Estimating time-varying parameters in brand choice models: A semiparametric approach

Nowadays, brand choice models are standard tools in quantitative marketing. In most applications, parameters representing brand intercepts and covariate effects are assumed to be constant over time. However, marketing theories, as well as the experience of marketing practitioners, suggest the existence of trends or short-term variations in particular parameters. Hence, having constant parameters over time is a highly restrictive assumption, which is not necessarily justified in a marketing context and may lead to biased inferences and misleading managerial insights.In this paper, we develop flexible, heterogeneous multinomial logit models based on penalized splines to estimate time-varying parameters. The estimation procedure is fully data-driven, determining the flexible function estimates and the corresponding degree of smoothness in a unified approach. The model flexibly accounts for parameter dynamics without any prior knowledge needed by the analyst or decision maker. Thus, we position our approach as an exploratory tool that can uncover interesting and managerially relevant parameter paths from the data without imposing assumptions on their shape and smoothness.Our approach further allows for heterogeneity in all parameters by additively decomposing parameter variation into time variation (at the population level) and cross-sectional heterogeneity (at the individual household level). It comprises models without time-varying parameters or heterogeneity, as well as random walk parameter evolutions used in recent state space models, as special cases. The results of our extensive model comparison suggest that models considering parameter dynamics and household heterogeneity outperform less complex models regarding fit and predictive validity. Although models with random walk dynamics for brand intercepts and covariate effects perform well, the proposed semiparametric approach still provides a higher predictive validity for two of the three data sets analyzed.For joint estimation of all regression coefficients and hyperparameters, we employ the publicly available software BayesX, making the proposed approach directly applicable.     

Option Pricing in ARCH-type Models

ARCH models have become popular for modeling financial time series. They seem, at first, however, to be incompatible with the option pricing approach of Black, Scholes, Merton et al., because they are discrete-time models and possess too much variability. We show that completeness of the market holds for a broad class of ARCH-type models defined in a suitable continuous-time fashion. As an example we focus on the GARCH(1,1)-M model and obtain, through our method, the same pricing formula as Duan, who applied equilibrium-type arguments.     

Marketing Science and the Ivory Tower

How much has quantitative "marketing science" contributed to the practice of marketing? In my view, not much. In this article, based on extensive consulting experience, it is argued that well-established quantitative techniques like econometric models and diffusion models have produced little of either practical or scientific value. Other quantitative techniques, such as conjoint analysis, have been more useful for marketing decision-makers. But what is needed is a more pluralistic culture, drawing on a range of complementary disciplines.     

Will the frog change into a prince? Predicting future customer profitability

More and more companies have customer databases that enable them to analyze customer profitability over time. These companies often seek to determine the most important customers as indicated by their current or historical profitability and focus attention on them. Focusing on profitable customers can result in more efficient use of marketing resources, but this approach neglects the fact that customers can evolve over time. Some customers begin as low-profit customers but eventually develop into high-profit customers. Others may start out as high-profit customers but become unprofitable over time. Previous efforts to predict future profitability have been relatively unsuccessful, with relatively simple, naïve models often performing just as well as or better than more sophisticated ones. Our paper presents a new approach to predicting customer profitability in future periods that performs significantly better than naïve models. We estimate the models on data from a high-tech company in a business-to-business context and validate the models' predictive ability on a holdout sample.We show that a model based on simulation of customer futures provides large improvements over naïve extrapolation of average profits. By using the simulation model to select customers, ROI from marketing efforts is projected to increase by 58%.     

An Assessment of Experiential Learning of Global Poverty Issues Through International Service Projects

Service learning has been used to supplement a standard business curriculum, but not typically in an international business context. We report the results of two short-term study abroad programs in which we incorporated service learning projects, one in Cambodia and the other in Vietnam. Our objective is to assess how we organized and delivered effective service learning projects in short-term study tours, and to assess students’ learning outcomes on global poverty issues in a business curriculum. We used both quantitative and qualitative assessment measures. The findings suggest that several types of learning outcomes did occur through the service learning projects, as the literature suggested. Seeing poverty firsthand and doing something about it through service learning may be a first experience for many students, but it seems to be a transformational one for many. We conclude that students may approach business and even political decisions with a greater understanding of their impact on poverty in the developing world.     

