Determining an optimal margin of error for supply chain audits

Unsaleables are products that need to be removed from the primary distribution channel for a variety of reasons including being damaged in the supply chain or reaching the end of their useful life before being sold. One approach for processing unsaleables is the development of Adjustable Rate Policies (ARP) whereby manufacturers establish reimbursement rates for damaged and expired product based on data collected from supply chain audits. A prerequisite for developing equitable reimbursement rates is the need for representative audits of the supply chain which in turn depend on the development of proper sampling plans. Given the need to obtain a representative sample in order to establish accurate reimbursement rates and critical flaws in the conventional sampling methodology, the purpose of this research is to propose a new methodology for determining the sample size for conducting supply chain audits and compare the proposed method to other methods. The results of the study consistently support the value of optimally determining the margin of error based on contextual factors such as sales volume, unit cost, and unit sampling costs.     

Evaluating a County-Sponsored Social Marketing Campaign to Increase Mothers' Initiation of HPV Vaccine for their Pre-teen Daughters in a Primarily Rural Area

Routine vaccination against human papillomavirus (HPV), the main cause of cervical cancer, is recommended for 11-12 year old girls, yet vaccine uptake is low. This study evaluates a social marketing campaign initiated by 13 North Carolina counties to raise awareness among parents and reduce barriers to accessing the vaccine in a primarily rural area. The 3-month campaign targeted mothers of girls ages 11-12 and healthcare practices serving pre-teen girls in four counties. Principles of social marketing were: product (recommended vaccine against HPV), price (cost, perception of safety and efficacy, and access), promotion (posters, brochures, website, news releases, doctor's recommendation), and place (doctors' offices, retail outlets). We analyzed (1) website traffic, hotline calls, and media placement; (2) cross-sectional surveys of mothers and providers; and (3) HPV immunization rates in intervention versus non-intervention counties. Of respondent mothers (n=225), 82% heard or saw campaign messages or materials. Of respondent providers (n=35), 94% used campaign brochures regularly or occasionally in conversations with parents. HPV vaccination rates within six months of campaign launch were 2% higher for 9-13 year old girls in two of the four intervention counties compared to 96 non-intervention counties. This evaluation supports campaign use in other primarily rural and underserved areas.     

Market Share Quotas and Community Reinvestment

This notes explores some theoretical implications of the U.S. Department of Justice's policy requiring lenders to seek as much market share in protected neighborhoods as elsewhere. In the asymmetric Cournot case, the high-cost lender in the protected neighborhood responds in the expected way, but the low-cost lender's response depends on the curvature of the demand function. For concave demand, the low-cost lender's output decisions run counter to those of the high-cost lender, undermining the policy's effectiveness and inefficiently shifting production in the protected market from the low-cost provider to the high-cost provider.     

Functional Forms and Declining Average Costs

The translog form, if fitted to data exhibiting monotonically decreasing average costs, generally will imply spurious U-shaped average costs. The reason is that the log-log transform of any cost function characterized by monotonically declining average costs is strictly convex in the logarithm of size except in limited cases. Simulations suggest that the severity of the bias is exacerbated by a realistically skewed sample distribution. Similar properties of alternative forms also are considered. Estimates fitted to three samples of U.S. banks bear out the potential importance of these concerns.     

Effects of Materiality, Risk, and Ethical Perceptions on Fraudulent Reporting by Financial Executives

This paper examines fraudulent financial reporting within the context of Jones' (1991) ethical decision making model. It was hypothesized that quantitative materiality would influence judgments of the ethical acceptability of fraud, and that both materiality and financial risk would affect the likelihood of committing fraud. The results, based on a study of CPAs employed as senior executives, provide partial support for the hypotheses. Contrary to expectations, quantitative materiality did not influence ethical judgments. ANCOVA results based on participants' estimates of the likelihood that a "typical CPA" would manipulate reported results indicated that both materiality and risk significantly influenced the likelihood of fraud, but that the perceived morality of the action did not. In contrast, results based on participants' self-reported behavior indicated that materiality and the perceived morality of the action would influence the likelihood of fraud, but that financial risk would not. Regardless of the measure used for the likelihood of fraud, the results indicate that financial executives continue to be influenced by quantitative materiality when misstatements are clearly material on qualitative grounds.     

Indifference to profit-sharing is consistent

The incentive for a firm unilaterally to switch from a conventional wage to profit-sharing is analyzed for a duopoly as a function of the degree of market power. The point of indifference is shown to be the consistent-conjectures mode of conduct; more competitive firms will not switch while less competitive firms will switch. A proportional tax on corporate profits will not alter the incentive of a firm to adopt or reject profit-sharing.This paper embodies the views of the author and does not necessarily reflect the views of the Federal Reserve System or of the Federal Reserve Bank of Philadelphia.     

Optimal linear taxation of polluting oligopolists

A linear ad valorem tax can induce homogeneous oligopolists to produce at socially optimal levels, achieving the first-best allocation, in the presence of external costs that vary exogenously with aggregate output. The optimal tax rate is independent of private cost functions and thus reduces informational requirements on the regulator. Alternatively, if the regulator knows marginal private costs but not the pattern of firms' conduct or the slope of the demand curve, an iterative implementation of the tax is possible. Both blockaded and endogenous entry are considered, as is strategic behavior by firms toward the regulator.The views expressed in this paper are those of the author and do not necessarily reflect the views of the Federal Reserve Bank of Philadelphia or of the Federal Reserve System. The author is grateful to Paul Calem for helpful discussions and to two anonymous referees for helpful comments.     

Core concepts in economies where information is almost complete

Summary. The paper analyzes the properties of cores with differential information, as economies converge to complete information. Two core concepts are investigated: the private core, in which agents' net trades are measurable with respect to agents' private information, and the incentive compatible core, in which coalitions of agents are restricted to incentive compatible allocations. Received: March 15, 2000; revised version: August 24, 2000