the walking debt crisis abstract this article sheds light on the question whether arising sovereign credit risk in the emu has been triggered by the us subprime crunch by adapting recent econometric methodologies suggested in the related field of speculative bubbles we find clear evidence for fast diverging and even explosive behavior of emu government bond yields of peripheral countries relative to germany during the financial and the european debt crisis this might be caused by flight to quality effects to german government bonds coincident with the collapse of lehman brothers and by a loss of confidence in the fiscal stability of greece ireland italy portugal and spain during the european debt crisis first we find compelling evidence for bubbles in the dow jones equity real estate investment trusts reits index which serves as a weekly measure of economic activity in the north american real estate sector second in our main analysis we test whether the collapsing bubble in the housing market triggered the diverging government bond yields during two crisis regimes our findings indicate that this was the case in the course of the financial crisis but not during the emu sovereign debt crisis these results suggest that the severe fiscal problems in peripheral countries are homemade rather than imported from the us

multiattribute preference analysis with performance targets this paper develops an approach based on performance targets to assess a preference function for a multiobjective decision under uncertainty this approach yields preference functions that are strategically equivalent to conventional multiattribute utility functions but the target oriented approach is more natural for some classes of decisions in some situations the target oriented preference conditions are analogous to reliability theory conditions for series or parallel failure modes in a system in such cases reinterpreting the conditions using reliability concepts can be useful in assessing the preference function the target oriented approach is also a generalization of common forms of goal programming the approach has particular applicability for resource allocation decisions where the outcome of the decision is significantly determined by the actions of other stakeholders to the decision such as new product development or decision making in a controversial regulated environment

how to set price and quality in a supply chain of virtual products under bi criteria and risk consideration abstract virtual products are characterized by ample production capacity zero lead time and no holding costs we consider a two echelon supply chain of a virtual product consisting of a single manufacturer and a single retailer who face random demand demand depends on both price and quality of the product and its stochastic nature exposes the supply chain members to financial risk each party adopts profit criteria that reflect his or her attitude toward this risk including the use of bi criteria by formulating a model that follows a stackelberg game and using the stochastic dominance property we show that one can analytically obtain equilibrium by assuming certain common structures of the demand function and of the risk attitudes the contribution of this study is fourfold i analyzing multiplicative and additive demand forms and comparing the properties of the decisions under the two forms ii showing that under the multiplicative demand form the pricing strategies are not affected by the parties attitudes toward risk whereas the manufacturer s decision on quality investment is affected by his risk attitude iii showing that under the additive demand form the manufacturer s utility function and the demand uncertainty affect pricing and investment strategies and iv suggesting a method to construct the efficient set of decisions and the non dominated set of profit criterion values

contagion during the greek sovereign debt crisis abstract we examine the impact of news about greece and news about a greek bailout on bank stock prices in 2010 using data for 48 european banks we identify the twenty days with extreme returns on greek sovereign bonds and categorise the news events during those days into news about greece and news about the prospects of a greek bailout we find that except for greek banks news about greece does not lead to abnormal returns while news about a bailout does even for banks without any exposure to greece or other highly indebted euro countries this finding suggests that markets consider news about the bailout to be a signal of european governments willingness in general to use public funds to combat the financial crisis sovereign bond prices of portugal ireland and spain respond to both news about greece and news about a greek bailout

inventory competition for newsvendors under the objective of profit satisficing abstract inventory competition for newsvendors nvs has been studied extensively under the objective of expected profit maximization which is based on risk neutrality in this paper we study this classic problem under the objective of profit satisficing which is based on downside risk aversion consistent with prior literature we consider two possible scenarios in the first scenario each nv s demand depends on the stocking levels of all nvs other than herself in this scenario we show that there is a unique nash equilibrium where all nvs optimally order as if they were independent in the second scenario each nv s demand depends on the stocking levels of all nvs including herself we prove the existence of nash equilibrium for both additive and multiplicative forms of demands as a special case we also study symmetrical nvs under the proportional allocation model we show that at equilibrium if the number of nvs exceeds a threshold the market becomes highly competitive

safe haven or contagion the disparate effects of euro zone crises on non euro zone neighbours abstractwhile there have been many studies that examine contagion within the euro zone this article investigates the potential contagion from changes in the greek sovereign risk premium over 2009 2016 as measured by the yield on 10 year government bonds to six european countries outside of the euro zone all of which operated a managed float against the euro we find evidence of contagion to potential euro zone ascendants czech republic hungary and poland but flight to safety or safe haven effects for the united kingdom sweden and switzerland

understanding corporate coherence theory and evidence abstract multiproduct firms are perceived to be coherent in their scope yet there is no strong theoretical foundations to explain coherence in modern industrial organization theory this paper shows that as u s manufacturing firms grow more diverse they maintain a constant level of coherence between neighboring activities this finding runs counter to the idea that firms with many activities are generally more incoherent a framework is then presented which appeals to the nature of enterprise learning path dependencies and the nature of the selection environment to explain the ubiquity of coherent diversifiers

evaluating interval forecasts a complete theory for evaluating interval forecasts has not been worked out to date most of the literature implicitly assumes homoskedastic errors even when this is clearly violated and proceed by merely testing for correct unconditional coverage consequently i set out to build a consistent framework for conditional interval forecast evaluation which is crucial when higher order moment dynamics are present the new methodology is demonstrated in an application to the exchange rate forecasting procedures advocated in risk management

