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Category Archives: 2012

The Effects of Prevention and Treatment Interventions in a Microeconomic Model of HIV Transmission

By Allison Stashko

A rational choice-based model for sexual transmission of HIV demonstrates the behavioral and epidemiological effects of public health interventions. Susceptible individuals choose to protect or expose, both responding to and determining HIV prevalence. Interventions are modeled as exogenous shocks to the cost of protection, treatment coverage, and treatment quality. A prevention intervention is more effective when infected individuals are better off. Specifically, treatment interventions increase the elasticity of behavioral change with respect to the cost of protection. Complementary effects between different types of interventions are important for finding an optimal public health HIV strategy.

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Advisor: Curtis Taylor | JEL Codes: D61, D69, D91 | Tagged: Epidemiology, HIV/AIDS, Microeconomics

The Effects of Digital Media on Advertising Markets

By Bradford Lightcap

This paper examines the viability of sustained advertising spending in an increasingly digital age. Beginning with print media and through the advent of television, the ad market has seen vast evolution in information consumption. The result has been a creative adaptability by advertisers to keep pace with said change. However, growth in ad spending has not significantly outpaced GDP growth, as documented in the Relative Constancy Hypothesis. RCH asserts that both ad spending and consumer expenditure as a percent of GDP remain steady over time. This paper focuses on whether the advertising claim holds up through the rise of the Internet. How this powerful medium may alter traditional advertising trends remains unclear. The answer could have implications for both advertisers and parties that rely on them

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Advisor: Connel Fullenkamp | JEL Codes: L82, M3, M37, O39 | Tagged: Digital Media, Relative Constancy Hypothesis

Optimal Ordering in Sequential English Auctions: A Revenue-Comparison Model for 18th Century Art Auctions in London and Paris

By Amaan Mitha

We develop a model based on several auction parameters to test the widely held notion that in a sequential English auction, it is optimal for the seller to arrange the lots in order of decreasing value. We test this model against two datasets of 18th century auctions, one of various auctions from Paris and the other from Christie’s sales in London. We find that the Paris data support the claim, while the Christie’s data seem to refute the optimal strategy. We also find a rationale for bidders in the Christie’s auctions to alter their strategies, accounting for the discrepancy.

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Advisor: Neil De Marchi | JEL Codes: D4, Z11 | Tagged: Auctions, English Auction, Lot Ordering, Optimal Auction Strategy, Sequential Auctions

Martin Bronfenbrenner and Japan’s Post-WWII Economic Recovery

By Nitish Basandra

This paper explores the economic recovery of post-World War II Japan through the eyes of the late Duke professor and American economist Martin Bronfenbrenner. Specifically, we address the period of US Occupation from 1947-1952, detailing how Bronfenbrenner sensitized America to Japanese economics. Along the way, Bronfenbrenner faced several obstacles as his loyalty to the US was questioned due to his growing attachment to the Japanese culture and passion for its crisis. Using a methodological approach, we begin with Bronfenbrenner’s initial encounter with a fallen Japan, and conclude with a thorough analysis of his vision for Japan’s reconstruction.

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Advisor: E. Roy Weintraub | Tagged: Economic Relations, Exchange Rates, International Economics, Martin Bronfenbrenner, Occupation, Recovery, Trade, US-Japan

Price Partitioning and Consumer Rationality in Internet Retail Markets

By Katherine Bodnar

This paper seeks to further understand the bounds of consumer rationality and search on the Internet. Specifically this paper focuses on how consumers respond to partitioned prices when making their purchasing decisions. The goal of the paper is to determine if consumers are as sensitive to explicitly stated shipping prices, as they are to list prices, in an environment where items are sorted by list prices. After evaluating the data using a non-linear regression model, the results suggest that consumers do not weight partitioned prices (taxes or shipping prices) as much as they do list prices, contradicting the standard economic model about consumer rationality. The results imply that price partitioning is an effective obfuscation method that is allowing retailers to continue to maintain mark-ups and profit margins in Internet settings.

