This paper presents a model on the leverage of …nancial intermediaries, where debt are held by risk averse agents and equity by the risk neutral. The paper shows that in an unregulated competitive market, …nancial intermediaries choose to be leveraged over the social best level. This is because the leverage of one intermediary imposes a negative externality upon others by reducing their pro…t m...

In the new competitive order, Australian electricity systems have been oriented to growth of electricity sales based on low margins and the capture of market share. Electricity is a premium fuel. The second law of thermodynamics testifies to this, as does the relationship between coal-fired electricity and the negative externality of greenhouse warming. Electricity prices should reflect its sta...

This paper studies the full equilibrium dynamics of an economy with financial frictions. Due to highly non-linear amplification effects, the economy is prone to instability and occasionally enters volatile episodes. Risk is endogenous and asset price correlations are high in down turns. In an environment of low exogenous risk experts assume higher leverage making the system more prone to system...

Discussion papers are research materials circulated by their authors for purposes of information and discussion. They have not undergone formal peer review or the editorial treatment accorded RFF books and other publications. Abstract Uncertainty about costs causes otherwise equivalent price and quantity controls to result in different quantity responses and costs. Weitzman (1974) found that th...

This study investigates the relationship between information technology (IT) expenditures and national productivity based on a production estimation approach by using pooled time-series country-level data set for the period from 1992 to 2000. The results confirm the findings of earlier studies on country-level IT investment effect, showing IT to have significant and positive effects on national...

With the advent of social networks such as Facebook and LinkedIn, and online offers/deals web sites, network externalties raise the possibility of marketing and advertising to users based on influence they derive from their neighbors in such networks. Indeed, a user’s knowledge of which of his neighbors “liked” the product, changes his valuation for the product. Much of the work on the mechanis...