the peak of oil production timings and market recognition abstract energy is essential for present societies in particular transportation systems depend on petroleum based fuels that world oil production is set to pass a peak is now a reasonably accepted concept although its date is far from consensual in this work we analyze the true expectations of the oil market participants about the future availability of this fundamental energy source we study the evolution through time of the curves of crude oil futures prices and we conclude that the market participants among them the crude oil producers already expect a near term peak of oil production this agrees with many technical predictions for the date of peak production including our own that point to peak dates around the end of the present decade if this scenario is confirmed it can cause serious social and economical problems because societies will have little time to perform the necessary adjustments

war and natural resource exploitation abstract we build a theoretical framework that allows for endogenous conflict behaviour i e fighting efforts and for endogenous natural resource exploitation i e speed ownership and investments while depletion is spread in a balanced hotelling fashion during peace the presence of conflict creates incentives for rapacious extraction as this lowers the stakes of future contest this voracious extraction depresses total oil revenue especially if world oil demand is relatively elastic and the government s weapon advantage is weak some of these political distortions can be overcome by bribing rebels or by government investment in weapons the shadow of conflict can also make less efficient nationalized oil extraction more attractive than private extraction as insecure property rights create a holdup problem for the private firm and lead to a lower license fee furthermore the government fights less intensely than the rebels under private exploitation which leads to more government turnover without credible commitment to future fighting efforts private oil depletion is only lucrative if the government s non oil office rents are large and weaponry powerful which guarantees the government a stronger grip on office and makes the holdup problem less severe

mergers and business model assimilation evidence from low cost airline takeovers this paper examines mergers that lead to an almost immediate replacement of the target firm s business model in favour of that of the acquiring firm we examine the post merger behaviour of the two leading european dedicated low cost airlines easyjet and ryanair each acquiring another low cost airline respectively go fly and buzz we find that both takeovers had an immediate and sustained impact on both the pricing structures and the extent of inter temporal price discrimination used on the acquired routes with early booking fares noticeably reduced and only very late booking fares increased overall the analysis points to a pro competitive effect of both takeovers as a consequence of the introduction of the acquiring firms business models and associated yield management pricing systems

ambiguity aversion and optimal derivative based pension investment with stochastic income and volatility abstract this paper provides a derivative based optimal investment strategy for an ambiguity adverse pension investor who faces not only risks from time varying income and market return volatility but also uncertain economic conditions over a long time horizon we derive a robust dynamic derivative strategy and show that the optimal strategy under ambiguity aversion reduces the exposures to market return risk and volatility risk and that the investor holds opposite positions for the two risk exposures in the presence of a derivative ambiguity has distinct effects on the optimal investment strategy more important we demonstrate the utility improvement when considering ambiguity and exploiting derivatives and show that ambiguity aversion and derivative trading significantly improve utility when return volatility increases this improvement becomes more significant under ambiguity aversion over a long investment horizon

multinational operation ownership and efficiency differences in the international oil industry abstract although state involvement in market systems often leads to inefficiency this influence in the oil industry is not dwindling due to strong growth of some state oil companies based on this background there are concerns about how state firms can continue to stay relevant in the international oil industry by offsetting inefficiencies due to state control this study assesses the effects of multinational operations on the performance of oil firms this is achieved by comparing productive and scale efficiencies of state and private oil companies as well as state multinationals and private multinationals a dataset of 50 firms each year from 2001 to 2010 reveals that although multinational operation is important in reducing productive inefficiencies of state firms it does not mitigate scale inefficiencies of state owned firms state firms should therefore make multinational operations a key policy direction since this will provide a transformative agenda towards equally competing with their private counterparts however better efforts need to be paid in reducing scale inefficiencies that are pervasive among state owned oil firms providing better controls on firm size will provide better drive towards future efficient production levels

employer stock and 401 k plans the sharp decline in the stock prices of several firms at which employees held a large fraction of their 401 k plan assets in company stock including enron global crossing lucent and polaroid has sparked a public policy debate about investment options in 401 k plans at many large firms particularly those with retirement saving plans that combine elements of an employee stock ownership plan esop with a traditional 401 k a substantial fraction of defined contribution retirement plan assets are held in company stock such undiversified holdings are a source of concern because they raise the volatility of the retirement wealth for employees and expose some workers to the prospect of very small retirement values holding an undiversified position in employer stock may be particularly costly because of the potential correlation between company stock returns and the value of the worker s human capital which may depend on the company s prospects this paper reviews the extent of undiversified company stock investments in 401 k plans evaluates the cost of such investments from an employee s perspective and discusses a range of policy actions that could address the excessive concentration of retirement plan assets

