Labor income and risky investments: can part-time farmers compete?

In the developed countries, a majority of farm households receive at least as much income from nonfarm sources as from the farm. Such part-time farms have survived inspite of lower returns than full-time farms. This paper considers when lower returns to part-time farming could be compensated by risk-reduction due to diversification of income sources. The paper uses a dynamic portfolio choice model with labor income. The model and results could be applied in other contexts as well.     

A dynamic approach to the analysis of strategic alliances

The increasing trend in strategic alliance formation between major firms around the world, has prompted researchers from various disciplines to look at this phenomenon in great detail. In this paper, we review alternate approaches in the literature in this area. We then propose a non-linear dynamic approach to study the formation of competitive strategic alliances and contrast it with the traditional game-theoretic approach. The pros and cons of these two approaches are discussed with reference to a competitive alliance scenario. Dynamic models have significant managerial implications as they enable us to investigate ‘if-then’ type scenarios and project the impact of different strategies.     

Structural models of complementary choices

This article reviews the rapidly growing literature on structural models of complementary choices. It discusses recent modeling developments and identifies promising areas for future research.     

Weak Property Rights and Holdup in R&D

We study how the sequence of financing of R&D varies according to the ease with which property rights over knowledge can be defined. There are two financiers: a venture capitalist (VC) and a corporation. The knowledge acquired in costly research becomes embodied in the researcher's human capital, and she may hold up the financier and walk away with the project to develop it elsewhere. The main results are: (1) When property rights are strong, research is always funded by the VC, development is performed efficiently, and breakaways from the VC to the corporation are observed in equilibrium. (2) When property rights are weak, projects may be financed by the VC or the corporation, or may remain unfunded. (3) When property rights are weak, no breakaways occur in equilibrium; local spillovers and strong product market competition increase the likelihood that research projects will get funding. (4) The equilibrium sequence of R&D finance need not be first-best efficient. (5) In equilibrium, and controlling for the strength of property rights, VCs finance projects that are more profitable on average.     

KALDORIAN DEMAND FUNCTIONS AND THE RETURN TO CAPITAL: AN ANALYSIS IN A TRADE THEORETIC FRAMEWORK

Abstract.  This paper shows that under certain plausible conditions capital accumulation raises the return to capital. A three good trade theoretic model with Kaldorian demand functions is used to establish this result. This proposition is also independent of the assumption of diminishing return to capital a key feature of endogenous growth theory. Our result sheds light on the high rates of investment and growth that many East Asian economies have achieved.     

ILLEGAL MIGRANTS, TOURISM AND WELFARE: A TRADE THEORETIC APPROACH

Abstract.  Many countries receive illegal migrants but are reluctant to accept them due to possible negative externalities. We provide a rationale for not policing illegal migration by linking it to the tourism industry. By paying illegal migrants less than local workers, the relative price of the non-traded goods is shown to be lower than it would be in the absence of such workers. An expansion in tourist trade, under certain intensity conditions, necessarily raises resident welfare and employment. This tourist boom necessarily lowers the welfare of the illegal migrants. It is established that an increase in tourism increases the supply of illegal migrants.     

Modeling response to repetitive promotional stimuli

Marketers frequently include promotional stimuli which elicit some form of response from the recipient among the tactics used to market products or services. Print ads, including 800 numbers which allow consumers to respond, and direct mail campaigns are examples of such activities. Promotions of this nature are often repeated a number of times, thus providing several opportunities to respond. Understanding consumer response to such campaigns is critical for more efficient design and use of these activities. A conceptual framework of response to repetitive stimuli is proposed, and stochastic models of alternative response patterns are developed. Alternative contexts in which such models are useful are also noted. Variations of the models are provided for those situations when only a fraction of the target population will ever respond. Estimation of model parameters is discussed, and data from actual campaigns are used to demonstrate how to apply the models. He received his Ph.D. in mathematical statistics from Michigan State University. He joined the Terry College of Business after a 15-year career in industry, including 10 years in consumer research at Procter & Gamble. His research interests include discrete choice models, market response to promotional stimuli, forecasting marketing potential from initial sales results, and, in general, applications of quantitative methods to business problems. He has published articles in such journals as theAnnals of Mathematical Statistics, Annals of Statistics, Journal of the Academy of Marketing Science, Journal of Retailing, and theJournal of Advertising. He earned his Ph.D. at Columbia University and has served as assistant and associate professor of marketing at New York University, as visiting assistant professor at Columbia University, and as visiting associate professor at the University of California, Los Angeles. He is a member of the editorial review boards ofMultivariate Behavioral Research andJournal of Marketing Channels. He has published in theJournal of Marketing Research, Journal of Marketing, andManagement Science, among others. His research interests include the study of brand extensions, relationship marketing, strategic alliances, and television program scheduling. He received his Ph.D. in marketing from the University of Georgia. His current research interests include marketing strategy, strategic alliances, relationship marketing, and the implications of new technologies on business research and practice. He has published in various conference proceedings and theInternational Business Review.     

R&D Reporting Biases and Their Consequences*

The immediate expensing of research and development (R&D) expenditures is often justified by the conservatism principle. However, no accounting procedure consistently applied can be conservative throughout the firm's life. We therefore ask the following questions: (1) When is the expensing of R&D conservative and when is it aggressive, relative to R&D capitaliza‐tion? (2) What are the capital‐market implications of these reporting biases? To address these questions we construct a model of profitability biases (differences between reported profitability under R&D expensing and capitalization) and show that the key drivers of the reporting biases are the differences between R&D growth and earnings growth (momentum), and between R&D growth and return on equity (ROE). Companies with a high R&D growth rate relative to their profitability (typically early life‐cycle companies) report conservatively, while firms with a low R&D growth rate (mature companies) tend to report aggressively under current generally accepted accounting principles. Our empirical analysis, covering the period 1972‐2003, generally supports the analytical predictions. In the valuation analysis we find evidence consistent with investor fixation on the reported profitability measures: we detect undervaluation of conservatively reporting firms and overvaluation of aggressively reporting firms. These misvaluations appear to be corrected when the reporting biases reverse from conservative to aggressive and vice versa. This evidence is consistent with behavioral finance arguments about investor cognitive biases.     

TOURISM, TAXES AND IMMISERIZATION: A TRADE THEORETIC ANALYSIS

Abstract.   Many countries promote tourism as a device for earning foreign exchange and promoting domestic welfare and growth. In all these countries the non-traded goods (internationally not traded) are consumed by both domestic residents and tourists. It is well known that the relative price of non-traded goods and services is determined in the local market – hence the tourist demand results in monopoly power in trade for the host country. We use a very simple two-country model to demonstrate the specific nature of the offer curve and the trade equilibrium and the difficulties of taxation.     

TOURISM AND REGIONAL IMMISERIZATION

Abstract.  This paper analyzes the consequences of tourism in rural and urban areas on regional incomes, welfare and urban unemployment using a generalized Harris Todaro model. In this model two urban and two rural goods are produced. A distinguishing characteristic of this model is that the urban non-traded good is not consumed in the rural region and, similarly, the rural non-traded good is not consumed in the urban region. The most important result we obtain is that a tourist boom in the urban region may immiserize the rural area. Hence the welfare interests of rural and urban consumers may be in conflict as a result of tourist expansion in the urban region.