Is econometrics useful for private policy making? A case study of replacement policy at an auto rental company

The goal of this paper is to illustrate the potential usefulness of econometrics as a tool to assist private policy makers. We provide a case study and detailed econometric analysis of the automobile replacement policy adopted by a large car rental company. Unlike public policy making–where the benefits from using econometric models and “science-based” approaches to policy making are hard to quantify because the outcomes of interest are typically subjective quantities such as “social welfare”–in the case of firms there is an objective, easily quantifiable criterion for judging whether policy A is better than policy B: profits. We introduce and estimate an econometric model of the rental histories of individual cars in the company’s fleet. Via stochastic simulations, we show that the model provides a good approximation to the company’s actual operations. In particular, the econometric model is able to reproduce the extraordinarily high rates of return that the company obtains on its rental cars, with average internal rates of return between purchase and sale of approximately 50%. However, the econometric model can simulate outcomes under a range of counterfactual vehicle replacement policies. We use the econometric model to simulate the profitability of an alternative replacement policy under pessimistic assumptions about the rate maintenance costs would increase and rental rates would have to be decreased if the company were to keep its rental cars longer than it does under the status quo. Depending on the vehicle type, we find that the company’s expected discounted profits would be between 6% to over 140% higher under the suggested alternative operating strategy where vehicles are kept longer and rental rates of older vehicles are discounted to induce customers to rent them. The company found this analysis to be sufficiently convincing that it undertook an experiment to verify the predictions of the econometric model.     

Information technology and culture: Identifying fragmentary and holistic perspectives of culture

In this paper, we review the literature on information technology (IT) and culture. The construct of “culture” has alternately been defined and studied by international scholars as national culture, and by organizational scholars as organizational or corporate culture. We argue that, despite the considerable amount of research activity in these areas, the two research traditions have existed as “stovepipes,” operating in parallel but not communicating effectively with each other. After reviewing how the linkage between IT and culture has been conceptualized in the literatures on national and organizational culture, we identify some gaps in these research streams, and propose a new conceptualization of culture. Grounding our framework in social identity theory (SIT), we argue that it is necessary to advance from the fragmentary perspectives that exist at present to a more holistic view of culture. We believe that this novel perspective will enable scholars to move toward a more multi-faceted view of culture as a richly layered set of forces that shape individuals’ beliefs and actions. We also identify opportunities for mutual learning, areas of challenge, and domains of possible contradiction between the two research streams as one step toward further theoretical advances.     

不同产品类型下虚拟体验营销对品牌忠诚度影响研究 ——有调节的中介效应模型

以品牌在网上的虚拟品牌体验活动为主题,研究品牌创新感知在品牌体验与品牌忠诚度间的中介作用,并考察产品类型对品牌创新感知的调节作用。结果发现:(1)品牌创新感知能作为中介解释虚拟品牌体验对品牌忠诚度的影响,并确认品牌体验能有效引起消费者的品牌创新感知;(2)产品类型调节品牌体验中的感官体验、思考体验与行动体验,通过品牌创新感知起到对消费者品牌忠诚的影响;当产品类型为享乐型产品时,感官体验、思考体验与行动体验对品牌创新感知的正向效应更强。     

Myopic utility functions on sequential economies

In Brown and Lewis (1981) continuity in the Mackey topology of (l^∞, l¹) is related to myopic (or impatient) economic behavior. They also show that finer (locally convex) topologies admit continuous non-myopic utility functions. In that work the space of bounded sequences, l^∞, is interpreted as all time sequences of bounded consumption plans. In Brown (1981) the analysis is extended to study the theory of interest on related sequence spaces.This note applies our simple technique for ‘computing’ Mackey continuity of real-valued functions defined on l^∞. Our first result is motivated by Bewley's (1972, app. II) theorem, but extends it in several important ways (on sequential economies). First, Beweley's examples (specialized to the sequential setting) are all ‘temporally separable’,that is, consumption in one time period does not affect indifference sets in another. We give new explicit examples of Cobb-Douglass-like utility functions and show that the ‘obvious’ infinite-dimensional Cobb-Douglass functions are non-myopic. Known equilibrium theory [from Bewley (1972), but pre-dating him in the sequential case] applies to these new examples. Second, we remove the assumptions of concavity and monotony from the proof of continuity.Our second result shows that some of the ‘stationary’ utility functions studied by Koopmans, Diamond and Williamson (1964) are also myopic in the sense of Brown and Lewis. In general their work is based on the finer uniform topology.Finally, we show how to transform our technique so that it applies to Brown's more general sequential economies. A change of variables transfers our examples to these spaces.     