this time it s different an inevitable decline in world petroleum production will keep oil product prices high causing military conflicts and shifting wealth and power from democracies to authoritarian regimes abstract there is virtual agreement among geologists that world production of conventional oil will peak at some point in the future oil after all is a finite resource while demand will only grow over time geologists disagree however exactly when the peak will occur using data from the international energy agency the us department of energy the association for the study of peak oil and gas and petroleum industry sources we argue that conventional oil production will reach a worldwide maximum within the next 5 10 years earlier than generally estimated thus leaving a very short time frame within which to plan for conversion to alternative sources of energy unless planning is initiated immediately the united states and other western democracies will see their positions in the global economy undercut as military conflicts over limited energy resources increase and wealth and power are shifted to authoritarian regimes in russia venezuela africa and the middle east

total factor spillovers similarities and competitions in the petroleum industry this chapter investigates multi dimensional spillovers similarities and competitions in the petroleum industry spatial techniques are applied first in production function in order to observe the cross sectional dependence in each of the four dimensions product technology segment and region wide these four single dimensional spatial models are then aggregated by a model averaging method that assigns weights to different models based on their ability to explain data taking all dependences into consideration this chapter estimates the total factor spillovers similarities and competitions in the spirit of total factor productivity negative spillover effects are observed in all the four dimensions moreover segment wide competition has negative effect on productivity some policy implications concerning human capital globalization and development strategies are also discussed

fair demographic risk sharing in defined contribution pension systems in this article we formulate and solve the optimal design problem of a defined contribution public pension fund in a highly stylized but still rather general non stationary framework we adopt the viewpoint of a benevolent social planner who aims at treating in a fair manner the successive overlapping generations participating to such a long term mandatory system using the approach of el karoui and jeanblanc 1998 for the optimal consumption and portfolio choice problem with random income in a complete market we exhibit a solution to our intertemporal stochastic control problem where each generation receives a fair lumpsum retirement benefit it is proportional to the contributions she has paid during her active worklife and follows a fixed common rule although her pension value itself may depend on variables only observable at her retirement time we next relax the assumption that the collective pension system is mandatory and investigate the performance of individual investment plans in the market comparing the outcomes of both alternatives we derive a condition under which the collective fund can be expected to overperform the individual plan in the special case of a stationary economy such a possibility has been pointed out by gollier 2008 in fact this effect results from the possibility for the collective fund to borrow today against contributions of future generations which allows to implement riskier strategies and may improve its performance

oil wealth and regime survival in the developing world 1960 1999 the global oil market and its associated booms and busts have generated a large literature in political science one contention in this literature is that political instability is a near certain long term outcome of oil wealth another line of argument maintains just the opposite that oil makes authoritarian regimes stronger by funding patronage and repressive apparatuses in this article i conduct the first cross national tests of these arguments and investigate the effects of oil wealth and the oil booms and busts on political stability drawing on data from 107 developing countries between 1960 and 1999 i estimate the effects of oil wealth on regime failure antistate social protest and domestic armed conflict thus as a first goal this article addresses an analytic shortcoming in previous studies by separating regime survival empirically from both economic policy and regime type democratic or authoritarian and by focusing on the direct effects of oil wealth on several measures of political stability i address the relationship between oil wealth and these outcomes both by comparing exporters to the rest of the developing world and by comparing oil rich states across pre boom boom and bust periods the results indicate that oil wealth is robustly associated with more durable regimes and significantly related to lower levels of protest and civil war moreover

rent sharing in the european airline industry abstract to the extent that product market competition affects managerial incentives to control costs price cost margins offer a poor guide to the evaluation of market power we propose a method to evaluate simultaneously both market power and its pass through on cost we focus on rent sharing between unions and management as a mechanism through which costs are endogenised we develop and estimate a structural model of competition where wages are endogenously determined in the first stage with a price setting market game following in the second stage this structural model is then estimated using data for 8 european airlines from 1976 1990 we find a strong support for the hypothesis that lax competition induces extensive rent sharing through excessive wages

the impact of mergers on fares structure evidence from european low cost airlines this paper examines mergers that lead to an almost immediate replacement of the target firm s business model in favor of that of the acquiring firm we examine the post merger behavior of the two leading european dedicated low cost airlines easyjet and ryanair each acquiring another low cost airline go fly and buzz respectively we find that both takeovers had an immediate and sustained impact on both the pricing structures and the extent of intertemporal price schedules used on the acquired routes with early booking fares noticeably reduced and only very late booking fares increased the analysis suggests that the takeovers had a net beneficial effect for consumers at least in price terms as a consequence of the introduction of the acquiring firms business models and associated yield management pricing systems

