The role of (non-)transparency in a currency crisis model

This paper extends the work by Morris and Shin (Am. Econom. Rev. 88 (1998) 587-597) where multiple equilibria in the self-fulfilling currency attack models can be reduced to a unique equilibrium when agents observe fundamentals privately with small errors. We find that under a more general specification with realistic parameters, noisy private observations are generally insufficient to prevent the multiplicity of equilibria. The pivotal role played by the transparency of fundamentals/policies in currency crisis is also examined. Surprisingly, transparency may trigger rather than eliminate currency crises when fundamentals are relatively healthy. Our results may be relevant to research in other coordination problems.     

Improving perishable product inventory management using goal programming

The multiple objectives of perishable product inventory management are examined in this paper. These objectives include: (1) satisfying demand by carrying sufficient inventories, (2) holding down inventory carrying costs, (3) keeping the amount of product spoilage (outdating) at an acceptable level, and (4) maintaining quality by using the product while it is still fresh, and (5) keeping the cost of rotation low. Some of the above objectives are in conflict. Thus, certain redistribution policies may help attain one or more of these objectives to a greater extent. Redistribution involves the transfer of the product from outlets where demand is low to outlets where demand is high. A goal programming model for solving redistribution problems is presented. An example is provided and sensitivity analysis is performed in order to determine when redistribution is advantageous. Applicability of the model is discussed.     

Determinants of the stock price reaction to leveraged buyouts

This paper investigates the determinants of leveraged buyout activity through the use of an abnormal return premium from the time of the first announcement through the final trading day. Consistent with the free. cash flow theory, firms with either high free cash flow or low Tobin’s q have higher abnormal returns. However, the returns to firms with both high free cash flow and low Tobin’s q are lower than firms with just one of these characteristics. Firms which substantially increase leverage and management buyouts with high insider ownership prior to the buyout have lower abnormal returns. Firms with lower risk, and therefore greater debt capacity, have higher abnormal returns.     

The economic costs of biological predation

This paper developes a bioeconomic model to analyse the economic losses from the reduced harvesting of prey species resulting from an increase in the stock of a natural predator. Examples of large mammals creating economic damage are whales and African elephants. The economic losses depend critically on the actual management of the prey stock, although the three measures we develop are equal when the stock is managed so as to maximize the sustained economic rent from the prey species. Predation losses are illustrated by the case of the Northeastern Atlantic Minke whale, where the estimate of the average predation cost per whale in 1991–1992 is between $US 1780 and $US 2370, using Norwegian cost and earnings data. A ten percent stock increase is estimated to cause a loss of almost $US 19 million to the fishers of the prey species. If half of this cost were assigned to Norway it would be equivalent to 2.8 and 6.7 percent of the gross profits of the Norwegian cod and herring fisheries, respectively.     

Product differentiation, cost‐reducing mergers, and consumer welfare

Abstract.  Cost synergies are an explicitly recognized justification for a two‐firm merger, and empirical techniques are now widely used to assess the impact of cost‐reducing mergers on prices and welfare in the post‐merger market. We show that if the merger occurs in a vertically product differentiated market, then the merger will lead to a reduction in product offerings that limits the usefulness of pre‐merger empirical estimates. Indeed, we further show that in such markets, two‐firm mergers will typically lead to higher prices regardless of the merger's cost savings. JEL classification: L10, L41     

The international potential of traditional resource systems in marginal areas

Marginal areas of the world, including tropical highlands, tropical coastal zones, and arid lands, are problematical for development. They are ecologically special areas, often of vital consequence to the stability of more populated regions nearby. Commonly, their peoples are culturally distinct. To develop marginal areas it is suggested that “transformational” development may be appropriate. Transformational development recognizes the importance of equity and of working with existing resource systems already ecologically and culturally appropriate to the area. In marginal areas, a special application of transformational development could include incremental changes in existing systems and their connection to modern international systems so as to benefit the inhabitants of marginal areas and to supply commodities and goods demanded in the rest of the world. By rethinking ideas about resources, an exploratory framework for such transformation is examined. This framework uses the concept of “resource system”, a concept which might play an important part in the application of equitable future global development efforts.     

Inoculating consumers against deception: The influence of framing and executional style

This study examines conditions affecting consumer susceptibility to advertising deception and educational efforts designed to inoculate consumers against it. Results show that consumers are best able to detect deception when their frame of reference (cognitive or affective) is incongruent with the advertisement's executional style (attribute or emotional). Attempts to inoculate consumers against deception by providing factual brand comparisons have their strongest effect among consumers with an affective frame of reference and for emotionally charged ads.

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Die Immunisierung von Konsumenten gegen werbliche Irreführung: Der Einflu der persönlichen Informationsausrichtung und des werblichen Argumentationsstils

Zusammenfassung Die Studie befa\t sich mit den Bedingungen werblicher Irreführung von Konsumenten und mit den Bemühungen der Verbrauchererziehung, Konsumenten durch vergleichende Warentestergebnisse gegen solche Irreführung zu immunisieren. Ihre Ergebnisse zeigen, da\ Konsumenten werbliche Irreführung am ehesten dann durchschauen, wenn ihre persönliche Informationsausrichtung (kognitiv oder affektiv) nicht mit dem werblichen Argumentationsstil (informativ oder emotional) übereinstimmt. Versuche, Konsumenten mit Hilfe vergleichender Warentest-Informationen gegen werbliche TÄuschung zu immunisieren, sind am wirkungsvollsten bei Konsumenten mit affektiver Informationsausrichtung und bei emotionshaltiger Werbung.

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The authors wish to thank Joel Cohen and the Editors and reviewersof Journal of Consumer Policy for their valued suggestions, and Jill Joyce for assistance in data collection and analysis.     

Household migration in the Southern Cone: the case of Paraguay

This study of migration from Paraguay to Argentina focuses on urban to urban migration and uses about 1300 interviews collected during September 1983 to May 1984 for constructing a profile of the migrants. Paraguayan migration to Argentina has historical roots. The first flows were in 1936 and 1947 and were due to war. Migrants tended to settle in Formosa and Misiones provinces in the northern region. The second waves that occurred during the 1950s, 1960s, and 1970s were to Buenos Aires. Most migration during the more recent years was motivated by economics. It is likely that the key factors were push factors in Paraguay. Migration policies in sending and receiving countries are lax. Half of the interviews were conducted among families in Gran Buenos Aires, and half were conducted among families in Asuncion, Paraguay. 33% of migrants in Argentina reported Asuncion as their last residence. Many migrants were from departments bordering on Argentina. Only 222 of the 543 heads of household who had been employed prior to departure reported that farm work had been their employment. Migration is precipitated by both economic and noneconomic factors. Logistic model findings indicate that urban migrant heads of households tended to be younger and less educated than nonmigrants. Migrants tended to be single heads of households with relatively few children. Rural migrants were less likely to be female and were more likely to have a larger family size than urban migrants. Heads of household with fewer continuous years of employment were more likely to migrate. Findings from data at the time of the interview suggest that higher relative wages were a pull force, when age, sex, education, marital status, size of business, and job seniority were controlled for. The recent democratization in Paraquay is like to attract return migrants, if urban employment opportunities are available.