Customs Union and Gains from Trade Under Imperfect Competition: Variation of a Kemp-Wan Theme

In a world where firms are oligopolists, is it possible to create a customs union that raises the welfare of member countries without hurting non-member countries? We give sufficient conditions for an affirmative answer.     

The Regulation of Predatory Firms

This article investigates the issue ofpredation by a regulated firm. Since it has private information, a regulated firm obtains higher rents in case of successful predation: the fewer the competitors, the higher the marginal social value of the regulated firm's effort and the higher the informational rents. Both principals (the investor of a "target" firm and the regulator) have to provide some incentives to prevent predation: the investor has to reduce the sensitivity of refinancing to predation; the regulator has to lower the gain of successful predation. It is shown that there is a trade-off between the power of the regulatory incentive scheme and the regulated firm's incentives to prey. In addition, as deterring predation is costly, the investor and the regulator compete when offering contracts: each wants to free-ride on the other. Hence, predation may occur in equilibrium although it makes both principals worse off.     

ECONOMIC GROWTH, INCOME AND HAPPINESS: AN EXPLORATORY STUDY

The pursuit of high economic growth is considered desirable as it generates an increase in a nation's wealth, income, employment and output. The rising income should enable consumers to purchase more goods and services, which in turn should result in enhanced utility and subjective happiness. Empirical studies suggest that higher income resulting from high rates of economic growth contribute to poverty alleviation and life satisfaction in low income countries. Higher income raises the happiness of the poor. In developed countries, higher income does not seem to "buy" higher happiness, once a threshold level of income is reached. This exploratory study seeks to examine the quantitative and qualitative sources of happiness. A higher absolute level of income is found to be significantly related to subjective happiness. Among the non-income factors, family togetherness, a good working environment and a higher level of education can contribute to making people happier. Happiness thus involves more than just economic growth and income.     

Mobile Termination: What is the “Right” Charge?*

The regulation of fixed-to-mobile (F2M) termination charges has become increasingly important in Europe, Australia, and New Zealand under the Calling Party Pays principle. In the absence of any regulation, mobile operators have an incentive to set F2M termination charges “too high”. We show that the setting of the optimal F2M termination charges depends on the significance of network externalities, the intensity of competition in the mobile sector, and the distribution of customer preferences. We also discuss the merits of possible remedies which are not very intrusive. Tommaso Valletti has advised the European Commission and the UK regulator (OFCOM) on mobile termination and Frontier Economics has acted as advisor to a number of mobile operators on the same issue. The views expressed in this paper are those of the authors alone. We thank Carlo Cambini, Yulia Kossykh, participants to the 15th Biennial International Telecommunications Society Conference, the 3rd International Conference on Applied Infrastructure Research in Berlin, for their comments. We also thank the editor Michael Crew and two anonymous referees for many suggestions that have greatly improved the paper.     

Disability Risk Management and Postinjury Employment of Workers With Back Pain

We analyze the outcomes of occupational back pain among four large employers that use one or more of the following disability management practices: aggressive return to work, claims management, medical management, or time‐limited job accommodations. Outcomes measured at 6 and 12 months postonset include: duration of initial work absence and the probability of returning to stable employment. Employment outcomes are better in firms with more proactive return‐to‐work policies than in firms with more restrictive policies. We devise a statistical test for attrition bias and conclude that sample attrition does not significantly alter our results.     

Risk aversion and framing effects

We present a new experimental evidence of how framing affects decisions in the context of a lottery choice experiment for measuring risk aversion. We investigate framing effects by replicating the Holt and Laury’s (Am. Econ. Rev. 92:1644–1655, 2002) procedure for measuring risk aversion under various frames. We first examine treatments where participants are confronted with the 10 decisions to be made either simultaneously or sequentially. The second treatment variable is the order of appearance of the ten lottery pairs. Probabilities of winning are ranked either in increasing, decreasing, or in random order. Lastly, payoffs were increased by a factor of ten in additional treatments. The rate of inconsistencies was significantly higher in sequential than in simultaneous treatment, in increasing and random than in decreasing treatment. Both experience and salient incentives induce a dramatic decrease in inconsistent behaviors. On the other hand, risk aversion was significantly higher in sequential than in simultaneous treatment, in decreasing and random than in increasing treatment, in high than in low payoff condition. These findings suggest that subjects use available information which has no value for normative theories, like throwing a glance at the whole connected set of pairwise choices before making each decision in a connected set of lottery pairs.     

Empirical bias in intraday volatility measures

Intraday volatility measures have recently become the norm in risk measurement and forecasting. This article empirically investigates the unbiasedness of three of these measures over four different datasets. We find that the three measures are significantly biased and that the bias can have either sign.     

Risk Aversion and the Value of Risk to Life

The standard literature on the value of life relies on Yaari’s (1965) model, which includes an implicit assumption of risk neutrality with respect to life duration. To overpass this limitation, we extend the theory to a simple variety of preferences that are not necessarily additively separable. The enlargement we propose is relevant for the evaluation of life‐saving programs: current practice, we estimate, puts too little weight on mortality risk reduction of the young. Our correction exceeds in magnitude that introduced by the switch from the notion of number of lives saved to the notion of years of life saved.     

Factors influencing purchase intent in virtual worlds: a review of the literature

Previous empirical studies have identified several factors that seem to play a role in determining purchase intent in virtual worlds; three-dimensional online environments in which users interact while represented by their avatars. So far however, a clear overview of these factors is lacking, and the question that remains is what factors affect purchase intent most. Therefore, this study aims to create an overview of factors that influence users’ purchase intent in virtual worlds, and to subsequently identify the most influential factors. To conduct this review, relevant literature was gathered using a variety of search engines and keywords. An article had to explicitly study factors influencing purchase intent in virtual worlds in order to be included in this review. This search method resulted in a selection of twelve relevant articles that were used for further analysis. Results show that perceived enjoyment, social influence, customization and ease of use are important factors that influence purchase intent in virtual worlds. Enjoyment of the virtual world, beliefs and attitudes of others, avatar customization, and easy-to-use virtual world applications can thus increase users’ willingness to purchase products in the virtual world. Practical implications as well as limitations and suggestions for future research are discussed.