nonparametric estimation of sample selection models sample selection models provide an important way of accounting for economic decisions that combine discrete and continuous choices and of correcting for nonrandom sampling nonparametric estimators for these models are developed in this paper these can be used for estimating shapes and important economic quantities as in standard nonparametnc regression endogeneity of regressors of interest is allowed for series estimators for these models are developed which are useful for imposing additivity restnctions that arise from selection corrections convergence rates and asymptotic normality results are derived an application to returns to schooling among australian young females is given

employer matching and 401 k saving evidence from the health and retirement study abstract employer matching of employee 401 k contributions is often touted as a powerful incentive to save for retirement and is a key component in pension plan design in the united states using detailed administrative contribution earnings and pension plan data from the health and retirement study this analysis formulates a life cycle consistent econometric specification of 401 k saving and estimates the determinants of saving accounting for non linearities in the household budget set induced by matching the participation estimates indicate that an increase in the match rate by 25 cents per dollar of employee contribution raises 401 k participation by 5 percentage points the parametric and semi parametric estimates for saving indicate that an increase in the match rate by 25 cents per dollar of employee contribution raises 401 k saving by 365 in 1991 dollars overall the analysis reveals that the 401 k saving response to matching is quite inelastic and hence matching is a rather poor policy instrument with which to raise retirement saving

volatility spread and stock market response to earnings announcements abstract using a broad sample of earnings announcements we find a monotonic increase in the spread between call and put implied volatilities as it gets closer to the earnings announcement date the steady build up of volatility spread in the days leading up to the announcement date coupled with the predictive power of cumulative abnormal implied volatility spread on subsequent announcement returns suggests that informed traders are the driving force behind the option market activities prior to earnings announcements such informed trading as proxied by the abnormal implied volatility spread increases rather than decreases the stock market response to earnings announcements after controlling for an array of firm and announcement characteristics this effect is most pronounced when the pre earnings option trading volume is heightened overall our findings lend strong support to the notion that informed options trading immediately before earnings announcements helps alleviate the stock market under reaction to earnings announcements and make it closer to a complete response

shareholder information and partial tender offers abstract the raider faces a winners curse problem when the target shareholders have private information about the post takeover value using marquez and yilmaz 2008 framework we show that this problem can be partly mitigated by using partial tender offers

security analysis and trading patterns when some investors receive information before others in existing models of information acquisition all informed investors receive their information at the same time this article analyzes trading behavior and equilibrium information acquisition when some investors receive common private information before others the model implies that under some conditions investors will focus only on a subset of securities herding while neglecting other securities with identical exogenous characteristics in addition the model is consistent with empirical correlations that are suggestive of oft cited trading strategies such as profit taking short term position reversal and following the leader mimicking earlier trades in existing models of information acquisition all informed investors receive their information at the same time while these models provide many important insights in reality some investors either fortuitously or owing to superior skill acquire pertinent information before others by being first an investor can exploit this information to great advantage information that is uncovered only slightly later is less valuable even if it has not yet been publicly revealed we show in this article that the sequential nature of information arrival has a significant effect on both the trading decisions and the types of information collected by investors the model we develop describes the investment choices of a set of competitive risk averse investors who investigate the long term prospects of firms lucky or high ability investors uncover the

how trading institutions affect financial market performance some laboratory evidence i introduction trading institutions vary considerably across contemporary financial markets 1 but most can be classified into one of two basic types the continuous double auction da allows traders to submit public offers to buy or to sell and to accept other traders offers at any moment in time the double auction institution offers immediacy but non uniform transaction prices the other basic trading institution the clearinghouse ch gathers offers and clears them at a unified price at a pre specified time it sacrifices immediacy for uniform transaction prices 2 the two types of institutions have co existed and evolved for centuries but now are emerging in new electronic versions market participants and policy makers would like to know which institution or variant or combination is most efficient but theoretical and empirical work to date provides little guidance this paper reports on a series of laboratory asset markets experiments designed to compare variants of the double auction and clearinghouse trading institutions the markets are small usually with eight or nine traders but the traders are profit motivated and experienced with the trading institutions the traded asset has uncertain market value and traders receive useful but inconclusive private information they can only learn the asset s true value during the course of trade laboratory markets offer several advantages for empirical study of financial market institutions first private information is observable even controllable in the laboratory and therefore the investigator can directly measure market efficiency 3 second the complexity of the environment can be varied systematically in the laboratory and its effects on market performance can be separated from the effects of the market institution and other forces finally the market institution itself is controllable in the laboratory so it is possible to make valid causal inferences on how the market institution shapes market performance i begin with a survey of relevant literature and other preliminaries in the rest of this section section ii outlines the laboratory procedures the creation of trading environments of varying complexity the electronic implementation of the clearinghouse and double auction trading institutions the computation of theoretical benchmark prices and allocations and the measurement of market performance section iii collects the results following an illustrative account of a double auction trading period and a clearinghouse trading period i use descriptive statistics to summarize market performance in each of the thirty nine experiments the main conclusions are based on statistical comparisons of market performance across alternative market institutions the clearinghouse institution does surprisingly well it delivers greater market depth than the double auction discovers prices at least as efficiently and produces final allocations almost as efficient as the double auction the main institutional variants examined in this paper concern the amount of information made public regarding order placement orderflow the data suggest that public display of the orderflow enhances double auction efficiency but may impair clearinghouse efficiency a study of trading volume shows higher volume in the double auction in both institutions volume increases when important private news arrives and when the trading period is about to end the paper concludes with a brief summary and discussion of the results a companion paper friedman 1991 considers the effects of awarding various privileges to some but not all traders copeland and friedman 1987 1991 provide useful background information on laboratory procedures and computerized double auction markets instructions for the current experiments are available on request the need for empirical work a skeptic might argue that empirical work is unnecessary the mere fact that the double auction and clearinghouse institutions both persist in major financial markets implies that both are highly efficient because a more efficient institution would displace less efficient institutions

