Search

People often have to judge the social motives of others, for example, to distinguish truly prosocial people from those merely trying to appear prosocial. Gaze can reveal the motives underlying social decisions, as decision-makers dedicate more attention to motive-relevant information. We extend the use of eye-tracking and apply it as a communication device by providing (real-time) eye-tracking information of one participant to another. We find that untrained observers can judge the prosociality of decision-makers from their eye-tracked gaze alone, but only if there are no strategic incentives to be chosen for a future interaction. When there are such strategic incentives, the cues of prosociality are invalidated, as both individualistic and prosocial decision-makers put effort into appearing more prosocial. Overall, we find that gaze carries information about a person's prosociality, but also that gaze is malleable and affected by strategic considerations. published

When pricing life annuity or insurance products issued to multiple lives, actuaries require a model for the survival of coupled lifetimes. For reasons of simplicity these multiple life premiums are often calculated under the assumption of independent lifetimes. In some circumstances this assumption is not realistic, and a number of correction methods based on bivariate survival data have been proposed in the actuarial literature. However, when we only observe the first occurring event time, the applicability of the models suggested for bivariate survival data turns out to be limited. The aim of this paper is to propose a copula-based analysis for bivariate survival data subject to left truncation and dependent censoring when only the first event time is observed. Our method is based on parametric marginals and parametric copulas. For this model, we show that the association between the survival and dependent censoring time is identifiable from the distribution of the observed data. The proposed model is estimated using maximum likelihood, which simultaneously estimates the marginal and dependency parameters. We also develop a goodness-of-fit test approach to examine the validity of the fitted copula model. Finally, our approach is illustrated on data from a large Canadian life insurance company. We hereby price joint and last-survivor annuities from data subject to left-truncation, administrative as well as dependent censoring.

To improve drinking water accessibility and safety in rural China, the Chinese government launched the rural drinking water program in the 1980s. As part of the program, tap water infrastructure has been constructed in rural areas to supply tap water to rural residents. This policy intervention provides a unique opportunity to examine the impact of early life exposure to tap water on children’s cognitive achievement in later life. Using data extracted from the China Family Panel Studies (CFPS), we find that one additional year of exposure to tap water in early life increases average cognitive test score by 0.109 standard deviations for a sample of rural children aged 10-15 in 2010. The effect is larger for children whose fathers are less-educated. Event study estimates confirm that the beneficial impacts are concentrated in early life with limited additional impact after the time window.

Bonus-Malus Systems traditionally consider a customer's number of claims irrespective of their sizes, even though these components are dependent in practice. We propose a novel joint experience rating approach based on latent Markovian risk profiles to allow for a positive or negative individual frequency-severity dependence. The latent profiles evolve over time in a Hidden Markov Model to capture updates in a customer's claims experience, making claim counts and sizes conditionally independent. We show that the resulting risk premia lead to a dynamic, claims experience-weighted mixture of standard credibility premia. The proposed approach is applied to a Dutch automobile insurance portfolio and identifies customer risk profiles with distinctive claiming behavior. These profiles, in turn, enable us to better distinguish between customer risks.

In this paper we use intraday government bond futures price changes around German and Italian Treasury auctions to identify unexpected shifts in the demand for public debt. Estimates show that positive demand shocks lead to large negative movements in Treasury yields. Evidence shows significant spillover effects into Treasury bond, equity, and corporate bond markets of other eurozone countries. We find interesting differences in the effects of demand shocks between the two countries, consistent with the “safe-haven” status of German bonds versus the “high-debt” status of Italian Treasuries. Results suggest that these effects are stronger during periods of high financial stress.

Traditional non-life reserving models largely neglect the vast amount of information collected over the lifetime of a claim. This information includes covariates describing the policy, claim cause as well as the detailed history collected during a claim’s development over time. We present the hierarchical reserving model as a modular framework for integrating a claim’s history and claim-specific covariates into the development process. Hierarchical reserving models decompose the joint likelihood of the development process over time. Moreover, they are tailored to the portfolio at hand by adding a layer to the model for each of the events registered during the development of a claim (e.g. settlement, payment). Layers are modelled with statistical learning (e.g. generalized linear models) or machine learning methods (e.g. gradient boosting machines) and use claim-specific covariates. As a result of its flexibility, this framework incorporates many existing reserving models, ranging from aggregate models designed for run-off triangles to individual models using claim-specific covariates. This connection allows us to develop a data-driven strategy for choosing between aggregate and individual reserving; an important decision for reserving practitioners. We illustrate our method with a case study on a real insurance data set and deduce new insights in the covariates driving the development of claims. Moreover, we evaluate the method’s performance on a large number of simulated portfolios representing several realistic development scenarios and demonstrate the flexibility and robustness of the hierarchical reserving model. keywords: Individual claims reserving, Covariate shift, Model and variable selection, Moving window evaluation, Simulation machine ispartof: Insurance: Mathematics and Economics vol:104 pages:158-184 status: published

