Partnerships of Bidders with Constant Relative Risk Aversions

In this paper, we study a dynamic auction for allocating a single indivisible project while different participants have different bid values for the project. When the price rises continuously, the bidders can retreat the auction and obtain the compensation by the difference between the price at retreating time and the previous bid price. The final successful bidder achieves the project and pays compensations to others. We show that the auction of bidders with constant relative risk aversion (CRRA) has a unique equilibrium. While the relative risk aversion coefficient approaches to zero, the equilibrium with CRRA bidders would approach to the equilibrium with risk-neutral bidders.

Valuación con opciones reales, transformación de Edgeworth y funciones isoelásticas de utilidad

Las empresas de la nueva economía como start up, empresas de base tecnólogicas, intangibles en I&D, e inversiones en estrategias innovadoras, entre otras, se caracteriza por su dinamismo y flexibilidad. Para su valoración se deben emplear modelos de opciones reales. La principal debilidad de los modelos reside en suponer mercados completos, condición difícil de cumplir en mercados emergentes. Por tal motivo, se desarrolla un modelo que combina la transformación de Edgeworth y funciones isoelásticas de utilidad (CRRA - relative risk aversión coefficient), incorporando grados de aversión al riesgo del agente. Se utiliza el análisis de casos, sobre un proyecto biofarmacéutico con opciones secuenciales; se aplica análisis de sensibilidad sobre el coeficiente de aversión y el valor de la opción. Se concluye sobre las ventajas del modelo, en particular, se incorpora la probabilidad extrema de éxitos y fracasos mediante momentos estocásticos de orden superior y actitudes frente al riesgo.

Farm-Specific Risk Analysis in Dairy Farming: A Case Study from Turkey

The purposes of this study were to determine the socio-economic characteristics of dairy farmers in Antalya, in Turkey, calculate the gross income, variable costs and gross margin of dairy farms, determine the probability distributions of consequences for alternative decisions to enable dairy farmers as decision makers to make a good and well-informed choice, to determine cross effects of milk prices variations on the productive strategy of dairy farms. The data were gathered via face to face interviews in Korkuteli, Dosemealtı, Elmalı, Manavgat and Serik counties of Antalya province in Turkey. The survey study was conducted with 80 farmers, who were member of Dairy Cow Breaders Union, in the 2011 production period. In this study, on the basis of previous experience, dairy farmers assigned minimum, maximum and most likely values of milk price and yield over the next period of 5 years. Then, triangular and cumulative distributions were defined by using these values. Moreover, Monte Carlo Stochastic Simulation model was developed to obtain distribution of expected gross margin per cow. The model and triangular and cumulative distributions were built in Excel with @Risk add-in software. The relationship of mean risk aversion coefficient, calculated by using negative exponential function, with both average gross margin and gross margin standard deviation values determined for each farm was examined. The results show that the relation between average gross margin and mean risk aversion coefficient was negative and significant at 5% level. But, although the relation between gross margin standard deviation and mean risk aversion coefficient was found to be negative, it was not significant at 5% level.

Progressive and Regressive Equilibria in a Tax Competition Game

This article models interjurisdictional competition over nonlinear taxes on the incomes of mobile individuals. Each individual has exogenous wealth and a location preference that is drawn from a continuous distribution. We find that more concave utility of consumption functions lead to more progressive tax structures, as richer people place less value on marginal consumption relative to location. In the benchmark model, a relative risk aversion coefficient of one is the boundary between progressivity and regressivity. The exercise helps us to understand which types of jurisdictions are more likely to have progressive taxes as their optimal policies.

A Risk Analysis of Adjusted Gross Revenue-Lite on Beef Farms

This study evaluates the Adjusted Gross Revenue-Lite (AGR-Lite) whole-farm adjusted gross revenue insurance program on net farm income risk using panel data from 49 southeast Kansas beef farms. On average for the group, but not each individual farm, AGR-Lite reduces the mean and standard deviation of net farm income, raises the average minimum, and lowers the average maximum observations of the net income distribution. Thirty-four farms (69%) received at least one indemnity payment. Stochastic efficiency with respect to a function reveals that AGR-Lite is preferred by 18 of the farm managers (37%) when an upper bound on the risk-aversion coefficient is used.