Contributions in Merlin

Social norms are usually neglected in economics, because they are to anlarge extent enforced through non-market interactions and difficult to isolatenempirically. In this paper, we offer a direct measure of the social norm to work andnwe show that this norm has important economic effects. The stronger the norm, thenmore quickly unemployed people find a new job. This behavior can be explained bynutility differences, probably due to social pressure. Unemployed people arensignificantly less happy than employed people and their reduction in life satisfactionnis the larger, the stronger the norm is.

Based on an experimental analysis of a simple monetary economy we argue that a monetarynsystem is more stable than one would expect from individual rationality. We show thatnpositive reciprocity stabilizes the monetary system, provided every participant considers thenfeedbacks of his choice to the stationary equilibrium. If however the participants do not playnstationary strategies and some participants notoriously refuse to accept money then due tonnegative reciprocity their behavior will eventually induce a break down of the monetarynsystem.

The analysis of monthly exchange rates is carried out using a model of McCallum, which is based on the concept of Rational Expectations. Applying the model to the CHF/USD exchange rate starting a misspecification analysis, the RE component appears to be a weak point of the model. The theory of rational beliefs of M. Kurz generalizes the RE concept introducing special consideration of Data Generating Processes (DGP). We find, however, some evidence speaking against the rational belief approach (with respect to the CHF/USD exchange rate) which is related to regime switchings and the presence of unobserved variables in the data-generating process. It appears that the rationality of economic agents depends on complex cognitive processes not discussed by Kurz, but taken into account in a ''story'' by Paul De Grauwe. This story will be supplemented in Part II of the paper in order to eliminate the RE component and to proceed with the misspecification analysis of McCallum's model.

This study reports data from a field experiment that was nconducted to investigate the relevance of gift-exchange for charitable ngiving. Roughly 10,000 solicitation letters were sent to potential donors nin the experiment. One third of the letters contained no gift, one third ncontained a small gift and one third contained a large gift. Whether a npotential donor received a letter with or without a gift was randomly ndetermined. We observe strong and systematic effects from including gifts. nCompared to the no gift condition, the relative frequency of donations nincreased by 17 percent if a small gift was included and by 75 percent for na large gift. Consequently, including gifts was highly profitable for the ncharitable organization. The contribution of this paper is twofold: first, nit shows that reciprocity is an important motive for charitable giving, in naddition to the warm-glow motive. Second, the paper confirms the economic nrelevance of reciprocity by using field data. This extends the current body nof research on reciprocity, which is almost exclusively confined to nlaboratory studies.

This paper shows that a stock market is evolutionary stable if andnonly if stocks are evaluated by expected relative dividends. Any othernmarket can be invaded by portfolio rules that will gain market wealthnand hence change the valuation. In the model the valuation of assetsnis given by the wealth average of the portfolio rules in the market. Thenwealth dynamics is modelled as a random dynamical system. Necessary and sufficient conditions are derived for the evolutionary stabilitynof portfolio rules when (relative) dividend payoffs form a stationarynMarkov process. These local stability conditions lead to a unique evolutionary stable strategy according to which assets are evaluated bynexpected relative dividends.

This paper uses recent data for Germany and a new outcome variable to assess the consequences of parental separation on the well-being of youths. In particular, it is considered how subjective well-being, elicited from an ordinal 11-point general life satisfaction question, differs between youths living in intact and non-intact families, holding many other potential determinants of well-being constant using ordered probit regressions. The main finding of this study is that living in a non-intact family has not the hypothesised large negative effect on child well-being.

The German health care reform of 1997 provides a natural experiment for evaluating the price sensitivity of demand for physicians’ services. As part of the reform, copayments for prescription drugs were increased by up to 200 percent. However, certain groups of people were exempted from the increase, providing a natural control group against which the changed demand for physicians’ services of the treated, those subject to increased co-payments, can be assessed. The differences-in-differences estimates indicate that increased co-payments reduced the number of doctor visits by about 10 percent on average.

We examine cost-reducing investment in vertically-related oligopolies, where firms may be vertically integrated or separated. Analyzing a standard linear Cournot model, we show that: (i) Integrated firms invest more than separated competitors. (ii) Vertical integration increases own investment and decreases competitor investment. (iii) Firms may integrate strategically so as to preempt investments by competitors. Adopting a reduced-form approach, we identify demand/mark-up complementarities in the product market as the driving force for these results. We show that our results generalize naturally beyond the Cournot example, and we discuss policy implications.

Corporate scandals are reflected in excessive top management compensation and fraudulent accounts. These scandals cause an enormous amount of damage, not only to the companies affected, but also to the market economy as a whole. As a solution, conventional wisdom suggests more monitoring and sanctioning of management. We argue that these efforts will create a governance structure for crooks. Instead of solving the problem, they make it worse. Selfish extrinsic motivation is reinforced. We suggest measures which clash with conventional wisdom: selecting employees with pro-social intrinsic preferences, de-emphasizing variable pay for performance and strengthening the participation and self-governance of employees. These measures help to increase intrinsically motivated corporate virtue and honesty.

This paper examines the consequences of introducing mobile number portability (MNP). As MNP allows consumers to keep their telephone number when switching providers, it reduces consumers’ switching costs. However, MNP may also cause consumer ignorance if telephone numbers no longer identify networks. As a result, while fostering competition for mobile customers, MNP may also induce operators to increase termination charges for calls to mobile networks, generating ambiguous welfare e.ects. We examine how extensions such as MNP based on call-forwarding, termination fee regulation, and alternative means of carrier identification a.ect these findings.