Laboratory evidence shows that when people have to argue for a given position, they persuade themselves about the position’s factual and moral superiority. Such self-persuasion limits the potential of communication to resolve conflict and reduce polarization. We test for this phenomenon in a field setting, at international debating competitions that randomly assign experienced and motivated debaters to argue one side of a topical motion. We find self-persuasion in factual beliefs and confidence in one’s position. Effect sizes are smaller than in the laboratory, but robust to a one-hour exchange of arguments and a tenfold increase in incentives for accuracy. (JEL C93, D12, D72, D83, D91, I23)

Some credit booms result in financial crises. While excessive risk-taking could plausibly explain the boom-to-bust cycle, many investors do not anticipate increasing risk. We show that credit booms may be misunderstood as being driven by high productivity because opaque bank assets disguise risk incentives. Balanced funding relative to productive prospects can sustain prudent lending (good boom), whereas funding imbalances may induce high risk exposure and boost asset prices (bad boom) or lead to asset underpricing and insufficient lending (missed boom). Rational agents drawing inference from prices make mistakes that can amplify the effect of funding imbalances and propagate risk. Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.

Equity concerns in antitrust could justify market power in return for a fairer allocation by weighing the consumer welfare of certain disadvantaged groups more heavily. A simple example of an equity-justified agreement illustrates how seeking distributive justice through relaxed antitrust enforcement is ineffective and inefficient. Permitting competitors to jointly set prices gives them the power to price discriminate, which they could use to redistribute wealth by overcharging the rich and giving lower than competitive prices to the poor. Provided society values redistribution enough, such a ‘Robin Hood cartel’ is profitable, despite losing money on the poor and creating deadweight losses. Yet the poor will be given only what is minimally required in return for permission to take from the rich. Without conditions, the joint-profit maximizing wealth redistribution is nothing more than alms for the poor. They receive more under a full-payout plan, but total deadweight losses remain high. In essence, assigning a larger relative consumer welfare weight to the poor discounts the inefficiencies on the rich.

This paper addresses investment and spending policies of endowment funds aiming to generate a stable income stream in perpetuity. The standard academic approach to the design of such policies is based on optimization of utility aggregated over time. However, the explicit purpose of many funds to serve current and future generations ‘in equal measure’ suggests incorporation of a suitable notion of neutrality. The utilitarian and neutralitarian approaches are compared in two settings: one in which the preferences of individual generations are described by a standard CRRA utility function, and one in which these utility functions are modified by the introduction of a saturation level. Results are expressed in terms of the implied assumed interest rate (AIR), which reflects the apportionment of initially available capital to the time-0 values of individual future benefits. Under CRRA preferences, the neutralitarian point of view can be seen as a way of determining the discount factor that is used in the utilitarian method. When a saturation level is added, the neutralitarian and utilitarian policies are essentially different. The introduction of saturation generally induces a shift of value from earlier to later generations.

We exploit some specific features of a peculiar online selling mechanism, the so-called price reveal auctions, to empirically investigate how consumers’ behaviour changes in response to an item’s ‘social attributes.’ We document a significant effect of the item’s brand and portability in influencing consumers’ willingness to pay. We show that, although both characteristics have some explanatory power when considered in isolation, it is their interaction that really matters.

Cross-section average-augmented panel regressions introduced by Pesaran (2006) have been a popular empirical tool to estimate panel data models with common factors. However, the corresponding common correlated effects (CCEs) estimator can be sensitive to the number of cross-section averages used and/or the static factor representation for observables. In this paper, we show that most of the corresponding problems documented in the literature can be solved once cross-section averages are appropriately regularized, thus extending the applicability of the CCE setup. As the standard plug-in variance estimators are not able to account for all sources of estimation uncertainty, we suggest the use of cross-section bootstrap to construct confidence intervals. The proposed procedure is illustrated both using real and simulated data.

Andrade et al. analyze the data from a large panel of firms and show how sector-specific shocks erroneously influence firms’ outlooks about the aggregate economy. This paper is part of a broader research agenda that has extensively documented the existence of information rigidities using data from large-scale surveys of households and firms. This comment discusses the implications of this research agenda for central banking in light of a complementary empirical method, namely laboratory experiments, and their use in informing macroeconomic policies.

We find that an option-based equity tail risk factor is priced in the cross section of currency returns; more exposed currencies offer a low risk premium because they hedge against equity tail risk. A portfolio that buys currencies with high equity tail beta and shorts those with low beta extracts the global component in the tail factor. The estimated price of risk of this novel global factor is consistently negative in currency carry and momentum portfolios, and in portfolios of other asset classes, suggesting that excess returns of these strategies can be partially understood as compensations for global tail risk.

