
1522 Grebe, Tim; IvanovaStenzel, Radosveta; Krüger, Sabine  “BuyItNow” or “SellItNow” Auctions: Effects of Changing Bargaining Power in Sequential Trading Mechanisms
We study experimentally the effect of bargaining power in two sequential mechanisms that offer the possibility to trade at a fixed price before an auction. In the “BuyItNow” format, the seller has the bargaining power and offers a price prior to the auction; whereas in the “SellItNow” format, it is the buyer. Both formats are extensively used in online and offline markets. Despite very different strategic implications for buyers and sellers, results from our experiment suggest no effects of bargaining power on aggregate outcomes. There is, however, substantial heterogeneity within sellers. Sellers who ask for high prices not only benefit from having the bargaining power but also earn revenue above those expected in the auction.
1521 Chaigneau, Pierre; Eeckhoudt, Louis  Downside Risk Neutral Probabilities
The price of any asset can be expressed with risk neutral probabilities, which are adjusted to incorporate risk preferences. This paper introduces the concepts of downside (respectively outer) risk neutral probabilities, which are adjusted to incorporate the preferences for downside (resp. outer) risk and higher degree risks. We derive new asset pricing formulas that rely on these probability measures. Downside risk neutral probabilities allow to value assets in a simple meanvariance framework. The associated pricing kernel is linear in wealth, as in the CAPM. With outer risk neutral probabilities, the pricing kernel is quadratic in wealth, and can be Ushaped.
1520 Deffains, Bruno; Fluet, Claude  Social Norms and Legal Design
We compare faultbased and strict liability offences in law enforcement when behavior is influenced by informal prosocial norms of conduct. Fault tends to be more effective than strict liability in harnessing social or selfimage concerns. When enforcement relies on fines and assessing fault is not too costly, the optimal legal regime is faultbased with a standard consistent with the underlying social norm if convictions would seldom occur under optimal enforcement; otherwise liability should be strict. When sanctions are nonmonetary or when stigmatization imposes a deadweight loss, the legal standard may be harsher or more lenient than the social norm.
1519 Carmichael, Benoît; Koumou, Gilles Boevi; Moran, Kevin  A New Formulation of Maximum Diversification Indexation Using Rao's Quadratic Entropy
This paper proposes a new formulation of the Maximum Diversification indexation strategy based on Rao’s Quadratic Entropy (RQE). It clarifies the investment problem underlying the Most Diversified Portfolio (MDP) formed with this strategy, identifies the source of the MDP’s outofsample performance, and suggests dimensions along which this performance can be improved. We show that these potential improvements are quantitatively important and are robust to portfolio turnover, portfolio risk, estimation window, and covariance matrix estimation.
1518 Dufays, Arnaud  Evolutionary Sequential Monte Carlo Samplers for Changepoint Models
Sequential Monte Carlo (SMC) methods are widely used for nonlinear filtering purposes. Nevertheless the SMC scope encompasses wider applications such as estimating static model parameters so much that it is becoming a serious alternative to MarkovChain MonteCarlo (MCMC) methods. Not only SMC algorithms draw posterior distributions of static or dynamic parameters but additionally provide an estimate of the marginal likelihood. The tempered and time (TNT) algorithm, developed in the paper, combines (offline) tempered SMC inference with online SMC inference for drawing realizations from many sequential posterior distributions without experiencing a particle degeneracy problem. Furthermore, it introduces a new MCMC rejuvenation step that is generic, automated and wellsuited for multimodal distributions. As this update relies on the wide heuristic optimization literature, numerous extensions are already available. The algorithm is notably appropriate for estimating Changepoint models. As an example, we compare Changepoint GARCH models through their marginal likelihoods over time.
