the spatial and temporal diffusion of house prices in the uk abstract this paper provides a method for the analysis of the spatial and temporal diffusion of shocks in a dynamic system we use changes in real house prices within the uk economy at the level of regions to illustrate its use adjustment to shocks involves both a region specific and a spatial effect shocks to a dominant region london are propagated contemporaneously and spatially to other regions they in turn impact on other regions with a delay we allow for lagged effects to echo back to the dominant region london in turn is influenced by international developments through its link to new york and other financial centers it is shown that new york house prices have a direct effect on london house prices we analyse the effect of shocks using generalised spatio temporal impulse responses these highlight the diffusion of shocks both over time as with the conventional impulse responses and over space

repayment concentration and consumer motivation to get out of debt many indebted consumers carry multiple credit cards with significant balances and do not generate enough income to pay off these balances in full at the end of each repayment period in managing their debt over time these consumers must decide how to allocate repayments across their debt accounts this research examines how different monthly repayment allocations varying from entirely concentrated into one debt account i e a concentrated strategy to equally dispersed across all debt accounts i e a dispersed strategy influence consumers motivation to repay their debts evidence from a field study of indebted consumers with multiple debt accounts and from three experiments shows that concentrated vs dispersed repayment strategies tend to boost consumers motivation to become debt free leading them to repay their debts more aggressively importantly this motivating effect is most pronounced when the repayments are concentrated into consumers smallest accounts because consumers tend to infer overall progress in debt repayment from the greatest proportional balance reduction proportion of starting balance repaid within any one account these findings advance our understanding of how consumers repay their debts and help pinpoint the psychological process by which debt repayment strategies affect consumers motivation to get out of debt

licensing effect in consumer choice abstract most choices in the real world follow other choices or judgments the authors show that a prior choice which activates and boosts a positive self concept subsequently licenses the choice of a more self indulgent option the authors propose that licensing can operate by committing to a virtuous act in a preceding choice which reduces negative self attributions associated with the purchase of relative luxuries five studies demonstrate the proposed licensing effect of a prior commitment to a virtuous act on subsequent choice consistent with the authors theory the preference for an indulgent option diminishes if the licensing task is attributed to an external motivation the authors also report a mediation analysis in support of their theoretical explanation that the licensing effect operates by providing a temporary boost in the relevant self concept

virtual progress the effect of path characteristics on perceptions of progress and choice in goal oriented services consumers want to get transported from one well defined state start to another destination state without much concern for intermediate states a cost based evaluation of such services should depend on the total cost associated with the service i e the price and the amount of time taken for completion in this paper we demonstrate that the characteristics of the path to the final destination also influence evaluation and choice specifically we show that segments of idle time and travel away from the final destination are seen as obstacles in the progress towards the destination and hence lower the choice likelihood of the path further we show that the earlier such obstacles occur during the service the lower is the choice likelihood we present an analytical model of consumer choice and test its predictions in a series of experiments our results show that in choosing between two services that cover the same displacement in the same time i e identical average progress consumer choice is driven by the perception of progress towards the goal i e byvirtual progress in a final experiment we show that the effects of virtual progress may outweigh the effects of actual average progress

dynamics of brand competition effects of unobserved social networks brand competition is modelled using an agent based approach in order to examine the long run dynamics of market structure and brand characteristics a repeated game is designed where myopic firms choose strategies based on beliefs about their rivals and consumers consumers are heterogeneous and can observe neighbour behaviour through social networks although firms do not observe them the social networks have a significant impact on the emerging market structure presence of networks tends to polarize market share and leads to higher volatility in brands yet convergence in brand characteristics usually happens whenever the market reaches a steady state scale free networks accentuate the polarization and volatility more than small world or random networks unilateral innovations are less frequent under social networks

on the perceived value of money the reference dependence of currency numerosity effects money illusion research shows that the nominal face value of money affects consumer perceptions of its real value recent mixed findings on consumer valuations in different currencies suggest that the underlying anchoring and adjustment processes are complex we develop a framework to identify boundary conditions that specify the direction of anchoring effects on valuations in different currencies consumers anchor on the numerosity of the nominal difference between prices and salient referents e g budgets when evaluating transactions support for our framework comes from a series of experiments that evoke different reference standards we discuss implications and opportunities for future research