on the optimality of partial tender offers abstract this paper analyzes the optimality of partial tender offers in acquisition of firms we show that partial offers have no impact on the acquirer s expected profit under complete information

raiders or saviors the evidence on six controversial investors abstract carl icahn irwin jacobs carl lindner david murdock victor posner and the late charles bluhdorn are usually portrayed as corporate raiders the evidence here however shows that between 1977 and 1982 when it was first announced that they had purchased stock in a given firm stock prices on average increased significantly the investors activities in target firms for the two years following the initial stock purchase are likewise inconsistent with raiding we discuss two hypotheses that are consistent with the evidence first these investors improve the management of target firms second they are systematically able to identify under priced stocks

electricity curtailment behaviors in greek households different behaviors different predictors abstract this paper argues that electricity curtailment behaviors i e frequent and or low cost or free energy saving behaviors in households are distinct from one another and they thus should be analyzed and promoted we test this claim with data from telephone interviews with greek households in the capital city of athens n 285 analyzing the impact of a number of demographical structural psychological based on the theory of planned behavior and moral based on norms activation predictors though hierarchical binary logistic regression modeling we find that that each electricity curtailment behavior depends on a different mix of predictors with age gender and perceived behavioral control being statistically significant for most behaviors overall the psychological and the demographical structural clusters of variables substantially contribute to the explained variance of electricity curtailment behaviors the moral cluster s contribution is not statistically significant since moral concerns are largely interwoven in the psychological constructs

communities matter institutional preconditions for community renewable energy abstract energy transitions are high on political agendas from a practical viewpoint community approaches are deemed essential in order to transition from a predominantly centralized energy supply to a decentralized one and to exploit the potential of renewable energies in this paper i discuss how the emergence of community based energy projects can be analyzed from an institutional perspective in this context a community is treated as an individual institutional order that shapes decisions i examine how community structures the implementation of biogas cooperatives in the autonomous province of south tyrol in northern italy my findings suggest that community spirit a cooperative tradition and the norms of locality and responsibility are central drivers behind the emergence and constitution of biogas cooperatives not only do these institutional features of community influence the decision concerning which farmers are in or out but also plant location and scale i argue that community is a necessary analytical category for understanding community energy

competitive rational expectations equilibria without apology abstract consider a financial market with n risk averse asymmetrically informed traders when n grows at the same rate as noise trading prices in competitive and in strategic rational expectations equilibrium converge to each other at a rate of 1 n equilibria in the two scenarios are close when noise trading volume per informed trader is large in relation to risk bearing capacity both equilibria converge to the competitive equilibrium of a limit continuum economy as the market becomes large at a slower rate of 1 n the results extend to endogenous information acquisition and the connections with the grossman stiglitz paradox are highlighted

health behavior health knowledge and schooling the positive correlation between schooling and good health is well documented one explanation is that schooling helps people choose healthier life styles by improving their knowledge of the relationship between health behaviors and health outcomes that is schooling improves the household s allocative efficiency in producing health this empirical study uses direct measures of health knowledge to test this explanation part of the relationship between schooling and the consumption of cigarettes alcohol and exercise is explained by differences in health knowledge however most of schooling s effects on health behavior remain after differences in knowledge are controlled for

equilibrium price formation and the value of private information an economy is analyzed in which agents first choose whether to acquire costly information about the return to a risky asset and then choose demand functions that determine the allocation of assets it is a well known paradox that if agents are price takers and prices are fully revealing then an equilibrium with costly information acquisition does not exist it is shown that if the price formation process is modeled explicitly and agnets are not price takers then it is possible to have an equilibrium with fully revealing prices and costly information acquisition article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