the first law of petropolitics finalversion received19 april2011 we examine empirically the relationship between crude oil prices and the ebb and ow of democratic insti tutions in order to test the hypothesis that high oil prices undermine democracy and sustain autocracy we use a variety of time series and panel data methods over a wide range of country subsamples and timeperiods nding strictly no evidence in favour of this so called first law of petropolitics friedman2006

when will fossil fuel reserves be diminished crude oil coal and gas are the main resources for world energy supply the size of fossil fuel reserves and the dilemma that when non renewable energy will be diminished is a fundamental and doubtful question that needs to be answered this paper presents a new formula for calculating when fossil fuel reserves are likely to be depleted and develops an econometrics model to demonstrate the relationship between fossil fuel reserves and some main variables the new formula is modified from the klass model and thus assumes a continuous compound rate and computes fossil fuel reserve depletion times for oil coal and gas of approximately 35 107 and 37 years respectively this means that coal reserves are available up to 2112 and will be the only fossil fuel remaining after 2042 in the econometrics model the main exogenous variables affecting oil coal and gas reserve trends are their consumption and respective prices between 1980 and 2006 the models for oil and gas reserves unexpectedly show a positive and significant relationship with consumption while presenting a negative and significant relationship with price the econometrics model for coal reserves however expectedly illustrates a negative and significant relationship with consumption and a positive and significant relationship with price consequently huge reserves of coal and low level coal prices in comparison to oil and gas make coal one of the main energy substitutions for oil and gas in the future under the assumption of coal as a clean energy source

beyond kyoto plan b a climate policy master plan based on transparent metrics abstract many scholars analyze the kyoto copenhagen process and offer corrective suggestions for identified flaws in the present design based on various proposals in the literature this article adopts a global master plan perspective leaving executive architecture to sovereign participants transparent flexible and fair top down rules must synchronize the numerous bottom up initiatives while addressing the diversity of national circumstances in the drastic transformation of the world s energy economies plan b refutes absolute emission reduction targets on old or speculative baselines it criticizes global tax and permit trade instruments for being ineffective inefficient and unfair when uniformly applied on a tremendous differentiated world plan b is built on three annually observed variables measuring percentage progress against rolling baselines the variables values in the previous year the ratio of net climate tax revenues to gdp the commercial energy intensity of gdp and the carbon intensity of commercial energy use the three variables together indicate countries progress affecting emissions per person a metric that must converge to lower bands when climate change is addressed seriously long term scenarios of global convergence funnels serve as guidance to frame near term actions rich and poor countries individually propose to take the global regime is common for all countries and is ranked by gdp per person to determine whether a nation is a donor or a beneficiary in a global climate transfer fund fund payments and drawing rights depend on that ranking but also on the performances of the countries in realizing committed progress the transparent mechanisms of the design and of the fund persuasively invite countries to participate in a fair self enforcing agreement

oil scarcity what have the past three decades revealed oil shortages have been predicted over the past 30 years in fact oil is more plentiful now in an economic sense than in 1973 the reason for such misconceptions lies mainly in reliance on analytical techniques that do not comprehend oil as an economic commodity

economic indicators of resource scarcity a critical essay abstract the theoretical arguments of the conceptual and empirical literature on economic indicators of long run resource scarcity are logically flawed if resource allocators were informed of the nature of resource scarcity their behavior and the economic indicators it generates would reflect the scarcity but if they were so informed we could simply ask them if resources were scarce if they are not informed their behavior and economic indicators are as likely to indicate their ignorance as the reality unfortunately there is no way of knowing whether they are informed or not unless we already know whether resources are scarce

retirement and the evolution of pension structure defined benefit pension plans have become considerably less common since the early 1980s while defined contribution plans have spread previous research showed that defined benefit plans with sharp incentives encouraging retirement after a certain point contributed to the striking decline in american retirement ages in this paper we find that the absence of agerelated incentives in defined contribution plans leads workers to retire almost two years later on average compared to workers with defined benefit plans thus the evolution of pension structure can help explain recent increases in the typical retirement age after decades of decline

