A dynamic decision-theoretic model of technology adoption for the competitive firm

In this article, the technology adoption problem of the competitive firm is revisited. The firm is assumed to allocate a quasi fixed factor between a traditional and a new technology. In the presence of costs of adjustment and learning, the adoption problem is formulated as an optimal control problem.     

A dynamic model of firm behavior in a planned economy

Conclusion This paper presents a dynamic model of the interaction between the planning authority and a firm in a centrally planned economy with emphasis on the firm's decision-making process and its results, given the overall constraints imposed by the planners. For possible relationships between the actual and target levels of output over time, the model offers either the case of an initial period of under-fulfillment followed by a period of overfulfillment or the case of continuous overfulfillment. We have also determined how a firm reacts to the planning authority changing one of its overall constraints (the final target or the length of the time period) or one of the parameters of the firm's bonus function. It is crucial for the planning authority to have a good understanding of what a firm's response to any of these changes will be in order to be able to select an optimal strategy in light of the ultimate goals of the planning mechanism. The results of our paper offer useful insights for this selection process.     

A model of repeat advertising

Advertising conveys information not only about product characteristics but also about the number of consumers who know about the product. More advertising may shift expectations towards a larger consumer base, increasing buyers' valuation when there are consumption externalities.     

The regulated firm and the DCF model: Some lessons from financial theory

This paper explores lessons from established financial theory for allowed rate of return calculations within the constant-growth dividend (DCF) framework. Analysts using this model have been wedded to the conventional cost-of-equity formula. We set forth equivalent alternatives which make the analysts' task easier, more precise, and more confident. What is even more important, we derive a set of consistency conditions that must be observed for the appropriate use of the model. We also use a basic capital-market principle to determine an alternative, flotation-cost adjusted, rate of return, an expression which provides useful insights for regulatory participants.     

Capital waste in the rate-of-return regulated firm

Here it is shown how capital waste can be motivated under rate-of-return regulation, even when the marginal product of capital is positive. This result means that the sign of the marginal product of capital is not adequate as a basis for defining waste. The wasteful use of capital is motivated to avoid an inelastic region of demand, and involves pricing as well as technical input decisions of the firm.     

浅论网络广告“病毒式营销”

随着中国互联时代的到来,网络作为新兴的广告媒体,日益成为企业及广告运营商关注的焦点。与传统的大众传播方式不同,网络广告具有成本低、即时性、开放性的特点,在企业新产品上市推广,促销及企业形象传播方面起着重要作用。本文试图从网络广告病毒式营销的概念、优劣势,以及运作时应注意的问题等方面做出阐述。     

A model of advertising with application to the German automobile industry

This paper develops a dynamic duopolistic model of advertising and price competition. Advertising accumulates a stock of goodwill which enters directly into the demand functions and both the cooperative and predatory effects of advertising are considered. It is shown that firms invest more in advertising the higher the degree of cooperativeness of advertising and some comparative static results are provided. In the second, empirical part of the article, estimations of the demand equations are presented using data from the German automobile industry. The main conclusion drawn is that advertising plays an important role in this market and has a predatory nature.     

Economic depreciation and the regulated firm under competition and technological change

Capital recovery is increasingly important to utilities, especially telephone companies, when technological change and competitive entry are occurring. In the absence of efficient capital recovery policies companies are going to see their equity eroded. In addition to losses by the companies there are likely to be losses to ratepayers in the form of reductions in service quality and higher rates in the future. To address the above problem this paper first reviews economic depreciation and capital recovery in the simple case of a regulated single product monopoly facing competitive entry. It employs the concept of economic depreciation to show how capital recovery policies will be front-loaded. It also develops the concept of the window of opportunity for capital recovery. There is a limited time for regulators to take remedial action, and if timely action is not taken there is no alternative but for the company to fail to recover some of its capital. These results are shown under both traditional rate of return and price caps.     

A dynamic model of settlement

We investigate the role of settlement in a dynamic model of a payment system where the ability of participants to perform certain welfare-improving transactions is subject to random and unobservable shocks. In the absence of settlement, the full information first-best allocation cannot be supported due to incentive constraints. In contrast, this allocation can be supported if settlement is introduced, provided that it takes place with a sufficiently high frequency.     