economic feasibility of stationary electrochemical storages for electric bill management applications the italian scenario battery energy storage systems besss are expected to become a fundamental element of the electricity infrastructure thanks to their ability to decouple generation and demand over time besss can also be used to store electricity during low price hours when the demand is low and to meet the demand during peak hours thus leading to savings for the consumer this work focuses on the economic viability of bess from the point of view of the electricity customer the analysis refers to a lithium ion li ion an advanced lead acid a zinc based a sodium sulphur nas and a flow battery the total investment and replacement costs are estimated in order to calculate the cumulated cash flow the net present value npv and the internal rate of return irr of the investment a parametric analysis is further carried out under two different assumptions a varying the difference between high and low electricity prices b varying the peak demand charges the analysis reveals that some electrochemical technologies are more suitable than others for electric bill management applications and that a profit for the customer can be reached only with a significant difference between high and low electricity prices or when high peak demand charges are applied

hedonic theory bid rents and willingness to pay some extensions of ellickson s results abstract an alternative to ellickson s multinomial logit model of household bids for dwelling units is derived by making use of observable information on the price paid by the winning bidder the alternative specification makes it possible to estimate willingness to pay for housing attributes which cannot be obtained from ellickson s model some methodological issues arising from ellickson s method of grouping households are also examined

can small victories help win the war evidence from consumer debt management abstract the question of how people should structure goal directed activity to maximize the likelihood of goal attainment is one of theoretical and practical significance in particular should people begin by attempting relatively easy tasks or more difficult ones how might these differing strategies affect the likelihood of completing the overarching goal the authors examine this question in the context of an important goal for a large number of consumers getting out of debt using a data set obtained from a debt settlement firm they find that 1 closing debt accounts is predictive of debt elimination regardless of the dollar balance of the closed accounts whereas 2 the dollar balance of closed accounts is not predictive of debt elimination when controlling for the fraction of accounts closed these findings suggest that completing discrete subtasks might motivate consumers to persist in pursuit of a goal the authors discuss implications for goal pursuit generally and for consumer debt managemen

small victories creating intrinsic motivation in task completion and debt repayment abstracttasks such as the elimination of all debts when faced with the immediate option to spend can be unpleasant but not conceptually difficult dividing these tasks into smaller parts and completing the parts from smallest size to largest size can help people realize quick motivational gains that increase their likelihood of completing the task the authors more broadly define this idea as small victories and discuss model and empirically examine two related behavioral theories that might explain it a laboratory experiment tests this prediction and provides data for model calibration consistent with the idea of small victories when a task is broken down into parts of unequal size participants perform faster when the parts are arranged in ascending order i e from smallest to largest rather than descending order i e from largest to smallest the calibrated model is consistent with the directional predictions of each theory however when participants are given choice over orderings they

endogenous neighborhood formation in a local coordination model with negative network externalities the paper studies the evolution of coordination in a local interaction model where agents can simultaneously choose the strategy to play in the game and the size of their neighborhood we focus on pure coordination games played by agents located on one dimensional lattices and we assume that network externalities become eventually negative as neighborhood sizes increase we show that the society almost always converges to a steady state characterized by high levels of coordination and small neighborhood sizes we nd that neighborhood adjustment allows for higher coordination than if interaction structures were static and that large populations attain higher coordination provided that average initial neighborhood sizes are not too small

market organisation and trading relationships in this paper we give a theoretical model of buyers behaviour on a market for a perishable good where no prices are posted we show that if buyers learn from their own previous experience there is a sharp division between those who learn to be loyal to certain sellers and those who continue to shop around this feature remains in more general models which are simulated and is consistent with empirical data from the marseille fish market