testing static oligopoly models conduct and cost in the sugar industry 1890 1914 we explore the widespread methodology of using demand information to infer market conduct and unobserved cost components under the hypothesis of static oligopoly behavior direct measures of marginal cost and conduct indicating small market power serve as benchmarks the more competitive models yield better cost estimates the best cost estimates occur when conduct is estimated as a free parameter which in turn only slightly underestimates our direct measure it also tracks the decline in market power accompanying the industry s structural changes the methodology is largely validated although partial cost information can improve its predictive power conclusions are robust to demand function

reverse mortgage loans a quantitative analysis reverse mortgage loans rmls allow older homeowners to borrow against housing wealth without moving despite rapid growth in this market only 1 9 of eligible homeowners had rmls in 2013 in this paper we analyze reverse mortgages in a calibrated life cycle model of retirement the average welfare gain from rmls is 252 per homeowner and 1 770 per rml borrower bequest motives uncertainty about health and expenses and loan costs account for low demand according to the model the great recession s impact differs across age income and wealth distributions with a threefold increase in rml demand for lowest income and oldest households

assessing the date of the global oil peak the need to use 2p reserves combining geological knowledge with proved plus probable 2p oil discovery data indicates that over 60 countries are now past their resource limited peak of conventional oil production the data show that the global peak of conventional oil production is close many analysts who rely only on proved 1p oil reserves data draw a very different conclusion but proved oil reserves contain no information about the true size of discoveries being variously under reported over reported and not reported reliance on 1p data has led to a number of misconceptions including the notion that past oil forecasts were incorrect that oil reserves grow very significantly due to technology gain and that the global supply of oil is ensured provided sufficient investment is forthcoming to turn resources into reserves these misconceptions have been widely held including within academia governments some oil companies and organisations such as the iea in addition to conventional oil the world contains large quantities of non conventional oil most current detailed models show that past the conventional oil peak the non conventional oils are unlikely to come on stream fast enough to offset conventional s decline to determine the extent of future oil supply constraints calculations are required to determine fundamental rate limits for the production of non conventional oils as well as oil from gas coal and biomass and of oil substitution such assessments will need to examine technological readiness and lead times as well as rate constraints on investment pollution and net energy return

views on peak oil and its relation to climate change policy abstract definitions of fossil fuel reserves and resources and assessed stock data are reviewed and clarified semantics explain a large stake of conflict between advocate and critical voices on peak oil from a holistic sources sinks perspective limited carrying capacity of atmospheric sinks not absolute scarcity in oil resources will impose tight constraints on oil use eventually observed peaks in oil production in nearby years will result from politically imposed limits on carbon emissions and not be caused by physical lack of oil resources peak oil belief induces passive climate policy attitudes when suggesting carbon dioxide emissions will peak naturally linked to dwindling oil supplies active policies for reducing emissions and use of fossil fuels will also encompass higher energy end use prices revenues obtained from higher levies on oil use can support financing energy efficiency and renewable energy options but when oil producers charge the higher prices they can pump new oil for many decades postponing peak oil to occur while extending carbon lock in

adverse selection in the annuity market and the role for social security i study the role of social security in providing insurance when there is adverse selection in the annuity market i calculate welfare gain from mandatory annuitization in the social security system relative to a laissez faire benchmark using a model in which individuals have private information about their mortality i estimate large heterogeneity in mortality using the health and retirement study despite that i find small welfare gain from mandatory annuitization social security has a large effect on annuity prices because it crowds out demand by high mortality individuals welfare gain would have been significantly larger in the absence of this effect

retirement security in an aging population abstract elderly individuals exhibit wide disparities in their sources of income for those in the bottom half of the income distribution social security is the most important source of support program changes would directly affect their well being income from private pensions assets and earnings are relatively more important for higher income elderly individuals who have more diverse income sources the trend from private sector defined benefit to defined contribution pension plans has shifted responsibility for retirement security to individuals a significant subset of the population is unlikely to be able to sustain their standard of living in retirement without higher pre retirement saving

the new economics of regulation ten years after the new economics of regulation is an application of the principal agent methodology to the contractual relationship between regulators and regulated firms after a critique of the traditional paradigms of regulation from the point of view of information economics a canonical model of regulation under asymmetric information is developed a survey of the main results obtained in the new economics of regulation is then provided in particular concerning the implementation of optimal contracts by a menu of linear contracts the dichotomy between pricing and cost reimbursement rules the auctioning of incentive contracts the dynamics of contracting under limited commitment and the hierarchical problems in regulation empirical implications are then discussed and avenues of further research are described in the conclusion