We study the effects of the investment horizon on asset price volatility using a Learning to Forecast laboratory experiment. We find that, for short investment horizons, participants coordinate on self-fulfilling trend-extrapolating predictions. Price deviations are then reinforced and amplified, possibly leading to large bubbles and crashes in asset prices. For longer investment horizons such bubbles do not emerge and price volatility tends to be lower. This is due to the fact that, for longer horizons, there is more dispersion in participants’ forecasts, and participants extrapolate trends in past prices to a lesser extent. We also show that, independent of the investment horizon, if the initial history of asset prices is already relatively stable before participants start their prediction task, price volatility remains small, with prices close to their fundamental values for the duration of the experiment.

The reliability of tests on the risk premia in linear factor models is threatened by limited sample sizes and weak identification of risk premia frequently encountered in applied work. We, therefore, propose novel tests on the risk premia that are robust to both limited sample sizes and the identification strength of the risk premia as reflected by the quality of the risk factors. These tests are appealing for empirically relevant settings, and lead to confidence sets of risk premia that can substantially differ from conventional ones. To show the latter, we revisit two high-profile empirical applications.

Using an amended Gneezy’s cheap-talk game with multiple decisions, we test whether gender differences in lying depend on the magnitude of gains, as hypothesized in the literature. We find that women may have a greater aversion to lying for small monetary gains; this effect disappears with increased gains.

We present the results of a randomized control trial on the effect of the introduction of formalized property rights on individuals’ moral judgments and, in particular, on utilitarian morality. We show that institutions shape morality: being exposed to private property institutions makes individuals more utilitarian when confronted with moral dilemmas. Our results shed light on a possible institutional determinant of the variation of moral judgments across the globe and its geographical patterns, and have implications for the consequences of major institutional reforms—both intended, such as land-titling programs, and unintended, such as those following from recent historical events—on moral attitudes. We discuss two possible channels stemming from the inherent features of property rights: the loosening of social ties and the commodification of rights (JEL codes: K11; O13; Z10; Z13). Marco Fabbri gratefully acknowledges financial support from the Marie Curie Research Grants scheme, grant H2020-MSCA-IF-2017-789596. Giuseppe Dari-Mattiacci gratefully acknowledges research support from Columbia Law School.

A recent body of work has shown that quality of national institutions that enforce written contracts plays an important role in shaping a country’s comparative advantage. The current paper contributes to this literature by providing a comprehensive analysis of the mechanisms through which institutional frictions affect the pattern of aggregate trade flow by distinguishing its effect on the intensive and extensive margins. We find that better contracting institutions not only increase the probability of exporting (the extensive margin) but also enhance the export sales after entry (the intensive margin), particularly in industries where relationship-specific investments are most important. With around two-third to three-fourth share (depending on the definition used), the contribution of institutions along the intensive margin dominates that along the extensive margin. The benefits of improved institutions, particularly via the intensive margin, favor the less developed countries over the more developed ones. In addition, better contracting institutions increase the probability of survival of export products in more contract-intensive industries in particular. These findings are robust to measuring the intensive and extensive margins using a more granular export data based on firm-level aggregates, as well as the variety and destination based definitions.

We conduct a field and an online classroom experiment to study gender differences in self-set performance goals and their effects on performance in a real-effort task. We distinguish between public and private goals, performance being public and identifiable in both cases. Participants set significantly more ambitious goals when these are public. Women choose lower goals than men in both treatments. Men perform better than women under private and public goals as well as in the absence of goal setting, consistent with the identifiability of performance causing gender differences, as found in other studies. Compared to private goal setting, public goal setting does not affect men's performance at all but it leads to women's performance being significantly lower. Comparing self-set goals with actual performance we find that under private goal setting women's performance is on average 67% of goals, whereas for men it is 57%. Under public goal setting the corresponding percentages are 43% and 39%, respectively., Brandts thanks the Spanish Ministerio de Ciencia e Innovación (Grant number PID2020-114251GB-I00), the Spanish Agencia Estatal de Investigación (AEI), through the Severo Ochoa Programme for Centres of Excellence in R&D (Barcelona School of Economics CEX2019-000915-S) and the Generalitat de Catalunya (Grant: 2017 SGR 1136) for financial support.

