Organizational Design,Competition, and Financial Exchanges

We investigate the incentives for vertical and horizontal integration in the financial securities service industry. In a model with two exchanges and two central securities depositories (CSDs), we find that decentralized decisions might lead to privately and socially inferior industry equilibria with vertical integration of both CSDs with their respective exchanges. Allowing for horizontal integration of CSDs avoids privately inferior industry equilibria. However, we observe too little horizontal integration from the social perspective. We link our results to recent regulatory and institutional developments such as the emergence of multilateral trading facilities, over-the-counter regulation, and financial harmonization.     

Does competition foster trust? The role of tournament incentives

Members of organizations are often called upon to trust others and to reciprocate trust while at the same time competing for bonuses or promotions. We suggest that competition affects trust not only within dyads including direct competitors, but also between individuals who do not compete against each other. We test this idea in a trust game where trustors and trustees are rewarded based either on their absolute performance or on how well they do relative to players from other dyads. In Experiment 1, we show that competition among trustors significantly increases trust. Competition among trustees decreases trustworthiness, but trustors do not anticipate this effect. In Experiment 2, we additionally show that the increase in trust under competition is caused by a combination of increased risk taking and lower sensitivity to non-financial concerns specific to trust interactions. Our results suggest that tournament incentives might have a “blinding effect” on considerations such as betrayal and inequality aversion.     

A choice experiment on fuel taxation and earmarking in Norway

Pigouvian taxes are efficient — but unpopular among voters — and hence often politically infeasible. Earmarking of revenues has been widely reported to increase public support for taxes, but earmarking is generally not the most efficient use of the revenues. This trade-off between efficiency and political feasibility is the motivation for our primary research objective: to quantify the effect of earmarking on support for fuel tax rises. Our secondary research objective is to investigate why earmarking increases support. Using data from a representative sample of the Norwegian voter population (N = 1147), we estimate models of voter preferences for fuel taxes using logistic regression models. Our results show that, in the absence of earmarking, the majority of voters would like to reduce fuel taxes, but earmarking the revenues for environmental measures has a substantial effect on voter support for fuel tax increases, garnering a majority for increases of up to 15% above present levels. Further analysis indicates that a prime reason why earmarking for environmental measures is popular is that it increases the perceived environmental effectiveness of the tax, and hence its legitimacy as an environmental rather than a fiscal policy instrument.     

Calling circles: network competition with nonuniform calling patterns

We introduce a flexible model of telecommunications network competition with nonuniform calling patterns, accounting for the fact that customers tend to make most calls to a small set of similar people. Equilibrium call prices are distorted away from marginal cost, and competitive intensity is affected by the concentration of calling patterns. Contrary to previous predictions, jointly profit‐maximizing access charges are set above termination cost in order to dampen competition if calling patterns are sufficiently concentrated. We discuss implications for regulating access charges as well as on‐ and off‐net price discrimination.     

Context matters: How existing sectors and competing technologies affect the prospects of the Swiss Bio-SNG innovation system

Emerging technological fields are affected by developments in their broader context. This article proposes a differentiation of context structures as a crucial step in the analysis of technological innovation systems. A thorough context analysis, so the argument, is essential for understanding the pace and direction of technology development and the prospects of an emerging technological innovation system. Empirical insights are provided for Bio-SNG, a technology in an early stage of development. The article discusses the conditions under which actors from different sectors (forestry, wood industry, and energy supply) may play a role in the emerging field. It is shown that Bio-SNG is likely to become a victim of the recent boom in wood-to-energy technologies that has favored investments in more mature but technologically inferior alternatives. The case provides lessons for policy making as it highlights how effective support schemes might foster a lock-in into technologies that are readily available.     

On the cultural basis of gender differences in negotiation

We study how culture and social structure influence bargaining behavior across gender, by exploring the negotiation culture in matrilineal and patriarchal societies using data from a laboratory experiment and a natural field experiment. One interesting result is that in both the actual marketplace and in the laboratory bargaining game, women in the matrilineal society earn more than men, at odds with years of evidence observed in the western world. We find that this result is critically driven by which side of the market the person is occupying: female (male) sellers in the matrilineal (patriarchal) society extract more of the bargaining surplus than male (female) sellers. In the buyer role, however, we observe no significant differences across societies.     

Labour Supply,Life Satisfaction,and the (Dis)Utility of Work*

In economic theory, it is typically assumed that there is a “disutility of labour”. However, empirical research on subjective well‐being has consistently shown that unemployed people are less happy than employed people, even after taking income differences into account. In this paper, we attempt to reconcile both findings. We show that happiness and work hours exhibit an inverse U‐shaped relation – working longer raises the level of happiness, as long as the total working time is not too long. Hence, working can be beneficial for happiness and, at the same time, it can exert a disutility at the margin.     

The Impact of Private Interest Contributions on RPS Adoption

In the last two decades, many U.S. states introduced policies to promote electricity generation from renewable energy sources (RES‐E). Renewable portfolio standards (RPS) are considered to be the key RES‐E policy tool to date. This article tackles the question on why some state legislators were front‐running the trend of RPS implementation whereas others adopted policies just recently, and why others have not adopted them at all. We compile data on financial contributions of conventional energy interest groups (CEI) and renewable energy interest groups (REI) to state‐level policy‐makers between 1998 and 2010. By means of hazard and tobit regressions, we test the effect of these financial contributions on the probability of RPS adoption and on RPS stringency. The article provides evidence in favor of interest group theory. First, CEI have donated more to state‐level legislators affiliated with the Republican Party than to Democrats while contributions from REI went largely to the latter. Second, there are statistically significant links between the likelihood of RPS adoption and private interest contributions. Contributions from CEI have a negative effect on the likelihood of RPS adoption whereas REI contributions have a positive effect.     

Public good provision and the Smith Process

An existing public good provision mechanism known as the Smith Process (SP) is extended to allow for non-zero fixed cost, non-constant marginal cost and imperfectly divisible output. Two versions of SP are considered: unrestricted (USP) and restricted with a unanimity rule (RSPU). USP implements efficient choice provided the gap between marginal and average cost is sufficiently low. RSPU relaxes the conditions for efficient implementation but increases the set of equilibria involving inefficient choice. Furthermore, if weakly dominated strategies are eliminated, then non-provision is no longer an equilibrium under RSPU but continues to be one under USP.