technical and economical assessment of distributed electrochemical storages for load shifting applications an italian case study abstract time of use tou energy cost management involves the use of energy storage systems esss by customers to reduce their electricity bills the ess is charged during off peak time periods when electricity energy prices are low and discharged during times when on peak energy prices are applied this article addresses the question whether it is economically viable to install medium scale distributed esss designed to lower the electricity cost for a customer side application assuming flexible electricity tariffs the technical economical evaluation is carried out referring to lithium ion li ion sodium sulfur nas and vanadium redox battery vrb technologies performing a parametric analysis by changing the capital cost of the batteries and the difference between the maximum and minimum electricity price a case study is performed to show the advantages disadvantages of the proposed approach the analysis reveals that at the current costs of esss the use of batteries for tou applications is economically advantageous for a public institution facility in italy only if there is a significant difference between the maximum and the minimum electricity price the decrease in the cost of storage stimulated by the implementation of support policies will make ess even more convenient for load shifting applications

residential income segregation a behavioral model of the housing market abstract we represent the functioning of the housing market and study the relation between income segregation income inequality and house prices by introducing a spatial agent based model abm differently from traditional models in urban economics we explicitly specify the behavior of buyers and sellers and the price formation mechanism buyers who differ by income select among heterogeneous neighborhoods using a probabilistic model of residential choice sellers employ an aspiration level heuristic to set their reservation offer price prices are determined through a continuous double auction we first provide an approximate analytical solution of the abm shedding light on the structure of the model and on the effect of the parameters we then simulate the abm and find that i a more unequal income distribution lowers the prices globally but implies stronger segregation ii a spike in demand in one part of the city increases the prices all over the city iii subsidies are more efficient than taxes in fostering social mixing

split sample instrumental variables estimates of the return to schooling this article reevaluates recent instrumental variables iv estimates of the returns to schooling in light of the fact that two stage least squares is biased in the same direction as ordinary least squares ols even in very large samples we propose a split sample instrumental variables ssiv estimator that is not biased toward ols ssiv uses one half of a sample to estimate parameters of the first stage equation estimated first stage parameters are then used to construct fitted values and second stage parameter estimates in the other half sample ssiv is biased toward 0 but this bias can be corrected the splt sample estimators confirm and reinforce some previous findings on the returns to schooling but fail to confirm others

modeling urban housing market dynamics can the socio spatial segregation preserve some social diversity addressing issues of social diversity we introduce a model of housing transactions between agents who are heterogeneous in their willingness to pay a key assumption is that agents preferences for a location depend on both an intrinsic attractiveness and on the social characteristics of the neighborhood the stationary space distribution of income is analytically and numerically characterized the main results are that socio spatial segregation occurs if and only if the social influence is strong enough but even so some social diversity is preserved at most locations comparison with data on the paris housing market shows that the results reproduce general trends of price distribution and spatial income segregation

an alternative test of the hedonic theory of housing markets abstract in this paper the hedonic theory of housing markets is used to generate a multinomial logit model of household behavior in an urban housing market application of hedonic theory to housing markets is by now fairly familiar and a link to multinomial logit has also been established however by emphasizing more heavily the bid price interpretation of hedonic theory this paper develops a new connection to econometric estimation that essentially involves running the usual logit equations in reverse one advantage of this approach is that the link between the logit equations and hedonic theory involves bid price rather than utility functions and this in turn permits the empirical results to be given an extremely clear interpretation furthermore in contrast to the standard logit model the extreme value distribution required to justify the estimation technique emerges endogenously as part of the analysis

a measure of segregation based on social interactions we develop an index of segregation based on two premises 1 a measure of segregation should disaggregate to the level of individuals and 2 an individual is more segregated the more segregated are the agents with whom she interacts we present an index that satisfies 1 and 2 and that is based on agents social interactions the extent to which blacks interact with blacks whites with whites etc we use the index to measure school and residential segregation using detailed data on friendship networks we calculate levels of within school racial segregation in a sample of u s schools we also calculate residential segregation across major u s cities using block level data from the 2000 u s census

