A note on linear utility

Summary We show that any complete, lower-semicontinuous, and translation-invariant preorder defined on a topological vector space admits a linear and continuous utility representation.Thanks are given to an anonymous referee for his/her valuable suggestions and comments.     

Nonlinear pricing with self-control preferences

A basic assumption of economics is that consumers choose what they want. However, many consumers find it difficult to stop overeating, overspending, smoking, procrastinating, etc, even though they want to. In reality, consumers have temptation and it is psychologically costly to exercise self-control. To clarify the implications of the existence of temptation and self-control costs, this paper studies a firm's optimal selling strategy exploiting the behavioral features of consumers. We characterize optimal nonlinear pricing schemes for a monopoly when self-control is costly for consumers. Since consumers have a preference for commitment, the firm faces a trade-off between offering a small menu that makes the consumers’ self-control easier and offering a large menu that achieves better price discrimination. We show that the optimal menu resembles the one in the standard nonlinear pricing problem with a price ceiling, where the upper bound on prices is determined endogenously by a participation constraint. The ceiling motivates the firm to offer a relatively flat and compact price schedule, serving more consumers with low demand. The characterization also shows that the firm may earn less if consumers have temptation.     

Using Additional Information in Structural Decomposition Analysis: The Path-based Approach

Structural decomposition analysis (SDA) is a well-known methodology to assess the relative importance of effects that together constitute the actual change in a variable of interest. A widely recognized problem of SDA is that the results often depend strongly on the specific decomposition formula chosen, while numerous formulae are equivalent from a theoretical point of view. This ‘non-uniqueness’ problem is often solved rather pragmatically, by reporting an average over (a subset of) all possible formulae. In this paper, we propose an approach that uses maximum entropy econometrics techniques to select a specific decomposition formula if additional information on one or more (but not all) determinants is available. We illustrate the method empirically by investigating the sources of change in real labour costs by industry in Spain, 1980–1994.     

The impact of distressed economies on the EU sovereign market

Financially distressed economies inside the European Union (EU) are being blamed for producing a general increase in borrowing costs. This article analyzes the channels of default risk transmission within the EU countries using the information content in the sovereign Credit Default Swap (CDS) market. We proceed in two directions. First, we test the existence of cross-border volatility effects between the central and the peripheral EU countries. Second, we explore the effect of distressed economies on the default and risk premium constituents of sovereign default swaps. We show a significant volatility spillover from distressed to central European Economic and Monetary Union (EMU) economies. This causality pattern leads to a significant impact on the default swap risk premia. On average, the risk premium accounts for approximately 42% of central EMU spreads and 56% of the spreads for those countries outside of the EMU. The peripheral risk also affects the default component of central economies, although its impact is lower.     

Little victories local economic development in European regions

This paper analyses how different institutional frameworks condition the influence of selected social traits: the social stigma to entrepreneurial failure and the presence of entrepreneurial role models, over entrepreneurial activity levels in a rural area with strong industrial and entrepreneurial history versus those that are not necessarily characterized by such a tradition. To attain this objective we undertake a rare events logit model using a robust Spanish dataset from 2003. The main contribution of the study indicates that there is a significant difference between entrepreneurial activity levels in rural Catalonia as compared to rural areas in the rest of Spain. This difference is in large part explained by the distinct impact of the observed social traits, where the presence of entrepreneurial role models is a prominent explanatory factor favouring entrepreneurial activity in rural (Catalonia) areas with strong industrial tradition. The findings of the paper back the growing call for territorial specificity in the formulation and application of entrepreneurship support measures, distinguishing between rural and urban areas. Hence, and in accordance with the new rural paradigm, entrepreneurship promotion should take a more holistic character and become an integral part of any rural development plan. The paper's results imply that fostering business creation in rural areas is more often than not a generational process, where the search for short-term benefits can result in the mistaken impression that in rural areas entrepreneurship support policy does not work.     

The international hotel industry in Spain: Its hierarchical structure

This paper empirically analyzes the indebtedness of the main companies in the Spanish hotel industry. In particular, it introduces a method to analyze the structures and dynamics of the largest companies in this sector. The method combines the Pearson correlation coefficient with the nearest neighbour single linkage clustering algorithm (Mantegna, R. N. (1999). Hierarchical structure in financial markets. The European Physical Journal B, 11, 193–197). The Pearson correlation coefficient determines a metric distance between two different multidimensional time series that is then used to construct a Minimal Spanning Tree. From this tree, an ultra metric distance that is used to derive the Hierarchical Tree can be computed. From the analysis of the time series data of companies included in the SABI, or the Iberian Balance Sheet Analysis System 2005, it is possible to derive a hierarchical organization of the Spanish hotel firms. In particular, different dynamic clusters of companies, which correspond to their common production and indebtedness strategies, can be detected.     

Key success factors for strategy implementation in Latin America

Increasing competition among Latin American firms fosters more proactive processes aimed at reviewing business strategy. The research objective is to measure the impact of key variables on successful implementation of business strategy. Relying on the knowledge and experience of Latin American entrepreneurs and managers, the questions addressed include: How important is the role of the CEO and management actors? Do firms prioritize actions prior to implementing strategy? Are control and follow-up tools valued? How is a successful strategy implementation ensured? Research findings are expected to provide useful knowledge for management decision processes relating to successful implementation of business strategy.     

Risk and the strategy of foreign location choice in regulated industries

We argue that firms in regulated industries react to macroeconomic and policy risks in sharply different ways. While they seek to avoid countries with high levels of macroeconomic uncertainty, we predict that they find it more attractive to expand into countries characterized by governments with discretionary policymaking capacities so as to be able to negotiate favorable conditions of entry. We also argue that firms are heterogeneous in their attitudes toward risk. We predict that firms in which the state holds a partial equity stake exhibit a more tolerant attitude. We also expect that as firms accumulate foreign experience, they develop an aversion toward further foreign entries into politically unstable markets. Support for these predictions is provided by an analysis of the Latin American market entries of all listed Spanish firms in regulated industries between 1987 and 2000. Copyright © 2008 John Wiley & Sons, Ltd.