Spinning out new ventures: a typology of incubation strategies from European research institutions

This paper explores the different incubation strategies for spinning-out companies employed by European Research Institutions. More specifically, we focus on two central questions: (i) What differences or similarities are there in the goals and objectives of the Research Institutions for creating new spinout ventures? (ii) What different incubation strategies are employed to achieve these goals in terms of the resources utilized and activities undertaken? The study uses a two-stage approach. In the first stage, seven spin-out services in five European countries were selected for analysis. At the time of the study, each research institute under analysis had only one unique way to stimulate spin-outs. Therefore, the spin-out service and the particular Research Institution they are associated with are interchangeable as units of analysis. Based upon an in-depth analysis of these seven cases, we identified three distinct incubation models of managing the spin-out process: Low Selective, Supportive, and Incubator. The different incubation models have very different resource implications in managing the process. In particular, we identify resource and competence differences relating to finance, organization, human resources, technology, network, and infrastructure. In the second stage, 43 cases were used to validate these incubation models in terms of resources and activities. This process identified two categories that departed from the normative models, namely, the Resource-Deficient group and the Competence-Deficient group.     

New Perspectives on Customer Relationships: How Relational Models Influence Customer Experience and How They Are Activated

Abstract

Much research has been conducted into the determinants of customer experience. However, these studies do not include relationship norms as a possible determinant of customer experience. Nevertheless, there are strong indications that the relationship norms used by a customer are an important factor in customer behavior and customer experience. The purpose of this paper is to investigate the influence of relational models on customer experience and to explain possible differences in presence of relational models. This paper describes the results of two studies. The first study focuses on the effects of relational models on customer experience. This first study shows that the type of relationship has a strong influence on customer experience in terms of consumption emotions, customer satisfaction, and recommendation intention. Knowing that differences in the presence of relational models have a strong influence on customer experience, a second study focuses on finding a possible explanation for the differences in the presence of relational models. We hypothesize that differences in the presence of relational models can be explained by how organizations approach their customers and how customers perceive the organization. Especially, the perceived organizational involvement and freedom of choice as perceived by the customer play an important role. The second study, therefore, focuses on the influence of perceived organizational involvement and freedom of choice on relational models. The study shows that organizational involvement and freedom of choice have a significant impact on the activation of relational models. The findings are interesting for organizations that want to improve customer experience.     

The ‘Catch 22’ of communicating CSR: Findings from a Danish study

This research explored the apparent ‘Catch 22’ of communicating Corporate Social Responsibility (CSR). Although companies are regularly encouraged to engage in CSR, they are simultaneously discouraged to communicate about this engagement. We contribute with two models that may help to explain how companies can best communicate about their CSR initiatives. Based on a reputation survey and two case studies of Danish corporate CSR frontrunners, first we develop an ‘inside‐out approach’ to suggest how managers can manage their CSR activities to achieve favourable CSR reputation in a ‘Catch 22’ context. Employees appear as a key component in building trustworthiness as CSR communication is shown to evolve when taking an ‘inside‐out approach’. Second, we develop a CSR communication model with two CSR communication processes targeting different stakeholder groups: ‘the expert CSR communication process’ and ‘the endorsed CSR communication process’. Integrating these models and processes may help companies strategically capture reputational advantage from their CSR initiatives.     

The need for international policy coordination: what's old, what's new, what's yet to come?

The first generation of policy coordination models was introduced some 25 years ago; it provided a rationale for policy coordination, but the gains from coordination were generally thought to be small. Now, a new generation of policy coordination models is emerging, incorporating monopolistic competition and nominal inertia. Here, we examine macroeconomic interdependence and the scope for policy coordination in a tractable second generation model with two countries and multiple sectors. Initial calibration of the model suggests that second generation models may have more scope for policy coordination than did the first.     

