auditors response to political connections and cronyism in malaysia this paper extends the literature on the role of political economy in financial reporting and auditing by testing two hypotheses the first hypothesis predicts that there will be a greater increase in audit effort and audit fees for malaysian firms with political connections as a result of the asian financial crisis than for non politically connected firms because these firms have a higher risk of financial misstatements the second hypothesis predicts that the audit fees of politically connected firms will decline when capital controls are introduced by the government as a ploy to financially assist politically connected firms to rebound from the crisis and thus reduces the risk of financial misstatements the results show that there is a greater increase in audit fees for firms with political connections than for non politically connected firms as a result of the asian financial crisis however there is a decline in audit fees for politically connected firms after the capital controls are implemented

what do we know about macroeconomics that fisher and wicksell did not the answer to the question in the title is a lot in this essay i argue that the history of macroeconomics during the 20th century can be divided into three epochs

competitive pricing by a price leader we examine the problem of pricing in a market where one brand acts as a price leader we develop a procedure to estimate a leader s price rule which is optimal given a sales target objective and allows for the inclusion of demand forecasts we illustrate our estimation procedure by calibrating this optimal price rule for both the leader and the follower using data on past sales and prices from the mid size sedan segment of the u s automobile market our results suggest that a leader follower system stackelberg seems more consistent with the pricing behavior in this market than a mutually independent pricing rule nash we also find that our optimal price rule explains this market data better than other pricing schemes that do not account for optimizing behavior on the part of the leader and the follower

the role of ignorance in the emergence of redistribution abstract our study investigates the emergence of redistribution societies when individuals vote on distribution rules with their feet the choice of a distribution rule is a strategic decision since individuals differ in the productivity of their investments and hence total income depends on the types of individuals who have chosen the same distribution rule in our laboratory experiment we find that compared to full information the amount of redistribution increases if individuals face uncertainty about their productivity at the time they choose a distribution rule moreover we find a coexistence of libertarian and redistributive societies as well as imperfect segregation for all degrees of uncertainty so that heterogeneous redistribution societies turn out to be sustainable throughout

state dependent pricing and the dynamics of money and output standard macroeconomic models of price stickiness assume that each firm leaves its price unchanged for a fixed amount of time we present an alternative model in which the pricing decision depends on the state of the economy we find a method of aggregating individual price changes that allows a simple characterization of macroeconomic variables the model produces a positive money output correlation and an empirical phillips curve in addition the impact of monetary shocks depends crucially on the current level of output which points to a natural connection between state dependent microeconomics and state dependent macroeconomics i introduction there is a long tradition in macroeconomics of attributing the real effects of nominal demand shocks to nominal price stickiness in this view if there is no change in prices when nominal demand rises then quantities must bear the burden of adjustment hence nominal price rigidity provides the friction needed for nominal demand shocks to be transmitted to the real economy standard models of this transmission mechanism such as fischer 1977 and taylor 1980 are based on the assumption that each firm leaves its price unchanged for a fixed amount of time the main reason for considering such time dependent pricing rules is their analytic tractability constraining firms to adjust their prices at prespecified times both simplifies the derivation of equilibrium strategies and allows the use of powerful time series techniques to analyze aggregate dynamics the main disadvantage of the timedependent approach is that between price adjustments firms are not allowed to respond even to extreme changes of circumstance this makes it difficult to know whether the qualitative effects of money in these models are the result of nominal rigidities per se or of the exogenously imposed pattern of price changes an alternative approach to modeling price stickiness is to allow the price setting decision to depend on the actual state of the

uma breve historia sobre a abordagem de desequilibrio na macroeconomia this paper presents a brief history of non market clearing approach emphasizing its macroeconomics developments this episode is part of keynesian reaction to neoclassical synthesis crises while friedman and lucas classical reaction is widely known disequilibrium approach became a virtually forgotten episode in the history of economic thought disequilibrium authors aimed to develop a framework sustained in analytical primitives distinct from those that became dominant after new classical methodological victory in that scheme keynesian model was no longer a special case of the classical world but actually the exact opposite that was a singular episode which should not be understood as neoclassical synthesis height or the first movements toward new keynesian economics we also discuss the causes of its failure in became the new mainstream

