Multiple Listing Service Subsidies and Economic Efficiency

In an earlier article in this journal, Sefton and Yavas (1995) concluded that subsidizing a monopoly multiple listing service (MLS) can be efficient when the curvature of the representative consumer's demand function leads to overshifting. This paper extends their analysis to a multiple-consumer demand model. It shows that, for the generalized demand configuration considered here, in general, there is no Pareto superior MLS subsidy supportable by nondiscriminatory MLS consumer taxes when the Pareto ranking is imposed without the Hicks–Kaldor compensation principle.     

Learning from Coworkers: Peer Effects on Individual Investment Decisions

Using unique data on employee stock purchase plans (ESPPs), we examine the influence of networks on investment decisions. Comparing employees within a firm during the same election window with metro area fixed effects, we find that the choices of coworkers in the firm's ESPP exert a significant influence on employees’ own decisions to participate and trade. Moreover, we find that the presence of high-information employees magnifies the effects of peer networks. Given participation in an ESPP is value-maximizing, our analysis suggests the potential of networks and targeted investor education to improve financial decision-making.     

External Networking and Internal Firm Governance

We use panel data on S&P 1500 companies to identify external network connections between directors and CEOs. We find that firms with more powerful CEOs are more likely to appoint directors with ties to the CEO. Using changes in board composition due to director death and retirement for identification, we find that CEO‐director ties reduce firm value, particularly in the absence of other governance mechanisms to substitute for board oversight. Moreover, firms with more CEO‐director ties engage in more value‐destroying acquisitions. Overall, our results suggest that network ties with the CEO weaken the intensity of board monitoring.     

Government Makes Exchange Rates Volatile

The foreign exchanges operate in markets that are widely distrusted as unpredictable and destabilising for international trade. Roy Batchelor and Geoffrey Wood argue that history and argument show that it is government that makes the exchanges more volatile, because it adds a range of uncertainty which is the most unpredictable.