market composition and price informativeness in a large market with endogenous order types we analyse the joint determination of price informativeness and the composition of the market by order type in a large asset market with dispersed information the market microstructure is one in which informed traders may place market orders or full demand schedules and where market makers set the price market order traders trade less aggressively on their information and thus reduce the informativeness of the price in a full market order market price informativeness is bounded whatever the quality of traders information about the asset s dividend when traders can choose their order type and demand schedules are even marginally costlier than market orders then market order traders overwhelm the market when the precision of private signals goes to in nity this is because demand schedules are substitutes at high levels of precision a residual fraction of demand schedule traders is sufficient to take the trading price close to traders signals while the latter is itself well aligned with the dividend hence the gain from trading conditional on the price as demand schedule traders do in addition to one s own signal as all informed traders do vanishes

disagreement and learning dynamic patterns of trade we study volume dynamics when there are disagreements among investors for that purpose we develop a dynamic model in which differences in the interpretation of public information lead to trade we obtain a simple linear equilibrium in closed form in which risk averse agents take into account future trading opportunities when solving for their optimal portfolio allocation using this framework we then study what restrictions on the disagreement process are needed to generate empirically observed patterns in volume and prices we show that having infrequent but major disagreements leads to autocorrelation in volume and correlation between volume and absolute price changes when agents disagree on past news but agree on the interpretation of current news there is learning and the convergence of agents opinions leads to trade

tail expectation and imperfect competition in limit order book markets abstract perfect competition in liquidity provision in limit order markets is characterized by a tail expectation condition glosten 1994 in this paper we model imperfect competition in schedules by infinitely many liquidity suppliers quoting on a limit order book we show that there are zero rent mixed strategy equilibria featuring finite numbers of active liquidity suppliers none of the equilibria satisfies the competitive outcome not even on average considering a sequence of equilibria with the number of active liquidity suppliers becoming large we show that the aggregate stochastic marginal price schedule converges to the deterministic competitive marginal price schedule

central bank secrecy in the foreign exchange market abstract this paper argues that with sticky goods prices and a forward looking exchange rate the central bank will only want a partial dissemination of its information about shocks to the economy it is shown that in such a model the central bank may prefer to intervene secretly in the foreign exchange markets when responding in anticipation of future shocks but openly when reacting to current shocks the model thus provides a rationale for secrecy in central bank foreign exchange operations the model also elucidates the relationship between the signaling and portfolio balance channels of sterilized intervention

cultivating trust and harvesting value in virtual communities although previous scholars have examined the value of virtual communities to customers in this study we investigate the role of a firm s efforts in cultivating trust and harvesting value for themselves via the virtual communities that they sponsor we hypothesize that the perceptions of a firm s efforts to provide quality content to foster member embeddedness and to encourage interaction foster favorable customer beliefs about and trust in a virtual community sponsor further we hypothesize that trust motivates customers to behave relationally toward the sponsoring firm by sharing information with coproducing new products with and granting loyalty to the sponsoring firm data from 663 customers are analyzed using structural equation modeling techniques we find that efforts to provide quality content and foster member embeddedness have positive effects on customer beliefs about the sponsor in fact fostering member embeddedness has a stronger explanatory effect on customer beliefs than does providing quality content however despite the fact that previous studies show that customers value interaction in virtual communities our findings suggest that firms must do more than encourage interaction among their community members if they hope to create value from their virtual communities

ownership structure speculation and shareholder intervention an institution holding shares in a firm can use information about the firm both for trading speculation and for deciding whether to intervene to improve firm performance intervention increases the value of the institution s existing shareholdings but intervention only increases the institution s trading profits if it enhances the precision of the institution s information relative to that of uninformed traders thus the ability to speculate can increase or decrease institutional intervention we examine key factors that affect the intervention decision the usefulness of short swing provisions and restricted shares in encouraging institutional intervention and implications for ownership structure across different firms institutional investors hold an ever greater fraction of corporate america s equity traditionally these institutions were stock pickers who tried to beat the market through trading if a firm whose stock they held seemed headed for trouble these investors headed for the door the wall street rule more recently some of these institutions have been using the ownership rights attached to their shares to pressure firms to act in the shareholders interest some have even argued that there is a synergy between gathering information for use in trading shares speculation and intelligently pressuring firms to improve performance intervention we argue that these motives can also conflict analyzing these motives allows us to predict which firms are most likely to attract institutional intervention which in turn has crosssectional implications for firm ownership structure recent examples suggest that institutional investors with large stakes sometimes intervene and sometimes follow the wall street rule so that there is indeed a choice to be studied in the early 1990s there was a wave of activism by a variety of large institutional investors among them calpers the california public employees pension fund putnam management a mutual fund manager and j p morgan a bank holding company these institu

