Estimating a Parsimonious Model of Inequality Aversion in Stackelberg Duopoly Experiments*

In the Stackelberg duopoly experiments in Huck et al. (2001) , nearly half of the followers’ behaviours are inconsistent with conventional prediction. We use a test in which the conventional self‐interested model is nested as a special case of an inequality aversion model. Maximum likelihood methods applied to the Huck et al. (2001) data set reject the self‐interested model. We find that almost 40% of the players have disadvantageous inequality aversion that is statistically different from zero and economically significant, but advantageous inequality aversion is relatively unimportant. These estimates provide support for a more parsimonious model with no advantageous inequality aversion.     

An empirical investigation of Yankee stock offerings

This paper examines the operating and investment performance of 100 foreign firms that conduct their initial public offerings (IPOs) in the U.S. (Yankee stock offerings). The uniqueness of these firms is that the U.S. IPOs are their first public equity issue in any market, including the home market. We find significant improvement in the operating performance subsequent to these U.S. IPO events and firms from countries with poor investor protection benefit more. Compared to various benchmarks, unlike the significant underperformance of IPOs documented in many countries, these firms show no significant abnormal long-run stock market performance after 1, 3, or 5 years of seasoning. The findings are consistent with signaling and selective entry hypotheses.     

Social capital and career outcomes: a study of Chinese employees

This study examines the impacts of social capital on employees’ career outcomes in the Chinese context. Access to information and access to resources are hypothesized as the mediators in the relationships. A new measure of individual social capital is developed and used as the key predictor of the outcome variables. Data were collected from a survey administered to 184 employees in a state-owned enterprise. The results of regression analysis showed that individual social capital enhanced both career satisfaction and career achievement among Chinese employees. Further, access to information and access to resources were found to mediate the above relationships. The theoretical and practical implications are discussed.     

Auditor Industry Specialization,Political Economy and Earnings Quality: Some Cross‐Country Evidence

Using cross‐country data, we evaluate the impact of investor protection on the association between earnings quality and audits by industry specialists. Our findings show that the positive association between industry specialist auditors and earnings quality as documented in the literature is affected by the political electoral system, which reflects investor protection rights in a country. We document that audits by industry specialists are associated with higher earnings quality in countries with the proportional electoral system, reflecting weak investor protection. Our results also confirm Kwon et al.'s findings that overall there is a positive association between earnings quality and audits by industry specialists in countries with weak legal enforcement. Our findings, however, indicate that Kwon et al.'s results are valid only for countries with weak investor protection reflected by the proportional electoral system and not for countries with strong investor protection reflected by the majoritarian electoral system. These findings thus suggest that higher earnings quality of firms audited by industry specialists across countries can especially be expected when investor protection is low and legal enforcement is also weak. In addition, our research suggests that future cross‐country studies could explicitly consider the role of the political electoral system of a country in evaluating corporate governance, management and accounting issues.     

Demographic structure and overlapping generations: A simpler proof with more general conditions

d’Albis (2007) considers a continuous-time general equilibrium overlapping-generations model with age-specific mortality rates. His proof of the existence and uniqueness of the steady-state equilibrium, which can be extended to other overlapping-generations models, relies on the shape of a function that appears in the equation defining the equilibrium. By focusing on the mean age as a function of the stable population growth rate instead of the function used in d’Albis (2007), we provide a simpler proof with more general conditions. We also obtain useful properties about the first and second derivatives of the mean age function that can be applied in future work.     

Learning, teaching, and turn taking in the repeated assignment game

History-dependent strategies are often used to support cooperation in repeated game models. Using the indefinitely repeated common-pool resource assignment game and a perfect stranger experimental design, this paper reports novel evidence that players who have successfully used an efficiency-enhancing turn taking strategy will teach other players in subsequent supergames to adopt this strategy. We find that subjects engage in turn taking frequently in both the Low Conflict and the High Conflict treatments. Prior experience with turn taking significantly increases turn taking in both treatments. Moreover, successful turn taking often involves fast learning, and individuals with turn taking experience are more likely to be teachers than inexperienced individuals. The comparative statics results show that teaching in such an environment also responds to incentives, since teaching is empirically more frequent in the Low Conflict treatment with higher benefits and lower costs.     

Elasticities of substitution and export demands in a world trade model

Alternative complete models of world trade, based on the trade shares matrix approach, are specified and estimated for twenty-seven countries and regions. This model attempts to explain the composition of imports on the bases of relative prices and time trend, given the total quantity of imports of each country. Elasticities of substitution amongst imports of different countries of origin in each import market are obtained and used in the derivation of aggregate export demand functions for the individual countries. There is also a comparison of the predictive performance of the alternative models.     

Anatomy of option features in convertible bonds

Several earlier theoretical studies on the optimal issuer's calling policy of a convertible bond suggest that the issuer should call the bond as soon as the conversion value exceeds the call price. However, empirical studies on actual cases of calling by convertible bond issuers reveal that firms “delayed” calling their convertible bonds until the conversion value well exceeded the call price. In this paper, we construct valuation algorithms that price risky convertible bonds with embedded option features. In particular, we examine the impact of the soft call and hard call constraints, notice period requirement and other factors on the optimal issuer's calling policy. Our results show that the critical stock price at which the issuer should optimally call the convertible bond depends quite sensibly on these constraints and requirements. The so‐called “delayed call phenomena” may be largely attributed to the underestimation of the critical call price due to inaccurate modeling of the contractual provisions. © 2004 Wiley Periodicals, Inc. Jrl Fut Mark 24:513–532, 2004     

Does New Information Technology Lower Media Quality? The Paradox of Commercial Public Goods

We define commercial public goods as goods that are broadcast via television, radio, newsprint, or websites for which consumption is non-rival and non-exclusive, and revenue is generated mainly through advertising alongside a product in a two-sided market. With new information technology the fixed cost of entry in these markets has substantially declined. We demonstrate that as fixed costs of entry decline in a competitive media market, lower industry concentration results in lower resources to each firm for the production of commercial public goods. The counterintuitive result of new information technology is that it may result in lower quality news reporting and a less-informed population. The result may hold even when consumers exhibit preferences for diversity in media outlets.