Incentive Constrained Risk Sharing, Segmentation, and Asset Pricing

Incentive problems make securities’ payoffs imperfectly pledgeable, limiting agents’ ability to issue liabilities. We analyze the equilibrium consequences of such endogenous incompleteness in a dynamic exchange economy. Because markets are endogenously incomplete, agents have different intertemporal marginal rates of substitution, so that they value assets differently. Consequently, agents hold different portfolios. This leads to endogenous markets segmentation, which we characterize with optimal transport methods. Moreover, there is a basis going always in the same direction: the price of a security is lower than that of replicating portfolios of long positions. Finally, equilibrium expected returns are concave in factor loadings. (JEL D51, D52, G11, G12)

Tourists’ Willingness to Pay for holiday trip characteristics: A Discrete Choice Experiment

This article studies the marginal rates of substitution and Willingness to Pay for holiday trip characteristics. Using a Discrete Choice Experiment, we examine how much individuals from four cities in Northern Spain are willing to pay for accommodation, mode of transport, travel time and length of stay. We estimate a Latent Class Model that accounts for taste heterogeneity based on sociodemographic characteristics. The welfare loss due to a tourism daily tax is also examined. Our results show that respondents place positive utility to travelling by plane, high-quality accommodation and longer stays. Specifically, they are willing to pay €170 more for plane travelling with respect to the use of car, €120 for staying at a four-star hotel relative to an apartment and €760 for a 10-day trip relative to a 3-day one. A daily tax of €1 per person would produce a larger welfare loss in coastal destinations.

Trade-offs analysis of sustainability dimensions using integer-valued data envelopment analysis

Conducting an in-depth exploration of trade-offs between sustainability aspects is a notable matter of taking decisions. Furthermore, there are many real world investigations that trade-offs and sustainability should be dealt with in the presence of desirable and undesirable materials while some of them accept integer amounts. Therefore, this study addresses trade-offs of sustainability dimensions when undesirable and integer-valued measures are presented. For this purpose, approaches based upon data envelopment analysis (DEA) are proposed. To explain, DEA models are introduced to calculate individual and group marginal rates of substitution and also directional marginal rates of substitution when integer and undesirable variables are observed. These procedures are applied to calculate trade-offs between different sustainability dimensions, including economic, environmental and social ones. The applications of ports and industrial parks are provided to clarify the approaches appeared in this study. The results derived from the proposed strategies show the usefulness and validity of them.

On the Asset Market View of Exchange Rates

If the asset market is complete, then the difference between foreign and domestic agents’ log intertemporal marginal rates of substitution (IMRSs) equals the log change in the real exchange rate. This equation is frequently used to argue that changes in real exchange rates reflect differences between agents’ required compensation for exposure to asset return uncertainty. We show that the relative returns on frictionlessly traded assets are only reflected in the common component of agents’ IMRSs, not in differences. Instead, when this equation does offer insights, frictions in the goods market are the source of economic distinction between agents. Received December 10, 2013; editorial decision November 5, 2018 by Editor Geert Bekaert. 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.

THE EFFECTIVENESS OF SUBSTITUTING CAPITAL STREAM FOR HUMAN LABOUR IN COMMERCIAL FARMS WITH DIFFERENT PRODUCTION POTENTIAL

The paper aimed to evaluate the effectiveness of substituting a stream of capital for human labour in commodity farms in Poland depending on their production potential. The studies were based on unit data from the monitoring of the Polish FADN from 2016, using the Cobb-Douglas agricultural production function method. Using the relationship between agricultural farm production and production factors (workload, cropland area and stream of capital) as the basis for determining isoquant equations and marginal rates of substitution, the effectiveness of substitution was evaluated for two groups of farms: classified as small and medium large farms in terms of economic size. The most effective factor affecting production on the farms was capital. Studies showed that in both analyzed groups of farms substituting capital for human labour was advantageous. However, substitution turned out more profitable in the group of small farms in comparison to farms having a higher production potential.