Does It Pay to Promote on eBay?

Promotional upgrades to auction listings are now a ubiquitous feature of auction Web sites. We examine 705 auctions of a single consumer-electronic product on eBay and test whether use of various promotions results in a greater probability of sale or a higher realized price. We find that promotions that focus on display enhancements, such as border, bold, or highlight, are not worth the cost. However, the subtitle promotional tool is effective and worth the cost. We also find interesting results regarding seller reputation: although seller reputation does not increase the probability of a sale overall, it can result in higher realized price if a reputable seller is selected. Implications for promoting on eBay are discussed.     

Optimal Indirect and Capital Taxation

We consider an environment in which agents' skills are private information and follow arbitrary stochastic processes. We prove that it is typically Pareto optimal for an individual's marginal benefit of investing in capital to exceed his marginal cost of doing so. This wedge is consistent with a positive tax on capital income. We also prove that it is Pareto optimal for the marginal rate of substitution between any two consumption goods to equal the marginal rate of transformation. This lack of a wedge is consistent with uniform taxation of consumption goods within a period.     

Policies and international trade agreements on technical compatibility for industries with network externalities

The paper considers a country (home) in which consumers have heterogeneous preferences over ex ante incompatible domestic and imported products and benefit from a network externality. We analyze the cases with trade under perfect competition and the international duopoly, in which both governments strategically use policies toward compatibility but cannot use conventional trade policies. In both cases, the equilibrium outcome of the non-cooperative game depends upon the strength of the network externality effect and involves either an excessively high equilibrium level of compatibility (in combination with either too much or too little trade) or very low equilibrium levels of both compatibility and trade. The paper concludes with the analysis of the international agreements on policies toward compatibility and evaluates the existing provisions in the WTO legal system aimed at minimizing the trade-inhibiting impact of standards and regulations in the area of technical compatibility.     

Assessing systemic risk and its determinants for advanced and major emerging economies: the case of ΔCoVaR

The paper examines conditional risk relationships among sovereign CDS prices and stock market indices for 11 economies with particular relevance for international portfolio investment holdings (Canada, China, Brazil, France, Germany, Italy, Japan, Russia, Spain, the USA, and the UK). The analysis is based on delta conditional value at risk (ΔCoVaR). The UK, France, and Italy significantly contribute to the overall systemic risk in both markets. The USA, the UK, and Russia appear to be important contributors to it in the stock market. In the meantime, the advanced economies exhibit much higher resilience to the systemic risk propagation in comparison with China, Brazil and Russia. Gross government debt to GDP, state fragility index, EU membership and world gross GDP share of a country in distress are key determinants of ΔCoVaRs for the sovereign CDS prices. Stock market total value traded to GDP and world gross GDP share of a country in distress drive ΔCoVaRs in the stock market. In both cases geographic distance tends to deter systemic risk propagation. Inflation, trade and financial openness as well as common language and time zone differences are less important predictors of bilateral ΔCoVaR exposures.     

Strategic interoperability standards and trade taxes

In a two-country international trade framework, the paper considers the interplay between the governments' incentives for conducting traditional trade policies and their incentives for the policies toward compatibility between the products of the firms competing in the international market. The model assumes that one domestic and one foreign firm supply partially incompatible products for the home country market while consumers value both variety and a network externality. Motivated by the benefits of the network externality, the home government sets a standard requiring the foreign firm to guarantee a minimum level of compatibility between its own product and the product of the domestic rival. The paper analyzes the home country standard setting and import tariff policies as well as the incentives of the foreign country for imposing the export tax and conducting a policy which enhances the degree of compatibility between the rival products in the export market.     

Party Fragmentation and Presidential Elections in Post-Communist Democracies

Despite its controversial status as a stable governmental form, many of today's societies attempting to make the transition to democracy have or will, for a variety of reasons, choose presidentialism. Meanwhile, the evidence suggests that the combination of presidentialism and multipartism is especially dangerous for democratic stability (Mainwaring 1994). The question this essay addresses, though, is whether presidential elections themselves serve to encourage a fragmented party system, at least in the initial stages of democratization. In transitional political systems presidential elections encourage party fragmentation, but in a way different from that of highly proportional purely parliamentary mechanisms. Specifically, parties proliferate to support the presidential aspirations of political elites. Multivariate regression analysis on cross-sectional aggregate electoral data, supported by extensive outliers diagnostics and assessments of the role of country-specific effects is applied. A nested model is used to discriminate among the secondary hypotheses. Controls include: parliamentary election rules (district magnitude, threshold for representation, adjustment districts, ballot structure), relative timing of presidential and parliamentary elections, and basic societal cleavage structure. Using as our data source the recent elections in East and Central Europe and the European part of the former Soviet Union, we show that presidential elections consistently significantly increase party fragmentation. At the same time, the data are consistent with the hypothesis that presidentialism does encourage the overall consolidation in party systems through voters' abandonment of some parties, akin to Duverger's 'psychological effect'.     

How do auditors view managers’ voluntary disclosure strategy? The effect of earnings guidance on audit fees

The objective of this study is to examine the relation between attributes of earnings forecasts issued by managers and audit fees. Although there is an extensive literature on managers’ disclosure of earnings forecasts, there is a paucity of research on how auditors incorporate information from these voluntary disclosures. We find that the issuance of an annual or quarterly management earnings forecast in the prior period is positively associated with the current period audit fees. Our results indicate that on average, audit fees are higher by about 7% for firm-years associated with an annual forecast. Among the firms that issue earnings forecasts, we find no association between audit fees and likelihood of updating a previously issued earnings forecast, indicating that auditors do not view such behavior negatively. Further, we find audit fees to be positively associated with the error and the bias (or optimism) in the forecasts for annual forecasts but not for quarterly forecasts. Overall, these results suggest that management’s forecast behavior captures higher business risk for the auditor via greater risk of earnings management or litigation risk.