Papers by Hinnerk Gnutzmann
Food commodity prices escalated during the 2007/2008 food crisis, and have scarcely fallen since.... more Food commodity prices escalated during the 2007/2008 food crisis, and have scarcely fallen since. We show that high fertilizer prices, driven by the formation of an international export cartel as well as high energy prices, explains the majority of the recent price spikes. In particular, we estimate the pure fertilizer cartel effect explains more than 60% of crisis food price increases. While population growth, biofuels, high energy prices and financial speculation doubtlessly put stress on food markets, our results help to understand the severity and sudden emergence of the crisis and suggest avenues to prevent its repetition.
Penny auctions are a novel selling mechanism, which combines an auction with elements of a lotter... more Penny auctions are a novel selling mechanism, which combines an auction with elements of a lottery. Using a large dataset gathered online, I show that penny auction profitability - while high on average - is negative for low-value goods. Early bids have lower expected return and low bid increments are associated with greater profits. I develop a prospect theory model of penny auction bidding and show that it replicates all these stylised facts; parameter estimates are in line with the literature. This adds further evidence on the usefulness of prospect theory in providing a descriptive theory of behaviour under risk. Moreover, I show that prospect theory outperforms the rationalistic alternative hypothesis of risk-loving bidders.
Customs Unions are the silent success story of regional integration, now surpassing Free Trade Ar... more Customs Unions are the silent success story of regional integration, now surpassing Free Trade Areas in trade volumes and prevalence among neighbouring countries, the quintessential natural trading partners. Yet their importance has often been concealed from the literature because CUs are few in number compared to other agreements. We show that the standard regionalism model implies that CUs dominate all other PTAs in political viability even with asymmetric production - hence FTAs may turn into CUs with higher tariffs, challenging the view that endogenous trade agreements necessarily benefit third countries. Moreover, Customs Unions can be an engine for development: even when governments are politically biased, we demonstrate that CU maximises social welfare in member states among the alternative agreements as long as trade with the rest of the world does not cease entirely.
Price discrimination by consumer's purchase history is widely used in regulated industries, such ... more Price discrimination by consumer's purchase history is widely used in regulated industries, such as communication or utilities, both by incumbents and entrants. I show that such discrimination can have surprisingly negative welfare effects - even though prices and industry profits fall, so does consumer surplus. Earlier studies that did not allow entrants to discriminate or assumed symmetric firms yielded sharply different results, the pro-competitive effect of price discrimination are stronger in these settings. Imposing a pricing constraint on incumbent's discrimination leads the entrant to discriminate more heavily, but still improves both consumer and producer welfare.
International Review of Law and Economics, 2010
The incidence of money laundering, and the zeal with which international anti-money laundering (A... more The incidence of money laundering, and the zeal with which international anti-money laundering (AML) policy is pursued, varies significantly from country to country, region to region. There are, however, quite substantial social costs associated with a policy of toleration, and this begs the question as to why such a variance should exist. In this paper we claim that, due to the globalisation of crime, if a single country should break the "chain of accountability", then it will provide a safe haven for criminals and attract the total financial proceeds of crime. Because smaller economies are best able to insulate themselves from the costs of crime, we argue that smaller countries bear only a tiny share of the total costs relative to the potential benefits of investment that money laundering offers, and so have a higher incentive to tolerate the practice compared to their larger neighbours. As such, we claim that the existence of a money laundering market is due to a policy of AML 'defection', and that the degree of 'defection' depends largely on the size of the country. We present a simple model of policy competition which formalises this intuition, and conclude by exploring a number of policy recommendations which flow from this.
International Review of Law and Economic, 2010
The incidence of money laundering, and the zeal with which international anti-money laundering (A... more The incidence of money laundering, and the zeal with which international anti-money laundering (AML) policy is pursued, varies significantly from country to country, region to region. There are, however, quite substantial social costs associated with a policy of toleration, and this begs the question as to why such a variance should exist. In this paper we claim that, due to the globalisation of crime, if a single country should break the “chain of accountability”, then it will provide a safe haven for criminals and attract the total financial proceeds of crime. Because smaller economies are best able to insulate themselves from the costs of crime, we argue that smaller countries bear only a tiny share of the total costs relative to the potential benefits of investment that money laundering offers, and so have a higher incentive to tolerate the practice compared to their larger neighbours. As such, we claim that the existence of a money laundering market is due to a policy of AML ‘defection’, and that the degree of ‘defection’ depends largely on the size of the country. We present a simple model of policy competition which formalises this intuition, and conclude by exploring a number of policy recommendations which flow from this.
Computational Economics, 2008
When joining a social network, the already well-connected often make for especially attractive pa... more When joining a social network, the already well-connected often make for especially attractive partners because they can facilitate links to other network members. However, the effect is potentially weakened by increasing redundancy of contacts with network size. We consider the trade-off between these two factors in a dataset of the Cambridge High-Tech Cluster and compare results with the county of Cambridgeshire as a whole. As expected, network effects are stronger in the former, but in both datasets, redundancy does not offset the benefits of reach in attracting new partners.
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Papers by Hinnerk Gnutzmann