occupational mobility and the distribution of occupational success among young men interpretation of the distribution of occupational success depends crucially on an understanding of the process of mobility if the holders of low paying jobs this year are just as likely as anyone else to hold good jobs next year then the lower tail of the earnings distribution is not a matter of great social concern further if the distribution of success is primarily determined by a random process the prospects for a significant reduction in the inequality of earnings are unfavorable on the other hand high mobility in the short run may conceal systematic stratification of the labor force it may be that the same individuals spend most of their time in the worst jobs if so luck and random events may play a small role in the distribution of well being inequality may be a major issue and the elimination of stratification may hold out the promise of an important reduction in inequality simple tabulation of distributions of success and of mobility among categories of success cannot answer the basic question of the role of stratification in this paper we develop a model and statistical method for studying mobility and relating it to characteristics upon which stratification may be based our study rests on annual interviews conducted from 1966 through 1969 with about 3 000 white males born between 1942 and 1952 1 we find that mobility is closely related to personal characteristics especially intelligence and education men with high iqs and extensive education are more likely to move to high paying jobs and are more likely to remain in them nevertheless random events dominate the distribution of occupational success in the short run our results strongly support the finding of christopher jencks and his collaborators that redistribution of the determinants of earnings would do almost nothing to reduce the observed inequality of annual earnings

the demand for housing theoretical considerations abstract this paper focuses on housing s dual roles of consumption good and investment asset and studies its intertemporal demand in a multi period model with uncertainty while the existence of a competitive equilibrium is proved the emphasis is on the derivation of comparative statics properties the results admit an upward sloping own demand curve for housing which is consistent with observation in some housing markets additional restrictions which ensure a downward sloping housing demand function are then developed these restrictions indicate that the assumptions typically employed in the literature on housing demand are unnecessarily restrictive journal of economic literature classification numbers r21 d11 d91

an econometric model of housing price permanent income tenure choice and housing demand abstract this paper addresses the determination of housing price permanent income tenure choice and housing demand full housing demand elasticities incorporate the interactive effects among the four stages of the model price and income have major effects in the tenure choice equation sociodemographic variables such as age have complex effects that may be lost in simpler forms of estimation

estimating the value of electricity storage in pjm arbitrage and some welfare effects significant increases in prices and price volatility of natural gas and electricity have raised interest in the potential economic opportunities for electricity storage in this paper we analyze the arbitrage value of a price taking storage device in pjm during the six year period from 2002 to 2007 to understand the impact of fuel prices transmission constraints efficiency storage capacity and fuel mix the impact of load shifting for larger amounts of storage where reductions in arbitrage are offset by shifts in consumer and producer surplus as well as increases in social welfare from a variety of sources is also considered

on the influence of jurisdiction on the profitability of residential photovoltaic storage systems a multi national case study policy makers in many jurisdictions have implemented incentive schemes such as feed in tariffs fit and upfront purchase subsidies to encourage consumers to self generate parts of their power requirements by solar energy we quantitatively study the impact of jurisdiction specific solar radiation profile the typical residential loads the cost of system components the price of grid electricity and incentive programs on photovoltaic pv and storage system profitability in germany ontario and austin texas in each jurisdiction for a range of pv and storage system sizes we compute the optimal use of the system and hence the best possible profitability of that system in that jurisdiction over a 20 year life span this methodology allows us to quantitatively estimate the influence of a jurisdiction on the best possible profitability of pv storage systems we find that the choice of jurisdiction has significant impact on the profitability of pv storage systems we also find that policy makers can use the price of grid electricity as well as upfront subsidies to influence profitability and therefore adoption

the complexity of exchange the computational complexity of two classes of market mechanisms is compared first the walrasian interpretation in which prices are centrally computed by an auctioneer recent results on the computational complexity are reviewed the non polynomial complexity of these algorithms makes walrasian general equilibrium an implausible conception second a decentralised picture of market processes is described involving concurrent exchange within transient coalitions of agents these processes feature price dispersion yield allocations that are not in the core modify the distribution of wealth are always stable but path dependent replacing the walrasian framing of markets requires substantial revision of conventional wisdom concerning markets

