Bell Journal Research Articles

Magnolias at the End of the World

Magnolias at the End of the World Catherine Garbinsky (bio) Wind whipped every cheek as pink as the ginger petal which gangles its long teenage limb we remember the bare branch the waxen leaf reflecting the moon's face there have been a lot of dead possums on the road no one watching where they are going eyes lit up at dusk breaks sigh as we slow the temperature has dropped skin prickles hair we bring the big comforter back out again and turn the ceiling fan off black walnuts in their green suits thump and rumble on the roof and something is nesting in the eaves you shake your fist and I cup your cheeks in my hands did you hear about now we should probably everyone is starting to we don't finish the sentences or else it's real it's happening it's here instead I move the flower pots on the back porch to find a ring of wriggling insects who have made their home beneath now disturbed by my hands birds watch and wait until I slap hands together brushing off the dirt and head inside before they descend scratching soft at the chipping paint crushing squishing bodies in their beaks satisfying slurp and crunch at three am the trains at the rail yard test their horns long short short long they work we all hear it but every night they check again as if time isn't collapsing in on itself the horn sounds and we are all awake under the blanket dead on the side of the road pecking for scraps on the porch shining pink we hear it coming we lay down on the tracks tie each other down and will there be magnolias then [End Page 84] Catherine Garbinsky Catherine Garbinsky is a writer living in Knoxville, Tennessee. They have written two chapbooks: All Spells Are Strong Here (Ghost City Press, 2018) and Even Curses End (Animal Heart Press, 2019). Catherine is currently a PhD student at the University of Tennessee-Knoxville. Her work has been featured in Occulum Journal, Coffin Bell Journal, White Stag Press, and elsewhere. Copyright © 2023 University of Wisconsin Board of Regents

Can optimism solve the entrepreneurial earnings puzzle?*

AbstractIn this paper, we apply a general equilibrium occupational choice model to the study of the impact of optimism on the earnings of entrepreneurs and workers. We extend the work of Lucas (1978 Bell Journal of Economics 9, 508–523) by assuming a fraction of individuals are optimistic about their ability as entrepreneurs. The model shows that optimism leads to a misallocation of talent and inputs, which raises input prices and lowers output. The model is calibrated to match salient features of the UK economy and the British Household Panel Survey. The calibration shows that optimism can account for more than half of the size of the entrepreneurial earnings puzzle in the UK.

The Lamp Above My Door

The Lamp Above My Door David S. Higdon (bio) is where I watch buckmoths and mayflies clingthe gentle strobing, wingsdrumming against the fragrantoilskin of night sky—drawnlike sentinels to the mine,flutters and twitches and dropsin their cages. The lamp above my dooris my heart's conflicted beacon,wayward sibling of the Furies,born of seafoam, ternsbolt from foghorns steeringtoward a rock-jagged shore.I am wrapped in ruin, retracepathways to thorn-filled nestsfull of birdsong. [End Page 75] David S. Higdon David S. Higdon is a writer from Kentucky. His work has been published or is forthcoming in Still: The Journal, Rust + Moth, Exposition Review, Lucky Jefferson, Coffin Bell Journal, and others. He is the 2021 winner of The Grand Prix Prize from the Kentucky State Poetry Society. He lives with his family in Louisville. Copyright © 2022 Berea College

A Note on the Existence of the Competitive Equilibrium in Grossman and Shapiro (1984)

Abstract In their seminal paper, Grossman, G. M., and C. Shapiro. 1984. “Informative Advertising with Differentiated Products.” The Review of Economic Studies 51: 63–81 assume that it is not profitable for a firm to deviate to the supercompetitive price of Salop, S. C. 1979. “Monopolistic Competition with outside Goods.” The Bell Journal of Economics 10: 141–56. In this note, it is shown that this assumption is violated if, roughly, each firm reaches less than half of all consumers unless it is a duopoly. This implies that most of the simulations in Grossman, G. M., and C. Shapiro. 1984. “Informative Advertising with Differentiated Products.” The Review of Economic Studies 51: 63–81 are not actually equilibria. More importantly, this implies that for their equilibrium to exist nearly all consumers must receive at least one ad. For example, with just four firms in the market, at least 96% of the consumers must receive at least one ad, and this percentage increases with the number of firms in the market.

Can free-shipping hurt online retailers?

In this paper, we investigate optimal pricing strategies for an online grocery retailer that derives its profits from delivery fees and grocery sales. We base our theoretical framework on the well-established work of Schmalensee (Bell Journal of Economics12(2), 445–466, 1981) in two-part pricing, while allowing for repeat purchase occasions. We derive testable implications that we take to data using a unique dataset detailing transaction information from an online grocery retailer in a Western European country. We find that an increase in the number of deliveries is associated with a greater-than-proportional increase in grocery sales, implying that preferences for deliveries and groceries are negatively correlated. Therefore, counter to the current popularity of free shipping, the observed strategy of discounting groceries and charging high delivery fees appears to be optimal in our empirical setting.

