Aleksander Berentsen, Samuel Huber, Alessandro Marchesiani, Free-riding on Liquidity, In: Working paper series / Department of Economics, No. No. 32, 2011. (Working Paper)
Do financial market participants free-ride on liquidity? To address this question, we construct a dynamic general equilibrium model where agents face idiosyncratic preference and technology shocks. A secondary financial market allows agents to adjust their portfolio of liquid and illiquid assets in response to these shocks. The opportunity to do so reduces the demand for the liquid asset and, hence, its value. The optimal policy response is to restrict (but not eliminate) access to the secondary financial market. The reason for this result is that the portfolio choice exhibits a pecuniary externality: An agent does not take into account that by holding more of the liquid asset, he not only acquires additional insurance but also marginally increases the value of the liquid asset which improves insurance to other market participants. |
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Yeon-Koo Che, Jinwoo Kim, Konrad Mierendorff, Generalized reduced-form auctions: A network-flow approach, In: Working paper series / Department of Economics, No. 31, 2013. (Working Paper)
We develop a network-flow approach for characterizing interim-allocation rules that can be implemented by ex post allocations. Our method can be used to characterize feasible interim allocations in general multi-unit auctions where agents face capacity constraints, both ceilings and floors. Applications include a variety of settings of practical interest, ranging from individual and group-specific capacity constraints, set-aside sale, partnership dissolution, and government license reallocation. |
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Margit Osterloh, Bruno Frey, Input Control and Random Choice: Improving the Selection Process for Journal Articles, In: Working paper series / Department of Economics, No. No. 25, 2011. (Working Paper)
The process by which scholarly papers are selected for publication in a journal is faced with serious problems. The referees rarely agree and often are biased. This paper discusses two alternative measures to evaluate scholars. The first alternative suggests input control. The second one proposes that the referees should decide only whether a paper reaches a minimal level of quality. Within the resulting set, each paper should be chosen randomly. This procedure has advantages but also disadvantages. The more weight that is given to input control and random mechanism, the more likely it is that unconventional and innovative articles are published. |
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Rafael Lalive, Armin Schmutzler, Auctions vs Negotiations in Public Procurement: Which Works Better?, In: Working paper series / Department of Economics, No. No. 23, 2011. (Working Paper)
Public agencies rely on two key modes to procure goods and services: auctions and direct negotiations. The relative advantages of these two modes are still imperfectly understood. This paper therefore studies public procurement of regional passenger railway services in Germany, where regional agencies can use auctions and negotiations to procure regional passenger rail services. This offers the unique opportunity to assess the two procurement modes within the same institutional and legal framework. We first characterize the decisions of the agency in a simple reduced form framework of negotiations and auctions. This analysis suggests accounting for the endogeneity of the choice of procurement mode by estimating the mode of procurement, quantity and price simultaneously. We then test this framework using information on lines that were auctioned and lines that were directly negotiated with the former monopolist. Results indicate (i) endogeneity of procurement choice can be fully characterized by observed line characteristics; (ii) frequency of service is 16 percent higher on lines that were auctioned compared to lines that were negotiated, and (iii) the procurement price is 25 percent lower on auctioned lines than on those with direct negotiations. Taken together, these results indicate a significant efficiency enhancing effect of auctions. |
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Franziska Barmettler, Ernst Fehr, Christian Zehnder, Big experimenter is watching you! Anonymity and prosocial behavior in the laboratory, In: Working paper series / Department of Economics, No. No. 27, 2011. (Working Paper)
