Do Entrepreneurs Need Firms? A Contribution to a Missing Chapter in Austrian Economics

The Review of Austrian Economics -     

Brown's original fictitious play

What modern game theorists describe as “fictitious play” is not the learning process George W. Brown defined in his 1951 paper. Brown's original version differs in a subtle detail, namely the order of belief updating. In this note we revive Brown's original fictitious play process and demonstrate that this seemingly innocent detail allows for an extremely simple and intuitive proof of convergence in an interesting and large class of games: nondegenerate ordinal potential games.     

Preferential Trade Liberalization Under Cournot Competition

Suppose a country imports a homogeneous good from n foreign countries/producers and wants to eliminate tariffs on imports from m < n of them. If foreign producers differ in their marginal costs, which ones will be among the m that are granted free trade? This paper shows, among other things, that under constant marginal cost and fairly general assumptions about demand it will be the least efficient producers.     

The use of trading strategies by fund managers: some first survey evidence

A questionnaire survey has found that most fund managers rely on the strategies of buy-&-hold, momentum and contrarian trading. These strategies are typically applied mutually. Their use is rooted in the attributes and beliefs of the respective fund managers: buy-&-hold traders are fundamentally oriented, risk averse and are less (over)confident than others. Momentum traders appear as the least risk-averse professionals, going aggressively with the trend. Contrarian traders, however, show signs of overconfidence and peculiar risk aversion, both indicating difficulties in successful strategy implementation. The behavioural patterns revealed are not easily reconciled with efficient markets.     

Reverse convertible bonds analyzed

We study the pricing of reverse convertible (RC) bonds. These are bonds that carry high coupon payments. In exchange, the issuer has an option at the maturity date to either redeem the bonds in cash or to deliver a pre‐specified number of shares. We find that Dutch plain vanilla and knock‐in RC bonds are, on average, overpriced by almost 6%. This overpricing is confirmed in a model‐free analysis with respect to option‐ and bond‐pricing models. We find that rational factors explain 23% of the documented overpricing. In addition, we find that the combination of financial marketing, framing, and the representativeness bias further increases our ability to explain the documented overpricing to more than 35%. © 2009 Wiley Periodicals, Inc. Jrl Fut Mark 29:895–919, 2009     

Alexander von Hoffmann (1924–2006)

Ohne Zusammenfassung