not all rivals look alike estimating an equilibrium model of the release date timing game a very serious game of strategy is at work a cross between chess and chicken which studio distribution chiefs play year round but with increasing intensity during the summer and holiday release period new york times december 6 1999 hubris hubris if you only think about your own business you think i ve got a good story department i ve got a good marketing department we re going to go out and do this and you don t think that everybody else is thinking the same way in a given weekend in a year you ll have five movies open and there s certainly not enough people to go around joe roth chairman of walt disney studios answering a question about the large number of major movies opening within days of each other los angeles times december 31 1996 i introduction the number of americans who go to the movies varies dramatically over the course of the year and sometimes more than doubles within a period of two weeks at the same time the first week accounts for almost 40 of the box office revenues of the average movie the combination of these two facts makes the timing of launching a new movie a major focus of attention for distributors of movies with virtually no subsequent price competition the movie s release date is one of the main short run vehicles by which studios compete with each other in this paper i develop and estimate a model of discrete games which allows me to analyze this release date timing game most empirical industry studies focus on price and quantity competition taking other product characteristics as given in many industries however prices play a very small role and competition is channeled through other product attributes the entertainment industry is a prime example competition among movies television programs or broadway shows is on nonmonetary product attributes such as content advertising and time therefore understanding competition in such industries requires a model that endogenizes some of these product attributes especially those that can be changed in the short run this paper provides a framework in which release decisions can be endogenized and nonprice competition can be analyzed the absence of price competition is useful because it allows the focus of the analysis to be on the timing dimension without relying on assumptions about the nature of the postrelease price competition 1 together with the frequent timing decisions associated with different movies this makes the motion picture industry quite attractive for empirical analysis of the timing game this industry however is not the only example in which timing decisions play a central role similar timing considerations are also important in the release decisions of books compact disks and other new products as well as in the scheduling decisions of major events television programs flight schedules and promotional sales 2 when taking on a new project distributors of movies typically plan for a friday release which falls within a relatively short window of time carefully chosen to match the type of the movie this makes the choice of the release date a very discrete one the exact friday within the season is generally determined by a strategic timing game played among distributors before each release season distributors scramble to release their movies on big holiday weekends when demand is high when doing so each distributor tries to release on the attractive holiday weekend and at the same time to deter competitors from doing the same the extent to which distributors are successful in doing so largely depends on the quality of the movies at their disposal and on the way they can compete with movies released by other studios thus modeling this timing game must account for the asymmetries among movies and for the variation in these asymmetries across release seasons specifically i develop and estimate a sequential move game with private information i assume that the observed release date decisions are the equilibrium outcome of such a game

central bank design abstract starting with a blank slate how could one design the institutions of a central bank for the united states this paper explores the question of how to design a central bank drawing on the relevant economic literature and historical experiences while staying free from concerns about how the fed got to be what it is today or the short term political constraints it has faced at various times the goal is to provide an opinionated overview that puts forward the trade offs associated with different choices and identifies areas where there are clear messages about optimal central bank design

mundell meets poole managing capital flows with multiple instruments in emerging economies abstract we study the optimal management of capital flows in a small open economy model with financial frictions and multiple policy instruments the paper reports two main findings first both foreign exchange intervention fxi and macroprudential policies are tools complementary to the monetary policy rate that can greatly reduce inflation and output volatility in a scenario of capital outflows second the optimal policy mix depends on the underlying shock driving capital flows fxi takes the leading role in response to foreign interest rate shocks while macroprudential policy becomes the prominent tool for domestic risk shocks these results blend the policy prescriptions of mundell 1968 who stated that policies should be paired with the objectives on which they have the most influence and poole 1970 who showed that the optimal policy instrument ultimately depends on the underlying shock hitting the economy

the quantitative analytics of the basic neomonetarist model this paper constructs a dynamic macroeconomic model with less than perfect price flexibility which has a classical side consistent with real business cycle theory augmented by investment adjustment costs increasing returns to scale and a new flexible formalization of imperfect competition something akin to the classical dichotomy is justified by a mode of approximation appropriate for a model in which one state variable adjusts quickly while another state variable adjusts slowly even with investment adjustment costs monetary expansions are found to raise the real interest rate the determinants of real rigidity and the macroeconomic rate of price adjustment are investigated copyright 1995 by ohio state university press

why do entrepreneurs leave the market an explanation from experimental economics in peru understanding the behavior of those who start or intend to start a business is vital for a country of entrepreneurs such as peru which registered the third highest rate of active entrepreneurship worldwide in 2011 according to the global entrepreneurship monitor gem however peru also registered in 2011 one of the highest business discontinuation rates among efficiency based and resource based economies this study represents the first effort to analyze certain behavioral characteristics risk aversion joy of winning overconfidence and tax collection of a sample of necessity driven entrepreneurs in lima peru these features might help explain in the first place the decision to become entrepreneurs but also the decision to leave the market in particular wefind that entrepreneurs are risk averse tend to overestimate their abilities and are willing to work harder when the gross pay is higher and are taxed than when it is lower and are not taxed altogether these traits may explain the high discontinuation rate of businesses in peru one of the highest in efficiency based and resource based economies

endogenous objectives and the evaluation of targeting rules for monetary policy recent research in monetary economics has followed the advice of mccallum 1988 robustness properties of a rule for monetary policy carnegie rochester conference series on public policy 29 173 203 and investigated the robustness properties of monetary policy rules by evaluating them in a variety of models evaluation across models is typically based on an exogenously specified loss function however the theory on which many recent monetary policy models are based implies that changes in the structure of the model also have consequences for the policy objectives the central bank should pursue objectives are endogenous not exogenous to the model in this paper i investigate the impact of endogenous objectives on the evaluation of targeting rules for monetary policy r 2005 elsevier b v all rights reserved

