Matthias Benz, Alois Stutzer, Do Workers Enjoy Procedural Utility?, In: Working paper series / Institute for Empirical Research in Economics, No. No. 127, 2002. (Working Paper)
People are likely to obtain utility not only from actual outcomes, but also from the conditions which lead to these outcomes. This paper empirically tests the notion of procedural utility for the context of work relationships. Using a large survey among British workers, we find substantial procedural effects on the utility workers derive from their pay. Utility from pay is not only strongly influenced by economic outcomes (the pay levels workers get for given inputs), but also by the way pay is determined. The findings are robust to a series of alternative explanations. |
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Rainer Winkelmann, Health Care Reform and the Number of Doctor Visits An Econometric Analysis, In: Working paper series / Socioeconomic Institute, No. No. 210, 2002. (Working Paper)
The paper evaluates the German health care reform of 1997, using the individual number of doctor visits as outcome measure and data from the German Socio- Economic Panel for the years 1995-1999. A number of modified count data models allow to estimate the effect of the reform in different parts of the distribution. The overall effect of the reform was a 10 percent reduction in the number of doctor visits. The effect was much larger in the lower part of the distribution than in the upper part. |
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Yves Schneider, Peter Zweifel, How Much Internalization of Nuclear Risk Through Liability Insurance?, In: Working paper series / Socioeconomic Institute, No. No. 211, 2002. (Working Paper)
An important source of conflict surrounding nuclear energy is that with a very small probability, a large-scale nuclear accident may occur. One way to internalize the financial risks associated with such an accident is through mandatory liability insurance. This paper presents estimates of the willingness to pay for increased financial security provided by an extension of coverage, based on the `stated choice' approach. A Swiss citizen with median characteristics may be willing to pay 0.08 cents per kwh to increase coverage beyond the current CHF 0.7 bn. (USD 0.47 bn.). Marginal willingness to pay declines with higher coverage but exceeds marginal cost at least up to a coverage of CHF 4 bn. (USD 2.7 bn.). An extension of nuclear liability insurance coverage therefore may be effciency-enhancing. |
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Enrico De Giorgi, A Note on Portfolio Selections under Various Risk Measures, In: Working paper series / Institute for Empirical Research in Economics, No. No. 122, 2002. (Working Paper)
This work gives a brief overview of the portfolio selection problem following the mean-risk approach first proposed by Markowitz (1952). We consider various risk measures, i.e. variance, value-at-risk and expected-shortfall and we study the efficient frontiers obtained by solving the portfolio selection problem under these measures. We show that under the assumption that returns are normally distributed, the efficient frontiers obtained by taking value-at-risk or expected-shortfall are subsets of the mean-variance efficient frontier. We generalize this result for all risk measures that can be written as a particular combination of mean and variance and we show that for these measures Tobin separation holds under some restrictions. |
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Zava Aydemir, Armin Schmutzler, Acquisitions versus Entry: The Evolution of Concentration, In: Working paper series / Socioeconomic Institute, No. No. 208, 2002. (Working Paper)
We consider market dynamics in a reduced form model. In the simplest version, there are two investors and several small noninvesting firms. In each period, one investor can acquire a small firm, the other investor decides about market entry. After that all firms play an oligopoly game. We derive conditions under which increasing market concentration arises with myopic firms, we show that a model with forward-looking firms and with arbitrary numbers of investors yield similar results. We apply the framework to a Cournot model with cost synergies and a Bertrand model where acquisitions extend the product spectrum of a firm. |
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Thorsten Hens, Klaus Reiner Schenk-Hoppé, Martin Stalder, An Application of Evolutionary Finance to Firms Listed in the Swiss Market Index, In: Working paper series / Institute for Empirical Research in Economics, No. No. 128, 2002. (Working Paper)
This paper presents an application of evolutionary portfolio theory to stocks listed in the Swiss Market Index (SMI). We study numerically the long-run outcome of the competition of rebalancing rules for market shares in a stock market with actual dividends taken from firms listed in the SMI. Returns are endogenous because prices are determined by supply and demand stemming from the rebalancing rules. Our simulations show that in competition with rebalancing rules derived from Mean-Variance Optimization, Maximum Growth Theory and Behavioral Finance, the evolutionary portfolio rule discovered in Hens and Schenk-Hoppé (2001) will eventually hold total market wealth. According to this simple rule the portfolio weights should be proportional to the expected relative dividends of the assets. |
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Stefan Buehler, Armin Schmutzler, Men-Andri Benz, Infrastructure Quality in Deregulated Industries: Is there an Underinvestment Problem?, In: Working paper series / Socioeconomic Institute, No. No. 209, 2002. (Working Paper)
We investigate how various institutional settings affect a network provider’s incentives to invest in infrastructure quality. Under reasonable assumptions on demand, investment incentives turn out to be smaller under vertical separation than under vertical integration, though we also provide counter-examples. The introduction of downstream competition for the market can sometimes improve incentives. With suitable non-linear access prices investment incentives under separation become identical to those under integration. |
