Simple and inertial behavior: an optimizing decision model with imprecise perceptions

Summary Simplicity and inertial (or status-quo) bias are common features of actual decision rules used by real-life agents. In this paper, we provide one possible rationale for these features in terms of a model in which the decision maker is subject to imprecise perceptions about the consequences of actions that differ from (an already experienced) status quo.I am grateful to participants in seminars at Harvard University, University of Virginia, Virginia Polytechnic Institute, and Universitat Autonoma de Barcelona for helpful comments. Finantial support by the CICYT, project no. PB86-0613, and the Institute for Advanced Studies of the Hebrew University of Jerusalem in gratefully acknowledged.     

Low carbon procurement: An emerging agenda

The importance of climate change is shaping public policy internationally at several levels with much of the effort aimed at reducing the amount of carbon emissions released to the atmosphere through anthropogenic activity. Public procurement is a key financial mechanism available to governments to drive policy change and because of its scale can be also one of the most effective. During the past decade Low Carbon Procurement (LCP) has emerged as focal policy agenda in the UK and other countries. However, the implementation of LCP requires improved definition by governments and a greater understanding of Carbon Management tools and concepts such as Lifecycle Analysis on the part of procurement chiefs. Focusing on public procurement in the UK within the context of international policy development, this paper develops a working definition and model for LCP to guide future discussions on policy and practice. The paper presents an agenda of expected challenges for the implementation of LCP, including problems associated with weighing trade-offs between carbon and wider environmental or sustainability objectives, use of carbon tools and methodologies. The paper concludes by identifying key directions for further LCP research.     

Book Reviews

Daniel T. Sicular, Scavengers, Recyclers, and Solutions for Solid Waste Management in Indonesia, Monograph No. 32, International and Area Studies, Berkeley: Center for Southeast Asia Studies, University of California at Berkeley, 1992, pp. xii + 201. US$16.50.

Pearl lmada and Seiji Naya (eds), AFTA: The Way Ahead, Singapore: Institute of Southeast Asian Studies, 1992, pp. xv + 143. Paper: S$19.

J.W.T. Bottema, F. Dauphin and G. Gijsbers, Soybean Research and Development in Indonesia, Proceedings of a Workshop held in Cipayung, CGPRT No. 10, Bogor: CGPRT Centre, 1987, pp. 477.

Aman Djauhari, Adimesra Djulin and Irlin Soejono, Maize Production in Java: Prospects for Improved Farm-Level Production Technology, CGPRT No. 13, Bogor: CGPRT Centre, 1988, pp. 50.

World Bank Support for Industrialization in Korea, India, and Indonesia, Washington DC: Operations Evaluation Department, World Bank, 1992, pp. x + 65.

Cornelis Fasseur, The Politics of Colonial Exploifation: Java, the Dutch, and the Cultination System, translated by R.E. Elson and Ary Kraal, edited by R.E. Elson, Studies of Southeast Asia, Ithaca: Southeast Asia Program, Cornel1 University, 1992, pp. 266.

P. Bwmgaard (ed.), The Colonial Past: Dutch Sources on lndonesian History, Bulletin 323, Amsterdam: Royal Tropical Institute, 1991, pp. 64. Dfl. 20.00.

John Sullivan, Local Government and Community in Java: An Urban Case-study, Southeast Asian Social Science Monographs, Singapore: Oxford University Press, 1992, pp. xvii + 242. A$59.95.     

Persistence in some energy futures markets

In this study, we examine the possibility of long‐range dependence in some energy futures markets for different maturities. In order to test for persistence, we use a variety of techniques based on non‐parametric, semi‐parametric and parametric methods. The results indicate that there is little or no evidence of long memory in gasoline, propane, oil and heating oil at different maturities. However, when we focus on the volatility process, proxied by the absolute returns, we find strong evidence of long memory in all the variables at different contracts. © 2009 Wiley Periodicals, Inc. Jrl Fut Mark 30:490–507, 2010     

Impact of Customer Orientation,Inducements and Ethics on Loyalty to the Firm: Customers’ Perspective

Customer orientation (CO) and the development of long-term relationships with customers are known conditions for growth and profit sustainability. Businesses use special treatments, inducements, and personal gestures to show their appreciation to customers. However, there are concerns about whether these inducements really create the right perceptions in customer’s mind. This study suggests that when customers believe that the firm is ethical, the inducements and special treatments received are seen in a positive light and can help develop loyalty. The hypotheses were tested with responses from 299 customers of financial institutions in Chile. Results support the hypotheses that firm’s ethical reputation helps in retaining customers. Managerial implications are provided.     

Investment commitment and the valuation of underwriting agreements for rights issues

I extend the option pricing framework for the underwriting of rights issues, by considering that the funds received at maturity may already have been committed to a project at the time of signing of the underwriting agreement (investment commitment). The model yields valuations that are up to several times the amount implied by no investment commitment, and this is most pronounced for large issues. An upper bound for the model’s explanatory power is obtained by assuming that all issues exhibit full investment commitment; under this assumption, the model explains 40–65% of the overpricing of underwriting agreements in the United Kingdom.     

The Economic Determinants of Conditional Conservatism

Abstract:  We study the economic determinants of conditional conservatism. Consistent with prior literature, we find that contracting induces only conditional conservatism and litigation induces both conditional and unconditional conservatism. We extend prior evidence by Qiang (2007) by showing that taxation and regulation induce not only unconditional conservatism, but conditional conservatism as well. We show that in certain scenarios taxation and regulation create incentives to shift income from periods with high taxation pressure and high public scrutiny to periods with lower taxation pressure and lower public scrutiny. These income shifting strategies are implemented by recognising current economic losses that, given managerial incentives to report aggressively, would not have been recognized otherwise, or by delaying the recognition of current economic gains that would have been recognized had circumstances been different.     

Trade, demand spillovers, and industrialization: The emerging global middle class in perspective

In this paper, we investigate international demand spillovers brought about by a global middle class and their impact on trade patterns and industrialization. We propose a multi-industry and two-country trade model featuring demand complementarities propagating increasing returns across industries and national boundaries. We show how the international extent of demand spillovers depends upon asymmetries in domestic income distribution, labor efficiency, and labor force size; that is, on the global distribution of real income.