Purchase Behavior and Psychophysiological Responses to Different Price Levels

The aim of the study was to examine emotional processes when product prices for different brands were changed. In a within‐subjects design, the participants were presented purchase decision trials with 14 different products (seven private label and seven national brand products) whose price levels were changed while their facial electromyography (EMG) and electrodermal activity were recorded. The results suggest that low prices and national brand products induce higher positive emotions indexed with zygomatic EMG compared to high prices and private label products. Also, positive emotions are related to greater purchase intent. Naturally, a low price has also a direct positive influence on purchase intent. However, the involvement of emotions and the influence that price and brand have on elicitation of emotions may be one explanation for consumers’ varying purchase behavior. The results highlight the importance of emotional factors in pricing research and support the usefulness of psychophysiological measures in the consumer research.     

Predicting entry of Swedish wholesale firms into local markets

Applying microeconomic theory, we develop a forecasting model for firm entry into local markets and test this model using data from the Swedish wholesale industry. The empirical analysis is based on directly estimating the profit function of wholesale firms. Profits are assumed to depend on firm- and location-specific factors, and the profit equation is estimated using panel data econometric techniques. Using the residuals from the profit equation estimations, we identify local markets in Sweden where firm profits are abnormally high, given the level of all independent variables included in the profit function. From microeconomic theory, we then know that these local markets should have higher net entry than other markets, all else being equal, and we investigate this in a second step, also using a panel data econometric model. The results of estimating the net-entry equation indicate that 19 of 30 estimated models have more net entry in high-return municipalities, but the estimated parameter is only statistically significant at conventional levels in one of our estimated models, and then with an unexpected negative sign.     

The size and scope of government in the US states: does party ideology matter?

We investigate empirically how party ideology influences size and scope of government as measured by the size of government, tax structure and labor market regulation. Our dataset comprises 49 US states over the 1993–2009 period. We employ the new data on the ideological mapping of US legislatures by Shor and McCarty (Am. Polit. Sci. Rev. 105(3):530–551, 2011) that considers spatial and temporal differences in Democratic and Republican Party ideology. We distinguish between three types of divided government: overall divided government, proposal division and approval division. The main result suggests that Republican governors have been more active in deregulating labor markets. We find that ideology-induced policies were counteracted under overall divided government and proposal division.     

Interest Rates, Stock Returns and Credit Spreads: Evidence from German Eurobonds

We investigate daily variations in credit spreads on investment‐grade Deutschemark‐denominated Eurobonds during the challenging 1994–1998 period. Empirical results from a Longstaff and Schwartz (1995) two‐factor regression, extended for correlated spread changes and heteroskedasticity, indicate strong persistence in spread changes. Consistent with theory and previous findings, changes in spreads are significantly negatively related to the term‐structure level while, contrary to theory, the proxy for asset value does not yield a significant negative contribution. We even find a significant positive relation for Eurobonds with long maturity. Tentative interpretations are portfolio‐rebalancing activities or differing risk factor sensitivities on short‐ vs. long‐maturity bonds.     

Temporary grant programmes in Sweden and central government behaviour

The purpose of this paper is to study whether the central government in Sweden approves applications for temporary grants from municipalities according to political objectives. We also study factors that determine the municipal decision to apply for temporary grants. Two hypotheses are tested, that the central government supports municipalities with many swing voters in order to influence voters, and that the central government provides benefits to groups that share its ideology and that provide political support. Data is used from three election years 1982, 1985, and 1988. Under the Socialist governments municipalities with a high share of Socialist voters were more likely to apply for grants. The same pattern does not apply to the 1982 Conservative government. There is evidence that Socialist governments approved temporary grants on the basis of party tactical criteria. However, there is no indication of vote purchasing behaviour by the 1982 Conservative government.     

Tests for cointegration rank and the initial condition

Many economic events involve initial observations that substantially deviate from long-run steady state. Such initial conditions are known to affect the power of univariate unit root tests diversely, whereas their impact on multivariate tests is largely unknown. This paper investigates the impact of the initial condition on the power of tests for cointegration rank, such as Johansen??s widely used likelihood ratio test, tests with prior adjustment for deterministic terms, and a test based on the eigenvalues of the companion matrix. We find that the power of the likelihood ratio test is increasing in the magnitude of the initial condition, whereas the power of the other tests is generally decreasing. We exploit these findings in an application to price convergence.