marginal contribution reciprocity and equity in segregated groups bounded rationality and self organization in social networks we study the formation of social networks that are based on local interaction and simple rule following agents evaluate the profitability of link formation on the basis of the myerson shapley principle that payoffs come from the marginal contribution they make to coalitions the np hard problem associated with the myerson shapley value is replaced by a boundedly rational spatially myopic process agents consider payoffs from direct links with their neighbours level 1 which can include indirect payoffs from neighbours neighbours level 2 and up to m levels that are far from global agents dynamically break away from the neighbour to whom they make the least marginal contribution computational experiments show that when this self interested process of link formation operates at level 2 neighbourhoods agents self organize into stable and efficient network structures that manifest reciprocity equity and segregation reminiscent of hunter gather groups a large literature alleges that this is incompatible with self interested behaviour and market oriented marginality principle in the allocation of value we conclude that it is not this valuation principle that needs to be altered to obtain segregated social networks as opposed to global components but whether it operates at level 1 or 2 of social neighbourhoods remarkably all m 2 neighbourhood calculations for payoffs leave the efficient network structures identical to the case when m 2

segregation and the quality of government in a cross section of countries we provide a new compilation of data on ethnic linguistic and religious composition at the subnational level for a large number of countries using these data we measure segregation of groups within the country to overcome the endogeneity problem that arises because of mobility and endogenous in ternal borders we construct an instrument for segregation we find that more ethnically and lin guistically segregated countries i e those where groups live more spatially separately have a lower quality of government there is no relationship between religious segregation and governance trust is an important channel of influence it is lower in more segregated countries jel hi 1 h77 j15 017 z12 z13 racial and religious conflicts are often associated with poor politicoeconomic performance especially in developing countries economists have recently turned their attention to ethnolinguistic fractionalization as an explanation of differences in the pace of development starting with an influential paper by william easterly and ross levine 1997 since then many others have shown that fractionalization is negatively correlated with a host of policy outcomes and the quality of government 1 however many ethnically diverse countries the united states for instance are quite successful what makes different countries more or less capable of handling

neighbourhood effects and housing demand in this paper we estimate a model of housing demand with neighborhood eects we exploit special features of the national sample of the american housing survey and properties of housing markets that allow us to create natural instruments and therefore identify the impact of social interactions we find evidence of both endogenous and contextual neighborhood eects we report two alternative sets of estimates for neighborhood eects that dier in terms of the instruments we use for estimating the model when the endogenous neighborhood eect is large the respective contextual eects are weak and vice versa the elasticity of housing demand with respect to the mean of the neighbors housing demands the endogenous eect ranges from 0 19 to 0 66 and is generally very significant the contextual eects are also very significant a key such eect the elasticity with respect to the mean of neighbors permanent incomes ranges from 0 17 to 0 54

new hedonic estimates of regional constant quality house prices abstract this paper employs a new national data set to estimate constant quality dwelling prices for four regions of the country the data set collected by the national association of realtors provides sale prices locations and characteristics of 5581 dwellings sold during the years 1986 1992 inclusive the paper provides the first national hedonic analysis based upon transaction prices of sample dwellings the estimated equation implies that more than half of dwelling price increases during the period resulted from quality improvements in dwellings

credit counseling and consumer credit trajectories nonprofit credit counseling provides consumers with financial education individualized financial counseling and debt restructuring despite potential benefits relatively little is known about its efficacy this study uses administrative data to assess the relationship between counseling and consumer credit outcomes we estimate difference in difference models to analyze credit outcomes for a counseled group relative to a matched comparison group for six quarters after a baseline period we find evidence of a substantial credit shock around the time of counseling post treatment counseling is associated with a persistent reduction in debt even after accounting for bankruptcies foreclosures debt charge offs or participation in debt consolidation programs jel d12

effect of face value on product valuation in foreign currencies ringgits p 1 u s dollar four studies demonstrate the robustness of the face value dinar p 1 effect across different currencies exchange rate frames and with samples from two countries and two studies show that ability related factors such as time pressure and experience moderate the face value effect the article concludes by discussing the theoretical implications of the findings

the original management incentive schemes during the 1990s the structure of pay for top corporate executives shifted markedly as the use of stock options greatly expanded by the early 2000s as the dot com boom ended and the nasdaq stock index melted down these modern executive incentive schemes were being sharply questioned on many grounds for encouraging excessive risk taking and a short run orientation for being an overly costly and inefficient method of providing incentives and even for tempting managers of firms like enron worldcom and tyco to commit fraud in order to ensure a high stock price at the time of exercise this article examines executive incentive schemes developed by du pont and general motors in the 1920s the original incentive schemes linking executive compensation to stock prices the author argues that these plans were well designed to pre empt and address many of the criticisms of modern day executive stock option plans

