settlement tax and non synchronous effects in the basis of u k stock index futures abstract the basis in stock index futures markets is analytically and empirically studied in this paper within a no arbitrage cost of carry framework explanatory power improved when the implications of the u k stock exchange settlement system were introduced into the modelling process and until recently with the maturity of the market evidence indicating the presence of non synchronicities between the cash and futures markets was found strong evidence for tax effects upon the basis was not found to be present in the data analysed statistically significant relationships between basis mispricing and volume and volatility were found

some aspects of the taxation of capital gains abstract the analysis of the effects of capital gains taxation requires a careful modelling both of the details of the tax code and the imperfections in the capital market under the standard assumptions concerning perfect capital markets and under the standard idealizations of the tax code there are several strategies by which rational investors can avoid note only all taxes on their capital income but also all taxes on their wage income these strategies leave individuals consumption and bequests in each state of nature and at each date unchanged from what they would have been in the absence of taxes although certain detailed provisions of the tax code may limit the extent to which rational investors can avail themselves of these tax avoidance activities there are ways in a perfect capital market by which the effects of these restrictions can be ameliorated accordingly any analysis of the effects of capital taxation must focus on imperfect capital markets if individuals face limitations on the amounts which they can borrow and or if there are limitations on short sales then under some circumstances there is a locked in effect individuals do not sell securities which they would have sold in the absence of taxation but under other circumstances individuals are induced to sell securities that they otherwise would have held in order to take advantage of the asymmetric treatment of short term losses and long term gains a policy of realizing gains as soon as they become eligible for long term treatment dominates the policy of postponing the realization of capital gains provided the gains are not too large a simple general equilibrium model is constructed within which it is shown that the taxation of capital gains may increase the volatility of asset prices and lead individuals not to trade when they otherwise would while the analysis casts doubt on the significance of the welfare losses resulting from these exchange inefficiencies there are circumstances in which the tax leads to production inefficiencies e g terminating projects at other than the socially optimal date finally we argue that the focus of some recent policy debates on the short run revenue impact of a decrease in the tax rate on capital gains is misplaced even when the short run revenue impact is positive consumption may increase thus exacerbating inflationary pressures and private savings may decrease thus leading to a lower level of investment in the private sector moreover there is some presumption that the long run revenue impact is negative our analysis has some important implications for empirical research in particular it suggests that the impact of the tax is not adequately summarized by a single number such as the effective tax rate representing the average ratio of tax payments to capital gains moreover the impact of the tax cannot be assessed by looking only at reported capital gains and losses

dynamic investment and financing under personal taxation this paper examines the effects of capital gains taxation on firms investment and financing decisions we develop a real options model in which the timing of investment the decision to default and the firm s capital structure are endogenously and jointly determined our analysis demonstrates that the asymmetric taxation of capital gains and losses fosters investment by eroding the option value of waiting it also shows that firms controlled by taxable investors employ more equity financing the higher the firm s stock price and the worse the firm s historical performance using a large sample of u s industrial firms that are owned by taxable investors between 1970 and 2008 we present new evidence on corporate investment and financing policies which is supportive of the model s predictions

a parsimonious model for forecasting gross box office revenues of motion pictures the primary objective of this paper is to develop a parsimonious model for forecasting the gross box office revenues of new motion pictures based on early box office data the paper also seeks to provide insights into the impact of distribution policies on the adoption of new products the model is intended to assist motion picture exhibitor chains retailers in managing their exhibition capacity and in negotiating exhibition license agreements with distributors studios by allowing them to project the box office potential of the movies they plan to or currently exhibit based on early box office results it is also of interest to practitioners in other software industries e g music books cd roms where the distribution intensity is highly variable over the product life cycle and is an important determinant of new product adoption patterns the model and its extensions are of interest to academic researchers interested in modeling distribution effects in new product adoption as well as forecasters looking for ways to leverage historical data on related products to forecast the sales of new products we draw upon a queuing theory framework to conceptualize stochastically the consumer s movie adoption process in two steps the time to decide to see the new movie and the time to act on the adoption decision the parameter for the time to decide process captures the intensity of information intensity flowing from various information sources while the parameter for the time to act process is related to the delay created by limited distribution intensity and other factors our conceptualization extends existing new product forecasting models which assume that consumers act instantaneously on the motivating information they receive about the new product the resulting model is parsimonious yet it accommodates a wide range of adoption patterns in addition the stochastic formulation allows us to quantify the uncertainty surrounding the expected adoption pattern in the empirical testing we focus on the most parsimonious version of the modeling framework boxmod i a model that assumes stationarity with respect to the two shape parameters that characterize the adoption process the model produces fairly accurate early forecasts using at most the first three weeks of data for calibration and the predictive performance of the model compares favorably with benchmark models we propose extensions of the basic model that account for more realistic non stationary distribution intensity patterns including a wide release pattern that relies on intensive distribution and promotion and a platform release pattern that involves a gradual buildup of distribution intensity finally we present an adaptive weighing scheme that combines initial parameter estimates obtained from a meta analysis procedure with estimates obtained from early data to produce forecasts of box office revenues for a new movie when little or no box office data are available an important finding from the empirical testing is that motion picture box office revenue patterns display remarkable empirical regularity we find that there are only three classes of adoption patterns and these can all be represented within the basic model by using a two parameter exponential or erlang 2 probability distribution or a three parameter generalized gamma distribution we also find that cumulative box office revenues can be predicted with reasonable accuracy often within 10 of the actual using as little as two or three data points however our attempts to predict revenue patterns without any sales data meet with limited success while the scale parameter can be estimated reasonably well from a historical database of parameter values we find that it is considerably more difficult to predict the shape parameters using historical data the parsimony we seek in developing the model comes at the cost of several limiting assumptions we assume that the time to decide subprocess and the time to act subprocess are independent which may not be the case if decisions on continued exhibition by retailers are endogenously related to box office revenues over the life cycle in the basic model formulation we also assume that the time to act process can be represented by an exponential distribution which may not always be the case while we provide some empirical evidence to support these assumptions further research could relax these and other assumptions to enrich the basic model although this would entail some loss in parsimony

diffusion of renewable energy technologies in south korea on incorporating their competitive interrelationships renewable energy technologies rets have attracted significant public attention for several reasons the most important being that they are clean alternative energy sources that help reduce greenhouse gas emissions to increase the probability that rets will be successful it is essential to reduce the uncertainty about its adoption with accurate long term demand forecasting this study develops a diffusion model that incorporates the effect of competitive interrelationships among renewable sources to forecast the growth pattern of five rets solar photovoltaic wind power and fuel cell in the electric power sector and solar thermal and geothermal energy in the heating sector the 2 step forecasting procedure is based on the bayus 1993 manage sci 39 11 1319 1333 price function and a diffusion model suggested by hahn et al 1994 marketing sci 13 3 224 247 in an empirical analysis the model is applied to the south korean renewable energy market