direct sale of information when precision is unobservable this paper studies the incentives of an information seller to produce precise information in a setting where precision is not observable and investors with rational expectations can extract information from the equilibrium asset price i show that the seller can verify her unknown precision by employing a nonlinear contract proposed by bhattacharya and p eiderer 1985 although precision is not observable buyers can perfectly deduce it from the contract apart from incentives to produce precise information and reveal it truthfully the nonlinear contract also insures against the portfolio risk of information buyers and causes them to trade aggressively for a given precision this increases the extent of information that is built into the equilibrium asset price the seller s equilibrium fee depends on i her inferred precision ii the value of portfolio insurance for buyers and iii the extent of information that leaks from the equilibrium asset price

full implementation and belief restrictions we introduce a framework to study the problem of full implementation under general restrictions on agents beliefs which we call implementation first we provide a characterization of the properties of the mechanisms that achieve implementation these conditions relate the possibility of achieving full implementation to the strength of the strategic externalities induced by the mechanism we then study how to achieve full implementation via the design of simple transfer schemes in these context the general conditions for implementation suggest a simple design principle in which belief restrictions are used to weaken the strategic externalities induced by the baseline transfers of the belief free benchmark importantly our results require minimal information on agents beliefs which regard simple moments of the distribution of types these moment conditions arise naturally in applications and in practical problems of mechanism design

risk arbitrage in takeovers this article studies the role of risk arbitrageurs in takeovers and the source of their advantage we show how the presence of arbitrageurs affects the value of the target shares since arbitrageurs are more likely to tender therefore an arbitrageur has the informational advantage of knowing he bought shares in equilibrium the number of arbitrageurs buying shares and the price they pay are determined endogenously we also present several empirical implications including the relationship among trading volume takeover premium liquidity of the shares and the number of risk arbitrageurs investing in one particular deal copyright 2002 oxford university press

overtime pay overtime hours and labor unions this article analyzes the effect of labor unions on overtime compensation and overtime hours estimates from may 1985 current population survey data indicate that unionization increases the prevalence of premium pay for overtime and reduces the incidence and extent of overtime hours along with the finding of previous research that unionized workers are more susceptible to temporary layoffs these results are consistent with a model in which unions use overtime pay to stabilize working hours and expand membership

endogenous market thinness and stock price volatility thin equity markets cannot accommodate temporary bulges of buy or sell orders without large price movements the resulting volatility can induce risk averse transactors who face transaction costs to desert these markets thus thinness and the related price volatility may become joint self perpetuating features of an equity market irrespective of the volatility of asset fundamentals if however appropriate incentive schemes are adopted to encourage entry by additional investors this vicious circle can be broken eventually shifting the market to a selfsustaining superior equilibrium characterized by a higher number of transactors lower price volatility and larger supply of the asset a number of empirical studies cohen et al 1976 telser and higimbotham 1977 pagano 1986 tauchen and pitts 1983 have found that thin speculative markets are ceteris paribus more volatile than deep ones a plausible explanation for this finding is that thin markets are generally characterized by small numbers of transactors per unit time and thus their prices are more sensitive to the impact of individual traders demand shocks conversely in deep markets transactors are so many that the uncorrelated demand shocks experienced by individual traders tend to offset each other and leave market prices largely unaffected while this suggests a rationale for the observed relationship between market size and price volatility it does so by taking market size as the exogenous factor however the volatility of a speculative market may feed back on its size in the sense that the high liquidation risk implied by very volatile prices can induce potential entrants to keep out of the market this paper shows that in a stock market with transaction costs this interaction between thinness and volatility can produce multiple steady state equilibria some characterized by low trade and high volatility and others by high trade and low volatility whether the market will settle in one equilibrium or another depends entirely on the expectations held by economic agents sections 2 and 3 the existence of these multiple bootstrap equilibria can be explained heuristically as follows each additional trader generates a positive externality for other actual or potential traders by decreasing the riskiness of the stock lower risk in turn tends to attract more investors with the effect of raising stock prices and inducing corporations to issue additional equity we thus have a feedback loop between market size and price volatility where market size is measured both along the dimension of the number of traders and along that of the total stock of equities if however investors face transactions costs in the stock market this positive feedback may fail to be operative if the volume of trade is expected to be small investors with relatively high transaction costs will abstain from trading thus the market

making the most out of programme evaluations and social experiments accounting for heterogeneity in programme impacts the conventional approach to social programme evaluation focuses on estimating mean impacts of programmes yet many interesting questions regarding the political economy of programmes the distribution of programme benefits and the option values conferred on programme participants require knowledge of the distribution of impacts or features of it this paper presents evidence that heterogeneity in response to programmes is empirically important and that classical probability inequalities are not very informative in producing estimates or bounds on the distribution of programme impacts we explore two methods for supplementing the information in these inequalities based on assumptions about participant decision making processes and about the strength in dependence between outcomes in the participation and non participation states dependence is produced as a consequence of rational choice by participants we test for stochastic rationality among programme participants and present and implement methods for estimating the option values of social programmes