Gender, formality, and entrepreneurial success

In this paper, we address two entrepreneurship puzzles prevailing in developing countries. First, field experiments on business training programs and grants have shown that it is much more difficult to improve business outcomes for female entrepreneurs than for their male counterparts. Second, empirical studies have revealed that it is difficult to increase entrepreneurial performance in the informal sector. We argue that an extended version of the entrepreneurship model in Lucas (Bell Journal of Economics, 9, 508–523, Lucas 1978) can provide insights into these recurrent puzzles. In particular, if female entrepreneurs are time constrained, interventions that only target business ability and credit constraints may not be sufficient to raise the entrepreneurial outcomes of female entrepreneurs. In addition, if informal entrepreneurs face business constraints in terms of both their access to credit and entrepreneurial ability, interventions that target these constraints together can have a potentially greater impact than those that target either in isolation. We support our theoretical predictions using data from a field experiment with microfinance clients, conducted in Tanzania.

ON THE OPTIMALITY OF A STRAIGHT DEDUCTIBLE UNDER BELIEF HETEROGENEITY

AbstractThis article attempts to extend Arrow’s theorem of the deductible to the case of belief heterogeneity, which allows the insured and the insurer to have different beliefs about the distribution of the underlying loss. Like Huberman et al. [(1983) Bell Journal of Economics14(2), 415–426], we preclude ex post moral hazard by asking both parties in the insurance contract to pay more for a larger realization of the loss. It is shown that, ceteris paribus, full insurance above a constant deductible is always optimal for any chosen utility function of a risk-averse insured if and only if the insurer appears more optimistic about the conditional loss given non-zero loss than the insured in the sense of monotone hazard rate order. We derive the optimal deductible level explicitly and then examine how it is affected by the changes of the insured’s risk aversion, the insurance price and the degree of belief heterogeneity.

PAUL MACAVOY AND THE MARKETPLACE OF IDEAS

Paul MacAvoy's work focused on economic analysis of regulation, antitrust, and other forms of government intervention that constrain the management and strategies of the American corporation. As a scholar and business school dean, he repeatedly faced the questions of how American industry could be persuaded to fund such research and how, if such funding were forthcoming, its recipients would maintain academic standards of rigor and objectivity. I recount here two episodes from different points in Paul's career that reveal his thinking and action concerning these questions. The first was his founding of the Bell Journal of Economics and Management Science in 1970. The second was Paul's role as the outside academic adviser to the American Enterprise Institute's telecommunications deregulation project, beginning in 1992.

ЭКОНОМИКО-МАТЕМАТИЧЕСКОЕ МОДЕЛИРОВАНИЕ ПРОФЕССИОНАЛЬНЫХ КОНТРАКТОВ ПРИ НАЙМЕ РАБОТНИКОВ В ФИРМУ

The paper considers an economic-mathematical model of the recruitment procedure. In the real sector of economy, employers are often incapable of evaluating professional skills of a candidate for a certain job position. This problem is becoming more pressing nowadays, when managers are usually proficient in managing skills but do not have a relevant job experience. Under these conditions, a specialist from among the employees could be better at assessing qualities of a candidate from outside the company. Thus, the principal (a firm owner/manager) may wish to use his employees' knowledge to hire new smart (skilled, talented) staff. However, workers know that the firm will only keep a limited number of workplaces. That may be for various reasons: perhaps, in a division inside a big company there is a quota on the number of workplaces; or the firm needs a limited number of qualified employees to produce its optimal output. Thus, workers have incentives to prevent more talented candidates from getting a job because those people may later recommend the principal to replace less gifted ones. In the paper, we consider this conflict using the modeling approach of game theory. The research appears to be currently relevant since there is a necessity to solve personnel problems at all levels, including the level of the firm's activity. The novelty of the solution to this task in Russian scientific literature is provided by the solution method and the essential content – application of the game theory to decision-making problems in the contract theory. Unlike foreign analogs, the problem of delegation of powers is considered as a solution to the task on social optimum, when the profitability of the company reaches the maximum but the amount of payment to workers does not decrease. It is shown that to achieve the social optimum the owner has to delegate powers to competent employees. Keywords economic-mathematical model, game theory, decision theory, recruitment procedure contract theory.

Paul MacAvoy and the Marketplace of Ideas

Paul MacAvoy's work focused on economic analysis of regulation, antitrust, and other forms of government intervention that constrain the management and strategies of the American corporation. As a scholar and business school dean, he repeatedly faced the questions of how American industry could be persuaded to fund such research and how, if such funding were forthcoming, its recipients would maintain academic standards of rigor and objectivity. I recount here two episodes from different points in Paul's career that reveal his thinking and action concerning these questions. The first was his founding of the Bell Journal of Economics and Management Science in 1970. The second was Paul's role as the outside academic adviser to the American Enterprise Institute's telecommunications deregulation project, beginning in 1992.