1517 BlaisMorisset, Paul; Boucher, Vincent; Fortin, Bernard  L'impact des dépenses publiques en sport sur les médailles olympiques: une analyse économétrique
Chaque année, une part significative des dépenses gouvernementales est consacrée au sport de niveau professionnel ou amateur. Certains analystes affirment que ces investissements contribuent fortement au succès d’un pays aux Jeux olympiques (JO). Nous présentons une analyse économétrique du nombre de médailles obtenues aux JO. Nous introduisons l’investissement public en sport comme facteur potentiellement important du nombre de médailles remportées par un pays, en prenant soin de contrôler pour l’hétérogénéité inobservable des pays participants aux JO. Nous présentons, à notre connaissance, la première modélisation du succès olympique utilisant des spécifications de comptage (count data model) en panel estimées à l’aide de variables instrumentales et captant les caractéristiques individuelles et invariantes des nations. Selon les spécifications du modèle retenues, un pays aux caractéristiques moyennes aurait dû accroître son investissement de 72 à 94 millions de dollars, ceteris paribus, afin d’obtenir une médaille supplémentaire aux JO d’été de Londres en 2012.
1516 Dionne, Georges; Saissi Hassani, Samir  Endogenous Hidden Markov Regimes in Operational Loss Data: Application to the Recent Financial Crisis
We determine whether there is an endogenous Hidden Markov Regime (HMR) in the operational loss data of banks from 2001 to 2010. A high level regime is marked by very high loss values during the recent financial crisis. There is therefore temporal heterogeneity in the data. If this heterogeneity is not considered in risk management models, capital estimations will be biased. Levels of reserve capital will be overestimated in periods of normal losses, corresponding to the low level of the regime, and underestimated in periods of a high regime. Variation in capital can go up to 30% during this period of analysis when regimes are not considered.
1515 Carmichael, Benoît; Gnagne, Jean Armand; Moran, Kevin  Securities Transactions Taxes and Financial Crises
This paper assesses the impact that a widelybased Securities Transaction Tax (STT) could have on the likelihood of systemic financial crises. We apply the methodology developed by DemirgüçKunt and Detragiache (1998) [IMF Staff Papers 45 (1)] to a panel dataset of 34 OECD countries for the sample 1973 – 2012, using a measure of a country’s average bidask spread in financial markets as a proxy for the likely effect of a STT on transactions costs. Our results indicate that the establishment of a STT could sizeably increase the risk of financial crises.
1514 Boucher, Vincent; Goussé, Marion  Wage Dynamics and Peer Referrals
We present a flexible model of wage dynamics where information about job openings is transmitted through social networks. The model is based on CalvóArmengol & Jackson (2004, 2007) and extends their results outside the stationary distribution, and under observed and unobserved heterogeneity. We present an empirical application using the British Household Panel Survey by exploiting direct information about individual’s social networks. We find that the distribution of job offers is positively affected by the employment status of an individual’s friends, and that this relationship is stronger for women.
1513 Beland, LouisPhilippe; Boucher, Vincent  Polluting Politics
This paper estimates the causal impact of party affiliation (Republican or Democrat) of U.S. governors on pollution. Using a regression discontinuity design, gubernatorial election data, and air quality data from U.S. Environmental Protection Agency (EPA), we find that pollution is lower under Democratic governors. We identify that this is mostly due to environmental policies enacted by Democratic governors.
1512 Taptué, AndréMarie  Comparing the Homogeneity of Income Distributions using Polarization Indices
In the context of polarized societies, income homogeneity is linked to the frequency and the intensity of social unrest. Most homogenous countries exhibit a lower frequency of intense social conflicts and less homogeneous countries show a higher frequency of moderate social conflicts. This paper develops a methodology to compare the degree of homogeneity of two income distributions. We use for that purpose and index of polarization that does not account for alienation. This index is the identification component of polarization that measures the degree to which individuals feel alike in an income distribution. This development leads to identification dominance curves and derives firstorder and higherorder stochastic dominance conditions. Firstorder stochastic dominance is performed through identification dominance curves drawn on a support of identification thresholds. These curves are used to determine whether identification, homogeneity, or similarity of individuals is greater in one distribution than in another for general classes of polarization indices and ranges of possible identification thresholds. We also derive the asymptotic sampling distribution of identification dominance curves and test dominance between two distributions using Intersection Union tests and bootstrapped pvalues. Our methodology is illustrated by comparing pairs of distributions of eleven countries drawn from the Luxembourg Income Study database.