a theory of market pioneers dynamic capabilities and industry evolution we analyze a model of industry evolution where the number of active submarkets is endogenously determined by pioneering innovation from incumbents and entrants incumbent pioneers enjoy an advantage of additional pioneering innovation via a dynamic capability that takes the form of an improved technology for innovation in young submarkets entrants are motivated in part by a desire to acquire the dynamic capability we show that dynamic capabilities increase total innovation but whether the capability confers an advantage in terms of marginal or average cost is important in determining how the impact of dynamic capabilities is distributed across incumbent and entrant innovation rates we complement the existing literature that focuses on exogenous arrival of submarkets or the steady state of a model with constant submarkets by describing how competition free entry and the dynamic capability of incumbents drive the evolution of an industry the shift from immature to mature submarkets can lead to a shakeout in firm numbers and it eventually leads to a reduction in total dynamic capabilities in an industry this paper was accepted by bruno cassiman business strategy

a single period inventory placement problem for a supply system with the satisficing objective abstract consider the inventory placement problem in an n stage supply system facing a stochastic demand for a single planning period each stage is a stocking point holding some form of inventory e g raw materials subassemblies product returns or finished products that after a suitable transformation can satisfy demand stocking decisions are made before demand occurs unsatisfied demands are lost the revenue salvage value ordering transformation and lost sales costs are proportional there are fixed costs for utilizing stages for stock storage the objective is to maximize the probability of achieving a given target profit level we prove the existence of optimal stocking decisions where at most three stages receive nonzero stocks we also characterize properties of the optimal stocking decisions and provide an o n 3 algorithm for their computation for the special case where all fixed costs are zero the stages utilized do not depend on the demand distribution or the target level and one can find optimal stocking decisions by performing a simple o n 2 search and solving a single variable optimization problem

analysis of protection and pricing strategies for digital products under uncertain demand abstract we analyze pricing and protection digital rights management strategies in a two echelon supply chain that consists of a manufacturer and a retailer of digital products the demand for the legal non pirated product which depends on both price and monetary investment in protection is assumed to be uncertain three different supply chain models are analyzed manufacturer stackelberg retailer stackelberg and vertical integration we show that the retailer s utility function has no effect on the equilibrium strategies and suggest schemes to find these strategies for any utility function of the manufacturer further results are obtained under assumptions of either a multiplicative or an additive demand model we study the players strategies under different profit criteria reflecting different attitudes toward risk specifically the expectation criterion and the target criterion and for each criterion we obtain the dependence between the pricing and the protection investment we show that there are situations in which the manufacturer can increase his profit by giving up his leadership to the retailer even if the power balance is in his favor

first party content and coordination in two sided markets the strategic use of first party content by two sided platforms is driven by two key factors the nature of buyer and seller expectations favorable versus unfavorable and the nature of the relationship between first party content and third party content complements or substitutes platforms facing unfavorable expectations face an additional constraint their prices and first party content investment need to be such that low zero participation equilibria are eliminated this additional constraint typically leads them to invest more less in first party content relative to platforms facing favorable expectations when first and third party content are substitutes complements these results hold with both simultaneous and sequential entry of the two sides with two competing platforms incumbent facing favorable expectations and entrant facing unfavorable expectations and multi homing on one side of the market the incumbent always invests weakly more in first party content relative to the case in which it is a monopolist this paper was accepted by bruno cassiman business strategy

the endogenous relationship between innovation and diversification and the impact of technological resources on the form of diversification abstract this research has endeavoured to build on earlier research on the relationship between a firm s technological resources and the direction of its diversification by trying to confirm the endogeneity of this relationship and by addressing the influence of innovation on the choice of the mode of diversification based on a sample of spanish firms our results suggest that innovation drives diversification but not the reverse the second important finding of this research is the empirical confirmation that knowledge assets are not related to the diversification mode

user industry spinouts downstream industry knowledge as a source of new firm entry and survival recent scholarship on entrepreneurship suggests that the pre entry know how of start ups embodied in their founders affects not only entry but also performance although prior work focuses on new entrants from the focal industry i e employee spinouts and academic organizations i e university spinoffs this study identifies and examines a hybrid category of start ups from downstream user industries which we call user industry spinouts we draw from the literature on evolutionary theory user innovation and industrial dynamics to propose that given the unique combination of knowledge inherited by these entrants their choices at entry and their ability to survive in the focal industry will differ with respect to other start ups we do this by extending existing work on new firm creation to investigate entry and performance in different product markets our findings based on a dataset of start ups in the semiconductor industry over a 10 year period 1997 2007 show that user industry spinou

econometric issues in the analysis of contagion this paper presents a canonical econometric model of contagion and investigates the conditions under which contagion can be distinguished from inter dependence in a two country market set up it is shown that for a range of fundamentals the solution is not unique and for sufficiently large values of the contagion coefficients it has interesting bifurcation properties with bimodal density functions the extension of the model to herding behaviour is also briefly discussed to identify contagion effects in the presence of inter dependencies the equations for the individual markets or countries must contain country market specific forcing variables this sheds doubt on the general validity of the correlation based tests of contagions recently proposed in the literature which do not involve any country market specific fundamentals finally we show that ignoring inter dependence can introduce an upward bias in the estimate of the contagion coefficient and using monte carlo experiments we further show that this bias could be substantial

innovation diversity and diffusion a self organisation model a number of features of innovation diffusion are identified appropriability diversity expectations selection learning and spillover externalities a dynamic model is formul ated to embed the diffusion question into a more general framework of disequilibrium competition the model incorporates distinct vintage structures reflecting a change in technological trajectory learning by using a nd expectations driven investment rules of thumb simulation studies reveal robust quasi logistic curves but a complicated pattern of net market share gains and losses uncertainty regarding the rationality of early or late adoption it is argued ensures that the requisite behavioral variety is present to generate these diffusion patterns copyright 1988 by royal economic society