electricity tariff reforms welfare impacts and energy poverty implications abstract like other energy exporting countries brunei darussalam has pursued an energy pricing policy that sets energy prices below market rates the country introduced tariff reforms replacing the declining block tariff dbt scheme by an increasing block tariff ibt structure in 2012 the reform however was a rate structure change and not a subsidy removal and electricity tariffs in the country remained lower than the long run marginal cost the study investigated a subsidy removal scenario setting the tariff rate at the short run marginal cost which is around 200 higher than the current average tariff rate the results show that with ibt welfare losses and the increase in electricity expenditures would be high for non poor households for those living in urban areas and for those engaged in white collar jobs and it would have been the reverse had the government not introduced tariff rate structure reforms under price elasticity scenarios welfare losses would be high under inelastic than elastic demand case for both ibt and dbt cases electricity expenditures however would remain below 5 level far lower than the energy poverty threshold level of 10 of household income the tariff structure reform therefore shielded the lowest income households from potential impacts of subsidy removal

optimal monetary policy responses to relative price changes abstract an optimizing model with a flexible price sector and a sticky price sector is presented to analyze the effects of relative price changes on inflation fluctuations the relative price of the flexible price good represents a shift parameter of the new keynesian phillips curve the optimal monetary policy is to target sticky price inflation rather than a broad inflation measure although stabilizing the relative price around its efficient value is one of the appropriate goals of the central bank stabilizing sticky price inflation is sufficient for achieving this goal an optimal monetary policy for a small open economy is also discussed

nominal price rigidity money supply endogeneity and business cycles abstract this paper investigates the ability of nominal price rigidity to explain the co movement of inflation with the cyclical component of output observed in the post war u s data a dynamic general equilibrium model is constructed with the introduction of monopolistic competition and nominal price rigidity in a standard real business cycle model allowing for an endogenous money supply rule it is then demonstrated that sticky price models can explain the observed associations between movements in inflation and output much better than flexible price models this result depends little on whether money supply is assumed to be endogenous or not

reference point formation and new venture creation in this study we introduce reference point formation as an important antecedent of new venture creation based on considerations from prospect theory we hypothesize that individuals who generally and consistently set more aspiring reference points have a higher intention to form a new venture testing our hypothesis with entrepreneurs and managers results show that entrepreneurs indeed set more aspiring reference points therefore they might find themselves more often in a perceived loss situation which in turn increases their risk taking behavior following the predictions of prospect theory in testing entrepreneurial intention of business graduate students results are shown to be robust we discuss theoretical and managerial implications of the findings and develop avenues for future research

the cyclical behavior of the price cost markup countercyclical markups constitute the key transmission mechanism for monetary and other demand shocks in new keynesian models this paper tests the foundation of those models by studying the cyclical properties of the markup of price over marginal cost the first part of the paper studies markups in the aggregate economy and the manufacturing sector we use bils s 1987 insights for converting average cost to marginal cost but do so with richer data we find that all measures of markups are either procyclical or acyclical moreover we show that monetary shocks lead markups to fall with output the second part of the paper merges input output information on shipments to the government with detailed industry data to study the effect of demand changes on industry level markups industry level markups are found to be acyclical in response to demand changes

the case for inflation stability abstract we evaluate the case for inflation stabilization in a new keynesian nns model that includes various frictions capital accumulation and a variety of shocks in such a model price rigidity may provide the monetary authorities with an opportunity to improve upon the inefficient flexible price equilibrium via the suitable cyclical manipulation of real marginal costs we find that such an opportunity is of limited value and that a strong case for perfect inflation stabilization remains policies that tolerate a small amount of inflation variability may outperform perfect inflation targeting when capital adjustment costs are low and the monetary distortion is substantial but only if prices are very flexible

real wage rigidities and the new keynesian model most central banks perceive a trade off between stabilizing inflation and stabilizing the gap between output and desired output however the standard new keynesian framework implies no such trade off in that framework stabilizing inflation is equivalent to stabilizing the welfare relevant output gap in this paper we argue that this property of the new keynesian framework which we call the divine coincidence is due to a special feature of the model the absence of nontrivial real imperfections we focus on one such real imperfection namely real wage rigidities when the baseline new keynesian model is extended to allow for real wage rigidities the divine coincidence disappears and central banks indeed face a trade off between stabilizing inflation and stabilizing the welfare relevant output gap we show that not only does the extended model have more realistic normative implications but it also has appealing positive properties in particular it provides a natural interpretation for the dynamic inflation unemployment relation found in the data

the fallacy of only the strong survive the effects of extrinsic motivation on the persistence decisions for under performing firms abstract under performing firms persist even though existing theoretical perspectives indicate that they should be selected out of the market building upon threshold theory gimeno j folta t cooper a woo c 1997 survival of the fittest entrepreneurial human capital and the persistence of underperforming firms administrative science quarterly 42 750 783 and using staw s staw b m 1981 the escalation of commitment to a course of action academy of management review 6 4 577 587 theoretical model of commitment to a course of action we explore and test the factors that lead entrepreneurs to persist with under performing firms we found environmental munificence personal investment personal options previous organizational success and perceived collective efficacy impact the decision to persist with an under performing firm in addition extrinsic motivation moderates those relationships this research adds to the growing literature on highly persistent under performing firms and complements and extends threshold theory

the effect of link costs on simple buyer seller networks we examine experimentally how link costs affect the formation of links between a single seller and two potential buyers as well as the ensuing bargaining theory predicts that link costs lead to less competitive networks with one link rather than two links and that link costs do not affect the bargaining outcomes conditional on the network we find support for the first but not the second prediction 2 link networks form less frequently when there are link costs given that a 2 link network forms however a seller on average offers a smaller share of the pie to the buyers in the presence than in the absence of link costs this impact of link costs can be explained by a disutility for advantageous inequality on the part of the seller

real options logic revisited the performance effects of alternative resource allocation regimes we delineate three dimensions of resource allocation behavior that allow us to distinguish between real options logic and alternative resource allocation regimes sequencing low initial commitment and reallocation we then measure these in a product innovation context to test for the performance effect of real options logic vis a vis its alternatives sequencing which distinguishes dynamic allocation regimes more generally is associated with higher new product sales low initial commitment and reallocation do not show individual direct effects on new product sales however when assessed as a match we find that the fit between low initial commitment and reallocation yes yes no no increases performance significantly after controlling for such fit as well as sequencing we find no significant performance difference between real options logic and other regimes our findings imply that insufficient identification of real options logic picks up confounding effects which may provide an explanation for the inconclusive results in prior studies of real options and performance in addition to bounding the concept more precisely we contribute to theory by situating real options logic within the broader set of allocation regimes conducive to innovation performance in uncertain competitive markets

competitor orientation and the evolution of business markets competitor orientation i e the focus on beating the competition rather than maximizing profits seems to thrive in business situations despite being by definition suboptimal for profit maximizing firms our research explains how a competitor orientation can persist and even thrive in equilibrium in markets that reward only profits we apply evolutionary game theory to business markets where reputation matters we use three games that represent classic interactions in business marketing chicken to illustrate competition for product adoption the battle of the sexes channel negotiations and the prisoners dilemma pricing battles initial populations are assumed to have both profit maximizing managers and competitor oriented managers i e those who gain additional utility from beating others we demonstrate that a competitor orientation can survive in equilibrium despite selection that is based solely on profits using chicken we show that a competitor orientation thrives and can even overrun the population we use the battle of the sexes to show that a competitor orientation will overrun one population in a two sided negotiation e g all retailers in a retailer manufacturer dyad last using the prisoners dilemma we show that competitor orientation is not selected against we conclude that evolutionary profit driven selection pressures cannot be assumed to eliminate nonprofit maximizing behavior even when selection is based purely on profitability

darwin s invisible hand market competition evolution and the firm competition among firms has been suggested to reflect the ruthless logic of darwinian selection a free market is a struggle for survival in which successful firms survive and unsuccessful ones die this view appears to bolster three pillars of neoclassical economics 1 that economic actors are self interested 2 that self interest leads to public goods adam smith s invisible hand and 3 that together these lead to market optimization however this chain of reasoning leads to a paradox we show that the application of darwinian selection to competition among firms as opposed to among individuals invokes group selection which leads to exactly the opposite predictions notably altruism and the suppression of individual self interest we apply an alternative evolutionary model of economic competition multi level selection mls theory which integrates the effects of selection at both individual and group levels this approach reveals that while individuals may generally pursue their own self interest as in the standard evolutionary account humans also have evolved traits that as if led by an invisible hand steer our self interest to align with the good of the firm or wider society as well but it is the hand of darwin not smith

entrepreneurial exit as a critical component of the entrepreneurial process theoretical development abstract by demonstrating the importance of entrepreneurial exit to the entrepreneur the firm the industry and the economy i contend that our understanding of the entrepreneurial process is incomplete without the inclusion of entrepreneurial exit i define entrepreneurial exit and demonstrate how this conceptualization provides concepts that are unique from those addressed by researchers in other domains thus outlining a space for it within the literature in each phase of the entrepreneurial process i explore the development of an exit strategy reasons for exit and options for exit

the development of an infrastructure for entrepreneurship abstract this paper takes a macroperspective of entrepreneurship and focuses on the issues and events involved in constructing an industrial infrastructure that facilitates and constrains entrepreneurship this infrastructure includes 1 institutional arrangements to legitimate regulate and standardize a new technology 2 public resource endowments of basic scientific knowledge financing mechanisms and a pool of competent labor as well as 3 proprietary rd numerous entrepreneurial actors in the public and not for profit sectors play crucial roles it motivates one to examine the different roles played by these actors and how their joint contributions interact to develop and commercialize a new technology this in turn makes it possible to understand how the risk time and cost to an individual entrepreneur are significantly influenced by developments in the overall infrastructure for entrepreneurship it also explains why the entrepreneurs who run in packs will be more successful than those that go it alone to develop their innovations

inflation forecast targeting implementing and monitoring inflation targets abstract inflation targeting is shown to imply inflation forecast targeting the central bank s inflation forecast becomes an explicit intermediate target inflation forecast targeting simplifies both implementation and monitoring of monetary policy the weight on output stabilization determines how quickly the inflation forecast is adjusted towards the inflation target money growth or exchange rate targeting is generally inferior than inflation targeting and leads to higher inflation variability commitment to target rules may be better than commitment to instrument rules

optimistic behavior when a decision bias is costly an experimental test the existence of optimism when biased decisions are costly is investigated experimentally subjects make an informed guess about an exogenously determined event the outside temperature a couple of days later payments in the control group depend only on how close the guess was to the realized temperature while payments in the treatment group also depend positively on realized temperature the data show the treatment group subjects to guess higher temperatures that is higher payments compared with the control group results thus indicate that there is optimism also when a decision bias is costly jel c91 d81 d84

price level versus inflation targeting abstract this paper shows that price level targeting outperforms inflation targeting in the standard new keynesian model under the assumption that the central bank is forced to operate in an environment characterized by discretion in the benchmark case with no persistence in the shocks the commitment solution can be fully replicated intuitively price level targeting introduces history dependence and a stationary level of prices both of which are prominent features of the commitment solution

should monetary policy respond strongly to output gaps much recent monetary policy analysis has featured stochastic simulations with small structural macroeconomic models that include a spending vs saving is sector a price adjustment sector and an interest rate policy rule the first two are frequently specified so as to reflect optimizing behavior policy may or may not be specified as optimizing depending on the study s objectives some leading issues concern modifications to simple quantitative optimizing models that are needed to generate realistic degrees of persistence in inflation and output gap variables a major policy issue is whether it is desirable for monetary policy to respond strongly to the output gap the paper argues that the latter is unobservable and considers the implications of using a trend type measure while the true concept is of a type more in keeping with basic theory in such circumstances highly undesirable consequences are likely to ensue if policy responds strongly to the measured gap this abstract was borrowed from another version of this item

job matching and occupational choice this paper presents a model of job matching the generalizes the existing literature by allowing for different jobs types or occupations such differences affect the value of job specific experience inducing a career profile where certain types are sampled before others more specifically the analysis shows that it is optimal for the young and inexperienced to gravitate toward jobs exhibiting a certain kind of risk then after deriving the equilibrium job turnover rate for an economy in which people do not switch occupations panel data are used to estimate its underlying parameters the hypothesis that people do not switch occupations is rejected against the alternative that they do thus providing empirical support for the theoretical extension undertaken here

speed limit policies the output gap and optimal monetary policy in a standard new keynesian model a myopic central bank concerned with stabilizing inflation and changes in the output gap will implement a policy under discretion that replicates the optimal timeless perspective precommitment policy by stabilizing output gap changes the central bank imparts inertia into output and inflation that is absent under pure discretion even a fully optimizing i e non myopic central bank operating in a discretionary policy environment achieves better social outcomes if it focuses on inflation and changes in the output gap than are achieved under inflation targeting this abstract was borrowed from another version of this item

do your online friends make you pay a randomized field experiment on peer influence in online social networks demonstrating compelling causal evidence of the existence and strength of peer to peer influence has become the holy grail of modern research in online social networks in these networks it has been consistently demonstrated that user characteristics and behavior tend to cluster both in space and in time there are multiple well known rival mechanisms that compete to be the explanation for this observed clustering these range from peer influence to homophily to other unobservable external stimuli these multiple mechanisms lead to similar observational data yet have vastly different policy implications in this paper we present a novel randomized experiment that tests the existence of causal peer influence in the general population one that did not involve subject recruitment for experimentation of a particular large scale online social network we utilize a unique social feature to exogenously induce adoption of a paid service among a group of randomly selected users and in the process develop a clean exogenous randomization of treatment and control groups a variety of nonparametric semiparametric and parametric approaches ranging from resampling based inference to ego level random effects to logistic regression to survival models yield close to identical statistically and economically significant estimates of peer influence in the general population of a freemium social network our estimates show that peer influence causes more than a 60 increase in odds of buying the service due to the influence coming from an adopting friend in addition we find that users with a smaller number of friends experience stronger relative increase in the adoption likelihood due to influence from their peers as compared to the users with a larger number of friends our nonparametric resampling procedure based estimates are helpful in situations of networked data that violate independence assumptions we establish that peer influence is a powerful force in getting users from free to premium levels a known challenge in freemium communities this paper was accepted by sandra slaughter information systems

optimal continuation versus the timeless perspective in monetary policy the timeless perspective approach suggests that policymakers implement in each period policy actions conforming to a rule that would have been fully optimal to adopt in the distant past a motivating advantage is that policy henceforth would continue by recommending the same optimality conditions if reconsidered thereby enhancing credibility we argue that continuation can alternatively be achieved with better results on average in terms of policymakers objectives by implementing in each period the time invariant policy that is optimal from the viewpoint of the contemporary understanding of objectives and constraints but while ignoring the conditions that happen to prevail at the time

optimal simple and implementable monetary and fiscal rules welfare maximizing monetary and fiscal policy rules are studied in a model with sticky prices money and distortionary taxation the ramsey optimal policy is used as a point of comparison the main findings are the size of the inflation coefficient in the interest rate rule plays a minor role for welfare it matters only insofar as it affects the determinacy of equilibrium optimal monetary policy features a muted response to output interest rate rules that feature a positive response to output can lead to significant welfare losses the welfare gains from interest rate smoothing are negligible optimal fiscal policy is passive the optimal monetary and fiscal rule combination attains virtually the same level of welfare as the ramsey optimal policy

the relevance of stakeholder theory and social capital theory in the context of csr in smes an australian perspective the concept of business responsibility usually termed as corporate social responsibility csr originated in the early 1930s after the wall street crash of 1929 exposed corporate irresponsibility in large organisations the understanding of csr has evolved since then and its scope has now broadened from mere compliance to corporate laws to active alignment of internal business goals with externally set societal aspirations unfortunately the significance of this multidimensional concept within the small and medium enterprise sme sector has continued to be overshadowed by its application in large and multinational organisations more importantly this has led to the practice of judging smes which are experiencing increasing pressure to engage in social activities as if they are no different from their larger counterparts this study therefore investigates csr from the perspective of smes in australia without any theoretical presumptions and then comments on the relevance and applicability of the two theories that have been commonly used to investigate business responsibility namely stakeholder theory st and social capital theory sct the research findings indicate that csr within the sme sector is more aligned to the fundamentals of sct mainly owing to the unique resource and survival challenges that they face and which are arguably not so pronounced in large organisations

designing a simple loss function for central banks does a dual mandate make sense yes it makes a lot of sense this paper studies how to design simple loss functions for central banks as parsimonious approximations to social welfare we show both analytically and quantitatively that simple loss functions should feature a high weight on measures of economic activity sometimes even larger than the weight on inflation two main factors drive our result first stabilising economic activity also stabilises other welfare relevant variables second the estimated model features mitigated inflation distortions due to a low elasticity of substitution between monopolistic goods and a low interest rate sensitivity of demand the result holds up in the presence of measurement errors with large shocks that generate a trade o between stabilising inflation and resource utilisation and also when imposing a moderate degree of interest rate volatility

implications of applying solar industry best practice resource estimation on project financing abstract solar resource estimation risk is one of the main solar pv project risks that influences lender s decision in providing financing and in determining the cost of capital more recently a number of measures have emerged to mitigate this risk the study focuses on solar industry s best practice energy resource estimation and assesses its financing implications to the 27 mwp solar pv project study in brunei darussalam the best practice in resource estimation uses multiple data sources through the measure correlate predict mcp technique as compared with the standard practice that rely solely on modelled data source the best practice case generates resource data with lower uncertainty and yields superior high confidence energy production estimate than the standard practice case using project financial parameters in brunei darussalam for project financing and adopting the international debt service coverage ratio dscr benchmark rates the best practice case yields dscrs that surpass the target rates while those of standard practice case stay below the reference rates the best practice case could also accommodate higher debt share and have lower levelized cost of electricity lcoe while the standard practice case would require a lower debt share but having a higher lcoe

modern theories of entrepreneurial behavior a comparison and appraisal this paper compares and appraises three principal contemporary theories of entrepreneurial decision making neoclassical austrian and behavioral we employ theory appraisal criteria made available in fritz machlup s 1967 celebrated article on alternative theories of the firm the paper considers theories that treat sequences of behavior by which individual entrepreneurs reach decisions on two levels the discovery of profit opportunities and their exploitation we also consider how each theory characterizes the entrepreneur s decision making process by contrast with the posited behavior of other economic agents austrian theory is suited to explaining novel adventurous behavior at the discovery stage the algorithm for opportunity exploitation in both the neoclassical and austrian approaches is a single repertoire optimization rule neoclassical theory is situated in frictionless atomistic walrasian markets and emphasizes mathematical tractability austrian and behavioral theories conceive entrepreneurial acts taking place in market processes understood as complex institutional phenomena there are strong theoretical complementarities between austrian and behavioral approaches both approaches value descriptive accuracy though the behavioralists place more weight on operational tractability austrians and behavioralists share an interest in heuristics they emphasize the role of prior micro level knowledge at the discovery stage therefore more collaborative research in future between austrians and behavioralists should prove fruitful

on targeting frameworks and optimal monetary policy we show that speed limit policy a monetary policy strategy that focuses on stabilizing inflation and the change in the output gap consistently outperforms flexible inflation targeting and flexible price level targeting in empirical medium scale dsge models under discretionary policymaking in contrast to small scale new keynesian models this welfare ranking of the targeting frameworks is not overturned when inflation dynamics are mostly backward looking importantly the performance of the speed limit policy shows less sensitivity to its parameterization than other frameworks that target the inflation rate or the price level

optimal monetary policy with relative price distortions this paper analyzes optimal monetary policy in a sticky price model with calvo type staggered price setting in the paper the optimal monetary policy maximizes the expected utility of a representative household without having to rely on a set of linearly approximated equilibrium conditions given the distortions associated with the staggered price setting it shows that the complete stabilization of the price level is optimal in the absence of initial price dispersion while optimal inflation targets respond to changes in the level of relative price distortion in the presence of initial price dispersion

imperfect credibility and the zero lower bound as the nominal interest rate cannot fall below zero a central bank with imperfect credibility faces a significant challenge to stabilize the economy in a new keynesian model during a large recession we characterize the optimal monetary policy at the zero lower bound for the nominal interest rate if credibility is imperfect confronting monetary policy communication of the u s federal reserve and the swedish riksbank with such a framework the credibility of both institutions is shown to have been low in the aftermath of the 2008 economic crisis

revealing the preferences of the us federal reserve we use bayesian methods to estimate changes in us post war monetary policy in the smets and wouters model we perform the estimations by allowing for a break in monetary policy at the time of volcker s appointment as chairman this enables us to capture changes in the monetary policy regime introduced by volcker during the volcker greenspan period we find support for the assumption that monetary policy in the volcker greenspan period performed optimally under commitment our estimation strategy allows us to estimate the preferences of the us federal reserve in the volcker greenspan period where the main objective of policy appears to be inflation followed by interest rate stabilization output growth and interest rate smoothing we find that the great moderation of output growth is explained by a combination of two factors the decrease in the volatility of the structural shocks and the improved monetary policy conduct inflation stabilization however is mainly due to the change in monetary policy that took place at the beginning of volcker s mandate copyright 2010 john wiley sons ltd

controlling preferences for lotteries on units of experimental exchange in an experimental setting when outcomes are stochastically related to actions predictions of equilibrium behavior depend not only on the participants preference orderings of outcomes but also on their orderings of lotteries on outcomes as well we introduce and test a reward structure that can be utilized in any experimental setting to allow the experimenter to decree beforehand the subjects preferences for lotteries on experimental outcomes we show analytically that the proposed reward structure can induce subjects to behave as if they have the decreed preference function defined on experimental outcomes empirical tests using two different choice settings provide evidence to support this ability to control preferences

modeling the psychology of consumer and firm behavior with behavioral economics abstract marketing is an applied science that tries to explain and influence how firms and consumers behave in markets marketing models are usually applications of standard economic theories which rely on strong assumptions of rationality of consumers and firms behavioral economics explores the implications of the limits of rationality with the goal of making economic theories more plausible by explaining and predicting behavior more accurately while maintaining formal power this article reviews six behavioral economics models that are useful to marketing three models generalize standard preference structures to allow for sensitivity to reference points and loss aversion social preferences toward outcomes of others and preference for instant gratification the other three models generalize the concept of game theoretic equilibrium allowing decision makers to make mistakes encounter limits on the depth of strategic thinking and equilibrate by learning from feedback the authors also discuss a sp

on measuring the welfare cost of business cycles lucas 1987 argues that the gain from eliminating aggregate fluctuations is trivial following lucas a number of researchers have altered assumptions on preferences and found that the gain from eliminating business cycles are potentially very large however in these exercises little discipline is placed on preference parameters this paper estimates the welfare cost of business cycles allowing for potential time non separabilities in preferences where discipline is placed on the choice of preference parameters by requiring that the preferences be consistent with observed fluctuations in a model of business cycles that is a theoretical real business cycle world is constructed and the representative agent is then placed in this world the agent responds optimally to exogenous shocks given the frictions in the economy the agent s preference parameters along with other structural parameters are estimated using a bayesian procedure involving markov chain monte carlo methods two main results emerge from the paper first the form for the time non separability estimated in this paper is very different than the forms suggested and used elsewhere in the literature second the welfare cost of business cycles is close to lucas s estimate

the robustness and efficiency of monetary policy rules as guidelines for interest rate setting by the european central bank abstract this paper examines the implications of recent research on monetary policy rules for practical monetary policy making with special emphasis on strategies for setting interest rates by the european central bank ecb the paper draws on recent research and new simulations of a large open economy model to assess the efficiency of a simple benchmark rule in comparison with other proposed rules further it stresses new results on the robustness of monetary policy rules in which each rule that is optimal or good according to one model or researcher is tested for robustness by other researchers using different models because of the large increase in the number of economists focussing on econometric evaluation of monetary policy rules for the interest rate instrument and because of the parallel increase in the variety of models being developed for this purpose much more evidence is becoming available on the robustness of simple monetary policy rules for the interest rate than ever before

the role of sticky prices in an open economy dsge model a bayesian investigation in this paper we use a dynamic stochastic general equilibrium dsge model for an open economy to examine the role of sticky prices in explaining the joint behaviour of inflation and a fairly large set of macroeconomic variables we find that price stickiness is an important feature for firms active in the domestic export and import sectors even though the model embodies variable capital utilisation a working capital channel and a time varying inflation target we also document that price stickiness in all sectors is important even if the markup shocks are allowed to be autocorrelated although the implied average contract duration falls substantially under this assumption jel e40 e50 c11

screening and labor market flows in a model with heterogeneous workers we construct a monetary model in which workers are heterogeneous and productivity is worker specific resulting in time varying deviations between the average productivity of employed and unemployed workers we assume the worker specific component of productivity which we label as the worker s efficiency level is unobservable ex ante by firms and job search is nondirected by interviewing an unemployed worker firms can observe the worker s efficiency level workers with low overall productivity may be interviewed but not hired as firms screen these workers out during the interview process we show that screening amplifies the volatility of the exit rate from unemployment capturing the idea that firms become more selective in a recession reducing the vacancy yield relative to a model with homogeneous levels of efficiency following a negative productivity shock the

quantifying the impact of r d on pv project financing costs abstract energy technology research and development r d typically focuses on advancing the performance and reducing equipment and installation costs however such r d can also have significant indirect impacts on other factors incorporating the impact that r d activities have on financing costs can provide a more complete picture of the consequences of these decisions and may allow policymakers to make better decisions in this paper we discuss some historical examples of r d impacting financing costs in the solar energy sector summarize the areas of r d that can impact financing and describe methodological approaches that can be used to quantify the impact of r d on financing costs and as a result the levelized cost of energy lcoe we estimate that r d driven reductions in financing costs in the solar sector from current levels to low risk levels could reduce lcoe approximately 25 alternatively without the r d advances needed to prevent future risks and complications financing costs in the solar sector could increase by as much as 115

planned behaviour of tourism students entrepreneurial intentions in china this research aims to investigate the influence of planned behaviour and personal variables on entrepreneurial intention in order to explain and improve low entrepreneurial intention among tourism

quantifying and sustaining welfare gains from monetary commitment abstract our objectives are to quantify the stabilization welfare gains from commitment to examine how commitment to an optimal rule can be sustained as an equilibrium to find a simple interest rate rule that approximates the optimal commitment one we utilize an empirical micro founded euro area dsge model a quadratic approximation of household utility as the welfare criterion employing a nominal interest rate lower bound in contrast to previous studies we find significant commitment stabilization gains of around a 0 4 0 5 equivalent permanent consumption increase and with higher price stickiness gains over 2 we find that a simple optimized commitment rule responding to inflation and the real wage mimics the optimal one

a proclivity for entrepreneurship abstract despite intensive inquiry relatively little is known about the entrepreneur the central figure in entrepreneurship the question of how an individual who operates his or her own business differs from a corporate manager remains unanswered in addressing this question the primary purpose of this study was to investigate the potential of psychological constructs to predict a proclivity for entrepreneurship the research model includes three classic themes in the literature achievement motivation risk taking propensity and preference for innovation a survey of 767 small business owner managers and corporate managers was assembled from a 20 state region primarily the southeastern united states the participants completed a questionnaire composed of the achievement scale of the personality research form the risk taking and innovation scales of the jackson personality inventory and questions pertaining to numerous individual and organizational variables respondents were first divided into two groups managers and small business owner managers subsequently due to the often cited variations in entrepreneurs the owner managers were further categorized as either an entrepreneur or small business owner using the widely cited carland et al 1984 theoretical definitions entrepreneurs are defined by their goals of profit and growth for their ventures and by their use of strategic planning alternatively small business owners focus on providing family income and view the venture as an extension of their personalities in this study both groups of owner managers were simultaneously compared with managers using hierarchical set multinomial logit regression the results indicated that the psychological constructs are associated with small business ownership but with some important caveats as hypothesized those labeled entrepreneurs were higher in achievement motivation risk taking propensity and preference for innovation than were both the corporate managers and the small business owners this profile of the entrepreneur as a driven creative risk taker is consistent with much of the classic literature concerning the entrepreneur nonetheless not all of the owner managers fit this profile when compared with managers the small business owners demonstrated only a significantly higher risk taking propensity in terms of the constructs studied the small business owners were more comparable to managers than to entrepreneurs in addition to theoretical and methodological implications the results presented here have important implications for small business owner managers of both types a major issue is the connection between the owner s psychological profile and the characteristics of the venture including performance it would appear that psychological antecedents are associated with owner goals for the venture some owners will be more growth oriented than will others and performance should be assessed in light of the owner s aspirations for the venture moreover owners should be aware of their own personality sets including risk preferences which may be more or less suited to different venture circumstances including those with relatively high levels of risk planning in small businesses appears to enhance venture performance research has demonstrated the connections between psychological factors and planning behaviors in small businesses those labeled entrepreneurs in this study have goals of profit and growth and tend to engage in more planning an awareness of these psychological preferences and concomitant attention to planning behaviors have the potential to improve the performance of the venture irrespective of owner aspirations venture teaming is becoming more popular among entrepreneurs balanced venture teams appear to improve the chances of entrepreneurial success timmons 1990 but a common source of conflict among venture team members is inconsistent or ambiguous motives for the new venture awareness of venture partners psychological predispositions in areas such as risk taking could be used to identify and reconcile areas of potential conflict and enhance the planning process in the small firm in sum an individual s awareness of his or her psychological profile provides a number of advantages not only to existing entrepreneurs but also to aspiring entrepreneurs who should assess their perceived entrepreneurial opportunities against the backdrop of their psychological proclivity for entrepreneurship

monetary policy housing rents and inflation dynamics in this paper we study the effect of monetary policy shocks on housing rents our main finding is that in contrast to house prices housing rents increase in response to contractionary monetary policy shocks we also find that after a contractionary monetary policy shock rental vacancies and the homeownership rate decline this combination of results suggests that monetary policy may affect housing tenure decisions own versus rent in addition we show that with the exception of the shelter component all other main components of the consumer price index cpi either decline in response to a contractionary monetary policy shock or are not responsive these findings motivated us to study the statistical properties of alternative measures of inflation that exclude the shelter component we find that measures of inflation that exclude shelter have most of the statistical properties of the widely used measures of inflation such as the cpi and the price index for personal consumption expenditures but have higher standard deviations and react more to monetary policy shocks finally we show that the response of housing rents accounts for a large proportion of the price puzzle found in the literature

overconfidence and excess entry an experimental approach psychological studies show that most people are overconfident about their own relative abilities and unreasonably optimistic about their futures e g shelly e taylor and j d brown 1988 neil d weinstein 1980 when assessing their position in a distribution of peers on almost any positive trait like driving ability ola svenson 1981 income prospects or longevity a vast majority of people say they are above the average although of course only half can be if the trait is symmetrically distributed this paper explores whether optimistic biases could plausibly and predictably influence economic behavior in one particular setting entry into competitive games or markets many empirical studies show that most new businesses fail within a few years for example using plant level data from the u s census of manufacturers spanning 1963 1982 timothy dunne et al 1988 estimated that 61 5 percent of all entrants exited within five years and 79 6 percent exited within 10 years most of these exits are failures see also dunne et al 1989a 1989b d shapiro and r s khemani 1987

equilibrium play in large group market entry games coordination behavior is studied experimentally in a class of noncooperative market entry games featuring symmetric players complete information zero entry costs and several randomly presented values of the market capacity once the market capacity becomes publicly known each player must decide privately whether to enter the market and receive a payoff which increases linearly in the difference between the market capacity and the number of entrants or stay out payoffs for staying out are either positive giving rise to the domain of gains or negative giving rise to the domain of losses the major findings are substantial individual differences that do not diminish with practice aggregate behavior that is organized extremely well in both the domains of gains and losses by the nash equilibrium solution and variations in the population action strategies with repeated play of the stage game that are accounted for by a variant of an adaptive learning model due to roth and erev 1995

is the fed too timid monetary policy in an uncertain world estimates of the taylor rule using historical data from the past decade or two suggest that monetary policy in the u s can be characterized as having reacted in a moderate fashion to output and in

distinguishing the effect of overconfidence from rational best response on information aggregation this article studies the causal effect of individuals overconfidence and bounded rationality on information aggregation by using a new multiperiod game in which agents are rewarded for submitting accurate estimates of an unknown asset s value based on i their private information and ii others past estimates by carrying out laboratory sessions of this game in which subjects overconfidence is a treatment variable i find that overconfidence affects the information aggregation process by increasing the dispersion of estimates and decreasing the rate of estimates convergence however even when subjects are not overconfident qualitatively similar deviations from the fully rational model predictions are observed i show that this can be explained by subjects strategic response to errors the author 2008 published by oxford university press on behalf of the society for financial studies all rights reserved for permissions please email journals permissions oxfordjournals org oxford university press

monetary policy and labor market frictions a tax interpretation replicating the flexible price allocation in models with nominal rigidities and labor market frictions that lead to an inefficient matching of unemployed workers with job vacancies even if feasible is generally not desirable we characterize the tax instruments that implement the first best allocation and examine the trade offs faced by monetary policy if these tax instruments are unavailable our tax interpretation helps explain why the welfare cost of inefficient labor market search can be large while the incentive to deviate from price stability is small gains from deviating from price

managerial overconfidence and accounting conservatism managerial overconfidence overconfident managers overestimate ixwxuhuhwxuqviurpwkhluilupv lqyhvwphqwv 7kxv zh predict that overconfident managers will tend to accelerate good news recognition delay loss recognition and generally use less conservative accounting furthermore we test whether external monitoring helps to mitigate this effect using measures of both conditional and unconditional conservatism we find robust evidence of a negative relation between ceo overconfidence and accounting conservatism we further find that external monitoring does not appear to mitigate this effect our findings add to the growing literature on overconfidence and complements findings in schrand and zechman 2011 that overconfidence affects financial reporting behavior

monetary policy response to oil price shocks how should monetary authorities react to an oil price shock this paper shows that in a noncompetitive economy policies that perfectly stabilize prices entail large welfare costs hence explaining the reluctance of policymakers to enforce them the policy trade off is nontrivial because oil energy is an input to both production and consumption as welfare maximizing policies are hard to implement and communicate i derive a simple interest rate rule that depends only on observables but mimics the optimal plan in all dimensions the optimal rule is hard on core inflation but accommodates oil price changes

the entrepreneur s character life issues and strategy making abstract although entrepreneurs seem to engage little in formal planning strategy in entrepreneurial firms can exhibit identifiable patterns over time the strategic orientations of such firms are particularly likely to reflect the priorities of their entrepreneurial ceos while researchers have looked at entrepreneurial traits in order to explain business start ups and generic strategies little attention has been paid to possible interactions between entrepreneurs personal characteristics and the strategic options they choose to pursue this study links entrepreneurs strategy making processes to their life issues legacies of their past histories its finding suggests that an entrepreneurial firm will consistently pursue the strategic directions that most reflect the entrepreneur s set of life issues

personality characteristics of self employed an empirical study this paper is concerned with the personality characteristics of self employed most existing studies on personality characteristics of entrepreneurs concentrate on factors like age educational profile and motivations to become self employed there is a lack of significant empirical findings to claim that entrepreneurs are psychologically different from the general population based on a large sample of 14 846 individuals we compare self employed with the general population and with wage and salary earners we empirically show that entrepreneurs differ from the general population and wage and salary earners in a number of characteristics entrepreneurs are more individually oriented than the rest of the population individual responsibility and effort are distinguishing characteristics when asked about important qualities that children can be encouraged to learn at home entrepreneurs answer that it is important to teach children an ethic of working hard except for the latter characteristic the same holds if we compare self employed with wage and salary earners

risk preferences and the economics of contracts t he literature of risk aversion and risk preference is one of the richest sources of ad hoc assumptions concerning tastes n o significant behavior has been illuminated by assumptions of differences in tastes such theories have been a convenient crutch to lean on when the analysis has bogged down they give the appearance of considered judgement yet really have only been ad hoc arguments that disguise analytical failures george j stigler and gary s becker 1977 p 89

risk uncertainty and entrepreneurship evidence from a lab in the field experiment theory predicts that entrepreneurs have distinct attitudes toward risk and uncertainty but empirical evidence is mixed to better understand the unique behavioral characteristics of entrepreneurs and the causes of these mixed results we perform a large lab in the field experiment comparing entrepreneurs to managers a suitable comparison group and employees n 2 288 the results indicate that entrepreneurs perceive themselves as less risk averse than managers and employees in line with common wisdom however when using experimental incentivized measures the differences are subtler entrepreneurs are only found to be unique in their lower degree of loss aversion and not in their risk or ambiguity aversion this combination of results might be explained by our finding that perceived risk attitude is not only correlated to risk aversion but also to loss aversion overall we therefore suggest using a broader definition of risk that captures this unique feature of entrepreneurs their willingness to risk losses this paper was accepted by uri gneezy behavioral economics

price setting and attainment of equilibrium posted offers versus an administered price abstract the operation of the posted offer market with advance production environment mestelman and welland 1988 appropriately parameterized differs from that of the market entry game selten and guth 1982 appropriately presented only in terms of price setting we establish the effect of this difference in price setting on attainment of the competitive equilibrium allocation while controlling for effects relating to the presentation of the market entry game and to the stationarity or non stationarity of environment free posting of prices promotes convergence to the competitive equilibrium allocation while the typical market entry game data can be characterized as displaying cycling prices

monetary policy trade offs in an estimated open economy dsge model this paper studies the trade offs between stabilizing cpi inflation and alternative measures of the output gap in ramses the riksbank s estimated dynamic stochastic general equilibrium dsge mode

optimal consumption portfolio rules with biased beliefs abstract we extend the model of optimal consumption and asset allocation by incorporating the biased agent beliefs overconfidence and overextrapolation it predicts that overconfidence entails overconsumption lower overconfidence induced hedging demand and overinvestment in the risky assets while overextrapolation induces underconsumption higher overextrapolation induced hedging demand and underinvestment our model provides an alternative explanation for an agent s mis consumption hedging and portfolio misallocation from the perspective of biased beliefs

using founder status age of firm and company growth rate as the basis for distinguishing entrepreneurs from managers of smaller businesses abstract this article examined the empirical implications of definitions that distinguish entrepreneurs from managers of smaller businesses based on their founder nonfounder status and their firms ages and growth rates the best distinctions were created using 1 founders 2 younger companies and 3 the combination of founders and younger companies growth indicators did not discriminate well the two founder based distinctions shared a profile of entrepreneurs as running smaller companies with higher return on assets roa than nonentrepreneurial managers having shorter tenure in their positions having previous work experience in the same industry and having higher risk taking propensity the distinction based on age of firm also showed strong ability to discriminate among respondents the field of entrepreneurship has few longer standing controversies than the one surrounding the question of what distinguishes entrepreneurs from nonentrepreneurial managers in trying to separate entrepreneurs from managers of smaller businesses in particular questions exist concerning the key defining differences definitions of entrepreneurship have utilized founder versus nonfounder status company age and company growth rates as distinguishing elements entrepreneurs have been defined by one or more of the following elements being a company founder running a young company and running or desiring to run a high growth company this article tests these elements to see if they provide a clearly differentiated profile of entrepreneurs it uses the founder nonfounder distinction for example to see if this distinction functions well in identifying a number of company financial and personal attributes that associate with founders rather than nonfounders the approach advocated here borrows from configurational theory as it has emerged in the fields of strategic management and organizational theory meyer tsui and hinings 1993 to look for a constellation of variables that group together in depicting entrepreneurs if founder status company age and growth rate are useful definitions of entrepreneurship they should point to a configuration of factors that together comprise a profile of an entrepreneur in predicting what configuration of factors will emerge this article adopts a strategic adaptation perspective low and macmillan 1988 to argue that differences between entrepreneurs and nonentrepreneurs spring from divergent thought processes and personal attributes of individuals who face the question of whether and how to enter business for themselves using the founder nonfounder distinction we view individuals who decide to start a new business rather than buy or manage an existing one as more likely to have previously founded a business have experience in the same industry be higher in risk taking show more type a behavior and be more growth oriented findings from a sample of ceos in the smaller business association of new england indicated that neither of the two tests based on high growth as a definition of entrepreneurial firms proved adept at creating a distinct entrepreneurial profile distinctions based on founder status younger firm status and founder of a younger firm status on the other hand proved effective in creating such profiles dimensions shared by the two founder based definitions of entrepreneurship included company attributes of smaller size and higher roa and ceo attributes of shorter tenure on the job previous experience in the same industry and higher risk taking propensity additional attributes showed in the younger company founder group including company attributes of lower liquidity and higher sales growth and personal attributes of having previously founded a business ranking roa as a high priority and external locus of control the distinction based on younger firm status performed well in discriminating among respondents in this study in addition to sharing several variables with the founder based distinctions it alone identified younger firms ceos as having lower education and type a tendencies and higher expectations of children succeeding them in the business as one implication of these findings knowledge of the profiles may help people who deal with these groups to have a better sense of how to interact with and respond to them the young company founder profile for example presents a picture of a relatively small company experiencing high rates of sales growth squeezing all it can from its assets in the face of high comparative liabilities because the company is young its founder has relatively short tenure but may well have had previous experience in the industry and have previously founded a company personally the founder is a risk taker who is external in locus of control and places high priority on roa if this configuration holds firm in future research those who deal frequently with entrepreneurs such as bankers venture capitalists consultants accountants and lawyers will be able to use a few identifying factors such as founder status and age of firm to draw reasonable inferences about a host of other characteristics of their clients the attempt to profile the entrepreneur in recent years thought to be futile may yet prove viable

the effects of perceived and actual financial literacy on financial behaviors a combined measure of financial literacy that includes both a test score of actual financial literacy and a self rating of overall financial literacy is used in this study we find that the combined measure appears to provide greater understanding about how financial literacy affects financial behaviors a large national survey of u s adults and households n 28 146 was used to investigate how this overall financial literacy is likely to change financial behaviors across five financial topics credit cards investments loans insurance and financial advice for each topic we include 4 5 financial behaviors 22 in total to demonstrate the consistency of the findings within and across topics although we are unable to identify a causal relationship the results from the probit analysis show that both actual and perceived financial literacy appear to influence financial behaviors and that perceived financial literacy may be as important as actual financial literacy jel d14 g00