Customs union theory and the nonuniformity of tariffs

Allowance is made for the initial nonuniformity of the tariffs of a union country before it joins a customs union. The reduction of such nonuniformity is a possible source of welfare again distinct from the usual trade creation and trade diversion effects. A net welfare gain from a union may result even when the country's total trade stays unchanged and even when all trade with the outsider ceases. A three-product, small-country model is used, domestic production and consumption substitution between the two importables yielding the import pattern effect that produces the possible gains referred to.     

When consumers become project backers: The psychological consequences of participation in crowdfunding

Crowdfunding involves financing new ventures by relying on a large number of individual project backers who typically receive the venture's new product as a reward for their financial support. In three experimental studies, it is revealed that crowdfunding participation increases the extent to which consumers can personally connect to and identify with the focal venture compared to customers who merely buy the product in a classic market exchange setting (the baseline in our analysis). This identification process, which is rooted in the insight that one's financial contribution is perceived to be more meaningful to the focal venture, is also shown to trigger behavioral effects on important outcome variables such as increased subsequent consumption of the venture's products and more positive word-of-mouth behavior. The studies thus validate the idea that crowdfunding may be an effective tool to build strong(er) relationships with the venture's initial customer base. Hence, crowdfunding might not only answer the question “Where could I get funding from?” but also another: “Where can I effectively connect with my future customers?” The findings further point to interesting consequences for participating consumers: because the venture is more strongly perceived as theirs, this means that also the associations linked to it may rub off more strongly on their sense of self compared to customers who merely buy the same venture's product in a classic market exchange setting. Crowdfunding participation may thus more strongly effect a qualitative change in the consumer's self-concept.     

Comparative dynamics in a life cycle theory of the firm

Important insights and contributions to the corporate financial manager's decision problem have been provided by the balanced-growth financial modeling literature, e.g., see [4, 5, 8, 10, 11, 13, 15]. In the spirit of this research, the objective of this paper is twofold. First, a normative model of the dynamic financial planning process in a deterministic environment is constructed wherein the traditional, steady-state assumptions are relaxed. In contrast to prior models, the firm is allowed to pay a liquidating dividend and faces a time-dependent investment rate of return, interest rate, and equity discount rate. Necessary and sufficient conditions for the levered firm's optimal investment-financing-dividend policy decisions which maximize the wealth of its investors are developed, and a solution synthesis technique is employed to catalogue the different decisions at each time instant in terms of three earnings-growth stages over the firm's life cycle. Over this life cycle, the firm experiences high, low, and negative growth stages, with the latter stage distinguished by a liquidating dividend payout and retirement of debt outstanding. Secondly, the life cycle depiction further permits an analysis of the effects, in terms of both direction and magnitude, on the optimal duration of the firm's different growth stages and optimal growth rates due to changes in the firm's return on investment, debt-equity ratio, borrowing rate, equity discount rate, depreciation rate, and flotation costs via a comparative dynamics and simulation framework. Changes in the return on investment are found to have the most influence on the duration of the firm's growth periods and their respective earnings growth rates, while changes in the mix of financing and depreciation rate tend to have the least effect. Furthermore, the magnitudinal impact of marginal changes in any of the above firm variables is greatest at low levels of debt-to-equity and growth-in-earnings and quickly dissipates as the degree of leverage increases.     

