Combining “real effort” with induced effort costs: the ball-catching task

We introduce the “ball-catching task”, a novel computerized task, which combines a tangible action (“catching balls”) with induced material cost of effort. The central feature of the ball-catching task is that it allows researchers to manipulate the cost of effort function as well as the production function, which permits quantitative predictions on effort provision. In an experiment with piece-rate incentives we find that the comparative static and the point predictions on effort provision are remarkably accurate. We also present experimental findings from three classic experiments, namely, team production, gift exchange and tournament, using the task. All of the results are closely in line with the stylized facts from experiments using purely induced values. We conclude that the ball-catching task combines the advantages of real effort tasks with the use of induced values, which is useful for theory-testing purposes as well as for applications.     

THE DETERMINANTS OF SELECTIVE EXCHANGE RISK MANAGEMENT–EVIDENCE FROM GERMAN NON-FINANCIAL CORPORATIONS

Survey studies of both corporate exchange risk management and the corporate use of derivatives in general have shown considerable variation in managerial practices. Some firms do not hedge open positions at all, and some hedge their exposures completely. Most companies, however, hedge only those positions on which they expect a currency loss, while leaving open positions on which they expect a currency gain—a practice known as “selective hedging.” Finally, there is a small minority of firms that engage in outright speculation, deliberately creating risk exposures in addition to those arising from their normal business operations. Such findings are consistent with survey studies that suggest that a majority of corporate financial managers appear to believe that they are able to “beat the market”—a belief that, of course, is inconsistent with efficient markets theory. So why do some companies follow selective risk management strategies while other firms hedge open positions without recourse to exchange rate forecasts? In an attempt to answer this question, the author surveyed 74 German non‐financial companies about their exchange risk management practices. He found that highly levered firms were less likely to take bets in the currency markets, while bank‐controlled firms were more likely to use a selective risk management strategy. There was a negative relationship between profitability and the use of selective hedging—a finding that could be interpreted as suggesting that selective hedging does not generally benefit the firm's shareholders. Finally, there was a weak tendency for larger firms to be more inclined to use forecasts in their foreign exchange risk management.     

Nonlinear incentive provision in Walrasian markets: a Cournot convergence approach

The paper studies insurance with moral hazard in a system of contingent-claims markets. Insurance buyers are modelled as Cournot monopolists or oligopolists. The other agents condition their expectations on market prices, as in models of rational-expectations equilibrium with asymmetric information. Thereby they correctly anticipate accident probabilities corresponding to effort incentives induced by insurance buyers’ net trades. When there are many agents to share the insurance buyers’ risks, Cournot equilibrium outcomes are close to being second-best. In contrast, if insurance buyers are price takers, equilibria fail to exist or are bounded away from being second-best.     

Estimation of zero-intelligence models by L1 data

A unit volume zero-intelligence (ZI) model is defined and the distribution of its L1 process is recursively described. Further, a generalized ZI model allowing non-unit market orders, shifts of quotes and general in-spread events is proposed and a formula for the conditional distribution of its quotes is given, together with a formula for price impact. For both the models, MLE estimators are formulated and shown to be consistent and asymptotically normal. Consequently, the estimators are applied to data of six US stocks from nine electronic markets. It is found that more complex variants of the models, despite being significant, do not give considerably better predictions than their simple versions with constant intensities.     

Cause-related Marketing: Ein scheinheiliges Kooperationskonzept?

Zusammenfassung  Wenn Krombacher für jeden verkauften Kasten Bier ein Stück Regenwald rettet oder Volvic pro verkauftem Liter Mineralwasser zehn Liter Trinkwasser in Afrika f?rdert, dann steht dahinter ein besonderes Konzept, Cause-related Marketing (CrM): Ein Wirtschaftsunternehmen kooperiert mit einer Nonprofit-Organisation und sein Beitrag wird mit dem Umsatz von Produkten verbunden. Was erwarten Unternehmen, NPOs, aber auch die Konsumenten von CrM? Inwieweit stehen ihre Ziele in Einklang? Und was sollten die Beteiligten beachten, um CrM zum Erfolg zu führen? Prof. Dr. Dr. h.c. mult. Heribert Meffert Emeritierter Direktor und Gründer des Instituts für Marketing an der Westf?lischen Wilhelms-Universit?t Münster; ehemaliger Vorsitzender des Vorstandes der Bertelsmann Stiftung Dipl.-Kfm. Martin Holzberg Wissenschaftlicher Mitarbeiter am Marketing Centrum Münster der Westf?lischen Wilhelms-Universit?t Münster