America's Option: a Survey

Dear Readers,

I am looking for a survey on "America's Options". Do you know other than -Hall "Future and Options"- works on such field? I only know this fundamental book, but what else? Specifically I strongly need to find the optimal stopping time mathematic technique on America's Option.

Thank in advance if you will help me! Write me!!

Matteo
www.theye.it

Public and Private sectors: wage distorsions!

In an article on the free press I read that (in Italy) police detectivies abandon their job because they earn low wages with respect to their job' responsabilities and dangers in which they incur. Then, I thought that this problem was strictly connected with the public sector (police detectivies are paid by the public system) and with the wage distorsions generated by it: public system maintains low wages for a wide class of types of public jobs (as teachers, professors, detectivies..which earn no more than 2000 or 3000 euro a month) and very high wages for public managers (which have not the same responsability of private sector managers..)!!!! After a while I change my mind thinking of private sector wage distorsions: as an example, football kickers earn very high wages without risking to be killed..!! AND SO WHAT?? As public sector distorts wages, the same is made by private sector and the free market..as the public sector doesn't assure an elevate wage for some types of public workers, the private sector assures too much elevate wages to some types of private workers!!! Hence, there is no solution: both the public and the private sector create wage distorsions!!!

Byee

Asking for some references..

Dear all,
is there anyone who knows something about:
- studies on different typologies of organizations (hierarchical, horizontal, ..) in term of their effect on efficiency and effectiveness: in pariticular I would like to know if there are some papers in which different types of organizations are compared in terms of efficiency and effectiveness.
- studies on methods REALLY used by firms to price products..in particular, I would like to know if there are papers in which it is explained how firms REALLY make a prevision on the quantity demanded of their products (i.e. a prevision one the demand function, future sales) and then on the methods used to price products.
- studies on the relation between growth rates of developing countries (as China, India, ..) and of the world renewable and non renewable resources (like oil, natural resources, etc...).

Thanks for everything..

Expectations and New Year!

Every year, a month before and after New Year (which is 21 March in my country) we have a high inflation up to 30% including nearly all commodities and services. Why? Perhaps the direct and first answer coming to mind is because of high demand of consumers for commodities before New Year. This is partly true but it is not all the story for my country.

According to above answer, the ministry of commerce performs a policy to inject the highly demanded commodities (highly demanded for New Year) into market (think about supply law) in order to keep prices constant. Does this policy works? No, I think the second answer now is “expectations”. Years after year consumers and sellers has used to face higher prices before New Year so they form their expectation. We have another reason to have higher prices before New Year in my country. I call it traffic of changes in prices which again form expectations.

Every year when we get close to the end of the year a committee will decide how much to increase the minimum salaries for employees of government and other sections for the next year. Another committee will decide how much to increase the price of fuel which has an important role in transportation cost including public transportation and transportation of goods across the country. Another committee will decide how much to increase the price of natural gas (used by households), electricity and other utilities. I call this mechanism “Shock trapy”. Why? The purpose of this once increases in prices and salaries is to avoid persistence inflation. It is assumed by officials that when you increase all prices once like a shock we will have a sudden inflation and then during the year everything will be OK. Is this true? I don’t know. We are going to try dividing these changes across months of years to avoid expectations to form only for New Year. If we assume rationality of people I think this will not be useful in long term and the ultimate solution is to let invisible hand to work but is invisible hand successful in regulating market even for New Year? (This is like a cycle, we are back to first point)

Inflation and the Twelve Days of Christmas

This post is more to bring up an article that is fun to look at, but is also somehow relevant to the issue of percieved vs calculated inflation that Domenico brought up.

Since 1984 PNC (a US financial consulting company) has calculated the Christmas Price Index and checked how much this differs from the Consummer Price Index. The Christmas Price Index is calculated summing up the values of the items quoted in the Twelve Days fo Christmas, a Christmas Carol. The items are (in brackets price in 2007 and 2006):

1. Partridge ($15 / Same) and Pear Tree ($150 / $130)
2. Two Turtle Doves ($40 / Same)
3. Three French Hens ($45 / Same)
4. Four Calling Birds - canaries ($600 / $480)
5. Five Gold Rings ($395 / $325)
6. Six Geese a-Laying ($360 / $300)
7. Seven Swans a-Swimming ($4,200 / Same)
8. Eight Maids a-Milking ($47 / $41)
9. Nine Ladies Dancing - per performance ($4,759 / Same)
10. Ten Lords a-Leaping - per performance ($4,285 / $4,160)
11. Eleven Pipers Piping - per performance ($2,213 / $2,124)
12. Twelve Drummers Drumming - per performance ($2,398 / $2,301)

If you look at the prices, one of the worst price increases is that of food (geese, and milking maids, meaning that milk prices would go up too), which makes me think that even if prices overall may not grow that much (turtles, partridge, swans are still the same), what matters for percieved inflation is that the things you buy actually become more exensive. When at ballaro' they show families that have a hard time getting to the end of the month, I think that is mostly because it is true that prices for food and other essential commodities have gone up.

