Correlated risks,bivariate utility and optimal choices

In this paper, we consider a decision-maker facing a financial risk flanked by a non-financial background risk such as health or environmental risk. A decision has to be made about the amount of an investment (in the financial dimension) resulting in a future benefit either in the same dimension (savings) or in the other dimension (environmental quality or health improvement). In this framework, we study the impact of the correlation between the two risks on optimal choices. In the saving problem, we find conditions ensuring that positive correlation between the two risks implies that the optimal amount of savings increases. These conditions involve specific requirements on the direct and cross derivatives of the two-argument utility function. Similarly, we find a different and specific set of conditions ensuring that the same conclusion on optimal investment for health (environmental) improvement is reached. The two sets of conditions determined support the conclusion that the signs of the derivatives of the two-argument utility function should alternate.     

Marshall on equilibrium and time: a reconstruction

This paper's aim is to offer a reconstruction of the Marshallian conception of equilibrium and time. Its main features are as follows. First, I argue that the hallmark of this conception is to posit an interrelationship between two equilibrium concepts — market-day and normal equilibrium. I claim that they are part and parcel and cannot be analysed separately. Second, my reconstruction gives a central role to the market period. Third, I argue that the so-called short and long-period equilibrium concepts refer to the same unique concept of normal equilibrium. Fourth, I argue that Marshall’s value theory admits the effective existence of disequilibrium states. A Marshallian disequilibrium refers to cases where market-day and normal values fail to coincide, this state of affairs going along, however, with market clearing. I also propose an alternative interpretation of Marshall's corn model wherein perfect information is considered the linchpin of achieving equilibrium. Finally, I argue that my reconstruction avoids a series of interpretative pitfalls.     

Explaining European Union Citizens’ Trust in the European Central Bank in Normal and Crisis Times

We study the determinants of trust in the European Central Bank (ECB) as measured by the European Commission's Eurobarometer survey, in particular during the global financial crisis and the European sovereign debt crisis. We find that the fall in trust in the ECB in crisis times can be rather well explained based on the pre‐crisis determinants. We also show that the fall in trust reflected the macroeconomic deterioration, a more generalized fall in the trust in European institutions in the wake of the crisis, and the severity of the banking sector's problems, to which the ECB was associated in the public opinion.     

Backhouse and Boianovsky on “disequilibrium theory”. A review article of transforming modern macroeconomics. Exploring disequilibrium microfoundations, 1956–2003

Abstract

This article is an in-depth analysis of Backhouse and Boianovsky's book, Transforming Modern Macroeconomics: Exploring Disequilibrium Microfoundations, 1956–2003. I start with questioning Backhouse and Boianovsky's too broad understanding of the disequilibrium approach. Thereby they bring together theories that should be kept separate, those by Patinkin, Clower and Leijonhuvud on the one hand, and those by Barro and Grossman, Drèze and Benassy, on the other. I also substantiate my disagreement with their claim that an inner link exists between fixed price equilibrium theories and imperfect competition modelling. Finally, I put forward a few conjectures about the reason why fixed price modelling petered out.     

Do Retailers Really Profit from Ambidextrous Managers? The Impact of Frontline Mechanisms on New and Existing Product Selling Performance

When manufacturers introduce a new product to the market, downstream retail partners are faced with inherent trade‐offs. Retail sales personnel have to support the new product's introduction with substantial sales efforts but also sell the existing products in stock, before storage and devaluation costs spin out of control. This study shows how retail sales managers can guide sales personnel's performance of new and existing product selling, respectively. The authors argue that a manager may prioritize selling new products, existing products, or both (i.e., have an ambidextrous selling orientation). Based on data gathered from sales representatives and company databases of a large European consumer electronics retailer, the authors perform a time‐lagged partial least squares analysis to test empirically their conceptual model. The authors find that ambidextrous sales managers outperform their singular‐oriented counterparts if they properly align their orientation with a frontline management mechanism consisting of task autonomy, performance feedback, and employee age. More specifically, ambidextrous managers promote net profit obtainment if they grant their sales employees task autonomy and give little performance feedback. In addition, a remarkable finding is that older sales agents tend to outperform their younger counterparts when working under an ambidextrous manager. The authors discuss the implications of these findings.     