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Advisor: Andrew Sweeting | JEL Codes: L1, L11, L81 | Tagged: E-­‐Commerce, Obfuscation, Price Partitioning, Retail Competition, Search, Shipping Price

Cross-Stock Comparisons of the Relative Contribution of Jumps to Total Price Variance

By Vivek Bhattacharya

This paper uses high-frequency price data to study the relative contribution of jumps to the total volatility of an equity. In particular, it systematically compares the relative contribution of jumps across a panel of stocks from three different industries by computing the cross-correlation of this statistic for pairs of stocks. We identify a number of empirical regularities in this cross-correlation and compare these observations to predictions from a standard jump-diffusion model for the joint price process of two stocks. A main finding of this paper is that this jump-diffusion model, when calibrated to particular pairs of stocks in the data, cannot replicate some of the empirical patterns observed. The model predictions differ from the empirical observations systematically: predictions for pairs of stocks from the same industry are on the whole much less accurate than predictions for pairs of stocks from different industries. Some possible explanations for this discrepancy are discussed.

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Advisor: George Tauchen | JEL Codes: C5, C52, C58 | Tagged: Econometric Modeling, Financial Econometrics, High-Fequency Data, Jumps

Unitization of Oil Reserves in Alaska and the Supply Elasticity of a Common Pool Resource

By Emily Bailey

Unitization, a common but not omnipresent policy that is lauded in both the economics and environmental world for its efficiency, attempts to solve the “tragedy of the commons” common pool failure of oil production by creating a system in which all those with interests in one reserve produce jointly and split profits accordingly. This paper empirically demonstrates what other researchers have hypothesized – that unitization reduces the elasticity of supply with respect to price. It then extrapolates to potential impacts this policy could have on the environment at large by forecasting a future production path based on the model from the previous section. Finally, it demonstrates how unitization could slow the accumulation of greenhouse gases in the atmosphere.

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Advisor: Christopher Timmins | JEL Codes: Q38, Q48, Q54 | Tagged: Alaska, Climate Change, Oil, Oil Production, Oil Reserves, Unitization

The Influence Effect of Critics’ Reviews on Foreign and Domestic Movies

By Jayoung Jeon

Critics and their reviews provide crucial information for consumers in many “experience goods” markets, and the movie market is one such market. Through their impact on the consumer’s film selection, critics’ reviews influence the first weekend box office performance (the influence effect). We hypothesize that the influence effect of critics’ reviews is different for foreign and domestic movies. Using the U.S. film industry as our empirical setting, we examine the effects of reviews on opening weekend revenues in the U.S. film industry. We find that, when the critics’ assessment of domestic movies is positive, people are discouraged from watching the movie. On the other hand, for foreign movies, the impact of positive reviews is found to be positive. We interpret this result as arising from the different target audiences for foreign and domestic movies. Further analysis of our data supports this hypothesis. We also find that people are more influenced to watch movies when they see multiple reviews than only a few of them. This positive impact of the number of critics’ reviews is greater for domestic than foreign movies, and greater for domestic art movies than domestic non-art movies.

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Advisor: James Roberts | JEL Codes: L82, M37 | Tagged: Art, Critics, Films, Foreign, Movies, Reviews

The Hidden Costs of Central Bank Borrowing

By Shane Hunt

This paper explores a previously overlooked unintended consequence of a private bank accepting Central Bank loans as a lender of last resort. Applying the basic Markowitz Security Model, I explore the potential effect of a private bank accepting a Central Bank loan as a signal of increased risk of investment in that private bank to the private markets. Finding a possibility that private investors will charge a penalty risk premium for having sought Central Bank financing, I consider the effects of this premium in three different game theoretic scenarios, each with a different set of assumptions that could apply in different Economic settings. Depending on the specific environment, possible effects include dependence on Central Bank financing, bankruptcy, or an eventual return to the private financial markets for future funding.

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Advisor: Marjorie McElroy, Nir Jaimovich | JEL Codes: E58, G02, G21, G28, G32 | Tagged: Banking, Central Banking, Finance

Empirical Analysis on the Effects of Jumps on Realized Beta and the Disentanglement of Jump Beta1

By Hao Sun

This paper constructs jump-robust estimators for the beta in Capital Asset Pricing Model (CAPM) in order to test the robustness of the recently developed Realized Beta in the presence of large discontinuous movements, or jumps, in stock prices. To complete the analysis on effect of jump on Realized Beta, this paper also disentangles jump beta and diffusive beta from the Realized Beta measurement in order to examine whether stocks react differently to jumps under the CAPM. Then, the results are compared to recent literatures tackling the same problem from different approaches.

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Advisor: George Tauchen

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