THE DEMAND FOR CIGARETTES IN JAPAN: IMPACT OF INFORMATION DISSEMINATION ON CIGARETTE CONSUMPTION

The authors present a theoretical derivation of cigarette demand and estimate the demand in Japan with prefecturE-level data. By examining the impact of information dissemination regarding the health hazards of smoking, the authors argue that information dissemination is an effective instrument of public health policy, supplementary to cigarette taxation and antismoking ordinances.     

Coverage area expansion, customer switching, and household profiles in the Japanese broadband access market

This paper examines the diffusion process of Internet broadband access in Japan by modeling the household choice of access modes. Estimates reveal that the characteristics of users, rather than those of the access modes, play a significant role in demand substitution across the modes. Simulation exercises indicate that had optic fibers (fiber-to-the-home; FTTH) been made available to the whole country in 2005, only 10% of households would have switched to that mode. This result implies that once chosen, the household choice of access mode persists, and that indirect network effects are an important element in decisions to adopt the new technology of broadband. Finally, policy implications are discussed.     

A cointegrated commodity pricing model

We propose a commodity pricing model that extends the Gibson–Schwartz two‐factor model to incorporate the effect of linear relations among commodity spot prices, and provide a condition under which such linear relations represent cointegration. We derive futures and call option prices for the proposed model, and indicate that, unlike in Duan and Pliska (2004), the linear relations among commodity prices should affect commodity derivative prices, even when the volatilities of commodity returns are constant. Using crude oil and heating oil market data, we estimate the model and apply the results to the hedging of long‐term futures using short‐term ones.     

Early twentieth-century Japanese worker saving: precautionary behaviour before a social safety net

This paper pools data from independent household surveys of Japanese workers roughly spanning the Taishō period (1912–1926), a time before private-business or government-provided social safety nets. First, we construct estimates of permanent and transitory income and then estimate saving functions consistent with intertemporal optimization. The saving behaviour of Japanese worker households is in turn compared with that of American worker households before World War I, a time when they too lacked access to general social services. The estimated marginal propensities to save out of permanent and transitory incomes were quite similar for Japanese and American worker households, but the Japanese ones saved more at a given level of income. The economic environment facing Japanese workers, however, seemed to be no riskier than that facing American workers. We attribute instead this result primarily to the widespread postal savings banks in Japan which increased the convenience and decreased the risk of saving.     

Econometric analysis of price index for home video cassette recorders in the U.S., 1978-1987

This paper conducts an empirical analysis on the U.S. VCR market using a hedonic approach. The paper finds that quality-adjusted price indices decline at 11-12% per year, with a large annual drop of about 18% from 1982-85. Estimation and data analysis reveal interesting aspects of the evolution of quality and price in the VCR market. As a result of the exclusion of the VCR category until 1986, the paper estimates a bias of 2.4% per year in the CPI electronics subindex.     

Security Innovation on Several Assets Under Asymmetric Information

The paper examines the optimal innovation of securities by an issuer who is endowed with several risky assets and private information on one of the assets. Assuming that the degree of asymmetric information between the issuer and the outside investor is large, we show that the issuer restricts the number of securities that he creates. We also show that the payoff of the security created by the issuer is not closely correlated, and is sometimes completely uncorrelated, with the payoff of the asset that is subject to the asymmetric information, depending on the hedging needs and the accuracy of information.
JEL Classification Numbers: D52, D82, G20.     

Did US safeguards resuscitate Harley-Davidson in the 1980s?

This paper examines US safeguards applied to the motorcycle market in the 1980s. After receiving temporary protection by means of a maximum tariff of over 45%, Harley-Davidson sales recovered dramatically. Simulations, based on structural demand and supply estimates, indicate that while safeguard tariffs did benefit Harley-Davidson, they only account for a fraction of its increased sales. This is primarily because consumers perceived that Harley-Davidson and Japanese large motorcycles were poorly matched substitutes for each other. Our results provide little evidence that safeguard provisions triggered restructuring in Harley-Davidson.