Graphical Analysis of Capability of a Process Producing a Product Family

Statistical techniques are effective and powerful means of quantifying the variability of processes, analyzing this variability with reference to product requirements, and eliminating this variability in product manufacturing. Many process capability indices have been effectively and widely used to determine whether the quality of a process meets preset targets. However, conventional process capability indices cannot be applied to assess the entire process capability of a product family with nominal-the-best specifications. This work presents a novel process capability index (C_pp^T), which takes into account all family members. The index C_pp is a simple transformation from index C_pm, and C_pp^T provides additional, individual information concerning the accuracy and precision of a process. Vännman’s (δ, γ)-plot [Vännman and Deleryd, Quality and Reliability Engineering International 15(3): 213–217 (1999)] is revised to compare the process capabilities of family members under both 100% inspection and sampling plans. Examples are provided to demonstrate the method’s practical application.     

Restricted houseswapping games

Restricted houseswapping games (RHGs) are a generalization of ‘one-sided matching games’, in which we specify a class II* of ‘allowable’ simple trading cycles. The cores of such games may be empty. Given II*, all possible closed RHGs have non-empty cores of II* is ‘strongly balanced’. Examples include the one-sided matching markets (^{Shapley and Scarf. Journal of Mathematical Economics 1974. 1. 23–37}. ^{Tijs et al., OR Spektrum 1984, 6, 119–123}; ^{Quinzii, International Journal of Game Theory 1984, 13, 41–60}) and the two-sided matching markets (^{Gale and Shapley. American Mathematical Monthly 1962. 69, 9–16}; ^{Shapley and Shubik, International Journal of Game Theory 1972, 1, 111–130}: and ^{Demange and Gale Econometrica 1985, 53, 873–888}).We then consider the subclass of RHGs in which there is no transferable resource. In this case, a weaker condition on II*, called ‘weak balancedness’, is sufficient to guarantee core non-emptiness. In addition, if II* is not weakly balanced, then there exists a preference profile such that the strict core of the resultant game is empty.Several other examples are given of II* that are (a) strongly balanced: (b) weakly balanced but not strongly balanced: and (c) not even weakly balanced.Finally, we discuss the issues of equilibrium definition, existence, and core-equilibrium allocation equivalence in RHGs.     

Benchmark priors for Bayesian model averaging

In contrast to a posterior analysis given a particular sampling model, posterior model probabilities in the context of model uncertainty are typically rather sensitive to the specification of the prior. In particular, ‘diffuse’ priors on model-specific parameters can lead to quite unexpected consequences. Here we focus on the practically relevant situation where we need to entertain a (large) number of sampling models and we have (or wish to use) little or no subjective prior information. We aim at providing an ‘automatic’ or ‘benchmark’ prior structure that can be used in such cases. We focus on the normal linear regression model with uncertainty in the choice of regressors. We propose a partly non-informative prior structure related to a natural conjugate g-prior specification, where the amount of subjective information requested from the user is limited to the choice of a single scalar hyperparameter g_0j. The consequences of different choices for g_0j are examined. We investigate theoretical properties, such as consistency of the implied Bayesian procedure. Links with classical information criteria are provided. More importantly, we examine the finite sample implications of several choices of g_0j in a simulation study. The use of the MC³ algorithm of Madigan and York (Int. Stat. Rev. 63 (1995) 215), combined with efficient coding in Fortran, makes it feasible to conduct large simulations. In addition to posterior criteria, we shall also compare the predictive performance of different priors. A classic example concerning the economics of crime will also be provided and contrasted with results in the literature. The main findings of the paper will lead us to propose a ‘benchmark’ prior specification in a linear regression context with model uncertainty.     

