Sorting Out the Differences Between Signaling and Screening Models

In this paper we analyze games in which there is trade between informed and uninformed players. The informed know the value of the trade (for instance, the value of their productivity in a labor market example); the uninformed only know the distribution of attributes among the informed. The informed choose actions (education levels in the Spence model); the uninformed choose prices (wages of interest rates). We refer to games in which the informed move first as signaling games - they choose actions to signal their type. Games when the uninformed move first are referred to as screening games. We show that in sequential equilibria of screening games same contracts can generate positive profits and others negative profits, while in signaling games all contracts break even. However, if the indifference carves of the informed agents satisfy what roughly would amount to a single crossing property in two dimensions, and some technical conditions hold, then all contacts in the screening game break even, and the set of outcomes of the screening game is a subset of the outcomes of the corresponding signaling game. In the postscript we take a broad view of the strengths and weakness of the approach taken in this and other papers to problems of asymmetric information, and present recommendations for how future research should proceed in this field.

Macro-Economic Equilibrium and Credit Rationing

In this paper we investigate the macro-economic equilibria of an economy in which credit contracts have both adverse selection and incentive effects. The terms of credit contracts include both an interest rate and a collateral requirement. We show that in this richer model all types of borrowers may be rationed. Interest rates charged borrowers may move either pro or counter-cyclically. If pro-cyclical shocks have a greater effect on the success probabilities of risky techniques than on safe ones, then the interest rate offered depositors may also move counter-cyclically. Finally, we show that the impact of monetary policy on the macro-economic equilibrium is affected by whether or not the economy is in a regime in which credit is rationed.

Banks as Social Accountants and Screening Devices for the Allocation of Credit

This paper presents and alternative perspective on the role of banks. We emphasize the ways in which banks act as social accountants and screening devices. In this view monetary disturbances have their effects through the disturbances which they induce in society's accounting system and in the mechanisms by which it is ascertained who is credit worthy. Because of asymmetric information, giving rise to credit rationing, interest rates do not play the simple allocative role ascribed by the conventional paradigm, and as a result the equilibrating forces provided by market mechanisms may be weak or virtually absent. The paper provides a critique of the transactions based approach to monetary theory, and sketches a general equilibrium formulation of the theory. The paper traces out some of the policy implications of the theory. We show that certain financial innovations, such as allowing for the more rapid recording of transactions, may actually be welfare reducing.

Informational Imperfections in the Capital Market and Macro-Economic Fluctuations

This paper describes the role that informational imperfections in capital markets are likely to play in business cycles. It then developes a simple illustrative model of the impact of adverse selection in the equity market and the way in which this may lead to large fluctuations in the effective cost of capital in response to relatively small demand shocks. The model also derives an expression for the cost of equity capital in the presence of adverse selection and provides informational explanations for several widely observed macro-economic phenomena.

Asymmetric Information in Credit Markets and Its Implications for Macroeconomics

In this paper we investigate the macroeconomic equilibria of an economy in which credit contracts have both the adverse selection and incentive effects. The terms of credit contracts include both an interest rate and a collateral requirement. We show that in this richer model all types of borrowers may be rationed. Whether or not the economy is in a rationing regime, interest rates charged borrowers may move either pro- or counter-cyclically. If pro-cyclical shocks have a greater effect on the success probabilities of risky techniques than on safe ones, then the interest rate offered depositors may also move counter-cyclically. Increases in the supply of loanable assets can increase or decrease the average interest rate charged borrowers. Finally, we show that the impact of monetary policy on the macroeconomic equilibrium is affected by whether or not the economy is in a regime in which credit is rationed

Impacts of the global economic crisis on cyprus tourism and policy responses

This study examines the impacts of the global economic crisis on Cyprus tourism and the pertinent policy responses. A qualitative approach was adopted by conducting eight semi-structured interviews with tourism authorities and suppliers/professionals. Findings indicated the main impacts of the crisis on Cypriot tourism: lack of competitiveness, decreased visitation/revenues, inadequate quality and escalated pricing. Furthermore, findings identify three types of policy measures: (i) immediate response measures; (ii) foreign investment in tourism; and (iii) diversification of the tourism product and quality improvement. The study highlights the need for Cyprus to develop a comprehensive tourism planning framework. It is suggested that crisis plans of small island states should be developed upon a holistic framework that leverages their destination capitals

How selective are real wage cuts? : a micro-analysis using linked employer-employee data

Using linked employer–employee panel data for Germany, this paper investigates whether firms implement real wage reductions in a selective manner. In line with insider–outsider and several strands of efficiency wage theory, we find strong evidence for selective wage cuts with high-productivity workers being spared even when controlling for permanent differences in firms’ wage policies. In contrast to some recent contributions stressing fairness considerations, we also find that wage cuts increase wage dispersion among peers rather than narrowing it. Notably, the same selectivity pattern shows up when restricting our analysis to firms covered by collective agreements or having a works council

Low-temperature magnetic properties of pelagic carbonates: Oxidation of biogenic magnetite and identification of magnetosome chains

Pelagic marine carbonates provide important records of pastenvironmental change. We carried out detailed low-temperature magneticmeasurements on biogenic magnetite-bearing sediments from the SouthernOcean (Ocean Drilling Program (ODP) Holes 738B, 738C, 689D, and 690C)and on samples containing whole magnetotactic bacteria cells. Wedocument a range of low-temperature magnetic properties, includingreversible humped low-temperature cycling (LTC) curves. Differentdegrees of magnetite oxidation are considered to be responsible for theobserved variable shapes of LTC curves. A dipole spring mechanism inmagnetosome chains is introduced to explain reversible LTC curves. Thisdipole spring mechanism is proposed to result from the uniaxialanisotropy that originates from the chain arrangement of biogenicmagnetite, similar to published results for uniaxial stable singledomain (SD) particles. The dipole spring mechanism reversibly restoresthe remanence during warming in LTC measurements. This supports aprevious idea that remanence of magnetosome chains is completelyreversible during LTC experiments. We suggest that this magneticfingerprint is a diagnostic indicator for intact magnetosome chains,although the presence of isolated uniaxial stable SD particles andmagnetically interacting particles can complicate this test. Magneticmeasurements through the Eocene section of ODP Hole 738B reveal aninterval with distinct magnetic properties that we interpret tooriginate from less oxidized biogenic magnetite and enrichment of abiogenic hard component. Co-occurrence of these two magneticfingerprints during the late Eocene in the Southern Ocean indicates lessoxic conditions, probably due to increased oceanic primary productivityand organic carbon burial