On the existence of a regulated production function

This paper examines the generalization of the regulated production function. It characterizes the set of admissible regulatory constraints that are compatible with the existence of a regulated production function in a sufficiently weak framework to encompass the usual rate-of-return constraints à la Averch and Johnson and value constraints.     

A two-dimensional non-equilibrium dynamic model

This paper develops a non-equilibrium dynamic model (NEDyM) with Keynesian features (it allows for a disequilibrium between output and demand and it considers a constant marginal propensity to consume), but where production is undertaken under plain neoclassical conditions (a constant returns to scale production function, with the stocks of capital and labor fully employed, is assumed). The model involves only two endogenous/prognostic variables: the stock of physical capital per unit of labor and a measure of market disequilibrium (MMD). The two-dimensional system allows for a careful analysis of local and global dynamics. Points of bifurcation and long-term cyclical motion are identified. The main conclusion is that the disequilibrium hypothesis leads to persistent fluctuations generated by intrinsic deterministic factors. These fluctuations may reflect some of the features frequently encountered in observed business cycles, once the model is conveniently adapted to this purpose.     

Optimal dynamic environmental policies of a profit maximizing firm

In this paper we study the optimal environmental policy of the firm for different scenarios dependent on (costs of) production technologies, financing costs, and governmental policy. The governmental instruments to be considered are:

A dynamic model of altruistically-motivated transfers

This paper studies a dynamic Markovian game of two infinitely-lived altruistic agents without commitment. Players can save, consume and give transfers to each other. We identify a continuum of equilibria in which imperfectly-altruistic agents act as if they were a perfectly-altruistic dynasty which is less patient than the two agents themselves. In such equilibria, the poor agent receives transfers until both effectively pool their wealth and tragedy-of-the-commons-type inefficiencies occur. We also provide a sharp characterization of strategic interactions in consumption and transfer behavior. This provides new insights relative to existing two-period models. It allows us to differentiate between the Samaritan's dilemma – e.g. a child runs down its assets inefficiently fast in anticipation of transfers – and what we refer to as the Prodigal-Son dilemma – e.g. parents do not leave an early bequest, anticipating a child's profligate behavior.     

A dynamic model of unsecured credit

We study the terms of credit in a competitive market in which sellers (lenders) are willing to repeatedly finance the purchases of buyers (borrowers) by engaging in a credit relationship. The key frictions are: (i) the lender cannot observe the borrower?s ability to repay a loan; (ii) the borrower cannot commit to any long-term contract; (iii) it is costly for the lender to contact a borrower and to walk away from a contract; and (iv) transactions within each credit relationship are not publicly observable. The lender?s optimal contract has two key properties: delayed settlement and debt forgiveness. Finally, we study the impact of changes in the initial cost of lending on the contract terms.     

Environmental regulation and firm location choice in China

How may environmental regulation affect firm location choice? While this question has generated great research interest from high-standard, industrial economies, in this article we turn the spotlight to low-standard, developing countries and use China’s Census of Manufactures data during 2003–2008 to explore how firms with different ownership, during different policy regimes as well as from different industries may respond to environmental regulations in different ways. Results show environmental stringency has a positive effect on state-owned enterprises’ location choice during 2003–2005, but the effect becomes insignificant during 2006–2008. Private-owned enterprises, foreign-owned enterprises and collective-owned enterprises are more likely to enter areas with less stringent environmental regulations during 2003–2005. However, this pattern is reversed for the period of 2006–2008. Furthermore, the above relationships are more pronounced for firms in polluting industries.     

A model of advertising format competition: on the use of celebrities in ads

We develop a model that endogenizes both advertising format – ads with or without celebrity endorsements – and the endorsement fee. Marketing studies suggest that celebrities enhance brand recall and perception of product value. In our model, ads featuring celebrities occur when the product market is large – endorsements are likely for products sold nationally – and when products are sufficiently similar that the persuasive character of advertising looms large in demand – running shoes, beauty products, soft drinks, for example. Celebrity endorsement fees are increasing in market size and in the degree of similarity of the products being advertised.     

A public firm in a model of spatial duopoly with price discrimination

We visit the role of privatization in the location decision of firms in an industry where no firm can produce all varieties demanded. We demonstrate that the Nash equilibrium locations are socially optimal, in the presence of a publicly owned firm, notwithstanding the degree of privatization.