product and price competition in a duopoly this paper examines the role of consumer preferences costs and price competition in determining the competitive product strategy of a firm in the model studied here there are two identical firms competing on product quality and price they face consumers who prefer a higher quality product to a lower quality product but differ in how much they are willing to pay for quality the consumers can also choose a substitute if they don t like the product price offerings of the two firms for the firms a higher quality product costs more to produce than a lower quality product the paper shows that the equilibrium strategy for each firm should be to differentiate its product from its competitor with the firm choosing the higher quality choosing the higher margin as well this differentiation however is not efficient that is it is possible to choose two other products and offer them at prices that cover their marginal cost and still satisfy consumers needs better in the aggregate a monopolist by contrast would differentiate his product line efficiently this suggests that cannibalization has different effects on product strategy than competition the paper also shows that if one firm enters the market first then it can defend itself from later entrants and gain a first mover advantage by preempting the most desirable product position

mutual funds ownership and firm performance evidence from china mutual funds have emerged and rapidly developed since 2000 in china this study tests empirically the impact of mutual funds ownership on firm performance in china using a large sample for the period of 2001 2005 we find that equity ownership by mutual funds has a positive effect on firm performance the result is robust to several measures of firm performance and various estimations our finding supports recent regulatory efforts in china to promote mutual funds as a corporate governance mechanism and suggests that pooling diffuse minority interests of individual shareholders who are prone to free rider problems via mutual funds is beneficial

internal pricing and cost allocation in a model of multiproduct competition with finite capacity increments internal prices are used in practice to allocate central resources to a firms profit centers the fixed costs of capacity acquisitions are often included in these prices we examine the interaction between capacity acquisition and competition when capacity is available in fixed increments we find predictably that if the increments are small unit capacity cost is a good approximation for the internal price and if the increments are large the internal price is zero however the relationship between the internal price and the capacity increment for intermediate cases is quite irregular to the extent that it is not possible to approximate the internal price with accounting data the analysis also suggests that full cost allocation overcharges for the opportunity cost of capacity furthermore the right internal price does not act either as a way of recovering fixed costs or as a proxy for externalities such as congestion costs the conclusions are not materially altered in the case where variable costs increase at the margin and where these costs rather than hard capacity constraints are the reason to restrict output

quality and competition in recent years the practitioner literature in operations management has seen a dramatic surge in articles on quality management it reflects the increased emphasis on quality by u s firms which has been attributed largely to increased competition faced by them the question of how quality is influenced by competitive intensity however has not received much attention either in the practitioner or the academic research literatures the notion of competitive intensity itself has not been defined precisely in this paper we develop formal models of oligopolistic competition to investigate whether equilibrium levels of quality increase as competition intensifies we consider three different competitive settings i asymmetric duopolistic competition where the dominant firm s intrinsic demand potential decreases ii a symmetric duopoly where the firms are precluded from cooperating in setting quality levels and iii symmetric oligopolistic competition where the number of firms increases we find that the relation between equilibrium quality and competitive intensity depends on what is understood by increased competition and in addition the relation is contingent on the values of parameters describing the cost and demand structure for the industry

a utility consistent combined discrete choice and count data model assessing recreational use losses due to natural resource damage abstract a two stage budgeting approach can often be taken when analyzing consumer choice situations in this paper we examine the particular situation where a consumer makes purchases of a discrete commodity of which there are a number of brands in the first stage the consumer decides how many purchases to make in the second stage the consumer decides how to allocate these purchases across brands our econometric approach to this type of situation uses a utility consistent combined discrete choice and count data model the second stage which is specified as a multinomial choice model produces a price index for the commodity which is used to estimate the first stage which is specified as a count data model we apply the model to recreational demand behavior in alaska in order to estimate the welfare losses suffered by recreational users due to the exxon valdez oil spill these results may provide useful input to government agencies attempting to estimate the appropriate level of taxes fines or regulations for deterring damage to the environment

on the internationalization of corporate boards the case of nordic firms this study investigates the internationalization of corporate boards using a sample of 346 non financial listed nordic firms during 2001 2008 given a high level of international activity these firms have surprisingly few foreign directors the picture of international expertise changes considerably however if we also count the international experience of national directors the percentage of foreign directors is related primarily to financial internationalization rather than foreign sales and thus presumably to the monitoring rather than advisory functions the international experience of the nationals covaries with foreign sales and increases with the share of foreign directors thus both sources of international expertise should be considered when analyzing board internationalization

financial distress outside directors and corporate tax aggressiveness spanning the global financial crisis an empirical analysis abstract we examine financial distress and tax aggressiveness spanning the global financial crisis gfc of 2008 and the impact of the interaction between board independence and firm specific financial distress on tax aggressiveness our regression results show that both financial distress and the gfc are positively associated with tax aggressiveness more importantly we find that the positive association between financial distress and tax aggressiveness is magnified by the gfc we also observe that the interaction between board independence and financial distress is positively associated with tax aggressiveness our results are robust to multiple measures of financial distress and tax aggressiveness

ownership concentration and firm performance in emerging markets a meta analysis the literature concerned with relations between ownership concentration and corporate performance in emerging markets presents conflicting theoretical predications and inconclusive empirical results we use meta analytical techniques to integrate the diverse empirical findings and investigate factors contribute to the inconsistencies in the empirical evidence using 419 correlations collected from 42 primary studies of listed corporations in 18 emerging markets heterogeneity tests show that only a small proportion of the variation in reported ownership concentration performance relations can be attributed to sampling error our meta regressions reveal how population differences researchers modeling choices and inadequate treatment of endogeneity explain a large portion of the true heterogeneity after adjusting for these effects we find ownership concentration has negative relation with firm performance across countries our results emphasize the importance of model specification and methods of addressing endogeneity and support further comparative study of the ownership concentration corporate performance relation between countries with seemingly similar corporate governance environments

