Service Quality,Competition, and Regulatory Policies in the Postal Sector

This paper presents a simple model which illustrates the possible policy- and welfare-implications of endogenous product selection in the postal sector. The cost of a unit of mail depends on its "quality" (e.g., speed of delivery) and on the type and location of the addressee (firms, urban households, and rural households). Senders have inelastic demands and differ in their willingness to pay for quality. Addressees are passive but their utility may affect social welfare. Two operators play a two-stage game, first choosing qualities and then prices. We first show that the equilibrium with two private (profit maximizing) operators results in an inefficient provision of quality. Then, we consider the mixed (Nash) equilibrium with one private and one (welfare maximizing) public operator. If the budget constraint of the public firm is not binding, this equilibrium is shown to be first-best efficient even if social welfare accounts for the utility of addressees. If the budget constraint is binding, the mixed equilibrium is not efficient but yields a higher level of welfare than the private equilibrium. Finally, we study the impact of minimum quality standards within our setting.     

American Parisian options

In this article, we describe the various sorts of American Parisian options and propose valuation formulae. Although there is no closed-form valuation for these products in the non-perpetual case, we have been able to reformulate their price as a function of the exercise frontier. In the perpetual case, closed-form solutions or approximations are obtained by relying on excursion theory. We derive the Laplace transform of the first instant Brownian motion reaches a positive level or, without interruption, spends a given amount of time below zero. We perform a detailed comparison of perpetual standard, barrier and Parisian options.     

Target zones in theory and history: Credibility, efficiency, and policy autonomy

An experiment with an exchange-rate band in Austria-Hungary in the early 20th century provides a rare opportunity to discuss critical aspects of the theory of target zones. Providing a new derivation of the target zone model as a set of nested hypotheses, the inference is drawn that policy credibility and market efficiency were paramount in the success of the Austro-Hungarian experience.     

What Causes the Positive Price-Turnover Correlation in European Housing Markets?

This paper examines what determines the correlation between prices and turnover in European housing markets. Using a panel vector autoregressive model, we find that there is a particularly strong feedback mechanism between prices and turnover. Momentum effects are another important reason why prices and turnover are correlated. Common underlying factors, such as GDP and interest rates, also explain part of the price-turnover correlation. The results in this paper imply that, to understand price and turnover dynamics, it is important to model prices and turnover as two interdependent processes. There is a considerable bias in the coefficient estimates of standard house price models if this dependency is not explicitly taken into account.     

Are sponsorship announcements good news for the shareholders? Evidence from international stock exchanges

The objective of this study is to analyse investors’ perceptions of sponsorship’s ability to increase brand equity, through the impact of sponsorship announcement on stock market value. An event study method, based on a unique sample of 293 worldwide sponsorship announcements from 2010, shows substantial negative abnormal returns following announcement dates. In addition, a cross-sectional regression analysis reveals the influence of several featured factors. Philanthropic sponsorships and sponsorships of events with distinctive values are less negatively perceived by investors, but US companies exhibit more negative returns in shareholder value than other firms. This study offers no support for varying impacts of event audience, renewal agreement, property sponsorship and title sponsorship on abnormal returns though.     

The perverse effect of environmental regulation on emissions: The role of product-mix changes

We study the effect of environmental regulation (taxation) on emissions when the only available abatement method consists of product-mix changes. Firms choose to produce one or both varieties of a product—a pollution-intensive (dirty) and a non-pollution-intensive (green)—and compete in a differentiated Cournot duopoly. We characterize the equilibrium market structure as a function of the tax rate and show that increases in the tax can promote product-mix changes that lead to a jump in emissions for some tax range, an effect we call the perverse effect of taxation. Our work emphasizes the key role horizontal product differentiation in this process and shows that the perverse effect does not require the presence of vertical product differentiation. Further, the perverse effect of taxation is especially strong in the presence of incomplete regulation, that is, when only one of the markets is subject to taxation.