Managerial utility-maximizing operating decisions under compound demand risk

This paper examines the demand and cost conditions under which utility maximizing pricing-risk and advertising-risk relationships are determinate. The structure of the firm's demand uncertainty captures both uncertain customer arrivals and uncertain individual customer demand. In addition to standard demand restrictions and constant marginal cost, determinate results depend upon the degree of managerial risk-aversion, the correlation between individual demand and customer arrival disturbances, the firm's cost fixity, and bounded product differentiation effects of advertising. The symmetry between price-cuts and advertising as demand-increasing costs is extensively examined; firm equilibrium requires that price-cuts not be an inferior input for increasing demand.     

The structure of coalitional power under probabilistic group decision rules

The paper extends the work of S. Barbera and H. Sonnenschein on probabilistic social welfare functions by permitting quasi-transitive and/or acyclic probabilistic social preferences. Allowing for quasi-transitivity it is shown that the social decision rule is characterized by a subadditive veto power structure. Gibbard's result on oligarchy is shown to be a special case. Similarly, Sen's theorem on Paretian Liberals is shown to be implied by the power structure in the acyclic case.     

RCA indices,multinational production and the Ricardian trade model

The practice of using Revealed Comparative Advantage (RCA) Indices to determine the flow of goods trade among countries is well established. But an important issue that demands attention is whether the RCA indices reflect the essentials of comparative advantage theory. Deb and Basu Foreign Trade Rev 46(3):3–28, (2011) examined the consistency of alternative RCA indices with the Heckscher-Ohlin theory of comparative advantage, leaving scope for re-examination of the indices in the context of the Ricardian comparative advantage theory, which insists on relative factor productivity differences among countries contrary to Heckscher-Ohlin’s relative factor endowment differences. The other issue which has been overlooked in much of the existing literature is the importance of value-added trade. With the growing importance of global production chains, RCA indices based on gross export values may not portray an accurate picture of the underlying comparative advantage of countries. In this context, adjusting the RCA indices to incorporate domestic value-added in exports seems to be quite relevant. This paper explores the consistency of RCA indices based on domestic value-added in exports with the Ricardian theory of comparative advantage using a panel data approach. A brief review on the structures of alternative RCA indices is also provided. The Log-of-Balassa index is found to be the best performer in this empirical examination, although the deficiencies of the index for cross-country or cross-commodity comparison must be acknowledged. The index of Yu et al. Ann Reg Sci 43(1):267–282, (2009) does possess the latter feature but in our study its performance is quite poor and hence its consistency with the Ricardian theory of comparative advantage is questionable.     

Notes on the postulate of the monotonicity in distance in inequality

In this paper, we strengthen Cowell and Flachaire's observation regarding the failure to satisfy Cowell's “monotonicity in distance” postulate by several well-known inequality indices. We also identify a general analytical reason for this failure to arise.     

Testing alone is insufficient

Review of Economic Design - The fear of contracting a serious illness caused by a contagious disease limits economic activity even after reopening. Widespread testing alone will not alleviate this...