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2014 Working Papers

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Title/Author(s) Abstract Number

Voting in Legislative Elections Under Plurality Rule

Niall Hughes

Conventional models of single district plurality elections show that with three parties anything can happen - extreme policies can win regardless of voter preferences. I show that when when single district elections are used to fill a legislature we get back to a world where the median voter matters.[read more] 1055

Incentives to Innovate, Compatibility and Efficiency in Durable Goods Markets with Network Effects

Thanos Athanasopoulos

This paper investigates the relation between firms’R&D incentives and their compatibility decisions regarding durable, imperfectly substitutable network goods in the presence of forward looking consumers. [read more] 1054

Effects of Marginal Speci cations on Copula Estimation

Kazim Azam

This paper studies the effect of marginal distributions on a copula, in the case of mixed discrete-continuous random variables. The existing literature has proposed various methods to deal with mixed marginals: this paper is the rst to quantify their e ect in a uni ed Bayesian setting. [read more] 1053

Dependence Analysis between Foreign Exchange Rates: A Semi-Parametric Copula Approach

Kazim Azam

Not only currencies are assets in investor's portfolio, central banks use them for implementing economic policies. This implies existence of some type of dependence pattern among the currencies. We investigate such patterns among daily Deutsche Mark (DM) (Euro later), UK Sterling (GBP) and the Japanese Yen (JPY) exchange rate, all considered against the US Dollar during various economic conditions. [read more] 1052

Bayesian Inference for a Semi-Parametric Copula-based Markov Chain

Mike Pitt and Kazim Azam

This paper presents a method to specify a strictly stationary univariate time series model with particular emphasis on the marginal characteristics (fat tailedness, skewness etc.). It is the rst time in time series models with speci ed marginal distribution, a non-parametric speci cation is used. [read more]


Optimal Security Design under Asymmetric Information and Profit Manipulation

Kostas Koufopoulos , Roman Kozhan, Giulio Trigilia

We consider a model of external financing under ex ante asymmetric information and profit manipulation (non verifability). Contrary to conventional wisdom, the optimal contract is not standard debt, and it is not monotonic. [read more]


The Wind of Change: Maritime Technology, Trade and Economic Development

Luigi Pascali

The 1870-1913 period marked the birth of the first era of trade globalization. How did this tremendous increase in trade affect economic development? This work isolates a causality channel by exploiting the fact that the steamship produced an asymmetric change in trade distances among countries. [read more]


Optimal strategies for operating energy storage in an arbitrage market

Lisa Flatley, Robert S MacKay , Michael Waterson

We characterise profit-maximising operating strategies, over some time horizon, for an energy store which is trading in an arbitrage market. Our theory allows for leakage, operating inefficiencies and general cost functions. [read more]


A vision of the European energy future? The impact of the German response to the Fukushima earthquake

Luigi Grossi , Sven Heim and Michael Waterson

The German response to the Fukushima nuclear power plant incident was possibly the most significant change of policy towards nuclear power outside Japan, leading to a sudden and very significant shift in the underlying power generation structure in Germany. [read more]


Individual and Societal Wisdom: Explaining the Paradox of Human Aging and High Well-Being

Dilip V. Jeste and Andrew J. Oswald

Although human aging is characterized by loss of fertility and progressive decline in physical abilities, later life is associated with better psychological health and well-being. [read more]


Cooperation and Personality

Eugenio Proto and Aldo Rustichini

Cooperating behavior may be fostered by personality traits reflecting either favorable inclination to others or willingness to comply with norms and rules. We test the relative importance of these two factors in an experiment where subjects provide real mental effort in two treatments with identical task, differing only by whether others' payment is affected. [read more]


The Effects of Entry in Oligopoly with Bargained Wages

Robin Naylor and Christian Soegaard

We show that a firm's profits under Cournot oligopoly can be increasing in the number of firms in the industry if wages are determined by decentralised bargaining in unionised bilateral oligopoly. [read more]


Compatibility, Intellectual Property,
Innovation and Welfare in Durable
Goods Markets with Network Effects

Thanos Athanasopoulos

This paper analyses firms’ behaviour towards compatibility and the relation of these decisions with their incentives to invest into improving their durable, network goods. By using a sequential game where the dominant firm plays first, we give its competitor the ability to build on innovations previously introduced by the market leader. [read more] 1043

Corporate Taxes and the Growth of the Firm

Federica Liberini

It is desirable to reduce the number of "artificial" merger and acquisitions (M&A) designed to escape from high tax jurisdictions, without discouraging domestic firms from growing into highly productive multinational corporations. This paper studies the effect of corporate taxes on the headquarters’ decision to expand its extensive margins through the acquisition of pre-existing firms. [read more]


Price Flexibility in British Supermarkets: Moderation and Recession

Huw Dixon.Jonathon S Seaton and Michael Waterson

This paper delivers a significantly different empirical perspective on micro pricing behaviour and its impact on macroeconomic processes than previous studies, largely resulting from the fact that our weekly price data for the three major British supermarkets spans a seven year period including the crisis years 2008-2010. [read more] 1041

The Effect of Stolen Goods Markets on Crime: Evidence from a Quasi - Natural Experiment

Rocco D'Este

This paper analyses the causal effect of the availability of stolen goods markets on theft crimes. Motivated by the richness of anecdotal evidence, we study this overlooked determinant of crime’s production function through the lens of pawnshops, a widespread business that offers secured loans to people, with items of personal property used as collateral. [read more] 1040

Does Money Make People Right-Wing and Inegalitarian? A Longitudinal Study of Lottery Winners

Nattavudh Powdthavee & Andrew J. Oswald

The causes of people’s political attitudes are largely unknown. We study this issue by exploiting longitudinal data on lottery winners. Comparing people before and after a lottery windfall, we show that winners tend to switch towards support for a right-wing political party and to become less egalitarian. The larger the win, the more people tilt to the right. [read more] 1039

Human Well-Being and In-Work Benefits: A Randomized Controlled Trial

Richard Dorsett, Andrew J. Oswald

Many politicians believe they can intervene in the economy to improve people’s lives. But can they? In a social experiment carried out in the United Kingdom, extensive in-work support was randomly assigned among 16,000 disadvantaged people. [read more] 1038

Longitudinal Evidence for a Midlife Nadir in Human Well-being: Results from Four Data Sets

Terence C. Chenga, Nattavudh Powdthaveea & Andrew J. Oswald

There is a large amount of cross-sectional evidence for a midlife low in the life cycle of human happiness and well-being (a ‘U shape’). Yet no genuinely longitudinal inquiry has uncovered evidence for a U-shaped pattern. Thus some researchers believe the U is a statistical artefact. [read more] 1037

Temptation with Uncertain Normative Preferences

John Stovall

We model a decision maker who anticipates being a ected by temptation but is also uncertain about what is normatively best. Our model is an extended version of Gul and Pesendorfer's (2001) where there are three time periods. [read more] 1036

Collective Rationality and Monotone Path Division Rules

John Stovall

We impose the axiom Independence of Irrelevant Alternatives on division rules for the conflicting claims problem. With the addition of Consistency and Resource Monotonicity, this characterizes a family of rules which can be described in three different but intuitive ways. [read more]