67 research outputs found
Self-Reinforcing Market Dominance
No full textAre initial competitive advantages self-reinforcing, so that markets exhibit an endogenous tendency to be dominated by only a few firms? Although this question is of great economic importance, no systematic empirical study has yet addressed it. Therefore, we examine experimentally whether firms with an initial cost advantage are more likely to invest in cost reductions than firms with higher initial costs. Wefind that the initial competitive advantages are indeed self-reinforcing, but subjects in the role of firms overinvest relative to the Nash equilibrium. However, the pattern of overinvestment even strengthens the tendency towards self-reinforcing cost advantages relative to the theoretical prediction. Further, as predicted by the Nash equilibrium, aggregate investment is not affected by the initial efficiency distribution. Finally, investment spillovers reduce investment, and investment is higher than the joint-profit maximizing benchmark for the case without spillovers and lower for the case with spillovers.Cost-reducing Investment, Asymmetric Oligopoly, Increasing Dominance, Experimental Study
Merger Negotiations and Ex-Post Regret
No full textWe consider a setting in which two potential merger partners each possess private information pertaining both to the profitability of the merged entity and to stand-alone profits, and investigate the extent to which this private information makes ex-post regret an unavoidable phenomenon in merger negotiations. To this end, we consider ex-post mechanisms, which use both players’ reports to determine whether or not a merger will take place and what each player will earn in each case. When the outside option of at least one player is known, the efficient merger decision can be implemented by such a mechanism under plausible budget-balance requirements. When neither outside option is known, we show that the potential for regret-free implementation is much more limited, unless the budget balance condition is relaxed to permit money-burning in the case of false reports.Mergers, Mechanism Design, Asymmetric Information, Interdependent Valuations, Efficient Mechanisms
ON THE ECONOMICS OF HOUSING CONSUMPTION AND FINANCE
No full textHouseholds consume housing, food and clothing. Housing consumption is the resuit of a décision making process that is influenced by the surrounding economic environment. According to the Swiss Household Panel, the average share total annual household net income devoted to housing in 2000 (2014) was approximately 28% (31%). For households in the first decile of the income distribution, the average share was roughly 41% (49%), compared to 19% (20%) for households in the tenth decile. Similarly, in the USA, housing expenditure shares in 2014 amounted 41% and 30% for low-income and high-income households, respectively. In terms of financing, household mortgages represent a significant share of total Swiss domestic loans, amounting to around 85% as of 2018Q2. Using various econometric techniques and theoretical modelling, this thesis studies: (i) how local policy affects house prices through its effect on household location and tenure choices, and (ii) how changes in interest rates affect loan supply, given that most owner-occupiers finance their housing consumption via mortgage debt.
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Les ménages consomment du logement, de la nourriture et des vêtements. La consommation de logements est le résultat d'un processus décisionnel influencé par l'environnement économique environnant. Selon le Panel suisse de ménages, la part moyenne du revenu annuel net des ménages consacrés au logement en 2000 (2014) était d'environ 28% (31%). Pour les ménages du premier décile de la distribution des revenus, la part moyenne était d'environ 41% (49%), comparée à 19% (20%) pour les ménages du dixième décile. De même, aux États-Unis, la part des dépenses de logement en 2014 s'élevait à 41% et 30% pour les ménages à faible revenu et à revenu élevé, respectivement. En termes de financement, les prêts hypothécaires aux ménages représentent une part significative du total des prêts domestiques suisses, soit environ 85% au deuxième trimestre de 2018. Par le biais des méthodes économétriques ainsi que la modélisation théorique, cette thèse étudie : (i) l'incidence de la politique locale sur le prix des logements par son effet sur la localisation des ménages et le choix de leur mode d'occupation, et (ii) l'incidence des variations des taux d'intérêt sur l'offre de prêts, étant donné que la plupart des propriétaires financent leur consommation immobilière par des emprunts hypothécaires.
ESSAYS ON DECISION UNDER RISK, EDUCATION AND UNEMPLOYMENT
No full textThis thesis is a collection of three distinct essays in the fields of behavioral economics and labor
economics.
