Consumers’ Perception and Misperception of Market Leadership and Market Pioneership

Abstract

Ever since Veblen and Simmel, luxury has been synonymous with conspicuous consumption. In this conceptual paper we demonstrate the rise of inconspicuous consumption via a wide-ranging synthesis of the literature. We attribute this rise to the signalling ability of traditional luxury goods being diluted, a preference for not standing out as ostentatious during times of economic hardship, and an increased desire for sophistication and subtlety in design in order to further distinguish oneself for a narrow group of peers. We decouple the constructs of luxury and conspicuousness, which allows us to reconceptualise the signalling quality of brands and the construct of luxury. This also has implications for understanding consumer behaviour practices such as counterfeiting and suggests that consumption trends in emerging markets may take a different path from the past.     

The EU public procurement regime— Does it work?

Has the Single Market for public procurement had the expected effects after six years in progress? The following article attempts to answer this question by first presenting alternative theoretical approaches to analysing the EU liberalisation of the public procurement market and then confronting these with the result of an empirical analysis.     

Social Risk in Health Insurance: A Reflection on the Economies of Scale and Scope in Health Insurance

Social risk causes distortion in the health insurance market. In the presence of social risk, health insurance must be inflated with a safety loading. This implies that policyholder will choose incomplete risk transformation and that health insurers have to build up large capital reserves. By using cross-diversification and enlarging the insurance pool with other kinds of risk (utilising economies of scope in addition to scale production), the problem of social risk will reduce. It is shown how this is possible by using the capital market as a diversification pool     

Creating markets for eco‐labelling: are consumers insignificant?

The proliferation of voluntary certification and labelling schemes for environmentally and socially responsible production is often seen as driven by companies and consumer demand. Through a careful examination of the initiation and spread of such initiatives in the fishery and forestry sectors, this paper challenges a rational–economic perspective that sees the spread of nonstate governance schemes primarily as a market‐driven phenomenon. Drawing on a political consumerism perspective, the paper argues that transnational environmental group networks and their targeting of firms were key to the emergence of nonstate eco‐labelling schemes, and that most firms decided to support or participate in such schemes only after intensive environmental group pressure. The paper opposes the view that nonstate governance challenges traditional state authority, by showing that states, through public procurement policies and support, contributed to create markets for forestry and fishery labelling in many countries. Although some states have been more sceptical of fishery labelling, largely because of the way fishery resources are managed, they have come to accept it as a helpful supplement to public rules and regulations.     

Regulatory induced performance persistence: Evidence from hedge funds

This paper tests the idea that financial regulation can impact performance persistence in the context of the hedge fund industry in 48 countries over the years 1994–2008. The data show evidence of three types of regulation influencing performance persistence: (1) minimum capital restrictions, which restrict lower quality funds and hence increase the likelihood of performance persistence, (2) restrictions on location of key service providers, which restrict human capital choices and hence tend to mitigate performance persistence, and (3) distribution channels, which make fund performance more opaque, decrease the likelihood of performance persistence. We do not find evidence that distribution channels, that promote fund presence to institutional investors, enhance performance persistence. Finally, we show differences in the effect of regulation on persistence by fund quartile ranking.     

Pricing growth-rate risk

We characterize the compensation demanded by investors in equilibrium for incremental exposure to growth-rate risk. Given an underlying Markov diffusion that governs the state variables in the economy, the economic model implies a stochastic discount factor process S. We also consider a reference growth process G that may represent the growth in the payoff of a single asset or of the macroeconomy. Both S and G are modeled conveniently as multiplicative functionals of a multidimensional Brownian motion. We consider the pricing implications of parametrized family of growth processes G ^ε , with G ⁰=G, as ε is made small. This parametrization defines a direction of growth-rate risk exposure that is priced using the stochastic discount factor S. By changing the investment horizon, we trace a term structure of risk prices that shows how the valuation of risky cash flows depends on the investment horizon. Using methods of Hansen and Scheinkman (Econometrica 77:177–234, 2009), we characterize the limiting behavior of the risk prices as the investment horizon is made arbitrarily long.     

