Economics Insights @ CBS

Three experiments investigate the emotions that arise from buying or not buying at an unintended purchase opportunity and how they color evaluations of affective advertising appeals that are viewed subsequently. We demonstrate that buying can cause happiness tempered with guilt, while not buying causes pride. Consistent with the felt affect, respondents who had bought at time 1 subsequently prefer happiness appeals to pride appeals, while those who had refrained prefer pride appeals.

We give a short proof of a result of Tovey ["Non-approximability of precedence-constrained sequencing to minimize setups," Discrete Appl. Math. 134:351–360, 2004] on the inapproximability of a scheduling problem known as precedence-constrained class sequencing. In addition, we present an approximation algorithm with performance guarantee (c+1)/2, where c is the number of colors. This improves upon Tovey's c-approximation.

Three studies support the proposal that need for closure (NFC) involves a desire for consensual validation that leads to cultural conformity. Individual differences in NFC interact with cultural group variables to determine East Asian versus Western differences in conflict style and procedural preferences (Study 1), information gathering in disputes (Study 2), and fairness judgment in reward allocations (Study 3).

Interest rate swap pricing theory traditionally views swaps as portfolios of forward contracts with net swap payments discounted using the LIBOR curve. Current market practices of marking-to-market and collateralization question this view. Collateralization and marking-to-market affects discounting of swap payments (through altered default characteristics) and introduces intermediate cash-flows. This paper provides a theory of swap valuation under collateralization and we find evidence supporting the presence of costly collateral.