optimal strategies for general price quality decision models of new products with learning production costs abstract the question of product quality permeates every level of business and is becoming crucial for the survival of modern manufacturing firms in automotive and high tech industries in this paper we deal with the optimal price and quality policies for the introduction of a new product on the supply side the firm wants to determine the unit price and quality level over time given that unit cost declines along a learning curve and increases if quality is made greater on the demand side dynamic demand is related to price and quality as well as to cumulative sales which represent diffusion and saturation effects we will model this problem in a general framework that includes several previous results as special cases by applying the maximum principle we will derive the optimal price and quality policies and discover the interactions between these two major strategic marketing instruments and the diffusion process several fundamental theoretical results will be established for the model under certain specified conditions higher prices do imply higher quality and under other conditions the optimal price declines over time while the product quality improves to illustrate these results the theoretical results are applied to two specific cases the first one is a simple nonseparable demand growth function in price and quality the other is a separable demand function of price and quality

management ownership and market valuation an empirical analysis we investigate the relationship between management ownership and market valuation of the firm as measured by tobin s q in a 1980 cross section of 371 fortune 500 firms we find evidence of a significant nonmonotonic relationship tobin s q first increases then declines and finally rises slightly as ownership by the board of directors rises for older firms there is evidence that q is lower when the firm is run by a member of the founding family than when it is run by an officer unrelated to the founder

stakeholder welfare and firm value abstract using data from the independent social choice investment advisory firm kinder lydenberg domini kld we construct a stakeholder welfare score measuring the extent to which firms meet the expectation of their non shareholder stakeholders such as employees customers communities and environment and find it to be associated with positive valuation effects an increase of 1 in the stakeholder welfare score leads to an increase of 0 587 in tobin s q furthermore the valuation effects vary across stakeholders and the aforementioned positive effects are driven by firms performance on employee relations and environmental issues these results suggest that stakeholder welfare in particular employee welfare and environmental performance represents intangibles such as reputation or human capital crucial for shareholder value creation rather than private benefits managers pursue for their own social or economic needs

partial backlogging inventory lot size models for deteriorating items with fluctuating demand under inflation abstract in this paper the traditional inventory lot size model is extended to allow not only for general partial backlogging rate but also for inflation the assumptions of equal cycle length and constant shortage length imposed in the model developed by moon et al moon i giri b c ko b 2005 economic order quantity models for ameliorating deteriorating items under inflation and time discounting european journal of operational research 162 3 773 785 are also relaxed for any given number of replenishment cycles the existence of a unique optimal replenishment schedule is proved and further the convexity of the total cost function of the inventory system in the number of replenishments is established the theoretical results here amend those in yang et al yang h l teng j t chern m s 2001 deterministic inventory lot size models under inflation with shortages and deterioration for fluctuating demand naval research logistics 48 2 144 158 and provide the solution to those two counterexamples by skouri and papachristos skouri k papachristos s 2002 note on deterministic inventory lot size models under inflation with shortages and deterioration for fluctuating demand by yang et al naval research logistics 49 5 527 529 finally we propose an algorithm to find the solution and obtain some managerial results by using sensitivity analyses

entry strategies for multinational enterprises and host countries abstract a multinational enterprise mne has a number of investment strategies to enter into a foreign market such as foreign direct investment fdi joint venture jv exclusive licensing el and others in contrast a host government also has the choice to introduce a suitable entry strategy into its local market with the objective of maximizing its tax revenue or national social welfare in this paper we explore the optimal strategies for not only a mne but also a host country

optimal price and advertising policy for a convenience goods retailer convenience goods are bought without much consideration or effort on the part of the consumer buyers don t try to get the best bargain when purchasing individual convenience items instead they adapt their store choice habits so that they can expect on average good value for money in the long run store choice is governed by aggregate information which is received on the price levels of stores this is embodied in store price images a store price image is defined in the subsequent paper as a perceived difference between the store s price level and a reference level that consumers expect of stores about which they have no particular information store price images are learnt adaptively over time we propose a theoretical model of store price image adaptation and a two stage sales response model according to the latter a store s price image and advertising determine the number of customers attracted per period sales per visit however depend only on the prices actually observed in the store for this sales model we have studied the optimal price and advertising policy making simple assumptions of cost our main interest is the interaction between optimal advertising and price image it turns out that image improvement is achieved mainly through pricing increased advertising follows only after the price image has been improved therefore as long as the price image is poor relative to some optimal equilibrium level a larger portion of the marketing budget should be allocated to lower prices rather than to advertising in phases where the price image declines towards the equilibrium however heavier advertising is profitable

competitive price and quality under asymmetric information we present an analysis of equilibrium in markets with asymmetrically informed consumers some consumers know both price and quality of all sellers whereas others know neither but may search among sellers the equilibrium correlation between price and quality generally increases with the level of information in the market and can be negative when this level is sufficiently small a meta analysis of the available empirical studies strongly supports the model s predictions

do esg controversies matter for firm value evidence from international data the aim of this paper is to investigate the relationship between environmental social and governance esg controversies and firm market value we use a unique dataset of more than 4000 firms from 58 countries during 2002 2011 primary analysis surprisingly shows that esg controversies are associated with greater firm value however when interacted with the corporate social performance csp score esg controversies are found to have no direct effect on firm value while the interaction appears to be highly and significantly positive building on this evidence we attempt to explore the channels through which csp may enhance market value conducting sample split analysis indicates that higher csp score has an impact on market value only for high attention firms those firms which are larger perform better located in countries with greater press freedom more searched on the internet more followed by analysts and have an improved corporate social reputation thus our findings provide new insights on the role of firm visibility through which firms can profit from their csp

