The Swiss authorities plan to reduce the currently excessively high taxes on bioethanol. We argue that a fair tax treatment of ecological fuels could lead to a rapid development in their use in the next few years. For this to be the case, Switzerland would however have to open up its market to...

This paper analyzes the important time variation in U.S. aggregate portfolio allocations. To do so, we first use flexible descriptions of preferences and investment opportunities to derive optimal decision rules that nest tactical, myopic, and strategic portfolio allocations. We then compare...

Behavioral economists have come to recognize that reciprocity, the interaction of trust and trustworthiness, is a distinct and economically relevant component of individual preferences alongside selfishness and altruism. This recognition is principally due to observed decisions in experimental...

This paper presents a simple model to analyse the impact of localised externalities on the internationalisation decision of firms. We argue that, once localised spillovers are taken into account, the standard predictions on the nature and direction of foreign direct investment (FDI) flows may...

The article re-examines the proposition, first formulated by Bryant (1980) and Diamond and Dybcvig ( 1983), that in a production economy with stochastic liquidity shocks to the household sector, banks serve to provide optimal intertemporal insurance to consumers. The paper argues that in order...

The paper studies managerial compensation schemes for suituations, where the current management knows more about the company's expected profitability than the new employee. When a manager is offered a contract with only a low fixed salary but high profit participation, he will be afraid that the...

This paper is about freedom of choice and rigidity of choice rules as incentive devices. We study the optimal design of an agent's freedom of choice when his information is endogenous and costly to acquire. We show that curtailing the agent's authority over decision-making may be optimal even if...