Influence of Soldout Products on Consumer Choice

Consumers often face situations in which information about soldout products is still present in the decision context. This paper demonstrates that the presence of soldout products in the decision environment can prompt consumers to purchase available options and decrease choice deferral. This effect can be explained by two underlying decision processes. First, soldout products may create a sense of urgency for consumers to expedite their purchases, which the authors call an immediacy effect. Second, soldout products may enhance the perceived attractiveness of products similar to the soldout products, which the authors refer to as an informational cascades effect.     

Estimation employing a priori information within mass appraisal and hedonic pricing models

Both statistical appraisal and hedonic pricing models decompose houses into a set of individual characteristics. Regression estimates yield the contribution of each characteristic to total value. Unfortunately, straightforward application of OLS may produce untenable results such as implausible coefficient magnitudes or incorrect signs. Often the suspected cause is multicollinearity. This article examines the effect on estimation efficiency of differing levels of multicollinearity, R², and a priori information in the form of sub-market cost data, by comparing inequality restricted least squares (IRLS) with OLS in a series of Monte Carlo experiments. The IRLS procedure investigated here hybridizes the statistical market approach implemented by OLS, and the more traditional cost approach. The experiments show dramatic gains in estimation efficiency from exploiting a priori information through IRLS.     

Changing multinational corporation — nation state relationship: The case of IBM in India

During 1977, IBM was asked to withdraw from India due to its unwillingnesss to comply with the Foreign Exchange Regulation Act (FERA) of 1973. However, with (1) the signing of Memorandum of Understanding between the U.S. and India, (2) the easing of trade restrictions by the Government of India against foreign firms, (3) the declining value of the U.S. dollar, (4) the slump in the U.S. computer market, (5) the rapid growth in the Indian computer market, and (6) changes in other environmental factors, IBM again began actively seeking and securing new business. By the mid-1980s, IBM had secured a number of large contracts and was on the verge of re-entry into the burgeoning Indian computer market.The purpose of this study is to examine the underlying factors that influence both the divorce and reunification between host country government and the multinational corporation. The study, conducted through personal interviews with chief executives of IBM, government officials, and other knowledgeable persons, examines the social-political aspects of the FERA and its implications for multinationals in India and elsewhere in developing countries.     

Studies of the 1987 stock market crash: Review and appraisal

Within four months of the stock market crash on October 19, 1987, there were six studies of what happened. The Brady Commission, the Commodity Futures Trading Commission, the Securities and Exchange Commission, the General Accounting Office, the New York Stock Exchange, and the Chicago Mercantile Exchange all produced reports that described and analyzed the Crash, and in some cases made recommendations for additional regulation. This paper examines the conclusions and analyses contained in these reports and provides a summary of their recommendations. Particular attention is given to the allegation that stock index futures trading was a significant factor in the Crash. In addition, the recommendations that higher margins be imposed on futures transactions and that formal trading halts be instituted in both the futures and stock markets are discussed in depth. A major conclusion of this review is that new market-making procedures are needed to cope with the growing institutionalization of trading in equity and equity-derivative markets. Columbia University     

Business Cycles and the Behavior of Metals Prices

The theory of storage says that the marginal convenience yield on inventory falls at a decreasing rate as inventory increases. The authors test this hypothesis by examining the relative variation of spot and futures prices for metals. As the hypothesis implies, futures prices are less variable than spot prices when inventory is low, but spot and futures prices have similar variability when inventory is high. The theory of storage also explains inversions of “normal” futures-spot price relations around business-cycle peaks. Positive demand shocks around peaks reduce metal inventories and, as the theory predicts, generate large convenience yields and price inversions.     

Piecewise linear incentive scheme and participative budgeting

This paper studies the economic incentives of participative budgeting through the design of incentive schemes within the agency theory framework. In particular, a piecewise linear incentive scheme (PLIS), an optimal version of Weitzman's New Soviet Incentive Scheme (NSIS), is derived. The characteristics of PLIS are: first, unlike NSIS, the bonus (penalty) rates of the optimal PLIS vary according to the agent's type in order to improve the principal's welfare, second, a penalty may be imposed on the overfulfillment of the agent's performance in order to maintain incentive compatibility, and finally, it is shown that if the coefficients are constant as in NSIS, there is no need for participative budgeting. Also, PLIS is compared with a quadratic incentive scheme. Both incentive schemes achieve the optimal solution, but each incentive scheme has its own advantage over the other depending on the situation.