mutual monitoring and corporate governance abstract mutual monitoring in a well structured authority system can mitigate the agency problem i empirically examine whether the number two executive in a firm if given authority incentive and channels for communication and influence is able to monitor and constrain the potentially self interested ceo i find strong evidence that 1 measures of the presence and extent of mutual monitoring from the no 2 executive are positively related to future firm value tobin s q 2 the beneficial effect is more pronounced for firms with stronger incentives for the no 2 to monitor and with higher information asymmetry between the boards and the ceos and 3 mutual monitoring is a substitute for other governance mechanisms the results suggest that mutual monitoring provides important checks and balances on ceo power

what should you do when your competitors send in the clones this paper develops a model to address an important problem facing a manufacturer of a durable product that is how can it plan its new product introductions to minimize the obsolescence of the old product preserve its market for the new product and keep copycat products at bay we analyze these issues by developing a two period model in which a firm sells an old product in period 1 and a new product in period 2 we consider various new product introduction strategies such as product replacement line extension and upgrading we find that the optimal response to a threat of competitive clones is to increase the level of product innovation this increase in innovation coupled with the entry of a competitive product implies that the incumbent firm has less of an incentive to leapfrog the old product or shelve the new product

capacity allocation for dynamic process improvement with quality and demand considerations management of process improvement activities is an essential part of the manufacturing strategy of a firm to remain globally competitive in the long run this paper considers a manufacturing environment where process improvement activities require use of the productive capacity of the firm in addition to other investments thus the firm must allocate its productive capacity between production activities and improvement activities the output of production activities is used to meet customer demand process improvement activities improve the quality of the output which in turn leads to lower quality related costs both internal and external and possibly lower per unit production cost it is assumed that the demand function is downward sloping and that revenue is a concave function of output a continuous time finite horizon profit maximization resource allocation model is developed to find an optimal time path for process improvement activities and production activities computational results are provided to study the effect of various problem parameters on the optimal decisions

an analysis of the dynamic price quality relationship abstract in this paper we develop a dynamic model in which demand depends on both price and quality the objective function maximizes the profit and the salvage value of the firm in part quality can be increased by investing into development processes and the value of the accumulated quality knowledge is incorporated into the model it is pointed out that this salvage value may have large impact on the solution and fundamentally may influence the dynamics of the quality improvement process the quality dynamics may have both increasing and decreasing impact on price and besides known factors the influence of the hamiltonian is identified we can observe also that improving operational efficiency softens price increase while quality increases

founders heirs and corporate opacity in the united states abstract we argue that information about firm activities can vary substantially in the presence of founder or heir ownership thereby influencing the risks borne by minority investors we explore two hypotheses with regard to these controlling shareholders and corporate transparency focusing on their role as monitor in place and their potential to exploit firm opacity to accrue private benefits of control to test these notions we create an opacity index that ranks the relative transparency of the two thousand largest industrial us firms and find founder and heir ownership in 22 and 25 of these firms respectively our analysis indicates that in large publicly traded companies both founder and heir firms are significantly more opaque than diffuse shareholder firms we also find that founder and heir controlled firms exhibit a negative relation to performance in all but the most transparent firms surprisingly additional tests reveal that concerns about divergences in ownership versus control management type dual class shares and board influence appear to be substantially less important than corporate opacity in explaining the performance impacts of founder and heir control finally we decompose corporate opacity into disclosure and market scrutiny components finding that the disclosure quality component appears to be of greater importance to investors however irrespective of whether these controlling shareholders create or stay in the firm because of corporate opacity our analysis suggests that founders and heirs in large publicly traded firms exploit opacity to extract private benefits at the expense of minority investors

optimal incentive contracts in the presence of career concerns theory and evidence this paper studies optimal incentive contracts when workers have career concerns concerns about the effects of current performance on future compensation we show that the optimal compensation contract optimizes total incentives the combination of the implicit incentives from career concerns and the explicit incentives from the compensation contract thus the explicit incentives from the optimal compensation contract should be strongest for workers close to retirement because career concerns are weakest for these workers we find empirical support for this prediction in the relation between chief executive compensation and stock market performance

payout taxes and the allocation of investment when corporate payout is taxed internal equity retained earnings is cheaper than external equity share issues if there are no perfect substitutes for equity finance payout taxes may therefore have an effect on the investment of firms high taxes will favor investment by firms who can finance internally using an international panel with many changes in payout taxes we show that this prediction holds well payout taxes have a large impact on the dynamics of corporate investment and growth investment is locked in in profitable firms when payout is heavily taxed thus apart from any level effects payout taxes change the allocation of capital

endogeneity and the dynamics of internal corporate governance abstract we use a well developed dynamic panel generalized method of moments gmm estimator to alleviate endogeneity concerns in two aspects of corporate governance research the effect of board structure on firm performance and the determinants of board structure the estimator incorporates the dynamic nature of internal governance choices to provide valid and powerful instruments that address unobserved heterogeneity and simultaneity we re examine the relation between board structure and performance using the gmm estimator in a panel of 6 000 firms over a period from 1991 to 2003 and find no causal relation between board structure and current firm performance we illustrate why other commonly used estimators that ignore the dynamic relationship between current governance and past firm performance may be biased we discuss where it may be appropriate to consider the dynamic panel gmm estimator in corporate governance research as well as caveats to its use