information aggregation in a noisy rational expectations economy abstract this paper analyzes a general equilibrium model of a competitive security market in which traders possess independent pieces of information about the return of a risky asset each trader conditions his estimate of the return both on his own private source of information and price which in equilibrium serves as a noisy aggregator of the total information observed by all traders a closed form characterization of the rational expectations equilibrium is presented a counter example to the existence of fully revealing equilibrium is developed

toward a strategic foundation for rational expectations equilibrium a step toward a strategic foundation for rational expectations equilibrium is taken by considering a double auction with n buyers and m sellers with interdependent values and affiliated private information if there are sufficiently many buyers and sellers and their bids are restricted to a sufficiently fine discrete set of prices then generically there is an equilibrium in nondecreasing bidding functions that is arbitrarily close to the unique fully revealing rational expectations equilibrium of the limit market with unrestricted bids and a continuum of agents in particular the large double auction equilibrium is almost efficient and almost fully aggregates the agents information

transforming the energy system why municipalities strive for energy self sufficiency abstract despite evidence that a rising number of municipalities in germany are striving for energy self sufficiency there is little understanding of the driving factors behind this development we investigate economic ecological social and energy system related factors that drive municipalities to strive for energy self sufficiency with a focus on electricity supply the empirical data for this study is based on insights generated through expert interviews n 19 with mayors energy experts and scientists as well as a quantitative study among mayors and energy officers n 109 of german municipalities results show that environmental awareness tax revenues and greater independence from private utilities are positively related to the mayors attitude towards the realization of energy self sufficiency furthermore citizens the political environment the mayor s political power and his her financial resources are relevant factors for a municipality striving for energy self sufficiency policymakers need to decide whether or not to support mayors in this development for suitable policy interventions the results suggest the importance of an integrated approach that considers a combination of identified factors finally we propose a morphological box to structure different aspects of energy self sufficiency and categorize the present study

does society benefit from investor overconfidence in the ability of financial market experts abstract this paper develops a securities market model in which participants beliefs diverge and prices are monotonic in beliefs relative to rational expectations i e correct and unanimous beliefs overconfidence among uninformed traders about the precision of experts information leads to pareto superior equilibria efficiency enhancing departures from rational expectations occur over a dense subset of parameter space but only for one configuration of beliefs uninformed traders must be more confident than informed experts overconfidence in the form of excessive trust in the predictive ability of experts sets off a virtuous cycle of increased trading that improves liquidity and reduces transaction costs for everyone

the information content of short interest a natural experiment an increase in the cost of selling short should increase the bearish information content of short interest announcements by driving relatively uninformed short sellers out of the market we extend the diamond and verrecchia 1987 model to include short selling against the box and test the extended model using a natural experiment based around the taxpayer relief act of 1997 tra97 tra97 made short selling more costly for those shorting against the box consistent with the implications of our extended model this increase in short selling costs strengthens the negative relationship between short interest and subsequent stock price performance post tra97

noise trading and takeovers a model of takeovers is investigated in which noise trading provides camouflage that makes it possible for a large corporate outsider to purchase enough shares at favorable prices so that takeovers become profitable although the model accommodates the possibility of dilution grossman and hart 1980 and a large incumbent shareholder shleifer and vishny 1986 neither dilution nor a large incumbent shareholder is necessary for costly takeovers to be profitable noise trading tends to encourage costly takeovers that otherwise would not occur and to discourage beneficial takeovers that otherwise would occur

information and efficiency in tender offers we analyze tender offers where privately informed shareholders are uncertain about the raider s ability to improve firm value the raider suffers a lemons problem in that for any price offered only shareholders who are relatively pessimistic about the value of the firm tender their shares consequently the raider finds it too costly to induce shareholders to tender when their information is positive in the limit as the number of shareholders gets arbitrarily large when private benefits are relatively low the tender offer is unsuccessful if the takeover has the potential to create value the takeover market is therefore inefficient in contrast when private benefits of control are high the tender offer allocates the firm to any value increasing raider but may also allow inefficient takeovers to occur unlike the case where all information is symmetric shareholders cannot always extract the entire surplus from the acquisition

asset auctions information and liquidity a model is presented of a uniform price auction where bidders compete in demand schedules the model allows for common and private values in the absence of exogenous noise it is shown how private information yields more market power than the levels seen with full information results obtained here are broadly consistent with evidence from asset auctions may help explain the response of central banks to the crisis and suggest potential improvements in the auction formats of asset auctions jel d44 d82 g14 e58