Moral consequences of a seller's market: Polish experience

The article is an analysis of the moral consequences of permanent and major shortages in supply for producers, distributors, and especially consumers. The analysis is based on the author's long experience, obtained in Poland during observations and studies of the behaviour of economic units and consumers. The conclusions presented can be generally applied to centrally planned economies. Similar studies are lacking in countries characterized by an `economics of shortage'. Immoral behaviour is reflected in the negligence of the socially accepted system of values and moral norms. In ‘economics of shortage’ this system has been largely destroyed, making moral evaluation of behaviour rather difficult. The seller's market puts society in a situation characterized by a conflict between the law and moral norms; it restricts distributive justice; makes it easier to infringe upon somebody's property; induces fraudulent activities to the detriment of the consumer; restricts the individual's freedom and the consumer's sovereignty; dehumanizes the consumption process; violates human dignity; carries a threat for family life and generates interhuman conflicts. Decisions concerning production and products do not make sufficient allowances for the needs of end users in the sphere of quality, assortment, information transmitted to consumers, and new product development. There exist, in parallel, different systems of allocation of goods and services: administrative allotment, government-controlled outlets, grey and black markets. The purchase of a product itself stretches in time and involves considerable obstacles. The consumer is forced to continue searching and queuing, compulsory substitution, compulsory spending of money and compulsory savings. All this paves the way for unethical behaviour of both sellers and consumers. Among consumers there can be seen symptoms of alienation from the market.     

Sexual orientation and consumption: Why and when do homosexuals and heterosexuals consume differently?

The increasing visibility of homosexuality in society, combined with the lesbian and gay community's considerable buying power, has triggered marketers and researchers' interest in understanding homosexual consumers' consumption patterns. Prior research on whether homosexual consumers behave differently from heterosexual consumers has yielded mixed results, and researchers and practitioners still do not know whether any substantial differences exist, what these differences look like, and how they can be explained. The findings from a meta-analysis reveal that sexual orientation explains on average <1% of the variation in consumption behavior across 45 papers, indicating only slightly different consumption behaviors. Findings from a moderator analysis contradict conventional wisdom and lay theories, while partly supporting assumptions that are rooted in evolutionary and biological theories that show consumption differences decrease with age; they increase when comparing homosexuals and heterosexuals of the same gender. These findings, which question long-held beliefs about homosexual consumers, help marketers to successfully adjust their strategies.     

An extension of the Kemp-Wan theorem on the formation of customs unions

Kemp and Wan (1976) proved that nations forming a customs union can always compensate each other so that no nation will be worse off, relative to the pre-union equilibrium. Their proof, however, is existential, giving no clue how to construct such compensation schemes. This paper proposes a particular compensation scheme which is always feasible. Further, there are circumstances where this scheme is the only feasible one. At world prices the arrangement breaks even for each nation. At post-union internal prices, member compensations sum to the union's tariff receipts. The proof that such a scheme is feasible depends upon the Grandmont McFadden theorem.     

National welfare in an open economy in the presence of foreign-owned factors of production

In the presence of foreign-owned factors of production in the economy, the effect of trade policy changes on national welfare needs to take into account the possible redistributive effect between foreign-owned and domestic factors. Therefore, an otherwise welfare-improving trade liberalization may paradoxically worsen national welfare. This paper analyzes this important, new area of trade theory and establishes the condition under which this paradox of immiserizing trade liberalization arises. The analysis is also applicable to analyzing the effects of external tariff variation in customs unions, with full internal factor mobility, on member countries' welfare.     

A note on business replies to consumer letters of praise and complaint

Business firms require feedback from the marketplace to determine whether or not the needs of the firm's customers are being satisfied. When feedback takes the form of consumer letters, it seems obvious that it is simply good marketing practice to respond to letters of complaint and good consumer relations to respond to any letter from a consumer. With the dual objectives of providing introductory marketing students with a meaningful and participatory exercise in consumerism and of exploring an apparently virgin research area, a project was undertaken which generated 250 letters to business firms concerning their products and services. The analysis of the business firms' responses attempted to find out: What types of business firms replied? In what from did these firms reply? And, how did the “customers” react to their replies?     

