TECHNICAL NOTE A MODIFIED EOQ MODEL WITH TEMPORARY SALE PRICE DERIVED WITHOUT DERIVATIVES

Most previous works applied differential calculus to derive optimal solutions for economic ordering policy. The formulations are suggested in this short note to show that optimal solutions can be derived algebraically without using differential calculus to treat the EOQ model with a temporary sale price.     

Consumer Search in Retail Gasoline Markets

This paper develops direct tests for search behavior in retail gasoline markets. We exploit a unique market‐level dataset that allows us to directly measure search intensity with daily web traffic data from a gasoline price reporting website and perfectly measure daily changes in price levels and dispersion. Our simple yet powerful tests provide strong evidence of both cross‐sectional and intertemporal price search.     

An Approach to the Capital Budgeting Problem with Multiple Objectives

This paper describes a course in Engineering Economy which has been taught at Bradford for twenty years. It employs a variety of teaching methods to meet the preferred learning styles of students with different personality profiles and rt enables them to develop by passing through all four quadrants of the Experiential Learning Cycle. To facilitate this process, a novel business game has been invented which allows the Net Present Value of a project to be calculated quickly. Working as teams, students can thereby appraise the economic merits of a capital project as it proceeds through the various stages of its life cycle. The derivation of this model is provided herein with a few examples of the memoranda which enable the game to develop in a realistic way and by applying sequential decisions.     

A NOTE ON BIAS IN CAPITAL BUDGETING INTRODUCED BY STOCHASTIC LIFE

This note extends work by Young and Contreras and by Rosenthal on the present worth of cash flows under uncertain timing. In capital budgeting analysis, the use of the expected life of a project instead of the life distribution of the project biases the estimate of its expected net present value. In most situations the bias results in an overestimate of the expected net present value of the project. When the exact life distribution is unknown, the bias can be approximated by Taylor series expansion. The sensitivity of the bias to the discount rate, to cash flow patterns, and to income taxes is also investigated.     

A review of: “COST ENGINEERING FOR EFFECTIVE PROJECT CONTROL” by Sol A. Ward,John Wiley & Sons,New York,NY, 1992, viii + 227 pp., ISBN 0-471-52851-X. List $54.95.

Our survey of the investor-owned electric utility companies and utility commissions indicates that the use of asset pricing models for estimating the cost of equity is limited in this industry. The respondents cite unfamiliarity with the arbitrage-pricing model as a main reason for not using it. Use of the capital asset pricing model is also less than one would expect. However, deregulation of the industry could create a need for more-precise quantification of risk. In the new environment, utility companies may find asset-pricing models more useful.     

Safety alerts reduce willingness to visit parks irrigated with recycled water

This study demonstrates the effects of framing safety precautions on the presentation of a controversial product (recycled water [RW]) to the inhabitants of two Greek towns by asking them whether they would visit various configurations of a public park irrigated with RW. The same questions are posed in an additional version augmented with a safety alert. Among many others, results mainly show that willingness to visit (WTV) a park irrigated with RW or willingness to pay for RW decrease when respondents are confronted with the safety statement that ‘the irrigated parts are isolated and have been properly marked for the visitor so that he/she does not come into touch with RW’. Moreover, WTV does not decrease when there is previous experience with the park. The upgrade of RW from secondary to tertiary treatment is valuated only when safety alerts are present. The paper yields promotion insights useful for relevant utilities, organizations, and governments which are interested in forming a social marketing mix for this product while contributing to the theoretical and empirical understanding of framing effects with their experimental demonstration in the two case studies.     

Neoliberalism and work-related risks: individual or collective responsibilization?

Based on a representative sample of the Dutch population (N?=?2467), we test four hypotheses about how utilitarian individualism influences the responsibilization of work-related risks (i.e. the risk of dropping out of work because of unemployment, disability, or sickness). The risk society hypothesis understands utilitarian individualism as a laissez-faire ideological orientation and assumes it to lead to individual responsibilization. The blame culture hypothesis conceives utilitarian individualists as consumer citizens and predicts the reverse – that those concerned expect to be protected by the government. The resentment hypothesis assumes that particularly utilitarian individualists with a vulnerable labor-market position individualize responsibility, because they distrust those who share their fate more than others do. The narcissism hypothesis reverses this logic, because it assumes that utilitarian individualists’ narcissistic self-centeredness entices them to make others responsible for their own risks. The two hypotheses predicting an individualization of work-related risk due to utilitarian individualism are both confirmed, whereas the two hypotheses predicting it to result in their collectivization are both rejected.     

Order book approach to price impact

Buying and selling stocks causes price changes, which are described by the price impact function. To explain the shape of this function, we study the Island ECN orderbook. In addition to transaction data, the orderbook contains information about potential supply and demand for a stock. The virtual price impact calculated from this information is four times stronger than the actual one and explains it only partially. However, we find a strong anticorrelation between price changes and order flow, which strongly reduces the virtual price impact and provides for an explanation of the empirical price impact function.