Monopoly, Subsidies and the Mohring Effect: A Synthesis

This paper provides a unifying framework to analyze whether a monopoly transit provider will under or over-supply frequency. To this end we couch the problem in term of Spence [(1975). Monopoly, quality and regulation. The Bell Journal of Economics, 6, 417–429] who analyzed the incentives to provide quality by a monopolist. We show that all of the results of a recent academic exchange discussing this topic are special cases of Spence [(1975). Monopoly, quality and regulation. The Bell Journal of Economics, 6, 417–429], albeit with an adjustment in order to take into account the cost structure of frequency provision in the case of public transport. In theory then, there are cases when a monopolist may offer optimal or above optimal levels of frequency without requiring subsidies. However, public transport is rarely provided by an unregulated monopolist. Rather, these services are usually provided either by an exclusive operator under regulated fares or by a group of competing operators, with or without fare regulation. We show that in the first case frequency will always be below the social optimal level.

Transaction Costs and the Employment Contract in the US Economy

purpose of this article is to use transaction cost economics (as in Williamson, O.E., M.L. Wachter, and J.E. Harris. 1975. Understanding the Employment Relation: Analysis of Idiosyncratic Exchange, 6(1) Bell Journal of Economics 250–78; Williamson, O.E. 1981. The Economics of Organization: Transaction Cost Approach, 87(3) American Journal of Sociology 548–77) to explore the relationship between job characteristics and observed employment contracts. Transaction cost considerations lead to jobs characterized by either normal or complex exchange. This in turn implies two contracting modes: contingent pay (fixed wage or piece-rate/commission contract) or noncontingent pay (salary with possibly a bonus). We show empirically that observed job characteristics, as measured by the Dictionary of Occupational Titles, can explain the contract form observed in the Panel Study on Income Dynamics. Second, we discuss the implications of contract form for wages and mobility, and show that noncontingent pay jobs have more able workers in more durable relationships. (JEL J31, J33, J41, K31)

The Alchian-Allen Theorem and the Economics of Internet Animals

The Alchian-Allen Theorem and the Economics of Internet Animals

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Corporate risk management and dividend signaling theory

This article investigates the effect of corporate risk management on dividend policy. We extend the signaling framework of Bhattacharya [1979. Bell Journal of Economics 10, 259–270] by including the possibility of hedging the future cash flow. We find that the higher the hedging level, the lower the incremental dividend. This result is intuitive. It is in line with studies suggesting that cash flows’ predictability decreases the marginal gain from costly signaling through dividends and the assertion that corporate hedging decreases cash flow volatility. It is also in line with the purported positive relation between information asymmetry and dividend policy (e.g., Miller and Rock [1985. The Journal of Finance 40, 1031–1051]) and the assertion that risk management alleviates the information asymmetry problem (e.g., DaDalt et al. [2002. The Journal of Future Markets 22, 261–267]). Our theoretical model has testable implications.

Jeffrey Rohlfs' 1974 Model of Facebook: An Introduction

This short essay, forthcoming in Competition Policy International, summarizes and evaluates Jeffrey Rohlfs' 1974 Bell Journal paper, A Theory of Interdependent Demand for a Telecommunications Service. Rohlfs' work helped create a large literature on markets with network externalities in which demand decisions have long-lasting consequences, a literature that has informed competition policy. But Rohlfs assumed that demand-side decisions did NOT have long-lasting consequences. Social networking and internet-based markets of this sort are increasingly important but have not been extensively studied. While they may post interesting antitrust challenges, they are almost certainly not the challenges to which the post-Rohlfs literature pointed.

Reversals of signal-posterior monotonicity for any bounded prior

Paul Milgrom [Milgrom, P.R., 1981. Goods news and bad news: representation theorems and applications. The Bell Journal of Economics 12, 380–391] showed that if the strict monotone likelihood ratio property (MLRP) does not hold for a conditional distribution then there exists some non-degenerate prior and pair of signals where the higher-signal posterior does not stochastically dominate the lower-signal posterior. We show that for any non-degenerate prior with bounded support there exists a conditional distribution (satisfying several natural properties) and pair of signals such that the lower signal’s posterior stochastically dominates that of the higher signal. Thus, for every bounded prior, higher signals may represent strictly “worse” news.

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The link between intraday signals and call warrant mispricing

This study proposes a linkage between intraday variables (signal amounts and signal duration) and the mispricing of Taiwan call warrant prices, based on the lower boundary condition of Merton [1973. Theory of rational option pricing. Bell Journal of Economics and Management Science, 4(1), 141–183] as modified by Galai [1978. Empirical tests of boundary conditions for CBOE options. Journal of Financial Economics, 9(2), 321–346]. Trading mispriced call warrants associated with a riskless hedging strategy over the period January 2004–December 2005 on average produces abnormal profits after taking into account transaction costs, as indicative of an inefficient market.