Uri Ben-Zion

Decision-making and the newsvendor problem: an experimental study

This paper investigates repetitive purchase decisions of perishable items in the face of uncertain demand (the newsvendor problem). The experimental design includes: high, or low profit levels; and uniform, or normal demand distributions. The results show that in all cases both learning and convergence occur and are effected by: (1) the mean demand; (2) the order-size of the maximal expected profit; and (3) the demand level of the immediately preceding round. In all cases of the experimental design, the purchase order converges to a value between the mean demand and the quantity for maximizing the expected profit.

On money, votes, and policy in a democratic society

*We are indebted to Gary Becker, Malcolm Burns, Richard Posner, George Stigler and Gordon Tullock, and to participants of the Human Capital Seminar at the University of Minnesota, for their helpful comments and suggestions. We gratefully acknowledge partial support from the Spencer Foundation through a postdoctoral fellowship at the University of Minnesota (Ben-Zion) and from a research grant of the American Telephone and Telegraph Company. We alone are responsible for the remaining errors.

A characterization of the price behavior of international dual stocks: an error correction approach

This paper deals with the interrelations between stocks listed and traded in two international unsynchronized markets. The data exhibits first order nonstationarity and the series across markets are cointegrated. This gives a justification for an error correction model which incorporates a short run adjustment mechanism. The model is applied for different day-groups. The main findings are: (1) The domestic country emerges as the dominant market and the foreign market as the satellite one; (2) The adjustment mechanism coefficient is highly significant for most shares; (3) Different behavioural patterns emerge for middle-of-the- week days as compared with beginning/end-of-week days; (4) The model fits better for the more heavily traded shares.

Factors affecting nurses' decision to get the flu vaccine.

The objective of this study was to identify factors that influence the decision whether or not to get the influenza (flu) vaccine among nurses in Israel by using the health belief model (HBM). A questionnaire distributed among 299 nurses in Israel in winter 2005/2006 included (1) socio-demographic information; (2) variables based on the HBM, including susceptibility, seriousness, benefits, barriers and cues to action; and (3) knowledge about influenza and the vaccine, and health motivation. A probit model was used to analyze the data. In Israel, the significant HBM categories affecting nurses’ decision to get a flu shot are the perceived benefits from vaccination and cues to action. In addition, nurses who are vaccinated have higher levels of (1) knowledge regarding the vaccine and influenza, (2) perceived seriousness of the illness, (3) perceived susceptibility, and (4) health motivation than do those who do not get the vaccine. Immunization of healthcare workers may reduce the risk of flu outbreaks in all types of healthcare facilities and reduce morbidity and mortality among high-risk patients. In order to increase vaccination rates among nurses, efforts should be made to educate them regarding the benefits of vaccination and the potential health consequences of influenza for their patients, and themselves.

A comparative study of lotteries-evaluation in class and on the Web

Abstract We report the results of an experiment in which 135 students were asked to bid buying prices for five simple lotteries. 65 subjects were asked to complete the evaluation forms in class; the other 70 subjects were asked to complete the questionnaire within 24 hours on the Web. The subjects for both groups were carefully selected to avoid a possible selection-bias. The main results are: (1) bids on the Web are significantly higher than bids in class; (2) the standard deviations of the bids are significantly higher on the Internet. We also find some differences across gender in the response to the electronic medium. Our results suggest that subjects “risk aversion” might be lower on the Web and that the Internet medium might increase the noise in experimental data.

Import controls under imperfect information

Abstract This paper examines the effects of governmentally imposed quality controls upon an industry which consists of a domestic monopolist which is facing competition from a large number of foreign firms. Domestic consumers know the quality of the home good, while their information about the quality of imports is imperfect. Although minimum quality standards are directly imposed on imports, they indirectly affect the behavior of the domestic monopolist. The domestic firm raises quality but its price response is ambiguous. Furthermore, its market share and profitability decline. Import controls harm some consumers and benefit others. We state conditions which lead to a lower national welfare.

On the role of institutional investors in corporate governance: Evidence from voting of mutual funds in Israel

This chapter investigates voting decisions by mutual funds in a variety of management-sponsored proposals in Israel. Our main findings are that mutual fund managers tend to vote with management and oppose only about 30 percent of all potentially harmful proposals. Larger equity holdings by the fund manager and better prior performance by the firm are found to be negatively associated with the odds of voting against management. Also, mutual funds managed by banks are found to exhibit better monitoring than mutual funds managed by private investment companies. We find that bank fund managers are more likely to vote against management than other mutual fund managers. We further find that non-bank funds tend to increase equity holding following the meeting regardless of their vote, whereas bank funds tend to follow the “Wall Street Rule” and reduce their equity holdings after voting against management.

Exchange rate and stock prices in Japan

This paper explores whether export intensity and net foreign position of the Japanese firms are carefully watched by investors and are properly reflected in the stock prices. By estimating a multifactor model including the TOPIX, the call rate, the exchange rate, and other variables representing the characteristics of individual firms, the market efficiency of the Japanese stock market has been examined. Novelty of this paper is in that the channels of the effect of exchange rate on stock prices are explicitly formulated and estimated directly, and in that the use of daily data enables knowledge to be gained on the market efficiency. The main results are as follows: (i) Japanese investors adequately consider the characteristics of the firms, such as the exporting behaviour and net foreign position. (ii) The market efficiency of the semistrong form has been improved throughout the period. (iii) Stock investors correctly evaluate firms’ foreign asset position and appropriately respond to the change of the exchange rate after 1992. In contrast, investors began to pay attention to exporting firms much earlier, that is, since 1985.

The newsvendor problem with unknown distribution

AbstractNewsvendor theory assumes that the decision-maker faces a known distribution. But in real-life situations, demand distribution is not always known. In the experimental study which this paper presents, half of the participants assuming the newsvendor role were unaware of the underlying demand distribution, while the other half knew the demand distribution. Participants had to decide how many papers to order each day (for 100 days). The experimental findings indicate that subjects who know the demand distribution behave differently to those who do not. However, interestingly enough, knowing the demand distribution does not necessarily lead the subject closer to the optimal solution or improve profits. It was found that supply surplus at a certain period strongly affects the order quantity towards the following period, despite the knowledge of the demand distribution.

Investors' Decision to Trade Stocks – An Experimental Study

This paper experimentally examines the behavior of investors when buying and selling stocks. This behavior was tested under different conditions, among them restrictions on asset holdings or different information conditions. Basic financial theory suggests that subjects buy and sell according to expectations regarding the future prices of assets. On the other hand, behavioral biases, such as the disposition effect, suggest that subjects are affected by past performance of assets. In a series of experiments, subjects were asked to allocate a given endowment among six assets. All the assets had the same normal distribution with positive mean. The results show no disposition effect in the simple case with no restrictions. A reverse disposition effect was found in case 2, where subjects were required to hold only three assets and change one asset on each round. However, when subjects received information on the market return each period, they showed disposition effect when gain and losses are measured relatively to the market. We explain these results by the disappointment effect and momentum trading behavior. The main contribution of the current research is to demonstrate that the disposition effect or momentum behavior can be a product of trading conditions.