Social preference research has received considerable attention in recent years. Researchers have demonstrated that the presence of people with other-regarding preferences can have important implications in many economic dimensions. However, it is important to be aware of the fact that the empirical basis of this literature relies to a large extent on experiments that do not provide anonymity between experimenter and subject. It has been argued that this lack of experimenter-subject anonymity may create selfish incentives to engage in seemingly other-regarding behavior. If this were the case these experiments would overestimate the importance of social preferences. Previous studies provide mixed results and methodological differences within and across studies make it dificult to isolate the impact of experimenter-subject anonymity on prosocial behavior. In this paper we use a novel procedure that allows us to examine the impact of the exact same ceteris-paribus variation in anonymity on behavior in three of the most commonly used games in the social preference literature. Our data reveals that introducing experimenter-subject anonymity has only minor, insignificant, effects on prosocial behavior. |
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Kevin E Staub, Rainer Winkelmann, Consistent estimation of zero-inflated count models, In: Working paper series / Socioeconomic Institute, No. No. 0908, 2011. (Working Paper)
Applications of zero-inflated count data models have proliferated in health economics. However, zero-inflated Poisson or zero-inflated negative binomial maximum likelihood estimators are not robust to misspeci*fication. This paper proposes Poisson quasi-likelihood estimators as an alternative. These estimators are consistent in the presence of excess zeros without having to specify the full distribution. The advantages of the Poisson quasi-likelihood approach are illustrated in a series of Monte Carlo simulations and in an application to the demand for health services. |
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Bruno Frey, Margit Osterloh, Rankings games, In: Working paper series / Department of Economics, No. No. 39, 2011. (Working Paper)
Research rankings based on publications and citations today dominate governance of academia. Yet they have unintended side effects on individual scholars and academic institutions and can be counterproductive. They induce a substitution of the “taste for science” by a “taste for publication”. We suggest as alternatives careful selection and socialization of scholars, supplemented by periodic self-evaluations and awards. Neither should rankings be a basis for the distributions of funds within universities. Rather, qualified individual scholars should be supported by basic funds to be able to engage in new and unconventional research topics and methods. |
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Ernst Fehr, Karla Hoff, Tastes, Castes, and Culture: The influence of society on preferences, In: Working paper series / Department of Economics, No. No. 26, 2011. (Working Paper)
Economists have traditionally treated preferences as exogenously given. Preferences are assumed to be influenced by neither beliefs nor the constraints people face. As a consequence, changes in behaviour are explained exclusively in terms of changes in the set of feasible alternatives. Here we argue that the opposition to explaining behavioural changes in terms of preference changes is illfounded, that the psychological properties of preferences render them susceptible to direct social influences, and that the impact of “society” on preferences is likely to have important economic and social consequences. |
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Olivier Ledoit, Sébastien Lotz, The Coexistence of Commodity Money and Fiat Money, In: Working paper series / Department of Economics, No. No. 24, 2011. (Working Paper)
In reaction to the monetary turmoil created by the financial crisis of September 2008, both legislative and constitutional reforms have been proposed in different Countries to introduce Commodity Money alongside existing National Fiat Currency. A thorough evaluation of the Economic consequences of these new proposals is warranted. This paper surveys some of the existing knowledge in Monetary and Financial Economics for the purpose of answering the significant Economic questions raised by these new political initiatives. |
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Sebastian Kube, Michel Maréchal, Clemens Puppe, The Currency of Reciprocity - Gift-Exchange in the Workplace, In: Working paper series / Institute for Empirical Research in Economics, No. No. 377, 2011. (Working Paper)
What determines reciprocity in employment relations? We conducted a controlled field experiment to measure the extent to which monetary and non-monetary gifts affect workers’ performance. We find that non-monetary gifts have a much stronger impact than monetary gifts of equivalent value. We also observe that when workers are offered the choice, they prefer receiving money but reciprocate as if they received a non-monetary gift. This result is consistent with the common saying, "it’s the thought that counts". We underline this point by showing that also monetary gifts can effectively trigger reciprocity if the employer invests more time and effort into the gift’s presentation. |
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Sandro Favre, The Impact of Immigration on the Wage Distribution in Switzerland, In: Working paper series / Department of Economics, No. No. 22, 2011. (Working Paper)
