Sanctions for repeat offenders: a question of wealth?

In a two‐period standard law‐enforcement model, individuals observe or break the law. In addition, individuals may offend accidentally. When sanctions are limited by individual wealth constraints, the government chooses appropriate sanctions for first and repeat offenders and the level of monitoring. We assume a welfare‐oriented government and derive subgame‐perfect equilibria for constant, increasing and decreasing sanctions depending on the individual wealth level.     

Are There Rational Bubbles in REITs? New Evidence from a Complex Systems Approach

This study applies a complex systems approach to test for the presence of rational bubbles in the Equity REITs market. The applied model is based on theoretical implications of the evolution of prices under rational bubble regimes. The advantage of the approach is twofold. The model is able to detect rational bubbles while they rise and to predict the most likely time of their collapse. We apply the model to daily price data on U.S. Equity REITs from 1989 to 2011. Our findings suggest the existence of a bubble for the period of 2003 to 2007. Tests for sub-markets reveal that the bubble developed in the Residential REITs market, but not in the Office REITs market.     

The role of online platforms for media markets — Two-dimensional spatial competition in a two-sided market

We analyze the market for online and offline media in a model of two-dimensional spatial competition where media outlets sell content and advertising space. Consumer preferences are distributed along the style and type of news coverage where the distance costs may vary across dimensions. For integrated provision of online and offline platforms we show that entering the online market reduces average profits and may even constitute a prisoner's dilemma. Specialized provision may yield polarization in the style and type dimensions. This is in contrast to the maximum–minimum differentiation result previously established in the literature on multidimensional horizontal competition. We show that maximal differentiation in both dimensions occurs due to the discrete nature of the type dimension and asymmetric advertising markets.     

A Framework for Market Discipline in Bank Regulatory Design

Abstract:   Given current debates on the future direction of regulatory design, the first objective of this paper is to contextualise the issues surrounding bank market discipline. Accordingly, the paper raises awareness of the current key themes within incentive‐based regulatory design and analyses the theory underlying market discipline. This leads to the creation of a theoretical framework of market discipline, which provides a powerful tool for understanding the conditions necessary for effective market discipline and for assessing the findings of market discipline‐related empirical research. The second objective is to emphasise the suitability of the theoretical framework for debates on contemporary market discipline and aiding future bank regulatory policy design, in particular, how to incorporate suitable, incentive mechanisms in international banking regulation.     

Spatial Variation in Reverse Mortgages Usage: House Price Dynamics and Consumer Selection

Reverse mortgages have been obtained by nearly one million senior households. In the future, the number of eligible households will grow substantially, about 80 % are homeowners, and many of them have substantial equity in their home. We study state-level variations in rate of originations of HUD’s Home Equity Conversion Mortgage (HECM) product. Our focus is on the impact of house prices on the origination rate. We test the hypothesis that in states where real house prices are volatile and the current level is above the long term norm, seniors rationally anticipate future reductions in house prices and lock-in their housing equity gains by obtaining a reverse mortgage. We test alternative hypotheses, the first being that seniors living in states with high rates of house price appreciation increase their use of HECMs as a means to convert an illiquid wealth capital gain into a more liquid asset. A second alternative hypothesis is that the intertemporal changes in originations of HECMs were a result of changes in the supply of mortgage originators. Our empirical work supports the hypothesis that seniors used HECMs to insure against house price declines, but we find no evidence in support of the alternative hypotheses.     

Untere Einkommensgruppen noch gezielter entlasten

Wirtschaftsdienst - Prices for energy and food are currently rising extraordinarily sharply. Households with low net incomes in particular are being burdened by the price increases, in some cases...     

Love is in the air. Consumers' perception of products from firms signaling their family nature

Signaling consumers that the company behind a brand is run by a family is increasingly observable in the marketing realm. One possible reason could be the emotional value signaled by the family nature of the firm. Brand signals carrying emotional value might contribute to a competitive advantage. Since we do not fully understand the effect of signaling the family nature of a firm yet and as family represents an emotional context, we examine this effect on consumer perceptions of the products being made with more love by conducting two experimental studies. In Study 1 (N = 371) we find that the firm's family nature triggers a strong perception of love being part of the production process of the brand, which leads to a higher willingness to pay. Specifically, in Study 2 (N = 280) we designed a process manipulation study to provide causative experimental explanation of the process of Study I. Thereby, we contribute to psychology and marketing research by showing that consumers consider a product signaling the family nature of a firm more strongly to be made with love and are willing to pay a price premium. This effect is driven by positive feelings related to one's own family.     

The Determinants of Subprime Mortgage Performance Following a Loan Modification

We use vector error correction models to examine the interdependence between the high and the low price tiers during the latest housing market boom and bust. For 118 of the 364 US statistical areas analyzed, the tiered price indexes are bound by a long-run relationship. In general, low tier homes appreciated more than high tier homes in the past two decades. In contrast to previous periods of high volatility, however, low tier homes appreciated more during the boom and lost more value during the bust of the market. We find a shift in the long-run equilibrium during the bubble —the cointegration parameter that ties the tiers together is greater in absolute value during the bubble period compared to the periods of more moderate appreciation and depreciation rates. Moreover, the shift in the long-run equilibrium can be explained by differences in subprime originations across housing markets. We also find that short run price dynamics is driven by momentum in both segments of the market.