Retail banking and behavioral financial engineering: The case of structured products

We apply cumulative prospect theory and hedonic framing to evaluate discount reverse convertibles (DRCs) and reverse convertible bonds (RCBs) as important examples of structured products from a boundedly rational investor’s point of view. While common expected utility theory would also conclude that DRCs and RCBs are of interest to investors with moderate return expectations and underestimated stock return volatility, that theory would overestimate the market success of DRCs and underestimate that of RCBs in comparison to a situation with bounded rationality. Hedonic framing and relatively low subjectively felt competence levels of investors are decisive for the demand for RCBs.     

Can retailers get higher prices for “end-of-life” inventory through online auctions?

Manufacturers and retailers are using online auctions to liquidate excess inventory. Using a field study of 11,879 online auctions, this paper builds upon theories of competitive processes to relate four key seller-controlled variables (starting price, day of close, auction length, and brand) to outcomes of online auction for apparel goods. Results suggest that to obtain a higher percentage of the original retail price, retailers should start with a lower price and feature national brands. These and other findings are discussed and a number of future research topics are offered.     

Internal Relative Price Stationarity in Long-Run Purchasing Power Parity

This study demonstrates that the joint relationship among domestic traded-goods prices, dometic nontraded-goods prices, foreign traded-goods prices, and foreign nontraded-goods prices is important to understanding rejections or confirmations of long-run PPP. This joint relationship is defined as the "cross-country internal relative price structure." For nine of the ten pairs of countries studied, the cross-country internal relative price structure is found to be stationary; thus, factors other than the influence of nontraded-goods prices must be responsible for the rejections of long-run PPP.     

Rent extraction,principal–agent relationships,and pricing strategies: vendor licensing during the 1996 Olympic Games in Atlanta

Two‐part pricing, price‐discrimination, rent creation and extraction, principal–agent theory, and public choice perspectives on public bureaucracies are used to interpret a vendor‐license marketing arrangement and controversy arising out of the 1996 Olympic Games in Atlanta, GA. Containing features predicted by principal–agency theory, Atlanta's arrangement with its marketing agent was a response to the behavior of public bureaucracies and a low cost method of converting visitors' consumer surplus to rent, which could be extracted by the marketing agent and then by Atlanta. Atlanta's incentive to enforce vendor property rights was influenced by the nature of the game between Atlanta and prospective vendors. Copyright © 2001 John Wiley & Sons, Ltd.     

LAND DEVELOPMENT UNDER REGULATION: COMPARISON BETWEEN THE EAST AND WEST SIDES OF THE CASCADE RANGE IN OREGON, WASHINGTON, AND CALIFORNIA

We compare how socioeconomic factors, physical landscape, profit uncertainty, and local land use policies have affected land development on the east and west sides of the Cascade Range in Oregon, Washington, and California. It is found that the west side has more actively planned and regulated land use than the east side. Consequently, the more intense land use regulations on the west side have reduced more land development than on the east side. Risks associated with alternative land uses as well as profits were important in land development decisions of both sides.     

KEITH WINDSCHUTTLE's CONTRIBUTION TO AUSTRALIAN HISTORY: AN EVALUATION

In two recent books, Keith Windschuttle has reinvigorated debate on two central questions in Australian history: the extent of frontier violence in the colonisation of Australia and the origins of the White Australia Policy. This assessment of Windschuttle's scholarship will focus on how he arrives at his conclusions: his methodology, his use of evidence and the coherence of his arguments. It will draw on the literature of economic history to show how its methods and perspectives can inform these debates in Australian history.