Managerial economics and operating beta

We model a firm's unlevered beta in terms of elementary microeconomic variables. The source of uncertainty is a shock to demand. A firm decides on capital before the shock, and on labor, output, and price after the shock. Some insights are: (1) with decreasing returns to scale of production, beta has an inverse relation with price elasticity of demand, given the income elasticity of demand; (2) beta has a direct relation with the firm's returns to scale of production; (3) due to the impact of operating leverage, beta has an inverse relation with industry concentration; and (4) for a given returns to scale, beta has a direct relation with the capital–labor ratio that strengthens as industry concentration decreases. Copyright © 2011 John Wiley & Sons, Ltd.     

A forward looking model of the exchange rate

This paper outlines a simple framework for testing some of the underlying concepts which form the basis of a number of recent models of exchange rate determination. It estimates a structural exchange rate equation with explicit forward expectations using the Wickens errors-in-variables method. The paper finds a strong rejection of the simple open arbitrage model in favour of a more complex model.     

Sixty years of research on technology and human resource management: Looking back and looking forward

Technology has changed the way we work and how companies manage their employees. This article reviews 60 years of research on the relationship between technology and human resource management, as represented in Human Resource Management. Based on 154 articles, we identify recurring and evolving patterns of research on technology across three time periods (separated by the advent of the personal computer in 1977 and by the popularization of consumer internet services in 1997), three perspectives on technology (tool, proxy, and ensemble view of technology), and three thematic streams (the impact of technology on jobs and organizations, the utilization of technology in HR activities, and the management of technology workers). Drawing on patterns of research that emerged in the past, we provide suggestions for future HR research on newly arriving technology.     

An assessment of industrial robots: Capabilities,economics, and impacts

Production managers and engineers have always tried to find better and less expensive ways of making a product. In recent years their search has led them to consider the use of robots for jobs previously thought to require more judgment and flexibility than a machine can offer. Before robots are introduced onto the factory floor, though, their capabilities and limitations should be fully understood, and an effective implementation plan devised.The purpose of this article is to examine some of the important issues underlying this growing technology and to assess its impacts. In particular, robots have a variety of virtues that go beyond simple cost savings. In many cases they relieve factory workers of tasks that are tediously repetitive or dangerous. From management's viewpoint, though, a robot is justified only when a practical application exists. The simple transfer of objects between work stations, storage facilities, and transport systems was one of the first such applications. In high volume production these “pick and place” operations must be performed accurately and consistently, making them ideal for automation.Though largely an American invention, robots have not taken their place in many domestic factories as fast as they have abroad. Many companies have been reluctant to make the initial investment, particularly when faced with a surplus of capacity and labor, and no pressure to hold down prices. Now, however, heightened competition in many industries previously thought to be secure from foreign intrusion has led to a change in attitude. The need to hold on to existing markets, and in some cases even catch up, has inspired many doubters to take a second look. Not surprisingly, this has brought forth charges that some employers, lacking in social conscience, are substituting machines for people and adding to the nation's jobless roles. The issue has been on the table in labor-management disputes for decades with the machines generally winning out. To a large extent, the residue of unemployment that remains in the economy even in the best of times reflects the effect of change and the problems of adjusting to it. To date there is no evidence that an accelerated introduction of robotics will cause any noticeable disruption in the labor force. Although there may be isolated instances of dislocation, a management sensitive to the concerns of its workers should be able to make the transition smoothly, perhaps allowing excess personnel to shrink through attrition rather than layoff while retraining as many as possible.If we trace the history of programmable devices, we see that most of the early mechanisms were developed by the machine-tool industry. By today's standards, this equipment was slow, heavy, and precise, and was driven by very simple algorithms stored on paper or magnetic tape. Virtually no on-line decision-making capability existed and only fixed, repetitive motions were possible. Still, being programmable automation, these machines could be considered the first robots. As microelectronics became more refined, the repertoire of robot manipulators was extended to include more complex tasks. For example, acts requiring considerable on-line processing such as the creation of straight line motion and the initiation of movement in response to sensed input are now straightforward to implement.To understand better what distinguishes robots from their machine tool predecessors, an examination of their basic features is needed. All robots are composed of three interdependent components: manipulators, a power supply, and a controller. The manipulator is the mechanical structure consisting of linkages and joints that provide motion along different axes. Each separate axis is called a “degree of freedom.” The manipulator, or “arm,” usually has three degrees of freedom while an attachment to the arm, called the “end effector” or “hand,” can furnish an additional three. Still, a seventh degree of freedom can be attained by placing the entire robot on a traversing x-y plane.The power supply is the muscle of the machine. Hydraulic systems comprising an electrical pump, filter, reservoir, and heat exchanger are the most popular because of their reliability and physical efficiency. Pneumatic systems, on the other hand, are typically found on light-weight capacity robots and have the advantage that the air supply needed to drive them is often present in the factory at no additional cost. The third component of any robot is the controller, which may range in sophistication from simple air-logic values to complex micro- and minicomputers. The former are only appropriate for jobs requiring a limited sequence of operations while the latter are capable of sorting and executing thousands of steps. A microcomputer can process feedback pulses and decide which of many actions is called for.The ability to respond to a changing environment is what makes a robot superior to an automated machine. There are three senses used in feedback control: touch, hearing, and vision, with the first being the most common. Depending on the situation, touch determines how much pressure to apply or where to position the arm. The use of hearing to modify operations has received some attention, but mainly in a laboratory setting. Major commercial applications should come in the next five years in the form of voice instructions and system monitoring. Vision is the most advanced sense and is accomplished by processing an array of black and white dots from armmounted television cameras. Depending on the resolution of the dots and the speed at which the computer can process the arrays, the robot's vision can be stated in a four-level hierarchical system: detection, orientation, recognition, and identification. To identify an object from its surroundings, the computer has to precisely describe the object using the limits of its knowledge in conjunction with its resident database.As the technology evolves, more emphasis will be placed on an ability to perform a generic set of tasks rather than a set of broadly-based functions. The next generation of robots will include manipulators with fewer than five degrees of freedom trading off dexterity for speed and accuracy. They will typically work in units of two or more and be designed for specific types of tasks. Some will be light and fast and have large ranges of motion while others will be more like programmable fixtures. Indeed, the most successful applications of robots to date have been those in which the robot either does not contact the workpiece, as in spray painting, or grabs the workpiece to fix a reference, as in spot welding.Finally, it should be mentioned that the biggest impact that robotics is likely to have in the factory is in the area of redesign of workpieces for ease of manufacturing. Often when a part is redesigned so it can be assembled “automatically,” it also becomes much easier for humans to assemble. Study of design-for-assembly for manufacturability is an area that has traditionally been neglected and that has huge potential for increasing productivity.     

