Customer retention when the customer's future usage is uncertain

Consumers are often uncertain about how much they will use a service in the future (e.g., health clubs, credit cards, cell phones), yet the effects of this uncertainty on customer retention have not been studied. This research investigates factors influencing consumers' decisions about whether to retain noncontractual services for which anticipated future usage levels are uncertain. The studies show that Future Usage Uncertainty (FUU) generally reduces the likelihood that a customer will continue in a service relationship. However, when consumers consider the flexibility they have to delay the keep/drop decision (i.e., drop flexibility), or the anticipated regret associated with making the wrong decision, the effects of FUU are essentially eliminated, and consumers are more likely to continue in the relationship. © 2007 Wiley Periodicals, Inc.     

Relational Contracting in Partnerships

When performance is not verifiable, firms in a long-term relationship may rely on incentive contracts that are self-enforced or "relational." This paper studies the optimal design and performance of relational contracts in partnerships such as joint ventures or buyer-seller alliances. Optimal contracts look the same in each period as long as the relationship continues, but may require termination of the relationship after bad outcomes. Payments between the partners depend on their relative performance. In the special case of bilateral trade with specific investments, optimal relational contracting results in a price that varies with cost and demand conditions but is more stable than under spot market bargaining. Parallels are drawn with "Japanese style" subcontracting.     

Just-in-time inventory systems innovation and the predictability of earnings

Firms that adopt just-in-time (JIT) inventory practices do so in order to realize cost savings and improve product quality, but an unexpected benefit to such firms could be a more predictable earnings stream. We examine the relationship between implementation of just-in-time inventory practices and the predictability of future quarterly earnings for a matched-pair sample of 82 firms, half of which have publicly announced that they have adopted JIT inventory practices. We find that one- and four-step-ahead forecasts of quarterly earnings, using either a Brown–Rozeff [Journal of Accounting Research (1979) 179–189] ARIMA or a seasonal random walk expectation model, are more accurate for the firms that have adopted JIT.     

Tests of Fairness Models Based on Equity Considerations in a Three-Person Ultimatum Game

Two recent models incorporating fairness considerations into the economics literature based on agents' concerns about the distribution of payoffs between themselves and others (Fehr-Schmidt, 1999,Quarterly Journal of Economics. 114 (3), 769–816; Bolton-Ockenfels, 2000,American Economic Review. 90, 166–193) are investigated using a new three-person ultimatum game: One person allocates a sum of money to two others, one of which is randomly chosen to accept or reject the offer. Rejection gives both the responder and the proposer zero income and a positive consolation prize for the non-responder. The data show essentially no reductions in rejection rates, holding offers constant, with and without consolation prizes, contrary to both models' predictions.     

A re-examination of socially responsible consumption and its measurement

Socially responsible consumption is increasing and many companies are responding to the desires and, in some cases, demands of socially and environmentally responsible consumers. Theoretically, the domain of socially responsible consumption has changed over the years, as have socially responsible corporate programs in the marketplace. The Socially Responsible Purchase and Disposal (SRPD) scale is developed to reflect recent developments that have occurred in theory and practice. Three dimensions of socially responsible consumption emerge: (1) purchasing based on firms' corporate social responsibility (CSR) performance; (2) recycling; and (3) avoidance and use reduction of products based on their environmental impact. The SRPD provides a tool for academicians and practitioners in the development of theory and marketing strategy.     

Understanding children's engagement with interpretation at a cultural heritage museum

This study aims to investigate how, and the extent to which, different interpretation techniques (e.g. visual, verbal and interactive) at a cultural heritage museum affect children's behaviour, associated with their engagement with interpretive materials and their understanding of the content and its key ideas and messages presented as cultural lessons. An exploratory study with classes of primary-school-aged children, adopting a qualitative method including observation and post-visit in-depth interviews, was carried out. The results did not indicate any discernible difference between the types of interpretation technique used, with regard to their interaction with the site, or their understanding of the museum's content. Rather, it is the circumstances under which the interpretation techniques were used by the children. Two main variations in the way that the children interacted with their peers and the interpretation were found to affect the level of understanding of different stories, and female and male children showed generalised preferences for different forms of behaviour. How these behavioural patterns impacted on their understanding of the interpretation and meanings of the displayed objects at the museum is discussed.     

Framing the decision to buy long-term care insurance: losses and gains in the context of statistical and narrative evidence

Rational models have difficulty explaining low levels of demand for long-term care insurance. We posit that insurers have framed the need for insurance in a manner that unintentionally promotes risk-seeking behavior (i.e., high probability loss frame), and that alternative frames can better promote willingness to insure. We further posit that emotional frames are more effective than rational risk frames in promoting willingness to pay. Survey evidence supports these hypotheses: emotional narrative frames are associated with greatest willingness to pay, and the high probability loss frame was associated with among the lowest average amounts willing to pay.     

Agriculture and climate change in global scenarios: why don't the models agree

Agriculture is unique among economic sectors in the nature of impacts from climate change. The production activity that transforms inputs into agricultural outputs involves direct use of weather inputs (temperature, solar radiation available to the plant, and precipitation). Previous studies of the impacts of climate change on agriculture have reported substantial differences in outcomes such as prices, production, and trade arising from differences in model inputs and model specification. This article presents climate change results and underlying determinants from a model comparison exercise with 10 of the leading global economic models that include significant representation of agriculture. By harmonizing key drivers that include climate change effects, differences in model outcomes were reduced. The particular choice of climate change drivers for this comparison activity results in large and negative productivity effects. All models respond with higher prices. Producer behavior differs by model with some emphasizing area response and others yield response. Demand response is least important. The differences reflect both differences in model specification and perspectives on the future. The results from this study highlight the need to more fully compare the deep model parameters, to generate a call for a combination of econometric and validation studies to narrow the degree of uncertainty and variability in these parameters and to move to Monte Carlo type simulations to better map the contours of economic uncertainty.