timing and quality decisions for entrepreneurial product development abstract an entrepreneur is developing a new product and each period must decide whether to enter the market or to continue development we formulate a model of this decision for ventures facing diminishing returns to product quality and for which funding availability product development success and market competition growth are uncertain we characterize the profit maximizing time to stop product development and enter the market and then show how this stopping time is affected by changes in the business environment by further focussing our modeling assumptions we are able to translate our time based criteria into product quality terms we propose that management set a target quality level that the product must meet in order for the venture to maximize profit we also demonstrate that management should decrease this target and hence the quality of the final product over time and adjust it to respond to changes in the business context

understanding the determinants of managerial ownership and the link between ownership and performance comment abstract himmelberg et al j financial econom 53 1999 353 384 argue that fixed effects estimators should be used in examination of the relationship between managerial ownership and firm performance i show that managerial ownership while substantially different across firms typically changes slowly from year to year within a company with rational managers maximising long term utility small one year changes in ownership are not likely to reflect notable changes in incentives that would lead to substantive within year changes in performance by relying on within variation fixed effects estimators may not detect an effect of ownership on performance even if one exists

average q marginal q and the relation between ownership and performance abstract using average performance measures as the literature does to investigate the relation between ownership structure and performance suffers from severe drawbacks we propose a marginal tobin s q and argue for its superiority

dynamic optimal control models in advertising recent developments this paper presents a review of recent developments that have taken place in the area of dynamic optimal control models in advertising subsequent to the comprehensive survey of the literature by sethi in 1977 the basic problem underlying these models is that of determining optimal advertising expenditures and possibly other variables of interest over time for a firm or a group of competing firms under consideration this optimization is done subject to some dynamics that define how these variables translate into sales and in turn into profits the purpose of this update is twofold on the one hand new contributions in the areas already treated in the earlier survey are reviewed on the other hand new trends in the advertising literature since 1977 such as quality as an additional marketing instrument cumulative sales models pulsing advertising and advertising as a part of corporate models of the firm are discussed the models covered in this update are organized under six headings models with ca

analyzing structure of two echelon closed loop supply chain for pricing quality and recycling management abstract this paper analyzes the effects of recycling and product quality level on pricing decision in a two echelon closed loop supply chain clsc where demand is sensitive with price and quality level of the product under stackelberg game setting this paper considers three possible collection activities of used product for recycling viz retailer led collection manufacturer led collection and third party led collection it is found that third party s involvement in used product collection activity is always disadvantageous in this proposed model cost parameters of the reverse channel play an important role in determining best channel structure quality level and price of the product directly vary with recycling a threshold of collection effort determines which party between manufacturer and retailer can provide the best quality product at least price to resolve channel conflict and to distribute surplus profit the concepts of sub game perfect equilibrium and alternative offer bargaining strategy are used the analysis reveals that the subgame perfect equilibrium retail price cuts out channel conflict and depicts particular profit split irrespective of the offering party the proposed model is also justified by illustrating numerical examples

board openness during an economic crisis does a board with greater gender diversity make better investment decisions drawing on austrian economic cycle theory and work groups theory we argue that such board openness will help male board members to overcome gender biases discrimination and conflicts integrate different perspectives under the economic cycle and crisis and foster an environment in which better decisions are made the results of an empirical study of 14 609 firm quarter observations from 1 555 listed firms in china between 2007 and 2009 strongly support our arguments we find that a chinese board is more likely to accept female directorship during an economic crisis than during an economic prosperity stage boards with greater gender diversity are more likely to make tough counter cyclical investments to improve firm performance during a crisis our study enriches the board decision making literature by exploring the impacts of board gender diversity on firm performance within the context of an economic crisis the results of our study also carry significant managerial implications for overcoming gender stereotypes biases and prejudices on a board

the dynamic pricing of next generation consumer durables learning curve effects aspects of consumer demand models e g reservation price distributions intertemporal utility maximizing behavior and competitive activity are reasons which have been offered to explain why prices of new durables decline over time this paper presents an alternative rationale based on the buying behavior for products with overlapping replacement cycles i e next generation products a model for consumer sales of a new durable is developed by incorporating the replacement behavior of a previous generation product pricing strategies for two product generations are investigated analytically and with numerical methods results indicate that durable replacement behavior leads to a wider set of optimal pricing strategies than previously obtained several empirical illustrations of industry pricing practices for successive product generations are also shown to be consistent with the theoretical results finally various areas for future research are outlined

green supply chain performance with cost learning and operational inefficiency effects environmental issues are receiving significant attention from the public accelerating the development of green supply chain in operations management this study focuses on the green supply chain performance in a single manufacturer retailer setup in which the manufacturer determines energy efficiency level and wholesale price while the retailer decides on sales price the unit production cost is jointly affected by cost learning and operational inefficiency effects open loop feedback and myopic equilibria are subsequently derived and the corresponding supply chain performance and profit distribution are analyzed the main results show that forward looking behavior is preferred to myopic one for channel members feedback equilibrium is beneficial to the manufacturer but is harmful to the retailer the supply chain efficiencies in forward looking and myopic situations are lower than the static supply chain efficiency which results from cost learning and operational inefficiency effects as well as non price variable the manufacturer and the retailer extract more profits under certain conditions i e high cost learning effect large energy efficiency effectiveness low operational inefficiency effect or discount rate however the corresponding supply chain efficiencies decrease and the manufacturer s profit proportions are less than 2 3 investigation of supply chain performance with competition from multiple retailers implies that the effects of system parameters on supply chain performance keep the same directions of single manufacturer retailer setup while competition improves supply chain efficiency and manufacturer s profit proportion this work contributes in involving cost learning and operational inefficiency effects simultaneously in a dynamic environment to explore supply chain performance