The first essay aims to further our understanding and improve our predictions of decision under risk. Through a joint test of two prominent theories in decision under risk, the essay shows that both theories play a role at desoibing aggregate choices and uncovers substantial heterogeneity by classifying the subjects into types according to which theory descibes best their behavior under risk.
The second essay is set in a context of a rigid labor market with high graduate unemployment.
Using the quasi-experimental variation in education created by a centralized allocation mechanism of high school graduates into university programs, I find evidence that selective track graduates struggle to find their first jobs suggesting that the labor market is unable to quickly absorb even the most able university graduates.
The third essay studies the effect of extended unemployment benefits duration on individual health during the Great Recession. I find that the individuals of who stayed unemployed the longest have a negative health response to the introduction and expiry of a program that extends unemployment benefits duration. Because they have been unemployed for more than a year, they might been unaware of their potential eligibility and therefore the program introduction was a let down. The expiry of the program affected them directly by cutting their income source.
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Cette thèse est une collection de trois essais distincts dans les domaines d'économie componementale et d'économie de travail.
Le premier essai vise à approfondir notre compréhension et à améliorer nos prévisions de décision sous risque. À travers un test joint de deux théories importantes dans Ia décision sous risque, I'essai montre que les deux théories jouent un rôle dans la description des choix agrégés et découwe une hétérogénéité substantielle en classant les sujets en types selon la théorie qui décrit le mieux leur comportement sous risque.
Le deuxième essai s'inscrit dans un contexte de marché du travail rigide avec un chômage élevé des diplômés. En utilisant des variations quasi-expérimentale de I'éducation créées par un mécanisme d'allocation centralisée des diplômés du secondaire dans les programmes universitaires, je trouve des preuves que les diplômés de Ia filière sélective ont des difficultés à trouver leur premier emploi suggérant que le marché du travail n'est pas en mesure d'absorber rapidement même les diplômés d'université les plus compétents.
Le troisième essai étudie I'effet de la prolongation de Ia durée des prestations de chômage sur la santé individuelle pendant la Grande Récession. Je trouve que les personnes qui sont restées au chômage le plus longtemps ont une réponse négative à la santé à I'introduction et à I'expiration d'un prograûrme qui prolonge la durée des prestations de chômage. Parce qu'ils sont au chômage depuis plus d'un an, ils ignorent peut-être leur admissibilité potentielle et, par conséquent, I'introduction du programme constitue une déception. L'expiration du programme les a touchés directement en réduisant leur source de revenu
The Impact of Aging on Future Healthcare Expenditure
No full textThe impact of aging on healthcare expenditure (HCE) has been at the center of a prolonged debate. This paper purports to shed light on several issues. First, it presents new evidence on the relative importance of the two components of HCE that have been distinguished by Zweifel, Felder and Meier (1999), viz. the cost of morbidity and the cost of mortality (their "red herring" hypothesis claims that neglecting the mortality component results in excessive estimates of future growth of HCE). Second, it takes account of recent evidence suggesting that HCE does increase life expectancy, implying that time-to-death is an endogenous determinant of HCE. Third, it investigates the contribution of population aging to the future growth of HCE. For the case of Switzerland, it finds this contribution to be relatively small regardless of whether or not the cost of dying is accounted for, thus qualifying the "red herring" hypothesis.Health econometrics, Aging, Cost of dying, Healthcare expenditure
Stochastic Expected Utility and Prospect Theory in a Horse Race: A Finite Mixture Approach
No full textThis study compares the performance of Prospect Theory versus Stochastic Expected Utility Theory at fitting data on decision making under risk. Both theories incorporate well-known deviations from Expected Utility Maximization such as the Allais paradox or the fourfold pattern of risk attitudes. Stochastic Expected Utility Theory parsimoniously extends the standard microeconomic model, whereas Prospect Theory, the benchmark for aggregate choice so far, is based on psychological findings. First, the two theories' fit to representative choice is assessed for two experimental data sets, one Swiss and one Chinese. In a second step, finite mixture regressions reveal a consistent mix of two different behavioral types suggesting that researchers may take individual heterogeneity into account in order to avoid aggregation bias
