The efficiency of top agents: An analysis through service strategy in tennis

We consider the question whether top tennis players in a top tournament (Wimbledon) employ an optimal (efficient) service strategy. While we show that top players do not, in general, follow an optimal strategy, our principal result is that the estimated inefficiencies are not large: the inefficiency regarding winning a point on service is on average 1.1% for men and 2.0% for women, implying that–by adopting an efficient service strategy–players can (on average) increase the probability of winning a match by 2.4%-points for men and 3.2%-points for women. While the inefficiencies may seem small, the financial consequences for the efficient player at Wimbledon can be substantial: the expected paycheck could rise by 18.7% for men and even by 32.8% for women. We use these findings to shed some light on the question of whether economic agents are successful optimizers

The Importance of Accounting for Time Trends when Estimating the Euro Effect on Trade

To study the effect of the euro on international goods trade one typically estimates a panel model for the level of trade. Trade levels increase over time, and we show that this is not fully explained by the included regressors. Because the euro is only present at the end of the sample, this may have led to an upward bias in existing euro estimates to help explain the upward trend. To correct for that, we extend the panel model (a gravity model) by including a time trend that may have different effects across country-pairs. Data on industrialized countries over 1967-2002 show the existing euro effects of between 5% and 40% shrink to a statistically insignificant 3%. For comparison, the estimated trade effects of other currency unions are reduced from90% to 25%. Hence, accounting for time trends matters.currency union; deterministic trend; EMU; fixed effects; gravity model; panel data

The efficiency of top agents: An analysis through service strategy in tennis

We consider the question whether top tennis players in a top tournament (Wimbledon) employ an optimal (efficient) service strategy. While we show that top players do not, in general, follow an optimal strategy, our principal result is that the estimated inefficiencies are not large: the inefficiency regarding winning a point on service is on average 1.1% for men and 2.0% for women, implying that-by adopting an efficient service strategy-players can (on average) increase the probability of winning a match by 2.4%-points for men and 3.2%-points for women. While the inefficiencies may seem small, the financial consequences for the efficient player at Wimbledon can be substantial: the expected paycheck could rise by 18.7% for men and even by 32.8% for women. We use these findings to shed some light on the question of whether economic agents are successful optimizers.Inefficiency Frontier Optimal strategy Tennis

Has the Euro increased Trade?

A major economic reason for the introduction of the euro was its supposedly positive effect on intra-EMU trade. Existing studies examine this suspicion indirectly using non-EMU data and report ambiguous results. We estimate the euro-effect directly from data that include EMU observations. Using a dynamic panel model for annual bilateral exports, we find that the euro has significantly increased trade, with an effect of 4% in the first year and cumulating to around 40% in the long-run. These estimates can be useful in the debates on whether to join the euro in countries such as the U.K.Currency union; dynamic panel data model; EMU; exports; imperfect substitutes model.