Inducing Cooperation with a Carrot Instead of a Stick

The Supreme Court’s reasoning in Leegin turned on the insight that manufacturers may use resale price maintenance (RPM) for procompetitive purposes. This paper presents a model of manufacturer-retailer interactions that clarifies why, as a rule, retailers and manufacturers are joint beneficiaries of service-inducing RPM. The model identifies factors that determine how RPM-generated benefits are allocated between a manufacturer and its retailers. The paper then shows that manufacturers may use market share discounts (MSD) in lieu of RPM or other vertical restraints to induce retailer performance. The outcomes and efficiency effects that are achieved with RPM can be replicated and usually surpassed if manufacturers substitute MSD for RPM, thereby enabling a manufacturer to retain all incremental profit rather than conceding some of it to retailers.     

International Evidence on the Predictability of Stock Returns

This article examines the predictability of stock returns using international stock market data from eighteen countries. The study finds that the ability of dividend yields to predict stock returns increases as the return horizon lengthens from one month to forty-eight months. These results add to earlier ones, based on U.S. data only, showing that predictability grows with the return horizon. The study also explores why the observed pattern of predictability arises and provides evidence supporting the reasons suggested by Fama and French.     

Smooth Sailing?: Passengers' Assessment of Cruise Brand Equity

This study proposes and tests the influence of the cruise ship brand equity model on behavioral intentions by utilizing the constructs of brand loyalty, image, awareness, message, and perceived quality. The study found overall that brand loyalty and perceived quality were most influential on the behavioral intentions of cruise passengers. Specifically, repeat purchase intentions, the likelihood of recommending the brand to others, and brand preference were found to be significant in the model. The finding is consistent with extant literature which credits brand loyalty with being the most influential variable on cruise passenger's behavioral intentions. Brand image was the most highly correlated construct with behavioral intentions and was found to lack discriminant validity although theory distinguishes the two as separate constructs. The results from this study may be useful to cruise line corporations, particularly in formulating successful marketing campaigns and in encouraging relationship building with customers.     

Assessing Growth Estimates in IPO Valuations—A Case Study

A common practice in discounted cash flow (DCF) valuations of growth businesses is to forecast cash flows over some initial period (say, five years) and then use a "perpetuity-with-growth" calculation to estimate the "terminal" value beyond that period. The assumed growth rate generally has a very large effect on the overall valuation, and there is no universally accepted method for challenging the assumptions underlying the selected growth rate. This article presents a framework based on the concept of Market Implied Competitive Advantage Period (MICAP) analysis that can be used to evaluate such growth assumptions and then demonstrates the use of that framework in the IPO valuation of Jordan Telecom.