liquidation of a large block of stock abstract in the financial engineering literature stock selling rules are mainly concerned with liquidation of the security within a short period of time this is practically feasible only when a relative smaller number of shares of a stock is involved selling a large position in a market place normally depresses the market if sold in a short period of time which would result in poor filling prices in this paper we consider the liquidation strategy for selling a large block of stock by selling much smaller number of shares over a longer period of time in particular we treat the selling rule problem by using a fluid model in the sense that the number of shares are treated as fluid continuous and the corresponding liquidation is dictated by the rate of selling over time the objective is to maximize the expected overall return the underlying problem may be formulated as a stochastic control problem with state constraints method of constrained viscosity solution is used to characterize the dynamics governing the optimal reward function and the associated boundary conditions numerical examples are reported to illustrate the results

trading and valuing depreciable assets abstract optimal policies for selling a risky depreciable asset with proportional taxes and transaction costs are derived for a representative investor who maximizes the market value of his investment also calculated are the market value of his investment and the competitive price of the depreciable asset depending upon the values of various parameters the investor realizes either capital gains and no losses capital losses and no gains or neither gains nor losses additional properties of the solution are derived numerically

the effect of business risk on corporate capital structure theory and evidence under corporate and personal taxation we demonstrate that the relation between optimal debt level and business risk is roughly u shaped this result follows from the fact that the tax liability is an option portfolio that is long in the corporate tax option and short in the personal tax option therefore the net effect of a change in business risk on the optimal debt level depends upon the relative magnitudes of the resultant marginal changes in the values of these two options results of empirical tests offer support for the predicted u shaped relationship

tax arbitrage restrictions and financial leverage clienteles abstract this paper argues that while total short sale constraints are often introduced to rule out tax arbitrage such constraints are both unrealistic and conceptually problematic instead milder constraints are advocated which prevent tax arbitrage while still allow short positions it is demonstrated that a model with these constraints employed can support bond pricing as in the miller equilibrium although it leads to a richer set of tax clienteles

imitating accrual taxation on a realization basis abstract while taxation of capital gains upon accrual poses problems of liquidity and valuation taxation upon realization evokes the so called lock in effect that possibly induces distortions of the investors liquidation and investment decision the tax schemes proposed in the literature in order to remedy simultaneously the shortcomings of both taxation methods are mostly based on the idea of imitating accrual taxation on a realization basis the paper surveys these proposals of so called formulaic taxation and develops a uniform formal way of describing the suggested schemes that allows them to be easily compared and evaluated from a theoretic point of view

debt and taxes a multiperiod investigation abstract this paper extends the miller bond market equilibrium analysis to a multiperiod setting from the model developed we derive several predictions relating optimal financial leverage to firm characteristics and to the business cycle the analysis also reveals some interesting determinants of the market value of the tax subsidy associated with corporate debt

alternative supply chain production sales policies for new product diffusion an agent based modeling and simulation approach abstract applying agent based modeling and simulation abms methodology this paper analyzes the impact of alternative production sales policies on the diffusion of a new generic product and the generated npv of profit the key features of the abms model that captures the marketplace as a complex adaptive system are i supply chain capacity is constrained ii consumers new product adoption decisions are influenced by marketing activities as well as positive and negative word of mouth wom between consumers iii interactions among consumers taking place in the context of their social network are captured at the individual level and iv the new product adoption process is adaptive conducting over 1 million simulation experiments we determined the best production sales policies under various parameter combinations based on the npv of profit generated over the diffusion process the key findings are as follows 1 on average the build up policy with delayed marketing is the preferred policy in the case of only positive wom as well as the case of positive and negative wom this policy provides the highest expected npv of profit on average and it also performs very smoothly with respect to changes in build up periods 2 it is critical to consider the significant impact of negative word of mouth in choosing production sales policies neglecting the effect of negative word of mouth can lead to poor policy recommendations incorrect conclusions concerning the impact of operational parameters on the policy choice and suboptimal choice of build up periods

differential taxation and the equilibrium structure of interest rates equilibrium coupon bond pricing relationships given differential taxation are derived under uncertainty assuming that both corporate and municipal bonds were originally issued at par but are currently selling at a discount the impact of differential taxation upon the term structure and coupon structure of interest rates is investigated while the tax structure of interest rates is uniquely characterized differential taxation substantially alters the prevailing equilibrium structure of interest rates

a new product growth for model consumer durables this article originally appeared in management science january 1969 volume 15 number 5 pp 215 227 published by the institute of management sciences a growth model for the timing of initial purchase of new products is developed and tested empirically against data for eleven consumer durables the basic assumption of the model is that the timing of a consumer s initial purchase is related to the number of previous buyers a behavioral rationale for the model is offered in terms of innovative and imitative behavior the model yields good predictions of the sales peak and the timing of the peak when applied to historical data a long range forecast is developed for the sales of color television sets

a strategic analysis of sinking fund bonds abstract unlike most securities the pricing of sinking fund bonds is influenced by the distribution of ownership which summarizes the extent to which the market is cornered the effect of the distribution of ownership on the pricing of sinking fund bonds is examined by an explicit game in which the price obtained for bonds sold can depend upon the size of the investor s position this framework is used to contrast the valuation of sinking fund bonds with the valuation of amortizing bonds and straight debt we show that it is generally incorrect to view sinking fund bonds as being equivalent to serial bonds

