribution of drinkers.A simple model within our contact framework predicts that if the relative residence times of moderate drinkers are distributed randomly between low- and high-risk environments then the proportion of heavy drinkers is likely to be higher than expected. However, the full story even in a highly simplified setting is not so simple because “strong” local social mixing tends to increase high-risk drinking on its own. High levels of social interaction between light and moderate drinkers in low-risk environments can diminish the importance of the distribution of relative drinking times on the prevalence of heavy drinking.     

Economic Implications of Further Harmonisation of Electronic Communications Regulation in the EU

There are some aspects of the European RFEC and its implementation today that could benefit from increased harmonisation; there are others in which substantial accommodation to local, national or regional circumstances and preferences is desirable or required.