Institutional authority and collusion

A “collusion puzzle” exists by which, even though increasing the number of firms reduces the ability to tacitly collude, and leads to a collapse in collusion in experimental markets with three or more firms, in natural markets there are such numbers of firms colluding successfully. We present an experiment showing that, if managers are deferential toward an authority, firms can induce more collusion by delegating production decisions to middle managers and providing suitable informal nudges. This holds not only with two but also with four firms. We are also able to distinguish compliance effects from coordination effects.     

Security Returns and Tax Aversion Bias: Behavioral Responses to Tax Labels

This article studies behavioral responses to taxes in financial markets. It is motivated by recent puzzling empirical evidence of taxable municipal bond yields significantly exceeding the level expected relative to tax exempt bonds. A behavioral explanation is a tax aversion bias, the phenomenon that people perceive an additional burden associated with tax payments. We conduct market experiments on the trading of differently taxed and labeled securities. The data show an initial overvaluation of tax payments that diminishes when subjects gain experience. The tax deduction of expenses is valued more than an equivalent tax exemption of earnings. We find that the persistence of the tax aversion bias critically depends on the quality of feedback. This suggests that tax aversion predominantly occurs in one-time, unfamiliar financial decisions and to a lesser extent in repetitive choices.     

20 Jahre Binnenmarkt

In 1992 the European Single Market was to have been completed. But there is still no truly integrated market in many fields — the EC has to overcome many obstacles yet to make this happen. Based on different EU integration indexes, it is shown that internal market integration has developed since the introduction of the euro. At the same time, the internal market linkages are different from country to country. Internal — but also external - trade and wealth have grown. However, whether there would have been more or less success without the internal market is a question that must be answered. A single market probably does not require a common currency.     

Does tourism cause growth asymmetrically in a panel of G-7 countries? A short note

We analyse whether tourism (measured by real tourism receipts) causes growth in an asymmetric fashion in a panel of G-7 countries over the period of 1995–2014. Our results reveal that the tourism-led growth hypothesis holds for France, Germany, and the US, with negative tourism shocks being more important for Germany, Italy, Japan, while positive shocks are more important in UK and the US. Our results imply that, policy makers in Germany, Italy and Japan should be more concerned when tourism receipts decline.     

An evaluation of the equilibrium value of the euro,its predecessors and their constituent currencies based on economic fundamentals

This study presents constructed equilibrium exchange rates (EERs) of the euro and its predecessors the European Unit of Account and the European Currency Unit, as well as the euro’s member states using a relative version of purchasing power parity (PPP) equilibrium. The revealed patterns of over- and undervaluation demonstrate how well suited the northern member states, in contrast to the southern states, were for the monetary union. Moreover, a relative persistent overvaluation for Greece and Portugal suggests that their ambition to join the euro reduced their competitiveness. The constructed EERs of the euro suggest the European Commission was able to set the initial value of the euro with a high degree of accuracy. Furthermore, the EERs indicate a successive strengthening of the fundamental value of the euro versus the U.S. dollar from 1999 to 2015. The analysis shows a close correlation between the deviations from equilibrium and the events of Greece’s sovereign debt crisis. In addition, the presented graphs show strong support for the PPP hypothesis. The results are robust to different constructed EERs and offer a guide to international market participants interested in the general equilibrium path of the euro and its predecessors.     

Empfehlungen für das Auktionsdesign für Emissionsberechtigungen

From an economic perspective, auctions are an appropriate mechanism for the initial allocation of emissions allowances, because they tend to be advantageous with respect to distributional and efficiency goals. Different auction designs can lead to different outcomes, though, and so the choice of the auction rules is a critical challenge. Recent developments in auction theory and rich experiences with practical auction design in the energy and many other sectors can help avoiding mistakes and designing an appropriate auction mechanism. This study summarizes the relevant research and concludes with concrete recommendations for the auction design for CO₂ allowances. In particular, it analyzes how the strategic options of buyers and sellers depend on the auction rules, and explains how secondary markets for allowances interact with bidding strategies and optimal institutional design.     

The new World Trade Organization: Pacemaker for world trade?

The Gatt Uruguay Round was finally brought to a conclusion in April following long-drawn-out negotiations. What changes are contained in the new agreements? How should we rate these changes? How important will the future World Trade Organization (WTO) be?     

Die Verbraucheransprüche und ihre Geltendmachung durch Verbraucherverbände nach der UWG-Novelle

According to West German civil law, consumers who have become victims of false or misleading competition have only limited rights with regard to compensation and withdrawal — this is a predominant opinion in the FRG. For this reason the Federal Government plans to amend the Law on Unfair Competition, with the intention of strengthening consumer protection. The bill was formulated by government experts but experienced several restrictions even before parliament discussions began. The author argues that the government bill will not reach its originally intended purposes. It does not assume that unfair competition in itself leads to the making of a contract. Instead the consumer has to prove that a specific instance of advertising was the (only) reason for the completion of a transaction. This condition will make the new law ineffective. According to the bill the consumer himself has the burden of proving the falsehood of advertising; only in this case is he allowed to demand the difference between the real value of an article and that value advertising has promised. This is a very dubious condition of the bill. The second part of the article deals with the rules specifying the right of consumer associations to sue. They must be seen as an impediment to the activities of the associations. The introduction of registration procedures will cause them additional costs. In the third part, the author maintains that support of consumer associations is unavoidable for an effective strengthening of consumer interests. As everyone knows, it is not easy to approach courts, especially for lower class people. It should be the task of public consumer policies to make consumer associations attractive to these groups, and to supply them with juridical and material possibilities. The bill is not able to contribute to these purposes; in some parts it blocks effective work in the interests of consumers.     

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