corporate income tax evasion and managerial preferences this paper investigates the role of managerial preferences in shaping corporate income tax evasion using noncompliance with the personal income tax as a measure of taste for evasion the empirical results from a sample of corporate income tax returns show that managerial preferences play an important role in determining noncompliance with the corporate income tax basic sample tabulations show that when compared to compliant firms noncompliant firms are three times more likely to be managed by executives who have understated personal taxes in addition results from multivariate analyses suggest that the amount of underreported income is significantly higher in the presence of such executives

an options based approach to forecast competing bids evidence for canadian takeover battles during takeover battles a tender offer provides a call option right to the target s shareholders it guarantees the offered price but maintains the chance of a higher offer we present an options based approach to estimate the probability and expected value of higher competing takeover bids using target stock price data analysing canadian takeover battles in the period 1997 to 2007 we find that during the 5 trading days prior to the occurrence of an increased takeover bid the estimated probability of a higher bid exceeds 80 on average and the expected value of a potential competing bid almost matches the realized value

an evolutionary approach to financial innovation the purpose of this paper is to explain why some markets for financial products take off while others vanish as soon as they have emerged to this end we model an infinite sequence of capm economies in which financial products can be used for insurance purposes agents participation in these financial products however is restricted consecutive stage economies are linked by a mapping transition function which determines the next period s participation structure from the preceding period s participation the transition function generates a dynamic process of market participation which is driven by the percentage of informed traders and the rate at which a new asset is adopted we then analyse the evolutionary stability of stationary equilibria in accordance with the empirical literature on financial innovation it is obtained that the success of a financial innovation a mutation depends on a sufficiently high trading volume marketing and new and differentiated hedging opportunities in particular a set of complete markets forming a stationary equilibrium is robust with respect to any further financial innovation while this is not necessarily true for a set of incomplete markets

which renewable energy policy is a venture capitalist s best friend empirical evidence from a survey of international cleantech investors governments around the world have adopted ambitious targets to increase the share of renewable energy and reduce greenhouse gas emissions they pursue a variety of policy approaches to achieve these targets it has been a popular theme for contributions in energy policy to investigate the effectiveness of such policies this article adds a new perspective to the debate namely looking at the policy preferences of private investors in innovative clean energy technology firms we surveyed 60 investment professionals from european and north american venture capital and private equity funds and asked them to assess the effectiveness of various policies in terms of stimulating their interest to invest in innovative clean energy technologies in addition to quantitative rankings we use qualitative interview data to capture additional information on why investors prefer some policies over others the combined analysis compensates for the inherent limitations of a quantitative ranking using generic policy types the results of this exploratory analysis demonstrate that all other things being equal investors in our sample perceived feed in tariffs to be the most effective renewable energy policy the overall preference for feed in tariffs is even more pronounced among investors based in europe and with higher exposure to clean energy

learning and price discovery in a search market we introduce learning into an otherwise standard two sided search and bargaining market there is uncertainty about the price distribution due to uncertainty about an underlying exogenous state of relative demand in the high state buyers are on the long side otherwise they are on the short side in equilibrium prices are on average higher in the high state individual agents learn about the distribution while searching agents typically start out by experimenting with a tough bargaining position buyers may initially insist on a low price and sellers on a high price after successive failures to trade agents become increasingly pessimistic about the market conditions and soften their bargaining stance when frictions are small equilibrium transaction prices are approximately market clearing despite aggregate demand being unknown thus the search and bargaining procedure enables price discovery in a decentralized market

bioenergy expansion in the eu cost effective climate change mitigation employment creation and reduced dependency on imported fuels presently the european union eu is promoting bioenergy the aim of this paper is to study the prospects for using domestic biomass resources in europe and specifically to investigate whether different policy objectives underlying the promotion of bioenergy cost effective climate change mitigation employment creation and reduced dependency on imported fuels agree on which bioenergy options that should be used we model bioenergy use from a cost effectiveness perspective with a linear regionalized energy and transport system model and perform supplementary analysis it is found that the different policy objectives do not agree on the order of priority among bioenergy options maximizing climate benefits cost effectively is in conflict with maximizing employment creation the former perspective proposes the use of lignocellulosic biomass in the stationary sector while the latter requires biofuels for transport based on traditional agricultural crops further from a security of supply perspective the appeal of a given bioenergy option depends on how oil and gas import dependencies are weighed relative to each other consequently there are tradeoffs that need to be addressed by policymakers promoting the use of bioenergy also the importance of bioenergy in relation to employment creation and fuel import dependency reduction needs to be further addressed

estimation of limited dependent variable models with dummy endogenous regressors applied economists have long struggled with the question of how to accommodate binary endogenous regressors in models with binary and nonnegative outcomes i argue here that much of the difculty with limited dependent variables comes from a focus on structural parameters such as index coefcients instead of causal effects once the object of estimation is taken to be the causal effect of treatment several simple strategies are available these include conventional two stage least squares multiplicative models for conditional means linear approximation of nonlinear causal models models for distribution effects and quantile regression with an endogenous binary regressor the estimation strategies discussed in the article are illustrated by using multiple births to estimate the effect of childbearing on employment status and hours of work