the ecology of organizational mortality american labor unions 1836 1985 this research analyzes the disbanding rates of the full population of american national labor unions for the period 1836 1985 it tests the hypothesis drawn from population ecology theory that di

on sales effort and pricing decisions under alternative risk criteria abstract in the literature different risk criteria are proposed for risk averse decision making but it is often unclear which risk criteria should be used and what their differences may be this study investigates this problem when a risk averse make to order firm decides its pricing and sales effort two factors affecting demand we consider alternative risk criteria commonly used in the literature namely expected utility theory eut mean variance mv mean semideviation ms value at risk var conditional value at risk cvar and loss aversion la we find that all of these criteria lead to similar qualitative behaviors regarding how risk loss averse decisions deviate from risk neutral ones a particularly interesting result is that the form of demand randomness i e additive or multiplicative can completely reverse the effect of risk loss aversion in certain cases we also find that the risk aversion models i e eut mv ms var and cvar are essentially equivalent in inducing the same set of optimal solutions under adverse market states however loss aversion is a mild version of risk aversion in that the la model can only lead to a subset of the solutions generated by other models these results may not be valid for other applications such as the newsvendor pricing problem so we can conclude that the relationship between alternative risk criteria is case sensitive and should be evaluated more carefully

newsvendor solutions via conditional value at risk minimization abstract in this paper we consider the minimization of the conditional value at risk cvar a most preferable risk measure in financial risk management in the context of the well known single period newsvendor problem which is originally formulated as the maximization of the expected profit or the minimization of the expected cost we show that downside risk measures including the cvar are tractable in the problem due to their convexity and consequently under mild assumptions on the probability distribution of products demand we provide analytical solutions or linear programming lp formulation of the minimization of the cvar measures defined with two different loss functions numerical examples are also exhibited clarifying the difference among the models analyzed in this paper and demonstrating the efficiency of the lp solutions

value at risk and inventory control the purposes of this paper are two fold on the one hand we shall provide a decision analysis justification for the value at risk var approach based on ex post disappointment decision making arguments we shall show that the var approach is justified by a disappointment criterion in other words the asymmetric valuation between ex ante expected returns above an appropriate target return and the expected returns below that same target level provide an explanation for the var criterion when it is used as a tool for var efficiency design second this paper provides applications to inventory management based on var risk exposure although the mathematical problems arising from an application of the var approach tuned to current practice in financial risk management are difficult to solve analytically solutions can be found by application of standard computational and simulation techniques a number of cases are solved and formulated to demonstrate the paper s applicability

the revealed preferences of high technology acquirers an analysis of the innovation characteristics of their targets this paper investigates whether acquisitions involving public high technology firms are best understood in terms of acquirers taking over firms with superior innovation performance to access their assets or acquiring firms with inferior innovation performance to turn them around innovation performance is proxied by r d intensity r d expenditure over assets patent intensity patents per us million of assets i e the r d productivity of a firm s assets and the patent stock i e the accumulated r d output we find substantial overlaps between target and non acquired firm characteristics nevertheless targets have a relatively high r d intensity and a large patent stock which is consistent with acquirers targeting firms with a superior innovation performance however these targets have significantly lower pre acquisition patent intensity and hence a lower r d productivity the targets are also experiencing weak financial performance our results are consistent with a selection process in which acquirers seek out firms that have a superior past innovation performance but that are failing in terms of recent r d productivity and financial performance a comparison of the performance of the targets with their acquirers reinforces this conclusion

the risk averse and prudent newsboy the effects of risk and risk aversion in the single period inventory newsboy problem are examined comparative static effects of changes in the various price and cost parameters are determined and related to the newsboy s risk aversion the addition of a random background wealth and of an increase in the riskiness of newspaper demand are also examined although many of the comparative effects generally are ambiguous some fairly simple restrictions on preferences and or risk increases are shown to lead to qualitatively deterministic results

incumbent entry into new market niches the role of experience and managerial choice in the creation of dynamic capabilities increasingly technological innovation creates markets for new products and services to survive firms must respond to these new markets how do firms develop the capabilities necessary to succeed in such changing conditions some suggest that experience with previous entry builds such capabilities others suggest that capabilities arise from experience producing and selling to existing markets the role of managers is also debated some argue that experience with existing markets causes managers to miss entry opportunities others argue that managers enter new markets when their firm possesses the experience needed to compete effectively in this paper we explore these issues by investigating entry patterns in the disk drive industry we investigate the effect of experience in existing markets and experience with previous market entry we find that experience in previous markets increased the probability that a firm would enter a new market we show that this experience had greater value if the firm entered the new market we infer that managers chose to enter these markets to obtain this increase in value

the effect of advertising on the distribution free newsboy problem abstract advertising is very important for the newsboy problem because the shelf life of the newsboy product is short and advertising may increase sales to avoid overstocking in this paper models to study the effect of advertising are developed for the distribution free newsboy problem where only the mean and variance of the demand are known as in khouja and robbins 2003 it is assumed that the mean demand is an increasing and concave function of advertising expenditure three cases are considered 1 demand has constant variance 2 demand has constant coefficient of variation and 3 demand has an increasing coefficient of variation this paper provides closed form solutions or steps to solve the problem numerical results of the model are also compared with those from other papers the effects of model parameters on optimal expenditure on advertising optimal order quantity and the lower bound on expected profit are derived or discussed