pension plan heterogeneity and retirement behavior abstract this paper examines the role of social security policy changes and the shift in pension plans from annuity based retirement plans like defined benefit to account based plans like defined contribution in explaining the recent increase in labor force participation of older workers a structural retirement model of consumption savings social security health insurance and pension plan heterogeneity is estimated using data from the health and retirement study the model captures key differences in pension wealth evolution across defined benefit and defined contribution pension plans and accounts for differences in out of pocket medical spending across different health insurance groups as a result it produces variation in labor supply both across different pension plan groups and health insurance types at older ages as observed in the data after controlling for any changes in the population age distribution and health insurance plans over time model simulations indicate that changes in pension plan composition can explain 30 5 percent of the increase in labor force participation of the age group 65 to 69 changes in social security normal retirement age and earnings test can each explain 19 and 45 of the increase in labor supply respectively for this age group

are americans saving optimally for retirement we solve each household s optimal saving decisions using a life cycle model that incorporates uncertain lifetimes uninsurable earnings and medical expenses progressive taxation government transfers and pension and social security benefits with optimal decision rules we compare household by household wealth predictions from the life cycle model using a nationally representative sample we find making use of household specific earnings histories that the model accounts for more than 80 percent of the 1992 cross sectional variation in wealth fewer than 20 percent of households have less wealth than their optimal targets and the wealth deficit of those who are undersaving is generally small

how will 401 k pension plans affect retirement income two decades ago most workers with pensions had a defined benefit db plan the employer made necessary contributions and investments to meet promised pension benefit payments when the employee retired by 1993 the tide had turned more than half of covered employees participated primarily in defined contribution dc pensions such as 401 k plans employee benefit research institute ebri 1997 this dramatic shift was associated as well with growing concerns about the emerging 401 k plans some viewed 401 k plans as a crisis waiting to happen when current generations having made minimal or no contributions to their dc plan retired with inadequate pension asset balances karen ferguson and kate blackwell 1995 anne willette 1995 another concern was that workers switching jobs would use the lump sum distributions for houses boats or other purchases rather than reinvesting them in another retirement account ellen e schultz 1995 u s department of labor usdol 1998a in a similar vein newly retired workers may not roll over the assets into an annuity and therefore risk spending down their retirement wealth too early e g jeffrey r brown and mark j warshawsky 2001 the most serious charge against 401 k plans

a variant of the hubbert curve for world oil production forecasts abstract in recent years the economic and political aspects of energy problems have prompted many researchers and analysts to focus their attention on the hubbert peak theory with the aim of forecasting future trends in world oil production in this paper a model that attempts to contribute in this regard is presented it is based on a variant of the well known hubbert curve in addition the sum of multiple hubbert curves two cycles is used to provide a better fit for the historical data on oil production crude and natural gas liquid ngl taking into consideration three possible scenarios for oil reserves this approach allowed us to forecast when peak oil production referring to crude oil and ngl should occur in particular by assuming a range of 2250 3000 gigabarrels gb for ultimately recoverable conventional oil our predictions foresee a peak between 2009 and 2021 at 29 3 32 1 gb year

defined contribution plans defined benefit plans and the accumulation of retirement wealth abstract the private pension structure in the united states once dominated by defined benefit db plans is currently divided between defined contribution dc and db plans wealth accumulation in dc plans depends on a participant s contribution behavior and on financial market returns while accumulation in db plans is sensitive to a participant s labor market experience and to plan parameters this paper simulates the distribution of retirement wealth under representative db and dc plans it uses data from the health and retirement study hrs to explore how asset returns earnings histories and retirement plan characteristics contribute to the variation in retirement wealth outcomes we simulate dc plan accumulation by randomly assigning individuals a share of wages that they and their employer contribute to the plan we consider several possible asset allocation strategies with asset returns drawn from the historical return distribution our db plan simulations draw earnings histories from the hrs and randomly assign each individual a pension plan drawn from a sample of large private and public defined benefit plans the simulations yield distributions of both dc and db wealth at retirement average retirement wealth accruals under current dc plans exceed average accruals under private sector db plans although dc plans are also more likely to generate very low retirement wealth outcomes the comparison of current dc plans with more generous public sector db plans is less definitive because public sector db plans are more generous on average than their private sector db counterparts

a model to assess the impact of employment policy and subsidized domestic fuel prices on national oil companies abstract national oil companies nocs control international oil markets nevertheless by the end of the 2000s their share of the industry s total revenues was only 35 while controlling more than 70 of the oil reserves and 65 of the gas reserves conventional financial theory prescribes that the proper management of an enterprise should seek the maximization of the nocs profits however maximization of profits is not their only objective their targets often include non commercial objectives such as domestic fuel subsidies and employment this paper develops a model to assess the impact of domestic fuel subsidies and employment on nocs performance which clarifies the trade offs among non commercial objectives and nocs market value production and reinvestment the model is applied and calibrated to the colombian noc to find the financial and operative effects of these non commercial objectives for different scenarios

