Bond Market Structure in the Presence of Marked Point Processes

We investigate the term structure of zero coupon bonds when interest rates are driven by a general marked point process as well as by a Wiener process. Developing a theory that allows for measure–valued trading portfolios, we study existence and uniqueness of a martingale measure. We also study completeness and its relation to the uniqueness of a martingale measure. For the case of a finite jump spectrum we give a fairly general completeness result and for a Wiener–Poisson model we prove the existence of a time–independent set of basic bonds. We also give sufficient conditions for the existence of an affine term structure.     

Product Liability: Beyond Class Action

Can punitive product liability enhance economic efficiency? A very simple economic theory, assuming that the probability and the degree of product dissatisfaction are functions only of the producer's not of the consumer's effort, is modelled and analysed in this paper. The qualitative conclusion hinges critically upon whether the legal liability is reflected on price determination. If the price of the product is insensitive to product liability legislation, then punitive liability beyond the class action (i.e., compensatory payments more than proportional representation of potentially dissatisfied consumers) can induce socially desirable levels of effort exerted by the producer firm. This affirmative effect disappears if the price fully reflects all the expected legal liabilities, whereby punitive liability tends to reduce economic efficiency by encouraging costly lawsuit.     

How Did the Dollar Peg Fail in Asia?

In this paper, we have constructed a theoretical model in which the Asian firm maximizes its profit, competing with the Japanese and the U.S. firms in their markets. The duopoly model is used to determine export prices and volumes in response to the exchange rate fluctuations vis-à-vis the Japanese yen and the U.S. dollar. Then, the optimal basket weight that would minimize the fluctuation of the growth rate of trade balance was derived. These are the novel features of our model. The export price equation and export volume equation are estimated for several Asian countries for the sample period from 1981 to 1996. Results are generally reasonable. The optimal currency weights for the yen and the U.S. dollar are derived and compared with actual weights that had been adopted before the currency crisis of 1997. For all countries in the sample, it is shown that the optimal weight of the yen is significantly higher than the actual weight.J. Japan. Int. Econ.,Dec. 1998,12(4), pp. 256–304. Institute of Economic Research, Hitotsubashi University, Kunitachi, Tokyo 186, Japan; Department of Commerce, Hitotsubashi University, Kunitachi, Tokyo 186, Japan; Department of Commerce, Takachiho University, Suginami, Tokyo 168, Japan.Copyright 1998 Academic Press.Journal of Economic LiteratureClassification Numbers F31, F33, O11.     

Disharmony in international accounting standards setting: The Chinese approach to accounting for business combinations

The paper addresses two distinct aspects of disharmony in international accounting standards setting. The first aspect relates to the political economic context of financial accounting standards. This is illustrated by the Chinese standards setters’ decision to allow the pooling of interests method of accounting for business combinations despite the prohibition of this method by both the FASB and the IASB. This decision by the Chinese standards setters appears to have been based on political economic factors related to the need for industrial reorganization in China rather than a desire to serve the needs of global capital markets. The second aspect of disharmony relates to the role played by differential understandings of the fundamental objectives of financial reporting in an international context. The IASB's goal of producing one set of global accounting standards to serve the needs of global capital markets has led to a reduction in the number of permissible accounting methods and a move towards the fair value accounting model. In particular, the IASB concluded that the acquisition method of accounting for business combinations should be the only method allowed for business combinations. In contrast, the Chinese standards setters have recognized the existence of both mergers and acquisitions, and in response they created two different methods of accounting for business combinations. Effectively, the Chinese standards setters developed an alternative approach to accounting for business combinations which challenges the IASB's goal of achieving international accounting convergence through the fair value model.     

Changes in Russian managerial values: a test of the convergence hypothesis?

This paper considers how Russian managerial values are developing in the context of the sweeping economic, political and social changes associated with the transition of Russia to a market economy.

By replicating earlier research (Holt et al., ; Ralston et al., ), it was possible to overcome the weaknesses of previous cross-sectional studies by tracking changes in Russian managers' values over time.

The paper concludes that some convergence between the values of Russian and US managers can be observed, but that the form of this convergence is not uniform. In addition, the way in which Russian managers act upon these values in the context of their own national context means that considerable divergence in managerial behaviour is still evident. Implications for international human resource management are discussed.     

Strategic Choice of Quantity Stickiness and Stackelberg Leadership

This paper re‐examines endogenous Stackelberg leader–follower relations by modelling an explicitly dynamic market. We analyze a twice‐repeated duopoly where, in the beginning, each firm chooses either a quantity‐sticky production mode or a quantity‐flexible production mode. The size of the market becomes observable after the first period. In the second period, a firm can adjust its quantity if and only if it has adopted the flexible mode. Hence, if one firm chooses the sticky mode whilst the other chooses the flexible mode, then they respectively play the roles of a Stackelberg leader and a Stackelberg follower in the second marketing period. Somewhat intriguing is the finding that such a Stackelberg‐like equilibrium can arise only when the relative weight of the pre‐Stackelberg first marketing period is sufficiently high, with time preferences being sufficiently strong.     

Gas transportation, geopolitics and future market structure

Recent studies have shown the important role of geography, politics and technology for the evolution of markets for natural gas. Gas market differs from other markets due to high share of transport and infrastructure costs. Since investment is location specific, it involves also geopolitical aspects as a consequence. Future market structure becomes path dependent on the investment decisions, particularly in gas infrastructure (pipelines and LNG). Another important aspect that shapes future gas market is heterogeneity in reserve-production ratios across gas producing countries that will eventually lead to the emergence of narrow oligopoly formed by countries with the largest reserves: Russia, Iran and Qatar. The goal of this paper is to analyse a long run gas game. There exist several time scales, and by backward induction we arrive at the conclusion that some time during the 21st century (we name it long run) there will be an oligopoly consisting of only three major gas reserve holders: Russia (26%), Iran (15%) and Qatar (14%). They will face the demand from three major gas importers: EU, USA and Core Asia. While the development paths and market structures are highly uncertain in the middle run (when temporal competition with rivals having 3% or less of gas reserves is feasible), the cloud of uncertainty shrinks in the long run. But investment strategies of major players in the middle run will determine the topology of gas infrastructure in the long run. All the players have a vector of strategic choices where geography, politics and technology set their limitations. Putting it in a simple formal framework, we can say that players choose: intensity of exploitation and shares of investment in transport infrastructure (LNG and location-specific pipelines). Geographical analysis of gas fields of Russia shows that it has moderate flexibility, but still can control the future share of LNG and pipeline flows to Europe and Asia. Pipelines to EU are slightly preferred to pipelines to Asia but political aspects may play crucial role. Qatar is likely to invest only in LNG, but has the flexibility in the speed of its field exploitation (it may be lower that for Russia). Iran has the highest technological and geographical freedom in choices. Future market structures for gas can vary from oligopolistic to monopolistic–monopsonistic relationship, with possibly different prices.