price competition for retailers with profit and revenue targets abstract price competition for retailers has been extensively studied in the literature assuming the objective of expected profit maximization in this paper we make a major contribution by studying price competition for retailers with both profit and revenue targets consequently each retailer maximizes her profit and revenue probability namely the probability of achieving the profit and revenue targets simultaneously more specifically we analyze a scenario where two competing retailers purchase a perishable product from a common supplier and sell to a common market employing the isoelastic demand model we derive the closed form solutions of the optimal order quantity the optimal selling price and the maximal profit and revenue probability for each retailer it is shown that when revenue is a relevant performance measure positive and non positive salvage values lead to different optima for competing retailers moreover as price elasticity and or price competition intensity becomes higher the optimal retail price decreases and the optimal order quantity increases for each retailer

note note on optimal ordering quantity to realize a pre determined level of profit in this note we consider the one period inventory model in which it is required to determine the order quantity which maximizes the probability of realizing a predetermined level of profit r we give a condition for determining the optimal order quantity and provide explicit expressions for the optimal order quantity in three special cases

the risk averse newsvendor problem with random capacity abstract we study the effect of capacity uncertainty on the inventory decisions of a risk averse newsvendor we consider two well known risk criteria namely value at risk var included as a constraint and conditional value at risk cvar for the risk neutral newsvendor we find that the optimal order quantity is not affected by the capacity uncertainty however this result does not hold for the risk averse newsvendor problem specifically we find that capacity uncertainty decreases the order quantity under the cvar criterion under the var constraint capacity uncertainty leads to an order decrease for low confidence levels but to an order increase for high confidence levels this implies that the risk criterion should be carefully selected as it has an important effect on inventory decisions this is shown for the newsvendor problem but is also likely to hold for other inventory control problems that future research can address

regionalization of r d activities dis economies of interdependence and inventive performance abstract this paper examines the impact of the extent of the regionalization of mnes r d activities on their inventive performance by joining the regionalization theory with the recombinant view of invention we challenge the implicit assumption that all foreign knowledge seeking activities will necessarily offer new knowledge to the firm we introduce the dis economies of interdependence defined as the dis advantages that the firm derives due to the interdependence among countries within a region as a new theoretical mechanism explaining the benefits and costs of regionalization our analysis of global pharmaceutical firms shows that an inverted u shaped relationship exists between the number of regions in which a firm has r d activities and its inventive performance our results also indicate that a firm s recombinant capability moderates the inverted u shaped relationship in such a way that when a firm s recombinant capability is high it reaches its turning point in a larger number of regions and the inverted u shaped relationship is flatter these results underscore that recombinant capability significantly influences the firm s ability to derive benefits and reduce costs from the regionalization of its r d activities our findings suggest that it is through the consideration of the dis economies of interdependence that offers the essential reasoning needed to unwind the inferred assumption that all foreign knowledge seeking activities will offer access to new knowledge

coordination and profit sharing between a manufacturer and a buyer with target profit under credit option several studies have focused on buyer vendor coordination through quantity discount credit option mechanism but few quantitative models and investigations are available that have explored the mechanism for transfer of surplus generated due to coordination in this paper we develop a coordination mechanism through credit option such that both the parties can divide the surplus equitably after satisfying their own profit targets two situations are explored here in the first situation both the parties have no individual profit target from the business whereas in the second situation there are individual profit target for both the parties the proposed mechanism for division of surplus is studied through a numerical study and the impact of different parameter values on the results are examined

determinants of sovereign yield spreads in the eurozone a bayesian approach abstract we analyze the determinants of sovereign yields spreads of emu member states applying bayesian model averaging bma to annual panel data from 1999 to 2009 bma is well suited in cases of small samples and high model uncertainty this seems to be the case in modeling sovereign yield spreads in the eurozone since the literature reports heterogeneous results with respect to significant explanatory variables we are testing a number of variables reported to be significant in the literature and find that the most likely country specific drivers of yield spreads are fiscal variables such as budget balance and government debt as well as external sector variables such as terms of trade trade balance and openness global financing conditions indicated by the us interest rate and market sentiments indicated by corporate bond spreads are likely to influence sovereign yield spreads

the multi product price setting newsvendor with resource capacity constraints abstract in this paper we consider a newsvendor problem commonly encountered in retail stores that cater to budget sensitive shoppers the newsvendor sells multiple products and in addition to determining order quantities must also determine the selling price of each product sold the demand for each product is of a stochastic nature and depends on the demands of other products i e is cross elastic we transform the objective function into a form that is amenable to developing integer programming solutions and then develop a numeric optimization procedure rooted in the nelder mead search technique we obtain encouraging numerical results on some small scale and large scale problems to the best of our knowledge this is the first work that produces implementable solutions for a scenario that is particularly relevant to retailers catering to budget sensitive customers who are abundant in the current economy