efficiency differences between private and state owned enterprises in the international petroleum industry technical managerial scale and allocative efficiency differences between private and state owned firms in the international petroleum industry are estimated the estimation of aigner chu deterministic frontiers maximum likelihood stochastic frontiers and maximum likelihood gamma frontiers make this analysis the most complete and sophisticated testing of property rights theory available the empirical findings suggestceteris paribus that state firms could satisfy the demand for their output with something less than half of their current resource inputs simply by being converted to private for profit enterprizes

incentive regulatory policies the case of public transit systems in france we assess the empirical relevance of the new theory of regulation using a principal agent framework to study the regulatory schemes used in the french urban transport industry taking the current regulatory schemes as given the model of supply and demand provides estimates for the firms inefficiency the effort of managers and the cost of public funds it allows us to derive the first best and second best regulatory policies for each network and compare them with the actual situation in terms of welfare loss or gain fixed price policies lie between fully informed and uninformed second best schemes cost plus contracts are dominated by any type of second best contract from these results we may conjecture that fixed price contracts call for better informed regulators

the incidence of mandated maternity benefits i consider the labor market effects of mandates which raise the costs of employing a demographically identifiable group the efficiency of these policies will be largely dependent on the extent to which their costs are shifted to group specific wages i study several state and federal mandates which stipulated that childbirth be covered comprehensively in health insurance plans raising the relative cost of insuring women of childbearing age i find substantial shifting of the costs of these mandates to the wages of the targeted group correspondingly i find little effect on total labor input for that group jel 118 j32 h51 in an era of tight fiscal budget constraints mandating employer provision of workplace benefits to employees is an attractive means for a government to finance its policy agenda consequently in recent years there has been a growth of interest in mandated benefits as a tool of social policy for example the centerpiece of president bill clinton s health care proposal is mandated employer provision of health insurance and more than 20 states have man

it s the rents stupid the political economy of the resource curse a number of studies suggest that natural resources can have a negative impact on the developing prospects of countries empirical results suggest that political economy models of patronage and rent seeking are central to understanding why such a resource curse arises in other words the resource curse is created by certain resource rents leading to dysfunctional behaviour this article introduces the term impartiality enhancing institutions to structure policy debates by distinguishing conditions under which negative effects of resources can be mitigated moreover it is argued that viewing institutions as an equilibrium outcome has implications for the analysis of institutional change policy initiatives that do not promote the impartiality of institutions nor attend to the underlying interests and incentives keeping a bad institutional equilibrium in place will not help lift the resource curse

institutional and individual investors saving for old age this paper brings together the academic literature on individual and institutional investors in order to understand the nature of difficulties faced by them and set the background for the special issue this introductory article and the papers in the special issue contribute to the debate on how to support individuals in their savings commitments and investment decision making and whether and how institutional investors have fulfilled their role in supporting the development of the funded pension industry there are three main conclusions i individual investors are not ready for the role that has been assigned to them in the pension industry ii institutional investors are a long way short of establishing healthy relational contracts and trustworthy relationships with their clients and iii more effective regulation may be needed

on the asset allocation of a default pension fund we characterize the optimal default fund in a dened contribution dc pension plan using detailed data on individuals and their holdings inside and outside the pension system we nd substantial heterogeneity among default investors in terms of labor income nancial wealth and stock market participation we build a life cycle consumption savings model incorporating a dc pension account and realistic investor heterogeneity we examine the optimal asset allocation for dierent realized equity returns and investors and compare it with age based investing the optimal asset allocation leads to less inequality in pensions while it moderates the risks through active rebalancing

regulation and incentives in european aviation we study the effect of liberalization on costs and competition in the european airline industry we construct and estimate a model that includes demand capacity and cost equations the latter accounts for inefficiency and cost reducing effort we show that failure to account for the choice of effort would lead to biased estimates of efficiency and competition in the industry we also find that the last european union package of deregulatory measures has led to significant efficiency improvements and has fostered competition

