The Price of Options Illiquidity

The purpose of this paper is to examine the effect of illiquidity on the value of currency options. We use a unique dataset that allows us to explore this issue in special circumstances where options are issued by a central bank and are not traded prior to maturity. The value of these options is compared to similar options traded on the exchange. We find that the nontradable options are priced about 21 percent less than the exchange-traded options. This gap cannot be arbitraged away due to transactions costs and the risk that the exchange rate will change during the bidding process.     

On the topological social choice model

The main goal of this paper is to show that if a finite connected CW complex admits a continuous, symmetric, and unanimous choice function for some number n>1 of agents, then the choice space is contractible. On the other hand, if one removes the finiteness, we give a complete characterization of the possible spaces; in particular, noncontractible spaces are indeed possible. These results extend earlier well-known results of Chichilnisky and Heal.     

The Effect of Educational Background On Performance and Organisational Commitment

In this research note Gedaliahu Harel, Senior Lecturer in Human Resource Management at the Israel Institute of Technology, and Yehuda Baruch, Visiting Fellow at the City University Business School, explore the effects of a special educational and training programme that affects the backgrounds of employees in technical jobs measured by variables such as level of performance, professionalism, and organisational commitment. the results are considered in terms of the particular population examined and the implications discussed for the use of special vocational education and training.     

Strategic restraint in contests

Economic policy is modelled as the outcome of a (political) game between two interest groups. The possible ex-post (realized) outcomes in the game correspond to the proposed policies. In the literature policy proposals are exogenous. We extend such games by allowing the endogenous determination of the proposed policies. In a first stage the groups decide which policy to lobby for and then, in a second stage, engage in a contest over the proposed policies. Our main result is that competition over endogenously determined policies induces strategic restraint that reduces polarization and, in turn, wasteful lobbying activities.     

Two-settlement Systems for Electricity Markets under Network Uncertainty and Market Power

We analyze welfare and distributional properties of a two-settlement system consisting of a spot market over a two-node network and a single energy forward contract. We formulate and analyze several models which simulate joint dispatch of energy and transmission resources coordinated by a system operator. The spot market is subject to network uncertainty, which we model as a random capacity derating of an important transmission line. Using a duopoly model, we show that even for small probabilities of congestion (derating), forward trading may be substantially reduced, and the market power mitigating effect of forward markets (as shown in Allaz and Vila 1993) may be nullified to a great extent. There is a spot transmission charge reflecting transportation costs from location of generation to a designated hub whose price is the underlying for the forward contract. This alleviates some of the incentive problems associated with the forward market in which spot-market trading is residual. We find that the reduction in forward trading is due to the segregation of the markets in the constrained state, and the absence of natural incentives for generators to commit to more aggressive behavior in the spot market (the strategic substitutes effect). In our analysis, we find that the standard assumption of no-arbitrage across forward and spot markets leads to very little contract coverage, even for the case with no congestion. We present an alternative view of the market where limited intertemporal arbitrage enables temporal price discrimination by competing duopolists. In this framework, we assume that all of the demand shows up in the forward market (or that the market is cleared against an accurate forecast of the demand), and the forward price is determined using a market clearing condition.     

Return and risk in initial public offerings of both shares and warrants

In the past few years there has been an increasing number of new issues of shares of common stock together with warrants intended to raise interest in initial public offerings of relatively young, growing firms. In this study we examine the pricing efficiency of stocks and warrants offered simultaneously to the public as a single unit. We present a model for evaluating the warrants in such offerings and test it empirically against data from the Tel-Aviv Stock Exchange, where such offerings have become standard. We find that the issued units are usually undervalued, allowing for significant abnormal positive returns. But, while the warrants are usually underpriced, the stocks are overpriced. Largely consistent with the evidence from other financial markets around the world, we also find abnormal negative rates of return in the long run.     

Expatriation and repatriation in MNCs: a taxonomy

The challenge of the management of expatriates and repatriates has never been more timely nor urgent: globalization has forced expatriation into the corporate agenda, confronting us with an array of questions on HRM strategy and practice. We propose that a wide range of current thinking and practice may be conveniently grouped into a taxonomy of five organizational options, each advancing a different set of expatriation relationships: Global, Emissary, Peripheral, Professional, and Expedient. A framework outlining the main configurations of these options generates a generic model for expatriation at the organizational level. This forms the principal part of the article, followed by a comprehensive discussion and implications for practice. © 2002 Wiley Periodicals, Inc.     

The Borda rule,Condorcet consistency and Condorcet stability

Summary. The Borda rule is known to be the least vulnerable scoring rule to Condorcet inconsistency, Saari (2000). Such inconsistency occurs when the Condorcet winner (the alternative which is preferred to any other alternative by a simple majority) is not selected by the Borda rule. This note exposes the relationship between the Borda rule and the Condorcet q-majority principle as well as the Condorcet q-majority voting rule. The main result establishes that the Borda rule is Condorcet q-majority consistent when where k is the number of alternatives. The second result establishes that is the minimal degree of majority decisiveness corresponding to the Borda rule under sincere voting. The same majority is required to ensure decisiveness under the Borda rule and to ensure that a q-rule (the generalized q-majority Condorcet rule) is a voting rule. Received: April 8, 2002; revised version: July 17, 2002 Correspondence to:S. Nitzan     

Is doing good good for you? how corporate charitable contributions enhance revenue growth

This study examines the impact of corporate philanthropy growth on sales growth using a large sample of charitable contributions made by U.S. public companies from 1989 through 2000. Applying Granger causality tests, we find that charitable contributions are significantly associated with future revenue, whereas the association between revenue and future contributions is marginally significant at best. We then identify the mechanism underlying our findings. Our results are particularly pronounced for firms that are highly sensitive to consumer perception, where individual consumers are the predominant customers. In addition, we document a positive relationship between contributions and customer satisfaction. Overall, our evidence suggests that corporate philanthropy, under certain circumstances, furthers firms' economic objectives. Copyright © 2009 John Wiley & Sons, Ltd.     

A methodology for reducing technological risk

The purpose of the paper is to suggest a quantitative method for analyzing the innovation risk from both technological and an economic point of view as a contribution to the strategic evaluation and planning process. Specifically the method provides a predictive evaluation of the probability of the commercial success of technological breakthroughs.
The method is a quantification of the qualitative method originally developed by White and Graham. It consists of a stepwise process in which the benefits of a technology are classified under four major headings: inventive merit, embodiment merit, market merit, and operational merit. Within each heading, the target technology is evaluated by pairwise comparison with alternative technologies, using a Saaty-type procedure. The decision-maker can conduct a sensitivity analysis and the evaluation can be made collaborative by using a group of judges.
The methodology which is computerized is described in some detail. Its use is illustrated by applying it to an hypothetical project in the field of information retrieval in which CD-ROM is compared with three alternative technologies.