newsvendor problem with random shortage cost under a risk criterion abstract we study profit maximization vs risk approaches for the standard newsvendor problem with uncertainty in demand as well as a generalized version with uncertainty in the shortage cost as often applies in practice we consider two well known risk approaches value at risk var included as a constraint and conditional value at risk cvar we first derive the explicit expressions of the optimal solution with uncertainty of shortage cost under different risk measures and then perform a numerical analysis to quantify the effect of uncertainty in shortage cost and risk measures for the standard newsvendor problem we find that the optimal quantity under cvar is always lower than that under the var constraint which in turn is lower than the order quantity that maximizes the expected profit insightful explanations for this result are that a a higher degree of risk aversion drives the newsvendor to order fewer products increasing the likelihood that all will be sold b this effect is stronger for the cvar approach as this does not consider the expected profit at all another interesting and counter intuitive observation for the cvar approach is that a higher retail price may lead to a smaller order quantity as fewer items need to be sold in order to attain a sufficient profit these results show that one should be careful in employing the cvar risk measure for newsvendor type problems the results remain valid if the shortage cost becomes uncertain however increased uncertainty of this type does improve the relative profitability under the cvar approach by increasing the order quantity under that criterion whilst there is no effect under the other criteria

effects of higher order moments on the newsvendor problem abstract in this paper we propose a stochastic programming model for the well known single period newsvendor problem by adopting the conditional value at risk cvar as the risk metric in the objective function the demand uncertainty is modeled in terms of discrete scenarios that reflect the empirical distributions implied by market demand data our numerical results demonstrate that the higher order moments skewness and kurtosis of demand have obvious effects on the newsvendor problem and the stochastic programming framework provides a flexible and effective decision support tool for the newsvendor problem

the multifaceted nature of exploration and exploitation value of supply demand and spatial search for innovation in this paper exploration and exploitation are conceptualized in terms of a nonlocal local search continuum in three dimensional supply demand and geographic space using cross sectional data from a wide range of manufacturing industries we develop and validate an operational measure of the exploration exploitation concept in line with theory based arguments our analysis suggests that the value of supply side demand side and spatial exploration and exploitation is contingent on the environment while boundary spanning supply side search is found to be positively associated with innovation in more dynamic environments typical of the entrepreneurial regime phase of technology evolution such exploration appears to hurt innovation in less dynamic environments in a reverse fashion while boundary spanning demand side search is found to be favorably associated with innovation in less dynamic environments it appears to harm innovation in a more dynamic context interestingly spatial boundary spanning search seems to contribute to innovation in more as well as less dynamic environments with the caveat that the substantive findings of this study are based on cross sectional data we discuss the implications of our work and future research directions

sovereign default exit and contagion in a monetary union abstract the european sovereign debt crisis is characterized by the simultaneous surge in borrowing costs in the gips countries after 2008 we present a theory which can account for the behavior of sovereign bond spreads in southern europe between 1998 and 2012 our key theoretical argument is related to the bail out guarantee provided by a monetary union which endogenously varies with the number of member countries in sovereign debt trouble we incorporate this theoretical foundation in an otherwise standard small open economy dsge model and explain i the convergence of interest rates on sovereign bonds following the european monetary integration in late 1990s and ii following the heightened default risk of greece the sudden surge in interest rates in countries with relatively sound economic and financial fundamentals we calibrate the model to match the behavior of the portuguese economy over the period of 1998 to 2012

risk aversion in inventory management traditional inventory models focus on risk neutral decision makers i e characterizing replenishment strategies that maximize expected total profit or equivalently minimize expected total cost over a planning horizon in this paper we propose a framework for incorporating risk aversion in multiperiod inventory models as well as multiperiod models that coordinate inventory and pricing strategies we show that the structure of the optimal policy for a decision maker with exponential utility functions is almost identical to the structure of the optimal risk neutral inventory and pricing policies these structural results are extended to models in which the decision maker has access to a partially complete financial market and can hedge its operational risk through trading financial securities computational results demonstrate that the optimal policy is relatively insensitive to small changes in the decision maker s level of risk aversion

capabilities as real options strategy research consists of a balance between positive and normative theory normative theories suggest particular heuristics or cognitive representations to find appropriate solutions heuristics permit faster solutions to real time problems they also suffer from the potential of negative transfer to inappropriate applications the theory of real options provides the appropriate heuristic framing of competencies and exploratory search a real options approach marries the theory of financial options to foundational ideas in strategy organizational theory and complex systems we join these approaches to identify three pairs of concepts scarce factor and the underlying asset in option theory inertia and irreversibility and the ruggedness of landscape and option values strategic theories of resources largely define a core competence as unique and nonimmutable in doing so this definition has wrongly forgotten barney s initial insight into scarce factor markets as determining the valuation of a competitive asset financial theory of real options derives its heuristics of investing in exploratory search by inferring future value of today s investments from market prices we apply the three conceptual pairs to the evaluation of capabilities as real options through a formal descriptive model the valuation of core capabilities is derived from observing the price dynamics of correlated strategic factors in the market because of inertia managers cannot easily adjust the wrong set of organizational capabilities to the emergence of market opportunities however firms that have made investments in capabilities appropriate to these opportunities are able to respond from this description we define core competence as the choice of capabilities that permits the firm to make the best response to market opportunities the heuristic framing of capabilities as real options guides the normative evaluation of the balance between exploitation and exploration

density dependence in the evolution of populations of newspaper organizations a model of density dependence is proposed to explain regularities in the growth and decline of organizational populations density the number of organizations is assumed to be a function of the social processes of legitimation and competition at low density the model predicts that the legitimation process will dominate and will lead to high organizational founding rates and low organizational mortality rates at high levels of density competition will dominate and consequently founding rates will decline and mortality rates will rise the model is tested with hazard function models using data from nine newspaper populations spanning the 19th and 20th centuries and covering over 5200 newspapers analysis offounding rates provides strong empirical support for the model analysis of mortality rates reveals that the model holds for large populations

