Recycled Effluent: Should the Polluter Pay?

A coastal city can either dispose of recycled effluent by dumping it in the sea, or transfer it to farmers in its hinterland for irrigation. Who should bear the cost of recycling? Three alternatives are employed: a central planner who maximizes the combined utility of city and farmers; regulation by prices, for which purpose we develop the city's supply function; and a bargaining framework for the allocation of costs. The main conclusions are that the polluter pays rule cannot be justified in principle and that bargaining may result in inefficiency. We demonstrate with an example from Israel that essentially conforms to the theoretical structure.     

The role of accounting disaggregation in detecting and mitigating earnings management

Though ample empirical evidence alludes to the importance of disaggregated accounting data in the context of earnings management, extant theory considers biases in reporting mostly at the aggregated level of the accounting report. By introducing accounting disaggregation into the conventional theoretical framework of earnings management, this study highlights the essential role that disaggregated accounting data play in detecting and mitigating reporting manipulations. Disaggregated reports are shown to be especially effective when they consist of accounting items that are tightly interrelated by their fundamental economic nature, differ considerably in their sensitivity to reporting manipulations, and vary in their signs.     

The WTO deal on basic telecommunications : Big bang or little whimper?

It has been widely asserted that the Group on Basic Telecommunications (GBT) agreement reached in February 1997 is a significant step forward for the cause of global telecommunications liberalization. This article brings together two authors on different sides of the needed debate about the potential impact of the GBT deal. Following a brief introduction, William Drake argues that the GBT deal could, depending on its implementation, have a substantial liberalizing effect not only on specific markets, but also on the broader institutional arrangements of the global telecommunications policy environment. In response, Eli Noam argues that the GBT is useful, but that its significance is being greatly exaggerated, that most policy changes were taking place anyway, and that it could in some cases have the negative effect of slowing down the process of global liberalization.     

Rational Versus Intuitive Gatekeeping: Escalation of Commitment in the Front End of NPD

The unwillingness of a gatekeeper to let go of a fruitless new product development (NPD) project wastes valuable resources and hampers NPD performance. The onset of such escalation of commitment is likely to occur already in the front end of NPD, where high ambiguity and complexity make it hard to distinguish fruitless from potentially successful projects. This study investigates if a gatekeeper’s thinking style—whether they think rationally or whether they follow their intuition—can prevent escalation of commitment in the front end. Theory on cognition provides arguments for and against either thinking style’s influence on escalation of commitment, but empirical evidence on this matter is lacking. Our study demonstrates that gatekeepers who think rationally are less likely to escalate their commitment than those who follow their intuition. This result holds both in a correlational study of dispositional thinking styles, as well as in an individual‐level randomized experiment in which the thinking style of experienced practitioners before they take gate decisions is induced. Our findings provide ample opportunities for improving existing front end gate review practices, such as allocating candidates for gatekeeper positions based on their thinking style, training gatekeepers to think rationally, and increasing the use of gate‐decision rules and templates.     

Indirect management of invasive species through bio-controls: A bioeconomic model of salmon and alewife in Lake Michigan

Invasive species are typically viewed as an economic bad because they cause economic and ecological damages, and can be difficult to control. When direct management is limited, another option is indirect management via bio-controls. Here management is directed at the bio-control species population (e.g., supplementing this population through stocking) with the aim that, through ecological interactions, the bio-control species will control the invader. We focus on stocking salmon to control invasive alewives in Lake Michigan. Salmon are valuable to recreational anglers, and alewives are their primary food source in Lake Michigan. We illustrate how stocking salmon can be used to control alewife, while at the same time alewife can be turned from a net economic bad (having a negative shadow value) into a net economic good (having a positive shadow value) by providing valuable ecosystem services that support the recreational fishery. Using optimal control theory, we solve for a stocking program that maximizes social welfare. Optimal stocking results in cyclical dynamics. We link concepts of natural capital and indirect management, population dynamics, non-convexities, and multiple-use species and demonstrate that species interactions are critical to the values that humans derive from ecosystems. This research also provides insight into the management of salmon fisheries in the Great Lakes.     

Destination marketing during and following crises: combating negative images in Asia

The goal of this study is to analyze which strategies Asian officials and marketers have adopted in order to combat stereotypes, negative perceptions, and crises in order to repair destination images and bring back visitors. The study includes qualitative content analyses of news reports, press interviews, and campaigns in order to uncover media policy, strategies, events, and marketing initiatives used since 2008. The conceptual framework used was the “multi-step model for altering place image”, which offers three types of strategies to use in order to repair a destination’s negative image during and after a crisis: source, message, and audience.     

Momentum in Residential Real Estate

This paper examines whether there is return momentum in residential real estate in the U.S. Case and Shiller (American economic review 79(1):128–137, 1989) document evidence of positive return correlation in four U.S. cities. Similar to Jegadeesh and Titman’s (Journal of finance 56:699–720, 1993) stock market momentum paper, we construct long-short zero cost investment portfolios from more than 380 metropolitan areas based on their lagged returns. Our results show that momentum of returns in the U.S. residential housing is statistically significant and economically meaningful during our 1983 to 2008 sample period. On average, zero cost investment portfolios that buy past winning housing markets and short sell past losing markets earn up to 8.92% annually. Our results are robust to different sub-periods and more pronounced in the Northeast and West regions. While zero cost portfolios of residential real estate indices is not a tradable strategy, the implications of our results can be useful for builders, potential home owners, mortgage originators and traders of real estate options.     

Stock Price Behavior Around Announcements of Write-Offs

Review of Accounting Studies - Is it plausible that important corporate events such as write-offs, averaging around 20% of firms' market values, are associated with stock-price responses of...