This paper investigates how subjects determine minimum selling prices for lotteries. We design an experiment where subjects have at every moment an incentive to state their minimum selling price and to adjust the price if they believe that the price that they stated initially was not optimal. We observe frequent and sizeable price adjustments. We find that random pricing models can not explain the observed price patterns. We show that earlier prices contain information about future price adjustments. We propose a model of Stochastic Pricing that offers an intuitive explanation for these price adjustment patterns.
"Four types of “economics” relevant for institutional analysis are distinguished: Standard Neoclassical Economics; Socio-Economics or Social Economics; New Institutional Economics; and Psychological Economics (often misleadingly called Behavioural Economics). The paper argues that an extension of Neoclassical Economics with elements from other social sciences (including political science, sociology, psychology, law and anthropology) is fruitful to explain institutions because it allows us to maintain the strength ofnthat approach. Social Economics can play an important role helping to overcome the limitations of Neoclassics. However, it should become more concrete, integrate what is useful in Neoclassics, and should seriously engage in empirical research."
This paper argues that the “Economics of Crime” concentrates too much on punishment as a policy to fight crime, which is unwise for several reasons. There are important instances in which punishment simply cannot reduce crime. Several feasible alternatives to punishment exist, such as offering positive incentives or handing out awards for law abiding behavior. These alternative approaches tend to create a positive sum environment. When people appreciate living in a society that is to a large extent law abiding, they are more motivated to observe the law.
Gegenwärtig spielt sich in der Ökonomie eine beinahe revolutionäre Entwicklung ab. Die direkte empirische Erfassung des subjektiven Wohlbefindens fordert die traditionelle Ökonomie heraus, inspiriert sie zu neuen Einsichten und eröffnet neue Wege der wissenschaftlichen Forschung. Ansatz und Möglichkeiten der ökonomischen Analyse des Glücks werden aufgezeigt und anhand von zwei spezifischen Anwendungen illustriert. Der Zusammenhang zwischen Einkommen und Lebenszufriedenheit wird wesentlich durch Anspruchsniveaus, mit denen Lebensumstände beurteilt werden, bestimmt. Die Anspruchsniveaus bilden sich dabei über soziale Vergleiche und Gewöhnungsprozesse heraus. Der Lebenszufriedenheitsansatz wird als neue Methode zur Bewertung öffentlicher Güter präsentiert. Die kurze Diskussion der »Glückspolitik« aus einer konstitutionellen Perspektive legt eine vergleichende institutionelle Analyse des subjektiven Wohlbefindens nahe. Die Glücksrevolution in der Ökonomie steht erst am Anfang. Weitere Einsichten für die Suche nach den Institutionen, die den Menschen am besten erlauben, ihre Vorstellungen vom guten Leben zu verfolgen, sind in der Zukunft zu erwarten.
Using a two-sector endogenous growth model, this paper explores how productivity shocks in the goods and human capital producing sectors contribute to explaining aggregate cycles in output, consumption, investment and hours. To contextualize our findings, we also assess whether the human capital model or the standard real business cycle (RBC) model better explains the observed variation in these aggregates. We find that while neither of the workhorse growth models uniformly dominates the other across all variables and forecast horizons, the two-sector model provides a far better fit to the data. Some other key results are first, that Hicks-neutral shocks explain a greater share of output and consumption variation at shorter-forecast horizons whereas human capital productivity innovations dominate at longer ones. Second, the combined explanatory power of the two technology shocks in the human capital model is greater than the Hicks-neutral shock in the RBC model in the medium- and long-term for output and consumption. Finally, the RBC model outperforms the two-sector model with respect to explaining the observed variation in investment and hours.
Future events are uncertain by their very nature. Therefore, people's risk preferences are likely to play a role in the valuation of allegedly guaranteed future outcomes. We show that future uncertainty conjointly with people's proneness to nonlinear probability weighting generates a unifying framework for explaining many anomalies in intertemporal choice, such as hyperbolic discounting and subadditivity of discount factors. Moreover, our approach implies that higher uncertainty of future prospects increases the hyperbolicity of discount rates, suggesting that institutional deficiencies such as lack of contract enforcement, may be a source ofnhyperbolic discounting behavior. Based on an experiment with monetary incentives, we show that people's risk taking behavior is indeed a significant determinant of their time discounting behavior: Greater departures from linear probability weighting predict a stronger decline in impatience on the level of individual behavior.
The Austrian Social Security Database (ASSD) is a matched firm-worker data set, which records the labor market history of almost 11 million individuals from January 1972 to April 2007. Moreover, more than 2.2 million firms can be identified. The individual labor market histories are described in the following dimensions: very detailed daily labor market states and yearly earnings at the firm-worker level, together with a limited set of demographic characteristics. Additionally the ASSD provides some firm related information, such as geographical location and industry affiliation. This paper is a short description of this huge data base and intended for people using this data in their own empirical work.
Momentum in developed countries' stock market index returns can be exploited to form portfolios of excess returns on foreign currencies as relatively high past foreign stock market returns signal a foreign currency appreciation. Two risk factors extracted from the stock index momentum based currency portfolio returns explain more than 80 percent of their cross-sectional variation. In contrast to currency risk factors constructed from forward discount sorted currency portfolios, these risk factors are not related to business cycle or liquidity risk. But high currency risk premia are associated with relatively deep financial integration and a high level of risk sharing.
This paper analyzes a model of oligopolistic competition with ongoing investment. It incorporates the following models as special cases: incremental investment, patent races, learning-by-doing, and network externalities. We investigate circumstances under which a firm with low costs or high quality will extend its initial lead through further cost-reducing or quality-improving investments. In many commonly-studied oligopoly games, such investments are strategic substitutes. We derive a new comparative statics result that applies to games with strategic substitutes, and we use the result to derive conditions under which leading firms invest more than lagging firms. We show that the conditions are satisfied in a variety of commonly-studied oligopoly models. We also highlight plausible countervailing effects from two distinct sources. First, leading firms may find it more costly than others to achieve the same increment to their state. This force is particularly salient inmany models of patentn races, where firms make research investments in an attempt to find a new technology that delivers a given level of cost or quality. Second, countervailing effects may arise in dynamic games with more than two firms are sufficiently patient.
Die Verhandlungen innerhalb der OECD zu einem multilateralen Abkommen ueber Investitionen (MAI) sind gescheitert. Damit werden Direktinvestitionen gegenwaertig weiterhin durch bilaterale Vertraege und durch einige wenige multilaterale Abkommen geregelt. In Zukunft ist jedoch weiterhin damit zu rechnen, daß diese durch ein allgemeines Rahmenwerk nach Vorlage des MAI ersetzt werden. Der vorliegende Aufsatz erlaeutert zunaechst die bestehenden multilateralen Rahmenbedingungen der WTO und der OECD. Anschließend werden die wesentlichen Inhalte des Vertragsentwurfs zum MAI vorgestellt und aus oekonomischer Sicht diskutiert. Ich komme zu der Einschaetzung, daß in einem zukuenftigen Investitionsabkommen (i) wettbewerbspolitische Inhalte, (ii) Ausnahmeregeln in bezug auf wenig industrialisierte Laender und (iii) ein differenzierter Investitionsbegriff enthalten sein sollten. Als Forum fuer ein multilaterales Investitionsabkommen bietet sich die WTO an.