optimal ordering quantities for multi products with stochastic demand return cvar model abstract multi product ordering problem with stochastic demand is often optimized by the expected cost reduction or the expected profit improvement in most of previous works moreover risk preference of decision maker is often ignored evidently this approach is impracticable when the corresponding volatility is larger based on the outstanding characteristics of conditional value at risk cvar as a risk measure the paper proposes an optimal order model for multi product with cvar constraints also the model is finally formulated as a linear programming problem the model is simulated for the case of a newsvendor to analyze to what degree it succeeds the solution in fact is bound consistent fully with the decision maker s intuition on return risk decision making finally results of return cvar model and the classical model are compared and shows that return cvar model is more flexible than the classical model

risk preferences of a newsvendor with service and loss constraints abstract using the newsvendor framework we present an approach to determine an order quantity which is relevant for the observed ordering behavior of an inventory manager whereas in literature just one constraint has been used we suggest two conflicting constraints the service constraint specified by a target value for the cycle service level is fulfilled by high order quantities the loss constraint is characterized by a target resulting in losses is met by low order quantities choosing as objective function a mean deviation rule where risk attitudes are measured by the conditional value at risk the optimal order quantity is determined depending on the risk parameters if the newsvendor is not able to specify the risk preferences we use the constraints to describe the risk attitudes of the decision maker in dependence of the profitability of the product and its demand distribution including those products where no admissible order quantity exists if there are admissible solutions we identify conditions such that the service constraint is dominating i e the prescribed service level is high and necessarily risk taking behavior is implied contrary if the loss constraint dominates i e the probability of loss is low the decision maker in any case is a risk averter but if both the service target and the loss target are not too challenging then for products with high profitability all risk preferences are possible

yield spreads on emu government bonds government bond spreads we provide evidence that the movements in yield differentials between euro zone government bonds explained by changes in international risk factors as measured by banking and corporate risk premiums in the united states are more pronounced for bonds issued by italy and spain liquidity factors play a smaller role so policies meant to increase financial market efficiency do not appear sufficient to deliver a seamless bond market in the euro area the risk of default is a small but important component of yield differentials movements which signal market perceptions of fiscal vulnerability impose market discipline on national fiscal policies and may be reduced only by further convergence in debt ratios lorenzo codogno carlo favero and alessandro missale

a unified approach to investigate pure and wake up call contagion evidence from the eurozone s first financial crisis abstract this paper simultaneously analyzes wake up call and pure contagion of sovereign risk in the eurozone during its recent financial crisis pure contagion of sovereign risk means the transmission of negative effects after a shock to a country which are not reflected in the risk pricing of fundamental determinants of sovereign risk of the recipient country wake up call contagion is defined as the change of sovereign risk pricing by market participants after negative events in a single country or a group of countries to examine both types of contagion in a unified framework we apply an extension of the canonical model for contagion proposed by pesaran and pick 2007 and metiu 2012 in that we allow for time varying coefficients controlling for changes in the risk pricing by investors we detect several channels of pure contagion between 2008 and 2012 but with decreasing number over time further we find evidence for a disruption of sovereign risk contagion channels from greece ireland and portugal to spain italy france and belgium after their respective bailouts as was desired by policymakers for all eurozone countries considered we observe an increase in the relevance of general risk aversion towards sovereign debt since may 2010 our model extension yields a device that is suitable to determine whether policy interventions are required and to judge their success ex post

the learning curve and optimal production under uncertainty this article examines the implications of the learning curve in a world of uncertainty we consider a competitive firm whose costs decline with cumulative output because the price of the firm s output evolves stochastically future production and cumulative output are unknown and are contingent on future prices and costs we derive an optimal decision rule that maximizes the firm s market value produce when the price exceeds a critical level which is a declining function of cumulative output we show how the shadow value of cumulative production the total value of the firm and the decision to produce depend on the volatility of the price and other parameters uncertainty increases the critical price required for the firm to produce but also increases the value of thefirm thus during periods of high volatility firms facing a learning curve ought to be producing less but are worth more

eating your own lunch protection through preemption recent discussions of management practices among successful high technology companies suggest that one key strategy for success is to eat your own lunch before someone else does the implication is that in intensely competitive or hypercompetitive markets firms with a leading position should aggressively cannibalize their own current advantages with next generation advantages before competitors step in to steal the market given the pace of technological and other types of change such strategy often requires creating next generation advantages while the current advantages are still profitable that is trading current profits for future market leadership we capture the tradeoff between a market leader s willingness to reap profits with its current set of advantages and its desire to maintain market leadership by investing in the next generation using a competitive model that determines the equilibrium launch time of a next generation advantage we find that in absence of lower launch costs for an

capital shortfall a new approach to ranking and regulating systemic risks the financial crisis of 2007 2009 has given way to the sovereign debt crisis of 2010 2012 yet many of the banking issues remain the same we discuss a method to estimate the capital that a financial firm would need to raise if we have another financial crisis this measure of capital shortfall is based on publicly available information but is conceptually similar to the stress tests conducted by us and european regulators we argue that this measure summarizes the major characteristics of systemic risk and provides a reliable interpretation of the past and current financial crises

a single period inventory placement problem for a supply chain with the expected profit objective consider the expected profit maximizing inventory placement problem in an n stage supply chain facing a stochastic demand for a single planning period for a specialty item with a very short selling season each stage is a stocking point holding some form of inventory e g raw materials subassemblies product returns or finished products that after a suitable transformation can satisfy customer demand stocking decisions are made before demand occurs because of delays only a known fraction of demand at a stage will wait for shipments unsatisfied demand is lost the revenue salvage value ordering shipping processing and lost sales costs are proportional there are fixed costs for utilizing stages for stock storage after characterizing an optimal solution we propose an algorithm for its computation for the zero fixed cost case the computations can be done on a spreadsheet given normal demands for the nonnegative fixed cost case we develop an effective branch and bound algorithm

