Contagion as a Wealth Effect

Financial contagion is described as a wealth effect in a continuous-time model with two risky assets and three types of traders. Noise traders trade randomly in one market. Long-term investors provide liquidity using a linear rule based on fundamentals. Convergence traders with logarithmic utility trade optimally in both markets. Asset price dynamics are endogenously determined (numerically) as functions of endogenous wealth and exogenous noise. When convergence traders lose money, they liquidate positions in both markets. This creates contagion, in that returns become more volatile and more correlated. Contagion reduces benefits from portfolio diversification and raises issues for risk management.     

Portfolio separation for stockholder owned depository financial intermediaries

The conditions leading to separation of asset composition and financing decisions for depository financial intermediaries have received considerable attention in the literature. Although research to date provides useful insights into the issue of separation, none analyze separation from the point of view of shareholder approval. In this paper a single-period model of investor behavior is developed and analyzed based on market equilibrium. The impetus for the existence of intermediaries is random cash payments of investors and liquidation costs. The conditions for shareholder unanimity and optimal rules for intermediary decisions are derived. The optimality conditions are then analyzed for separation.     

THE STRATEGIC USE OF INTEGRATED MANUFACTURING: AN EMPIRICAL EXAMINATION

The increasing importance of advanced manufacturing technology, total quality management, and just-in-time to manufacturing firms raises some basic questions as to the strategic use of these techniques in manufacturing. Does strategic use of these techniques influence performance? How is the impact of these techniques influenced by the competitive environment? Are the techniques actually being used strategically? A study in a large sample of manufacturing organizations confirms that the use of integrated manufacturing techniques—particularly total quality—influences performance, and that these effects are magnified or diminished by both the competitive environment and manufacturing strategy. It also shows that, in some cases, firms are missing opportunities to combine integrated manufacturing and strategy in ways that would substantially impact their performance.     

Selecting Influential Business-to-Business Customers in New Product Development: Relational Embeddedness and Knowledge Heterogeneity Considerations

This study examines how the most influential business‐to‐business (B2B) customers, both existing and potential, involved in providing input to a new product development (NPD) project influence new product advantage. As the relational literature suggests, involving customers who have had close and embedded relationships with a firm's new product organization, such as a firm's largest customers, and customers who have been involved in past collaborative activities, should lead to the development of superior products. To the contrary, the innovation literature suggests that a firm may become too close to its large, embedded customers resulting in less innovation and in lower performing products. Also, the relationship between the heterogeneity of the knowledge of the most influential customers and new product advantage is examined. A contingency perspective is hypothesized such that the degree of product newness sought in the project moderates the effects of both relational embeddedness and knowledge heterogeneity on new product advantage. Empirical findings from a sample of 137 NPD projects support this contingency view. For projects seeking to develop incremental products, where the product being developed is an extension or an enhancement to an existing product, new product advantage tended to be higher in projects using embedded or homogeneous customers. For incremental projects, projects using less‐embedded or heterogeneous customers tended to have lower product performance. For projects following a highly innovative product strategy, new product advantage tended to be higher in projects that involved heterogeneous customers. These heterogeneous customers provided NPD projects with a diversity of perspectives, competencies, and experiences that fostered significant product innovations. The study contributes to the literature by empirically testing relational and innovation theories in NPD projects and by providing evidence on the importance of relational embeddedness and knowledge heterogeneity in selecting influential customers in NPD projects.     

Cartel pricing dynamics with cost variability and endogenous buyer detection

This paper characterizes collusive pricing patterns when buyers may detect the presence of a cartel. Buyers are assumed to become suspicious when observed prices are anomalous. We find that the cartel price path is comprised of two phases. During the transitional phase, price is generally rising and relatively unresponsive to cost shocks. During the stationary phase, price responds to cost but is much less sensitive than under non-collusion or simple monopoly; a low price variance may then be a collusive marker. Compared to when firms do not collude, cost shocks take a longer time to pass-through to price.