closed loop advertising strategies in a duopoly using the lanchester model to describe the dynamics of the market where two firms compete for customers by advertising we solve the problem of determining an optimal advertising strategy for maximum discounted profits we develop both open and closed loop strategies and explain the relationship between them using a new mathematical approach we prove that our closed loop solution is a global nash equilibrium the closed loop strategy is time variant and depends linearly on the actual market share the time variant coefficient incorporates the discount factor its computation requires the solution of a backward differential equation and a set of two nonlinear differential equations for an initial value problem the closed loop advertising expenditures are proportional to the open loop advertising expenditures and to the square of the competitor s actual market share this provides a very practical adaptive control rule that allows the manager to adjust the actual advertising expenditure and to deviate f

discussion of what determines corporate transparency the goal of bushman piotroski and smith hereafter bps is to extend our understanding of financial information systems around the globe they focus on the availability of firm specific information to those outside of publicly traded firms to examine how and why this information varies across countries given the breadth of the question and the scope of global work the paper includes far ranging discussions of these factors and a large number of empirical variables however the analyses address two relatively straightforward questions first which aspects of the information system are observed to occur together second how are these aspects of the information system related to the government s role in the economy clearly these are important questions global variation in financial markets and accounting is a topic increasingly studied by academics in accounting as well as economics and finance these variations have been attributed with affecting economic development within countries and affecting the ability to transact business across countries la porta et al 1997 clayton jorgensen and kavajecz 2002 leuz nanda and wysocki 2003 bradshaw bushee and miller 2003 given the increasing globalization of business in general it is only reasonable to expect that studies of global

consumer demand and equilibrium unemployment in a working model of the customer market incentive wage economy though not conceived as a constant the natural unemployment rate was taken to be invariant to supply shocks until the late seventies and to real demand shocks until now the largely micro theoretic model here is one in a series deriving the natural rate path from general equilibrium in this model the labor market exhibits generalized real wage rigidity resulting from the use of incentive wages to combat shirking and the asset backing shares is the firms customers arising from customer market friction one finding is that increased consumer demand drives up the natural rate by driving real interest rates up

welfare payments and other economic determinants of female migration this article investigates the effects of welfare payments wages and unemployment on women s probability of interstate migration in the united states it also investigates if the income attraction of locations varies with recency of labor market experience welfare gains increase the probability of interstate migration welfare effects are largest for single mothers with small children and stronger among women with no recent labor market experience the welfare effects albeit small are larger than the wage effects the wage effects are weaker among women with no recent work experience ethnic specific analyses suggest differences in migration behavior among anglos african americans and puerto ricans

what have we learned about policy and growth from cross country regressions economists have been seeking to comprehend why some countries are rich and others poor for well over 200 years a better understanding of the national policies associated with long run growth would both contribute to our ability to explain cross country differences in per capita incomes and provide a basis for making policy recommendations that could lead to improvements in human welfare recently economists have used cross country regressions to search for empirical linkages between longrun growth and indicators of national policies e g roger kormendi and philip meguire 1985 robert j barro 1991 the large cross country growth literature has identified various fiscal monetary trade exchange rate and financial policy indicators that are significantly correlated with longrun growth yet levine and david renelt 1992 show that many of these findings are fragile to small alterations in the conditioning information set that is small changes in the right hand side variables produce different conclusions regarding the relationship between individual policies and growth in this paper we take stock of what the profession has learned from cross country regression studies of policy and long run growth i limitations

welfare magnet hypothesis fiscal burden and immigration skill selectivity in this paper we investigate the effect of welfare state generosity on the difference between skilled and unskilled migration rates and the role of mobility restriction in shaping this effect we utilize the free labor movement within the european union plus norway and switzerland eur and the restricted movement from outside the eur in order to compare the free migration regime to the restricted migration regime we find strong support for the magnet hypothesis under the free migration regime and the fiscal burden hypothesis under the restricted migration regime even after controlling for differences in educational quality and returns to skills in source and host countries