how does liquidity affect government bond yields the paper explores the determinants of yield differentials between sovereign bonds using euro area data there is a common trend in yield differentials which is correlated with a measure of aggregate risk in contrast liquidity differentials display sizeable heterogeneity and no common factor we propose a simple model with endogenous liquidity demand where a bond s liquidity premium depends both on its transaction cost and on investment opportunities the model predicts that yield differentials should increase in both liquidity and risk with an interaction term of the opposite sign testing these predictions on daily data we find that the aggregate risk factor is consistently priced liquidity differentials are priced for a subset of countries and their interaction with the risk factor is in line with the model s prediction and crucial to detect their effect

was it different the second time an empirical analysis of contagion during the crises in greece 2009 15 over the period between end 2009 and end 2015 greece experienced two discernible financial crises this article undertakes a correlation analysis of risk premia to investigate the nature and extent of contagion from these crises to other selected euro zone countries a commonly expressed view is that the effects of the second crisis were more muted since the systemic risks were seen by markets as being lower however using a rolling correlation model a dcc garch model and a t copula model we find that this is not the case broadly speaking the contagion effects of the second crisis were at least as large as those associated with the first one

inventory control with an exponential utility criterion a base stock policy is shown to be optimal when a dynamic version of the news vendor model is optimized with respect to an exponential utility criterion

technological platforms and diversification as the invention of fundamental new sciences spawns subsequent research discovery and commercialization core technologies branch into new applications and markets some of them evolve over time into many derived technologies whereas others are essentially dead ends the pattern of evolution and branching is called a technological trajectory an intriguing question is whether some firms can ride the trajectory by developing proprietary experience in a platform technology because the knowledge is proprietary firms that originate in industrial fields based on a platform technology acquire the technological skills to diversify and to mimic the branching of the underlying technological trajectory the ability to compete in hypercompetitive markets depends on the acquisition of know how that is applicable to a wide set of market opportunities such capabilities serve as platforms into quickly evolving markets to respond rapidly to market changes a firm must have already acquired fundamental compet

sovereign bond yield spreads a time varying coefficient approach abstract we study the determinants of sovereign bond yield spreads across 10 emu countries between q1 1999 and q1 2010 we apply a semiparametric time varying coefficient model to identify to what extent an observed change in the yield spread is due to a shift in macroeconomic fundamentals or due to altering risk pricing we find that at the beginning of emu the government debt level and the general investors risk aversion had a significant impact on interest differentials in the subsequent years however financial markets paid less attention to the fiscal position of a country and the safe haven status of germany diminished in importance by the end of 2006 two years before the fall of lehman brothers financial markets began to grant germany safe haven status again one year later when financial turmoil began the market reaction to fiscal loosening increased considerably the altering in risk pricing over time period confirms the need of time varying coefficient models in this context

the evolution of new industries and the determinants of market structure several empirical regularities concerning firm growth rates and industry firm size distributions have been developed by studying primarily mature industries the primary purpose of this article is to bring together and extend empirical regularities on the evolution of new industries and to use these regularities to gain further insight into the forces governing industry evolution to explain these regularities a model is constructed which emphasizes how factors governing the early evolution of industries may shape their market structure at maturity it stresses how chance events and exogenous factors that influence the number of potential entrants to the industry the growth rate of incumbents and the ease of imitation of industry leaders will influence the ultimate number and size distribution of firms in the industry

var as a risk measure for multiperiod static inventory models abstract this paper explores the possibility to use value at risk var in the context of inventory management var is being used more and more in financial management as a natural measure of the risk taken with a given position in the framework of inventory management it can work as well after having built a decision model where the choice concerns the quantity to be ordered to face a random demand in order to optimize the expected result an expected cost to be minimized or an expected profit to be maximized the model explores the probability distribution of the result both via analytical methods and via simulation methods the analytical exploration of this problem has originated a general method to deduce from inequalities for distribution functions which are based on the expected value related tail inequalities which are particularly useful for var problems where only one tail is involved

aggregate constrained inventory systems with independent multi product demand control practices and theoretical limitations in practice inventory managers are often confronted with a need to consider one or more aggregate constraints these aggregate constraints result from available workspace workforce maximum investment or target service level we consider independent multi item inventory problems with aggregate constraints and one of the following characteristics deterministic leadtime demand newsvendor basestock policy rq policy and ss policy we analyze some recent relevant references and investigate the considered versions of the problem the proposed model formulations and the algorithmic approaches finally we highlight the limitations from a practical viewpoint for these models and point out some possible direction for future improvements

affine modeling of credit risk pricing of credit events and contagion we propose a discrete time affine pricing model that simultaneously allows for i the presence of systemic entities by departing from the no jump condition on the factors conditional distribution

a note on probability distributions with increasing generalized failure rates distributions with an increasing generalized failure rate igfr have useful applications in pricing and supply chain contracting problems we provide alternative characterizations of the igfr property that lead to simplify verifying whether the igfr condition holds we also relate the limit of the generalized failure rate and the moments of a distribution