identification of endogenous social effects the reflection problem this paper examines the reflection problem that arises when a researcher observing the distribution of behaviour in a population tries to infer whether the average behaviour in some group influences the behaviour of the individuals that comprise the group it is found that inference is not possible unless the researcher has prior information specifying the compisition of reference groups if this information is available the prospects for inference depend critically on the population relationship between the variables defining reference groups and those directly affecting outcomes inference is difficult to implossible if these variables are functionally dependent or are statistically independent the prospects are better if the variables defining reference groups and those directly affecting outcomes are moderately related in the population

a strategic model of social and economic networks we study the stability and efficiency of social and economic networks when self interested individuals can form or sever links first for two stylized models we characterize the stable and efficient networks there does not always exist a stable network that is efficient next we show that this tension persists generally to assure that there exists a stable network that is efficient one is forced to allocate resources to nodes that are not responsible for any of the production we characterize one such allocation rule the equal split rule and another rule that arises naturally from bargaining of the players

the mechanisms of spatial mismatch the spatial mismatch hypothesis smh argues that low skilled minorities residing in us inner cities experience poor labour market outcomes because they are disconnected from suburban job opportunities this assumption gave rise to an abundant empirical literature which is rather supportive of the smh surprisingly it is only recently that theoretical models have emerged which probably explains why the mechanisms of spatial mismatch have long remained unclear and not properly tested this article presents relevant facts reviews the theoretical models of spatial mismatch confronts their predictions with available empirical results and indicates which mechanisms deserve further empirical tests

labor supply of new york city cabdrivers one day at a time life cycle models of labor supply predict a positive relationship between hours supplied and transitory changes in wages because such changes have virtually no effect on life cycle wealth previous attempts to test this hypothesis empirically with time series data have not been supportive estimated elasticities are typically negative or nonsignificant such analyses however are vulnerable to measurement error and other estimation problems we use data on daily observations of wages and hours for new york city cab drivers to estimate the supply response to transitory fluctuations in wages cab drivers decide daily how many hours to supply and face wages that are positively correlated within days but largely uncorrelated between days using these data our central finding is that wage elasticities are persistently negative from 5 to 1 in three different samples even after correcting for measurement error using instrumental variables these negative wage elasticities challenge the notion that cab drivers trade off labor and leisure at different points in time and question the empirical adequacy of life cycle formulations of labor supply

bounded rationality and the emergence of simplicity amidst complexity abstract the purpose of this essay is to explore the relationship between the simple and the complex in economics by anchoring our analysis on bounded rationality much of the conventional literature focuses on un bounded rationality of the rationality as consistency variety theorizing of bounded rationality tends to assume that the problem to be solved is independent of the nature of bounded rationality following the insights from the works of herbert simon and contributions from outside economics both bounded rationality and the environment are inextricably linked the boundaries between bounded rationality and its environment can shift the form in which bounded rationality is found depends on the complexity of the environment furthermore if local interactions between bounded rational agents result in the formation of hierarchies the complexity of the collective system will change whether this will occur depends on the nature of bounded rationality at the individual level

economics of electric energy storage for energy arbitrage and regulation in new york unlike markets for storable commodities electricity markets depend on the real time balance of supply and demand although much of the present day grid operates effectively without storage cost effective ways of storing electrical energy can help make the grid more efficient and reliable we investigate the economics of two emerging electric energy storage ees technologies sodium sulfur batteries and flywheel energy storage systems in new york state s electricity market the analysis indicates that there is a strong economic case for ees installations in the new york city region for applications such as energy arbitrage and that significant opportunities exist throughout new york state for regulation services benefits from deferral of system upgrades may be important in the decision to deploy ees market barriers currently make it difficult for energy limited ees such as flywheels to receive revenue for voltage regulation charging efficiency is more important to the economics of ees in a competitive electricity market than has generally been recognized