1511 Taptué, AndréMarie  Comparing the Size of the Middle Class using the Alienation Component of Polarization
This paper shows how to compare the size of the middle class in income distributions using a polarization index that do not account for identification. We derive a class of polarization indices where the antagonism function is constant in identification. The comparison of distributions using an index from this class motivates the introduction of an alienation dominance surface, which is a function of an alienation threshold. We first prove that a distribution has a large alienation component in polarization compared to another if the former always has a larger dominance surface than the latter regardless of the value of the alienation threshold. Then, we show that the distribution with large dominance surface is more concentrated in the tails and has a smaller middle class than the other distribution. We implement statistical inference and test dominance between pairs of distributions using the asymptotic theory and Intersection Union tests. Our methodology is illustrated in comparing the declining of the middle class across pairwise distributions of twentytwo countries from the Luxembourg Income Study data base.
1510 Fluet, Claude; Galbiati, Roberto  Lois et normes: les enseignements de l'économie comportementale
Nous discutons de quelques développements récents en économie expérimentale sur la relation entre la loi et les normes sociales dans la détermination des comportements. Dans l’approche traditionnelle de l’analyse économique du droit, l’effectivité des lois repose uniquement sur le système répressif mis en œuvre pour les faire respecter. De nombreuses expériences de laboratoires montrent cependant que les obligations légales influencent aussi les comportements par un effet sur les anticipations, ce qui permet la coordination sur de « bons équilibres » par le jeu des préférences sociales, ainsi que par un effet direct sur les préférences ellesmêmes. Ces résultats ont des conséquences importantes pour l’analyse économique des politiques légales et réglementaires.
1509 Garon, JeanDenis; Séguin, Charles  Enviromental Tax Reform in a Federation with RentInduced Migration
We study the welfare effects of a revenueneutral green tax reform in a federation. The reform consists of increasing a tax on a polluting input and reducing that on labor income. Households are fully mobile within the federation. Regions are unequally endowed with a nonrenewable natural resource. Resource rents are owned by regions and are redistributed to citizens on a residence basis, which generates a motive for inefficiently relocating to the resourcerich jurisdiction. Since the resourcepoor region has a higher marginal product of labor than does the resourcerich region, the tax reform mitigates the scope of inefficient migration. This positive welfare effect may significantly reduce abatement costs of pollution and calls for higher environmental tax, as compared with a model where migration is assumed away.
1508 Carmichael, Benoît; Koumou, Gilles Boevi; Moran, Kevin  Unifying Portfolio Diversification Measures Using Rao's Quadratic Entropy
This paper extends the use of Rao(1982b)’s Quadratic Entropy (RQE) to modern portfolio theory. It argues that the RQE of a portfolio is a valid, flexible and unifying approach to measuring portfolio diversification. The paper demonstrates that portfolio’s RQE can encompass most existing measures, such as the portfolio variance, the diversification ratio, the normalized portfolio variance, the diversification return or excess growth rates, the GiniSimpson indices, the return gaps, Markowitz’s utility function and Bouchaud’s general free utility. The paper also shows that assets selected under RQE can protect portfolios from mass destruction (systemic risk) and an empirical illustration suggests that this protection is substantial.
1507 Dionne, Georges; Angers, JeanFrançois; Desjardins, Denise  Étude des comportements de sécurité routière des propriétaires, exploitants et conducteurs des véhicules lourds au Québec
Le contenu de notre rapport consiste à : 1) Identifier les effets de l’application de la « Politique d’évaluation des PEVLs » sur la sécurité routière. 2) Inventorier les infractions commises par les conducteurs de véhicules lourds et par les PEVLs les plus courantes et leurs récurrences. Établir un lien statistique entre les types d’infraction des conducteurs de VLs et des PEVLs et les types d’accident. 3) Identifier et catégoriser les profils des conducteurs des VLs et des PEVLs et déterminer ceux qui sont les plus à risque sur le plan de la sécurité routière.
