Subjective Uncertainty over Behavior Strategies: A Correction

In order to model the subjective uncertainty of a player over the behavior strategies of an opponent, one must consider the player's beliefs about the opponent's play at information sets that the player thinks have probability zero. This corregendum uses “trembles” to provide a definition of the convex hull of a set of behavior strategies. This corrects a definition we gave in [E. Dekel, D. Fudenberg, and D. K. Levine, 1999, J. Econ. Theory89, 165-185], which led to two of the solution concepts we defined there not having the properties we intended. Journal of Economic Literature Classification Numbers: C72, D82, C610.     

Improving retirement adequacy through asset class prioritization

Highly risk-averse retirees are generally advised to adopt a fixed spending strategy such as the 4% withdrawal rule. To prevent the premature depletion of a retirement portfolio, the rule attempts to proxy as the ‘safe withdrawal rate’. But a constant withdrawal rate means that retirees accumulate unspent surpluses when markets outperform and face spending shortfalls when markets underperform. While a safe withdrawal rate can prevent spending shortfalls, the opportunity cost of unspent surpluses associated with this strategy can be extreme. We apply a range of basic investment decision rules to a retirement portfolio applying various withdrawal rates and examine the probability of shortfalls over a retirement horizon. Using a block bootstrap simulation technique, we examine decision rules relating to stock and bond investments. Our results show that retirement portfolios with a bias towards stocks coupled with a decision rule that sources withdrawals from bonds and cash before stocks significantly outperforms alternative withdrawal strategies, despite the inherent increase in volatility. This finding is in direct contrast to the safe withdrawal rate conventions used in contemporary financial advice models.     

Going for Gold: Atlanta's Bid for Fame

This article explores the importance of image to the Atlanta Olympic Games of 1996. It suggests that the event must be seen as an example of the use of the propagation of selected images designed to boost the standing of the city in an increasingly competitive interurban environment. The intersection of major sporting spectacles, big business and vastly increased television coverage provides an important new medium through which boosterists can put their city on the world map. However, as the Atlanta case reveals, the ‘semiotics of the successful city‘ involves a highly ideological construction which often presents urban areas as conflict‐free zones. In Atlanta, potentially negative images were removed both physically and symbolically from the urban landscape, while the actual experience of the Games suggested that the city had some way to go in material terms to match its often hyperbolic self‐promotion. The article suggests that the staging of events such as the Olympics is a necessarily high‐risk venture for cities, one that, as in the case of Atlanta, may not have been ultimately worth the effort. Cet article examine l'importance de l'image dans le cadre des Jeux Olympiques d'Atlanta de 1996. Il propose de considérer l'événement comme un exemple de la diffusion d'images sélectionnées, conçues et utilisées afin de promouvoir la réputation de la ville dans un contexte interurbain de plus en plus concurrentiel. L'intersection entre des spectacles sportifs exceptionnels, de grandes entreprises et une couverture télévisuelle considérablement étendue constitue un moyen novateur grâce auquel les promoteurs de cette dynamique peuvent positionner leur ville sur la carte du monde. Cependant, comme le montre le cas d'Atlanta, la ‘sémiotique d'une ville gagnante’ implique une construction idéologique très forte qui présente souvent les zones urbaines comme des espaces non conflictuels. À Atlanta, les images à potentiel négatif ont étééliminées à la fois physiquement et symboliquement du paysage urbain, tandis que les Jeux eux‐mêmes laissaient à penser que la ville devait progresser sur le plan matériel si elle voulait correspondre à son auto‐promotion souvent hyperbolique. L'article suggère que la mise en scène d'événements tels que les Jeux Olympiques est une opération nécessairement très risquée pour des villes, opération qui, à l'instar de l'expérience d'Atlanta, peut finalement ne pas justifier les efforts réalisés.     

The Federal Reserve and the 2007–2009 Financial Crisis: Treating a Virus with Antibiotics? Evidence from the Commercial Paper Market

The two main explanations for the crisis in the commercial paper (CP) market are credit concerns and liquidity issues. The CP market is not homogeneous in terms of credit quality, maturities and types of issues. We find that lower credit‐quality CP suffered more during the crisis. Additionally, we find little evidence that Federal Reserve (Fed) liquidity facilities reduced the impact of the crisis, but that when the Fed became a lender in the CP market, the crisis pressures were dramatically reduced. We conclude that the crisis in the money markets is related more to increases in credit risk. Liquidity is a secondary issue.     

Risk factors in Australian bond returns

This study examines the risk factors in Australian bond returns. The study quantifies bond liquidity and estimates a liquidity risk factor in the Australian setting. We develop a three‐factor asset pricing framework that uses term, default and liquidity risk factors to explain the variation of Australian bond returns. Our findings corroborate the US evidence on the pervasiveness of these risk factors faced by bond investors. The three‐factor model developed in this study has practical applications when calculating the cost of debt, evaluating the performance of an active bond fund manager and hedging underlying risk in a bond portfolio.     

Would adopting the Australian dollar provide superior monetary policy in New Zealand?

Counterfactual experiments with the Reserve Bank of New Zealand's core model provide some insight into the implications for New Zealand's economic performance over the 1990s, had it credibly fixed its currency to the Australian dollar. If New Zealand had faced the relatively more stimulatory Australian monetary conditions prevailing over the 1990s, then output growth may have been temporarily boosted. However, demand pressures would have probably been greater and inflation higher. In particular, results suggest that over the latter part of the 1990s annual inflation would have been approximately 1% point higher on average. Stochastic simulation experiments provide a vehicle to analyse what the implications of currency union might be more generally. Results suggest that if New Zealand were to lose its ability to set monetary policy independent of that set in Australia, then the variability of inflation and output would increase over the business cycle.     

意法半导体大手笔重组

2005年初,当Pasquale Pistorio在担任意法半导体公司首席执行官18年之后退休时, Carlo Bozotti接过了这一重任。Pistorio帮助这家法意合资的芯片制造商一跃成为充满平衡感、精妙之处和多样性的全球半导体工业巨人。接替Pistorio将面临极大的困难。现年53岁的Bozotti要面临重建公司增长、削减公司成本和鼓励公司创新营销等接踵而来的重任。简而言之, Bozotti的工作就是重组这家欧洲最大的芯片制造商,使其在比以往更加以消费者市场为导向的半导体行业中抓住更多的机会。     

Refinery mix in the U.S., Canada,and the E.E.C.

This paper examines the response of gasoline's share of a barrel of crude oil to changes in relative petroleum product prices. An inter-country comparison of the U.S., Canada, and the E.E.C. allows investigation of different parts of the production possibility frontier. In the U.S. and Canada, with relatively large amounts of cracking capacity, there is price responsiveness of the product mix to changes in relative product prices. In the U.S., both residual and distillates are substitutes in production for gasoline, but for Canada, only distillate is a substitute. Part of this difference is attributed to the U.S. oil quota. For the E.E.C. with relatively small amounts of cracking capacity there was no discernible effect of product prices on product mix.     

Pharmacy discount card programs: catching up with the health markets

Pharmacy costs continue to rise, as does the number of senior citizens. One of the ways of containing costs may be the pharmacy discount drug card program, for both seniors and the general population.