How optimal distinctiveness affects new ventures' failure risk: A contingency perspective

In this article, we apply the concept of optimal distinctiveness to test whether category spanning has a nonlinear effect on new ventures' risk to fail. We argue that by being optimally distinct, i.e., by attaining a level of category spanning that allows new ventures to benefit from balancing the competing needs of conformity with and differentiation from competitors, new ventures can improve their survival chances. In addition, we argue that the relevance of optimal distinctiveness varies with a venture's age and a category's density. We tested our hypotheses using data from 1668 metal bands that were founded in the United Kingdom between 1967 and 2005. The results indicate that optimal distinctiveness is relevant to new ventures' failure risk. Moreover, we show that venture age attenuates the relevance of optimal distinctiveness, whereas category density strengthens that factor's relevance.     

Reswitching,primary inputs and the Heckscher-Ohlin-Samuelson theory of trade

The 2× 2 × 2 Heckscher-Ohlin-Samuelson model of trade is examined under all the usual assumptions, except that a positive rate of interest is assumed. The factor-price-equalization and Stolper-Samuelson theorems are shown to be unaffected by the positive interest rate. The H-O-S theorem on the pattern of trade still holds in its ‘quantity’ form but is shown to be invalid in its ‘price’ form. Consequently trade need not ‘harm’ a country's scarce factor. It is to be expected that, in general, international equilibrium will not be unique.     

The monetary approach to the balance of payments

This is a review article of the theoretical papers in The Monetary Approach to the Balance of Payments, edited by Jacob A. Frenkel and Harry G. Johnson. The paper concentrates on: (a) The difficulties which there appear to be in the theoretical models used as a main vehicle of analysis and (b) the question of whether and in what circumstances the excess demand for financial assets is equivalent to the balance of payments. It is argued that the main contribution of the 'Monetary Approach' is that it alerts us to the important stock flow distinctions which must be made when account is taken of the effect of the balance of payments on the stock of financial assets.     

A note on Mill's theory of international values

This note provides an algebraic formulation of the analysis contained in section 7 of John Stuart Mill's chapter on international values. It is shown that Mill's results can be obtained as the solution to a pair of nonlinear programming problems. In addition, an error in Mill's analysis regarding the post-trade terms of exchange is pointed out.     

Analyzing leases with the after-tax cost of debt

A generalized expression of the net advantage of leasing (NAL) is used to assess the implications of discounting incremental cash flows at the firm's before-tax cost of debt and the firm's after-tax cost of debt, respectively. If no personal tax biases are assumed, then the before-tax cost of debt should be used to compute NAL. If the before-tax cost of debt is the correct discount rate, then any change in the firm's borrowing level brought about by the decision to lease rather than purchase will alter the computed NAL by the amount of the present value of the tax savings on interest payments. Thus using the before-tax cost of debt is consistent with basic MM valuation theory. Using the after-tax cost of debt, in contrast, implies that any associated change in the firm's borrowing level is irrelevant for purposes of computing NAL. Sufficient conditions are specified for the after-tax cost of the debt to be the correct discount rate for lease versus purchase analysis. Finally, lease analysis in a MM world is compared to lease analysis in a Miller tax world. For the special case of a 100% leverage ratio, the specification of NAL is the same in both worlds. Use of the after-tax cost of debt is correct in a Miller world and is a good approximation in an MM world provided the cash flows are predominantly debt financed.     

A causal analysis of psychological climate and leader behavior relationships

Individual perceptions of the work environment, or psychological climates, have been shown to be important determinants of work attitudes such as satisfaction and job involvement. However, little is known concerning the relationships between psychological climate and other variables that may lead to or cause these perceptions. This research examined causal relationships among dimensions of psychological climate and leader behavior. Specifically, the investigation attempted to determine whether leader behavior caused psychological climate, or whether psychological climate caused leader behavior. Eithty-five foremen from a truck manufacturing facility participated in the study over a 17-month period. Results of cross-lagged panel correlations and causal path analysis indicated that psychological climate caused leader behavior. Since one individual's perceptions of his/her work environment can only indirectly be linked to another person's (in this case, the leaders) behavior, an intervening variable is required to explain these findings. This variable may be a consensual or organizational climate.     

