infonet-economy

RATIONALE: People often face decisions that pit self-interested behavior aimed at maximizing personal reward against normative behavior such as acting cooperatively, which benefits others. The threat of social sanctions for defying the fairness norm prevents people from behaving overly selfish. Thus, normative behavior is influenced by both seeking rewards and avoiding punishment....

Reducing tax evasion is a key challenge for governments around the world, particularly in developing countries. This paper presents a methodology to generate information to optimize audit strategies. Randomly selected taxpayers receive a deterrence message. Comparing their subsequent tax payments to a control group allows estimating what types of taxpayers are more likely to respond...

Public attention has focused on how the launch of the national health exchanges could impact the types of risks who initially enroll and thereby affect future premiums and enrollment. We introduce simple dynamics into a standard model of insurance under adverse selection to show that such "initial conditions" can indeed matter. When firms are price-takers, the market can...

The mispricing of marketing performance indicators (such as brand equity, churn, and customer satisfaction) is an important element of arguments in favor of the financial value of marketing investments. Evidence for mispricing can be assessed by examining whether or not portfolios composed of firms that load highly on marketing performance indicators deliver excess returns....

Recent field evidence suggests a positive link between overconfidence and innovative activities. In this paper we argue that the connection between overconfidence and innovation is more complex than the previous literature suggests. In particular, we show theoretically and experimentally that different forms of overconfidence may have opposing effects on innovative activity. While...

This paper analysis the global distribution of art collections and collectors´ biases with respect to the origin of artworks. Employing a unique dataset we find that the greatest number of private art collections are located in Europe, North America and Asia. There are relatively few collections in Latin America and Africa. The artists whose oeuvres dominate the markets for collected...

The process of economic reforms launched in 1978, and gradually extended until current days, has catapulted China into a stellar growth trajectory that has proven highly resilient. In this paper, we estimate the effect on economic development of China’s industrial policy, in particular, the establishment of Special Economic Zones (SEZ), a salient economic reform. We use data from a...

In this article, we generalize the classical Edgeworth series expansion used in the option pricing literature. We obtain a closed-form pricing formula for European options by employing a generalized Hermite expansion for the risk neutral density. The main advantage of the generalized expansion is that it can be applied to heavy-tailed return distributions, a case for which the...