Growth and evolution of technical efficiency among entrant versus incumbent firms: the Spanish retail sector

This study investigates two objectives using a cohort approach: first, the firms' growth and, second, the technical efficiency of entrant and incumbent firms with a non-parametric approach, keeping in mind changes in the Spanish retail environment. The results obtained suggest, on the one hand, that evidence suggested by Gibrat's Law has not been fully proven. In this sense, smaller firms within their cohort membership grow faster than larger ones. On the other hand, our results indicate significant differences in the efficiency by sector. In this sense, entrant and incumbent firms shift the frontier in non-specialized and specialized sectors, respectively.     

Facilitation Methods for Collaborative Modeling Tools

This paper presents results of an ongoing research effort to support effective user involvement during modeling and analysis meetings. Productivity and user participation of traditional group meetings have been limitations imposed by chauffeured facilitation and single-user tools. These tools have been designed for analysts rather than for direct use by non-analyst users. Recently, electronic meeting systems (EMS) modeling tools that allow users to work in parallel to contribute directly during meetings have been developed. Such tools allow more domain experts to participate directly and productively during model development meetings than is possible using the traditional approach. Although previous research has demonstrated that EMS modeling tools may be used to develop some model content, little research had been done on collaborative facilitation methods that employ these tools. This paper presents a comparison of modeling approaches for use with EMS modeling tools and proposes an approach that overcomes significant problems inherent in other approaches. It leverages the productivity enhancement afforded by direct group access and still results in production of complete, integrated, high quality models. This approach allows models to be developed two to four times faster than with traditional modeling support and yet avoids model ambiguities and inconsistencies.     

Analysis of government policies,institutions, and inward foreign direct investment: Evidence from sub‐Saharan Africa

This article examines the effects of government policies and institutions on foreign direct investment (FDI) inflows in sub‐Saharan African context using both quantitative and qualitative approaches. On the quantitative approach, we analyzed the effects of institutions on FDI using two statistical techniques—canonical cointegration regression (CCR) and fully modified ordinary least square (FMOLS)—over the period of 1984–2012. We find that political instability, democratic accountability, and investment risk have significant impact on inward FDI in Nigeria. Using a trend analysis, our results provide evidence to suggest that liberal government investment policies have positive influence on FDI inflows. Our qualitative analysis over the 1962–2012 period supports the results of the quantitative analysis.     

Wand and Weber’s Decomposition Model in the Context of Business Process Modeling

Whereas the benefits of decomposing process models are obvious, the question what actually characterizes a ??good?? decomposition of a business process model has been given little attention to date. In addition, the process of decomposition itself is considered as being an ??art?? in literature. Our approach for achieving a ??good?? decomposition is Wand and Weber??s decomposition model for information systems. As a first step in our investigation we aim to explore in how far the decomposition model can be adapted for business process modeling at all. The potential this model might bear for evaluating decompositions of process models has been promoted in literature quite often, while a corresponding investigation is still missing. We address this gap by the following research. In the long term, we intend to establish guidelines for decomposing business process models in a structured way.     

Power laws in firm size and openness to trade: Measurement and implications

Existing estimates of power laws in firm size typically ignore the impact of international trade. Using a simple theoretical framework, we show that international trade systematically affects the distribution of firm size: the power law exponent among exporting firms should be strictly lower in absolute value than the power law exponent among non-exporting firms. We use a dataset of French firms to demonstrate that this prediction is strongly supported by the data, both for the economy as a whole and at the industry level. Furthermore, the differences between power law coefficients for exporters and non-exporters are larger in sectors that are more open to trade. While estimates of power law exponents have been used to pin down parameters in theoretical and quantitative models, our analysis implies that the existing estimates are systematically lower than the true values. We propose two simple ways of estimating power law parameters that take explicit account of exporting behavior.     

