Investment choices: Indivisible non-marketable assets and suboptimal solutions

Several investment decisions deal with non-marketable assets. Non-marketable assets are available only to one investor and are often indivisible. This has relevant consequences on investor investment opportunities. Adhering to a mean–variance representation of the investment space and considering a non-marketable asset (divisible or not), we derive some possible investment scenarios an investor may face. Furthermore, we show how a limited ability to gather and process information affects investor portfolio choices. Our results define a set of conditions under which the non-marketable asset represents a good investment and show that, under certain assumptions, the efficient frontier exhibits non-linearities and intervals of discontinuity.     

Being ‘Green and Competitive’: The Impact of Environmental Actions and Collaborations on Firm Performance

In this paper, we seek to enhance the understanding of the link between environmental management and firm performance, so contributing to the debate of being “green and competitive”. Relying on the resource‐based view, we study the effect of different environmental management capabilities on a firm's market and image performance. In particular, we analyze the capabilities to implement product and process‐related environmental actions with different types of environmental focus (materials, energy, pollution) and the capabilities to develop environmental collaborations with different types of actors (both business actors and non‐business actors). To this aim we conducted a survey on 122 Italian companies. Results show that market performance and image performance have partially different antecedents. Specifically, a firm's market performance is positively affected by the capabilities to implement environmental actions with a focus on energy and pollution and to develop environmental collaborations both with business and with non‐business actors. On the other hand, a firm's image performance is positively affected by the capabilities to implement environmental actions with a focus on materials and to develop environmental collaborations with non‐business actors. Copyright © 2013 John Wiley & Sons, Ltd and ERP Environment     

A simple approach to international monetary policy coordination

This paper analyzes the strategic interaction between the monetary policymakers of two countries, in an intertemporal general equilibrium model with nominal rigidities and imperfect competition. It offers an excursus on non-cooperative towards cooperative solutions. In a non-cooperative equilibrium the monopolistic allocation prevails in both countries, because of the incentive to use strategically the terms of trade. In a cooperative solution where both policymakers internalize the externalities given by the terms of trade, the competitive allocation is reached. However, cooperation can be counterproductive. We then characterize a problem of delegation in which the set of choice is restricted to the Pareto efficient allocations and in which the participation constraints implied by the non-cooperative equilibrium are taken into account.     

Horizontal innovation-based growth and product market competition

The influence of the intensity of competition in the product market on economic growth is analyzed by developing an endogenous growth model with horizontal innovation. Product market competition is measured by (1 − Lerner index) and depends on both the share of factor inputs in total income and the degree of substitutability across goods. We find that the shape of the relationship between competition and growth can change dramatically according to which proxy of competition is used. We explain our results in terms of the interplay between the resource allocation and the profit incentive effects.     

Dynamic psychological games

The motivation of decision makers who care for various emotions, intentions-based reciprocity, or the opinions of others may depend directly on beliefs (about choices, beliefs, or information). Geanakoplos, Pearce and Stacchetti [J. Geanakoplos, D. Pearce, E. Stacchetti, Psychological games and sequential rationality, Games Econ. Behav. 1 (1989) 60-79] point out that traditional game theory is ill-equipped to address such matters, and they pioneer a new framework which does. However, their toolbox - psychological game theory - incorporates several restrictions that rule out plausible forms of belief-dependent motivation. Building on recent work on dynamic interactive epistemology, we propose a more general framework. Updated higher-order beliefs, beliefs of others, and plans of action may influence motivation, and we can capture dynamic psychological effects (such as sequential reciprocity, psychological forward induction, and regret) that were previously ruled out. We develop solution concepts, provide examples, explore properties, and suggest avenues for future research.     

Effects of background music endings on consumer memory in advertising

Background music is widely used in advertising to attract audiences' attention. However, no research to date has considered the effect of background music endings on consumer memory for advertised products and messages. Across two experiments, the present research shows that background music that ends abruptly (i.e., truncated ending) distracts consumers' attention, reducing memory for both products and messages, compared to background music that ends with a note in the chord of the dominant tonality (i.e., regular ending) or that concludes with a fading-out ending.     

Technology and efficiency in a panel of Italian dairy farms: an SGM restricted cost function approach

This article employs a short‐term specification of the symmetric generalised McFadden (SGM) cost function capable of accommodating quasi‐fixed factors and variable returns. Temporary equilibrium and scale economies are investigated while maintaining the consistency of the estimated model with microeconomic theory and approximation properties. It also makes use of a two‐step procedure to estimate first the technology parameters and then time‐varying efficiency at farm level. No distributional assumptions are required on efficiency as we consider a fixed effect model. A balanced panel of Italian dairy farms during the years from 1980 to 1992 serves as the case study. The results suggest a rigid productive structure during the pre‐ and post‐quota period. Moreover, Italian milk producers are found to exhibit considerable excess capacity and rather low input technical efficiency.     

Costly contracting in a long‐term relationship

We examine a model of contracting where parties interact repeatedly and can contract at any point in time, but writing formal contracts is costly. A contract can describe the external environment and the parties' behavior in a more or less detailed way, and the cost of writing a contract is proportional to the amount of detail. We consider both formal (externally enforced) and informal (self‐enforcing) contracts. The presence of writing costs has important implications both for the optimal structure of formal contracts, particularly the tradeoff between contingent and spot contracting, and for the interaction between formal and informal contracting. Our model sheds light on these implications and generates a rich set of predictions about the determinants of the optimal mode of contracting.     

Linear-quadratic approximation of optimal policy problems

We consider a general class of nonlinear optimal policy problems with forward-looking constraints, and show how to derive a problem with linear constraints and a quadratic objective that approximates the exact problem. The solution to the LQ approximate problem represents a local linear approximation to optimal policy from the “timeless perspective” proposed in Benigno and Woodford (2004, 2005) [6], [7], in the case of small enough stochastic disturbances. We also derive the second-order conditions for the LQ problem to have a solution, and show how to correctly rank alternative simple policy rules, again in the case of small enough shocks.     

Modelling technical change in Italian agriculture: a latent variable approach

This paper presents an alternative approach to the measurement of technical change. It is based on the latent variable level of technology that enters explicitly the input demand system and on a hypothesis about the innovation generating process. By adding measurement error equations, the behavioral system can be viewed as a Multiple Indicators/Multiple Causes (MIMIC) model. The parameter estimates are obtained with a maximum likelihood estimator which involves the implicit covariance matrix. The analysis refers to Italian agriculture and the results provide some evidence on the nature and level of technical change during the years 1961–1991.