International environmental agreements under uncertainty

Negotiations toward international environmental agreements takeplace under uncertainty. We address the process of coalitionformation in this context. Coalitions are more likely to formamong countries which are similar. Since countries are morelikely to be facing similar conditions ex ante rather than expost, (i.e. before the resolution of uncertainty rather thanafter it), the possibility of coalition formation is enhancedthe sooner the negotiations take place. The social value ofbetter scientific information may well be negative in such circumstances.     

Depth of knowledge and the effect of higher order uncertainty

Summary A number of recent papers have highlighted the importance of uncertainty about others' information in models of asymmetric information. We introduce a notion that reflects the depth of knowledge in an information system. We show how the depth of knowledge can be used to bound the effect of higher order uncertainty in certain problems. We further provide bounds on the size of bubbles in finite horizon rational expectations models where the bounds depend on the depth of knowledge.We thank Dov Samet for pointing out an error in an earlier version.     

Does exchange rate variability matter for welfare? A quantitative investigation of stabilization policies

This paper studies what degree of exchange rate stabilization is optimal for several types of open economies. This is accomplished through a quantitative evaluation of optimal monetary policy rules in a two-country sticky-price model. First, a calibrated benchmark model with incomplete asset markets supports past conclusions from simpler models, emphasizing inflation stabilization rather than exchange rate stabilization. It also highlights that the utility gains from optimal stabilization policy are small. Second, while an economy extended to include consumer habits implies greater sensitivity by households to consumption variability, it has only minor effects on the benchmark conclusions and benefits. Finally, these conclusions are altered under an alternative environment where international asset markets exhibit asymmetry in the form of “original sin.” Such countries can benefit from policies that aggressively stabilize the exchange rate, with utility gains larger than the previous cases.     

Consumer ethnocentrism: A test of antecedents and moderators

This article identifies theoretical antecedents of consumer ethnocentricity and the effect ethnocentricity has on evaluations toward importing products. Hypotheses pertaining to the relationship between the identified antecedents and consumer ethnocentricity are developed based on an extensive review of the ethnocentrism and country-of-origin literatures. Also identified are factors moderating the effect of ethnocentric tendencies on consumers’ attitudes toward importing products. The hypotheses are subjected to an empirical test using data collected in Korea. He has published inJournal of Marketing, Journal of Marketing Research, Marketing Science, Management Science, and elsewhere. He has published inJournal of Consumer Research, Journal of Marketing Research, Journal of Marketing, and elsewhere. He received his Ph.D. in marketing from the University of South Carolina.     

Does One Soros Make a Difference? A Theory of Currency Crises with Large and Small Traders

Do large investors increase the vulnerability of a country to speculative attacks in the foreign exchange markets? To address this issue, we build a model of currency crises where a single large investor and a continuum of small investors independently decide whether to attack a currency based on their private information about fundamentals. Even abstracting from signalling, the presence of the large investor does make all other traders more aggressive in their selling. Relative to the case in which there is no large investor, small investors attack the currency when fundamentals are stronger. Yet, the difference can be small, or non-existent, depending on the relative precision of private information of the small and large investors. Adding signalling makes the influence of the large trader on small traders' behaviour much stronger.     

Efficiency of the OLSE for regressions on two-dimensional grids with sinusoidal regressors and spatially correlated errors

For spatial regressions with sinusoidal surfaces, the ordinary least squares estimator (OLSE) is shown to be asymptotically as efficient as the generalized least squares estimator (GLSE) in that the covariance matrices of the two estimators have the same nontrivial limit under the same normalization.     

Disappearing internal capital markets: Evidence from diversified business groups in Korea

This paper examines how the onset of a financial crisis affects the operation of internal capital markets among firms within a diversified business group. We find that active internal capital markets within Korean business groups (chaebols) attenuate the financial constraints of the group-affiliated firms, allowing them to make efficient capital allocations during the early 1990s. However, these markets barely function after the financial crisis of 1997. Instead, we observe public debt markets serving as a substitute for internal capital markets. Our results suggest that chaebol firms’ coordinated attempts to achieve healthier financial structures in the wake of the crisis have taken place at the expense of investment efficiency.     

Customer retention when the customer's future usage is uncertain

Consumers are often uncertain about how much they will use a service in the future (e.g., health clubs, credit cards, cell phones), yet the effects of this uncertainty on customer retention have not been studied. This research investigates factors influencing consumers' decisions about whether to retain noncontractual services for which anticipated future usage levels are uncertain. The studies show that Future Usage Uncertainty (FUU) generally reduces the likelihood that a customer will continue in a service relationship. However, when consumers consider the flexibility they have to delay the keep/drop decision (i.e., drop flexibility), or the anticipated regret associated with making the wrong decision, the effects of FUU are essentially eliminated, and consumers are more likely to continue in the relationship. © 2007 Wiley Periodicals, Inc.