Recent immigrants in Switzerland are overrepresented at the top of the wage distribution in high and at the bottom in low skill occupations. Basic economic theory thus suggests that immigration has led to a compression of the wage distribution in the former group and to an expansion in the latter. The data confirm this proposition for high skill occupations, but reveal effects close to zero for low skill occupations. While the estimated wage effects are of considerable magnitude at the tails of the wage distribution in high skill occupations, the effects on overall inequality are shown to be negligible. |
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Stefan Staubli, Josef Zweimüller, Does raising the retirement age increase employment of older workers?, In: Working paper series / Department of Economics, No. 20, 2012. (Working Paper)
Two pension reforms in Austria increased the early retirement age from 60 to 62 for men and from 55 to 58.25 for women. The reforms reduced early retirement by 18.9 percentage points among affected men aged 60-62 and by 22.3 percentage points among affected women aged 55-58.25. The associated increase in employment was merely 6.8 percentage points among men and 10.1 percentage points among women. The reforms had large spillover effects to the unemployment insurance program but negligible effects on disability insurance claims. Specifically, unemployment increased by roughly 10 percentage points both among men and women. Spillover effects had substantial fiscal implications. Absent spillover effects, the reduction of net government expenditures would have amounted to 264 million Euros per year. Due to higher unemployment insurance claims and associated foregone income tax revenues the actual reduction was only 148 million Euros. High-wage and healthy workers carried the bulk of the fall in net government expenditures. Low-wage and less healthy workers generated much less government savings as they either continue to retire early via disability pensions or bridge the gap to regular retirement by drawing unemployment benefits. |
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Jacob Goeree, Alexey Kushnir, On the Equivalence of Bayesian and Dominant Strategy Implementation in a General Class of Social Choice Problems, In: Working paper series / Department of Economics, No. No. 21, 2011. (Working Paper)
We consider a standard social choice environment with linear utilities and independent, one-dimensional, private values. We provide a short and constructive proof that for any Bayesian incentive compatible mechanism there exists an equivalent dominant strategy incentive compatible mechanism that delivers the same interim expected utilities for all agents. We demonstrate the usefulness and applicability of our approach with several examples. Finally, we show that the equivalence between Bayesian and dominant strategy implementation breaks down when utilities are non-linear or when values are interdependent, multi-dimensional, or correlated. |
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Rafael Lalive, Michael Morlok, Josef Zweimüller, Applying for jobs: Does ALMP participation help?, In: Working paper series / Department of Economics, No. No. 19, 2011. (Working Paper)
This paper calculates the impact of Active Labour Market Programmes through the use of three new indicators measuring the application performance of the unemployed. These indicators can be measured repeatedly and therefore allow the usage of Panel Regression methods, cancelling out any unobserved individual heterogeneity. To implement the new approach, data on 30,000 applications has been collected. Using this data, a large positive effect for unemployed with a long term unemployment forecast was estimated. For unemployed without such a forecast, the effect is much smaller. The paper also shows that the new evaluation approach fulfils the requirements of a good controlling instrument: It is accurate, detailed, non-intrusive, inexpensive and therefore easy to keep up to date, easy to understand and communicate. |
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Andreas Hefti, On Uniqueness and Stability of symmetric equilibria in differentiable symmetric games, In: Working paper series / Department of Economics, No. No. 18, 2011. (Working Paper)
Higher-dimensional symmetric games become of more and more importance for applied micro- and macroeconomic research. Standard approaches to uniqueness of equilibria have the drawback that they are restrictive or not easy to evaluate analytically. In this paper I provide some general but comparably simple tools to verify whether a symmetric game has a unique symmetric equilibrium or not. I distinguish between the possibility of multiple symmetric equilibria and asymmetric equilibria which may be economically interesting and is useful to gain further insights into the causes of asymmetric equilibria in symmetric games with higher-dimensional strategy spaces. Moreover, symmetric games may be used to derive some properties of the equilibrium set of certain asymmetric versions of the symmetric game. I further use my approach to discuss the relationship between stability and (in)existence of multiple symmetric equilibria. While there is an equivalence between stability, inexistence of multiple symmetric equilibria and the unimportance of strategic effects for the comparative statics, this relationship breaks down in higher dimensions. Stability under symmetric adjustments is a minimum requirement of a symmetric equilibrium for reasonable comparative statics of symmetric changes. Finally, I present an alternative condition for a symmetric equilibrium to be a local contraction which is more general than the conventional approach of diagonal dominance and yet simpler to evaluate than the eigenvalue condition of continuous adjustment processes. |