Structural instability of the core

Let σ be a q-rule, where any coalition of size q, from the society of size n, is decisive. Let w(n,q)= 2q-n+1 and let W be a smooth ‘policy space’ of dimension w. Let U(W)^N be the space of all smooth profiles on W, endowed with the Whitney topology. It is shown that there exists an ‘instability dimension’ w^*(σ) with 2w^*(σ)w(n,q) such that:

1. (i) if ww^*(σ), and W has no boundary, then the core of σ is empty for a dense set of profiles in U(W)^N (i.e., almost always),

2. (ii) if ww^*(σ)+1, and W has a boundary, then the core of σ is empty, almost always,

3. (iii) if ww^*(σ)+1 then the cycle set is dense in W, almost always,

4. (iv) if ww^*(σ)+2 then the cycle set is also path connected, almost always.

The method of proof is first of all to show that if a point belongs to the core, then certain generalized symmetry conditions in terms of ‘pivotal’ coalitions of size 2q−n must be satisfied. Secondly, it is shown that these symmetry conditions can almost never be satisfied when either W has empty boundary and is of dimension w(n,q) or when W has non-empty boundary and is of dimension w(n,q)+1.     

关系营销策略对客户忠诚的影响

本文利用可置信承诺界定关系营销策略的内涵,在此基础上探讨关系营销策略到客户忠诚的影响途径,认为它是一个从心理到行为逐步过渡的过程,正是客户关系质量的三个层次:满意、信任、关系承诺完成了客户从心理依赖到行为忠诚的转变,最后通过引入客户个体因素对该影响途径进行扩展分析。     

Explicit filters and supply chain design

Due to the complexity of present day supply chains it is important to select the simplest supply chain scheduling decision support system (DSS) which will determine and place orders satisfactorily. We propose to use a generic design framework, termed the explicit filter methodology, to achieve this objective. In doing so we compare the explicit filter approach to the implicit filter approach utilised in previous OR research the latter focusing on minimising a cost function. Although the eventual results may well be similar with both approaches it is much clearer to the designer, both why and how, an ordering system will reduce the Bullwhip effect via the explicit filter approach. The “explicit filter” approach produces a range of DSS designs corresponding to best practice. These may be “mixed and matched” to generate a number of competitive delivery pipelines to suit the specific business scenario.     

Competitive prizes: when less scrutiny induces more effort

We consider a principal who is keen to induce his agents to work at their maximal effort levels. To this end, he samples n days at random out of the T days on which they work, and awards a prize of B dollars to the most productive agent. The principal’s policy (B, n) induces a strategic game Γ(B, n) between the agents. We show that to implement maximal effort levels weakly (or, strongly) as a strategic equilibrium (or, as dominant strategies) in Γ(B, n), at the least cost B to himself, the principal must choose a small sample size n. Thus less scrutiny by the principal induces more effort from the agents.The need for reduced scrutiny becomes more pronounced when agents have information of the history of past plays in the game. There is an inverse relation between information and optimal sample size. As agents acquire more information (about each other), the principal, so to speak, must “undo” this by reducing his information (about them) and choosing the sample size n even smaller.     

Levels of strategic purchasing: Impact on supply integration and performance

The growing importance of supply chain management has led to an increasing recognition of the strategic role of purchasing, which has recently evolved and expanded from “buying” to “procurement” and “supply management”. In this study, we chart our sample firms’ advance in strategic purchasing, characterized by the strategic focus, strategic involvement of the purchasing function and the status and visibility of the purchasing professionals, into three stages.This study provides strong empirical support for the importance of strategic purchasing by showing that, by moving towards the more advanced stages, firms at the nascent stage of strategic purchasing can achieve better supply integration, a second-order construct composed of four facets of relational, process, information, and cross-organizational team integration. Our analyses further reveal that strategic purchasing can have a profound impact on supply chain performance for both buyer and supplier firms.     