new product diffusion acceleration measurement and analysis it is a popular contention that products launched today diffuse faster than products launched in the past however the evidence of diffusion acceleration is rather scant and the methodology used in previous studies has several weaknesses also little is known about why such acceleration would have occurred this study investigates changes in diffusion speed in the united states over a period of 74 years 1923 1996 using data on 31 electrical household durables this study defines diffusion speed as the time it takes to go from one penetration level to a higher level and it measures speed using the slope coefficient of the logistic diffusion model this metric relates unambiguously both to speed as just defined and to the empirical growth rate a measure of instantaneous penetration growth the data are analyzed using a single stage hierarchical modeling approach for all products simultaneously in which parameters capturing the adoption ceilings are estimated jointly with diffusion speed parameters the variance in diffusion speed across and within products is represented separately but analyzed simultaneously the focus of this study is on description and explanation rather than forecasting or normative prescription there are three main findings 1 on average there has been an increase in diffusion speed that is statistically significant and rather sizable for the set of 31 consumer durables the average value of the slope parameter in the logistic model s hazard function was roughly 0 48 increasing with 0 09 about every 10 years it took an innovation reaching 5 household penetration in 1946 an estimated 13 8 years to go from 10 to 90 of its estimated maximum adoption ceiling for an innovation reaching 5 penetration in 1980 that time would have been halved to 6 9 years this corresponds to a compound growth rate in diffusion speed of roughly 2 between 1946 and 1980 2 economic conditions and demographic change are related to diffusion speed whether the innovation is an expensive item also has a sizable effect finally products that required large investments in complementary infrastructure radio black and white television color television cellular telephone and products for which multiple competing standards were available early on pcs and vcrs diffused faster than other products once 5 household penetration had been achieved 3 almost all the variance in diffusion speed among the products in this study can be explained by 1 the systematic increase in purchasing power and variations in the business cycle unemployment 2 demographic changes and 3 the changing nature of the products studied e g products with competing standards appear only late in the data set after controlling for these factors no systematic trend in diffusion speed remains unaccounted for these findings are of interest to researchers attempting to identify patterns of difference and similarity among the diffusion paths of many innovations either by jointly modeling the diffusion of multiple products as in this study or by retrospective meta analysis the finding that purchasing power demographics and the nature of the products capture nearly all the variance is of particular interest specifically one does not need to invoke unobserved changes in tastes and values as some researchers have done to account for long term changes in the speed at which households adopt new products the findings also suggest that new product diffusion modelers should attempt to control not only for marketing mix variables but also for broader environmental factors the hierarchical model structure and the findings on the systematic variance in diffusion speed across products are also of interest to forecasting applications when very little or no data are available

optimal tax timing with asymmetric long term short term capital gains tax we develop an optimal tax timing model that takes into account asymmetric long term and short term tax rates for positive capital gains and limited tax deductibility of capital losses in contrast to the existing literature this model can help explain why many investors not only defer short term capital losses to long term but also defer large long term capital gains and losses because the benefit of tax deductibility of capital losses increases with the short term tax rates effective tax rates can decrease as short term capital gains tax rates increase

accrual equivalent marginal tax rates for personal financial assets this paper shows that the appropriate approach to calculating accrual equivalent marginal tax rates for nonaccrual taxes on personal financial investments is the relative reduction in the internal rate of return approach which equates the present values from the after tax returns from an investment under an accrual and a nonaccrual tax detailed comparisons are made with alternative approaches proposed by boadway bruce and mintz 1984 and by king and fullerton 1984 for the capital gains tax both find accrual tax rates that equate the present values of accrual and actual tax revenues fundamental problems are found with both alternative approaches

a model of capital structure when earnings are mean reverting a multiperiod model of optimal capital structure is developed under the assumption that earnings follow an autoregressive process firm value and leverage vary through time and at each date the firm achieves an optimal debt level that is a function of the full state contingent debt policy the reversion parameter of the earnings series is shown to be positively related to various measures of variability and negatively related to leverage if earnings processes are not homogeneous across firms then standard earnings risk measures in capital structure studies do not adequately represent crosssectional differences in variability in firm value

forecasting and inventory management of short life cycle products in this paper we provide an integrated framework for forecasting and inventory management of short life cycle products the literature on forecasting and inventory management does not adequately address issues relating to short life cycle products we first propose a growth model that can be used to obtain accurate monthly forecasts for the entire life cycle of the product the model avoids limiting data requirements of traditional methods instead it extracts relevant information from past product histories and utilizes the information on total life cycle sales and the peak sales timing using disguised demand data from a personal computer pc manufacturer we validate the model next we model the inventory management problem for the short life cycle environment the uncertainty in demand is modeled through the uncertainty in the realized values of the parameters of the forecasting model the high cost of terminal inventory shortages and rapidly changing procurement costs are all included in the model extensions to the basic model are also developed using optimal control theory we derive a solution that provides valuable information on procurement cutoff time and terminal service levels a detailed example explains the characteristics of the policy and its relevance in decision making many of the issues covered in the models were brought to our attention while implementing a forecasting model at a pc manufacturer the benchmark monthly forecasts and the associated inventory levels provide information that can be very helpful in planning and controlling marketing sales and production

capital gains taxes and asset prices capitalization or lock in this paper demonstrates that the equilibrium impact of capital gains taxes reflects both the capitalization effect i e capital gains taxes decrease demand and the lock in effect i e capital gains taxes decrease supply depending on time periods and stock characteristics either effect may dominate using the taxpayer relief act of 1997 as our event we find evidence supporting a dominant capitalization effect in the week following news that sharply increased the probability of a reduction in the capital gains tax rate and a dominant lock in effect in the week after the rate reduction became effective this paper jointly tests two effects of capital gains taxation on equity trading a demand side capitalization effect and a supply side lock in effect while previous studies have tested these effects separately to the best of our knowledge this is the first study to evaluate them jointly and empirically document the relative dominance of each effect surrounding a change in a tax rate employing an equilibrium approach we show that these effects net tax impact on asset prices is ambiguous evaluating returns and trading volume around the 1997 reduction in the capital gains tax rate we find evidence that the capitalization and the lock in effects jointly affect trading in particular the capitalization effect dominates the lock in effect in the week following an increase in the probability of a reduction in the capital gains tax rate as buyers respond to information that future capital gains tax rates will be lower the lock in effect however dominates the capitalization effect after the rate reduction actually becomes effective taxation is one of the most prevalent market frictions in financial markets affecting investors decisions and distorting the valuation of assets capital gains taxes in particular play an important role in determining an investor s trading strategies and can ultimately affect asset prices because investors

managing demand and sales dynamics in new product diffusion under supply constraint the bass diffusion model is a well known parametric approach to estimating new product demand trajectory over time this paper generalizes the bass model by allowing for a supply constraint in the presence of a supply constraint potential customers who are not able to obtain the new product join the waiting queue generating backorders and potentially reversing their adoption decision resulting in lost sales consequently they do not generate the positive word of mouth that is typically assumed in the bass model leading to significant changes in the new product diffusion dynamics we study how a firm should manage its supply processes in a new product diffusion environment with backorders and lost sales we consider a make to stock production environment and use optimal control theory to establish that it is never optimal to delay demand fulfillment this result is interesting because immediate fulfillment may accelerate the diffusion process and thereby result in a greater loss of customers in the future using this result we derive closed form expressions for the resulting demand and sales dynamics over the product life cycle we then use these expressions to investigate how the firm should determine the size of its capacity and the time to market its new product we show that delaying a product launch to build up an initial inventory may be optimal and can be used as a substitute for capacity also the optimal time to market and capacity increase with the coefficients of innovation and imitation in the adoption population we compare our optimal capacity and time to market policies with those resulting from exogeneous demand forecasts in order to quantify the value of endogenizing demand