In this paper we investigate to what extent the bootstrap can be applied to conditional mean models, such as regression or time series models, when the volatility of the innovations is random and possibly non-stationary. In fact, the volatility of many economic and financial time series displays persistent changes and possible non-stationarity. However, the theory of the bootstrap for such models has focused on deterministic changes of the unconditional variance and little is known about the performance and the validity of the bootstrap when the volatility is driven by a non-stationary stochastic process. This includes near-integrated exogenous volatility processes as well as near-integrated GARCH processes, where the conditional variance has a diffusion limit; a further important example is the case where volatility exhibits infrequent jumps. This paper fills this gap in the literature by developing conditions for bootstrap validity in time series and regression models with non-stationary, stochastic volatility. We show that in such cases the distribution of bootstrap statistics (conditional on the data) is random in the limit. Consequently, the conventional approaches to proofs of bootstrap consistency, based on the notion of weak convergence in probability of the bootstrap statistic, fail to deliver the required validity results. Instead, we use the concept of ‘weak convergence in distribution’ to develop and establish novel conditions for validity of the wild bootstrap, conditional on the volatility process. We apply our results to several testing problems in the presence of non-stationary stochastic volatility, including testing in a location model, testing for structural change using CUSUM-type functionals, and testing for a unit root in autoregressive models. Importantly, we work under sufficient conditions for bootstrap validity that include the absence of statistical leverage effects, i.e., correlation between the error process and its future conditional variance. The results of the paper are illustrated using Monte Carlo simulations, which indicate that a wild bootstrap approach leads to size control even in small samples., This research was supported by the Danish Council for Independent Research, Denmark (DSF Grant 015-00028B), by the University of Bologna, Italy (ALMA IDEA 2017 Grant), and by the Italian Ministry of University and Research, Italy (PRIN 2017 Grant 2017TA7TYC).

The impact of finite forecasting horizons on price dynamics is examined in a standard infinite-horizon asset-pricing model. Our theoretical results link forecasting horizon inversely to expectational feedback, and predict a positive relationship between expectational feedback and various measures of asset-price volatility. We design a laboratory experiment to test these predictions. Consistent with our theory, short-horizon markets are prone to substantial and prolonged deviations from rational expectations, whereas markets with even a modest share of long-horizon forecasters exhibit convergence. Longer-horizon forecasts display more heterogeneity but also prevent coordination on incorrect anchors – a pattern that leads to mispricing in short-horizon markets.

This paper considers the difference of stop-loss payoffs where the underlying is a difference of two random variables. The goal is to study whether the comonotonic and countermonotonic modifications of those two random variables can be used to construct upper and lower bounds for the expected payoff, despite the fact that the payoff function is neither convex nor concave. The answer to the central question of the paper requires studying the crossing points of the cumulative distribution function (cdf) of the original difference with the cdf's of its comonotonic and countermonotonic transforms. The analysis is supplemented with a numerical study of longevity trend bonds, using different mortality models and population data. The numerical study reveals that for these mortality-linked securities the three pairs of cdf's generally have unique pairwise crossing points. Under symmetric copulas, all crossing points can reasonably be approximated by the difference of the marginal medians, but this approximation is not necessarily valid for asymmetric copulas. Nevertheless, extreme dependence structures can give rise to bounds if the layers of the bond are selected to hedge tail risk. Further, the dependence uncertainty spread can be low if the layers are selected to hedge median risk, and, subject to a trade-off, to hedge tail risk as well.

We present a mixed frequency repeat sales model for commercial real estate, taking into account changes in net operating income between the date of buying and selling the property. Moreover, we relate monthly private market index asset returns to lags, up to one year, of daily REIT returns. The underlying REIT model enables us to interpolate the monthly private market index returns on a daily basis, and to predict the private market index asset returns going forward. The mixed frequency repeat sales model facilitates daily appraisal of commercial real estate portfolios. We apply the model on sale prices (all property types, and apartments only) in the period January 2006 up to July 2020, provided to us by Real Capital Analytics. We find that the mixed frequency repeat sales model reduces one-month-ahead forecasts errors and index revisions, compared to a benchmark model without daily REIT returns.

We analyze clients’ contract choices in auctions where Dutch law firms compete for standard cases such as labor disputes for individuals and collecting debts for businesses. In the auctions, lawyers can submit bids with any fee arrangement they prefer, including an hourly rate, a fixed fee, and a ‘mixed fee’: a time-capped fixed fee plus an hourly rate for any additional hours should the case take longer than expected. A game-theoretic analysis of this auction format reveals that clients should accept only fixed-fee bids in equilibrium. We estimate a simultaneous equation model that includes both the client’s and lawyers’ side. Qualitatively in line with our theoretical prediction, we find that clients strongly prefer fixed fees. Our results suggest that selecting a lawyer through an auction may benefit clients who face an incidental legal problem. More generally, our findings tentatively contradict lawyers’ often made argument that hourly rates are in a client’s best interest. ispartof: Review Of Industrial Organization vol:61 issue:2 pages:1-26 status: Published online