dynamic programming approach to discrete time dynamic feedback stackelberg games with independent and dependent followers stackelberg games play an extremely important role in such fields as economics management politics and behavioral sciences stackelberg game can be modelled as a bilevel optimization problem there exists extensive literature about static bilevel optimization problems however the studies on dynamic bilevel optimization problems are relatively scarce in spite of the importance in explaining and predicting some phenomena rationally in this paper we consider discrete time dynamic stackelberg games with feedback information dynamic programming algorithms are presented for the solution of discrete time dynamic feedback stackelberg games with multiple players both for independent followers and for dependent followers when the followers act dependently the game in this paper is a combination of stackelberg game and nash game

a differential oligopoly game for optimal production planning and water savings abstract a production planning single decision problem is extended to a production planning and water saving dual decision problem a differential oligopoly game in which product prices are sticky and water right trading occurs is used to study this problem unlike previous studies appeared in the literature the decisions in this study are affected simultaneously by both the product and the water right prices static open loop closed loop and feedback equilibria are analyzed to show optimal production plans and water saving decisions the impact of oligopoly competition on the social welfare is finally analyzed different optimal solutions as the values of the parameters change are also simulated numerically the results show that the firms optimal production plans and water saving decisions are strongly influenced by the water efficiency initial water right allocations and water right reservation prices

optimal pricing and advertising in a durable good duopoly abstract this paper analyzes dynamic advertising and pricing policies in a durable good duopoly the proposed infinite horizon model while general enough to capture dynamic price and advertising interactions in a competitive setting also permits closed form solutions we use differential game theory to analyze two different demand specifications linear demand and isoelastic demand for symmetric and asymmetric competitors we find that the optimal price is constant and does not vary with cumulative sales while the optimal advertising is decreasing with cumulative sales comparative statics for the results are presented

an introduction to the economics of immigration in oecd countries the share of the foreign born in oecd countries is increasing and this article summarizes economics research on the effects of immigration in those nations four broad topics are addressed labor market issues fiscal questions the political economy of immigration and productivity international trade extreme concerns about deleterious labour market and fiscal impacts following from new immigrants are not found to be warranted however it is also clear that government policies and practices regarding the selection and integration of new migrants affect labour market fiscal and social cultural outcomes policies that are well informed well crafted and well executed beneficially improve population welfare

efficient wage bargaining as a repeated game this paper builds a bridge between the two existing approaches for wage and employment determination in a unionized market the monopoly union model and the efficient bargaining model both fail to capture the dynamic aspects of wage bargaining when the repeated nature of the wage bargaining process is considered the equilibria are neither as inefficient as the monopoly union model predicts nor as fully efficient rather the two models can be regarded as particular cases with certain discount rates we apply our model to issues such as the endgame interpretation of the u s steel industry wage concessions and featherbedding

menu costs and the neutrality of money a model of endogenous price adjustment under money growth is presented firms follow s s pricing policies and price revisions are imperfectly synchronized in the aggregate price stickiness disappears and money is neutral the connection between firm price adjustment and relative price variability in the presence of monetary growth is also investigated the results contrast with those obtained in models with exogenous fixed timing of price adjustment

do supply curves slope up this paper examines the short run responses of price and quantity to exogenous demand shocks for disaggregated u s manufacturing industries using prior information on input output linkages to identify industries whose fluctuations are likely to function as approximately exogenous demand shocks for other industries i find that demand shocks induce positive covariation between price and quantity for 16 out of 26 sample industries controlling for observable cost shift variables when sample industries are pooled i estimate that a demand shock which initially raises industry output by 1 percent generates a price increase of 0 182 percent within one year i find that input output instruments detect upward sloping supply curves more readily than least squares or other commonly used demand shift instruments