Discovering and Evaluating Collaboration Engineering Opportunities: An Interview Protocol Based on the Value Frequency Model

Collaboration Engineering (CE) is an approach to designing collaborative work practices for high-value recurring tasks and transferring those designs to practitioners to execute for themselves without the ongoing intervention of professional facilitators. Because CE projects can entail considerable cost, it would be useful to have a way to predict whether a group would be likely to adopt a collaborative work practice were one developed for them. In this paper we present an interview protocol for that purpose. Using the logic of the Value Frequency Model (VFM), we derived the protocol with two layers of questions. The first layer is for discovering potential collaboration engineering opportunities; the second is for evaluating the degree to which practitioners might be willing to adopt a new work practice were one offered. We used the protocol in two field studies; one with a team of experienced collaboration engineers working in the headquarters of a large multi-national organization, and one with a group of students with no CE experience working with a variety of for-profit and non-profit organizations in their community. The qualitative and quantitative outcomes of these studies suggest that the interview protocol may be a useful means for discovering and evaluating CE opportunities. Outcomes also provide support for VFM, the theory from which the protocol was derived.     

Technical Changes and the Rate of Profit in Models with Joint Production and Externalities: A Duality Approach

This paper generalizes a result due to Okishio: the rate of profit increases as a result of cost reducing technical changes. The generalization is carried out first in a model of joint production which allows for new processes and commodities to be introduced or some of the old ones to be discarded. Then we consider nonlinear models incorporating external and internal (dis)economies     

MICROECONOMIC FOUNDATIONS OF MACROECONOMICS IN THE POST-KEYNESIAN APPROACH

The purpose of this paper is to explore further some issues within the ⇐ mark-up ⇒ models. Among the numerous alternative formulations which have been put forward in the literature, two of them are particularly analysed in this paper. Kalecki's microanalysis, and especially the price determination as from the Theory of Economic Dynamics, is discussed in section II. Eichner's approach to the determination of the ⇐ mark-up ⇒ in oligopoly is examined in section III. These two different models yield different dynamic implications: section IV and section V contain a comparison between these different approaches in terms of the relation between the mark-up and the growth rate especially. Finally, in section V, we suggest a direction of research to provide a theoretical justification of price setting according to the ⇐ mark-up ⇒. Indeed, we show that under certain assumptions, this pricing behaviour can arise from a process of learning.     

Parsimonious Models of Financial Insolvency in Small Companies

This study is an extension of current research on insolvency diagnosis. We intend to demonstrate that in small firms, the relevant information for the preventive diagnosis of insolvency can be synthesised in a model built upon a more reduced number of economic and financial ratios than the ones generally used in this kind of study. Our approach produces parsimonious models that can extract information from publicly available accounting-financial data. We demonstrate that using an extensive exploratory stage that will monitor the effects of correlation between financial variables, we will be able to build relatively stable models with a small set of variables.The results of the models built by resorting to discriminant analysis and to logistic regression present a similar accuracy to models previously developed. Our models present the advantage of including a small number of variables that can be interpreted in the light of current financial theory and therefore it reduces the number of financial data needed to make an insolvency diagnosis. This is particularly decisive when working in an environment of restricted information availability, which is very common in small companies.     

Group Development (I): A Review and Synthesis of Development Models

This is the first of two parts that examine the issue of group development and its impact on the study design of group support systems (GSS). We review the various models of group development, analyze the sources of differences among these models, and synthesize common themes across various models. The paper concludes with a meta-framework for understanding group development; this framework highlights the two areas of focus that have dominated group development research in the past: group processes and outcomes. The second paper will build on the ideas developed here and discuss the implications of group development for GSS research.Previous research on group behavior suggests that groups change over time; patterns of change, referred to as group development models, have been an important area of study for the past four decades. For the first three of these decades, unitary models of group development were very popular; that is, the notion that all groups go through a certain series of predefined stages. In the last decade, however, researchers have cast doubt on such unitary models of group development. Nonsequential models that recognize the uniqueness of each group (and consequently reject the idea of a single, predetermined series of stages) have become increasingly popular. This paper examines the implications of these issues for researchers and managers of groups. It also attempts to serve as the foundation for the propositions developed in the next paper, in which the relevance of group development for GSS research and practice are discussed.