from the editors endogeneity in international business research this essay builds on the exposition by thomas et al and focuses on analyzing cause and effect in international business research we attempt to explain how endogeneity problems occur and why they are so prevalent in international business research in a non technical fashion we then discuss the importance of explicitly identifying how the chosen research design best approximates a randomized controlled experiment finally we provide some guidelines on achieving this goal and emphasize the practices that seem most relevant to jibs reviewers in evaluating high quality international business research

country level institutions firm value and the role of corporate social responsibility initiatives drawing on transaction cost theories and the resource based view of a firm we posit that the value of corporate social responsibility csr initiatives is greater in countries where an absence of market supporting institutions increases transaction costs and limits access to resources using a large sample of 11 672 firm year observations representing 2445 unique firms from 53 countries during 2003 2010 and controlling for firm level unobservable heterogeneity we find supportive evidence that csr is more positively related to firm value in countries with weaker market institutions we also provide evidence on the channels through which csr initiatives reduce transaction costs we find that csr is associated with improved access to financing in countries with weaker equity and credit markets greater investment and lower default risk in countries with more limited business freedom and longer trade credit period and higher future sales growth in countries with weaker legal institutions our findings provide new insights on non market mechanisms such as csr through which firms can compensate for institutional voids

structural models and endogeneity in corporate finance the link between managerial ownership and corporate performance this paper presents a parsimonious structural model that isolates primary economic determinants of the level and dispersion of managerial ownership firm scale and performance and the empirical associations among them in particular variation across firms and through time of estimated productivity parameters for physical assets and managerial input and corresponding variation in optimal compensation contract and firm size combine to deliver the well known hump shaped relation between tobin s q and managerial ownership to assess the effectiveness of standard econometric approaches to the endogeneity problem we apply those remedies to panel data generated from the model the unfortunate conclusion is that at least in the ownership performance context proxy variables fixed effects and instrumental variables do not generally provide reliable solutions to simultaneity bias

assessing the value of museums with a combined discrete choice count data model this article assesses the value of dutch museums using information about destination choice as well as about the number of trips undertaken by an actor destination choice is analysed by means of a mixed logit model and a count data model is used to explain trip generation we use a utility consistent framework in which the discrete choice model for destination choice is linked to an indirect utility function the results are used to compute the compensating variation of particular museums and of the total group of museums in the sample

are ceos really paid like bureaucrats a common view is that there is little correlation between firm performance and ceo pay using a new fifteen year panel data set of ceos in the largest publicly traded u s companies we document a strong relationship between firm performance and ceo compensation this relationship is generated almost entirely by changes in the value of ceo holdings of stock and stock options in addition we show that both the level of ceo compensation and the sensitivity of compensation to firm performance have risen dramatically since 1980 largely because of increases in stock option grants

optimal advertising policies for diffusion models of new product innovation in monopolistic situations this paper deals with the determination of optimal advertising strategies for new product diffusion models we consider the introduction of a new consumer durable in a monopolistic market and the evolution of sales is modelled by a flexible diffusion model repeat sales and possible entry of rivals are disregarded but we allow for discounting of future revenue streams and cost learning curve using standard methods of optimal control theory we characterize qualitatively the structure of an optimal advertising strategy for different versions of the diffusion model

the impact of competitive entry in a developing market upon dynamic pricing strategies this paper analyzes dynamic pricing strategies for new durable goods in a two period context the first period is characterized as a monopoly market structure for a new product having dynamic demand the second period begins when a new firm enters the market and thereby changes the market structure to a duopolistic one we begin by analyzing the pricing strategies of three types of monopolists nonmyopic myopic and surprised a nonmyopic monopolist is a first entrant who perfectly predicts the competitive entry a myopic monopolist totally discounts the duopolistic period and a surprised monopolist is a first entrant who has the longer time horizon of the nonmyopic monopolist but who does not foresee the competitive entry our results indicate that the nature of these pricing strategies may be quite different it is optimal for the nonmyopic firm to price its product at a higher level than the myopic monopolist additional results indicate under what circumstances the surprised monopolist will p

has new york become less competitive than london in global markets evaluating foreign listing choices over time abstract we study the determinants and consequences of cross listings on the new york and london stock exchanges from 1990 to 2005 this investigation enables us to evaluate the relative benefits of new york and london exchange listings and to assess whether these relative benefits have changed over time perhaps as a result of the passage of the sarbanes oxley act in 2002 we find that cross listings have been falling on us exchanges as well as on the main market in london this decline in cross listings is explained by changes in firm characteristics instead of by changes in the benefits of cross listing we show that after controlling for firm characteristics there is no deficit in cross listing counts on us exchanges related to sox investigating the valuation differential between listed and non listed firms the cross listing premium from 1990 to 2005 we find that there is a significant premium for us exchange listings every year that the premium has not fallen significantly in recent years and that it persists when allowing for time invariant unobservable firm characteristics in contrast no premium exists for listings on london s main market in any year firms increase their capital raising activities at home and abroad following a cross listing on a major us exchange but not following a cross listing in london our evidence is consistent with the theory that an exchange listing in new york has unique governance benefits for foreign firms

optimal pricing strategies for new products in dynamic oligopolies this paper deals with the determination of optimal pricing policies for firms in oligopolistic markets the problem is studied as a differential game and optimal pricing policies are established as nash open loop controls cost learning effects are assumed such that unit costs are decreasing with cumulative output discounting of future profits is also taken into consideration initially the problem is addressed in a general framework and we proceed to study some specific cases that are related to models presented in recent literature three basic classes of sales dynamics are analyzed competition with price effects only competition with price as well as adoption effects and competition with adoption effects only in some cases it turns out that results which hold for the monopoly case carry over to the multi firm case in the sense that the qualitative structure of optimal pricing strategies is the same in the monopoly and the oligopoly cases however due to competitive interdependencies differences certainly exist in the levels as well as the rates of change of optimal prices