individual attitudes towards migration a re examination of the evidence recent economic research has highlighted the importance of labor market and welfarestate mechanisms in the explanation of individual attitudes towards immigration by contrast political scientists argue that attitudes are mostly determined by individual cultural values and beliefs this paper takes a fresh look at this debate and contains the following contributions to the literature first we address the problem that unobserved cultural values and beliefs might be correlated with education a potential source of bias in the estimations second we compile a detailed database on the education levels of immigrants and natives and on the degree of fiscal redistribution in european countries third our econometric estimates rely on a simple structural model taking individual heterogeneity with respect to education explicitly into account the structural model enables us to evaluate quantitatively the importance of the labor market and welfare state channels and of other individual factors such as cultural values and beliefs our results show that the labor market and welfare state mechanisms play a significant role in explaining individual attitudes however the quantitative importance of these two mechanisms turns out to be rather limited compared to other individual factors jel classification f22 j61

political connection and leverage some malaysian evidence abstract this paper extends prior work on the linkage between politically connected pcon firms and capital structure in developing countries specifically this paper focuses on the association between malaysian pcon firms and leverage and is motivated by the results of fraser et al 2006 who report a positive association between leverage and political patronage controlling for a potential misspecification in that paper this study documents that a significant proportion almost 12 of the malaysian pcon firms have negative equity and builds on the previous paper by providing fresh evidence that market to book ratio is positively associated with leverage and that borrowing pcon firms have significantly lower roa compared to non pcon firms

political incentives to suppress negative information evidence from chinese listed firms this paper tests the proposition that politicians and their affiliated firms i e firms operating in their province temporarily suppress negative information in response to political incentives we examine the stock price behavior of chinese listed firms around two visible political events meetings of the national congress of the chinese communist party and promotions of high level provincial politicians that are expected to asymmetrically increase the costs of releasing bad news the costs create an incentive for local politicians and their affiliated firms to temporarily restrict the flow of negative information about the companies the result will be fewer stock price crashes for the affiliated firms during these event windows followed by an increase in crashes after the event consistent with these predictions we find that the affiliated firms experience a reduction an increase in negative stock return skewness before after the event these effects are strongest in the three month period directly preceding the event among firms that are more politically connected and when the province is dominated by faction politics and cronyism additional tests document a significant reduction in published newspaper articles about affected firms in advance of these political events suggestive of a link between our observed stock price behavior and temporary shifts in the listed firms information environment

country level institutions and management earnings forecasts using a comprehensive sample hand collected from the original texts of management earnings forecasts from 27 countries we provide descriptive evidence on the country level institutional determinants and economic consequences of forecast characteristics using principal component factors constructed from a number of country level institutional variables we find that forecast disaggregation frequency precision and attribution vary significantly with the business and accounting environment of a country we further document that better quality management forecasts are generally associated with stronger stock market reactions and higher investment efficiency together our findings suggest that country level institutions play a vital role in voluntary disclosure characteristics

a near rational model of the business cycle with wage and price inertia this paper presents a model in which insignificantly suboptimal behavior causes aggregate demand shocks to have significant real effects the individual loss to agents with inertial price wage behavior is second order in terms of the parameter describing the shock while the effect on real economic variables is first order thus significant changes in business activity can be generated by anticipated money supply changes provided that some agents are willing to engage in nonmaximizing behavior which results in small losses

the fundamental transformation in macroeconomics when factors enter into joint production they typically develop a degree of specificity with respect to each other it is well known that when combined with contracting difficulties specificity gives rise to a williamsonian fundamental transformation from an ex ante competitive relationship to an ex post bilateral monopoly the macroeconomic consequences of widespread specificity are far reaching specificity results in misallocation underutilization and unemployment of the economy s productive factors it hampers growth by depressing the incentives to replace what is outdated and to fully utilize the economy s resources it disrupts macroeconomic adjustment by inducing a wedge between timid creation and excessive destruction of the old system and it exacerbates downturns by elastifying the cyclical response of inelastic factors this abstract was borrowed from another version of this item