the determinants of capital gains tax compliance evidence from the rjr nabisco leveraged buyout abstract inability to observe both actual and reported capital gains has impeded studies of capital gains tax compliance this study overcomes such limitations through access to both confidential tax returns and internal shareholder records tests are conducted at the individual taxpayer level for associations between compliance rates for capital gains taxes generated by rjr nabisco shareholders during its leveraged buyout and income marginal tax rates socioeconomic characteristics and measures of the taxpayer s perception of the noncompliance penalty we find noncompliance decreasing in taxable income including rjr nabisco capital gains first dollar marginal tax rates self employment income rental income and other interest paid

effective tax rates and tobin s q abstract this paper clarifies the relation between the average and marginal effective tax rates using the notion of the change in tobin s average q the equation connecting the effective rates shows that corporate taxation can be represented by a mixture of two extreme tax rules one being a distorting pure corporate tax and the other a nondistorting cash flow tax the paper proposes new measures representing this feature

how burdensome are capital gains taxes abstract this paper uses capital gain realization data from individual tax returns to evaluate recent claims that sophisticated portfolio strategies permit investors to avoid capital gains taxes the results suggest important investor heterogeneity twenty percent of taxpayers with capital gains or losses face binding loss offset constraints another significant group of investors evades the capital gains tax prior to recent legislative changes forty percent of capital gains were unreported finally about forty percent of capital gains accrue to investors who report capital gains and face significant tax burdens as the traditional analysis of the capital gains tax suggests

direct evidence on the marginal rate of taxation on dividend income abstract miller and scholes 1978 hypothesize that the marginal tax rate on dividend income may be less than the marginal rate of tax on capital gains their hypothesis is dependent upon individuals utilizing existing provisions of the code which serve to reduce the taxation of dividends in this study estimates of the marginal and effective rates of tax on dividend income for the year 1979 are presented using the statistics of income sample of returns the average marginal rate of tax on dividend income is estimated to be 40 while the average effective rate of tax is estimated to be 30

capacity decisions for high tech products with obsolescence abstract modern high tech products experience rapid obsolescence capacity investments must be recouped during the brief product lifecycle during which prices fall continuously we employ a multiplicative demand model that incorporates price declines due to both market heterogeneity and product obsolescence and study a monopolistic firm s capacity decision we investigate profit concavity and characterize the structure of the optimal capacity solution moreover for products with negligible variable costs we identify two distinct strategies for capacity choice demarcated by an obsolescence rate threshold that relates both to market factors and capacity costs finally we empirically test the demand model by analyzing shipping and pricing data from the pc microprocessor market

are negative option prices possible the callable u s treasury bond puzzle market prices for callable treasury bonds often imply negative values for the implicit call option the author considers a variety of possible explanations for these negative values including the treasury s track record in calling bonds optimally tax related effects tax timing options and bond liquidity none of these factors accounts for the negative values although the costs of short selling may explain why these apparent arbitrage opportunities persist over time why these implicit call values become negative in the first place remains a puzzle copyright 1992 by university of chicago press

prospect theory and the disposition effect this paper shows that prospect theory is unlikely to explain the disposition effect prospect theory predicts that the propensity to sell a stock declines as its price moves away from the purchase price in either direction trading data on the other hand show that the propensity to sell jumps at zero return but it is approximately constant over a wide range of losses and increasing or constant over a wide range of gains further the pattern of realized returns does not seem to stem from optimal after tax portfolio rebalancing a belief in mean reverting returns or investors acting on target prices

optimal portfolio choice with wash sale constraints abstract we analytically solve the portfolio choice problem in the presence of wash sale constraints in a two period model with one risky asset our results show that wash sale constraints can heavily affect portfolio choice of investors with unrealized losses the trading behavior of such investors is to a large extent driven by the desire to realize those losses either immediately by sharply decreasing the holding of assets carrying unrealized losses or indirectly by increasing such holdings in order to prepare for a decrease in a future period to earn the tax rebate payment our findings are robust to increasing the number of trading dates and introducing a second risky asset and a correlation structure

market valuation of tax timing options evidence from capital gains distributions we examine a distribution that is taxed as a capital gain rather than as a dividend since the distribution induces a realized capital gain while the price change is an unrealized gain ex day return behavior provides evidence of the value of tax timing capital gains we show that investors are compensated 7c in unrealized gains for each dollar of realized capital gains that is 1 of realized capital gains is equivalent to 93c of unrealized gains an investor with a tax rate on realized gains of 15 has an effective tax rate on unrealized capital gains of 8 6 capital gains taxes can be deferred until assets are sold this feature provides the investor who purchases a security with an option regarding the timing of the realization of capital gains and losses this option can be used to lower one s expected tax liability even if capital gains tax rates remain constant for different holding periods an investor who delays the realization of a gain effectively enjoys compound returns on the postponed taxes if capital losses are tax deductible or partially tax deductible tax timing is even more valuable since investors can follow the strategy of selling stocks with capital losses early while postponing the sale of winners recent evidence lends support to the contention that some investors respond to this tax timing option for example odean 1998 shows that u s investors are more likely to sell losers in december than other months similarly grinblatt and keloharju 2002 show that at the end of the tax year finnish investors are more likely to realize losses than gains this type of tax motivated trade seems to affect market returns as shown by poterba and weisbenner 2001 who demonstrate that end of year tax loss selling is related to return variation in the month of january

tax managed factor strategies we examine the tax efficiency of an indexing strategy and six factor tilts between june 1995 and march 2018 average value added by tax management exceeded 1 50 per year at a 10 year horizon for

the canadian tax reform and its effect on stock prices a note the effect of personal taxation on stock prices remains controversial while some researchers have found evidence of a tax effect in the stock market others have found evidence to the contrary this paper provides additional empirical evidence on the effect of the differential taxation of dividends and capital gains on stock prices by analyzing stock price changes around the 1971 canadian tax reform and its subsequent amendments in 1977 the results show that changes in the taxation of cash dividends and capital gains affected high yield and lowyield stocks listed on the toronto stock exchange tse differently section i of the paper describes the tax changes the method used to analyze the tax effect is described in section ii section iii reports the results and conclusions are presented in section iv

