Trading in derivatives when the underlying is scarce

Regulatory restrictions and market frictions can constrain the aggregate quantity of long and short positions in a security. When these constraints bind, we refer to the security as scarce, and its price becomes distorted relative to its value in a frictionless market. We show that an otherwise redundant derivative can reduce the price distortion of the underlying security by relaxing its scarcity. We also show that it is especially important to analyze the underlying and derivative markets jointly when evaluating the impact of regulation, such as short-sales bans and position limits in derivatives, that restricts trade.     

Regulation,reputation, and environmental risk

This paper examines how preferences for social reputation affect the design of monetary incentives in an efficient mechanism for environmental risk. Our results are a high reputation firm receives less than optimal transfer; the low reputation firm sacrifices information rent.     

Partial Assimilation of Technology: Prognosis and Remedial Measures

Prior research mentions that there may be technology assimilation gaps in that a technology may be cumulatively assimilated over a period of time depending on knowledge and experience from initial usage. Thus, stages of partial assimilation are indicated that, if not accounted for, could lead to erroneous understanding of technology adoption and diffusion. However, the phenomenon has not received serious academic attention, and there is still a lack of understanding as to when and why partial assimilation may occur, its consequences to organizations, and remedial steps that could be taken to minimize it. We investigate these issues in the context of assimilation of third-party business-to-business (B2B) e-market by four small firms. Our findings reveal that partial assimilation occurred because of different perceptions of benefit and risk of the two different features of the B2B e-market—the informational (buyer/supplier and product information) and the transactional (auction, request for quote, price negotiation, message archiving, payment systems), arising from different moderating impacts of the organizational (relational norms and the type of business handled) and environmental (perceptions of competitive pressure and institutional norms of technology usage and work practices) contexts of deployment and usage of the two features. The consequences of partial assimilation were mixed; while it was found to be detrimental to firms with low relational norms with their clients, it proved to be gainful for firms with high relational norms. Theoretical and practical implications of the findings are discussed.     

Morally Contentious Technology-Field Intersections: The Case of Biotechnology in the United States

Technologies can be not only contentious—overthrowing existing ways of doing things—but also morally contentious—forcing deep reflection on personal values and societal norms. This article investigates that what may impede the acceptance of a technology and/or the development of the field that supports or exploits it, the lines between which often become blurred in the face of morally contentious content. Using a unique dataset with historically important timing—the United States Biotechnology Study fielded just 9 months after the public announcement of the successful cloning of the first mammal (i.e., Dolly the sheep)—we find that microlevel factors (i.e., conservative Christianity) predict unfavorable judgments of the technology-field intersection while macrolevel representations [i.e., exposure to Science, Technology, Engineering, and Mathematics disciplines and media coverage] predict more favorable judgments.     

The long-run Phillips curve and non-stationary inflation

Modern theories of inflation incorporate a vertical long-run Phillips curve and are usually estimated using techniques that ignore the non-stationary behaviour of inflation. Consequently, the estimates obtained are imprecise and unable to test the veracity of a vertical long-run Phillips curve. We estimate a Phillips curve model taking into account the non-stationary properties in inflation and identify a small but significant positive relationship between inflation and unemployment. The results also provide some evidence that the trade-off between inflation and the rate of unemployment in the short-run worsens as the mean rate of inflation increases.     

The probability,size and uses of remittances from urban to rural areas in India

This paper examines the important determinants of the decision to remit and of the amount remitted by migrants in Delhi to their place of origin. The findings are compared with those obtained for Kenya by Knowles and Anker. The comparative exercise helps us to identify universal patterns of remittance behaviour from those which are time, place and sample specific. The paper also throws light on the validity of infering technological change in agriculture in rural areas from data on uses of remittances.     

On the interpretation of bribery in a laboratory corruption game: moral frames and social norms

Past studies on laboratory corruption games have not been able to find consistent evidence that subjects make “immoral” decisions. A possible reason, and also a critique of laboratory corruption games, is that the experiment may fail to trigger the intended immorality frame in the minds of the participants, leading many to question the very raison d’être of laboratory corruption games. To test this idea, we compare behavior in a harassment bribery game with a strategically identical but neutrally framed ultimatum game. The results show that fewer people, both as briber and bribee, engage in corruption in the bribery frame than in the alternative and the average bribe amount is lesser in the former than in the latter. These suggest that moral costs are indeed at work. A third treatment, which relabels the bribery game in neutral language, indicates that the observed treatment effect arises not from the neutral language of the ultimatum game but from a change in the sense of entitlement between the bribery and ultimatum game frames. To provide further support that the bribery game does measure moral costs, we elicit the shared perceptions of appropriateness of the actions or social norm, under the two frames. We show that the social norm governing the bribery game frame and ultimatum game frame are indeed different and that the perceived sense of social appropriateness plays a crucial role in determining the actual behavior in the two frames. Furthermore, merely relabelling the bribery game in neutral language makes no difference to the social appropriateness norm governing it. This indicates that, just as in the case of actual behavior, the observed difference in social appropriateness norm between bribery game and ultimatum game comes from the difference in entitlement too. Finally, we comment on the external validity of behavior in lab corruption games.     

A distribution-free newsvendor model with balking and lost sales penalty

In this paper, we extend the classical single period newsvendor model in an environment of customer balking, which occurs when customers are reluctant to buy a product if its available inventory falls below a threshold level. Since failure to make a sale usually results in a cost penalty, in addition to the opportunity cost of lost sales, we incorporate such costs in our model. Furthermore, we extend our model to include fixed ordering costs. Our analysis is based on the assumption that only the mean and the variance of the distribution of demand are known, without assuming any specific distributional form. We illustrate the concepts developed here through simple numerical examples and demonstrate the effectiveness of our approach by solving a set of 1000 randomly generated test problems.     

Fixed-step anonymous overtaking and catching-up

We investigate criteria for evaluating infinite utility streams that satisfy fixed-step anonymity and include some notion of overtaking or catching-up. We do so in a generalized setting that does not require us to specify the underlying finite-dimensional criterion (e.g. utilitarianism or leximin). We present axiomatizations that rely on weaker axioms than those in the literature, and which in one case is new. We also provide a complete analysis of the relationships between the symmetric parts of these criteria and likewise for the asymmetric parts.