stochastic competitive entries and dynamic pricing abstract how should firms price new products when they do not know the timing nor the nature of the next competitive entry to guide managers pricing decisions in such contexts we propose a dynamic pricing model with two types of randomly timed entry i e imitative and innovative the characterization of the equilibrium strategies reveals how optimal prices vary with the manager s knowledge about the timing of future competitive entries we show that price skimming is not always optimal when entry dates are unknown to managers everything else equal we demonstrate that the randomness of competitive entries make forward looking managers to choose constant prices even though the characteristics of the market would have justified skimming the demand in the normal course moreover we show that the constant pricing policy remains optimal even when the incumbent s optimal pricing strategy influences the probability of facing a competitive entry finally we find that uncertainty does not necessarily hurt firms profits

political connection and cost of debt some malaysian evidence abstract this paper investigates the association between malaysian politically connected pcon firms and the cost of debt we extend previous research that finds malaysian pcon firms are perceived as being of higher risk by the market and by audit firms by providing evidence that lenders also perceive these firms as being of higher risk we also find that pcon firms have a significantly 1 higher extent of leverage 2 higher likelihood of reporting a loss 3 higher likelihood of having negative equity and 4 higher likelihood of being audited by a big audit firm we suggest that pcon firms are charged higher interest rates by lenders as a result of efficient contracting given their higher inherent risks additionally we find that ceo duality present in pcon firms is perceived by lenders as being more risky and that a higher proportion of independent directors on the audit committee mitigate this perceived risk

income maximization and the selection and sorting of international migrants abstract two prominent features of international labor movements are that the more educated are more likely to emigrate positive selection and more educated migrants are more likely to settle in destination countries with high rewards to skill positive sorting using data on emigrant stocks by schooling level and source country in oecd destinations we find that a simple model of income maximization can account for both phenomena results on selection show that migrants for a source destination pair are more educated relative to non migrants the larger is the absolute skill related difference in earnings between the destination country and the source results on sorting indicate that the relative stock of more educated migrants in a destination is increasing in the absolute earnings difference between high and low skilled workers we use our framework to compare alternative specifications of international migration estimate the magnitude of migration costs by source destination pair and assess the contribution of wage differences to how migrants sort themselves across destination countries

owner managers and firm performance during the asian and global financial crises evidence from korea abstractwe examine the performance of the korean owner managers during the 1997 1998 asian financial crisis and the 2008 2009 global financial crisis to establish whether they overcome the unexpected exterior shocks better than employed managers we find that the owner managers record a significantly greater performance during the crises and especially during the latter period moreover our results suggest that such a tendency comes from the owner managers superior investment decisions our paper thus highlights the role of owner managers by studying their performance during the korean economic crisis periods jel g01 g32 g34

self selection and the earnings of immigrants this paper analyzes the way in which the earnings of the immigrant population may be expected to differ from the earnings of the native population because of the endogeneity of the decision to migrate the empirical study shows that differences in the u s earnings of immigrants with the same measured skills but from different home countries are attributable to variations in political and economic conditions in the countries of origin at the time of migration excerpt

the cyclical behavior of marginal cost and price the author examines the cyclical behavior of price marginal cost margins for u s manufac turing after 1956 short run marginal cost is markedly procyclical this is primarily due to procyclical overtime payments incurred beca use employment is not perfectly flexible in most industries output price fails to respond to the cyclical movement in marginal cost so price marginal cost margins are markedly countercyclical the res ults contradict business cycle theories that explain low production i n a recession by a high real cost of producing they support theories that explain low production in a recession by the inability of firms to sell their output copyright 1987 by american economic association

optimal management of fringe entry over time abstract in this paper we investigate the problem of a dominant company facing entry of a competitive fringe smaller competitor or fringe of smaller competitors we seek to identify pricing and advertising or other promotional strategies that maximize long term profits for the dominant firm under possible reactions of the competitive fringe two main situations are considered the firms in the fringe are price takers but they advertise the firms in the fringe are not price takers and advertise the possibility of a passive reaction in the case of a very small fringe is considered as a particular case we assume that the rate of change of fringe sales is dynamically related to the current sales price and advertising efforts of both the dominant firm and the fringe the higher the dominant firm price the faster fringe entry the higher dominant firm advertising effort the slower fringe entry fringe advertising and pricing may counterbalance these effects formulating a dynamic game with the dominant firm as a leader and the fringe as a follower we present a new methodology for providing time invariant feedback stackelberg equilibrium the methodology relies on finding the relationship between the co state variables and the state variable the equilibrium solution is obtained in an implicit form by solving a set of two backward differential equations to show the applicability of our solution to real situations we use data from the u s long distance market and find optimal decision rules for at t facing the entry of mci and sprint during the 1980 1990 period the feedback equilibrium indicates that while at t s price is decreasing when fringe mci and sprint sales increase the fringe price is increasing at t s advertising is increasing with fringe sales while the fringe s advertising increases and then decreases the comparison with actual behavior indicates that at t has adhered closer to the optimal solution in both price and advertising than the fringe