For whoever is rich enough to be able to afford the presents from the 12 days of Christmas, I guess an overall increase from $75,122 to $78,100 (4%) is not as bad as for someone who needs to buy more essential commodities.

Info from:
msnbc
PNC Christmas Price Index

The Carol on youtube (best version I could find...).

Bank notes and future of money in Transactions

When I came to Europe for my studying I decided to collect monies of different countries both in Europe and of outside of Europe from my classmates with different nationalities.
Yesterday when I was looking at them and comparing them, I understood that there is huge difference in the size of these monies.This seems something usual and maybe we don't think that much about consequences of these differences but keep this in your mind and then think about two things.

1-Cost of printing bank notes will increase as you print a bigger one.This cost can emerge either from special print ink which has a security benefits or from special paper which again has some security materials inside.

2-As you have a bigger bank notes in your hand or wallet then the life cicle of them will decrease faster.

In my collection I found out that the size of bank notes in Uzbekistan, Iran and Ghana are enormous compare to many European countries and also China.
The reason that i bring these names as examples is that all of these countries have a high inflation and they are developing countries.
In Europe only 500 Euro is big in size but it rarely happens that somebody carry it for shopping or etc.In contrast in Iran everyone need 2000 Toman(Rial is the official name) for shopping and daily usage and it rarely happens that you want 100 or 200 Toman.
I heard in the news few months ago that CBI(Central Bank of Iran) have designed 5000 Toman bank notes which are wider and larger 2 or 3 millimeters in size.Now the question is that why we are still printing even a bigger size(not value) of bank notes when every year the officials are announcing a large number as the cost of reprinting new bank notes and destroying the old ones.
The only reason that i can think now is that the technology of printing bank notes is very old in there and the solution is buying new printing press machines.
Another thing that I'm mentioning here and is new(I mean I have not write about it in my own blog) is about electronic money which I got to know about for the first time in Belgium. Electronic money is different from those money which we have in our debit cards and every time we need to have a connection to the server of our bank either to get cash or to pay for shopping. For those who are in Italy and studying in Venice I can bring a perfect example: the keys we use to pay for cofee machines. This means that you don't need any password or Internet connection to use your money. In Belgium I was able to put up to 20 Euro in the chip of my debit card and then use it to pay in some places but why only 20 Euro? As I mentioned before this is an electronic money so it is exactly like money just in electronic form, you can lost it and there is no way to claim that it was yours, there is no password and anyone can use it when they found it. I am seeing one day that no one will cary bank notes and every one will pay with electronic money!!!

The lire-euro Change: some confusion about it

In this days I was wondered about what were the reasons of the rise in prices people suffered (or thought to suffer) after the currency change in Italy (form lire to euro). Personally I thought that the reason was very simple: the "lucrative" behavior adopetd by firms in rising prices. Looking at some empirical articles (on La Voce website), I realized that most of the researchers think that the rise in prices of goods has not been so elevate as I though (the inflation rate computed by ISTAT (the national institute of statistics) during 2002 – the currency change date – was almost the same of 1999 or 2000).

They explain how the rise in prices is happened only in some sectors where the competition between firms was absent or low. As an example, in these articles, researchers shows that, even if in the third sector (the services sector: restaurants, bars, pubs, etc…) the inflation rate has been much elevate, in other sectors, like the technological one, there has been a decrease in prices.

The problems on which I am a little bit confused are those ones:

- Starting from the assumption that common people suffered by a very elevate infaltion rate and a decrease in their living standards after 2002, I was wondering how the the inflation rate of ISTAT is computed: probably ISTAT method to compute inflation rate is not the most appropriate one. The only reason I can think about it, is that ISTAT gives, as an example, the same importance to the purchase of a dvd player (technological good) as the purchase of bread or milk (primary goods)..

- The decrease in prices in the technological sector is not connected to the currency change but is a characteristic of that specific sector due to the continuing innovations. For this reason I would like to know if the decrease rate in prices before 2002 was the same or higher than the 2002 one.

Questions:

- I was interested in knowing if someone knows some articles where is explained and justified the difference between the perceived infaltion rate (by people after 2002) and the “real” one (that computed by ISTAT). Moreover I would like to know if there are some papers in which is shown how the inflation rate is computed by ISTAT.

- I was also interested in knowing if some authors have created a microeconomic theoretical model to explain the phenomenon of the rise in prices after the currency change.

Thanks

Domenico