Research on unethical leadership has predominantly focused on interpersonal and high-intensity forms of harmful leader behavior such as abusive supervision. Other forms of harmful leader behavior such as excessively pressuring subordinates or acting in self-centered ways have received less attention, despite being harmful and potentially occurring more frequently. We propose a model of four types of harmful leader behavior (HLB) varying in intensity (high vs low) and orientation (people/relationships or tasks/goals): Intimidation, Lack of Care, Self-Centeredness, and Excessive Pressure for Results. We map out how these relate to other constructs in the unethical leader behavior field in order to integrate the existing work on how leaders can cause harm to followers. Next, in five studies (N = 35, N = 218, N = 352, N = 160, N = 1921 in 196 teams), we develop and test a new survey instrument measuring the four proposed types of perceived HLB. We provide initial validity evidence for this new measure, establish its psychometric properties, and examine its nomological network by linking the four types of HLB to related leadership constructs and soft and hard outcome correlates at the individual and team level. We find that HLB is negatively related to constructive forms of leadership (e.g., ethical and transformational) and positively to unethical ones (e.g., abusive supervision). HLB is also related in the expected direction to job satisfaction, engagement, psychological safety, knowledge sharing, knowledge hiding, deviance, and objectively recorded team-level stress-related absenteeism.

We study how a gift exchange labor market reacts to the occurrence of negative shocks. One-round shocks may hit either workers’ wages or employers’ earnings (via worker productivity). In our model, other-regarding preferences suffice to predict gift exchange and wages above the competitive level. Wage rigidity is predicted if we add wage illusion and loss aversion. Using a real-effort laboratory experiment, we find support for the model. When there are no shocks, there is gift exchange. After a wage shock we see strong nominal wage rigidity and no impact on workers’ effort, as predicted. Rigidity is also observed after a productivity shock, but here we do observe increases in effort, especially at low wages. The latter is contrary to the model predictions and suggests that productivity shocks alter gift-exchange patterns. We conclude that the wage rigidity often observed in the field can be explained by boundedly rational workers with social preferences.

Several countries provide policy support to specific sectors in order to facilitate industry transitions. While industry-support policies stimulate the growth of their target sectors, little is known about how such policies engender heterogeneous international strategies. In this article, we investigate how industry-support policies influence foreign location choices. We argue that firms engage in jurisdiction shopping, choosing to invest in countries with more generous policy support, but that this tendency varies markedly across firms. Specifically, we suggest that firms’ nonmarket experience exacerbates the effect of policy support on location choice, whereas market experience has less of an impact. Further, we propose that some firms view generous policies more skeptically than others, depending on the nature of their nonmarket experience. We test and find support for our predictions using a longitudinal dataset of foreign investments of firms entering the solar energy industry in the European Union. Our findings indicate that supportive policies stimulate the energy transition, attracting in particular foreign entrants diversifying into renewables or having more policy experience. At the same time, they suggest that adverse policy changes in one country affect how firms assess policies in other countries, highlighting the need for policy coordination at a supranational level.

Schinkel and Spiegel (2017) finds that allowing sustainability agreements in which firms coordinate their investments in sustainability leads to lower investments and lower output. By contrast, allowing production agreements, in which firms coordinate output yet continue to compete on investments, boosts investments in sustainability and may also benefit consumers. We extend these results to the case where investments affect not only the consumers’ willingness to pay, but also marginal cost. We show that sustainability agreements continue to lower investments and output levels, while production agreements increase investments but when they benefit consumers, they are not profitable for firms and will therefore not be formed. This implies that exempting horizontal agreements from the cartel prohibition cannot be relied on to advance sustainability goals and satisfy the competition law requirement that consumers must not be worse off. ispartof: Economics Letters vol:216 status: published

This paper develops a novel Method of Moments approach for panel data models with endogenous regressors and unobserved common factors. The proposed approach does not require estimating explicitly a large number of parameters in either time-series or cross-sectional dimension, T and N respectively. Hence, it is free from the incidental parameter problem. In particular, the proposed approach does not suffer from “Nickell bias” of order O(T−1), nor from bias terms that are of order O(N−1). Therefore, it can operate under substantially weaker restrictions compared to existing large T procedures. Two alternative GMM estimators are analyzed; one makes use of a fixed number of “averaged estimating equations” à la Anderson and Hsiao (1982), whereas the other one makes use of “stacked estimating equations”, the total number of which increases at the rate of O(T). It is demonstrated that both estimators are consistent and asymptotically mixed-normal as N→∞ for any value of T. Low-level conditions that ensure local and global identification in this setup are examined using several examples.

We study partner preferences for education and attractiveness by conducting a field experiment in a large online dating market. Fictitious profiles with manipulated levels of education and photo attractiveness send random invitations for a serious relationship to real online daters. We find that men and women prefer attractive over unattractive profiles, regardless of own attractiveness. We also find that high-educated men prefer low-educated over high-educated profiles as much as high-educated women prefer high-educated over low-educated profiles. With preferences similar for attractiveness but opposite for education, two groups are more likely to stay single: unattractive, low-educated men and unattractive, high-educated women.