efficiency gains from liberalizing labor mobility in this paper we quantify the effect of a complete liberalization of cross border migration on the world gdp and its distribution across regions we build a general equilibrium model endogenizing bilateral migration and income disparities between and within countries our calibration strategy uses data on effective and potential migration to identify total migration costs and visa costs by education level data on potential migration reveal that the number of people in the world who have a desire to migrate is around 400 million this number is much smaller than that predicted in previous studies and reflects the existence of high incompressible migration costs in our benchmark framework liberalizing migration increases the world gdp by 11 5 12 5 percent in the medium term our robustness analysis reveals that the gains are always limited in the range of 7 0 percent with schooling externalities to 17 9 percent if network effects are accounted for

dynamic optimal pricing and possibly advertising in the face of various kinds of potential entrants abstract several nonlinear stochastic models are developed for a dynamic profit maximizing firm with respect to its price and possibly advertising decisions under threat of entry the optimal price advertising policies for these models are characterized by the use of the maximum principle while the optimal policy will depend on the assumed functional forms it is shown that under certain plausible assumptions the optimal policy is to increase profit by charging a higher price and decrease the resulting threat of entry by a higher level of advertising

keeping the keynesian faith this wide ranging discussion takes in the development of macroeconomics and the influence of ideas and events on that development the nature and causes of the great depression keynesianism lessons from the high inflation period of the 1970s the role of macroeconomic policy and the idea of the new economy

price and advertising signals of product quality we present a signaling model based on ideas of phillip nelson in which both the introductory price and the level of directly uninformative advertising or other dissipative marketing expenditures are choice variables and may be used as signals for the initially unobservable quality of a newly introduced experience good repeat purchases play a crucial role in our model a second focus of the paper is on illustrating an approach to refining the set of equilibria in signalling games with multiple potential signals

the many player advertising game this study extends the time variant closed loop strategy of fruchter and kalish 1997 to the n player advertising game we demonstrate that solving an n player game using 2 players results in overadvertising

migration the life cycle and state benefits how low is the bottom i show that among women likely to use welfare movers move to higher benefit states i also find that the probability likely welfare users will move at all is lower in higher benefit states this effect is concentrated early in the life cycle as theory predicts i construct a theoretical framework to measure the impact of welfare migration on optimal state benefits simulation results suggest little impact in higher benefit states but possibly a more substantial impact in other states finally evidence suggests little reason for concern due to welfare migration in using cross state variation in welfare generosity to identify incentive effects of the welfare system on other outcome variables

an empirical investigation of advertising strategies in a dynamic duopoly the equilibrium profit maximizing advertising policies of firms operating in a dynamic duopoly are derived by linking in a single framework the econometric estimation of the market response function and the technique of differential games that characterizes dynamic competitive behavior we use the lanchester model of combat to represent the system dynamics that capture the competitive shifts due to investments in advertising by the two market rivals we determine the equilibrium advertising levels using both closed and open loop policies we also compare these equilibrium advertising policies for each firm to those obtained using an optimal control theory formulation wherein the advertising spending levels of the rival are assumed to be known the empirical results obtained by analyzing the advertising rivalry between coke and pepsi for the period 1968 1981 under the above three alternative spending policies provide some interesting insights into the nature of competition between these two market rivals a significant contribution of this paper is to extend the existing literature on advertising competition by integrating theoretical and empirical analyses

