Imperfect price discrimination, market structure, and efficiency

Abstract.  We introduce a flexible third‐degree price discrimination framework by modeling the information firms possess about consumers' locations (preferences) on the Salop circle as a partition. Higher information quality is translated into a partition refinement. In the limit, we obtain the perfect price discrimination paradigm. We show that the free‐entry equilibrium number of firms exhibits a U‐shape as a function of the quality of information. This implies that imperfect price discrimination generates the most efficient free‐entry outcome. JEL classification: D43, L11, L43     

Investment decisions in manufacturing: assessing the effects of real oil prices and their uncertainty

We investigate the effects of real oil prices and their uncertainty on investment decisions. Making use of plant‐level data, we estimate dynamic, discrete‐choice models that allow modeling investment inaction, under different assumptions related to initial conditions and unobserved heterogeneity. We find that increases in real oil price changes and in real oil price uncertainty significantly reduce the likelihood of investment action, in line with the predictions of irreversible investment theory. We also document that investment decisions exhibit strong, pure state dependence and are also significantly affected by initial conditions. Copyright © 2012 John Wiley & Sons, Ltd.     

State Prices of Conditional Quantiles: New Evidence on Time Variation in the Pricing Kernel

We develop a set of statistics to represent the option‐implied stochastic discount factor and we apply them to S&P 500 returns between 1990 and 2012. Our statistics, which we call state prices of conditional quantiles (SPOCQ), estimate the market's willingness to pay for insurance against outcomes in various quantiles of the return distribution. By estimating state prices at conditional quantiles, we separate variation in the shape of the pricing kernel from variation in the probability of a particular event. Thus, without imposing strong assumptions about the distribution of returns, we obtain a novel view of pricing‐kernel dynamics. We document six features of SPOCQ for the S&P 500. Most notably, and in contrast to recent studies, we find that the price of downside risk decreases when volatility increases. Under a standard asset pricing model, this result implies that most changes in volatility stem from fluctuations in idiosyncratic risk. Consistent with this interpretation, no known systematic risk factors such as consumer sentiment, liquidity or macroeconomic risk can account for the negative relationship between the price of downside risk and volatility. Copyright © 2016 John Wiley & Sons, Ltd.     

THE FINANCIAL REPRESSION‐LIBERALIZATION DEBATE: TAKING STOCK,LOOKING FOR A SYNTHESIS

Financial repression and liberalization became the object of fierce debates between academics and policy makers since the early 1970s. As of the late 1980s, financial liberalization became also part of the ‘Structural Adjustment Programs’ sponsored by the International Monetary Fund and the World Bank. However, the literature on financial repression and liberalization remains controversial on its theoretical conclusions and policy implications. Given its importance for both the theory and policy of economic development and growth, this paper looks for a possible synthesis. After reviewing the theoretical contributions and empirical studies under the headings of the McKinnon–Shaw and new structuralists models, the survey concludes that a new synthesis might be found in the Post‐Keynesian attempt to take an institutional perspective within a globalised financial and economic environment.     

Efficiency Performance and Dominance in Influential Subsets: An Evaluation using Fuzzy Clustering and Pair-wise Dominance

The identification of influential subsets in efficiency studies is an ongoing research concern. Seaver et al. (1999) have demonstrated the value of using a fuzzy clustering strategy to identify influential subsets without knowing which production plans are outliers a priori. From a fuzzy clustering perspective, dominance is assessed in terms of the degree of belonging of a production plan in an influential subset. From a production point of view, dominance is assessed in terms of pair-wise comparisons. These concepts of dominance within influential subsets are illustrated using the preprint insertion data set (Girod, 1996).     

Backpacking Through an Ontology of Becoming: A Never‐ending Cycle of Journeys

By adopting an ontological stance of becoming, this study traces qualitatively the journeys of contemporary backpacker tourists using the theoretical construct of the ‘Hero's Journey’ as a conceptual vehicle. This process allows for the development of a cyclical model of experience that illustrates the backpacker's experience in three stages of departure, initiation and return. This approach reveals the role that former backpackers play through the sharing of knowledge and the invaluable support they offer to novice backpackers through a network of support that is available to contemporary backpackers who choose to follow established backpacking trails. This never ending cycle of journeys becomes instrumental into the shaping of what this paper see as the common, collective consciousness of the backpacking experience and the evolution of the backpacking experience market. Copyright © 2015 John Wiley & Sons, Ltd.     

Cruise visitors' experience in a Mediterranean port of call

This study aims to provide a better understanding on cruise travel experience by studying cruise ship passengers motivation, satisfaction and likelihood of return to the port of Heraklion (Crete, Greece). From the findings, it is evident that ‘exploration’ and ‘escape’ were among the main motivations of visitors, and ‘product and services’ as well as ‘tour pace’ were significant dimensions in shaping overall satisfaction levels. Nevertheless, onshore activities were restricted to sightseeing and shopping, because of the limited available time. Based on these findings, relevant proposals are made in order to provide positive port experiences. Copyright © 2010 John Wiley & Sons, Ltd.     

The lead-lag relation between the stock and the bond markets

I examine the relative informational efficiency of bonds and the underlying stocks through the lead-lag relation between their daily returns. I find that stock returns lead the returns of high yield bonds but not those of investment grade bonds, which indicates that the stock market is relatively more informational efficient than the bond market. The findings imply trading opportunities for the bonds that are highly sensitive to the release of new information. I also find that stocks detect impending defaults earlier than bonds, which implies that bond holders may have enough time to protect their capital.     

Optimal investment,derivative demand,and arbitrage under price impact

This paper studies the optimal investment problem with random endowment in an inventory‐based price impact model with competitive market makers. Our goal is to analyze how price impact affects optimal policies, as well as both pricing rules and demand schedules for contingent claims. For exponential market makers preferences, we establish two effects due to price impact: constrained trading and nonlinear hedging costs. To the former, wealth processes in the impact model are identified with those in a model without impact, but with constrained trading, where the (random) constraint set is generically neither closed nor convex. Regarding hedging, nonlinear hedging costs motivate the study of arbitrage free prices for the claim. We provide three such notions, which coincide in the frictionless case, but which dramatically differ in the presence of price impact. Additionally, we show arbitrage opportunities, should they arise from claim prices, can be exploited only for limited position sizes, and may be ignored if outweighed by hedging considerations. We also show that arbitrage‐inducing prices may arise endogenously in equilibrium, and that equilibrium positions are inversely proportional to the market makers' representative risk aversion. Therefore, large positions endogenously arise in the limit of either market maker risk neutrality, or a large number of market makers.