An Evolutionary Analysis of Buyer Insurance and Seller Reputation in Online Markets

Applying an evolutionary framework, we investigate how a reputation mechanism and a buyer insurance (as used on Internet market platforms such as eBay) interact to promote trustworthiness and trust in markets with moral hazard problems. Our analysis suggests that the costs involved in giving reliable feedback determine the gains from trade that can be obtained in equilibrium. Buyer insurance, on the other hand, can affect the trading dynamics and equilibrium selection. We find that, under reasonable conditions, buyer insurance crowds out trust, and trustworthiness. Ockenfels gratefully acknowledges the support of the Deutsche Forschungsgemeinschaft. Mengel’s research was supported by the Spanish Ministry of Education and Science (grant SEJ 2004-02172).     

Price Effects of the Minimum Wage: A Survey Data Analysis for the German Construction Sector

Utilizing the link between employment and price changes as a result of minimum wages, we use firm‐level data to evaluate the effect of minimum wage introduction in the German construction sector. In East Germany we find significant positive price effects that exclude the possibility of rising employment. Rather, the results indicate the existence of a competitive sector‐specific labour market, and thus declining employment. In contrast, we cannot find any significant price reaction for West Germany. This suggests that the implemented minimum wage in West Germany is too low in comparison to the predominantly paid wages and is hence not binding.     

Examining the effects of negative affectivity on self- and supervisor ratings of job stressors: the role of stressor observability

In this study, we investigated job stressor ratings through Lazarus' transactional stress theory and the usefulness of supervisor ratings as an alternative to employee self-reports. Based on the finding that negative affectivity (NA) causes incumbents to over-report job stressors, we hypothesized that supervisors may also be affected by their NA when appraising an incumbent's job stressors. Building upon the literatures on judgement processes and social-cognitive information processing, we further hypothesized that stressor observability is an important boundary condition. Specifically, we hypothesized that the impact of NA on both self- and supervisor-reported job stressors should increase as stressor observability decreases. Moreover, we hypothesized that incumbent and supervisor ratings would converge less as stressor observability decreases. Data from 260 incumbent-supervisor dyads showed that stressor observability reduced the impact of supervisor NA on supervisor ratings (but not the impact of incumbent NA on incumbent stressor ratings). Further, as hypothesized, incumbent and supervisor ratings showed less convergence the less observable the stressor was. The results highlight the importance of personal and situational factors in the stressor appraisal process – an issue that advances both research and practice in the field of stressor ratings.     

Empirical Limits for Time Series Econometric Models

This paper characterizes empirically achievable limits for time series econometric modeling and forecasting. The approach involves the concept of minimal information loss in time series regression and the paper shows how to derive bounds that delimit the proximity of empirical measures to the true probability measure (the DGP) in models that are of econometric interest. The approach utilizes joint probability measures over the combined space of parameters and observables and the results apply for models with stationary, integrated, and cointegrated data. A theorem due to Rissanen is extended so that it applies directly to probabilities about the relative likelihood (rather than averages), a new way of proving results of the Rissanen type is demonstrated, and the Rissanen theory is extended to nonstationary time series with unit roots, near unit roots, and cointegration of unknown order. The corresponding bound for the minimal information loss in empirical work is shown not to be a constant, in general, but to be proportional to the logarithm of the determinant of the (possibility stochastic) Fisher–information matrix. In fact, the bound that determines proximity to the DGP is generally path dependent, and it depends specifically on the type as well as the number of regressors. For practical purposes, the proximity bound has the asymptotic form (K/2)log n, where K is a new dimensionality factor that depends on the nature of the data as well as the number of parameters in the model. When ‘good’ model selection principles are employed in modeling time series data, we are able to show that our proximity bound quantifies empirical limits even in situations where the models may be incorrectly specified. One of the main implications of the new result is that time trends are more costly than stochastic trends, which are more costly in turn than stationary regressors in achieving proximity to the true density. Thus, in a very real sense and quantifiable manner, the DGP is more elusive when there is nonstationarity in the data. The implications for prediction are explored and a second proximity theorem is given, which provides a bound that measures how close feasible predictors can come to the optimal predictor. Again, the bound has the asymptotic form (K/2)log n, showing that forecasting trends is fundamentally more difficult than forecasting stationary time series, even when the correct form of the model for the trends is known.