Delegation and polarization of platforms in political competition

Summary. We consider a model of political competition among two ideological parties who are uncertain about the distribution of voters. The distinguishing feature of the model is that parties can delegate electoral decisions to candidates by nomination. It is shown that if the credible platform commitments of the candidates is feasible, then at least one of the parties nominates in equilibrium to a candidate who has an ideology that is more radical than the delegating party's ideology. In a variety of circumstances, this, in turn, yields a polarization of equilibrium policy choices of the candidates. It is thus argued formally here that strategic nomination of the candidates may well be one of the major reasons behind the well documented observation that the platforms associated with the political parties in two-party democracies are often surprisingly polarized. Received: January 10, 2002; revised version: May 8, 2002 RID="*" ID="*" We thank Alberto Alesina, Levent Ko?kesen, Antonio Merlo, Ronny Razin, Vijay Krishna, Alessandro Lizzeri, and seminar participants at Alicante, Columbia, Copenhagen, and NYU for helpful comments. We also thank an anonymous referee for its useful suggestions. A good fraction of this research was conducted while Ok was a visitor in the Department of Economics at University of Alicante; he thanks for the kind hospitality of this institution. We gratefully acknowledge the financial support from the Spanish Ministry of Education through grant CICYT BEC2001-0535 (Faulí-Oller) and BEC2001-0980 (Ortu?o-Ortín). Correspondence to:I. Ortu?o-Ortin     

Einkommensentstehung als Verteilungsfaktor

From the end of the Second World War onwards, a middle class emerged in Germany that was, by international standards, broadly based. The economic basis for this middle class was good pay and relatively low income differentiation, which was the result of collective agreement on a high coverage rate. Since the mid-1990s, however, the economic basis of middle-class prosperity and security has been crumbling. In the primary distribution, the share of households in the middle-income groups fell by almost ten percentage points, from 56.4 per cent to 48 per cent, between 1992 and 2013. The welfare state was no longer able to compensate fully for this unequal primary distribution. An increase in coverage by collective agreements, the re-regulation of atypical employment forms and the elimination of all incentives to take marginal, part-time jobs are the keys to strengthening the middle-income groups in Germany.     

What pupils can learn from working with robotic direct manipulation environments

This study investigates what pupils aged 10–12 can learn from working with robots, assuming that understanding robotics is a sign of technological literacy. We conducted cognitive and conceptual analysis to develop a frame of reference for determining pupils’ understanding of robotics. Four perspectives were distinguished with increasing sophistication; “psychological”, “technological”, “function”, and “controlled system”. Using Lego® Mindstorms® NXT robots, as an example of a Direct Manipulation Environment, we developed and conducted a lesson plan to investigate pupils’ reasoning patterns. There is ample evidence that pupils have little difficulty in understanding that robots are man-made technological and functional artifacts. Pupils’ understanding of the controlled system concept, more specifically the complex sense-reason-act loop that is characteristic of robotics, can be fostered by means of problem solving tasks. The results are discussed with respect to pupils’ developing technological literacy and the possibilities for teaching and learning in primary education.     

Fostering entrepreneurship in distressed urban neighbourhoods

During the last decade entrepreneurship research has focused increasingly on spatial aspects of entrepreneurship. Many systematic studies have been conducted on the national or regional scale, although other geographical scales—cities and their single districts and neighbourhoods—have drawn less attention. In this context, the paper aims, firstly, at identifying spatial success factors of entrepreneurial activities and their promotion at the local scale. Secondly, the paper aims at contributing to the development of a conceptual frame at the interface of entrepreneurship research, urban and economic geography, and regional economics. Empirically, the paper draws on results from explorative case studies in two distressed urban areas.     

Multi-product capacitated facility location problem with general production and building costs

This research introduces the multi-product capacitated facility location problem with general production and building costs (MP-CFLPGC). The MP-CFLPGC extends previous problems found in the literature by including multiple products and general production and building cost functions that allow the modeling of different behaviors like economies of scale and congestion. The MP-CFLPGC is formulated as a mixed integer linear program (MILP). To evaluate the performance of the proposed formulation we analyze the results of a commercial optimizer on a set of 288 randomly generated test instances that resemble the Colombian cement industry supply chain. After one hour the optimizer achieved an optimality gap of 1.0 % or less in 55 % out of the 288 test instances. On average the optimality gap was 3.57 %. Additionally, we propose a randomized mathematical-programming-based heuristic for the test instances where the MILP formulation presents significantly high optimality gaps.     