how larger demand variability may lead to lower costs in the newsvendor problem in this paper we consider the newsvendor problem intuition may lead to the hypothesis that in this stochastic inventory problem a higher demand variability results in larger variances and in higher costs in a recent paper song 1994a has proved that the intuition is correct for many demand distributions that are commonly used in practice such as for the normal distribution function however this paper shows that there exist demand distributions for which the intuition is misleading i e for which larger variances occur in combination with lower costs to characterize these demand distributions we use stochastic dominance relations

eurozone sovereign contagion evidence from the cds market 2005 2010 abstract this paper analyses the dynamics of the credit default swap cds market of piigs france germany and the uk for the period of 2005 2010 the study is performed on the basis of the datastream and dtcc data on cds spreads and the bis data on cross border exposures the analysis of the data shows that sovereign risk mainly concentrates in the eu countries the ewma correlation analysis and the granger causality test demonstrate that there was contagion effect since correlations and cross county interdependencies increased already after august 2007 furthermore the irf analysis shows that among piigs the cds markets of spain and ireland have the biggest impact on the european cds market whereas the cds market of the uk does not cause a big distress in the eurozone the adjusted correlation analysis confirms that greece and other piigs even spain and italy have lower capacity to trigger contagion than core eu countries besides portugal is the most vulnerable country in the sample whereas the uk is the most immune to shocks

decision bias in the newsvendor problem with a known demand distribution experimental evidence in the newsvendor problem a decision maker orders inventory before a one period selling season with stochastic demand if too much is ordered stock is left over at the end of the period whereas if too little is ordered sales are lost the expected profit maximizing order quantity is well known but little is known about how managers actually make these decisions we describe two experiments that investigate newsvendor decisions across different profit conditions results from these studies demonstrate that choices systematically deviate from those that maximize expected profit subjects order too few of high profit products and too many of low profit products these results are not consistent with risk aversion risk seeking preferences prospect theory preferences waste aversion stockout aversion or the consequences of underestimating opportunity costs two explanations are consistent with the data one subjects behave as if their utility function incorporates a preference to reduce ex post inventory error the absolute difference between the chosen quantity and realized demand two subjects suffer from the anchoring and insufficient adjustment bias feedback and training did not mitigate inventory order errors we suggest techniques to improve decision making

risk assessment on euro area government bond markets the role of governance abstract since the announcement of the outright monetary transactions program omt government bond yield spreads have decreased substantially but have not fallen to pre crisis levels this paper argues that the debt to gdp ratio has become less relevant as a determinant for government bond spreads while financial markets have become more concerned about the willingness and the capability to cooperate with the institutions that conduct the adjustment programs since the announcement of omt the paper links the willingness and the capability to cooperate to political stability and the quality of governance for which the indicators are available from the world bank by means of a time varying coefficient approach it can be shown that the coefficient for a composite world bank indicator on the quality of governance has outpaced other possible determinants of government bond spreads since the announcement of omt

gauging potential sovereign risk contagion in europe abstract this study adopts the covar methodology to analyse the tail risk relationships among european sovereigns which provide arguably important information for policymakers to identify countries that should come under close scrutiny during the current debt crisis

inventory pooling with environmental constraints using copulas abstract pooling is a best practice in inventory management for economic objectives in this paper we investigate whether pooling stays advantageous if environmental sustainability is considered in addition to the economic performance i e we analyze whether pooling could have a negative impact on the environment and evaluate the resulting trade off between economic and environmental performance within the newsvendor framework we consider three pooling models pooling via centralized ordering physical centralization including inventory allocation to the retailers with priority allocation and transshipments in addition we include environmental constraints based on carbon emissions covering all manufacturing and logistics operations of the product we characterize the optimal policy of the pooling models with emission constraints make a detailed comparison between the models and compare them to the decentralized i e no pooling case using copulas to model the joint distribution of dependent demands we prove that the profit decreases with increasing demand dependence further if the environmental constraint is binding optimal inventory level and emissions decrease with increasing demand dependence and pooling harms the environment compared to the case of no pooling additionally we numerically evaluate the impact of copulas and characterize when the economic and environmental performance of pooling can be balanced

multi product newsvendor problem with value at risk considerations abstract we consider the single period stochastic inventory newsvendor problem with downside risk constraints the aim in the classical newsvendor problem is maximizing the expected profit this formulation does not take into account the risk of earning less than a desired target profit or losing more than an acceptable level due to the randomness of demand we utilize value at risk var as the risk measure in a newsvendor framework and investigate the multi product newsvendor problem under a var constraint to this end we first derive the exact distribution function for the two product newsvendor problem and develop an approximation method for the profit distribution of the n product case n 2 a mathematical programming approach is used to determine the solution of the newsvendor problem with a var constraint this approach allows us to handle a wide range of cases including the correlated demand case that yields new results and insights the accuracy of the approximation method and the effects of the system parameters on the solution are investigated numerically

the setting of profit targets for target oriented divisions abstract setting profit targets and striving to achieve them is fundamental to business survival and success however there has been little research on modeling profit target setting in this paper we study analytic target setting under a common business scenario where a firm is in control of multiple divisions both the firm and the divisions maximize the profit probability i e the probability of achieving some given profit target the firm sets a profit target for each division which then acts as a price setting newsvendor we first obtain the optimal order quantity the optimal retail price and the maximal profit probability of a single division given its assigned target we then derive the firm s profit probability and focus on two specific cases to gain more managerial insights in the first case of fair target setting we show that when each division s demand distribution has an increasing failure rate if a division has a relatively high low production cost its assigned profit target decreases increases with regard to its price elasticity in the second case if the firm is in control of two identical divisions each division s optimal profit target is just half of the firm s profit target when the price elasticity is two or more regardless of production cost and demand distribution