Delegation and commitment in durable goods monopolies

This paper studies a simultaneous-move infinite-horizon delegation game in which the principal of a durable goods monopoly entrusts pricing decisions to a manager who enjoys consuming her monetary rewards but dislikes production effort. The delegation contract allows for continual interference with managerial incentives: in each period the principal rewards the manager according to her performance. We show that when the cost of delegation is low relative to profits, the principal can attain the precommitment price plan in a perfect rational expectations equilibrium. The paper analyzes the robustness of this result under alternative specifications of timing and objectives. We also provide a numerical characterization of the equilibrium strategies for the case of linear-quadratic payoffs.     

Misperceiving inequality

A vast literature suggests that economic inequality has important consequences for politics and public policy. Higher inequality is thought to increase demand for income redistribution in democracies and to discourage democratization and promote class conflict and revolution in dictatorships. Most such arguments crucially assume that ordinary people know how high inequality is, how it has been changing, and where they fit in the income distribution. Using a variety of large, cross‐national surveys, we show that, in recent years, ordinary people have had little idea about such things. What they think they know is often wrong. Widespread ignorance and misperceptions emerge robustly, regardless of data source, operationalization, and measurement method. Moreover, perceived inequality—not the actual level—correlates strongly with demand for redistribution and reported conflict between rich and poor. We suggest that most theories about political effects of inequality need to be reframed as theories about effects of perceived inequality.     

Return to the “natural” process of decision-making leads to good strategies

A novel approach to strategic management, Risk-Constrained Optimization (RCO), is an ensemble of special models, procedures, and algorithms to generate, evaluate, and help in executing good alternative strategies. RCO is a patented system of planning under uncertainty that searches for the most acceptable compromise between improving results and reducing risk in our decisions. Risk management and scenario planning dominate over optimization. RCO still uses maximization, but only in combination with several protective filters that screen, modify, and scale back the strategies, as necessary. As with any protective equipment, RCO could reduce the need for knowledge about the future.JEL Classification: D21, D81, C61I would like to acknowledge extremely helpful and insightful comments of Professor Mark Perlman (to whom this article owes very, very much), Professor Irma Adelman, Erwin Rezelman, Dr. Victor V. Masch, and an anonymous reviewer. I also greatly appreciate help in editing by David Owens and Professor Irving Rothman.     

POOLING VERSUS MODEL SELECTION FOR NOWCASTING GDP WITH MANY PREDICTORS: EMPIRICAL EVIDENCE FOR SIX INDUSTRIALIZED COUNTRIES

This paper discusses pooling versus model selection for nowcasting with large datasets in the presence of model uncertainty. In practice, nowcasting a low‐frequency variable with a large number of high‐frequency indicators should account for at least two data irregularities: (i) unbalanced data with missing observations at the end of the sample due to publication delays; and (ii) different sampling frequencies of the data. Two model classes suited in this context are factor models based on large datasets and mixed‐data sampling (MIDAS) regressions with few predictors. The specification of these models requires several choices related to, amongst other things, the factor estimation method and the number of factors, lag length and indicator selection. Thus there are many sources of misspecification when selecting a particular model, and an alternative would be pooling over a large set of different model specifications. We evaluate the relative performance of pooling and model selection for nowcasting quarterly GDP for six large industrialized countries. We find that the nowcast performance of single models varies considerably over time, in line with the forecasting literature. Model selection based on sequential application of information criteria can outperform benchmarks. However, the results highly depend on the selection method chosen. In contrast, pooling of nowcast models provides an overall very stable nowcast performance over time. Copyright © 2012 John Wiley & Sons, Ltd.     

Technology,employment and the business cycle in post-transition countries of the EU

This article analyses the importance of technology and non-technology shocks in the business cycles of European Union post-transition countries. Different assumptions of New Keynesian and Real Business Cycle theory are tested. The results demonstrate that a non-technology shock is more important in explaining business cycles in post-transition countries, although a technology shock is not trivial. The technology shock cannot replicate basic business cycle facts observed in the data: it produces a low or negative correlation between employment and GDP, and a strong negative correlation between labour productivity and employment. Technology and non-technology GDP components are analysed in the transition and post-transition period. The results show a non-technology shock was the dominant source of business cycles both during and after the transition period.     

Properties in science and their modelling

Properties in the usual sense are analyzed by means of the construction of an abstract property. Once constructed, the abstract property provides a useful tool for analyzing the nature of usual properties. This paper shows that such modelling allows to classify properties and to explicate their structure. Applications of this modelling to study of some classical and quantum physical quantities are also described.     

Agriculture,nutrition and development in Yugoslavia

Improvements in food consumption and nutrition, being important indicators of the standard of living, can only be analysed properly within the context of socioeconomic development. The authors examine the developments of food and nutrition policy in Yugoslavia, a country disadvantaged by a backward economy and poor social conditions inherited from the prewar and pre-revolutionary period and exacerbated by the second world war.     

How does law affect finance? An examination of equity tunneling in Bulgaria

We model and test the mechanisms through which law affects tunneling and tunneling affects firm valuation. In 2002, Bulgaria adopted legal changes which limit equity tunneling through dilutive equity offerings and freezeouts. Following the changes, minority shareholders participate equally in equity offerings, where before they suffered severe dilution; freezeout offer price ratios quadruple; and Tobin's q rises sharply for firms at high risk of tunneling. The paper shows the importance of legal rules in limiting equity tunneling, the role of equity tunneling risk as a factor in determining equity prices, and substitution by controlling shareholders between different forms of tunneling.