Some criticism of stochastic models generally used in decision making experiments

The general model of expectation maximation widely used in decision making experiments is criticized for several reasons: (1) It may not be considered appropriate as a normative ‘rational’ model by the subject in a variety of situations. (2) In all its consequences, it may be too complicated to be used by a human subject such that a simpler strategy might be more adequate. (3) Some of the conditions of the model, like independence of cues for probability revision and for utility assessment, are hardly ever tested, and probably difficult to meet at all. (4) It is questioned whether deterministic models (like expectation maximation) are not too strict to predict human behavior, such that they should be replaced by probabilistic ones. The emphasis of this paper, however, is not to doubt the applicability of the model in principle but rather to point at some problems where more research is needed.     

Endogenous entry in lowest-unique sealed-bid auctions

Lowest-unique sealed-bid auctions are auctions with endogenous participation, costly bids, and the lowest bid among all unique bids wins. Properties of symmetric NEs are studied. The symmetric NE with the lowest expected gains is the maximin outcome under symmetric strategies, and it is the solution to a mathematical program. Comparative statics for the number of bidders, the value of the item and the bidding cost are derived. The two bidders’ auction is equivalent to the Hawk–Dove game. Simulations of replicator dynamics provide numerical evidence that the symmetric NE with the lowest expected gains is also asymptotically stable.     

Employee Volunteering and Social Capital: Contributions to Corporate Social Responsibility

As employee volunteering (EV) is increasingly regarded as a means of improving companies' community and employee relations, we investigate the contribution of EV to corporate social responsibility, specifically whether and how it contributes to social capital. We investigate the dynamics of EV in three UK companies. We explore the social relations and resources which underpin social capital creation; the roles of opportunity, motivation and ability in bringing the actors together and enhancing their capacity for cooperation; and the ways in which alternative EV modes inform the different dimensions of social capital – networks, trust and norms of cooperation. Our paper contributes to our understanding of EV and the factors that enable it to create social capital. Finally we assess the contribution of EV to the overall corporate social responsibility agenda of companies.     

SEMIFAR forecasts, with applications to foreign exchange rates

SEMIFAR models introduced in Beran (1997. Estimating trends, long-range dependence and nonstationarity, preprint) provide a semiparametric modelling framework that enables the data analyst to separate deterministic and stochastic trends as well as short- and long-memory components in an observed time series. A correct distinction between these components, and in particular, the decision which of the components may be present in the data have an important impact on forecasts. In this paper, forecasts and forecast intervals for SEMIFAR models are obtained. The forecasts are based on an extrapolation of the nonparametric trend function and optimal forecasts of the stochastic component. In the data analytical part of the paper, the proposed method is applied to foreign exchange rates from Europe and Asia.     

Affective reactions influence investment decisions: evidence from a laboratory experiment with taxation

We experimentally investigate the effect of taxation of gains and losses on investment behavior. Based on the insights of economic research and psychological concepts, we expect subjects to react to taxation with behavioral and affective changes. Our main results are threefold: first, we show that taxation on gains and the possibility to deduct losses bias investment behavior, but in different directions. Since net payoffs are identical across all tax scenarios and therefore the same investment behavior is to be expected, these differences are in contrast to what a standard theory would predict. Second, we observe that different tax regulations have different effects on the affective and cognitive perception of our subjects. Third, with respect to possible connections of the affective and cognitive ratings, tax regulations, and investment decisions, we are able to show that arousal and risk perception fail to influence the decision making of participants, while there is a highly significant influence of valence perception on choice patterns.     

MORE MORTGAGES,LOWER GROWTH?

In newly collected data on 46 economies over 1990–2011, we show that financial development since 1990 was mostly due to growth in credit to real estate and other asset markets, which has a negative growth coefficient. We also distinguish between growth effects of stocks and flows of credit. We find positive growth effects for credit flows to nonfinancial business but not for mortgage and other asset market credit flows. By accounting for the composition of credit stocks and for the effect of credit flows, we explain the insignificant or negative growth effects of financial development in recent times. What was true in the 1960s, 1970s, and 1980s when the field of empirical credit‐growth studies blossomed, is no longer true in the 1990s and 2000s. New bank lending is not primarily to nonfinancial business and financial development may no longer be good for growth. These trends predate the 2008 crisis. They prompt a rethink of the role of banks in the process of economic growth. (JEL E44, O16, O40, C33)     

OFFSHORING AND THE POLARIZATION OF THE DEMAND FOR CAPITAL

In the past decades, the importance of different capital goods has gradually changed, which has led to a structural shift in the composition of the demand for capital at the expense of more traditional capital inputs such as machinery and equipment. In this paper, we focus on a novel driver of this development by analyzing the effect of offshoring on the demand for capital by asset class using a rich country-sector panel dataset. Estimating a system of factor demand equations, we document that offshoring reduces the relative demand for non-ICT capital, thereby polarizing the demand for capital. (JEL F14, F62, E22)     

The importance of peer relatedness at school for affective well‐being in children: Between‐ and within‐person associations

Two intensive longitudinal studies examining the association between children's feeling of relatedness to peers at school and their affective well‐being were performed. In Study 1, 110 third and fourth graders reported on their positive affect (PA) and negative affect (NA) 4 times daily and on their peer relatedness once a day over 4 weeks. Multilevel analyses revealed that children who reported higher peer relatedness on average also reported higher PA and lower NA (between‐person associations). Moreover, on days when children reported higher peer relatedness than usual, they also reported higher PA, but they did not necessarily report lower NA (within‐person associations). In Study 2, 55 fourth, fifth, and sixth graders indicated their PA, NA, and peer relatedness once a day over 2 weeks. We replicated the findings of Study 1 on both levels. The studies showed that feeling related to peers is associated with high PA at school and at home on a daily basis, illustrating the function of peer relatedness in promoting positive well‐being. The findings further demonstrated the necessity of intensive longitudinal studies focusing on within‐person associations and the importance of measuring both PA and NA in order to capture effects on affective well‐being thoroughly.