DEALING WITH UNCERTAINTY: ROBUST RULES IN MONETARY POLICY

We argue that in seeking to insure against model uncertainty, monetary policy makers are often ready to trade ex post performance for greater certainty in the outcome. They thus look for rules that although not optimal ex post, have certain properties that qualify them as robust. We apply first, Gul's approach of ‘disappointment’ aversion to describe policy makers' aversion to uncertainty and then define the properties the notion of ‘robustness’ entails. With these two tools we then link the desirability of such robust rules to the degree of policy makers' aversion to uncertainty. We thus show that provided such robust rules exist, a larger degree of disappointment aversion leads to a greater emphasis on robustness in policy implementation.     

Evolutionary Game Theory and the Modeling of Economic Behavior

Since the 1950s economists have applied game-theoretical concepts to a wide variety of economic problems. The Nash equilibrium concept has proven to be a powerful instrument in analyzing the outcome of economic processes. Since the late 1980s economists have also shown a growing interest in the application of evolutionary game theory. This paper discusses the main concepts of evolutionary game theory and their applicability to economic issues. Whereas traditional game theory focusses on the static Nash equilibria as the possible outcomes of the game, evolutionary game theory teaches us to explicitly model the behavior of individuals outside equilibrium. This may provide us with a better understanding of the dynamic forces within a society of interacting individuals.     

Perception of Malaysian Food Manufacturers Toward Halal Logistics

This article measures the perception of Malaysian food manufacturers toward halal logistics through an industry survey conducted in Malaysia. Based on a survey with 44 food manufacturers in Malaysia, results indicate that the responsibility of halal logistics according to the manufacturer is a shared responsibility in the halal food supply chain and value chain. Second, the study confirms that a dedicated storage and transportation is required. The manufacturer recognizes that for cold chain products a dedicated halal sea/airport complex is required, whereas for ambient products, no mixing of halal and nonhalal products in the same section is sufficient. The manufacturer thinks that no mixing of halal and nonhalal products in the same zone of the supermarket provides sufficient assurance for the Muslim consumer. Third, 52.3% of the manufacturers are willing to pay more for a halal logistics system, whereas small and large companies show a higher willingness to pay than medium-size companies. Halal logistics is an important component of the manufacturer's halal promise but will require pressure from the government through regulations to make halal logistics a requirement for halal certification of food manufacturers.     

One job,one deal…or not: do generations respond differently to psychological contract fulfillment?

This paper investigates generational differences in the relations between psychological contract fulfillment and work attitudes. Data were collected from a sample of 909 employees in the Dutch service sector. Structural equation modeling analyses were used to test the moderating effects of generational differences on the influence of psychological contract fulfillment on affective commitment and turnover intention. The relationship between psychological contract fulfillment and these work outcomes was moderated by generational differences. Furthermore, results indicate that different generations respond differently to different aspects of psychological contract fulfillment, such as career development, job content, organizational policies, social atmosphere and rewards. The study provides evidence that generational differences impact the reciprocal relationship between employer and employee. Results from this study suggest that Baby Boomers and Generation X may be more motivated by social atmosphere, whereas Generation Y may be more motivated by job content and career development. Fair organizational policies are particularly motivating to Generation X, and providing rewards, though more important to Generation Y, seem mostly unrelated to work outcomes. This article is the first to study the moderation of generational differences in the relationships between psychological contract fulfillment and work outcomes.     

Combining time-series and econometric forecast of tourism activity

It has always been difficult to model the travel industry because tourism involves such a diverse set of activities. However, various regional decision makers have become increasingly interested in predicting the flows of visitors through their market. Accurate forecasts of the number of tourists' arrivals, their length of stay, and their expenditures improve planning and inventory control. Stochastic time-series models have compared favorably with econometric models at the aggregate level while some naive automatic forecasting tools have fared well in comparison when predicting industry-level behavior. Several approaches have been developed to improve forecast accuracy. This paper presents parsimonious methods of improving accuracy by combining various forecasting techniques. The Box-Jenkins stochastic time-series method is combined with a traditional econometric technique to forecast airline visitors to the State of Florida.     

Supply and demand factors of Cleaner technologies: Some empirical evidence

This article identifies and analyzes factors that affect the willingness of firms and consumers to develop and adopt cleaner technologies. Cleaner technologies is used as a general term for pollution abatement technologies, re-use systems, and environmentally sound consumer products and materials. The article also contains the findings of three case studies on cleaner technologies (CFC substitutes, low-solvent paints and coatings, and membrane technology), in which the importance of the identified factors is investigated. From the case studies some general conclusions are drawn about these factors, and the way in which policy instruments can be used to stimulate innovation in and diffusion of cleaner technologies. No single policy instrument is considered to be optimal. Instead a policy mix is needed, involving a much wider use of economic instruments.This paper is based on a research project for the Ministries of Economic Affairs and the Environment in the Netherlands, and is a revision of an earlier paper Policy Instruments to Stimulate Cleaner Technologies, which was prepared for the EAERE conference in Stockholm, June 11–14th, 1991. The authors thank the referee for helpful comments.     

Beyond the gravity model

Gravity theory holds that more people will travel from a particular origin to a given destination than will travel to a more distant destination of the same type and size. Distance, according to gravity theory is a deterrent to travel and empirical evidence supports such a relationship in urban settings. This relationship is, however, hypothesized not to be true for long-distance leisure travel where distance may be a utility rather than a friction to be overcome. This study examines the relationship between subjective (perceived) distance and objective (geographic) distance and tests the hypothesis that, all other things being equal, the attractiveness of tourist destinations will increase as subjective distance increases. It is concluded that tourists tend to perceive all destinations to be closer than they actually are. It is also concluded that the far-off destination has a special allure about it simply because it is far-off.     

Bertrand Price Competition in a Social Environment

We analyze the dynamic behaviour of firms that locally interact through price competition in a social environment in an evolutionary game-theoretic model. These firms update their prices according to the behavioural rule Win Cooperate, Lose Defect (WCLD), which is often observed in experimental economics. It can be regarded as a generalized Tit-for-Tat strategy. The model can explain the simultaneous emergence of collusive behaviour, price dispersion and occasional local price wars. Price wars only last for a short period of time after which the firms start to collude again.     

Heavily skewed pricing in two-sided markets

A common feature in two-sided markets is the prevalence of heavily skewed pricing strategies in which price markups are much higher on one side of the market than the other. We show that maximal skewed pricing is profit maximizing under constant elasticity of demand. The most elastic side of the market is used to generate maximum demand by providing it with platform services at the lowest possible price. Full participation of the high-elasticity, low-price side of the market attracts the other side. As this side is less price elastic, the platform is able to extract high prices.