PRICE SETTING OF MARKET MAKERS: A FILTERING PROBLEM WITH ENDOGENOUS FILTRATION

This paper studies the price‐setting problem of market makers under risk neutrality and perfect competition in continuous time. The classic approach of Glosten–Milgrom is followed. Bid and ask prices are defined as conditional expectations of a true value of the asset given the market makers' partial information that includes the customers' trading decisions. The true value is modeled as a Markov process that can be observed by the customers with some noise at Poisson times. A mathematically rigorous analysis of the price‐setting problem is carried out, solving a filtering problem with endogenous filtration that depends on the bid and ask price processes quoted by the market maker. The existence and uniqueness of the bid and ask price processes is shown under some conditions.     

Does truth win when teams reason strategically?

We study behavior in the race game with the aim of assessing whether teams can create synergies. The race game has the advantage that the optimal strategy depends neither on beliefs about other players nor on distributional or efficiency concerns. Our results reveal that teams not only outperform individuals but that they can also beat the “truth-wins” benchmark. In particular, varying the length of the race game we find that the team advantage increases with the complexity of the game.     

Understanding the interplay of artificial intelligence and strategic management: four decades of research in review

Management Review Quarterly - As artificial intelligence (AI) is enabling the automation of many facets of management and is increasingly used in a wide range of strategic tasks, it is necessary to...     

The interplay of corporate entrepreneurship,environmental orientation,and performance in clean‐tech firms—A double‐edged sword

Clean‐tech innovations are an important driver in solving global issues such as climate change and for the sustainable development of economies around the world. Whereas a large part of the literature focuses on clean‐tech ventures, less is known on corporate entrepreneurship, that is, entrepreneurial behavior in established firms and its relation to sustainability. This paper extends the sustainable entrepreneurship debate to corporate entrepreneurship, which represents a fruitful avenue to further developing clean technologies. We focus particularly on clean‐tech firms' organizational preparedness for corporate entrepreneurship (OPCE), that is, how well a firm's structures and processes are set for entrepreneurial activities. On the basis of contingency theory, this study investigates how the level of OPCE influences the environmental and financial performance of clean‐tech firms and whether their environmental orientation affects these relationships. Building on data from 103 firms, we find support for a positive effect of OPCE on both environmental and financial performance. Both effects are stronger the higher the external environmental orientation. In contrast, the leverage of internal environmental orientation is not equally positive. Our study reveals that the effect of OPCE on financial performance diminishes for firms that are more strongly driven by an internal than an external environmental orientation.     

Determinants of Relative Sectoral Prices: The Role of Demographic Change

Demographic change raises demand for non‐tradable old‐age related services relative to tradable commodities. This demand shift increases the relative price of non‐tradables and thereby causes real exchange rates to appreciate. We claim that the change in demand affects prices via imperfect intersectoral factor mobility. Using a sample of 15 OECD countries, we estimate a robust increase of relative prices. According to our main estimate, up to one fifth of the average increase in relative prices between 1970 and 2009 can be attributed to population ageing. Further findings confirm the relevance of imperfect factor mobility: Countries with more rigid labour markets experience stronger price effects.     

Rentenpaket: die Bundesregierung auf Irrwegen

In the summer of 2014 Germany will witness the most substantial expansion of pension expenditures since the 1950s. Yet, while this reform package was motivated mainly by the dismal prospect of rising old age poverty rates, it does little to alleviate this problem. On the contrary, its two central elements, an expansion of the pension claims of mothers whose children were born before 1992, and access to early retirement at age 63 for workers with a long insurance history, tend to benefit rather privileged groups of the insured. These measures endanger the sustainability of the German pension system and will necessitate future generations to work even longer than would have been the case otherwise.