Competitive decision making: Two and a half frames

We argue that the study of competitive decision making has been heavily influenced by the frames of reference that are adopted by researchers. The dominant economic frame and the emergent behavioral frame describe largely separate phenomena and have little overlap. Drawing from examples of learning in games and markets, we show how each of these frames falls short of capturing some interesting elements in competitive decisions. We then describe how a coevolutionary perspective may be emerging as an integrative paradigm for the study of competitive decisions.This paper was prepared for the conference, Understanding Competitive Decision Making. Comments by the participants of that conference and Paul Shoemaker are gratefully acknowledged, as are discussions with Colin Camerer, Eldar Shafir, and Sharoni Shafir.     

External Monitoring of Property Appraisal Estimates and Information Asymmetry

Finance theory proposes that firms' cost of capital increases when market makers set wider spreads due to perceived higher information asymmetry across traders. Using a sample of UK investment property firms and controlling for firms' non-random selection of external monitors, we find evidence that market makers perceive information asymmetry across traders to be lower for firms employing external appraisers versus those employing internal appraisers. This evidence is consistent with liquidity-motivated traders being unable to overcome such reliability differences using asset value information from sources other than accounting. We fail to find a similar difference for firms employing Big 6 versus non-Big 6 auditors. Our findings contribute to the debate over the recognition of fair value estimates for long-lived tangible assets by documenting that reliability differences attributable to differential monitoring by appraisers can affect information asymmetry, and therefore firms' cost of capital.     

The Changing Status of Collectivized and Private Agriculture under Central Planning

A bstract . Official perceptions of agriculture's role in economic development in the Eastern European Soviet-type economies have undergone significant alterations over the past several decades. These changes have been especially important in Hungary , a country well known for its unorthodox economic approaches. The modifications of status analyzed below have been consistent with the overall economic policy directives of the Communist party, including the current renewed emphasis on economic rationality, pragmatism , and the revitalization of the economic reform of 1968 .     

On estimating the mean of the selected normal population under the LINEX loss function

Following Parsian and Farsipour (1999), we consider the problem of estimating the mean of the selected normal population, from two normal populations with unknown means and common known variance, under the LINEX loss function. Some admissibility results for a subclass of equivariant estimators are derived and a sufficient condition for the inadmissibility of an arbitrary equivariant estimator is provided. As a consequence, several of the estimators proposed by Parsian and Farsipour (1999) are shown to be inadmissible and better estimators are obtained. Received January 2001/Revised May 2002     

Trade and Renewable Resources in a Second Best World: An Overview

We provide an overview and introduction to the emerging field of trade and renewable resources, and discuss the potential impact of trade liberalization on welfare and resource conservation. A key factor determining the effect of trade reform is the institutional context or property rights regime, and our survey is organized such that it loosely follows the development of new insights with respect to institutions in this literature. This implies a transition from the benevolent planners model to the polar opposite benchmark of open access in the 1990s. Currently the pendulum is swinging back towards management and regulation, but institutions are treated as endogenous. We discuss and compare various key models in some detail and search for common ground between protagonists and antagonists of free trade. Paper based on Keynote address by Erwin Bulte, 12th Annual Conference of the European Association of Environmental and Resource Economists, Bilbao (Spain), June 28–30, 2003.     

Auctions for PURPA purchases: A simulation study

Competition was introduced into the electric utility industry with the passage of the Public Utilities Regulatory Policy Act (PURPA) of 1978. Increasing interest has appeared in structuring the PURPA purchase market into an auction system. This paper addresses the design issues associated with setting up such markets and introduces a simulation model to study them. The simulation analysis is guided by theoretical issues such as the alleged inefficiency of first-price auctions. We find that efficiency concerns raised about first-price auctions turn out to be less important than simple theoretical concerns would suggest.     

The Exchange Rate and Inflation in the UK

The United Kingdom is a highly open economy, and has a monetary policy strategy of targeting inflation in consumer prices. In this paper, we look at the evidence from the UK on inflation behaviour, and examine the propositions from several theoretical models about inflation dynamics in an open economy, focusing in particular on the hypothesized connections between the exchange rate and consumer price inflation. Theoretical open‐economy macroeconomic models ‘cover the waterfront’ on this issue, ranging from ‘exchange rate disconnect’ to a rigid link between nominal exchange rate changes and inflation. We estimate on UK data the open‐economy Phillips curves implied by the alternative explanations. We argue that, of the alternatives considered, only a model where imports are modelled as an intermediate good, as in McCallum and Nelson (1999) , provides a reasonable match with the data. Unlike the standard model, in which imports are treated as a final consumer good, the intermediate‐goods specification provides support for a policy of CPI inflation targeting.     

Reserve ratios: A proposal for change

The paper addresses the problem of Fed control of the money supply and the inherent instability of a fractional reserve banking system which Friedman covered in A Program for Monetary Stability. While Friedman proposed a 100 percent reserve requirement as a solution, this work suggests a change from imposing legal reserve ratios on specific liabilities to one of imposing them on total bank liabilities. Reserve ratios are compared to tax rates. Friedman's proposal is to increase the tax rate to 100 percent on specific liabilities and pay interest on reserve balances at the Fed. The proposal of this paper is to keep the tax rates (present reserve ratios) but change the tax base. It is shown that the Fed would gain control over the maximum expansion of banks, but would lose direct control over specific liabilities. The Fed would not tax some liabilities and subsidize others. The Fed could concentrate on setting the tone of the money market and allow the public to use whatever set of bank liabilities it desires as money without specific penalty.     

Bureaucrats as "Social Engineers": Federal Welfare Programs in Herbert Hoover's America

A bstract . Historians interested in 20th century American reform often seek to analyze the ideologies of political leaders separately from the institutions that these same leaders created. Such emphases on ideas, as opposed to actions, has, for example, led "revisionist" American historians to argue that the presidencies of Herbert Hoover and Franklin D. Roosevelt were "conceptually continuous." Our examination of the major social welfare programs undertaken by the federal government in the 1920s disputes this claim. Examination of the operations of the federal bureaucracy instead of the rhetoric of politicians demonstrates the existence of decided policy differences between the Hoover and Roosevelt eras. "Efficiency" analogues dominant during the Hoover era were replaced with "direct service-provider" approaches which created a clear distinction between private and public welfare programs. Elements of "continuity" between the two eras have been overdrawn. Background is provided for increased understanding of some of the policy implications of America's contemporary welfare debate—particularly about "rehabilitation" strategies and/or rationales for action in the social welfare field.