Remaining focus increases task evaluation and future task perseverance

Across six studies, the present research explores the effect of task progress focus—that is, attending to the distance of one's present state from either the beginning of a task (i.e., accumulated focus) or the end of it (i.e., remaining focus)—on task evaluation and subsequently on future task perseverance (i.e., willingness to perform the task again upon finishing it). The results show that relative to accumulated focus, remaining focus increases people's feelings of productivity on the task, which increases their task evaluation and subsequently their perseverance intentions toward the task. Moreover, we find that remaining (vs. accumulated) focus increases task evaluation regardless of whether people are in the early stage of the task or near the end. However, it decreases people's motivation to complete the task in the former stage but increases their motivation in the latter stage. Alternative interpretations in terms of task duration, self-efficacy beliefs, and task quantity are evaluated and ruled out.     

The journeyman executive: The demise of the lifetime contract

“We have a great incentive system around here; make one mistake and you're fired.” Until recently, executives would have found no meaning in what is now a cliche. The traditional concept, however, of an employer-employee lifetime contract has under-gone discernible alteration since the 1950s. This article explores this growing trend toward “journeymen executives.” All the factors contributing to this new management lifestyle-fluctuations in the economy, demands for innovations, attitudes of employers, expectations of employees—are considered. The implications in the changes are explored and questions raised on how the new assumptions are working.     

Random disturbances and the choice of exchange regimes in an intergenerational model

An overlapping generational model is used to derive the consumption demand for individuals of each generation under expected utility-maximizing behavior: these demand functions are used to derive macroeconomic equilibrium under fixed and flexible exchange rates. The standard aggregate results concerning the insulating role of flexible rates for real external disturbances and fixed rates for internal disturbances are shown. However, the variability of an individual's utility need not be the same as the variability of aggregate variables. It is shown that the form of the utility function and the sources of disturbances are crucial in determining which exchange regime is preferable.     

Employee attitudes toward advertising

The attitudes and opinions of a group of bank employees toward a recent advertising campaign run by the bank which stressed employee service were studied via factor analysis. The analysis revealed three clearly defined dimensions underlying the attitude-opinion items: general attitude toward the campaign, relevance of the campaign to the respondent's job, and changes in the respondent's job behavior caused by the campaign. Relationships among factor scores on these three dimensions with job satisfaction, job involvement, degree of customer contact, and degree of contact with other employees were investigated using multiple regressions and canonical correlation analysis. Employee attitudes toward the campaign were significantly related to all four of the job characteristic variables, as was perceived relevance of the campaign to the employee's job. Changes in job behavior were related only to involvement and satisfaction. The relationships found here suggest that in some cases, employee attitudes should be considered in evaluating the effects of advertising campaigns. Close coordination between marketing and general managerial functions is required in situations where advertisements relate to employees as well as customers.     

The role of buyer power in oligopoly models: An empirical study

This study investigates whether an industry's profitability and concentration are influenced by structural characteristics of the industries and final markets to which it sells. Very few similar studies have been made, and there is some dispute about their conclusions. This study discusses the methodological problems behind this dispute and the ways in which the specification and data used here avoid these problems. The results show that seller profitability rises with the extent to which buyers are dispersed across many industries, but that no other buyer characteristic exerts a significant influence on either the profitability or the concentration of the selling industry.     

Evaluation of inventory management: Efficiency can affect success

In many manufacturing companies, top management analyzes inventories only when financial trouble is at hand. The average amount of money committed to inventories is about three times the amount held in cash. It is rare that a member of top management gives the sustained attention to inventories that he gives to the company's cash position. A troubled company can take important steps in retrenching by evaluating its inventory management. However, this evaluation can be a part of the continuing analysis of the company's operations, in most cases as an outgrowth of auditing services. The resulting efficiencies can have a favorable effect on the company's success and growth—especially if money formerly tied up in inventories is freed for investment in other resources.