multiple expectational equilibria under monopolistic competition this paper shows that a monopolistically competitive economy with real investment can have multiple rational expectations equilibria one is associated with entrepreneurs optimistic expectations about future demand another with entrepreneurs pessimism it also shows that an optimistic expectational equilibrium pareto dominates a pessimistic equilibrium an investment subsidy can be beneficial both by reducing the original underinvestment distortion and by changing firms expectations from pessimistic to optimistic the most important assumption is increasing returns to scale and monopolistic competition makes increasing returns consistent with each producer s optimization

corporate lobbying political connections and the bailout of banks abstract political involvement has long been shown to be a profitable investment for firms that seek favorable regulatory conditions or support in times of economic distress but how important are different types of political involvement for the timing and magnitude of political support to answer this question we take a comprehensive look at the lobbying expenditures and political connections of banks that were recipients of government support under the 2008 troubled asset relief program tarp we find that politically engaged firms were not only more likely to receive tarp funds but they also received a greater amount of tarp support and received the support earlier than firms that were not politically involved

small menu costs and large business cycles a macroeconomic model of monopoly i introduction the conflict between modern neoclassical and traditional keynesian theories of the business cycle centers upon the pricing mechanism in neoclassical models prices are fully flexible they represent the continuous optimization of economic agents and the continuous intersection of supply and demand in keynesian models prices are often assumed to be sticky they do not necessarily equilibrate all markets at all times one of the reasons for the resurgence of the equilibrium approach to macroeconomics has been the absence of a theoretical underpinning for this keynesian price stickiness this note shows that sticky prices can be both privately efficient and socially inefficient the business cycle results from the suboptimal adjustment of prices in response to a demand shock to the extent that policy can stabilize aggregate demand it can mitigate the social loss due to this suboptimal adjustment in some keynesian models prices are simply exogenously fixed 2 in others agents must set their prices in advance of the transaction date the act of altering a posted price is certainly costly these costs include such items as printing new catalogs and informing salesmen of the new price yet these menu costs are small and therefore generally perceived as providing only a weak foundation for these fixed price models however this inference is flawed small menu costs can cause large welfare losses the claim that price adjustment costs are small does not rebut the claim that they are central to understanding economic fluctuations

profiting from product harm crises in competitive markets product harm crises force managers to implement pricing strategies that optimally balance profitability with future potential costs of a recall we propose a stochastic differential game to investigate what should be the optimal competitive pricing strategies in such contexts in the proposed model firms strategically choose prices taking into account that any player in the market can be forced to recall large volume of products at random dates the characterization of the optimal pricing strategies yields novel managerial insights we first find that prices of risk prone products should be higher than prices of risk free products due to the addition of state dependent risk premia optimal pricing strategies differ depending on whether firms play nash or stackelberg furthermore we find that despite its leadership position the value function of the leader is lower than the value function of the follower finally we discover that long term profits of competing firms can increase with intensities of the jump processes governing product harm crises this surprising result happens because anticipating a product harm crisis softens price competition

regulation of capital flows effects on liquidity and the role of financial reporting quality abstract capital controls as restrictions on capital flows are a tool proposed as a cure to the destabilizing market movements of the 1970s i e tobin 1978 despite the criticism that they have received edwards 1999 capital controls resurfaced during the european financial crisis and the restrictions imposed on capital flows in cyprus and greece these were the first instances of capital control implementation in the european union s history and had various effects on firms financial positions by using a sample of eu countries and distinguishing between austerity and capital controls periods we assess the effects of capital controls on the stock liquidity of firms all of the sample countries have a common financial reporting framework international financial reporting standards ifrs and some of them implemented a range of different measures from less intensive such as increases in tax rates to more intensive such as the enforcement of capital controls in their effort to stabilize their economies for the task at hand we specifically engage two accounting determinants of information asymmetry namely conditional conservatism and the level of earnings management our results show that financial reporting quality as measured by higher conditional conservatism and lower earnings management is beneficial for liquidity however during the capital controls period the relation between conditional conservatism and liquidity becomes negative and this negative relation relates to less risky firms thus the negative relation between conditional conservatism and liquidity is likely due to investors keeping more conservative firms in their portfolios as a measure against the crisis

