Estimation of posterior probabilities of consumer situational choices with neural network classifiers

This study shows how neural networks can be used to estimate the posterior probabilities in a consumer choice situation. We provide the theoretical basis for its use and illustrate the entire neural network modeling procedure with a situational choice data set from AT&T. Our findings supported the appropriateness of this application and clearly illustrate the nonlinear modeling capability of neural networks. The posterior probability estimates clearly add to the usefulness of the technique for marketing research.     

Experimental Evidence of the Impact of Increasing Auditors' Legal Liability on Firms' New Investments*

This laboratory market study examines the potential effect of increasing auditors' liability on firms' new investments. The experimental hypotheses are derived from Shibano's 2000 model, which predicts that an increase in auditors' liability will decrease the frequency of audit failures and may decrease firms' new investments if the liability level is “excessive”. Results from three experimental market settings (with low, medium, and high liability levels) suggest two major conclusions. First, firms' new investments increase significantly when auditors' liability level increases from low to medium, and decrease significantly as the liability level increases from medium to high. This result provides support for the argument that adequate auditor liability is necessary to motivate firms to invest in new projects. Excessive liability, however, may discourage firms from making new investments. Second, the frequency of audit failure decreases insignificantly when auditors' liability increases. These two results have an important policy implication: the benefit of imposing high liability on the auditor (i.e., an insignificant decrease in audit failure) may be more than offset by its cost (i.e., a significant decrease in new investments).     

Information and Trading Risks in Global Investing: An Empirical Analysis of Research Location and Pacific Rim Mutual Fund Performance

With the rapid growth of international investment, information and trading risk management has become increasingly important. Evidence suggests that investment companies use local offices as an effective way to manage both information and trading risks. This paper examines the evidence and asks what the characteristics are of investment companies that establish local research offices in foreign markets, and if companies that use local research offices show superior investment performance. My findings suggest that investment companies that manage large funds and use more company-specific information are more likely to have Pacific Rim research offices. However, my results provide no evidence of superior investment performance by companies with local research offices.     

Collapsing Exchange Rate Regime Under Optimal Monetary Control

In this paper, we analyse the problem of optimal domestic credit expansion for a small open economy. We show that (i) the transition from the fixed to the flexible exchange rate regime proceeds smoothly with no speculative attack on the central bank's foreign reserves; (ii) once the exchange rate has floated, it will never be optimal to repeg it afterward; (iii) even under uncertainty, there will not be any speculative attack; however, the optimal rate of credit expansion jumps discontinuously at the date of complete depletion of the known stock of foreign reserves.     

Industrial Diversification and Its Impact on Productivity Growth in Taiwan's Electronics Industry*

The present study attempts to link plant‐level production diversification to productivity growth in Taiwan's electronics industry. An account of the role of the Taiwanese government over the last 2 decades leading to the take‐off of its electronics industry is briefly discussed. We reviewed production activities of more than 20 000 Taiwanese electronics plants during the period 1992–1999. In an inter‐industry comparison, we find that at the four‐digit and seven‐digit industry levels, Taiwanese electronics production plants exhibit a significantly higher degree of product diversification than plants in the manufacturing sector as a whole. Econometric results positively identify diversification as a source of significant productivity growth across all electronics plants classified in the related industry groups.     

Non-convex aggregate technology and optimal economic growth

This paper examines a model of optimal growth where the aggregation of two separate well behaved and concave production technologies exhibits a basic non-convexity. First, we consider the case of strictly concave utility function: when the discount rate is either low enough or high enough, there will be one steady state toward which the convergence of the optimal path is monotone and asymptotic. When the discount rate is in some intermediate range, we will find sufficient conditions for having either one equilibrium or multiple equilibria steady state. Depending to whether the initial capital per capita is located with respect to a critical value, we show that the optimal paths monotonically converge to one single appropriate equilibrium steady state. Second, we consider the case of linear utility and provide sufficient conditions to have either unique or two steady states when the discount rate is in some intermediate range. In this range, we give conditions under which the above critical value might not exist, and the economy attains one steady state in finite time, then stays at the other steady state afterward. P. Michel passed away when this research was completed. This paper is dedicated to his memory as a friend and colleague. N. M. Hung and C. Le Van thank the referee for vey helpful remarks and criticisms. They are grateful to Takashi Kamihigashi for very fruitful discussions. They also thank J.-F. Leclerc for editing the final version of this paper.     

Dangers in data adjustment: the case of rights issues and returns

In this paper we alert researchers to the potential for unrecognised errors in using adjusted price and daily return data. This problem is illustrated by considering the case of ex‐rights price adjustments. We present five alternative adjustment procedures that would be expected to generate similar results. We show, however, that these procedures result in significantly different dilution factors and returns. Our investigations suggest that the problem is associated with the theoretical valuation of the rights. In a substantial proportion of cases, the standard textbook model is inappropriate because of the non‐standard nature of the rights issue. Correcting for these non‐standard cases is a non‐trivial task since they constitute more than half of the issues. The extent of this problem does not appear to be well recognised. Deletion of non‐standard rights issues eliminates extreme values in dilution factors, but statistically significant differences remain. Our moral is simple; uncritical acceptance of data 'as is' from computer data files may lead researchers to erroneous conclusions. It also seems noteworthy that the standard textbook model of rights pricing only applied to a minority of Australian rights issues over recent years. This result has implications for the calculation of EPS under AASB 1027. As a by‐product, our analysis suggests that the ex‐rights daily return is close to zero.     

Dynamic information disclosure

We study dynamic information disclosure by a sender attempting to persuade a partially informed receiver to take an action. We consider vertical and horizontal information. With vertical information, an optimal disclosure plan is static. If the sender cannot commit to the disclosure plan, there exists a simple Markov equilibrium with sequential disclosure. Shrinking the time interval to zero gives rise to full disclosure almost instantly. With horizontal information, the sender often benefits from sequential disclosure. Assuming partial commitment and a special receiver‐type space, a Markov equilibrium exists and almost instant full disclosure arises in the limit.     

Health Care Competition and Antibiotic Use in Taiwan

Antibiotic resistance, a negative externality of antibiotic use, is a growing threat to public health. Health care competition may encourage antibiotic use because receiving an antibiotic is a form of ‘quality’ for many patients. This paper examines the effect of market concentration on antibiotic use in a large, nationally‐representative data set from Taiwan. Moving from the 75th percentile to the 25th percentile of market concentration is associated with 6.6 per cent greater antibiotic use. We control for leading market‐level confounds, including population density and community health. We also show that the correlation is robust using fixed effects for patients, physicians and diagnoses. We document the correlation between antibiotic use and patient retention, which suggests a mechanism for this result. Finally, we show that strict regulation of antibiotics reduces but does not eliminate the effect of competition on antibiotic use.