Using flexible Poisson regressions, we analyse a huge micro-level lifetime dataset from a Dutch pension fund, including categorical, continuous and spatial risk factors collected on participants in the fund. The availability of granular lifetime data allows us to quantify the longevity gap between the national population and the fund on the one hand, and between participants within the fund on the other hand. We identify the most important risk factors using statistical criteria that measure the in- and out-of-sample performance of the regression models. We evaluate the financial performance of the models by introducing a novel type of backtest, which selects the risk factors that contribute most to an accurate prediction of future pension liabilities. For this portfolio, the most relevant risk factors (next to age and gender) are the salary, the time spent in disability and working at irregular hours. The resulting personalized mortality risk profiles show substantial differences between the remaining life expectancies for the most-favourable and least-favourable risk profiles. Our method to estimate these longevity gaps will help policymakers to assess wanted and unwanted consequences of longevity risk sharing in pension schemes.

We show that Moreira’s (2003) conditional critical value function for likelihood ratio (LR) tests on the structural parameter in homoskedastic linear instrumental variables (IV) regression provides a bounding critical value function for subset LR tests on one structural parameter of several for general homoskedastic linear IV regression. The resulting subset LR test is size correct under weak identification and efficient under strong identification. A power study shows that it outperforms the subset Anderson–Rubin test with conditional critical values from Guggenberger et al. (2019a) when the structural parameters are reasonably identified and has slightly less power when identification is weak.

This paper studies a one-period stochastic game to determine the optimal premium strategies of non-life insurers in a competitive market. Specifically, the optimal premium strategy is determined by the Nash equilibrium of an n -player game, in which each player is assumed to maximise the expected utility of terminal wealth. The terminal wealth is stochastic, since the number of policies and the size of claims are considered to be random variables. The total loss of each insurer is described by the collective risk model. The expected number of policies is affected by all the premiums in the market and further investigated by two distinct demand functions. Both models have an exponential functional form, that is characterised by market and price sensitivity parameters. The demand in the first model is zero for premiums above a given threshold, whereas the second model does not include such restriction. The pure strategy Nash equilibrium premiums are given as solutions to constrained optimisation problems. For the first model we prove the existence and uniqueness of a pure strategy Nash equilibrium, whereas for the second model we provide a formula when it exists. Two numerical examples are provided to illustrate the applicability of our findings.

Entrepreneurial fear of failure is a ubiquitous yet aversive experience with critical implications for entrepreneurial action and well-being. To understand how entrepreneurs can effectively cope with fear-inducing obstacles, we hypothesize and experimentally test the extent to which self-compassion, cultivated through Loving-Kindness Meditation (LKM), counteracts entrepreneurs’ fear of failure when facing a threatening venture obstacle. Compared to an active control group, entrepreneurs exposed to a brief guided LKM showed higher self-compassion, which, in turn, was associated with lower fear reactivity. We offer novel contributions to entrepreneurship theory and practice by highlighting the role of meditation and self-compassion in building entrepreneurial resilience.

Among the existing estimators of factor-augmented regressions, the CCE approach is the most popular. A major reason for this popularity is the simplicity and good small-sample performance of the approach, making it very attractive from an empirical point of view. The main drawback is that most of the available asymptotic theory is based on quite restrictive assumptions, such as that the common factor component should be independent of the regressors. The present paper can be seen as a reaction to this. The purpose is to study the asymptotic properties of the pooled CCE estimator under more realistic conditions. In particular, the common factor component may be correlated with the regressors, and the true number of common factors, r , can be larger than the number of estimated factors, which in CCE is given by k + 1 , where k is the number of regressors. The main conclusion is that while the estimator is generally consistent, asymptotic normality can fail when r > k + 1 .

The Bowley solution refers to the optimal pricing density for the reinsurer and optimal ceded loss for the insurer when there is a monopolistic reinsurer. In a sequential game, the reinsurer first sets the pricing kernel, and thereafter the insurer selects the reinsurance contract given the pricing kernel. In this article, we study Bowley solutions under asymmetric information on the insurer's risk preferences where the identity of the insurer is unknown to the reinsurer. By assuming that the insurer adopts a Value-at-Risk measure or a convex distortion risk measure, the optimal pricing kernel for the insurer and the optimal ceded loss function for the reinsurer are determined. Numerical examples are presented to illustrate the results.

