Beginning in 1997, the price of concert tickets took off and ticket sales declined. From 1996 to 2003, for example, the average concert price increased by 82%, while the CPI increased by 17%. Explanations for price growth include (1) the possible crowding out of the secondary ticket market, (2) rising superstar effects, (3) Baumols and Bowen's disease, (4) increased concentraion of promoters, and (5) the erosion of complementarities between concerts and album sales because of file sharing and CD copying. The article tentatively concludes that the decline in complementarities is the main cause of the recent surge in concert prices.

I examine optimal taxes in an overlapping generations economy in which each consumer's utility depends on consumption relative to a weighted average of consumption by others (the benchmark level of consumption) as well as on the level of the consumer's own consumption. The socially optimal balanced growth path is characterized by the Modified Golden Rule and by a condition on the intergenerational allocation of consumption in each period. A competitive economy can be induced to attain the social optimum by a lump-sum pay-as-you-go social security system and a tax on capital income. Copyright 2005, Wiley-Blackwell.

A club's majority rule defines the number of members that must approve a policy proposed to replace the status quo. Since the majority rule thus dictates the extent to which winners must compensate losers, it also determines the incentives to invest in order to become a winner of anticipated projects. If the required majority is large, members invest too little because of a holdup problem; if it is small, members invest too much in order to become a member of the majority coalition. To balance these opposing forces, the majority rule should increase in the project's value and the club's enforcement capacity but decrease in the heterogeneity in preferences. Externalities can be internalized by adjusting the rule. With heterogeneity in size or initial conditions, votes should be appropriately weighted or double majorities required. Copyright (c) 2005 Massachusetts Institute of Technology.

Economic growth within countries varies sharply across decades. This paper examines one explanation for these sustained shifts in growth—changes in the national leader. We use deaths of leaders while in office as a source of exogenous variation in leadership, and ask whether these plausibly exogenous leadership transitions are associated with shifts in country growth rates. We find robust evidence that leaders matter for growth. The results suggest that the effects of individual leaders are strongest in autocratic settings where there are fewer constraints on a leader's power. Leaders also appear to affect policy outcomes, particularly monetary policy. The results suggest that individual leaders can play crucial roles in shaping the growth of nations.

Abstract In this study, we incorporate taxpayers' threat /opportunity perceptions into our analysis of taxpayer behavior in order to refine and extend our understanding of the internal cognitive forces that shape taxpayer behavior. Decision‐making frames (that is, the gain and loss domains from the prospect theory value function) and individual perceptions (that is, perceptions of decision alternatives as being threats or opportunities) are both likely to influence behavior, yet prior research has generally ignored the behavioral effects of individual perceptions. The results of our experiment reveal that taxpayers who are due a tax refund (owe additional taxes) prior to considering a judgemental tax deduction tend to perceive the conservative (aggressive) tax deduction to be more of an opportunity/less of a threat. In turn, we find that taxpayer frames have a direct effect on taxpayer behavior and an indirect effect on behavior through their effect on taxpayers' threat/opportunity perceptions. Perhaps the most important message of this study is that researchers can advance our understanding of the internal cognitive processes that shape taxpayer behavior by incorporating taxpayer perceptions into their research designs.

Prices of interest rate derivative securities depend crucially on the mean reversion parameters of the underlying diffusions. These parameters are subject to estimation bias when standard methods are used. The estimation bias can be substantial even in very large samples and much more serious than the discretization bias, and it translates into a bias in pricing bond options and other derivative securities that is important in practical work. This article proposes a very general and computationally inexpensive method of bias reduction that is based on Quenouille's (1956; Biometrika, 43, 353-360) jackknife. We show how the method can be applied directly to the options price itself as well as the coefficients in the models. We investigate its performance in a Monte Carlo study. Empirical applications to U.S. dollar swap rates highlight the differences between bond and option prices implied by the jackknife procedure and those implied by the standard approach. These differences are large and suggest that bias reduction in pricing options is important in practical applications.

A firm seeks to raise capital in credit markets to fund risky operating activities. The firm has private information about the future cash flows from such activities. Firm owners delegate operating decisions to a manager who privately learns further information about the distribution of those cash flows subsequent to contracting, but before taking actions. Those actions include the selection of which operating activities to pursue and how much hidden effort to exert. At issue initially after introducing the problem is the efficient design of the manager's compensation as a device for signaling private information to lenders as well as for inducing operating decisions. Our results provide conditions under which a Bayesian Nash separating equilibrium satisfying the Cho–Kreps intuitive criterion exists. Broadly speaking, these results suggest that contracts that resolve internal adverse selection and moral hazard problems may serve as signaling devices in efficiently resolving information asymmetries with external parties. Next, we show how earnings-based debt covenants and the selection of conservative accounting methods may eliminate signaling costs altogether.

Executives can only impact firm outcomes if they have influence over crucial decisions. On the basis of this idea, we develop and test the hypothesis that firms whose CEOs have more decision-making power should experience more variability in performance. Focusing primarily on the power the CEO has over the board and other top executives as a consequence of his formal position and titles, status as a founder, and status as the board's sole insider, we find that stock returns are more variable for firms run by powerful CEOs. Our findings suggest that the interaction between executive characteristics and organizational variables has important consequences for firm performance.

We estimate parameters of standard stock selection and market timing models using daily mutual fund returns and quarterly measurement periods. We then rank funds quarterly by abnormal return and measure the performance of each decile the following quarter. The average abnormal return of the top decile in the post-ranking quarter is 39 basis points. The post-ranking abnormal return disappears when funds are evaluated over longer periods. These results suggest that superior performance is a short-lived phenomenon that is observable only when funds are evaluated several times a year.

Recent bank failures are followed by significant and permanent negative declines in real county income. These declines are larger for small failures than for large failures per dollar of assets, are larger for bank failures than thrift failures, and are larger for bank closures than assisted mergers. More interestingly, the failure of even healthy banks has significant and permanent negative effects on economic activity.