Do sustainable products make us prevention focused?

In recent years, increasing attention is evident with regard to the depletion of natural resources, the development of “green” products and services and the sustainability practices of organisations. Building on Regulatory Focus theory (Higgins, Organ Behav Hum Decis Processes 69(2):117–132, 1997), we examine the difference between a promotion focus for marketing products and services (which emphasises attainment, achievement and advancement) and a prevention focus (which emphasises protection, security and responsibility). The results of three empirical studies show that (1) perceived sustainability practices of a company activate a prevention focus in consumers, (2) consumers make prevention-focused inferences about the products of a sustainable company, and (3) sustainable products are perceived to be better positioned if they are marketed with prevention-framed (vs. promotion-framed) appeals. This suggests that companies with sustainability-oriented practices and product offerings will be more effective if they use prevention-focused appeals in their marketing efforts. Implications for theory and practice are discussed.     

Monetary policy synchronization in the ASEAN-5 region: an exchange rate perspective

In light of the long-standing vision of economic and monetary integration in the ASEAN (Association of Southeast Asian Nations) region and the importance of coordinating monetary policies to achieve it, the objective of this article is to assess the monetary policy synchronization among the founding members of the ASEAN, that is, Indonesia, Malaysia, the Philippines, Singapore and Thailand. Due to the importance of exchange rate movements to monetary policies, we approach this issue from a currency exchange rate perspective. Specifically, multivariate trend–cycle decomposition is employed to investigate common trends and common cycles among the exchange rates of these countries during the period 1976–2012. Our analysis reveals that the real exchange rates of Malaysia, the Philippines, Singapore and Thailand share common cycles in the short term and have common trends in the long term, but the Indonesian currency does not share these relationships. Thus, our results augur well for the synchronization of monetary policies among Malaysia, the Philippines, Singapore and Thailand. In contrast, the relatively turbulent dynamics of the Indonesian rupiah evident in frequent bouts of stark depreciation separated by periods of steady depreciation over the past three decades raise questions regarding the readiness of Indonesia for participating in a monetary alliance with the ASEAN-4 nations.     

Risk Taking and Performance of Public Insurers: An International Comparison

We investigate how investor protection, government quality, and contract enforcement affect risk taking and performance of insurance companies from around the world. We find that better investor protection results in less risk taking, as do higher quality government and greater contract enforceability. However, we find only limited evidence that these factors influence firm performance. We conclude that better overall operating environments result in less risk taking by insurers without the concomitant decline in performance. These results imply that better investor protection environments benefit policyholders and outside stockholders by preventing corporate insiders from expropriating wealth from policyholders and outside stockholders.     

Dynamic price discovery

This article analyzes the dynamic process of price discovery in a competitive securities market where investors are equally informed about the fundamental determinants of an asset's end-of-period value but, because they do not know each other's wealth positions, do not know the equilibrium price of shares at the start of a current trading session. Because a large number of participants is assumed, issues concerning market impact and market manipulation are avoided. As trading progresses, participants update their expectations of an asset's equilibrium value. As they do so, price can either converge to a new level or, following a run, revert back to a previous level. This implies that, in clusters of adjacent prices, price changes are more apt to be predominantly of like sign (positive or negative) than would be the case under random walk with a bid-ask spread. Moreover, reversals, when they do occur, should be larger than continuations. An examination of 1988 transactions data for the 30 Dow Jones Industrial stocks shows that this is indeed the case. With the effect of the bid-ask spread removed, first-order autocorrelation coefficients are found to be positive.     

An Empirical Model of Advertising Dynamics

This paper develops a model of dynamic advertising competition, and applies it to the problem of optimal advertising scheduling through time. In many industries we observe advertising “pulsing”, whereby firms systematically switch advertising on and off at a high-frequency. Hence, we observe periods of zero and non-zero advertising, as opposed to a steady level of positive advertising. Previous research has rationalized pulsing through two features of the sale response function: an S-shaped response to advertising, and long-run effects of current advertising on demand. Despite considerable evidence for advertising carry-over, existing evidence for non-convexities in the shape of the sales-response to advertising has been limited and, often, mixed. We show how both features can be included in a discrete choice based demand system and estimated using a simple partial maximum likelihood estimator. The demand estimates are then taken to the supply side, where we simulate the outcome of a dynamic game using the Markov perfect equilibrium (MPE) concept. Our objective is not to test for the specific game generating observed advertising levels. Rather, we wish to verify whether the use of pulsing (on and off) can be justified as an equilibrium advertising practice. We solve for the equilibrium using numerical dynamic programming methods. The flexibility provided by the numerical solution method allows us to improve on the existing literature, which typically considers only two competitors, and places strong restrictions on the demand models for which the supply side policies can be obtained. We estimate the demand model using data from the Frozen Entree product category. We find evidence for a threshold effect, which is qualitatively similar to the aforementioned S-shaped advertising response. We also show that the threshold is robust to functional form assumptions for the marginal impact of advertising on demand. Our estimates, which are obtained without imposing any supply side restrictions, imply that firms should indeed pulse in equilibrium. Predicted advertising in the MPE is higher, on average, than observed advertising. On average, the optimal advertising policies yield a moderate profit improvement over the profits under observed advertising.JEL Classification: L11, L66, M30 M37 R12     

Tax efficiency in selected Indian states

This paper attempts to measure pure tax efficiency of fifteen major Indian states (Andhra Pradesh, Assam, Bihar, Haryana, Gujarat, Karnataka, Kerala, Madhya Pradesh, Maharashtra, Orissa, Punjab, Rajasthan, Tamilnadu, Uttar Pradesh and West Bengal) for the period 1980–81 to 1992–93 in a manner that allows this efficiency to vary both across time as well as across states. It is discovered that there is a moral hazard problem in the design of central grants in that higher grants by the central government to the state governments reduce efficiency of tax collection by these states. The less poor states are more efficient in tax collection. The rankings of states by tax efficiency for the various years do not converge. An index of aggregate tax efficiency is calculated and it appears that this index has been stagnating. It is argued that the weight placed on tax effort in the formula determining central grants to state governments should be increased to improve tax efficiency of state governments. First version received: November 1997/final version received: November 1998     

Internet use and consumption diversity: Evidence from rural China

The Internet is integral to modern living. While the Internet is ubiquitous in China's urban areas, its uptake is still lagging in the country's rural regions—the development potential of the Internet remains untapped, and despite China's steep economic growth during the 21st century, the living standards in its rural regions remain low. The Internet can accelerate rural development in China. This study is focused on analyzing whether and to what extent Internet use affects consumption diversity, an indicator of the quality of life, in rural China. To this end, we employ the instrumental-variable-based two-stage endogenous treatment regression model to analyze the 2018 China Family Panel Studies survey data. The modeling approach allows us to account for the endogeneity of Internet use. The results show that consumption diversity is positively associated with Internet use. Furthermore, it rises with household income, household size, and wealth. Whether the Internet is accessed via smartphones or computers has no bearing on household consumption diversity. We also find that education, household income, and wealth increase one's predicted probability of using the Internet. The results also point to regional differences in consumption diversity and the likelihood of using the Internet.     

Corruption,remittances, and public goods: A unified framework

Remittances are an important source of income for the very countries afflicted by high levels of corruption. However, corruption undermines the development potential of remittances. With this in mind, we propose policy reforms that harness the potential of remittances while mitigating corruption. Unlike previous studies, we point to two channels: (1) the corrupt government's trade-off between its financial interests (corruption), the provision of a public good, and the gains from a higher inflow of remittances; and (2) the household's consumption of the public good relative to that of the privately obtained substitute of the public good.