Crowd counting: a behavioural economics perspective

Quality & Quantity - Developments in technology have facilitated the emergence of new crowd counting organisations. Some of the organisations have established platforms to disseminate their...     

Zero-intelligence agents looking for a job

We study a simple agent-based model of a decentralized matching market game in which agents (workers or job seekers) make proposals to other agents (firms) in order to be matched to a position within the firm. The aggregate result of agents interactions can be summarised in the form of a Beveridge curve, which determines the relationship between unmatched agents, unemployed job seekers and vacancies in firms. We open the black box of matching technology, by modelling how agents behave (make proposals) according to their information perception. We observe more efficient results—in the form of a downward shift of the Beverage curve in the case of simple zero-intelligent agents. Our comparative statics indicate that market conditions, such as the heterogeneity of agents’ preferences, will also shift the Beveridge curve downwards. Moreover, market thickness affects movement along the Beverage curve. Movement right-down along the curve if there is an increasing number of agents compared to positions within firms. Furthermore, we show that frictions in re-matching, such as commitment to a match, could be another factor shifting the Beveridge curve toward the origin.     

Managerial Bonus Systems in a Differentiated Duopoly: A Comment

A differentiated Cournot duopoly is considered where firm owners delegate the output decision to a manager, who is rewarded on the basis of his performance. If this performance is measured in terms of (i) pure profits, (ii) a combination of profits and sales, (iii) a combination of profits and market share or (iv) relative profits, the latter option strictly dominates the others if the products are perfect substitutes. Recently it was claimed that this result does not hold for all levels of product substitutability. In this comment, we show however that this result is robust against the introduction of product differentiation. Copyright © 2011 John Wiley & Sons, Ltd.     

Risk aversion and the elasticity of substitution in general dynamic portfolio theory: Consistent planning by forward looking, expected utility maximizing investors

Using the measure of risk aversion suggested by Kihlstrom and Mirman [Kihlstrom, R., Mirman, L., 1974. Risk aversion with many commodities. Journal of Economic Theory 8, 361–388; Kihlstrom, R., Mirman, L., 1981. Constant, increasing and decreasing risk aversion with many commodities. Review of Economic Studies 48, 271–280], we propose a dynamic consumption-savings–portfolio choice model in which the consumer-investor maximizes the expected value of a non-additively separable utility function of current and future consumption. Preferences for consumption streams are CES and the elasticity of substitution can be chosen independently of the risk aversion measure. The additively separable case is a special case. Because choices are not dynamically consistent, we follow the “consistent planning” approach of Strotz [Strotz, R., 1956. Myopia and inconsistency in dynamic utility maximization. Review of Economic Studies 23, 165–180] and also interpret our analysis from the game theoretic perspective taken by Peleg and Yaari [Peleg, B., Yaari, M., 1973. On the existence of a consistent course of action when tastes are changing. Review of Economic Studies 40, 391–401]. The equilibrium of the Lucas asset pricing model with i.i.d. consumption growth is obtained and the equity premium is shown to depend on the elasticity of substitution as well as the risk aversion measure. The nature of the dependence is examined. Our results are contrasted with those of the non-expected utility recursive approach of Epstein–Zin and Weil.     

The future of NATO: a defence economics perspective

This paper analyses the future direction of NATO and suggests some of the possible problems it will face. Most notably, the questions of how to share the burden of the cost of NATO action among its members and what is the optimal size of the organisation in the future, are addressed. One possible way forward is the creation of a NATO free trade area.     

Forecasting—looking back and forward: Paper to celebrate the 50th anniversary of the Econometrics Institute at the Erasmus University,Rotterdam

The first two influential books on economic forecasting are by Henri Theil [1961, second edition 1965. Economic Forecasts and Policy. North-Holland, Amsterdam] and by George Box and Gwilym Jenkins [1970. Time Series Analysis, Forecasting and Control. Holden Day, San Francisco]. Theil introduced advanced mathematical statistical techniques and considered a variety of types of data. Box and Jenkins introduced ARIMA models and how they are used to forecast. With these foundations, the field of economic forecasting has considered a wide range of techniques and models, wider and deeper information sets, longer horizons, and deeper questions including how to better evaluate all forecasts and how to disentangle a forecast, a policy, and the outcomes. Originally, forecasts were just for means (or expectations) then moved to variances, and now consider predictive distributions. Eventually, multivariate distributions will have to be considered, but evaluation will be difficult.     

Whistleblowing: A Study of Managerial Differences

A whistleblowing survey was completed by a sample of upper-level, middle-level, and first-level managers. A variety of individual, organizational, communication climate, and moral perception variables related to whistleblowing were examined across managerial levels using an ANOVA analysis. Results indicate significant differences with respect to most variables examined. Recommendations are made for practitioners and future research.