debt and taxes and uncertainty with a graduated personal tax schedule miller showed that there could be an equilibrium debt supply for the corporate sector as a whole in the presence of uncertainty there is also a unique debt equity ratio for each individual firm and this ratio is related to the firm s operational risk characteristics however if firms merge and spin off in response to tax incentives the identity of firms is ambiguous and only the corporate sector is a meaningful construct these arguments are developed in both discrete and continuous models that employ extensions of the arbitrage free pricing theory in his famous paper debt and taxes 1977 merton miller 11 showed that the original miller modigliani propositions on the irrelevance of capital structure were not necessarily overturned by considerations of taxation miller argued that with a broad enough span of progressivity in personal income taxation the corporate tax advantage to the issuance of debt would be offset by the disadvantage to investors of receiving ordinary income on personal account in equilibrium the differential rates of return on equity and debt would be such that the marginal investor would be indifferent between purchasing debt instruments or equity the margin would be determined by the total amount of debt issued by the corporate sector but in a competitive world it would be unaffected by the debt issued by any one firm as a consequence the total supply of corporate debt would be determined in equilibrium increasing to the point where aggregate corporate value was not enhanced by further debt financing but any individual firm would be looking at prices set at the margin and would find itself indifferent between issuing debt or equity the purpose of this article is to extend miller s argument by recognizing the differences between debt and equity when the environment is not certain we will not be concerned with what might be called corner questions i e with whether or not there is a marginal investor or an internal equilibrium to do so would obscure the basic points we have to make instead we will examine models that have internal equilibria and ordinary neoclassical marginal interpretations in related work de angelo and masulis 5 6 have also extended miller s analysis but their primary concern was with the effects of a more detailed treatment of the tax code and with the impact of bankruptcy we will deal with such matters only in passing our central concern is with the impact of uncertainty our main result is the finding that there is a relationship between the capital structure of the firm as induced by tax effects and ordinary beta measures

rational choice and erratic behaviour in this paper we show that rational choice in a stationary environment can lead to erratic behaviour when preferences depend on experience we mean by erratic behaviour choice sequences that do not converge to a long run stationary value or to any periodic pattern early investigations of the effects of experience on choice goes back to pareto see also benhabib 1979 some keynesian theories of the consumption function incorporate the effects of experience and habit formation on current levels of consumption duesenberry 1949 modigliani 1949 and brown 1952 a general model of experience dependent choice was described in day 1970 and investigated in day and kennedy 1971 while the specific issue of the existence of stable representable long run consumer demand when tastes vary endogenously has been treated by gorman 1967 pollak 1970 1976 weizsaicker 1971 mccarthy 1974 and hammond 1976 pollak gave conditions for the representability of long run choice when the equations of preference dependence are linear and utility additive hammond in a generalization of these findings provides conditions for stable representable long run choice when preferences are acyclic a condition which in essence assures convergence to a long run choice

tax induced intra year patterns in bonds yields the ratio of the yields on short term tax exempt and taxable bonds exhibits a sawtooth pattern that is consistent with the impacts of tax deferments from dates on which interest payments are received to dates on which the resulting tax payments are paid the effect of the tax deferment at turns of calendar years does not differ appreciably from the effect at the turn of any other tax quarter investors with tax payment schedules that differ from that of the investor that is indifferent between investing in taxable and tax exempt bolnds may benefit from tax related timing strategies for investing in these bonds issuers may benefit from tax related timing strategies for scheduling interest payments

managerial ability compensation and the closed end fund discount this paper shows that the existence of managerial ability combined with the labor contract prevalent in the industry implies that the closed end fund discount should exhibit many of the primary features documented in the literature we evaluate the model s ability to match the quantitative features of the data and find that it does well although there is some observed behavior that remains to be explained the role of delegated portfolio managers in financial markets has puzzled

intertemporal tax discontinuities we define an intertemporal tax discontinuity itd as a circumstance in which different tax rates are applied to gains realized at one point in time versus some other point in time we study the effects of itds on market behaviors at the time of disclosures of firm performance assuming that all investors who trade firm equities are subject to tax the results of our paper suggest that relative to an economy in which itds are absent itds may dampen trading volume and amplify price changes at the time of disclosure

optimal stock trading with personal taxes implications for prices and the abnormal january returns abstract the tax law confers upon the investor a timing option to realize capital losses and defer capital gains with the tax rate on long term gains and losses being about half the short term rate the law provides a second timing option to realize losses short term and gains long term if at all our theory and simulation over the 1962 1977 period establish that taxable investors should realize long term gains in high variance stocks and repurchase stock in order to realize potential future losses short term tax trading does not explain the small firm anomaly but predicts a seasonal pattern in trading volume which maps into a seasonal pattern in stock prices the january anomaly only if investors are irrational or ignorant of the price seasonality

a piecewise diffusion model of new product demands the bass model bm is a widely used framework in marketing for the study of new product sales growth its usefulness as a demand model has also been recognized in production inventory and capacity planning settings the bm postulates that the cumulative number of adopters of a new product in a large population approximately follows a deterministic trajectory whose growth rate is governed by two parameters that capture i an individual consumer s intrinsic interest in the product and ii a positive force of influence on other consumers from existing adopters a finite population purebirth process re formulation of the bm called the stochastic bass model sbm was proposed recently by the author in a previous paper and it was shown that if the size of the population in the sbm is taken to infinity then the sbm and the bm agree in probability in the limit thus the sbm expands the bm in the sense that for any given population size it is a well defined model in this paper we exploit this expansion and introduce a further extension of the sbm in which demands of a product in successive time periods are governed by a history dependent family of sbms one for each period with different population sizes a sampling theory for this extension which we call the piecewise diffusion model pdm is also developed we then apply the theory to a typical product example demonstrating that the pdm is a remarkably accurate and versatile framework that allows us to better understand the underlying dynamics of new product demands over time joint movement of price and advertising levels in particular is shown to have a significant influence on whether or not consumers are ready to participate in product purchase subject classifications marketing new products buyer behavior pricing probability diffusion inventory production stochastic nonstationary demand area of review manufacturing service and supply chain operations history received august 2003 revision received september 2004 accepted july 2005

allocating spending between advertising and information technology in electronic retailing this study examines coordination issues that occur in allocating spending between advertising and information technology it in electronic retailing electronic retailers run the risk of overspending on advertising to attract customers but underspending on it thus resulting in inadequate processing capacity at the firm s website in this paper we present a centralized joint marketing it model to optimally allocate spending between advertising and it and we discuss an uncoordinated case where marketing and it make suboptimal advertising and capacity decisions we show how these decisions can be coordinated either by reducing the value of a customer session or by designing an optimal processing contract between marketing and it both the coordination methods can be implemented with only local knowledge of the it function yet they generate a solution that almost matches the quality of the centralized solution we extend our basic model to consider demand uncertainty lagged advertising effects and uncertainties in the lead time to acquire it capacity with demand uncertainty electronic retailers should reduce spending on advertising and increase it capacity if there is potential for a demand upswing and the cost of it capacity is relatively low the value of a customer session should be further reduced when uncertainties exist this is required to share the risk of excess or inadequate it capacity