Available online 1 December 2020 We construct an election game to study the electoral impacts of biased candidate endorsements. We derive a set of testable predictions. We test these in a laboratory experiment and find that observed election outcomes and vote shares are well predicted. We find no support, however, for our prediction that the relationship between election outcome and the endorser's bias is non-monotonic; i.e., ex ante, a candidate's winning probability will first increase and then decrease as the endorser becomes more biased towards her. Voter turnout is much less responsive to the bias than predicted. We argue that observed voting behavior can be explained, to a substantial extent, by three behavioral mechanisms: (a) distinct levels of rationality for candidate choice and turnout decisions, (b) conservative belief updating, and (c) ‘partial competition neglect’, where voters underestimate the correlation between the information released by an endorsement and the closeness of elections.

National audience; The New Keynesian theory of inflation determination is tested in this paper by means of laboratory experiments. We find that the Taylor principle is a necessary condition to ensure convergence to the inflation target, but it is not sufficient. Using a behavioral model of expectation formation, we show how heterogeneous expectations tend to self-organize on different forecasting strategies depending on monetary policy. Finally, we link the central bank’s ability to control inflation to the impact that monetary policy has on the type of feedback –positive or negative– between expectations and realizations of aggregate variables and in turn on the composition of subjects with respect to the type of forecasting rules they use.

The World Food Programme (WFP) is the largest humanitarian agency fighting hunger worldwide, reaching approximately 90 million people with food assistance across 80 countries each year. To deal with the operational complexities inherent in its mandate, WFP has been developing tools to assist its decision makers with integrating supply chain decisions across departments and functional areas. This paper describes a mixed integer linear programming model that simultaneously optimizes the food basket to be delivered, the sourcing plan, the delivery plan, and the transfer modality of a long-term recovery operation for each month in a predefined time horizon. By connecting traditional supply chain elements to nutritional objectives, we are able to make significant breakthroughs in the operational excellence of WFP’s most complex operations. We show three examples of how the optimization model is used to support operations: (1) to reduce the operational costs in Iraq by 12% without compromising the nutritional value supplied, (2) to manage the scaling-up of the Yemen operation from three to six million beneficiaries, and (3) to identify sourcing strategies during the El Niño drought of 2016.

In our call for papers for this special issue we sought to advance our understanding of auditing and the context in which it operates from a broad perspective. We also emphasized the role in-depth qualitative methods could play in this regard. The five special issue papers do not disappoint in addressing these aims. They tackle several themes underlying different levels of transformation in audit practice and the environment in which it operates. The papers offer in-depth, rich insights into real-world issues which draw on ‘sense-making’ theories to significantly advance our understanding of these transformations. The transformations addressed encompass: the concept of audit; new audit technologies; professional associations; and inclusiveness and diversity in audit teams. The papers’ focus on audit-related transformations is timely given that, in several European contexts, audit practice and the accounting profession are yet again being scrutinized and subjected to suggestions for regulatory reform. This forms part of a cycle whereby auditing, auditors and the accounting profession continually confront calls for changes seen as essential to securing stability and the protection of the public. We hope that the papers’ findings, interpretations and future-oriented focus will stimulate significant debate and inform future research. We review the four transformation-oriented themes pervading the papers below and draw on them to suggest a future research agenda.

It has become standard practice in the non-life insurance industry to employ generalized linear models (GLMs) for insurance pricing. However, these GLMs traditionally work only with a priori characteristics of policyholders, while nowadays we increasingly have a posteriori information of individual customers available across multiple product categories. In this paper, we therefore develop a framework to capture this a posteriori information over several product lines using a dynamic claim score. More specifically, we extend the bonus-malus-panel model of Boucher and Inoussa (2014) and Boucher and Pigeon (2018) to include claim scores from other product categories and to allow for nonlinear effects of these scores. The application of the proposed multi-product framework to a Dutch property and casualty insurance portfolio shows that customers’ individual claims experience can have a significant impact on the risk classification. Moreover, it indicates that considerably more profits can be gained by accounting for their multi-product claims experience.

Published online December 10, 2020 We study whether gender influences credit attribution for group work using observational data and two experiments. We use data from academic economists to test whether coauthorship matters differently for tenure for men and women. We find that, conditional on quality and other observables, men are tenured similarly regardless of whether they coauthor or solo author. Women, however, are less likely to receive tenure the more they coauthor. We then conduct two experiments that demonstrate that biases in credit attribution in settings without confounds exist. Taken together, our results are best explained by gender and stereotypes influencing credit attribution for group work.

Intermittently, Singapore suffers from severe air pollution in periods of intense forest and peatland fires on neighboring South-Asian islands. A recent American Economic Review article modeled the causal relationships between fire intensity in Indonesia and air pollution (PSI) in Singapore, and between PSI and health clinic visits in Singapore. We find serious flaws in the quantitative assessment of these relationships. Attempts are made to repair these using the same classic methodology and data, but also by alternative methods requiring less speculative assumptions. Although actually more detailed data are required, there are some results produced which seem more credible.