a new utility consistent econometric approach to multivariate count data modeling summary in the current paper we propose a new utility consistent modeling framework to explicitly link a count data model with an event type multinomial choice model the proposed framework uses a multinomial probit kernel for the event type choice model and introduces unobserved heterogeneity in both the count and discrete choice components additionally this paper establishes important new results regarding the distribution of the maximum of multivariate normally distributed variables which form the basis to embed the multinomial probit model within a joint modeling system for multivariate count data the model is applied to analyzing out of home non work episodes pursued by workers using data from the national household travel survey copyright 2014 john wiley sons ltd

optimal trade credit and lot size policies in economic production quantity models with learning curve production costs abstract in reality a seller e g a supplier or a manufacturer frequently offers his her buyers trade credit e g permissible delay in payment trade credit reduces the buyer s holding cost of inventory and hence attracts new buyers who consider it to be a type of price reduction on the other hand granting trade credit also increases the seller s opportunity cost i e the loss of capital opportunity during the credit period and default risk i e the event in which the buyer will be unable to make the required payments on his her debt obligation in addition it is a well known fact of learning by doing that production cost of a new product declines by a factor of from 10 to 50 percent each time the accumulated production volume doubles therefore we propose an economic production quantity model from the seller s prospective to determine his her optimal trade credit period and production lot size simultaneously in which i trade credit increases not only sales but also opportunity cost and default risk and ii production cost declines and obeys a learning curve phenomenon then the necessary and sufficient conditions to obtain the seller s optimal trade credit and order quantity are derived finally we use some numerical examples to illustrate the theoretical results and to provide some managerial insights

corporate performance and managerial remuneration an empirical analysis abstract economic theories of efficient compensation predict a positive relationship between executive pay and corporate performance and yet efforts to document this relationship have been largely unsuccessful in this paper we argue that previous cross sectional studies have omitted important variables which seriously bias their results using data that focus on individual executives over time we find that executive compensation is strongly positively related to corporate performance as measured by shareholder return and growth in firm sales the results are robust to the stock market performance measure utilized

modeling the impact of product quality on dynamic pricing and advertising policies abstract the marketing mix of price quality and advertising quality relationship is well studied less understood is the price advertising quality relationship this article fills the gap investigating the interplay between price advertising and quality in an optimal control model our results generalize the condition of dorfman steiner in a dynamic context also they point to the impact of greater product quality on the dynamic policies of pricing and advertising furthermore a phase diagram analysis shows that quality develops monotonically in time and converges to a unique steady state we also show that quality investment could either decrease or increase over time but this depends on its effectiveness our results spot the profitable opportunities of a firm managing a more complex marketing mix

product servicing for lifespan extension and sustainable consumption an optimization approach abstract sustainable consumption has been defined as the consumption of goods and services that meet basic needs and quality of life without jeopardizing the needs of future generations oecd 2002 lifespan extension of durable products underpins sustainable consumption this paper describes a novel approach to extend product lifespans by using product servicing that conceptualizes the interactions of a producer a policy maker and multiple consumer segments having different price demand relationships we propose a multi period mathematical optimization model that maximizes the producer s profit while optimizing the prices of different servicing options production quantities and inventory levels a computational study elicits several insights about how the optimal production or alternatively consumption quantities are affected by the introduction of product servicing and the effects of various product characteristics and government incentive or penalty levels on producer s profitability and on product servicing decisions we conclude that quantitative optimization models are useful for evaluating the impacts of different regulatory policies assessing the benefits of offering product servicing options and investing in design for durability and serviceability

quality improvement vs advertising support which strategy works better for a manufacturer abstract we consider a marketing channel with a single manufacturer and a single retailer where both advertising and quality improvement contribute to the build up of goodwill in a non coop scenario the retailer controls the advertising efforts while the manufacturer controls the quality improvements and wholesale price although improving quality positively contributes to goodwill it also increases the production cost thereby reducing the manufacturer s profit in a coop scenario the manufacturer supports the retailer s advertising while decreasing his investments in quality we investigate the conditions under which a coop program is beneficial when such a trade off occurs our results demonstrate that only when advertising significantly contributes to goodwill the manufacturer has an incentive to cooperate and a coop program turns out to be pareto improving conversely the retailer is always better off with a coop program moreover the channel is operational and marketing driven when quality effectiveness is high independent of advertising effectiveness or when both quality and advertising effectiveness are large in all other cases the channel is marketing driven

dynamic pricing product and process innovation abstract the question of simultaneous dynamic pricing product and process investment policies is crucial for manufacturing and high tech industries this paper models these policies in an optimal control setting on the supply side the firm sets prices product and process investment levels over time on the demand side current demand depends on price and quality under an additive separable demand function dynamic pricing increases with quality and cost therefore both product innovation and process innovation impact the pricing policy under a multiplicative separable demand function dynamic pricing policy follows the dynamic of production cost and is independent of the evolution of product quality thus process innovation is the main determinant of a firm s pricing policy over time and product innovation has no impact

the dynamics of price quality and productivity improvement decisions abstract although quality has received significant attention during the last decades and its economic benefits are beyond any doubt lots of questions have remained unanswered as to how much when and in what to invest to maintain sustainable competitive advantage a model is introduced here to guide a firm in addressing these questions the firm produces a single product and operates in a market where monopolistic competition is effective demand for the product in the industry depends on both price and performance quality increasing productivity knowledge decreases unit production cost but demand for the company s product decreases over time as competitors will be able to offer products with similar performance productivity and quality knowledge can be developed through induced and autonomous learning in order to strengthen company position the paper provides an optimal control formulation of the problem and develops necessary conditions for optimality and characterizes the dynamics of optimal price quality and investment decisions