miller s equilibrium shareholder leverage clienteles and optimal capital structure the purpose of this paper is twofold first we examine the individual portfolio decisions when income from stocks and bonds is taxed at different rates second a rationale for the existence of risky debt in the presence of leverage related costs and differential personal income taxation is provided previous studies on capital structure with differential personal income taxation have ignored either the portfolio risk consideration and or the possibility of losing personal and corporate interest tax shields due to insufficient taxable earnings e g 8 2 3 14 13 6 7 1 9 19 20 21 23 in section i of this paper both the portfolio risk consideration and the possibility of losing personal and corporate interest tax shields are explicitly introduced this enables us to provide a rationale for the shareholder leverage clientele phenomenon within a mean variance framework we also demonstrate a non corner solution for the optimal corporate capital structure in a tax environment similar to that of miller s debt and taxes 14 in sections ii and iii of this paper miller s world is further modified to include risky debt and the attendant costs we re examine and synthesize recent studies on the theory of optimal capital structure which have appeared since the publication of debt and taxes e g 4 6 7 13 19 20

capital gains taxes and equity trading empirical evidence individual investors have an incentive to defer selling appreciated stock until it qualifies for tax favored long term capital gains treatment shackelford and verrecchia 2002 show that these incentives can affect equity trading around public disclosures this article provides some empirical support for their theory with evidence of price increases and equity constrictions around announcements of quarterly earnings and additions to the s p 500 index we find share returns rise and trading volume falls with the incremental taxes saved by deferring the sale of appreciated property the price increases however are temporary reversing in subsequent trading days the results are consistent with buyers believing the compensation to sell before long term qualification through higher prices is less costly than holding an inappropriately weighted portfolio this finding that personal capital gains taxes affect equity trading adds to a growing literature that challenges longstanding assumptions that firm value is independent of shareholders and their taxes

optimal consumption and investment with capital gains taxes this article characterizes optimal dynamic consumption and portfolio decisions in the presence of capital gains taxes and short sale restrictions the optimal decisions are a function of the investor s age initial portfolio holdings and tax basis our results capture the trade off between the diversification benefits and tax costs of trading over an investor s lifetime the incentive to rediversify the portfolio is inversely related to the size of the embedded gain and investor s age contrary to standard financial advice the optimal equity holding increases well into an investor s lifetime in our model due to the forgiveness of capital gains taxes at death taxes play an important role in the decision making process of individuals concerning their consumption and investment plans the taxation of returns on financial assets alters the benefits of saving for future consumption and thus affects the trade off between current consumption and investment moreover the ability of investors to defer the taxation of capital gains alters the relative valuation of stocks and bonds and thus affects the optimal portfolio composition of investors the deferral feature of capital gains taxes also affects the trade off investors face regarding taxes and diversification investors would like to maintain an optimally diversified portfolio over time

the value of the tax subsidy on risky debt the effect of corporate taxes on the market value of a levered firm continues to be a central issue in recent contributions in finance theory e g miller 1977 deangelo and masulis 1980 kim 1982 modigliani 1982 in these and other studies e g krause and litzenberger 1973 scott 1976 brennan and schwartz 1978 kim 1978 the relationship between market value and capital structure is established by formulating a tax subsidy function that specifies the partial effect of debt on the expected tax savings at the corporate level under the existing u s tax code a working assumption in most of these studies is that both principal and interest are tax deductible this assumption is made in the spirit of the original modigliani and miller 1963 formulation in which debt is taken to be perpetual and riskless indeed it is well known that the tax shield provided by the deduction of principal in a singleperiod framework has the same value as the tax shield from interest deductions in the case of perpetual and riskless debt under this assumption it is shown that in the absence of non debtthis paper examines the relationship between leverage and the value of the firm when non debt related tax shields are available and the corporate tax is levied as an income tax in a previous paper de angelo and masulis argue that in the presence of nondebt related tax shields the relationship between debt and firm value is concave resulting in an interior optimal capital structure when there is a tax induced differential in the cost of corporate debt their result derives from the fact that they assume the payment of debt principal and non debt related depreciation charges are deductible however the former deduction is consistent with a wealth tax while the latter is consistent only with an income tax we show that if the interest alone is deductible the debt firm value function is convex resulting in corner solutions to the capital structure problem the authors wish to thank richard castanias richard green lemma senbet and especially an anonymous referee for helpful comments and richard green and robert dammon for computational assistance

tax arbitrage and the existence of equilibrium prices for financial assets in models where both investors and securities are subject to differential taxation there may be no set of prices that rule out infinite gains to trade or tax arbitrage this paper characterizes the joint restrictions on financial asset returns and investors tax schedules that preclude tax arbitrage in the absence of short sale constraints the authors show that if there exists any configuration of marginal tax rates on investors tax schedules that rule out infinite gains to trade then no tax arbitrage prices will exist they also show that the existence of no tax arbitrage prices ensures the existence of equilibrium prices the effects of differential taxation on the equilibrium prices of financial assets have attracted much attention from financial economists in recent years otherwise identical securities that contribute to taxable income to different degrees will in general be valued differently by taxable investors as a result tax considerations have been useful in helping explain the effect of dividend yield on stock returns the effect of coupon levels and term to maturity on bond prices 2 the timing of investors portfolio transactions 3 and the observed capital structures of firms 4 while a rich set of observed behaviors can be better understood by reference to differential taxation there are well known difflculties in dealing with taxes in a general equilibrium setting to clear markets relative prices must reflect the marginal rates of substitution of all agents simultaneously when tax rates differ across investors however this condition can be impossible to achieve to illustrate consider a world of perfect certainty with two assets a tax exempt municipal bond and a taxable government bond to equate marginal rates of substitution the rate of return on the government bond rg must equal that on the municipal rm grossed up by one minus the investor s marginal tax rate ti that is rg rm 1 ti if there are investors in more than one tax bracket this condition will obviously be impossible to satisfy for all of them simultaneously both authors from graduate school of industrial administration carnegie mellon university we wish to thank scott richard steven spear and an anonymous referee for helping us sort through the issues considered here seminar participants at columbia wharton the johnson symposium on asset pricing at the university of wisconsin madison and the 1986 western finance association meeting also provided valuable comments we are also grateful for the financial support provided by the center for public policy research carnegie mellon university all errors are our own responsibility

