Trader Anonymity, Price Formation and Liquidity

Using data from the Frankfurt Stock Exchange we analyze price formationand liquidity in a non-anonymous environment with similarities to thefloor of the NYSE. Our main hypothesis is that the non-anonymity allows the specialist to assess the probability that atrader trades on the basis of private information. He uses this knowledgeto price discriminate. This can be achieved by quoting a large spread and granting price improvement to traders deemed uninformed.Consistent with our hypothesis we find that price improvement reflects loweradverse selection costs but does not lead to a reduction in the specialist's profit. Further, the quote adjustmentfollowing transactions at the quoted bid or ask price is more pronounced than the quote adjustment aftertransactions at prices inside the spread. Our results indicate that anonymity comes at the cost ofhigher adverse selection risk.     

Heuristic learning and the discovery of specialization and exchange

I develop and calibrate an agent-based model of boundedly rational, adaptive agents in a two-good production and exchange economy to replicate human-subject outcomes in the same eight-person experimental economy. To test agents’ ability to capture human behavior, I extend the model and use its output to make predictions about a second experimental environment in which the group of eight agents is slowly constructed by merging smaller groups. This environment improves human-subject performance in the specialization and exchange task, and commensurate improvement emerges for some parameterizations of the agent-based model. This iterative process yields incremental improvement of decision-level theories about economic discovery.     

Materialism and Consumer Ethics: An Exploratory Study

As the issue of marketing's social responsibility grows in significance, the topic of materialism surfaces. While many marketing efforts encourage materialism, the materialism that is encouraged may have negative societal effects. An understanding of the effects of materialism on individuals, families, society, etc., is important in evaluating whether or not it is socially irresponsible for marketers to encourage materialism. However, the adequate empirical work has not yet been done on the overall effects of materialism. The current paper asks and addresses one important empirical question in this area. Do consumers who are more materialistic have different ethical standards than those who are not? Empirical evidence is presented which would indicate that materialism is negatively correlated with people's higher ethical standards as consumers. The implications for this in understanding social responsibility are discussed.     

Do Antitrust Laws Facilitate Collusion? Experimental Evidence on Costly Communication in Duopolies*

Bertrand supergames with non‐binding communication are used to study price formation and stability of collusive agreements on experimental duopoly markets. The experimental design consists of three treatments with different costs of communication: zero‐cost, low‐cost and high‐cost. Prices are found to be significantly higher when communication is costly. Moreover, costly communication decreases the number of messages, but more importantly, it enhances the stability of collusive agreements. McCutcheon (1997) presents an interesting application to antitrust policy by letting the cost of communication symbolize the presence of an antitrust law that prohibits firms from discussing prices. Although our experimental results do not support the mechanism of McCutcheon's (1997) argument, the findings point in the direction of her prediction that antitrust laws might work in the interest of firms.     

The constant preferences assumption as a specification error in demand analysis

Complete demand systems often are estimated under the assumption that preferences are constant. If preferences do change in reality, this leads to a specification error. This note explores some of the implications of such a specification error.     

The impact of cognitive age on Internet use of the elderly: an introduction to the public policy implications

Despite the growth of the Internet, one area that has not really been discussed is the elderly's use of the Internet. Given the rapid growth of this population as well as the potential the Internet holds for them, it is a subject worth consideration. However, seniors cannot be defined simply by their chronological age, but by their cognitive age. This paper discusses the impact of cognitive age of a national random sample of American elderly consumers on their Internet use. The results suggest that those seniors with a younger cognitive age use the Internet more than those seniors with an older cognitive age. Additionally, seniors with a younger cognitive age have more social contact off‐line (but not online) than those seniors with an older cognitive age. Finally, in terms of demographic variables, chronological age is positively associated with cognitive age and women report a younger cognitive age than men. These results suggest that for policy makers interested in increasing the participation of seniors, they can utilize the Internet to reach those who are younger in terms of cognitive age; however, they will not be able to reach all seniors in this manner and they need to utilize the Internet as a complementing media to their traditional communication sources.     

The (International) Political Economy of Falling Wage Shares: Situating Working-Class Agency

This paper relates the financial and monetary dimensions of the contemporary economic crisis to working-class agency via a central concern of classical political economy: the distribution of surplus between the chief factors of production. The fall in the wage share of value added is now accepted as a stylised fact in the empirical economic literature. This paper argues that the punctuated pattern of the development validates the regulation theoretical narrative of an epochal shift from Fordism to finance-led accumulation. Furthermore, synthesising econometric studies supports a class-centred explanation. In the last instance, the falling wage share is due to successful transnational class rule in the form of a neoliberal hegemonic paradigm. Crucially, such class rule restructured the environment of trade unions, rendering increasingly ineffective its relational power resources. The paper concludes by considering the contradictory implications for organised labour of the current financial crisis. On the one hand, the financial crisis offers an opportunity to link its particular interests to the general interest of macroeconomic management since low wage share inhibits growth rates. But how might trade unions assert a higher wage share in the face of the structural power of (financial) capital?     

Does corruption increase emerging market bond spreads?

We study the relationship between corruption and borrowing costs for governments and firms in emerging markets. Combining data on bonds traded in the global market with survey data on corruption compiled by Transparency International, we show that countries that are perceived as more corrupt must pay a higher risk premium when issuing bonds. The global bond market ascribes a significant cost to corruption: an improvement in the corruption score from the level of Lithuania to that of the Czech Republic lowers the bond spread by about one-fifth. This is true even after controlling for macroeconomic effects that are correlated with corruption. We find little evidence that investors became more sensitive to corruption in the wake of the Asian financial crisis.