deviations from optimal ceo ownership and firm value abstract the transaction cost theory of managerial ownership and firm value predicts that deviations from optimal managerial ownership reduce firm value this paper empirically tests the transaction cost theory by studying the relation between deviations on either side of optimal ceo ownership and firm value we find that both above optimal and below optimal deviations reduce firm value we find that a change in ceo ownership is associated with a higher lower abnormal return if it moves the ownership towards away from the optimal level these findings are consistent with the transaction cost theory of managerial ownership and firm value

optimal pricing and advertising policies for new product oligopoly models in this paper our previous work on monopoly and oligopoly new product models is extended by the addition of pricing as well as advertising control variables these models contain bass s demand growth model and the vidale wolfe and ozga advertising models as well as the production learning curve model and an exponential demand function the problem of characterizing an optimal pricing and advertising policy over time is an important question in the field of marketing as well as in the areas of business policy and competitive economics these questions are particularly important during the introductory period of a new product when the effects of the learning curve phenomenon and market saturation are most pronounced we consider first the monopoly case with linear advertising cost exponential demand and three different pricing rules the optimal variable pricing the instantaneous marginal pricing and the optimal constant pricing rules several theoretical results are established for these rules including the facts that the instantaneous marginal pricing rule is a myopic version of the optimal pricing rule and the optimal constant pricing rule is a weighted average over time of the instantaneous marginal pricing rule another surprising result is that after the market is at least half saturated a pulse of advertising must be preceded by a significant drop in price numerical solutions of a number of examples are discussed oligopolistic models are analyzed as nonzero sum differential games in the rest of the paper the state and adjoint equations are easy to write down but impossible to solve in closed form hence we describe how to reformulate these models as discrete differential games and give a numerical algorithm for finding open loop nash solutions the latter was used to solve three triopoly models in each case it was found that optimal prices and advertising rates start high and steadily decline

simultaneous and dynamic price production inventory and capacity decisions abstract this paper concerns a profit maximizing firm that derives the optimal price for its output level of output level of inventory and composition of productive capacity over time first it is assumed that capacity may be acquired to either increase or replace the firm s existing productive capacity second it is assumed that the acquisition of new capacity causes a reduction in the firm s production cost lastly it is assumed that demand which is expressed as a function of time and price must be met either from current production or from inventory clearly the level of production cannot exceed the productive capacity at any time the optimal control model formulated requires the solution of a two point boundary value problem so that a discrete approximation numerical procedure is presented numerical results indicate that due to anticipated technological improvement the acquisition of new capacity is postponed and occurs in greater magnitude later in the planning horizon in addition as a result of upgrading productive capacity through the acquisition of new technology numerical results show that a firm lowers its per unit production cost and thereby reduces the optimal price charged for output which increases demand furthermore since the level of capacity is increased due to the purchase of new technology less reliance on inventory is necessary to meet peak demand lastly it is shown that a larger firm optimally acquires a greater level of new capacity over the planning horizon to reduce its operating costs and thereby further its competitive advantage

product balancing under conditions of quality inflation cost pressures and growth strategies abstract this paper analyzes an organization that has a well defined strategy providing a sustainable competitive advantage this advantage is expressed by at least one dimension of quality on which the product or service exhibits outstanding performance using decreasing and increasing exponential demand functions for price and quality respectively the optimal quality level is characterized when dollar sales volume under a cost based price floor and profit are maximized however as quality inflates the same quality performance is worth less tomorrow than today this paper shows that continuous and simultaneous improvement of operational efficiency and quality is a must and is independent from price setting policies the condition of optimal trade offs among quality dimensions is found for the case when the company competes on multiple quality dimensions finally the conditions are analyzed when the resources of quality are utilized in other market segments as well it is found that the corporate level quality or the utilization level of resources is lower higher than the highest least individual business unit product quality

ownership and corporate wage policy the signal and its strength abstractwe argue that identification and proper specification of ownership links among firms is an important factor and is affecting firm performance on different dimensions we focus on the corporate wage policy where we show that firms with same stockholders have similar average labour costs after controlling for standard factors of the wage equation moreover we propose new measures of stockholders ability to influence firms decision signal and its strength the signal measures stockholder s preferences over a given corporate policy while the strength function describes stockholder s ability to influence a firms corporate policy

competition strategy and price dynamics a theoretical and empirical investigation the authors explore how competition affects dynamic pricing of new products dynamics of diffusion saturation and cost reduction due to experience are all considered with emphasis on the last t

a simulation analysis of alternative pricing strategies for dynamic environments the implicit assumption of the classical economic model of price determination is that the firm maximizes short run profits however one of the key implications of strategy research of the past decade is that short run profit maximization is not an appropriate criterion for many market situations instead market share has been proposed as the key to long term profitability see e g buzzell gale and sultan 1974 abell and hammond 1979 this proposition has had a strong impact on both marketing practice and research hopkins 1981 reports that 88 of industrial firms surveyed spell out market share goals in detail the emphasis on market share in practice has been reflected in the theoretical side also where numerous market share forecasting and maximizing models have been published long term profitability has also become a research interest in its own right more than a dozen papers have appeared in major journals since 1975 the impetus to this activity has been the recognition of the existence of intertemporal effects in the environment for example on the demand side a consumer s purchasing in a given time period may preclude purchasing in the future because of the durability of the good or personal inventory loading on the supply side added current production early in new product introduction may reduce the cost of future proresearchers of the strategic implications of the well known demand e g adoption and diffusion and supply e g experience effects dynamics have typically sought analytical solutions their success in this has been achieved partly by limiting the richness of the dynamics considered this paper describes a simulation modeling capability simstrat which trades off analytical solutions for richer more realistic representations of supply and demand we present the model and then the results of our initial investigations using simstrat when joined with new computer graphics capabilities the model is successful in identifying conditions conducive to skimand penetration pricing strategies

