Reconciling introspective utility with revealed preference: Experimental arguments based on prospect theory

In an experiment, choice-based (revealed-preference) utility of money is derived from choices under risk, and choiceless (non-revealed-preference) utility from introspective strength-of-preference judgments. The well-known inconsistencies of risky utility under expected utility are resolved under prospect theory, yielding one consistent cardinal utility index for risky choice. Remarkably, however, this cardinal index also agrees well with the choiceless utilities, suggesting a relation between a choice-based and a choiceless concept. Such a relation implies that introspective judgments can provide useful data for economics, and can reinforce the revealed-preference paradigm. This finding sheds new light on the classical debate on ordinal versus cardinal utility.     

Break-even analysis for multiple product firms

The object of the paper is to present a method to compute break-even values of production for multiple product firms that produce under conditions of joint fixed costs and product interdependence, without assuming that the ratio of the variable costs of each output to the total variable costs of the firm remain constant. The result obtained with the methods proposed are compared with those obtained using other methods, and the implications for managerial decision-making are analyzed.     

Essential equilibria of large generalized games

We characterize the essential stability of games with a continuum of players, where strategy profiles may affect objective functions and admissible strategies. Taking into account the perturbations defined by a continuous mapping from a complete metric space of parameters to the space of continuous games, we prove that essential stability is a generic property and every game has a stable subset of equilibria. These results are extended to discontinuous large generalized games assuming that only payoff functions are subject to perturbations. We apply our results in an electoral game with a continuum of Cournot-Nash equilibria, where the unique essential equilibrium is that only politically engaged players participate in the electoral process. In addition, employing our results for discontinuous games, we determine the stability properties of competitive prices in large economies.     

Product Market Competition,Monetary Policy Regimes and Inflation Dynamics: Evidence from a Panel of OECD Countries

We empirically analyze the impact of product market competition on the responsiveness of inflation to macroeconomic imbalances. If competition is high the response of inflation to lagged inflation, unemployment and import prices is reduced, while inflation is more responsive to changes in productivity growth in countries in which competition is above the OECD average. Given the (‘good luck’) macroeconomic trajectories of the 1990s–2000s, the structural reforms that made goods markets more competitive improved the ability of OECD economies to smooth (dis)inflationary shocks, while changes in the monetary policy framework had a modest role in taming inflation during the Great Moderation.     

Are we ignoring supply shocks? A proposal for monitoring cyclical fluctuations

Although there are several mechanisms within theoretical models acknowledging that supply shocks can account for an important part of output fluctuations, even in the short-run, policy practitioners continue endorsing the idea that only demand shocks explain them. This article provides empirical evidence on several Latin American countries and the USA to show that the share of output variance explained by supply shocks in the short-run is substantial. It also offers a more agnostic implementation of the Blanchard–Quah type of structural analysis that focuses on policy evaluation. For this purpose, we propose constructing two indicators out of the historical decomposition of shocks: the goods market unbalance (GMU) and the total cyclical fluctuations (TCF). While GMU is an excess demand measurement that reveals the scope of the distortions caused by shocks, TCF, combined with GMU, helps to understand what type of shock is predominantly explaining (output and inflation) fluctuations. These two pieces of information provide a very different diagnosis than traditional output gaps and should guide monetary policy interventions more adequately. The agnosticism of this proposal has two aspects: the use of a different identification strategy and the assessment of the effects of both supply and demand shocks on output.

     

On the heterogeneous short‐term effects of minimum wages on labor demand

A strand of the literature documents no effects or even positive effects of a higher minimum wage on employment. This evidence is frequently linked to the existence of monopsonistic labor markets or search frictions. However, empirical studies show that these findings could be related to a low short‐term minimum wage–employment elasticity in a competitive labor market. We show that mixed theoretical employment effects of a minimum wage policy can be predicted in the short term in assignment economies with price‐taker agents and no search frictions.     

Tipping the scale? The workings of monetary policy through trade

The monetary policy entails demand‐augmenting and diverting effects, and its impact on the trade balance—and on other countries—depends on the magnitude of these opposing effects. Using U.S. data and a sign‐restricted structural vector autoregressive identification, we investigate the importance of these effects. Overall, the results indicate that a monetary loosening (tightening) leads to a strengthening (weakening) of the overall trade balance, indicating that demand diversion dominates. The paper also explores changes in the effects following the global financial crisis, reflecting the impaired monetary transmission mechanism.     

Service innovation as a political process

Service innovation processes are driven by stakeholders in interaction and are understood and sketched as a value negotiation process that consists of an iterative process of securing potential value in service. While previous research has focused on service innovation as a harmonious closed system, our study explores service innovation as a political process in which stakeholders negotiate to create and secure future value. Data are collected through interviews and participant observations in four different case studies. Our study contributes to the field by illuminating service innovation as a political process and explaining how this is operationalized. The findings also contribute to an understanding of how stakeholder resources impact a chosen strategy; the resulting strategy’s impact on the service concept vis-à-vis its potential value; and how several involved stakeholders formulate, negotiate, and secure future potential value, which are the activities that drive a service innovation process.     

After over 25 years of accrediting beaches,has Blue Flag contributed to sustainable management?

This paper examines the qualitative, quantitative, and geographical evolution (1987–2012) of the Blue Flag campaign and accreditation process in Spain, a leading coastal tourism destination heading the list of awards. The standard Blue Flag criteria for crowded, developed beaches are now adapting to new demands for natural beaches, but they still fail to capture essential sustainable tourism features, such as limiting user numbers, or preserving and restoring sand ecosystems. Given these shortcomings, some destinations are moving to alternative awards with a higher environmental commitment, such as EMS, ISO14001, and Eco-Management and Audit Schemes (EMAS). A cluster analysis of Blue Flag data for 983 beaches in Spain over 26 years revealed different behaviour patterns: established tourist areas that have always opted for the Blue Flag programme; tourist areas that adopted the Blue Flag early on but replaced it with ISO14001 and EMAS; recently developed destinations applying for the award to boost their tourism promotion; and tourist areas with no well-defined policy that have opted intermittently for Blue Flag. These profiles illustrate the different policies of Spain's Autonomous Regions, and they are useful for tourism managers to verify whether their destination's behaviour pattern contributes to sustainable tourism and matches strategic policies they have designed for them.     

Supra-National Money and the Euro Crisis: Lessons from Karl Polanyi

The paper seeks to examine some of the key features of Karl Polanyi’s ideas explaining the collapse of the pre-Great Depression unregulated market system by using his broad framework of analysis, as developed in The Great Transformation and published over 70 years ago, to explain the present Eurozone crisis. Emphasis is placed on the two key institutions of the pre-Depression era, namely haute finance and the gold standard, as well as his heterodox views on the nature and origin of money to shed light on the evolving crisis within the Eurozone. On the basis of Polanyi’s insights, the paper concludes that the cause of the latter crisis is similar and it lies primarily in the adoption of stateless or supra-national money that is even more restrictive on the behaviour of national authorities than the conditions imposed under the gold standard. The current situation of quasi-permanent austerity in the Eurozone is the inevitable consequence of its monetary architecture, and it will remain a long-term feature of Europe, unless significant institutional changes are put in place to bridge the gap between money and the state.