Expected inflation, expected stock returns, and money illusion: What can we learn from survey expectations?

We show empirically that survey-based measures of expected inflation are significant and strong predictors of future aggregate stock returns in several industrialized countries both in-sample and out-of-sample. Empirically discriminating between competing sources of this return predictability by virtue of a comprehensive set of expectations data, we find that money illusion seems to be the driving force behind our results. Another popular hypothesis – inflation as a proxy for aggregate risk aversion – is not supported by thedata.     

Real and nominal UK interest rates,ERM membership,and inflation targeting

This article estimates a two-factor term structure model to analyze the time-varying mean-reverting levels of the UK real and nominal short-term interest rates. Before and during British membership in the ERM, the mean-reverting levels of real and nominal short rates have a strong negative correlation. Afterward, when the UK implemented an inflation targeting policy, the mean-reverting levels have a strong positive correlation. The article also reports empirical evidence of a link between the time-varying central tendencies and inflation in the disinflation period before the implementation of the inflation targeting policy.     

Ghostbusting: which output gap really matters?

Reflecting domestic demand pressures, the output gap has important implications for economic analysis. This paper assesses the usefulness of four commonly-used gap measures for a small set of European countries. The main results are that the policy implications can be very different depending on the gap measure and that, consequently, care should be exercised when employing any such measure. Moreover the paper investigates in a simple inflation forecasting framework the common assertion that the output gap could improve the forecasting accuracy. For annual observations, however, these measures rarely provide useful information and there is no single best measure across countries.     

Stationary equilibria in bargaining with externalities

This paper studies infinite-horizon bargaining between a seller and multiple buyers when externalities are present. We extend the analysis in Jehiel and Moldovanu by allowing for both pure and mixed equilibria [Jehiel, P., Moldovanu, B., 1995a. Cyclical delay in bargaining with externalities. Rev. Econ. Stud. 62, 619–637]. A characterization of the stationary subgame perfect equilibria in generic games is presented. Equilibria with delay exist only for strong positive externalities. Since each buyer receives a positive payoff when the seller makes an agreement with some other buyer, positive externalities induce a war of attrition between buyers.     

Customer issues related to limited air connectivity

Air access can be crucial for regional economic development, especially when global industries are involved. However, air traffic generates negative impacts, such as noise and air pollution that can lead to politically motivated calls to reduce air traffic. This paper investigates customer issues and potential responses of frequent flyers to non-market-driven limitations on air transport. Based on a survey conducted at Zurich International Airport we show that frequent air travelers tend to be more senior and to work in industries that involve travel outside of the worker's country of origin. Consequently, they are more critical of potential restrictions on air travel.     

The inefficiency of price quantity bargaining

In bargaining between a buyer and several sellers on prices and quantities, strategic inefficiencies arise. By reallocating quantities between agreements, the buyer can increase its share of the surplus. With two symmetric sellers producing substitutes, the quantity in the first agreement will be higher than the efficient quantity, and the quantity in the last lower, thus implying that sellers are strategically discriminated. When asymmetries are not too large and sellers produce substitutes, the buyer first agrees with the seller with the lowest marginal cost and only the most efficient order of agreement is an equilibrium outcome. When goods are complements, both equilibrium quantities are lower than the efficient levels.     

Incumbents’ defense strategies: a comparison of deterrence and shakeout strategy based on evolutionary game theory

This paper addresses the question of how an established firm can successfully defend its market against current and future competitors. Previous studies on this issue are surprisingly scarce and typically concentrate on only a single generic defense strategy. Thus, little is known about the degree and the manner in which different generic defense strategies, such as a deterrence strategy (pursued before competitor market entry) and a shakeout strategy (pursued after competitor market entry), differ in effectiveness and efficiency and about the corresponding role of product and market conditions. As these strategies tend to be costly, an established firm must decide which of these strategies to focus its scarce resources on. Drawing on evolutionary game theory and an empirical calibration and validation study, this paper seeks to fill these research gaps. While both strategies turn out to be viable options for market defense, the authors find that in general, a shakeout strategy tends to be superior to a deterrence strategy. However, the authors also identify product and market conditions under which an established firm is better off focusing on a deterrence strategy. In methodological respects, the paper contributes to the marketing discipline by introducing evolutionary game theory, which has not been used previously for analyzing marketing issues, as well as an evolutionary approach to research on market defense.     

Gestaltung von Verrechnungspreisen unter Beachtung von Anreiz-und Steuerungseffekten

Ohne Zusammenfassung Prof. Dr. Wolfgang Schultze ist Inhaber des Lehrstuhls für Rechnungslegung und Controlling Dipl.-Math. oec. Andreas Weiler ist wissenschaftlicher Mitarbeiter und Doktorand am Lehrstuhl für Rechnungslegung und Controlling