dynamic advertising strategies of competing durable good producers this work develops a diffusion model which incorporates word of mouth and advertising effects for two firms introducing competing brands of a new durable product the competition between the two firms is formulated as a two player nonzero sum markovian game the firms are assumed to behave noncooperatively in choosing their advertising strategies and the solution concept is a nash noncooperative equilibrium optimal advertising policies for this stochastic closed loop control problem are obtained via dynamic programming our results indicate that both firms will start with high advertising outlays which will get reduced as the number of adopters increases this is similar to the result obtained previously for a monopolist further we find that there is a significant value in being the first brand to the market and the greater the intensity of word of mouth effects the greater the value in being first the first entrant advantage is due to the goodwill generated by its stock of previous adopters this first entrant advantage can only be overcome if the second entrant enters with a superior brand which is more enthusiastically endorsed by its adopters

empirical analysis of closed loop duopoly advertising strategies closed loop perfect equilibria in a lanchester duopoly differential game of advertising competition are used as the basis for empirical investigation two systems of simultaneous nonlinear equations are formed one from a general lanchester model and one from a constrained model two empirical applications are conducted in one involving coca cola and pepsi cola a formal statistical testing procedure is used to detect whether closed loop equilibrium advertising strategies are used by the competitors rather than open loop strategies in the second application involving anheuser busch and miller the general model is estimated results indicate that closed loop equilibria better explain dynamic advertising competition than do open loop equilibria also closed loop equilibrium advertising strategies implied by model estimates show that competitive advertising levels may or may not be monotonic in market share

oligopoly models for optimal advertising when production costs obey a learning curve business policy questions frequently involve competitive encounters among several different firms oligopoly theory in economics was devised to answer similar questions but its results so far are largely confined to cases of monopoly one firm duopoly two firms and many firms wheat farmers the cases with n firms where 3 n 10 are of great interest to business policy but are rarely treated in the economics literature because of their extreme difficulty the natural mathematical model for studying such questions is the theory of differential games originally devised by r isaacs isaacs r 1975 differential games robert e krieger publishing co huntington new york originally published by john wiley sons new york 1965 for pursuer evader games later it was extended by j case case j h 1979 economics and the competitive process new york university press new york to nonzero sum differential games for application to questions of economic competition the problem of characterizing an optimal advertising policy over time is an important question in the field of marketing it is especially important during the period of the introduction of a new product and it is also during this time that the production learning curve phenomenon is most pronounced in this paper we study oligopoly models which combine elements of bass s demand growth model bass f m 1969 a new product growth model for consumer durables management sci 15 january 215 227 the vidale wolfe vidale m l h b wolfe 1957 an operations research study of sales response to advertising oper res 5 370 381 and ozga ozga s 1960 imperfect markets through lack of knowledge quart j econom 74 29 52 advertising models with linear or quadratic costs and the production learning curve hirschmann w p 1964 profit from the learning curve harvard bus rev 42 january february 125 139 the boston consulting group 1972 perspectives on experience the boston consulting group boston in the monopoly case n 1 the optimal advertising function is derived by applying green s theorem in the duopoly n 2 and triopoly n 3 cases we use discrete differential game models and find nash equilibrium solutions in each of these models the form of the optimal policy is easy to find but because of the complicated nature of the resulting differential equations closed form solutions for the optimal state and control trajectories are impossible to find hence we use a computer to compute these optimal trajectories and plot them for various parameter settings because 13n parameters must be chosen to define a model with n players a complete search of the parameter space is clearly impossible we content ourselves in this paper with presenting computer plots of four different interesting encounters of the triopoly model our methods can be extended to work just as well for competitive encounters among n players where 1 n 10 we believe that in this paper we have opened up the way to studying oligopoly theory with a small number of participants and under widely varying conditions although the lack of closed form solutions may disappoint some readers we feel that the easy availability of graphical solutions is a more than adequate substitute

dynamic pricing and warranty policies for products with fixed lifetime abstract we consider a repairable product with known market entry and departure times a warranty policy is offered with product purchase under which a customer can have a failed item repaired free of charge in the warranty period it is assumed that customers are heterogeneous in their risk attitudes toward uncertain repair costs incurred after the warranty expires the objective is to determine a joint dynamic pricing and warranty policy for the lifetime of the product which maximizes the manufacturer s expected profit in the first part of the analysis we consider a linearly decreasing price function and a constant warranty length we first study customers purchase patterns under several different pricing strategies by the manufacturer and then discuss the optimal pricing and warranty strategy in the second part we assume that the warranty length can be altered once during the product lifetime in developing a joint pricing and warranty policy numerical studies show that a dynamic warranty policy can significantly outperform a fixed length warranty policy

monopolist pricing with dynamic demand and production cost this paper deals with pricing of a new product over time by a monopolist who maximizes the discounted profit stream the interdependency of cost and demand on cumulative production makes the problem inherently dynamic cost is assumed to be declining with cumulative production learning curve effect while demand is a function of price and cumulative sales representing word of mouth and saturation effects the paper addresses this problem in a general framework that includes several previous results as special cases and provides new insights in other situations while the learning curve and word of mouth effect cause prices to be lower than the price that maximizes immediate revenues the saturation factor has the opposite effect the price path over time is affected by these factors and the interest rate we characterize the price path under several different situations and interpret the results for policy guidelines