Der Wert der Worte – Wie digitale Methoden helfen,Kommunikations- und Wirtschaftswissenschaft zu verknüpfen

The use of digital methods offers a chance to connect communication science with economics. In recent years, a growing body of research in economics has turned its attention to media content, assuming that journalistic coverage contains hitherto neglected information relevant for business cycles or financial market movements. Interestingly, these approaches largely ignore communication science’s established theories and empirical findings. This paper aims at building a bridge between the two disciplines. Its contribution is threefold: a) it provides an overview of the most important approaches in economics that incorporate media content; b) it operationalizes the concept of the “narrative”, as it is used in economics, and distinguishes it from the concept of the “frame”, essential in communication science; c) exemplifying our approach, we present a new Uncertainty Perception Indicator (UPI) based on the topic modeling method Latent Dirichlet Allocation (LDA), that enables us to isolate different factors of economic policy uncertainty contained in media coverage.Economic studies treat journalistic media content as a proxy for sentiment prevalent in society. Typically, they rely on frequency analyses of certain keywords, like “recession” or “inflation”. Even more sophisticated approaches, such as Shiller (2017), who calls for establishing a new branch of “narrative economics”, or Baker et al. (2016), who construct a comprehensive set of media-based indicators, make no or little reference to communication science. This neglect could be discounted as pure ignorance, but this misses the point. Being a predominantly empirical discipline today, economics relies on long time-series of data, that have not been available for media content, a gap rendering the two disciplines largely incompatible.The gap is also reflected in terminology. “Frame” is a major analytical concept in communication science, while the term “narrative” has become in vogue in economics. Although both concepts are closely connected, they are rarely properly distinguished from each other. “Frame” can be considered as a rather static concept that applies during a limited period of time. “Narrative”, in contrast, implies dynamic properties, i.?e., the sorting of events, causes and effects over time, that explain how the current state of the world has come about, as stressed by Tenenboim-Weinblatt et al. (2016).In this paper, we propose a synergetic concept. Following Entman (1993), a media frame contains four elements: a) a problem definition, b) a problem diagnosis, c) a moral judgement, and d) possible remedies. We augment this approach by adding two more elements. According to our definition, a media narrative comprises a frame, or several ones, plus e) one or several protagonists—persons, institutions, or social groupings (nations, classes, etc.)—, whose relationships are (often) antagonistic and may change over time; and f) events, that are chronologically integrated and that are (often) assumed to constitute causal relationships. To put it metaphorically: a frame is to a narrative what a still photo is to a movie. Both are valuable concepts; the still photo shows more details, while the movie provides a contextualization over time.Topic models like LDA are valuable tools for the measurement of media narratives. The probabilistic approach enables researchers to conduct what may be called “macro-content analyses”, an exercise that focuses on average reporting patterns in large text corpora and can be translated into numerical time-series, thereby facilitating compatibility with empirical economics. Based on a topic’s frequency analysis, its top words and top articles, “mean media narratives” can be formulated, that integrate certain events, protagonists and frames.In our case study, we exemplify this concept by applying it to an indicator that is currently popular in economics, the Economic Policy Uncertainty Index (Baker et al. 2016). The EPU aims at capturing political developments that are exogenous to economic models and therefore unpredictable. Essentially, the indicator is based on the counts of articles containing a set of search words, such as “uncertain”, “economic” as well as institutions like the European Central Bank. Using identical search words as the EPU for Germany, we construct a similar corpus for the years 1994 to 2017. By conducting an LDA-based analysis, we are able to extract additional relevant information from the data. In particular, the evolution of different uncertainty factors and their development over time can be detected.Our Uncertainty Perception Indicator (UPI) contains six relevant news topics that are highly relevant for market developments: central banks, the national government, international politics, the business cycle, companies, and society. While the EPU merely shows how often uncertainty concerning economic policy is mentioned in the media, the UPI also indicates the origins of uncertainty. By grouping the six topics into three analytical categories—governments, markets, and society—we find a distinct break in the time-series. Before the financial crisis of 2008, the perception of uncertainty was rather balanced between the three factors. Since then, however, economic uncertainty has mainly been driven by political actors, most prominently by central banks. The corresponding narratives are a two-chapter story: in the first part, up to 2008, stable financial markets and smoothed business cycles prevailed, making central banking a rather straight-forward task. The second part is characterized by multiple crises, leaving central banks as dominant actors, that intervened with unconventional measures. Thereby, they became stabilizing forces, but at the same time sources of uncertainty with respect to the timing and the impact of these measures.     

Optimal subsidies to declining industries: Efficiency and equity considerations

This paper considers equity versus efficiency in a small economy that subsidizes an industry facing falling world market prices. Subsidies keep up output in the short run when wages and factors are rigid. But once introduced, subsidies become permanent, because of pressures from vested interests. This creates missalocation of resources in the long run. An optimal efficiency subsidy balances the short-run gains and long-run losses. It should be raised when prices fall if there is full employment initially and lowered if there is unemployment. An optimal distribution subsidy, which aims at maintaining the existing income distribution, should always be raised.