recent developments in dynamic advertising research a variety of continuous time differential functions have been developed to investigate dynamic advertising problems in business and economics fields since major dynamic models appearing before 1995 have been reviewed by a few survey papers we provide a comprehensive review of the dynamic advertising models published after 1995 which are classified into six categories i nerlove arrow model and its extensions ii vidale wolfe model and its extensions iii lanchester model and its extensions iv the diffusion models v dynamic advertising competition models with other attributes and vi empirical studies for dynamic advertising problems for each category we first briefly summarize major relevant before 1995 models and then discuss major after 1995 models in details we find that the dynamic models reviewed in this paper have been extensively used to analyze various advertising problems in the monopoly duopoly oligopoly and supply chain systems our review reveals that the diffusion models have not been used to analyze advertising problems in supply chain operations which may be a research direction in the future moreover we learn from our review that very few publications regarding dynamic advertising problems have considered the supply chain competition we also find that very few researchers have used the diffusion model to investigate the dynamic advertising problems with product quality as a decision variable and the pricing decision has not been incorporated into any extant lanchester model the paper ends with a summary of our review and suggestions on possible research directions in the future

empirical analysis of closed loop duopoly advertising strategies closed loop perfect equilibria in a lanchester duopoly differential game of advertising competition are used as the basis for empirical investigation two systems of simultaneous nonlinear equations are formed one from a general lanchester model and one from a constrained model two empirical applications are conducted in one involving coca cola and pepsi cola a formal statistical testing procedure is used to detect whether closed loop equilibrium advertising strategies are used by the competitors rather than open loop strategies in the second application involving anheuser busch and miller the general model is estimated results indicate that closed loop equilibria better explain dynamic advertising competition than do open loop equilibria also closed loop equilibrium advertising strategies implied by model estimates show that competitive advertising levels may or may not be monotonic in market share

welfare induced migration at state borders new evidence from micro data abstract this paper extends and synthesizes the various approaches used in the recent welfare migration literature to both offer the most comprehensive set of tests to date for welfare migration and to also determine the relative importance of short distance moves in welfare migration flows the current study follows on the finding of mckinnish mckinnish t importing the poor welfare magnetism and cross border welfare migration journal of human resources 2005 40 57 76 of welfare migration effects obtained by comparing welfare participation at state borders to state interiors this identification strategy is extended to micro data from the 1980 and 1990 decennial censuses and combined with the demographic comparisons used elsewhere in the welfare migration literature the signs and patterns of the estimates are consistent with the presence of welfare migration effects and the magnitudes of the estimates are consistent with the importance of short distance moves in welfare induced migration flows but most of the estimates are not statistically significant

immigration and welfare magnets this article investigates if the location choices made by immigrants when they arrive in the united states are influenced by the interstate dispersion in welfare benefits income maximizing behavior implies that foreign born welfare recipients unlike their native born counterparts may be clustered in the states that offer the highest benefits the empirical analysis indicates that immigrant welfare recipients are indeed more heavily clustered in high benefit states than the immigrants who do not receive welfare or than natives as a result the welfare participation rate of immigrants is much more sensitive to changes in welfare benefits than that of natives

welfare reform and the race to the bottom theory and evidence economists have argued that welfare migration leads to a race to the bottom in the choice of welfare benefits although a system of federal matching grants can remedy this problem the recent welfare reform law replaced the existing matching grant structure with block grants a policy change that appears undesirable to judge whether this critique of welfare reform is justified this paper evaluates the evidence in favor of a race to the bottom after explaining the theoretical effects of welfare migration the paper surveys the empirical evidence on the occurrence of such migration concluding that the evidence is mixed the discussion also considers recent empirical tests for strategic interaction which show that benefit levels in nearby states affect a given state s benefit choice the most plausible source of such interaction is a concern about welfare migration which leads policymakers to look at benefits in neighboring states when making their own choices judging that the evidence appears consistent with the existence of a race to the bottom the paper concludes that the demise of matching grants may be undesirable from a policy perspective