j shaped returns to timing advantage in access to information experimental evidence and a tentative explanation abstract the question of how useful information is in financial markets has been discussed for decades and is still unresolved in this paper we challenge the widely held belief that additional information is never a disadvantage we present results from experimental financial markets with asymmetrically informed traders in all treatments we conduct we find a j shaped distribution of returns while the best informed outperform all others average informed traders have significantly lower returns than the least informed this can mainly be attributed to trend reversals in the fundamental information prices in our markets do not reflect ree but rather naive trader equilibrium

regional energy autarky potentials costs and consequences for an austrian region local actors at community level often thrive for energy autarky to decrease the dependence on imported energy resources we assess the potentials and trade offs between benefits and costs of increasing levels of energy autarky for a small rural region of around 21 000 inhabitants in austria we use a novel modeling approach which couples a regional energy system model with a regional land use optimization model we have collected and processed data on the spatial distribution of energy demand and potentials of biomass photovoltaics and solar thermal resources the impacts of increasing biomass production on the agricultural sector are assessed with a land use optimization model that allows deriving regional biomass supply curves an energy system model is subsequently applied to find the least cost solution for supplying the region with energy resources model results indicate that fossil fuel use for heating can be replaced at low costs by increasing forestry and agricultural biomass production however autarky in the electricity and the heating sector would significantly increase biomass production and require a full use of the potentials of photovoltaics on roof tops attaining energy autarky implies high costs to consumers and a decline in the local production of food and feed

a causal interpretation of extensive and intensive margin effects in generalized tobit models the usual decomposition of effects in corner solution models into extensive and intensive margins is generally incompatible with a causal interpretation this paper proposes a decomposition based on the joint distribution of potential outcomes which is meaningful in a causal sense the difference between decompositions can be substantial and yield diametrically opposed results as shown in a standard tobit model example in a generalized tobit application exploring the effect of reducing firm entry regulation on bilateral trade flows between countries estimates suggest that using the usual decomposition would overstate the contribution of the extensive margin by around 15

pollution reduction preferences of u s environmental managers applying ajzen s theory of planned behavior we modified ajzen s theory of planned behavior to analyze the behavioral preferences of environmental managers we used structural equation analysis to link the source reduction preferences of 295

freeze out mergers do freeze out mergers mitigate the free rider problem of corporate takeovers we study this question in a tender offer model with finitely many shareholders under a freeze out merger minority shareholders expect to receive the original offer price whether or not they tender their shares we show that the ability to freeze out shareholders increases the raider s expected profit however as the number of shareholders gets arbitrarily large the raider s expected profit in equilibrium converges to zero for any freeze out clause with an ownership threshold that is strictly above simple majority in this sense freeze out mergers do not solve the free rider problem received september 17 2016 editorial decision june 3 2018 by editor francesca cornelli

information in tender offers with a large shareholder we study takeovers of firms whose ownership structure is a mixture of minority block holders and small shareholders we show that the combination of dispersed private information on the side of small shareholders and the presence of a large shareholder can facilitate profitable takeovers furthermore our analysis implies that even if some model of takeovers predicts a profit for the raider for example due to private benefits the profit will be underestimated unless the large shareholder and the dispersion of information among the small shareholders are modeled

let them eat cake a note on comparing alternative models of the demand for medical care this article comments on the rand econometric approach to estimating and testing models of the demand for medical care as typified in duan et al 1983 the rand methodology is contrasted with more mainstream econometric approaches to similar empirical problems as developed in the sample selection literature it is shown that despite rand s claim their approach requires some fairly unusual assumptions on the model joint error distribution and functional form alternatively their model likelihood functions may be interpreted as being nested in more general sample selection model likelihood functions with easily testable parameter restrictions

viable allocations of information in financial markets abstract we study in the context of a financial market allocations of information that are consistent with endogenous information acquisition we focus on whether information is concentrated within a fraction of the market or is diffuse the aggregation of information in prices tends to make signals more complementary than they would be if considered in isolation favoring concentration of information however the ability to use some signals together with prices to predict other signals may increase the degree of substitutability among signals we present conditions under which each of these effects is particularly strong

price volatility without news about fundamentals abstract in a pseudo dynamic model financial prices can exhibit chaotic volatility even when there is no fluctuation in economic fundamentals the source of the volatility is some speculative trading rule