La Configuration Stratégique de l'entreprise mixte: pour la distinction public vs privé au plan organisationnel

The present document attempts to provide a global understanding of the ways in which the mixed corporation differs from public and private firms. Its main objectives are to: 1) identify how organizational theory specialists distinguish mixed firms from those which are purely public or private; 2) redefine the lines of thought which can serve to classify public, mixed and private firms from an organizational perspective; 3) formulate research proposals related to the functioning and survival of mixed firms operating alongside public and private firms.
This document aims to constitute a synthesis of the ideas and empirical knowledge already acquired about the nature and functioning of mixed firms, in order to identify the means by which this type of firm can become specific and distinct from public and private firms as an object of study. Specifically, our review of the literature is intended to lead to the development of an organizational approach which will distinguish between public, mixed and private enterprises.
We undertake the integration of hybrid, resource dependence, strategic choice, organizational ecology and institutionalism theories in order to develop criteria of distinction between the public, mixed and private categories, as well as between sub-categories of mixed firms, so as to arrive at a strategic configuration perspective of the organization.
Use of the model is illustrated by examples taken from observation of a number of mixed Western European and Canadian firms. Research proposals on the distinctive character and variety of mixed firms are also outlined in view of future empirical verification.     

Are risk‐averse agents more optimistic? A Bayesian estimation approach

Our aim is to analyze the link between optimism and risk aversion in a subjective expected utility setting and to estimate the average level of optimism when weighted by risk tolerance. Its estimation leads to a non‐trivial statistical problem. We start from a large lottery survey (1536 individuals). We assume that individuals have true unobservable characteristics. We adopt a Bayesian approach and use a hybrid MCMC approximation method to numerically estimate the distributions of the unobservable characteristics. We find that individuals are on average pessimistic and that pessimism and risk tolerance are positively correlated. Copyright © 2008 John Wiley & Sons, Ltd.     

The intraday multivariate structure of the Eurofutures markets

We investigate the multivariate intraday structure in interest rates, focusing on implied forward rates from Eurofutures contracts. Since futures markets are the most liquid for interest rate instruments and they yield high-quality intraday data, it is somehow surprising that their intraday behavior has not been thoroughly studied in the literature.We find interesting similarities with the foreign exchange market: scaling law, intraday patterns, all of which point to the heterogeneity of market participants. Other properties like asymmetric causal information flow between fine and coarse volatilities for the same time series are present in our data. There are also lead–lag correlations across the term structure of implied forward rates, but they tend to disappear as markets mature.A principal component analysis of the short end of the yield curve allows us to determine the most important components and to reduce the number of time series needed to describe the term structure. We find the decomposition rather stable over time. The first component, which describes the curve level, shows an asymmetry in the information flow between volatilities of different time resolution, i.e., the coarse-grained volatility predicts the fine-grained volatility better than the other way around, as observed in the foreign exchange market. The remaining components do not show such an effect, having instead significant negative autocorrelations for the time series themselves. A heterogeneous autoregressive conditional heteroskedasticity (HARCH) model is estimated for the first component and the impact of different market agents is discussed.     

Choquet Rationality

Consider a decision problem under uncertainty for a decision maker with known (utility) payoffs over prizes. We say that an act is Choquet (Shafer, Bernoulli) rational if for some capacity (belief function, probability) over the set of states, it maximizes her “expected” utility. We show that an act may be Choquet rational without being Bernoulli rational, but it is Choquet rational if and only if it is Shafer rational. Journal of Economic Literature Classification Numbers: C72, D81.