Desirability bias in foresight: Consequences for decision quality based on Delphi results

In foresight activities uncertainty is high and decision makers frequently have to rely on human judgment. Human judgment, however, is subject to numerous cognitive biases. In this paper, we study the effects of the desirability bias in foresight. We analyze data from six Delphi studies and observe that participants systematically estimate the probability of occurrence for desirable (undesirable) future projections higher (lower) than the probability for projections with neutral desirability. We also demonstrate that in the course of a multi-round Delphi process, this bias decreases but is not necessarily eliminated. Arguably, the quality of decisions based on Delphi results may be adversely affected if experts share a pronounced and common desirability for a future projection. Researchers and decision makers have to be aware of the existence and potential consequences of such a desirability bias in Delphi studies when interpreting their results and taking decisions. We propose a post-hoc procedure to identify and quantify the extent to which the desirability bias affects Delphi results. The results of this post-hoc procedure complement traditional Delphi results; they provide researchers and decision makers with information on when and to which extent results of Delphi-based foresight may be biased.     

Monetary equilibrium and price stickiness: Causes,consequences and remedies

We assess monetary equilibrium theory by focusing on its foundation—price stickiness—and answer several ancillary questions. Prices are sticky at times. Contra monetary equilibrium theorists, this is not a reason to advocate an issuance of fiduciary media to counteract the effects of a sluggish price adjustment process. Issuances of fiduciary media will breed negative effects, primarily via wealth redistributions, faulty interest rate signals and exacerbated business cycles. Allowing the price level to adjust to maintain monetary equilibrium provides for fewer detrimental effects than adjusting the supply of credit.     

Disziplinierung steigender Staatsschulden durch Brüssel, Frankfurt oder Basel?

Der Stabilit?ts- und Wachstumspakt soll dazu beitragen, dass die Mitgliedstaaten der Europ?ischen W?hrungsunion die Verschuldungskriterien einhalten. Welche Funktion k?nnen dabei die Kapitalm?rkte ausüben? Gibt es Ineffizienzen auf dem Markt für Staatsschulden? Wie k?nnen die EU-Kommission als Wettbewerbsbeh?rde, die Europ?ische Zentralbank und die Bank für Internationalen Zahlungsausgleich hinsichtlich der Finanzmarktaufsicht zur St?rkung der M?rkte beitragen? Philipp Paulus, 38, Dipl.-Volkswirt, ist wissenschaftlicher Mitarbeiter des Instituts für Wirtschaftspolitik an der Universit?t zu K?ln. * Dieser Artikel entstand im Rahmen eines Projekts zur Stabilit?t von Staatsverschuldung bei EWU-Beitrittskandidaten für das Otto-Wolff-Institut für Wirtschaftsordnung in K?ln.     

Ein Regressionsmodell zur sparten- bzw. marktbezogenen Analyse der Eigenkapitalkosten von Unternehmen am Beispiel der Versicherungsbranche

In this paper we present a regression model which is fitted in the cost of equity of stock market companies. In this way we can estimate the cost of equity for companies which are not listed on the stock market based on the weights of line of business and market. Thus the cost of equity used for a value based management of strategic business units can be derived on the basis of these economic parameters. The theoretical model is introduced in a general setting for companies of any industry sectors. Then the model is applied to the insurance sector based on the lines of business Life and Non-life as well as on markets for Germany, Europe and the United States of America.     

Reductions in Real versus Tariff Barriers: The Impact on Industry Concentration

Economic integration has had ambiguous effects on industry concentration. The literature on the topic proposes various explanations for these empirical findings. This paper provides an additional theoretical argument. It shows that in a world of monopolistic competition, integration alone (modeled as a reduction of trade barriers) may exert opposing forces on industry concentration, depending on whether the barrier consists of real (frictional) or tariff costs. In particular, the Herfindahl index of industry concentration falls for a reduction in real costs, but rises for a reduction in tariff costs. The reason is that real barriers burn up resources, such that industry profitability is reduced, reducing entry, and resulting in fewer firms and a correspondingly higher concentration. Under a tariff barrier, the redistributed tariff revenue stabilizes industry profitability, resulting in more firms and a lower concentration.