Stochastic Expected Utility and Prospect Theory in a Horse Race: A Finite Mixture Approach
No full textThis study compares the performance of Prospect Theory versus Stochastic Expected Utility Theory at fitting data on decision making under risk. Both theories incorporate well-known deviations from Expected Utility Maximization such as the Allais paradox or the fourfold pattern of risk attitudes. Stochastic Expected Utility Theory parsimoniously extends the standard microeconomic model, whereas Prospect Theory, the benchmark for aggregate choice so far, is based on psychological findings. First, the two theories' fit to representative choice is assessed for two experimental data sets, one Swiss and one Chinese. In a second step, finite mixture regressions reveal a consistent mix of two different behavioral types suggesting that researchers may take individual heterogeneity into account in order to avoid aggregation bias.stochastic expected etility theory, prospect theory, finite mixture models
Beyond Scylla and Charybdis: four essays on latent heterogeneity in economic behavior
No full textMost economic models are limited to analyzing the behavior of a representative agent and, consequently, make the implicit assumption that either individuals are homogeneous
or that individual heterogeneity does not matter for the aggregate outcome. However, recent empirical evidence in experimental economics indicates that under strategic complementarity a minority of irrational agents may, indeed, drive the market's outcome. To avoid potential aggregation bias, researchers in empirical economics should take individual heterogeneity into account, which results in the following trade-off: on the one hand, a representative agent approach, which is parsimonious and easy to interpret, completely neglects heterogeneity, but on the other hand, estimating economic behavior at the individual level, which requires a lot of parameters and results in a plethora of estimates, may demand too much from the data. To escape this dilemma, empirical economists may apply finite mixture models, which offer a compromise between completely ignoring individual heterogeneity and running into difficulties when estimating individual by individual. This thesis comprises four independent applications of finite mixture regression models. The first three experimental studies are part of a comprehensive research project, funded by the Swiss National Science Foundation, and discuss the identification and stability of
two different behavioral types of decision makers in the domain of risk. The last essay applies a finite mixture model to the German Socio-Economic Panel to segregate the share of altruists from the rest of the population which is assumed to be selfish.
Deutsche Zusammenfassung: Die in der experimentellen Wirtschaftsforschung gängigen ökonometrischen Modelle schätzen häufig das Verhalten eines repräsentativen Individuums. Dem liegt die implizite Annahme
zu Grunde, dass sich die Individuen entweder homogen verhalten, oder aber individuelle Heterogenität keinen Einfluss auf das aggregierte Verhalten ausübt. Neuere empirische und theoretische Evidenz zeigt jedoch, dass in imperfekten Märkten - insbesondere unter strategischer Komplementarität - eine Minderheit irrationaler Agenten das Marktgleichgewicht stark beeinflussen kann. Um Verzerrungen bei der Aggregation zu vermeiden, sollten in solchen Situationen individuelle Unterschiede zwingend berücksichtigt werden. Typischerweise stehen aber bei Experimentaldaten zu wenige Beobachtungen pro Individuum
zur Verfügung, um komplexe Verhaltensmodelle auf individueller Ebene schätzen zu können. Finite Mixture Modelle bieten hier einen guten Kompromiss zwischen einem
Repräsentativen Agenten Modell und einer Schätzung auf individueller Ebene: Sie erlauben es eine bestimmte Anzahl Verhaltenstypen zu identifizieren und jedes einzelne
Individuum endogen einem dieser Verhaltenstypen zuzuordnen. Damit erfassen sie einerseits den entscheidenden Teil der individuellen Heterogenität, nämlich die Existenz verschiedener Verhaltenstypen, und benötigen andererseits deutliche weniger Parameter als eine Schätzung auf individueller Ebene.
Diese Arbeit umfasst vier unabhängige Anwendungen von Finite Mixture Modellen. Die ersten drei experimentellen Studien sind Teil eines vom Schweizerischen Nationalfonds
unterstützten Forschungsprojekts zur Charakterisierung verschiedener Verhaltenstypen bei Entscheidungen unter Risiko. In der vierten Studie wird mit einem Finite Mixture
Modell der Anteil an Altruisten in einer Teilstichprobe des Deutschen Haushaltspanels identifiziert
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