A Pricing Model for Residential Homes with Poisson Arrivals and a Sales Deadline

We introduce a pricing model for single-family residences on the real estate market. The model considers purchase offers that arrive according to a Poisson process. The homeowner’s problem is to set a price that will maximize his net profit. The selling agent suggests a price to the homeowner that will maximize her net profit, which consists of her sales commission minus her costs. Our model accounts for a deadline to sell the home, a common feature of the housing market, beyond which fixed and variable penalty costs accrue to both the homeowner and selling agent. We demonstrate the behavior of the model and show under what conditions the owner’s and agent’s incentives are aligned. Our computational results suggest, in most circumstances, that agents should not pressure owners to substantially lower their asking prices in the presence of a deadline.     

Crowd out effects of place-based subsidized rental housing: New evidence from the LIHTC program

Since its inception in 1987, the Low Income Housing Tax Credit (LIHTC) program has ballooned into the largest ever source of subsidized construction of low-income housing in the United States, accounting for one-third of all recent multi-family rental construction. This paper examines the crowd out effects of this increasingly important source of low-moderate income housing. To do so, we analyze the impact of LIHTC construction at three different levels of geography, MSA, county, and 10-mile radius circles. This allows us to employ increasingly extensive geographic fixed effects that help to difference away unobserved factors. Political variables are also used as instruments to further facilitate identification.In all of our models, IV estimates yield substantially greater crowd out than OLS, confirming the endogenous attraction of LIHTC development to areas ripe for new construction. Our most robust IV estimates indicate that nearly 100% of LIHTC development is offset by a reduction in the number of newly built unsubsidized rental units, although the confidence band around this point estimate allows for less dramatic assessments. Additional estimates suggest that LIHTC development has a much more moderate impact on construction of owner-occupied housing, but these estimates are imprecise. Overall, while LIHTC development may well affect the location of low-moderate income rental housing opportunities, our estimates suggest that the impact of the program on the number of newly developed rental housing units appears to be small.     

Rationalising terror‐related risks: the case of Israeli tourists in Sinai

Research into tourist reactions to terror requires qualitative studies that provide insight into the affective and cognitive processes that tourists experience when facing terror‐related risks. The study responds to this need by focusing on Israeli tourists who voluntarily travelled to the terror‐threatened destination of Sinai, Egypt. Applying ethnographic methods, the study identifies two major rationalisations tourists used to reduce their perceived risk: (i) inward‐oriented rationalisations that reduce the perceived risk of the destination by stressing the safety within it; and (ii) outward‐oriented rationalisations that reduce the perceived risk of the destination by emphasising the terror‐related risks, which exist elsewhere. Copyright © 2007 John Wiley & Sons, Ltd.     

Cyclical fluctuations in the Israeli housing market

While public construction in Israel is of a magnitude sufficient to exert effective housing market countercyclical influence, it has often had the opposite effect. This phenomenon is viewed with particular concern, given that economywide recessions of past decades have been precipitated by significant downturns in the construction industry. This paper describes specification and estimation of a simultaneous-equation structural model of the Israeli housing market. Results of the analysis indicate the importance of disaggregation by public and private sectors as well as the significance of mortgage availability and price, substitution and income effects, disruptions caused by war and the like in an explanation of cyclical phenomenon.     

SOME ESTIMATES OF THE IMPACT OF CORPORATE DIVERSIFICATION ON THE VALUATION AND LEVERAGE OF USA FIRMS: ESTIMATES FROM 1972 DATA

This paper estimates the effect of corporate diversification on market valuation and leverage. Using a data base which allows one to determine the product lines of companies on the 3-digit S.I.C. code level, a set of multi-industry firms was chosen. For each of these diversified firms, a portfolio of single industry firms was constructed which matched the component parts of the multi- industry firm. Tests showed that although diversified firms employ significantly greater financial leverage, their relative market value is significantly less than that of the matching portfolios of single industry firms with which they com- pete. This study does not support the view that corporate diversification creates synergistic benefits which can be translated into increased market value of the firm's securities.     

Strategic analysis of the competitive exercise of certain financial options

Warrants and convertible bonds are claims on the firm which change the outstanding number of common stock shares when exercised or converted. Exercise of such claims in competitive circumstances is modeled here as a noncooperative game played by a continuum of players. First, equilibria of the game are shown to exist by applying results of Schmeidler. Second, the game's equilibria are compared to outcomes that come about when one individual controls the exercise of all the claims, but is constrained to exercise them in one block. The results are analogues of earlier results by one of the authors on the competitive pricing of such claims.     

Stakeholder Theory and Public Policy: How Governments Matter

The Social Issues in Management Division has had a long history of research into various aspects of governmental influences on business. Recent years, however, have seen stakeholder theory sort of sweep the field, and under a stakeholder theory of capitalism, governments will matter less then they have in the past as stakeholder principles are implemented throughout the corporate world. This article will examine the nature of this claim by discussing problems with the implementation of stakeholder theory and examining the role of public policy in our society.     

Politically Determined Income Inequality and the Provision of Public Goods

Political processes may bring about Pareto improvements by increasing income inequality in a society that produces a public good by voluntary contributions. Proportional taxation funds a “governing agent.” The most endowed agent is the Condorcet winner for governing agent. When the tax rate can also be chosen by a vote, the ideal point of the agent with median initial endowment is the Condorcet winner under Cobb–Douglas utility. If Pareto improvements are possible, this ideal point corresponds to Pareto improvement. Pareto improvement may also be possible, even when a Leviathan set taxes, if there is deadweight loss from taxation. Pareto improvements are indeed always possible in “large” societies. On the other hand, no improvements may be possible if the initial distribution of wealth is very unequal in a “small” society, and Condorcet winners may not exist for other utility functions.