1506 Angers, JeanFrançois; Desjardins, Denise; Dionne, Georges; Guertin, François  Modelling and Estimating Individual and Firm Effects with Count Panel Data
In this article, we propose a new parametric model for the modelling and estimation of accident distributions for drivers working in fleets of vehicles. The analysis uses panel data and takes into account individual and fleet effects in a nonlinear model. Our sample contains more than 456,000 observations of vehicles and 87,000 observations of fleets. Nonobservable factors are treated as random effects. The distribution of accidents is affected by both observable and nonobservable factors from drivers, vehicles and fleets. Past experience of both individual drivers and individual fleets is very significant to explain road accidents. Unobservable factors are also significant, which means that insurance pricing should take into account both observable and unobservable factors in predicting the rate of road accidents under asymmetric information.
1505 Dauphin, Anyck; Fortin, Bernard; Lacroix, Guy  How Falsifiable is the Collective Model? a New Test with an Application to Monogamous and Bigamous Households in Burkina Faso
Collective rationality is seldom if ever rejected in the literature, raising doubt about its falsifiability. We show that the standard approach to test the collective model with distribution factors may yield misleading inference. We generalize the model and provide an appropriate test procedure to assess its validity. Our new approach extends to households that include more than two decisionmakers (e.g., polygamous households, adult children). We investigate household consumption decisionmaking within monogamous and bigamous households in Burkina Faso. Using the standard testing approach, collective rationality within monogamous households is not rejected. Using our proposed test procedure, collective rationality is however rejected for monogamous households. Furthermore, our test also rejects collective rationality for bigamous households. We conclude that the household efficiency does yield empirically falsifiable restrictions despite being scarcely rejected in the literature.
1504 Boucher, Vincent; Fortin, Bernard  Some Challenges in the Empirics of the Effects of Networks
We study some recent developments and challenges in the empirics of the effects of social networks. We focus in particular on researchers’ ability to make policy recommendations based on a standard linear econometric model. We examine the potential compatibility between this type of econometric model and a microeconomic theoretical approach based on fundamentals, such as preferences, technology and decision processes. We discuss sources of identification for the social multiplier as well as for the identity of the key player. We study the possibility of testing endogeneity in network formation. We analyse the use of proxy variables and their impact for the causal interpretation of the peer effect coefficients. Our analysis suggests that greater care should be taken in grounding econometric network models to sound and credible theoretical underpinnings.
1503 Samano, Mario; Santugini, Marc  LongRun Market Configurations in a Dynamic QualityLadder Model with Heterogeneity
We study the longrun market configurations in a qualityladder dynamic model. Specifically, we assume that the return to investment in quality differs across the firms. That is, for a given level of investment, one firm has a higher probability to raise the quality of the good it produces. We show that the model can generate five different types of longrun market configurations (market collapse, market collapse or monopoly, monopoly, duopoly and monopoly, and duopoly). A high degree of heterogeneity in the return to investment can mitigate the effect of highly reversible investments on the probability of market collapse, giving rise to nonnegligible probabilities of observing a duopoly or even dominance of the firm with the lowest return to investment.
1502 Mirman, Leonard J.; Salgueiro, Egas M.; Santugini, Marc  Noisy Learning in a Competitive Market with Risk Aversion
We address the issue of risk aversion in a competitive equilibrium when some buyers engage in learning and information is conveyed through the price system. Specifically, since the learning process yields uncertainty, we study the effect of risk aversion on the equilibrium outcomes of the model, including the amount of information released by the market. We show that risk aversion has an effect on the market outcomes but not on the flow of information. In particular, an increase in risk aversion lowers the competitive price and quantity. However, an increase in risk aversion does not change the amount of information embedded in the equilibrium price.
1501 Masoudi, Nahid; Santugini, Marc; Zaccour, Georges  A Dynamic Game of Emissions Pollution with Uncertainty and Learning
We introduce learning in a dynamic game of international pollution, with ecological uncertainty. We characterize and compare the feedback noncooperative emissions strategies of players when the players do not know the distribution of ecological uncertainty but they gain information (learn) about it. We then compare our learning model with the benchmark model of full information, where players know the distribution of ecological uncertainty. We find that uncertainty due to anticipative learning induces a decrease in total emissions, but not necessarily in individual emissions. Further, the effect of structural uncertainty on total and individual emissions depends on the beliefs distribution and bias. Moreover, we obtain that if a player’s beliefs change toward more optimistic views or if she feels that the situation is less risky, then she increases her emissions while others react to this change and decrease their emissions.