valuation for renewable energy a comparative review abstract environmental cost benefit analysis is applied for the evaluation of renewable energy projects since some benefits and costs do not have monetary values economic valuation techniques are applied to estimate them this paper reviews the literature on the valuation evaluation of renewable energy resources and summarizes the methods used in them it discerns four main streams of valuation in renewable energy the first is economic welfare oriented and comprises stated and revealed preference methods the second is the financial option analysis with a financial background the third is emergy analysis which is mostly an ecological engineering based method with capable economic links and the fourth is again economic but not welfare based the paper discusses the main directions discerned in these studies and recognizes first that proper valuation takes place only in the first method while the other methods describe only evaluation procedures and second that there is a research gap that has yet to be filled in as compared to other areas of environmental resource and energy economics

institutionalization delegation and asset prices abstract we study the effects of institutionalization on fund manager compensation and asset prices institutionalization raises the performance sensitive component of the equilibrium contract which makes institutional investors effectively more risk averse institutionalization affects market outcomes through two opposing effects the direct effect is to bring in more informed capital and the indirect effect is to make each institutional investor trade less aggressively on information through affecting the equilibrium contract when there are many institutions and little noise trading in the market the indirect contracting effect dominates the direct informed capital effect in determining market variables such as the cost of capital return volatility price volatility and market liquidity otherwise the direct informed capital effect dominates

a comparison of alternative models for the demand for medical care we have tested alternative models of the demand for medical care using experimental data the estimated response of demand to insurance plan is sensitive to the model used we therefore use a split sample analysis and find that a model that more closely approximates distributional assumptions and uses a nonparametric retransformation factor performs better in terms of mean squared forecast error simpler models are inferior either because they are not robust to outliers e g anova anocova or because they are inconsistent when strong distributional assumptions are violated e g a two parameter box cox transformation

comparing drivers barriers and opportunities of business models for renewable energies a review abstract this article systematically reviews the emerging field of research on business models for renewable energies differentiating between developing and industrialized countries the key findings on developing countries are as follows first there is a lack of quantitative data second opportunities are driven primarily by unfulfilled basic needs and micro finance whereas corruption and weak electricity grids are the main barriers and third business models should be replicable the key findings on industrialized countries are as follows first opportunities are driven primarily by climate change mitigation and energy efficiency improvements second stuck thought patterns and high costs of energy storage are important barriers and third cooperation is a key in future business models to handle increasing complexity this review reveals implications for researchers and policy makers promising avenues for future research are the analysis of intermodal business models and opportunities concerning energy self supply and renewable district heating policy makers are advised to design legal frameworks that account for the global nature of the renewable energy challenge and are simultaneously adapted to regional disparities

are more risk averse agents more optimistic insights from a rational expectations model we analyze the link between pessimism and risk aversion we consider a model of partially revealing competitive rational expectations equilibrium with diverse information in which the distribution of risk aversion across individuals is unknown we show that when a high individual level of risk aversion is taken as a signal for a high average level of risk aversion more risk averse agents are more optimistic this correlation between individual risk aversion and optimism leads to a pessimistic consensus belief hence to an increase in the market price of risk risk sharing schemes and welfare implications are analyzed we show that agents welfare may increase upon the receipt of more precise information

informed speculation with imperfect competition competitive rational expectations models have the unsatisfactory property dubbed the schizophrenia problem by hellwig that each trader takes the equilibrium price as given despite the fact that he influences that price an examination of information aggregation in a non competitive rational expectations model using a nash equilibrium in demand functions shows that the schizophrenia problem is avoided by having each trader take into account the effect his demand has on the equilibrium price given a distribution of private information across traders prices reveal less information than in the competition equilibrium and prices no longer become fully informative in the limit as noise trading vanishes or as traders become risk neutral with small traders the model may become one of monopolistic competition not perfect competition in contrast to the competitive model a reasonable model of endogenous acquisition of costly private information is obtained even when traders are risk neutral

utilities business models for renewable energy a review abstract the transformation of today s electric power sector to a more sustainable energy production based on renewable energies will change the structure of the industry consequently utilities as the major stakeholders in this transformation will face new challenges in their way of doing business they will have to adapt their business models to remain competitive in the new energy landscape the present review of business model literature shows that two basic choices exist utility side business models and customer side business models the two approaches follow a very different logic of value creation while the former is based on a small number of large projects the latter is based on a large number of small projects the article reveals that blueprints for utility side business models are available whereas customer side business models are in an early stage of development applying the business model framework as an analytical tool it is found that existing utility side business models comprise a series of advantages for utilities in terms of revenue potential and risk avoidance this study provides new insights about why utilities will favor utility side business models over customer side business models and why they also should engage in customer side business models in their quest for more sustainable future business models

risk aversion market liquidity and price efficiency a model of a noncompetitive speculative market is analyzed in which privately informed traders and market makers are risk averse market liquidity is found to be nonmonotonic in the number of informed traders their degree of risk aversion and the precision of their information it is also shown that increased liquidity trading leads to reduced price efficiency and that under endogenous information acquisition market liquidity may also be nonmonotonic in the variance of liquidity trades article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies