improving prediction market forecasts by detecting and correcting possible over reaction to price movements abstract we examine the impact of price trends on the accuracy of forecasts from prediction markets in particular we study an electronic betting exchange market and construct independent variables from market price odds time series from 6058 individual markets a dataset consisting of over 8 4 million price points using a conditional logit model we find that a systematic relationship exists between trends in odds and the accuracy of odds implied event probabilities the relationship is consistent with participants over reacting to price movements in particular in different time segments of the market increasing and decreasing odds lead respectively to under and over estimation of odds implied probabilities we develop a methodology to detect and correct the erroneous forecasts associated with these trends in odds in order to considerably improve the quality of forecasts generated in prediction markets

exploring decision makers use of price information in a speculative market we explore the extent to which the decisions of participants in a speculative market effectively account for information contained in prices and price movements the horse race betting market is an ideal environment to explore these issues a conditional logit model is constructed to determine winning probabilities based on bookmakers closing prices and the time indexed movement of prices to the market close we incorporate a technique for extracting predictors from price odds curves using orthogonal polynomials the results indicate that closing prices do not fully incorporate market price information particularly information that is less readily discernable by market participants

issues in measuring industrial r d abstract effective government science and technology policy requires a reliable database on industrial innovation this paper examines a number of issues concerning the measurement of industrial r d by analyzing the relationship between data reported in the nsf census rd 1 survey the basis for the official government r d statistics and data reported in two other sources firms 10 k reports and a federal procurement database we advance and test a hypothesis which accounts for systematic discrepancies between rd 1 and 10 k based estimates of company r d we also develop estimates of the extent of measurement error reflected in the various measures of r d and suggest some modifications to the rd 1 survey

bargaining and waning commitments this paper presents a non cooperative two agent two period complete information bargaining model that introduces gradual concession as observed for example in labor negotiations the capacity of concession may affect the agents payoffs in a non monotonic way since its change may cause the timing of agreement to change d 2006 elsevier b v all rights reserved

accounting for change in national systems of innovation a friendly critique based on the u s case abstract this paper advances a friendly critique of the national systems of innovation approach and offers some suggestions for its future development i argue that the approach has difficulty accounting for bounded change in national systems i review three recent changes in the u s innovation system the internet boom and bust of the late 1990s and early 2000s the response to the terrorist attacks of september 11 2001 and the acceleration of productivity growth since the mid 1990s in order to assess the strengths and weaknesses of the framework in this respect future research might be enriched at least in the case of large national innovation systems by absorbing concepts developed in other strands of institutionalist literature such as intercurrence and embeddedness

inter temporal price discrimination and satiety driven repeat purchases abstract we discuss customers inter temporal repeat purchasing behavior when their valuations for a product are subject to transitory satiety the satiety can be increased by purchases and gradually decays in between repeat purchasing customers optimize their inter temporal purchasing schedules including the purchasing time and the purchasing quantity to maximize their time average payoffs and the monopoly seller chooses the optimal cyclic pricing policy to maximize its time average profit we derive the conditions under which firms earn the same profit under the cyclic pricing policy as under the fixed price pricing policy when the inter temporal price discrimination is more profitable we show that the optimal pricing policy depends on the relation between customer valuation and customer satiety our results imply that overlooking the effect of transitory satiety tends to cause firms to underprice we also consider extensions in which there exists a fixed purchasing cost or in which purchasing and consumption decisions are separate

antitrust and technological innovation in the us ideas institutions decisions and impacts 1890 2000 abstract the history of antitrust policy in the us as it relates to technological innovation exhibits major swings every few decades between favoring concentration and favoring deconcentration this paper sketches for each period the contending ideas that frame antitrust technology policy debates the salience of these ideas in the larger antitrust policy process the institutions for agenda setting and decision making in this area the policy decisions themselves and more speculatively the impacts of these decisions on technological innovation and industrial development the paper concludes with a preliminary attempt to identify the cyclical secular and static processes that have shaped the history of this policy area and to use this analysis to inform future policy makers

reputation and imperfect information abstract a common observation in the informal literature of economics and elsewhere is that is multistage games players may seek early in the game to acquire a reputation for being tough or benevolent or something else but this phenomenon is not observed in some formal game theoretic analyses of finite games such as selten s finitely repeated chain store game or in the finitely repeated prisoners dilemma we reexamine selten s model adding to it a small amount of imperfect or incomplete information about players payoffs and we find that this addition is sufficient to give rise to the reputation effect that one intuitively expects

policy review section in this policy review section gerry stoker of the institute of local government studies presents a critical review of the role of urban development corporations udcs in comparing the experience of the udcs consideration is given to the varying nature of the land and property market in each udc area to the relationship with local authorities and other local bodies and the regeneration strategies pursued by the udcs this is followed by an assessment of the impact of the udcs in economic social and political terms in the second article john britton of the university of toronto examines the theoretical case for interventionist public policies to assist the innovation process in small and medium sized enterprises these arguments are supported by a review of the experience of various national support programmes introduced in the uk in particular the manufacturing advisory service introduced in 1978 and the design advisory service launched in 1982

inside information in a betting market inside information concerning a risky asset is presumed to be beneficial to its holder measurement of the impact and benefit of inside information is difficult because its use for financial gain is often illegal ideally one would like to investigate and compare two mutually isolated groups one with and the other without access to inside information the australian horse betting market offers such an opportunity it is found that even exposure to second hand inside information effects a change in behavior a rise in payoffs and adds power and significance to the prediction of race results copyright 1995 by royal economic society

government r d expenditure and space empirical evidence from five industrialized countries abstract in all industrialized countries several ministries pursue technology policies but only in germany and france are there special ministries for research and technology carrying out explicit technology policy in the usa great britain and france in particular public spending on defense is most relevant technologically in this study this kind of unintended technology policy will be referred to as implicit only a minor part of national r d activity is initiated with regional goals in mind the major part by far aims for national competitiveness the central hypothesis of this paper is that government r d spending generates unintended spatial effects which are far more consequential than the intended ones this study attempts to explain the phenomenon the technology policies of the five major industrialized countries usa germany japan france and great britain will be analyzed and the general tendency of governments to spatially cluster their r d assistance will be discussed the empirical section of this paper focuses on the relationship between government r d spending and employment in the high technology sector

bargaining and reputation the paper develops a reputation based theory of bargaining the idea is to investigate and highlight the influence of bargaining postures on bargaining outcomes a complete information bargaining model a la rubinstein is amended to accommodate irrational types who are obstinate and indeed for tractability assumed to be completely inflexible in their offers and demands a strong independence of procedures result is derived after initial postures have been adopted the bargaining outcome is independent of the fine details of the bargaining protocol so long as both players have the opportunity to make offers frequently the latter analysis yields a unique continuous time limit with a war of attrition structure in the continuous time game equilibrium is unique and entails delay consequently inefficiency the equilibrium outcome reflects the combined influence of the rates of time preference of the players and the ex ante probabilities of different irrational types as the probability of irrationality goes to zero delay and inefficiency disappear furthermore if there is a rich set of types for both agents the limit equilibrium payoffs are inversely proportional to their rates of time preference

modelling of insurers rating determinants an application of machine learning techniques and statistical models abstract in recent years financial regulations such as basel ii and solvency ii have highlighted the utility of credit risk assessments through internal rating systems particularly for estimating the probability of default pd of credit exposures financial entities must provide clear definitions of their internal ratings thus it is possible to associate internal grades to some external rating scale and then to attribute the external pd to the internal grades however this mapping must be based on an extensive comparison of both internal and external rating criteria a substantial body of research has been undertaken of rating determinants for banks and large industrial corporations however the academic literature on insurers rating determinants is very limited and fitness measures have not traditionally been provided this paper proposes a three step model to analyse rating determinants and it is applied to a sample of european insurance firms firstly a feature selection process is performed that mixes statistical bayesian and machine learning approaches from selected features several multivariate models are run both in the statistical field mda logit models and the decision trees research area c4 5 cart their accuracies are compared through bootstrapping strategies and a final model is proposed results show that the feature selection process selects a small group of relevant attributes regarding multivariate models the cart gini oblique decision tree appears to be a good strategy providing a quite satisfactory equilibrium between precision and comprehensibility

providing support for decisions based on time series information under conditions of asymmetric loss abstract in an experiment decision makers used time series information on the past demand for products to decide on production levels to meet the next period s demand either shortages cost more per unit than surpluses or the asymmetry of losses was in the opposite direction the decision makers were either i unsupported ii provided with statistical point forecasts of the next period s demand or iii asked to estimate probability distributions of next period s demand using the fractile method the decisions were inferred from these distributions decomposition providing statistical forecasts led to decisions incurring significantly lower expected costs than those achieved by the unsupported decision makers however the decomposition procedure did not significantly reduce expected costs because contrary to earlier evidence the fractile method generally led to distributions that were too wide and flat decision makers in both treatments i and ii also performed significantly better when shortages were more costly than surpluses

r d appropriability opportunity and market structure new evidence on some schumpeterian hypotheses one of the largest bodies of literature in the field of industrial organization is devoted to the interpretation and testing of several hypotheses advanced by joseph schumpeter 1950 concerning innovation and industrial market structure one set of hypotheses focuses on the role of firm size as a determinant of r d spending and the rate of technological advance another set focuses on the effect of market concentration on r d and technological advance in this paper we reexamine the latter set of hypotheses at the industry level using new data on r d appropriability and technological opportunity collected by levin et al 1984 in a survey of r d executives in 130 industries

bargaining with imperfect commitment abstract we study the effect of imperfect commitment in noncooperative two person bargaining games by establishing the reputation for being stubborn a player sometimes commits to her initial demand becoming unable to change her demands or to accept an inferior offer from her opponent when the probability of being stubborn is small the set of equilibria is shown to be small and agreement may be reached immediately despite the possibility of stubbornness a player has greater bargaining power when she is more patient and or is more likely to be stubborn journal of economic literature classification number c78

efficient market adjustment of odds prices to reflect track biases biases that reflect the economic worth of uncertain contingent claims occur in many financial markets parimutuel betting at racetracks is one such market with ample data to investigate such biases the total wagering market is about 10 billion per year in north america the configuration of racetracks leads to an advantage for horses breaking from post positions near the rail especially for tracks with small circumferences can the bettor make profits with knowledge of this bias to investigate we utilize data from 3 345 races involving over 300 million in wagers from 1982 1983 and 1984 on win and exotic bets at exhibition park in vancouver where this bias should be strong the results indicate that the bias exists but the prices adjust to fully negate the potential gains from the bias

revocable commitment and sequential bargaining in this paper the author presents a noncompetitive bargaining model which unifies the two well known but distinct bargaining games due to j nash 1953 and a rubinstein 1982 moreover the author explores the robustness of the equilibrium set of these two bargaining games to a particular kind of perturbation in the commitment structure of the underlying extensive forms from a different perspective and interpretation of the model the author examines and studies the relationship between the equilibrium commitment levels and the costs to the bargainers of revoking their respective commitments copyright 1992 by royal economic society

identifying innovators for the cross selling of new products with recent advances in information technology most companies are amassing extensive customer databases the wealth of information in these databases can be useful in identifying those customers most likely to purchase a new product and in predicting when this adoption may take place this can assist database marketers in determining when individuals should be targeted for the promotion of a new product which may increase the efficiency of manufacturing and distribution and assure a faster return on investments for this purpose we propose a model that considers the timing of past purchases across multiple product categories and produces estimates of each customer s propensity of ever purchasing in a particular product category and of the timing of their purchases the model is designed to help managers identify the best prospects for a new offer in one of multiple categories based on generalizations obtained from past offers the proposed model also provides projections of aggregate penetration for new brands within the database based on sample estimates

the u s national innovation system origins and prospects for change in recent years the concept of national innovation systems has attained considerable currency and interest although a precise definition of a national innovation system is difficult analyses of the japanese and u s national innovation systems have implicitly defined them as the array of public and private institutions and organizations within an economy that fund and perform rd nelson 1993 interest in national innovation systems stems in part from a growing acknowledgment of the contributions to national economic welfare of superior performance in the commercialization and adoption of new technologies this awareness in turn has been heightened by the innovative and economic strength of postwar japan

searching for positive returns at the track a multinomial logic model for handicapping horse races this paper investigates fundamental investment strategies to detect and exploit the public s systematic errors in horse race wager markets a handicapping model is developed and applied to win betting in the pari mutuel system a multinomial logit model of the horse racing process is posited and estimated on a data base of 200 races a recently developed procedure for exploiting the information content of rank ordered choice sets is employed to obtain more efficient parameter estimates the variables in this discrete choice probability model include horse and jockey characteristics plus several race specific features hold out sampling procedures are employed to evaluate wagering strategies a wagering strategy that involves unobtrusive bets with a side constraint eliminating long shot betting appears to offer the promise of positive expected returns even in the presence of the typically large track take encountered at thoroughbred racing events

are universities and university research under threat towards an evolutionary model of university speciation according to some universities and academic research are under threat as we move towards a more knowledge intensive economy academics face pressures to link their work more closely to economic needs with potentially adverse long term consequences this has been characterised as a fundamental change in the social contract between universities and the state with the latter now having more specific expectations regarding the outputs sought from the former others have described this as a transition from mode 1 to mode 2 knowledge production or in terms of the emergence of a triple helix relationship between universities government and industry this article critically examines these claims setting them in historical context we analyse the history of the university and its evolving functions as it responded to changing external demands adopting an evolutionary model we describe how different university species emerged and co evolved each with different emphases on the functions of teaching research and contributing to the economy and society turning to the current environment facing universities we identify the main drivers for change and assess their likely impact before arriving at conclusions about the future of the university and university research what we are witnessing today appears to be not so much the appearance of a new and hence worrying phenomenon but more a shift back towards a social contract for the university closer to the one in effect before the second half of the twentieth century one which as it did then may bring about the emergence of new university species

a bargaining model based on the commitment tactic abstract this paper studies a one shot simultaneous move bargaining game each bargainer makes a partial commitment a share of the unit size cake that she would like to get which can later be revoked at some cost to the player the payoffs are defined in part by the nash bargaining solution where the feasible utility set is affected by the players partial commitments under certain assumptions on the two cost of revoking functions we establish that the model has a unique nash equilibrium it is shown that a player s equilibrium share of the cake is strictly increasing in her marginal cost of revoking a partial commitment an application of our model selects a unique equilibrium in nash s demand game journal of economic literature classification number c78

effects of government financial incentives on firms innovation performance in china evidences from beijing in the 1990s abstract the purpose of this paper is to investigate the effects of chinese government financial incentives on firms innovation performance during the nation s initial economic transition period in the mid 1990s through a large scale empirical survey of more than 1000 chinese manufacturing firms the empirical evidences show that whereas the major government financial incentives such as special loans and tax credits were positively influential to innovative economic performance of firms direct earmarks not only failed to enhance innovative economic performance it sometimes negatively affected it surprisingly the findings show that all financial incentives of governments were unrelated to the patents of either high tech or general firms and direct earmarks affected the patents of these firms negatively although not to a significant degree this indicates that the centrally planned funding system of the 1990s was ineffective for enhancing technological progress for chinese manufacturing firms the study results imply that the chinese government should further increase the role of market force in its reforms a more market driven model by developing more s t initiatives to match the strategic directions of different enterprises particularly soes is recommended

delay in multilateral bargaining under complete information abstract this paper analyzes a complete information infinite horizon multilateral bargaining model in which one player bargains with each of the other players one at a time and binding cash offer contracts are used to govern transactions under a weak stationarity condition on equilibrium strategies we characterize the set of equilibria for the game we show that when players are sufficiently patient significant delay in reaching agreements may emerge and this delay can become longer quickly as the number of involved parties rises indeed when the number of bargainers is large perpetual disagreement can occur in equilibrium journal of economic literature classification numbers c78 d23 d62

a review of literature and hypotheses on new technology based firms abstract this paper examines the existing literature on new technology based firms in an attempt to understand how such companies contribute to the vitality of an economy and to see which variables are critical in enabling them to do so from recent research efforts we have drawn together a set of hypotheses and organized them around four central questions 1 what do new firms contribute to the economy 2 what factors contribute to the success of such enterprises 3 in what cultural contexts do new businesses succeed and 4 which government policies are effective in stimulating and supporting new companies we found that existing studies suggest 1 that new technology based firms contribute significantly to an economy in terms of exports employment taxes paid research and development and innovations 2 that the founders of these new businesses tend to have a strong entrepreneurial heritage a development rather research oriented background and a high need to achieve and are young and highly educated 3 that sector differences may be a more important influence on company location than are regional policies and 4 that no one government program has proven itself to be more than marginally successful in stimulating industrial innovation

misunderstanding of the binomial distribution market inefficiency and learning behavior evidence from an exotic sports betting market abstract this paper uses the setting of a volleyball game and an exotic sports betting on the point difference of volleyball games to test whether people correctly understand the probabilities related to outcomes of a process which follows a binomial distribution we find that people consistently underestimate the probabilities of outcomes that correspond to extreme ends of the distribution this is consistent with the extremeness aversion bias documented in decision making studies whereas previous studies on the extremeness aversion bias find the existence of the bias in a consumer choice setting we document that this bias also exists in an investment setting we find evidence of learning behavior over time however it is not sufficient to eliminate the bias

predation reputation and entry deterrence abstract economists often argue that predatory practices are irrational since there exist cheaper or more certain means to gain or maintain a monopoly our gametheoretic equilibrium analysis suggests that if a firm is threatened by several potential entrants then predation may be rational against early entrants even if it is costly when viewed in isolation because it yields a reputation which deters other entrants asymmetric information plays a crucial role in our analysis since it provides the rationale for entrants to base their expectations of the firm s future behavior on its past actions the analysis also suggests methods to treat general reputational phenomena

new firm survival institutional explanations for new franchisor mortality why do some new firms succeed and others fail economists argue that new firms fail because entrepreneurs inefficiently manage production and organizational design williamson 1985 sociologists e g granovetter 1985 have typically viewed this explanation as undersocialized and argue that institutional legitimacy must also be considered to explain the survival of new firms this paper examines the survival of 1292 new franchisors established in the united states from 1979 1996 the results show that institutional legitimacy adds to economic explanations for the survival of new franchisors and suggests the importance of a properly socialized explanation

time is money costing the impact of duration misperception in market prices abstract we explore whether and to what extent traders in a real world financial market where participants judgements are reportedly well calibrated are subject to duration misperception to achieve this we examine duration misperception in the horserace betting market we develop a two stage algorithm to predict horses winning probabilities that account for a duration related factor that is known to affect horses winning prospects the algorithm adapts survival analysis and combines it with the conditional logit model using a dataset of 4736 horseraces and the lifetime career statistics of the 53 295 horses running in these races we demonstrate that prices fail to discount fully information related to duration since a horse s last win we show that this failure is extremely costly since a betting strategy based on the predictions arising from the model shows substantial profits 932 5 percent and 16 27 percent with and without reinvestment of winnings respectively we discuss the important implications of duration neglect in the wider economy

unemployment insurance and unemployment spells this paper tests the effects of the level and length of unemployment insurance benefits on unemployment durations the paper particularly studies individual behavior during the weeks just prior to when benefits lapse higher unemployment insurance benefits are found to have a strong negative effect on the probability of leaving unemployment however the probability of leaving unemployment rises dramatically just prior to when benefits lapse individual data are used with accurate information of spell durations and the level and length of benefits the semiparametric estimation techniques used in the paper yield more plausible estimates than conventional approaches and provide useful diagnostics copyright 1990 by the econometric society

a reputation refinement without equilibrium the economic literature concerning agents reputations has grown steadily since the seminal work of kreps milgrom roberts and wilson 2 early work focused on how incomplete information leads to equilibria that are vastly different but more intuitive than those possible in the complete information game recently however game theorists have been studying how incomplete information might refine the set of equilibria 3 one important class of games is that in which a single long run agent plays a simultaneous move stage game with a sequence of opponents each of whom plays only once yet observes all previous play fudenberg and levine 1989 study the reputation of the long run player in this type of game they argue that the most reasonable equilibrium is the one which the long run player most prefers their intuition is sustained when one perturbs the game with the stackelberg strategy fudenberg and levine show that in the perturbed game the equilibrium payoffs of the long run player are bounded below by a number that converges to the stackelberg payoff

deadline effects and inefficient delay in bargaining with endogenous commitment abstract bilateral sequential negotiators delay agreements until a deadline if a player that rejects an offer is subsequently committed not to accept any poorer proposal and if the common discount factor is close enough to one journal of economic literature classification numbers c7 c78 j52

flexibility trap a case analysis of u s and japanese technological choice in the digital watch industry abstract this paper examines the widely shared belief that a flexible system of transactions is faster in adapting to major technological change than an inflexible system borrowing some ideas from elster ulysses and the sirens 1979 explaining technical change 1983 nuts and bolts for social sciences 1989 cambridge university press cambridge this paper contends that the flexible system may lead to a myopic selection of technology because it delays the technological turning point if the important part of the technological evolution is generated by the aggregation of the choice patterns of firms this paper investigates the case history of technological choice in the u s and japanese digital watch industries in the 1970s the paper s conclusions beg a reconsideration of current and previous thinking on industrial policy and technology strategy

large firms in the production of the world s technology an important case of non globalisation us patenting by 686 of the world s largest manufacturing firms shows that their share of the world s production of technology is less than their share of r d activities and varies greatly amongst sectors in most cases the technological activities of these large firms are concentrated in their home country the characteristics of which influence the volume and trends in their technological activities much more strongly then the international component of these activities at the same time these large firms are major elements in the volume and the pattern of sectoral specializations in their home countries technological activities

towards an economic theory of the multiproduct firm this paper outlines a theory of the multiproduct firm important building blocks include excess capacity and its creation market imperfections and the peculiarities of organizational knowledge including its fungible and taut character a framework is adopted in which profit seeking firms are seen to diversify in order to avoid the high transactions costs associated with using various markets to trade the services of various specialized assets neoclassical explanations of the multiproduct firm are shown to be seriously deficient

insider trading herding behaviour and market plungers in the british horse race betting market crafts n f r crafts 1985 economica 52 295 304 suggested that a pronounced shortening of bookmaker odds in horse race betting markets could indicate the presence of insider traders this paper uses the shin h s shin 1993 economic journal 103 1141 53 measure of the incidence of insider trading at the beginning of the betting period opening prices and at the end of it starting prices to distinguish the shortening of odds caused by insider trading from that caused by herding behaviour it turns out that significant positive betting returns are achieved when shortening odds are accompanied by a rise in the shin measure when they are accompanied by a fall returns are negative suggesting herd behaviour

not only the tragedy of the commons misperceptions of bioeconomics an exploratory search for explanations of mismanagement of renewable resources other than the theory of the commons was performed by an experiment eighty three subjects mostly recruited from the fisheries sector in norway were asked to manage the same simulated virgin fish stock one subject at a time exclusive property rights were granted to rule out the commons problem despite perfect property rights subjects consistently overinvested leading to an average overcapacity of 60 the resource was reduced by an average of 15 below its optimal level overcapacity and tough quotas resemble the situation in norwegian and other fisheries during the past few decades the likely explanation of the observed behaviour is misperception of feedback a phenomenon that occurs in many experimental studies of dynamically complex systems such misperceptions add a new and important dimension to the problem of renewable resource management beyond the commons problem

leaving teaching in the uk a duration analysis in this paper the authors analyze the decision by teachers to leave the profession their results affirm the importance of relative earnings in the tenure and turnover decisions of teachers the econometric modeling approach used yields important insights into the appropriateness of adopting a flexible semiparametric specification of the duration dependence structure and of the unobserved heterogeneity distribution in duration models copyright 1995 by royal economic society

simultaneous offers and the inefficiency of bargaining a two period example abstract it is shown that the pareto optimal outcomes in a two period simultaneous move bargaining model violate forwards induction rationality when the players are sufficiently patient this bargaining model describes a situation where a principal is represented by an agent whose flexibility is restricted hence a bargaining process with such agents can create costly delays the result also provides another example of the power of forwards induction and stability

u s technological leadership where did it come from and where did it go abstract during the quarter century following the second world war the united states was the world s most productive economy by virtually all measures and the technological leader across a very broad front this paper is concerned with the sources of u s technological leadership during that era and the reasons for the erosion of that leadership it is proposed that there were two distinguishable components of post war u s technological dominance one was a lead in mass production industries and this was of long standing the other was leadership in high technology industries due to massive american investments in science and technology eduction and research and development and this was new the u s advantage in mass production industries eroded when after bretton woods the world became a common market the u s preeminence in high technology industries diminished as other countries matched u s investments in science and technology it is argued that since the late 1960s the major industrial nations are bound together technologically as never before