Does relationship learning lead to relationship value? A cross-national supply chain investigation

In global business-to-business markets, shared resources between buyers and suppliers often result in competitive advantages and enhanced relationships between firms. Unfortunately, there is a paucity of research regarding learning capabilities between business partners in a cross-border setting. This study takes the approach to integrate customer value literature into interorganizational learning theory and adopts the often-neglected theoretical perspective of transaction value by contextualizing inter-firm collaboration in terms of relationship learning and value co-creation viewed by both the buyers and sellers in one single study. Through the development of a conceptual framework that examines how global environmental and inter-organizational conditions influence learning capabilities, the study investigates how relationship learning influences relationship value for both supplying and buying firms. Using a survey of 126 cross-border dyads in the industrial chemical, packaging, consumer durable, and apparel industries, the authors show how relationship learning is valued by both buyers and suppliers, and how it is critical when viewing the “supplier as a customer.” The results indicate the strategic nature of relationship learning in maintaining cross-border business-to-business relationships. Simultaneously, the findings provide evidence that cultural distance is not a significant influence on the firm's propensity to share knowledge with its global partners. It helps advance our understanding of the significance of cultural-pollination in the era of globalization.     

Using the phone to reduce donor attrition and drive loyalty

• Donor attrition is a major issue for fundraisers. With 40% of new monthly givers lapsing within a year of sign up, new techniques are urgently needed to slow the rate at which donors stop giving. Drawing on the commercial world's long‐established loyalty programmes, telephone fundraising agency, Pell & Bales, designed a programme of pure loyalty calls that reduced donor attrition by more than 10% over a year. These calls contain no ‘ask’; instead, they harness the power of the telephone by talking with and listening to supporters, building real and lasting relationships.

Copyright © 2013 John Wiley & Sons, Ltd.     

Arbitrage and price revelation with asymmetric information and incomplete markets

This paper deals with the issue of arbitrage with differential information and incomplete financial markets, with a focus on information that no-arbitrage asset prices can reveal. Time and uncertainty are represented by two periods and a finite set S of states of nature, one of which will prevail at the second period. Agents may operate limited financial transfers across periods and states via finitely many nominal assets. Each agent i has a private information about which state will prevail at the second period; this information is represented by a subset S_i of S. Agents receive no wrong information in the sense that the “true state” belongs to the “pooled information” set ∩_iS_i, hence assumed to be non-empty.Our analysis is two-fold. We first extend the classical symmetric information analysis to the asymmetric setting, via a concept of no-arbitrage price. Second, we study how such no-arbitrage prices convey information to agents in a decentralized way. The main difference between the symmetric and the asymmetric settings stems from the fact that a classical no-arbitrage asset price (common to every agent) always exists in the first case, but no longer in the asymmetric one, thus allowing arbitrage opportunities. This is the main reason why agents may need to refine their information up to an information structure which precludes arbitrage.     

Stochastic processes of temporary equilibria

It is the aim of the paper to study within the framework of an ‘overlapping generation model’ the evolution of temporary equilibria. At date t, there are ‘newborn’ agents and ‘old’ agents who were born in previous periods; the old agents hold cash balances (fiat money) that they carried over from the previous period. At the beginning of period t, all agents receive a random endowment of consumption goods. Then the agents exchange these endowments and money on spot markets at date t (trading in future markets is not considered). Once a temporary equilibrium is reached, the economy move to the next date. Agents who were born at date t then become old and meet agents born at period t+1.It is shown that the evolution of temporary equilibria in this model leads to analyse the ergodic properties of a certain class of Markov processes with stationary transition probability.     

“Agreeing to disagree” type results: a decision-theoretic approach

This paper explores interactive epistemology within Morris’ [S. Morris, Alternative definitions of knowledge, in: M.O.L. Bacharach, L.-A. Gerard-Varet, P. Mongin, H.S. Shin (Eds.), Epistemic Logic and the Theory of Games and Decisions, Kluwer Academic Publishers, Amsterdam, 1997, pp. 217–233] framework of knowledge. Specifically, this paper proves a generalized “agreeing to disagree” result. The major features of this formalization are: (i) non-expected utility receives a unified treatment; (ii) the information structure is not necessarily partitional; (iii) Aumann’s celebrated result of “agreeing to disagree” and Milgrom and Stokey’s well-known result of “no trade” are derived as special cases. This paper also presents some new extensions of the “no trade theorem”.