opec and venezuelan oil production evidence against a cartel hypothesis abstract this study revisits the opec cartel hypothesis using a case study a test is conducted to see if venezuela has its production granger cause its opec quota or whether the opec quota for venezuela granger causes venezuelan production the results show both occur at different times in the short run opec s oil production quota for venezuela granger causes venezuelan production however shortly after cuts venezuela cheats on agreements suggesting a tit for tat oligopoly game which is not anti competitive in the long run we show that venezuelan oil production granger causes opec s quota for venezuela but not vice versa having venezuelan oil production granger cause opec quotas for venezuela in the long run suggests opec does not coordinate outputs as much as it reacts to them the evidence suggests venezuela is not a part of an opec anti competitive syndicate even though we show that venezuelan oil production is low an alternative explanation for why venezuela and possibly other opec members have low oil production outputs is that institutions and risk aversion not cartel participation is the cause a vector error correction model shows that there is no tendency for venezuelan oil production to converge to opec s quota for venezuela

alternatives to conventional crude oil when how quickly and market driven abstract we examine the effect of uncertainty concerning remaining supplies of conventional crude oil and its production path on the date alternative fuels will be needed the quantity of alternative fuels needed and how this uncertainty affects firms willingness to provide alternatives in a timely fashion despite large uncertainties about the quantity of oil that remains and its production path the start date for replacements is likely to fall within a twenty two year period that is narrower and earlier than previous estimates the twenty two year window represents considerable uncertainty about the date of the peak and this uncertainty creates an asymmetry in the strategy that maximizes the welfare of firms relative to total social welfare which works against the market s ability to generate a smooth transition from oil to alternative fuels the timeliness of this transition is critical the production paths generated here suggest that 10 million barrels per day or more of alternative fuels will be needed within a decade of the peak in production of conventional crude oil

hubs and high fares dominance and market power in the u s airline industry this article estimates the importance of route and airport dominance in determining the degree of market power exercised by an airline the results indicate that an airline s share of passengers on a route and at the endpoint airports significantly influences its ability to mark up price above cost the high markups of a dominant airline however do not create much of an umbrella effect from which carriers with smaller operations in the same markets can benefit the article suggests a number of possible explanations for this asymmetry

product differentiation search costs and competition in the mutual fund industry a case study of s p 500 index funds we investigate the role that non portfolio fund differentiation and information search frictions play in creating two salient features of the mutual fund industry the large number of funds and the sizeable dispersion in fund fees in a case study we find that despite the financial homogeneity of s p 500 index funds this sector exhibits the fund proliferation and fee dispersion observed in the broader industry we show how extra portfolio mechanisms explain these features these mechanisms also suggest an explanation for the puzzling late 1990s shift in sector assets to more expensive and often newly entered funds an influx of highinformation cost novice investors

the end of cheap oil current status and prospects abstract this paper analyses the factors impacting the price of crude oil in order to examine the likely evolution of the oil market and attempts to answer the question whether cheap oil is already a thing of the past based on data made publicly available mostly by the major oil companies it examines the effects of demand and supply the evolution of world oil reserves the trends in new discoveries of new oilfields the evolution of world gross domestic product gdp and the depletion of oil resources the analysis concludes that the world peak in conventional oil production the point beyond which oil production will irreversibly start declining is approaching and will be reached even according to the most optimistic scenarios before 2040 and quite possibly much sooner if the appropriate solutions for substituting crude oil and for conserving the use of energy are not implemented in time then the current upward trend in oil prices is bound to continue

capacity and product market competition measuring market power in a puppy dog industry abstract in this paper we specify and estimate a structural model which accounts for competition in two variables capacity and prices the model has a two stage setup in the first stage firms make capacity decisions followed by a product differentiated price setting game in the second stage since costs are endogenized through the first stage this has important implications for the measurement of market power in the product market in particular simpler one stage specifications would result in a bias in the measurement of market power which can be linked to the taxonomy for two stage games given in fudenberg and tirole 1984 fudenberg d tirole j 1984 the fat cat effect the puppy dog ploy and the lean and hungry look american economic review paper and proceedings 74 361 366 we then estimate this model demand cost short and long run and conduct for the european airline industry using data for the period of 1976 1990 we perform a number of specification tests and reject a simple one stage specification in favor of our two stage set up in particular we find that some degree of market power in the product market exists however market conduct in the two stage set up is significantly less collusive than in the more widely employed one stage specification which is consistent with the direction of bias in puppy dog games this illustrates that collusiveness of firms market conduct in the product market is significantly overestimated whenever capacity competition is not accounted for