BidPacket: trading bandwidth in public spaces

Smart devices such as smartphones and tablets are used extensively in public spaces for the transmission and reception of content in the form of text, photos and streaming videos. Since the bandwidth provided for wireless access is limited in public areas, it becomes an issue for users to gain access to the bandwidth they need at the right times. While an omniscient controller could assign bandwidth to each device on the basis of their needs and overall availability, imperfect information about the instantaneous state of the wifi access patterns and needs of users make for a very inefficient allocation of such bandwidth. This paper provides a solution for bandwidth allocation by creating a market among users of smart devices so that they can bid for extra bandwidth when they need it and sell it when they don’t. They do so by using a virtual currency that is conserved so that each device owner maximizes his own utility. This utility function is composed of both the benefit accrued from accessing bandwidth and the loss of the currency incurred in bidding for such bandwidth. Extensive simulations show that this market-based method outperforms an omniscient model when demand is uncertain, while minimizing bandwidth consumption.     

The Coordinated Effect of a Merger with Balanced Sharing of Collusive Profits

It is hard to assess the coordinated effect of mergers in solid and convincing fashion, in part because economic theory deals mainly with the sustainability of tacit collusion and generally does not explore the conditions that foster collusion in the first place. Also the most popular schemes of collusion (Joint profit maximization and Nash Bargaining) proposed by the economic literature seem at odds with the evidence recorded on cartels and with the practical attitude of entrepreneurs. In this scenario the recent version of the Horizontal Merger Guidelines contained the interesting suggestion to pay attention to the process - parallel behaviour – which leads to collusive equilibria. Working on the same intuition we propose an approach based on the idea that firms can always find a feasible collusive agreement, for every possible value of the factor which discounts future profits. Assuming that in order to collude, firms demand the fair sharing of collusive gains, we exploit the egalitarian property of grim trigger strategies when all incentive compatibility constraints are binding. This approach suggests using three indicators to determine whether and how a merger affects the probability of collusion. An application of this approach to a real-world case (the AT&T/T-Mobile merger) is provided.     

It is not whom you know,it is how well you know them: Foreign entrepreneurs building close guanxi relationships

Within the growing body of Chinese entrepreneurship literature, guanxi is increasingly recognized as an important indigenous Chinese business practice with important implications for firm performance and success. Guanxi is defined as relationship or connection. China’s continued economic growth and forecasts of it becoming one of the world’s largest consumer markets present multinational corporations and foreign entrepreneurs alike with unprecedented economic opportunities. Thus, greater insight is required into how foreign entrepreneurs, as outsiders, establish and develop close guanxi relationships. Conceptualizing guanxi as a dynamic process, this paper explores the underlying interactions and processes foreign entrepreneurs engage in to establish and build a strong emotional connection and trust with their closest guanxi partner. Using an exploratory single case study approach, data from 15 foreign entrepreneurs operating legally registered small- and medium-size enterprises (SMEs) in Shanghai was collected and analyzed. In addition, self-administered structured questionnaires that utilize the McAllister trust scale were used to measure 20 foreign entrepreneurs’ levels of cognitive and affective trust toward their closest guanxi partner. Overall, the findings of the study provide an in-depth understanding of the complex interplay and functioning of third-party and anticipatory bases. In so doing, the study’s outsider perspective addresses a critical gap in the literature that yields initial yet important insights that contribute to a better understanding and appreciation of the inherent nuances and differences in relationship-building processes in cross-cultural settings. Furthermore, these findings bring to the fore the need to consider the ways in which this indigenous Chinese business practice may be evolving in the face of increasing internationalization.     

The proper panel econometric specification of the gravity equation: A three-way model with bilateral interaction effects

We argue that the proper specification of a panel gravity model should include main (exporter, importer, and time) as well as time invariant exporter-by-importer (bilateral) interaction effects. In a panel of 11 APEC countries, the latter are highly significant and account for the largest part of variation. First version received: February 2001/Final version received: June 2002 RID="*" ID="*"  We are grateful to two anonymous referees and Robert Kunst for their helpful comments.     

Unconventional Monetary Policy in the Euro Zone

The European Central Bank adopted a policy of quantitative easing early in 2015, long after the US and UK, and after implementing a succession of measures to increase liquidity in the Euro zone financial markets, none of which proved sufficient eventually. The paper draws out lessons for the Euro zone from US and UK experience. Numerous event studies have been undertaken to uncover the effects of QE on yields on and prices of financial assets. Estimated effects on long-term government bond yields are then converted into the size of the cut in the policy rate that would normally have been needed to produce them. From these implicit cuts in policy rates, estimates of the effect on GDP and inflation are generated. Euro zone QE appears to have had a much smaller effect on bond yields for the core members states than did QE in the US or UK. Therefore its effects on output and inflation are likely to be proportionately smaller. Its effects on long-term government bond yields in periphery members are greater. QE is compressing interest differential among Euro zone member states. The dangers of QE to which various commentators draw attention, that it creates a danger of inflation in the future, that it creates asset price bubbles, that it allows zombie firms and banks to survive, slowing down the process of adjustment, seem remote. Meanwhile it makes a useful contribution to cutting the costs of debt service and allowing member states more fiscal room for maneouvre.