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Ernst Fehr, Urs Fischbacher, Elena Tougareva, Do High Stakes and Competition Undermine Fairness? Evidence from Russia, In: Working paper series / Institute for Empirical Research in Economics, No. No. 120, 2002. (Working Paper)
This paper reports the results of a series of competitive labour market experiments in which subjects have the possibility to reciprocate favours. In the high stake condition subjects earned between two and three times their monthly income during the experiment. In the normal stake condition the stake level was reduced by a factor of ten. We observe that both in the high and the normal stake condition fairness concerns are strong enough to outweigh competitive forces and give rise to non-competitive wages. There is also no evidence that effort behaviour becomes generally more selfish at higher stake levels. Therefore, our results suggest that, contrary to common beliefs, fairness concerns may play an important role even at relatively high stake levels. |
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Andreas Polk, How Special Interests Shape Policy - A Survey, In: Working paper series / Socioeconomic Institute, No. No. 206, 2002. (Working Paper)
This paper surveys recent approaches towards lobbying if interest groups influence the decision of an incumbent government. It describes the two main channels of influence which mainly exist in parallel, namely contribution payments and the transmission of information through lobbying. Recent extensions to the two basic lobbying models are discussed in great detail. Thereafter follows a short overview over current research, which tries to consolidate the two distinct branches of literature into a general lobbying model. The survey concludes with a summary of the main insights and indicates promising directions of further research. |
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Simon Gächter, Armin Falk, Reputation and Reciprocity: Consequences for the Labour Relation, In: Working paper series / Institute for Empirical Research in Economics, No. No. 19, 2002. (Working Paper)
"Recent evidence highlights the importance of social norms in many economic relations. However, many of these relationships are long-term and provide repeated game incentives for performance. We experimentally investigate interaction effects of reciprocity and repeated game incentives in two treatments (one-shot and repeated) of a gift-exchange game. In both treatments we observe reciprocity, which is strengthened in the repeated game. A detailed analysis shows that in the repeated game some subjects imitate reciprocity. Thus, reciprocity and repeated game incentives reinforce each other. Observed behaviour is robust against experience. We conclude that a long-term interaction is a reciprocity-compatible contract enforcement device." |
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Klaus Reiner Schenk-Hoppé, Resuscitating the Cobweb Cycle, In: Working paper series / Institute for Empirical Research in Economics, No. No. 123, 2002. (Working Paper)
"This note shows that permanent fluctuations in the Cobweb model though inconsistent with a rational expectations equilibrium can be justified as being rational when reinterpreting the model in the theory of rational beliefs." |
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Rainer Winkelmann, Subjektive Daten in der empirischen Wirtschaftsforschung: Probleme und Perspektiven, In: Working paper series / Socioeconomic Institute, No. No. 207, 2002. (Working Paper)
Preise, Einkommen, und Nachfrage – die zentralen zu erklaerenden Variablen in den Wirtschaftswissenschaften sind objektiv messbar. Daneben gibt es jedoch zwei nicht minder zentrale Groessen, Erwartungen und Praeferenzen, die sich einer direkten objektiven Messung entziehen. Es sind subjektive Variablen, also solche, die von persoenlichen Meinungen und Erfahrungen bestimmt sind. Allerdings bedeutet dies nicht, dass sie ueberhaupt nicht messbar waeren. Ganz im Gegenteil enthalten typische Haushaltsbefragungen eine ganze Reihe von subjektiven Fragen, die ueber verschiedene Aspekte von Erwartungs- und Praeferenzbildung informieren. Im folgenden werde ich darstellen, welche Arten von subjektiven Variablen bisher in der empirischen Wirtschaftsforschung betrachtet wurden. Dann werde ich auf Probleme bei der Interpretation von subjektiven Variablen eingehen. Und schliesslich werde ich die wesentlichen Aspekte der oekonometrischen Modellbildung besprechen und zwei neue Modelle vorstellen. |
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Bruno Frey, "Publishing as Prostitution? Choosing Between One's Own Ideas and Academic Failure", In: Working paper series / Institute for Empirical Research in Economics, No. No. 117, 2002. (Working Paper)
Survival in academia depends on publications in refereed journals. Authors only get their papers accepted if they intellectually prostitute themselves by slavishly following the demands made by anonymous referees without property rights on the journals they advise. Intellectual prostitution is neither beneficial to suppliers nor consumers. But it is avoidable. The editor (with property rights on the journal) should make the basic decision of whether a paper is worth publishing or not. The referees only give suggestions on how to improve the paper. The author may disregard this advice. This reduces intellectual prostitution and produces more original publications. |
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Andreas Polk, Lobbying Activities of Multinational Firms, In: Working paper series / Socioeconomic Institute, No. No. 205, 2002. (Working Paper)
This paper investigates if multinationals in.uence the political process through lobbying more effectively than national firms. First, I introduce a model which contrasts a multinational’s incentives for lobbying with those of a national firm. Then the effect of lobbying on the political decision is analyzed. I conclude that multinationals have smaller incentives to lobby because they have smaller stakes in national markets. But the effectiveness of lobbying by multinationals might be higher if the government cares much about production in the home country. The resulting regulation depends on the relative strength of these effects. |
