Robust monopoly pricing

We consider a robust version of the classic problem of optimal monopoly pricing with incomplete information. In the robust version, the seller faces model uncertainty and only knows that the true demand distribution is in the neighborhood of a given model distribution. We characterize the pricing policies under two distinct decision criteria with multiple priors: (i) maximin utility and (ii) minimax regret. The equilibrium price under either criterion is lower then in the absence of uncertainty. The concern for robustness leads the seller to concede a larger information rent to all buyers with values below the optimal price without uncertainty.     

The Breakdown of Idiosyncratic Volatility Into Expected and Unexpected Components and Its Effects on Stock Returns in Brazil

Based on studies of idiosyncratic volatility developed in the recent literature, this study analyzes its relation with expected returns through the breakdown of idiosyncratic volatility in the Brazilian stock market and presents evidence of the importance of expected idiosyncratic volatility for asset pricing. We study the impact of the expected and unexpected components of idiosyncratic volatility on the returns of shares listed on the BOVESPA between 2004 and 2011. The results show a strong positive and significant relation between expected idiosyncratic volatility and returns. This evidence is highlighted when we use unexpected idiosyncratic volatility to control for unexpected returns. Additional robustness tests, controlling for size and momentum effects, also have positive and significant coefficients, corroborating previous findings.     

The Triumph of American Capitalism: An Assyrian Perspective

The collapse of communism, the success of the US economy and the rise of the internet have led many to argue that the rest of the world should adopt American capitalism. This article uses evidence from the ancient Mediterranean and Middle East to argue that the most successful form of capitalism in each area (and era) depends on the context of the time, the culture of the people and the history of the region.     

The Impact of Trade Liberalization on the International Oilseed Complex

One approach to trade liberalization is the zero-for-zero sectoral approach which involves agreements to eliminate export subsidies, import tariffs, and export taxes in a sector. This article provides an assessment of the impact of border trade liberalization on oilseeds and oilseed products trade. The analysis suggests that under all of the scenarios examined, North American oilseed crushers and oilseed producers gain from trade liberalization. The exact size and the distribution of these gains depends on the number of countries that participate in trade liberalization. The results suggest that the United States and Canada would gain from the adoption of the zero-for-zero proposal.     

The value and effects of introducing high standard train and bus concepts in Blekinge, Sweden

A set of improvements were introduced on a railway line in the south of Sweden in January 1992, including a new train concept, improved timetable and lower fares. The new train replaced a combination of old rail cars and standard coaches (bus). Furthermore, 18 months later, a new high comfort coach (bus) service was introduced as a complement to the train timetable to increase the number of departures. Forecasts from a national four-step model system, based on Revealed Preference data, which did not cover explanatory factors like mode concept, comfort, mode image, was made and compared with a forecast based on stated preference data choice model. Both type of forecasts were compared to travel statistics. Stated Preference data have been collected from car drivers, coach and train passengers. The set of improvements have been included in the SP alternatives presented to the subjects. A structured logit model, a regression model and a linear programming model are compared. Unstructured and structured logit models are compared. Logit models have been estimated and used to form a mode choice model which predicts the changes in market shares between the train and car. The choice model forecast coincide, accidentally, with actual demand 8–9 months after the introduction of the set of improvements (a 40% increase in journeys). The set of improvements, including the new train service, has proven to be a success with more than 100% increase in travel after only two years of operation. Differences in estimated logit models for 1991 and 1992 are explained as partly due to asymmetry effects and partly to shortcomings in the SP data collection technique. Logit model estimates for train and coach are compared. The value of high standard coach service, running in parallel to the train, is estimated. The new coach gained few new passengers and also a much lower monetary value than the train by both train and bus passengers.     

Fighting against the odds

The fight for power is not only over immediate rents, but also over advantageous positions in future power struggles. When incumbency yields an extra fighting edge, current struggles involve high stakes as a victory today may guarantee the victory also tomorrow. Such an incumbency edge may stem from the control of the army, the police and other instruments reserved for the government. The conclusions drawn from static conflict models are turned on their head when the fight is also over the incumbency edge. A sharper incumbency edge increases the implicit prizes of winning. The fighting intensity may therefore rise when the strength of each side becomes more unequal. Unbalanced fights can last long and become particularly severe. This is in contrast to the standard result that equal strengths give the most intense fighting. Received: June 2004, Accepted: December 2004, We want to thank the editor and a referee.