The economics of delegated regulation: The EEC and the case of insurance

It is the stated objective of the European Commission to open hitherto protected industries to international competition by the end of 1992. To this end, national governments have ceded regulatory authority over insurance to the Commission. Rather surprisingly however, the Commission in its turn appears to delegate this authority to insurance associations in EEC member countries. In this contribution, an attempt is made to explain why a supranational government might take the dual decision not to wield newly-won powers and to choose industry associations rather than governments as its partners in the regulatory process. The paper also sheds some light on the implications of such delegated regulation both for the Commission and insurers.     

Hedging Long-Term Forwards with Short-Term Futures: A Two-Regime Approach

In this paper we investigate Metallgesellschafts problem of hedging long-term forwards with short-term futures. Very different hedging strategies have been proposed in the literature. We attribute these differences to the underlying valuation approaches for oil futures and empirically compare five model-based hedging strategies. In particular, we consider a strategy which results from a two-regime pricing model. This continuous-time equilibrium model reflects the observation that prices of oil futures exhibit a very different behavior for low and high oil prices. Our empirical study shows that time diversification is the dominant effect for an effective hedging of long-term oil forwards with short-term futures. JEL classification G13, G30     

Robustness of a fixed-rent contract in a standard agency model

Summary. It is well known that there are infinitely many incentive contracts that achieve the full information outcome in the standard agency model when the agent is risk-neutral. However, since Harris and Raviv (1979), the fixed-rent contract has been the focal point among those infinitely many first-best contracts. This paper examines whether the fixed-rent contract is robust or not in various circumstances.Received: 6 June 2002, Revised: 9 June 2003, JEL Classification Numbers: J41, D82.Correspondence to: Susheng WangThe first authors work was supported by the Brain Korea 21 Project in 2003, and the grant for the Reform of university Education under the Brain Korea 21 Project of S.N.U. in 2001.     

A simple axiomatization and constructive representation proof for choquet expected utility

>P>Summary. We provide a set of simple and intuitive set of axioms that allow for a direct and constructive proof of the Choquet Expected Utility representation for decision making under uncertainty. Received: October 29, 2002; revised version: November 13, 2002 RID="*" ID="*" We thank Matthew Ryan for very useful comments and suggestions on related work and for encouraging us to write this note. Correspondence to: S. Grant     

Friedens-versus Ausscheidegrenze in der Krankenversicherung: Ein<Emphasis Type="Italic">kriegerischer</Emphasis> Beitrag für mehr Nachhaltigkeit

The German health insurance system is separated between the private and public sector by a social security ceiling. To reduce the risk selection of the current system we discuss the implications of the conversion of the upper income limit into a provision limit. Using a generational accounting approach, we find that such a conversion has a negative effect in respect of sustainability. In addition, we present the idea of a transfer premium, which reflects the value of the analyzed group of insurants. Our results show that with a transfer premium or in a system of lump-sum-premiums, the provision limit would have positive implications and would leave the German system more sustainable.     

Strategic Interaction in the Dutch Market for Consumer Magazines

Information goods such as newspapers and magazines have a number of distinct economic characteristics such as a high fixed cost – low marginal (variable) cost structure and the possibility to subsidize content through selling advertising space. We develop a simple one-shot duopoly model that analyses strategic interaction in a market with such features. We focus on the firms best responses and test the theoretical predictions of the model empirically by panel regression techniques using a balanced panel data set of 60 Dutch consumer magazines over the period 1991–1998. Our 3SLS estimation results confirm the prediction of our model that the Dutch market for consumer magazines is characterized by strategic complementarity between magazine and ad prices.     

Intra-Industry Trade in Intermediate Goods and Final Goods in a General Equilibrium Setting

This article develops a dual general equilibrium model to analyze the effects of intra-industry trade in both intermediate goods and final goods on the productivity in the final good production. Intra-industry trade in intermediate goods determines an increase in the number of intermediate good varieties available in the final good production, and intra-industry trade in final goods determines a reduction in the number of adaptations of an intermediate good to the final good production. Thereby, the productivity in the final good production increases. Different shares of intra-industry trade in intermediate goods and final goods in a general equilibrium setting implies that Jones' magnification effect and both the Rybczynski theorem and the Stolper-Samuelson theorem are not valid.     

Why Do REIT Prices Change? The Information Content of Barron's “The Ground Floor”

This article examines the information content in a series of market commentaries covering the publicly traded real estate market. The data are constructed from REIT-specific announcements published in a widely disseminated source of market commentary. The empirical methodology is designed to test whether the unexpected price change and unexpected volume are significant on the announcement day. The results demonstrate that the market commentaries provide information that impacts prices and that investors use this information in their trading. Additional analysis suggests that prices change more in the period following the REIT boom than during an earlier period. This result seems somewhat puzzling given recent studies that report an increase in REIT market liquidity.     

Partial retirement and the earnings test

This paper studies the effects of the earnings test on retirement behavior. The earnings tests of most social security systems tax post0retirement earnings at a relatively high level and do not lead to actuarially fair increases in futere benefits. This results in discouragement of partial retirement. The paper shows that a reduction in the earnings test's tax rate is likely to increase part-time work, and that, in special cases, the increase in work effort may even lead to a reduction in the net transfer from social security to the individual.I wish to thank the Institute of Industrial Relations at UC Berkeley for its hospitality and support. This research has been financed by the Austrian Fonds zur Förderung der wissenschaftlichen Forschung. I am indebted to J. K. Brunner, W. T. Dickens, J. Falkinger, E. Lazear, T. Sikor, B.-A. Wickström, R. Winter-Ebmer, and two referees for comments on an earlier draft.