Trade barriers and trade flows with product heterogeneity: An application to US motion picture exports

We extend Melitz (2003) to allow for both global and bilateral fixed export costs. If global (bilateral) export costs dominate, the average sales ratio (import sales per product variety/domestic sales per variety), decreases (increases) in variable (fixed) trade barriers, due to adjustment along the intensive (extensive) margin of trade. Using novel data on bilateral US movie exports we find that (i) variation in box-office revenues per movie is much larger than in the number of movies exported, and (ii) the average sales ratio decreases in geographic and linguistic distance. These findings suggest that global fixed export costs dominate.     

Mortgage convexity

Most home mortgages in the United States are fixed-rate loans with an embedded prepayment option. When long-term rates decline, the effective duration of mortgage-backed securities (MBS) falls due to heightened refinancing expectations. I show that these changes in MBS duration function as large-scale shocks to the quantity of interest rate risk that must be borne by professional bond investors. I develop a simple model in which the risk tolerance of bond investors is limited in the short run, so these fluctuations in MBS duration generate significant variation in bond risk premia. Specifically, bond risk premia are high when aggregate MBS duration is high. The model offers an explanation for why long-term rates could appear to be excessively sensitive to movements in short rates and explains how changes in MBS duration act as a positive-feedback mechanism that amplifies interest rate volatility. I find strong support for these predictions in the time series of US government bond returns.     

Why do suppliers choose wholesale price contracts? End-of-season payments disincentivize retailer marketing effort

Although theoretical work has shown that end-of-season payment contracts, which allow suppliers and retailers to share the cost of unsold inventory, increase total profit, most suppliers and retailers today still use simple wholesale price contracts. In a series of experimental studies, we show that supplier preferences for wholesale price contracts can be explained by their concern that end-of-season payments contracts will disincentivize retailer marketing effort. Moreover, suppliers’ pessimistic predictions regarding reduced retailer effort are confirmed by retailers’ reduced investment in marketing effort in our experiments. Our results suggest that for suppliers and retailers to benefit from end-of-season payments contracts, retailers should publicize their demand-enhancing marketing practices.     

Friends with benefits: social coupons as a strategy to enhance customers’ social empowerment

Businesses often seek to leverage customers’ social networks to acquire new customers and stimulate word-of-mouth recommendations. While customers make brand recommendations for various reasons (e.g., incentives, reputation enhancement), they are also motivated by a desire for social empowerment—to feel an impact on others. In several multi-method studies, we show that facilitating sharing of social coupons (i.e., coupon sets that include one for self-use and one to be shared) is a unique marketing strategy that facilitates social empowerment. Firms benefit from social coupons because customers who share spend more and report greater purchase intentions than those who do not. Furthermore, we demonstrate that social coupons are most effective when the sharer’s brand relationship is new versus established. For customers with an established relationship, sharing with a receiver who also has an established relationship maximizes potential impact. Together, these studies connect social empowerment to relationship marketing and provide guidance to managers targeting social coupons.     

Improving process safety by addressing the human element

Celanese had several process safety incidents and near misses in 1996. Although there were several root causes, this article will address only one of them; human error. The system which was developed by Celanese to improve this human element is the conduct of operations system. The conduct of operations system has improved process safety performance of the human element by focusing on three operational areas: training, procedures, and general operations. Conduct of operations is a proactive approach to improve the current practices, improve the support systems and the behavior of the operator. The benefits include the following:

• Consistent application of training and procedures
• Reduction in human error, and
• Less process safety incidents

This article will describe the need for and the content of conduct of operations system as implemented by Celanese. © 2009 American Institute of Chemical Engineers Process Saf Prog, 2009     

Time to End the National Dock Labour Scheme

Dr Charles Hanson of Newcastle University argues that to complete its reform of the labour market the Government should abolish the National Dock Labour Scheme.     

Transportation sensitivity and regional growth

Transportation sensitivity differs considerably among industries within a region. The magnitude of difference is due to unequal comparative positions within the region, the market structure of the industry, and the attributes of the product. The divergency of transportation sensitivity among industries and regions calls for an explicit treatment of transportation factors in a general economic analysis; especially in regional planning.Both the value added and transfer cost elasticities are unrelated to the value of the commodity and bear a limited association with the ratios of value added to gross output. The common practice of using the ratio of transfer to processing costs as a measure of transfer cost sensitivity in location analysis is only a special case of the generalized measure of the (line haul) transfer cost sensitivity assuming that each industry in a region attains a same percentage change in transfer costs.Due to data limitation, the results presented here should be described as studies in the workability of the proposed models. A more critical analysis of the available data and the results following from the models are necessary before a final judgment can be reached.     

Transfer pricing in the multinational corporation: A critical appraisal

A distinguishing characteristic of the multinational corporation is its ability to determine with some discretion the prices at which intra-firm transfers of goods and services are recorded. The incentives to manipulate such transfer prices in pursuit of global corporate objectives are often substantial. This paper examines the potential for abuse of the transfer pricing tool by multinational corporations, considers the adequacy of legal rules or guidelines for the setting of transfer prices and the extent to which corporate practice conforms with such guidelines, and assesses the prospects for more effective governmental control of transfer pricing policies.