Quality Uncertainty as Resolution of the Bertrand Paradox

It is well‐known that product differentiation eliminates the Bertrand paradox (i.e. marginal cost pricing under duopoly). While differentiation is often justified with reference to the consumer's ‘preference for variety’, the conditions under which such a preference is likely to arise are rarely considered. We investigate this question in a setting in which uncertainty about product quality can endogenously generate either convex or non‐convex preferences. We show that even when two goods are ex ante homogeneous, quality uncertainty can eliminate the Bertrand paradox.     

Interest Rate Risk, Residential Mortgages and Financial Futures Markets

Residential mortgage markets in both the United States and Canada have recently been dominated by instruments such as variable-rate and short-term rollover mortgages which require borrowers to assume a greater burden of interest rate risk. An outstanding question is whether this approach to risk allocation is Pareto optimal or whether there are other more effective methods of dealing with the risk created by interest rate volatility. This study examines the potential for shifting this risk from the mortgage market to the financial futures market. After considering the rationale for expecting that neither mortgage borrowers nor lenders wish to absorb the high levels of risk present in the existing financial environment, this study discusses the hedging of interest rate risk through financial futures markets. Empirical tests are then performed to evaluate the effectiveness of U.S. futures markets for hedging positions from the U.S. mortgage market. These results indicate that the interest rate risk inherent in residential mortgages can be substantially shifted through one or more positions in the existing futures contracts and long-term, fixed-rate mortgages may still be financially feasible under conditions of interest rate volatility.     

Dynamic effects of externalities,optimal saving and economic growth

Conclusion Recognizing the fact that provision of mixed public goods can result in both consumption externalities of the Samuelsonian variety as well as production externalities we set out to extend the earlier results of Rao and Kalpagam (1977) on the effect of public goods on economic growth. In so doing, we considered three standard specifications of production externalities and enlarged the concept of consumption displacement. Our basic conclusion is that the results of our earlier paper remain valid under the more general conditions set out in this paper.     

Your new product development (NPD) is only as good as your process: an exploratory analysis of new NPD process design and implementation

Given industry competitiveness, how do firms' new product development (NPD) process designs differ when responding to an innovation mandate? How do NPD design elements differ across firms when implementing NPD processes? These design elements are strategic business unit (SBU) senior management involvement, business case content, customer interactions, and cross‐functional integration. What are the consequences of different combinations of NPD process design elements for innovation productivity? We explore these questions via a collective case study of newly implemented NPD process designs at three different SBUs of a major US‐based international conglomerate, 1 year after receiving the mandate to grow through innovation. Our analysis suggests that industry competitiveness and firm characteristics influence the NPD process design as SBUs employ distinct combinations of NPD design elements. The differential emphasis on design elements leads to variation in process design and divergence in innovation productivity.