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This paper analyzes third-degree price discrimination of a monopoly airline in the presence of congestion externality when all markets are served. The model features the business-passenger and leisure-passenger markets where business passengers exhibit a higher time valuation, and a less price-elastic demand, than leisure passengers. Our main result is the identification of the time-valuation effect of price discrimination, which can work in the opposite direction as the well-known output effect on welfare. This time-valuation effect clearly explains why discriminating prices can improve welfare even when this is associated with a reduction in aggregate output.

We propose different schemes for option hedging when asset returns are modeled using a general class of GARCH models. More specifically, we implement local risk minimization and a minimum variance hedge approximation based on an extended Girsanov principle that generalizes Duan's (1995) delta hedge. Since the minimal martingale measure fails to produce a probability measure in this setting, we construct local risk minimization hedging strategies with respect to a pricing kernel. These approaches are investigated in the context of non-Gaussian driven models. Furthermore, we analyze these methods for non-Gaussian GARCH diffusion limit processes and link them to the corresponding discrete time counterparts. A detailed numerical analysis based on S&P 500 European Call options is provided to assess the empirical performance of the proposed schemes. We also test the sensitivity of the hedging strategies with respect to the risk neutral measure used by recomputing some of our results with an exponential affine pricing kernel. Comment: 26 pages, 6 figures, 3 tables

We investigate whether foreign exchange intervention volume matters for the exchange rate effects of intervention. Our investigation employs daily data on Japanese interventions from April 1991 to April 2012 and time-series estimations, non-temporal threshold analysis, as well as binary choice models. We find that intervention volume matters for the effects of intervention, but only to the extent that the exchange rate effect per intervention unit is magnified in a linear sense by the larger intervention amount. This is a policy-relevant finding that also adds to our understanding of how intervention works.

An approximate analytical method for solving the (Q, r) model when lead time demand is Gamma distributed is discussed. The method is quite accurate and requires less input than the familiar iterative method.

The purpose of the current paper is to extend the theory of regional public goods to account for population congestion,or crowding, and then to introduce the possibility of congestion into boundary spillovers of benefits. This paper deals with congestion costs for regional public goods provided by provinces which belong to a federation and indicates how optimizing subsidies may be used by the federal government to correct for benefit spillovers. The analysis is based on the assumption that for each province there is a social welfare function and that this welfare function is defined in terms of per capita consumption of private and public goods. The next section of the paper develops the theory of congested public goods and shows how congestion will affect the behaviour of a single province, which is exclusively concerned with the welfare of its residents. Section III introduces congestion into local public good benefits and into spilling benefits. Provincial and federal optimization conditions are also derived. Section IV concludes the paper.

Using the 2001 Census of Canada, this paper examines whether spatial residential patterns relate to an ethnic group’s socioeconomic achievement within urban Canada. Most literature suggests that ethnic clustering is primarily a consequence of systematic discrimination or poor socioeconomic resources. Our basic question is whether the relationship between residential segregation and social integration is weakening, thus making the spatial assimilation model less relevant than in the past. The results suggest the assimilation model provides a poor explanation in the Canadian context. Residential segregation persists over time although considerable variation exists among the CMAs. 

The concept of causality is naturally defined in terms of conditional distribution, however almost all the empirical works focus on causality in mean. This paper aim to propose a nonparametric statistic to test the conditional independence and Granger non-causality between two variables conditionally on another one. The test statistic is based on the comparison of conditional distribution functions using an L2 metric. We use Nadaraya-Watson method to estimate the conditional distribution functions. We establish the asymptotic size and power properties of the test statistic and we motivate the validity of the local bootstrap. Further, we ran a simulation experiment to investigate the finite sample properties of the test and we illustrate its practical relevance by examining the Granger non-causality between S&P 500 Index returns and VIX volatility index. Contrary to the conventional t-test, which is based on a linear mean-regression model, we find that VIX index predicts excess returns both at short and long horizons.

Background. Reviews and meta-analyses suggest that caregiver interventions have only been modestly effective in reducing caregiver distress. One possible reason is that many intervention studies have recruited heterogeneous caregivers with subclinical symptoms. This study examined the feasibility of recruiting a more homogenous group of caregivers with high clinical distress levels for an intensive therapy intervention. Methods. During the 2-year study and under ideal circumstances, we recruited caregivers of community-dwelling older adults with dementia for group cognitive behavioral therapy at a University of Toronto affiliated and internationally recognized geriatric health sciences center. We used strict eligibility criteria to recruit primary spouse caregivers with a DSM-IV diagnosis, normal cognitive functioning, and clinically significant distress levels. Results. Of the 97 caregivers screened, 61 were ineligible or uninterested. The 36 interested caregivers who met screening criteria completed a diagnostic intake assessment and only 28 were eligible to begin therapy. Discussion. These results indicate that it would be extremely difficult for clinicians or researchers working in smaller cities or health care centers to run caregiver intervention groups using strict entrance criteria such as those employed in this study. The results of this study provide further support for the importance of diverse and tailored caregiver interventions.

This commentary raises questions about the degree to which global innovation indicators enable us to understand the historical dynamics of innovation in Canada, and about future directions for Canadian innovation policy. By focusing on the automotive and telecommunications sectors, two currently troubled Canadian industries with completely different histories, some of the major successes and mistakes of Canadian industrial policy are assessed critically. The conclusion is that the innovation problem in Canada has less to do with capabilities or opportunities, than with recent tendencies not to follow through when ambitious innovation initiatives in specific industries could be transformed into new national "engines of growth".

In this paper, we present a flow control policy to address the problem of service capacity constraints in queueing systems that face non-stationary customer arrival rates. The studied system concerns commercial trucks arriving at international border checkpoints for processing. Based on an extensive range of numerical examples, we quantify how the flow control policy of bringing arrival rates more in line with available capacity affects customer-oriented metrics and measures of efficiency in service capacity resources. We also quantify the expectations that the policy would place on arriving customers. How these quantitative outcomes are influenced by contextual parameters such as the pattern of customer arrivals and the tightness of capacity constraints is also clarified.