securityholder taxes and corporate restructurings previous studies have found that positive abnormal stock returns are associated with corporate spin offs and divestitures using a simplified model of the process of investor tax trading we show that an improvement in the value of the tax timing option component of securities prices is a likely contributing factor to those abnormal returns the analysis indicates that the same phenomenon also may be part of the explanation for the generally higher returns observed for spin offs than for divestitures both when leverage is and is not present in the restructuring transactions

tax reform and ex dividend day behavior this paper investigates the effect of a major canadian tax reform on the ex dividend day behavior of companies on the toronto stock exchange the results are inconsistent with the hypothesis that price changes on ex dividend days reflect the relative taxation of dividends and capital gains for the representative investor but are consistent with the hypothesis that ex dividend day price behavior reflects short term trading activities

diffusion of innovations under supply constraints in this paper we present a canonical setting that illustrates the need for explicitly modeling interactions between manufacturing and marketing sales decisions in a firm we consider a firm that sells an innovative product with a given market potential the firm may not be able to meet demand due to capacity constraints for such firms we present a new model of demand modified from the original model of bass to capture the effect of unmet past demand on future demand we use this model to find production and sales plans that maximize profit during the lifetime of the product in a firm with a fixed production capacity we conduct an extensive numerical study to establish that the trivial myopic sales plan that sells the maximal amount possible at each time instant is not necessarily optimal we show that a heuristic build up policy in which the firm does not sell at all for a period of time and builds up enough inventory to never lose sales once it begins selling is a robust approximation to the optimal policy specializing to a lost sales setting we prove that the optimal sales plan is indeed of the build up type we explicitly characterize the optimal build up period and analytically derive the optimal initial inventory and roll out delay finally we show that the insights obtained in the fixed capacity case continue to hold when the firm is able to dynamically change capacity

dynamic asset pricing effects and incidence of realization based capital gains taxes abstract many analyses of capital gains taxation assume that realization based taxes are economically similar to accrual based taxes in equilibrium however the distinctive implications of realization taxes for asset trading through the lock in effect are associated with distinctive dynamic asset pricing effects asset prices are increased by the current realization tax to partly offset the sale disincentive that the tax would otherwise impose the resulting division of the tax burden between buyers and sellers of assets is similar to traditional public finance models of excise tax incidence in product markets

the effect of taxes and depreciation on corporate investment and financial leverage this paper provides an analysis of the effect of corporate and personal taxes on the firm s optimal investment and financing decisions under uncertainty it extends the deangelo aad masulis capital structure model by endogenizing the firm s investment decision the authors results indicate that when investment is allowed to adjust optimally the existing predictions about the relationship between investment related and debt related tax shields must be modified in particular the authors show that increases in investment related tax shields due to changes in the corporate tax code are not necessarily associated with reductions in leverage at the individual firm level in cross sectional analysis firms with higher investment related tax shields normalized by expected earnings need not have lower debt related tax shields normalized by expected earnings unless all firms utilize the same production technology differences in production technologies across firms may thus explain why the empirical results of recent cross sectional studies have not conformed to the predictions of deangelo and masulis

technology and demand forecasting for carbon capture and storage technology in south korea among the various alternatives available to reduce greenhouse gas ghg emissions carbon capture and storage ccs is considered to be a prospective technology that could both improve economic growth and meet ghg emission reduction targets despite the importance of ccs however studies of technology and demand forecasting for ccs are scarce this study bridges this gap in the body of knowledge on this topic by forecasting ccs technology and demand based on an integrated model for technology forecasting a logistic model and patent network analysis are used to compare the competitiveness of ccs technology for selected countries for demand forecasting a competition diffusion model is adopted to consider competition among renewable energies and forecast demand the results show that the number of patent applications for ccs technology will increase to 16 156 worldwide and to 4 790 in korea by 2025 we also find that the united states has the most competitive ccs technology followed by korea and france moreover about 5 million tco2e of ghg will be reduced by 2040 if ccs technology is adopted in korea after 2020

the optimal trading and pricing of securities with asymmetric capital gains taxes and transaction costs this article explores the optimal trading and pricing of taxable securities with asymmetric capital gains taxes and transaction costs in the long term region investors realize all gains below some critical cutoff level which we derive analytically in the short term region investors defer all gains and depending upon the time remaining in the short term region may also defer small losses contrary to common intuition deferral of short term losses can be optimal even without transaction costs the value of tax timing is considerably bigger under the optimal trading strategy than under alternative strategies previously analyzed the impact of offset rules is also explored article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

a reexamination of the value of tax options this article reexamines the value of tax trading when the tax rate on long term realizations is less than that on short term realizations in particular the value of the option to realize long term capital gains and repurchase stock in order to increase one s tax basis and restart the option to realizefuture losses short term is examined empirically our estimate of the incremental value of restarting which is based on the results of simulations of several alternative tax trading policies over a large number of independent return sequences is generally much smaller than that reported by constantinides 1984 the incremental value of restarting is shown to depend critically on the particular pattern of realized returns and the assumed tax treatment of unrealized capital gains at the end of the simulation period the effects of stockprice volatility transaction costs portfolio offset rules and realization cutoff levels on the value of tax trading are also investigated

a non linear model of interdependent consumer behaviour abstract interdependent consumer behaviour in r 2 is studied in this paper while for various parameter constellations the feigenbaum scenario well known from r 1 is observed there are quite remarkable reversals of a bifurcation for other values of the system s parameters

keeping up with the joneses abstract the paper is concerned with the dynamics of a two players status game there is a nash equilibrium in status seeking activities and one can show that chaotic adjustment pathe are possible for particular parameter constellations

volume for winners and losers taxation and other motives for stock trading capital gains taxes create incentives to trade our major finding is that turnover is higher for winners stocks the prices of which have increased than for losers which is not consistent with the tax prediction however the turnover in december and january is evidence of tax motivated trading there is a relatively high turnover for losers in december and for winners in january we conclude that taxes influence turnover but other motives for trading are more important we were unable to find evidence that changing the length of the holding period required to qualify for long term capital gains treatment affected turnover investors responding to the tax incentives in the capital gains laws should produce predictable patterns in the volume of trading in a stock but not necessarily in its price this study uses past price patterns as a proxy to measure the incentives to sell or avoid selling a stock and observes trading volumes to estimate the extent to which investors respond to these incentives past price patterns may influence trading volumes for other non tax related reasons as well these are also considered we find that past prices influence current incentives to trade through both tax and non tax motives winners tend to have higher abnormal volumes than losers this would be expected if non tax related motives were predominant however the influence of tax related motives on trading volume is shown by seasonal variations in the relationship between past price changes and turnover as predicted by tax induced trading theories the volume of losers is higher than normal in december and the volume of winners is higher than normal in january we found no evidence that trading volume was affected by changes in the length of the holding period required to qualify for long term capital gains investors reactions to capital gains taxes are important for several reasons first a comprehensive understanding of investor behavior would include both price and volume understanding the relationship between taxes and volume is a fruitful and convenient method of contributing to this subject the resource allocation consequences of capital gains taxes are controversial in part because