a model of the operation and development of a national oil company we present a model of the exploration and development activities of a national oil company noc which uses similar technology to a private firm to extract a depletable resource however unlike the private firm the noc may have a wider range of objectives than maximizing the present value of profits specifically we assume an objective function that balances firm profitability against a political desire to favor domestic consumer surplus and domestic employment we find that the non commercial objectives faced by a noc tend to reinforce each other in their effects on profitability the timing of cash flows and employment

economic freedom and productivity growth in resource rich economies summary the focus of this paper is to test whether free market institutions that protect property rights and support freedom of choice and voluntary exchange can change the curse of natural resources into a blessing to examine the above question this paper uses the fraser institute s economic freedom index and its five sub indices namely government size property rights access to sound money freedom to trade and setting proper regulations using data from 99 sample countries over the period 1970 2010 the system gmm estimates suggest that the negative growth effects of resource rents may turn positive in countries with greater economic freedom

the decision to seek advice in the self directed retirement fund industry this article examines the influence of investor knowledge and the cognitive bias that arises from overconfidence on the advice seeking behaviour of investors managing their own retirement funds specifically we trace whether overestimating one s own technical and financial abilities can hinder the willingness to seek advice particularly when it would be in the investors best interest to do so we identify a subset of investors who are not knowledgeable and yet do not seek advice these investors exhibit overconfidence in their ability to manage a fund despite holding under diversified and less sophisticated portfolios relative to their peers given the global rise in investors choosing to manage their own retirement funds and the importance of seeking advice in this context there are direct policy implications from these results they suggest a need to identify and target investors who display overconfidence since they are most likely to be managing underperforming retirement investments in the longe

privatization and efficiency differentiating ownership effects from political organizational and dynamic effects this paper argues that the private public ownership factor should be differentiated from other factors that also influence the effect of privatization on efficiency this is empirically confirmed in a longitudinal study of 24 spanish firms for which several political and organizational factors are found to influence the estimated effects of privatization on efficiency the analysis of the timing of the effects reveals a strong significance for post privatization years 5 6 negative and 7 8 positive this suggests that the negative effect of these factors is transitional being eventually offset by the positive effects of the change to private ownership 2000 elsevier science b v all rights reserved jel classification l33

reliable in the long run petroleum policy and long term oil supplier reliability abstract accelerating oil import dependence in energy consuming nations highlights the importance of having energy supplies at sufficient levels and at stable and reasonable prices consequently it is crucial that oil exporters realize their full production potential current debates on energy security are often focused on short term risks e g sudden disruptions due to wars domestic instability etc however when it comes to assessing oil supplier reliability it is equally important to assess their longer term ability and willingness to deliver oil to the global market this study analyzes the effects of petroleum investment policies on crude oil production trends in 14 major oil producing countries 2000 2010 by focusing on the political institutional frameworks that shape the investment conditions for the upstream oil sector our findings indicate that countries with less favorable oil sector frameworks systematically performed worse than countries with investor friendly and privatized sectors the findings indicate that assessments based on remaining reserves and planned production capacities alone could inflate expectations about future oil supplies in a world where remaining crude reserves are located in countries with unfavorable investment frameworks

the economic efficiency of backward vertical integration in the international petroleum refining industry a benefit of backward vertical integration in the petroleum refining industry is reduced uncertainly in the supply of crude oil for refining however there is no a priori reason to believe that refiners are more skilful in managing combined refining and crude oil production operations than are specialists in these functions using the concept of frontier production functions efficiency differences between firms with differing degrees of backward vertical integration are estimated backward vertical integration improves scale efficieny and reduces business risk significantly but it reduces both technical and overall economic efficiency this is the first comprehensive empirical test of the efficiency of vertical integration in the literature

estimation of stochastic frontier production function and technical inefficiency via the em algorithm with the definition that e v u being the composite error various alogrithms such as the davidon fletcher powell method are then used for finding the optimal values of the parameter vector 0 b ao oa once the estimates of 0 are obtained jondrow lovell materov and schmidt jlms 4 recently propose a method of decomposing the estimated error y b x into separate components v and u the proposed decomposition method is based on the derivation of the conditional distribution of ut given the composite

competition in european aviation pricing policy and market structure the purpose of this paper is to analyze the impact of liberal bilateral agreements on some european air routes in terms of price competition and market structure the author proposes a model that explains firms behavior and shows that after the liberalization firms exploit their cost advantages and differentiate their products more but market structure still depends on access to airport facilities and other ancillary services controlled by the flag carriers these results differ from american evidence in that the author finds that the effect of airport presence on prices through lower costs more than offsets the effect through higher perceived quality copyright 1995 by blackwell publishing ltd