The Innovative City in History

Book reviewed in this article: Peter Hall, Cities in civilization. Culture, innovation, and urban order     

Enforcement of regulation,irregular sector,and firm performance: a computational agent-based model

This paper investigates how enforcement of regulation affects the size of the irregular sector, firm performance and the exit rate to the market. Three kinds of enforcement policy will be tested in the model: control, punish and legitimacy. The first policy is based on the number of inspectors present in the economy; the second is defined by the magnitude of punishment; the third is measured by social legitimacy. Results show the negligible influence of control to fight irregularity; the strong effect of punishment on the irregular sector and on the exit rate; the good effect of legitimacy policy in promoting regularity but low output performance.     

TRUST,VALUES, AND FALSE CONSENSUS

Individuals’ beliefs about the trustworthiness of a generic member of the population are both heterogeneous across individuals and persistent across generations. We investigate one mechanism yielding these dual patterns: false consensus. In the context of a trust game experiment, we show that the relationship between behavior and beliefs is consistent with individuals extrapolating their trust beliefs from their own trustworthiness and that this tendency continues even after substantial learning opportunities. We go on to provide evidence suggesting that one's own trustworthiness can be traced back to the values parents transmit to their children during their upbringing.     

Country-of-Origin Effects on Russian Wine Consumers

In recent years, Russia has experienced significant economic growth. The wine industry is among those most affected by increases in disposable income. As a consequence, Russian wine importers have widened the range at the upper end of the quality spectrum. In the current scenario, some key questions arise concerning consumer attitudes toward wine and the way it is perceived in this evolving market. This article attempts to investigate such concerns through a choice experiment approach conducted by means of a questionnaire-based survey submitted to 388 Russian households located in the country's three largest cities (Moscow, Saint Petersburg, and Novosibirsk). In the experiment, respondents were asked to choose their favorite wine among seven dry red wines. The stated choices are analyzed using a random utility model to obtain an estimation of the price effect through a triangular distribution. Our results indicate the presence of three distinct market segments in the Russian wine market: a segment with only high-quality, highly priced Italian and French wines, a medium-quality segment currently limited to Spanish wines, and a much lower quality segment of wines in which demand for alcohol is essentially satisfied.     

Cost Reduction,Licensing and Incentive to Innovate: A Note

In this Note we consider an economy composed by two firms; a leader and a follower, that invest in R&D for process innovations. Competition to innovate is usually modelled as a two stage game. In the first stage of the game both firms simultaneously reduces their production costs. In the second stage the firms compete la Stackelberg and it is possible to prove that the profits of one of the two firms (and total profits) might decrease in a range of parameters. Then we consider the possibility of technology transfer from the leader that has the most productive technology to the follower under licensing by means of a fixed fee and of a royalty. It is possible to prove that under licensing total profits will increase in some range of parameters above mentioned in comparison to the pre-innovation case.     

The prevalence of hyperbolic discounting: some European evidence

Experimental matching data are used from the 2000 Bank of Italy Survey of Household Income and Wealth (SHIW) and the 2000 wave of the Center for Economic Research (CentER) Savings Survey at Tilburg University to compare the relative frequencies of hyperbolic and exponential discounters. Among 3200 Italian respondents and 1400 Dutch respondents, less than a quarter exhibited hyperbolic discounting. This finding is both statistically significant and robust with respect to various assumptions regarding utility; moreover, it holds across a wide variety of economic, social and demographic characteristics. The youngest, poorest, most urban and least educated individuals are the most likely to be hyperbolic discounters. In addition, it is found that hyperbolic discounters accumulate less wealth and are somewhat less likely than exponential discounters to utilize commitment devices to constrain their future choices.     

Evaluating how predictable errors in expected income affect consumption

This article studies whether anomalies in consumption can be explained by a behavioural model in which agents make predictable errors in forecasting income. We use a micro-data set containing subjective expectations about future income. This article shows that the null hypothesis of rational expectations is rejected in favour of the behavioural model, since consumption responds to predictable forecast errors. On average, agents who we predict are too pessimistic increase consumption after the predictable positive income shock. On average, agents who are too optimistic reduce the consumption.     

Competition in Regulated Markets with Sluggish Beliefs about Quality

We investigate the effect of competition on quality in regulated markets (e.g., health care, higher education, public utilities), using a Hotelling framework, in the presence of sluggish beliefs about quality. We take a differential‐game approach, and derive the open‐loop solution (providers choose the optimal quality investment plan based on demand at the initial period) and the feedback closed‐loop solution (providers observe demand in each period and choose quality in response to current demand). If variable costs are strictly convex, and the degree of cost complementarity between quality and output is not too strong, the steady‐state quality is higher under the open‐loop solution than under the feedback solution. In both solutions, quality and demand move in opposite directions over time on the equilibrium path to the steady‐state. While lower transportation costs or less sluggish beliefs lead to higher quality in both solutions, the quality response is weaker when players use feedback strategies.