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Christian Ewerhart, Optimal Design and p-Concavity, In: Working paper series / Institute for Empirical Research in Economics, No. No. 409, 2011. (Working Paper)
Some of the most beautiful results in mechanism design depend crucially on Myerson's (1981) regularity condition. E.g., the second-price auction with reserve price is revenue maximizing only if the type distribution is regular. This paper offers two main results. First, an interpretation of regularity is developed in terms of being the next to fail. Second, using expanded concepts of concavity, a tight sufficient condition on the density function is formulated. New examples of parameterized distributions are shown to be regular. Applications include standard design problems, optimal reserve prices, the analysis of bidding data, and multidimensional types. |
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Christian Ewerhart, Cournot games with biconcave demand, In: Working paper series / Department of Economics, No. 16, 2014. (Working Paper)
Biconcavity is a simple condition on inverse demand that corresponds to the ordinary concept of concavity after simultaneous parameterized transformations of price and quantity. The notion is employed here in the framework of the homogeneous-good Cournot model with potentially heterogeneous firms. The analysis leads to unified conditions, respectively, for the existence of a pure-strategy equilibrium via nonincreasing best-response selections, for existence via quasiconcavity, and for uniqueness of the equilibrium. The usefulness of the generalizations is illustrated in cases where inverse demand is either "nearly linear" or isoelastic. It is also shown that commonly made assumptions regarding large outputs are often redundant. |
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Bruno Frey, Tullock challenges: happiness, revolutions and democracy, In: Working paper series / Department of Economics, No. No. 15, 2011. (Working Paper)
Gordon Tullock has been one of the most important founders and contributors to Public Choice. Two innovations are typical “Tullock Challenges”. The first relates to method: the measurement of subjective well-being, or happiness. The second relates to digital social networks such as Facebook, Twitter, or to some extent Google. Both innovations lead to strong incentives by the governments to manipulate the policy consequences. In general “What is important, will be manipulated by the government”. To restrain government manipulation one has to turn to Constitutional Economics and increase the possibilities for direct popular participation and federalism, or introduce random mechanisms. |
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Lasse Steiner, Bruno Frey, Imbalance of World Heritage List: Did the UNESCO Strategy Work?, In: Working paper series / Department of Economics, No. No. 14, 2011. (Working Paper)
The official intention of the UNESCO World Heritage List is to protect the global heritage. However, the imbalance of the distribution of Sites according to countries and continents is striking. Consequently, the World Heritage Committee launched the Global Strategy for a Balanced, Representative and Credible World Heritage List in 1994. To date, there have not been any empirical analyses conducted to study the impact of this strategy. This paper shows that the imbalance did not decrease and perhaps increased over time, thus reflecting the inability of the Global Strategy to achieve a more balanced distribution of Sites. |
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Andreas Kuhn, Inequality perceptions, distributional norms, and redistributive preferences in East and West Germany, In: Working paper series / Department of Economics, No. No. 09, 2011. (Working Paper)
This paper studies differences in inequality perceptions, distributional norms, and redistributive preferences between East and West Germany. As expected, there are substantial differences with respect to all three of these measures. Surprisingly, however, differences in distributional norms are much smaller than differences with respect to inequality perceptions or redistributive preferences. Nonetheless, individuals from East Germany tend to be more supportive of state redistribution and progressive taxation, and less likely to have a conservative political orientation, even conditional on having the same inequality perceptions and distributional norms. |
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