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Bruno Frey, Stephan Meier, Museums between Private and Public - The Case of the Beyeler Museum, In: Working paper series / Institute for Empirical Research in Economics, No. No. 116, 2002. (Working Paper)
"In Europe, ever more private museums are now entering the field. This paper investigates the behavior of one of these private museums, using an institutional approach of cultural economics. The Beyeler museum in Basle, Switzerland, is a privately founded art museum with an extraordinary collection of art works. Though less than five years old, it is acknowledged to be the most successful museum in Switzerland in terms of number of visitors. However, the Beyeler museum is not completely private but receives public support. We analyze how this influences the museums behavior: (1) The directorate of the Beyeler museum stays away from the art market with its collection as public institutions do. (2) The museum embarks on a self-propelling process concerning special exhibitions, therewith losing some of its uniqueness. (3) Concerning visitors amenities, differences between private and publicnmuseums emerge but to a lesser extent than expected according to theory." |
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Bruno Frey, Matthias Benz, From Imperialism to Inspiration: A Survey of Economics and Psychology, In: Working paper series / Institute for Empirical Research in Economics, No. No. 118, 2002. (Working Paper)
Economics and psychology are both sciences of human behaviour. This paper gives a survey of their interaction. First, the changing relationship between the two sciences isndiscussed: while economics was once imperialistic, it has become a science inspired by psychological insights. In order to illustrate this, recent developments and evidence for three major areas are presented: bounded rationality, non-selfish behaviour, and the economics of happiness. |
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Reto Föllmi, Urs Meister, Product-Market Competition in the Water Industry: Voluntarily Nondiscriminatory Pricing, In: Working paper series / Institute for Empirical Research in Economics, No. No. 115, 2002. (Working Paper)
This paper presents an attempt to create competition in the water market by means of direct competition. We argue that the usual liberalisation device, competition for the market by franchise bidding, is problematic due to particular features in the water industry. Our approach proposes the implementation of product market competition, i.e. competition in the market. In such a situation several water utilities using a single set of pipes compete for customers in the same area. nUsing a two way access model with vertically integrated water suppliers, we show that: (i) Even without any regulation, an inefficient incumbent will give up its monopoly position and lower the access price far enough so that the low-cost competitor can enter his home market. (ii) Efficiency of production will rise due to liberalization. (iii) In contrary to prejudicial claims, investment incentives are not destroyed by the introduction of competition. Investments of low-cost firms may even increase. |
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Rafael Lalive, Josef Zweimüller, Benefit Entitlement and Unemployment Duration: The Role of Policy Endogeneity, In: Working paper series / Institute for Empirical Research in Economics, No. No. 112, 2002. (Working Paper)
"The potential duration of benefits is generally viewed as an important determinant of unemployment duration. This paper evaluates a unique policy change that prolonged entitlement to regular unemployment benefits from 30 weeks to a maximum of 209 weeks for elderly individuals in certain regions of Austria. In the evaluation, we explicitly account for the fact that the program was an endogenous policy response to a crisis affecting individuals with severe labor market problems. The main results are: (i) REBP reduced the transition rate to jobs by 17 ; (ii) accounting for endogenous policy adoption is important and quantitatively significant." |
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Ernst Fehr, Simon Gächter, Do Incentive Contracts Undermine Voluntary Cooperation?, In: Working paper series / Institute for Empirical Research in Economics, No. No. 34, 2002. (Working Paper)
In this paper we provide experimental evidence indicating that incentive contracts may undermine voluntary cooperation. This suggests that explicit incentives may have costly side effects that have been largely neglected by economists. In our experiments the undermining effect is so strong that the incentive contracts are less efficient than contracts without any incentives. Buyers, who are in the role of principals, nonetheless, prefer the incentive contracts because they allow them tonappropriate a much larger share of the (smaller) total surplus and are, hence, more profitable for them. The undermining of voluntary cooperation through incentives is, in principle, consistent with models of inequity aversion and reciprocity. Additional experiments show, however, that the reduction of voluntary cooperation throughnincentives is partly due to a framing effect. |
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Simon Gächter, Ernst Fehr, Fairness in the Labour Market - A Survey of Experimental Results, In: Working paper series / Institute for Empirical Research in Economics, No. No. 114, 2002. (Working Paper)
In this chapter we provide a selective survey of experiments to investigate the potential of social motivations in explaining labour market phenomena. We argue that laboratory experiments are a useful instrument to explore issues in labour market theory and personnel economics. Our starting point is the observation that employment relations are frequently governed by incomplete contracts. We show that the norm of reciprocity that leads to gift exchanges is an effective contract enforcement device under conditions of contractual incompleteness. We then present evidence that gift exchange can explain various labour market phenomena that are puzzles from the viewpoint of standard economic theory. Further issues in the related field of personnel economics that have by now been subjected to an experimental scrutiny concern characteristics of the employment relation and the issues of motivation and incentives systems. |
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