the capital structure puzzle revisited corporate finance researchers have long been puzzled by low corporate debt ratios given debt s corporate tax advantage this article recognizes that firm value typically reflects a growing stream of earnings while current debt reflects a nongrowing stream of interest payments debt to value is therefore a distorted measure of corporate tax shielding even with very small debt related costs this may explain the observed magnitude and cross sectional variation of debt ratios since this variation may be independent of tax shielding debt ratios provide an inappropriate framework for empirically examining the trade off theory of capital structure article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

taxes and the pricing of stock index futures stock index futures prices are generally below the level predicted by simple arbitrage models this paper suggests that the discrepancy between the actual and predicted prices is caused by taxes capital gains and losses are not taxed until they are realized as constantinides demonstrates in a recent paper this gives stockholders a valuable timing option if the stock price drops the investor can pass part of the loss on to the government by selling the stock on the other hand if the stock price rises the investor can postpone the tax by not realizing the gain since this option is not available to stock index futures traders the futures prices will be lower than standard no tax models predict on 24 february 1982 the kansas city board of trade began trading futures contracts on the value line average stock index during the next two months both the chicago mercantile exchange and the new york futures exchange also initiated trading in stock index futures although these contracts are actively traded their prices have puzzled both practitioners and academics the observed

a reply to new product diffusion decisions under supply constraints in our prior work on product diffusions in presence of a capacity constraint we postulated that a firm operating in such an environment should always attempt to fulfill as much of the present demand as is possible with the capacity constraint in other words the firm would never have demand backlogged while accumulating inventory in this note we derive a sufficient condition for the optimality of such fulfillment policy this paper was accepted by candace a yano operations management

planning operations before market launch for balancing time to market and risks in pharmaceutical supply chains abstract shorter product life cycles and the resulting increase in new product introductions boost the importance of product launch operations in the pharmaceutical sector product launch operations are of particular importance as companies seek to reduce time to market to better exploit patent protection large volumes of product need to be ready to fill the downstream supply chain immediately at market launch building up the required inventory is however connected to several risks in addition to the risk associated with the lack of demand information for a new product there are several risks unique to the pharmaceutical sector after approval by central authorities such as the fda or ema a new drug still needs to receive market authorization which is in most cases granted by some local authorities in europe for example by more than 30 national and regional bodies the duration of these different market authorization processes as well as their outcomes e g price and reimbursement levels requirements of label or leaflet changes are highly uncertain we develop a two stage stochastic model to support market launch preparation decisions it trades off the costs of accepting these risks for example by risk packaging before authorization against the lost revenue caused by risk averse operations the model is applied to a case based on an empirical study our approach results in significant savings compared to current practices we hereby provide an example of how quantitative methodology can provide valuable decision support for product launch operations even when complex regulatory affairs need to be considered

the saga of the first stock index futures contract benchmarks models and learning in the presence of imperfect or perturbed benchmarks pricing based on relative valuation or arbitrage can be affected adversely this study highlights persistent pricing irregularities in the kansas city value line kcvl stock index futures market this contract is especially interesting because the underlying benchmark underwent a midstream change in definition from a complex equally weighted geometric index to an equally weighted arithmetic index empirical analysis reveals that during a four year period the market displayed herd like behavior and priced the kcvl geometric contract using the simple but wrong cost of carry benchmark model a dramatic change occurs around the publication of the eytan harpaz 1986 model when the market turns efficient from the perspective of this new model the market appears to have succumbed initially to a bad information cascade primarily because arbitrage was difficult to understand and carry out under complex benchmarking the evidence provides empirical extension to the observational social learning paradigms of simon 1955 banerjee 1992 and bikhchandani hirshleifer and welch 1992 that lead to behavioral herding and information cascades

spindles and coexisting attractors in a dynamic model of interdependent consumer behavior abstract this paper studies interdependent consumer behavior in r 2 the model of interaction is such that an individual s demand pattern is not only influenced by the own past consumption decisions but also by those of another person to whom this individual is related in one way or another the paper concentrates on studying hopf bifurcations as well as the coexistence of several attractors more precisely the coexistence of a closed invariant curve with at least one other locally stable attractor which is a cycle of relatively low periodicity 3 15 a reversed hopf bifurcation exists taking the complicated interactions back into a unique globally stable fixed point

new product diffusion decisions under supply constraints two recent papers on managing new product diffusion decisions under production constraints reach somewhat contradictory conclusions ho et al ho t h s savin c terwiesch 2002 managing demand and sales dynamics in new product diffusion under supply constraint management sci 48 2 187 206 show that it is never optimal to refuse to satisfy any customers when the firm has inventory of the product on the other hand in a very similar model kumar and swaminathan kumar s j m swaminathan 2003 diffusion of innovations under supply constraints oper res 51 6 866 879 show that production constraints may in fact lead a firm to reject customers orders even when the firm has the inventory to satisfy them to slow down new product diffusion we provide a counterexample to the results of ho et al 2002 and show that in their and kumar and swaminathan s 2003 models it may be optimal to deny customers a product in inventory we provide a generalization of both models that includes the ability to dynamically price the product and also allows capacity and production costs to vary over time we show that the unintuitive but optimal behavior of denying customers products that are in inventory disappears when the firm can dynamically set prices this paper was accepted by candace a yano operations and supply chain management

tax clienteles and optimal capital structure under uncertainty this article demonstrates that investors heterogeneous tax status implies that they value bonds differently at the margin due to asymmetric personal taxes high risk bonds generate a higher amount of taxable income than low risk bonds and are therefore held by investors in low tax brackets in such a setting firms can increase their value by choosing a capital structure that attracts a particular bondholder clientele the author analyzes how bondholder clienteles change as the uncertainty about a bond s final payoff is resolved over time and shows how tax clientele effects influence firms capital structure decisions copyright 1990 by the university of chicago

the interaction of corporate and government financing in general equilibrium this article develops a general equilibrium model for analyzing the in teraction of corporate financial and production decisions consumers behavior and government financing the authors use the model to inv estigate how changes in income tax rates and government debt policy a ffect production interest rates and consumer welfare they also sho w how changes in the different tax rates affect other tax rates in ge neral equilibrium copyright 1988 by the university of chicago