This research documents employment opportunities of labour-market entrants during the COVID-19 crisis in the Netherlands. Two recent cohorts of graduates are studied and compared to two pre-COVID-19 cohorts: the 2019 cohort was unexpectedly hit by the COVID-19 crisis about six months after entering the labour market and the 2020 cohort graduated and entered the labour market in the midst of a lockdown. Our estimation results suggest short-term effects of lockdowns on employment probabilities, specifically for relatively lower educated labour-market entrants. The effects appear to be relatively small in size and seem to fade when the lockdown measures are eased. Men seem to have suffered more than women and some sectors are hit harder than others, which could result in short-run mismatches. Overall the effects appear to be less severe than during an economic recession, which is most likely due to the tight labour market and the strong measures taken by the government to mitigate the labour-market impact of the COVID-19 crisis.

We study a dynamic game in which players compete for a prize. In a waiting game with two-sided private information about strength levels, players choose fighting, fleeing, or waiting. Players earn a “deterrence value” on top of the prize if their opponent escapes without a battle. We show that this value is a key determinant of the type of equilibrium. For intermediate values, sorting takes place, with weaker players fleeing before others fight. Time then helps to reduce battles. In an experiment, we find support for the key theoretical predictions and document suboptimal predatory fighting.

We investigate competitive equilibria in a special type of incomplete markets, referred to as a comonotone market, where agents can only trade such that their risk allocation is comonotonic. The comonotone market is motivated by the no-sabotage condition. For instance, in a standard insurance market, the allocation of risk among the insured, the insurer and the reinsurers is assumed to be comonotonic a priori to the risk-exchange. Two popular classes of preferences in risk management and behavioral economics, dual utilities (DU) and rank-dependent expected utilities (RDU), are used to formulate agents’ objectives. We present various results on properties and characterization of competitive equilibria in this framework, and in particular their relation to complete markets. For DU-comonotone markets, we find the equilibrium in closed form and for RDU-comonotone markets, we find the equilibrium in closed form in special cases. The fundamental theorems of welfare economics are established in both the DU and RDU markets. We further propose an algorithm to numerically obtain competitive equilibria based on discretization, which works for both the DU-comonotone market and the RDU-comonotone market. Although the comonotone and complete markets are closely related, many of our findings are intriguing and in sharp contrast to results in the literature on complete markets in terms of existence, uniqueness, and closed-form solutions of the equilibria, and comonotonicity of the pricing kernel.

This article ties in directly with recently intensified interest in business models in international business (IB), using the energy transition as empirical context to explore their relevance in firm internationalization. The global energy transition presents a challenge for almost all industries, but some face specific difficulties particularly important from an IB perspective. We study a set of European firms that used to operate in a highly regulated context with (partial) state ownership, until government-directed market liberalization started to allow further competition and internationalization. Existing firms were prompted to adapt their business models to these changes, with new ventures entering the market to reap opportunities with novel energy-related technologies and business models. Linking insights from strategic management to the IB literature, we conceptualize business model-related specific advantages (BMSAs), and explore the role of BMSAs in the internationalization of the firms in our sample. We also uncover barriers to BMSA recombination in (potential) host countries, consider BMSA location-boundedness, and discuss implications for firms’ international expansion by presenting a new framework. Consequences for the energy transition and the actors already involved and (in)directly confronted with it are explicated, while outlining promising areas for further research, building on the insights and limitations of our study.

Gender differences in voting patterns and political attitudes towards redistribution are well-documented. The experimental gender literature suggests several plausible behavioral explanations behind these differences, relating to gender differences in confidence concerning future relative income position, risk aversion, and social preferences. We use data from lab experiments on preferences for redistribution conducted in the U.S. and several European countries to investigate gender differences and their causes. On aggregate, women’ s demand for redistribution is higher than men’ s, but the differences vary considerably across locations and countries. Moreover, the gender difference appears only when the source of inequality is based on relative abilities, but not when it is based on luck. Our most robust finding is that across all sampled locations, men’ s relatively higher (over)confidence in their abilities, in comparison to women, leads them to specify lower redistribution levels. We discuss the role of confidence in accounting for gender differences in political and redistributive choices outside the lab.

People differ in whether they like to be in control of a decision or whether they would happily delegate a decision. We explore the heterogeneity and the underlying factors of the participants’ values of decision-making power in an allocation choice between a fair and an unfair option. This allocation decision affects the outcomes of the deciding person and three other people in different ways. We find that people differ in their preference for keeping this social decision, and more than 85% never pay for delegating the choice. The value for keeping the decision-making power is affected by the strength, but not the direction of social preferences, and relates to the preference for keeping a useless decision, i.e. selecting the winning number of a lottery. The value of decision-making power is reflected in response times and both eye- and mouse-tracking.