Heterogeneous Firms,Globalisation and the Distance Puzzle

Despite the strong pace of globalisation, the distance effect on trade is persistent or even growing over time (Disdier and Head, 2008). To solve this distance puzzle, we use the recently developed gravity equation estimator from Helpman et al. (2008) (HMR henceforth). Using three different data sets, we find that the distance coefficient increases over time when ordinary least squares (OLS) is used, while the non‐linear estimation of HMR leads to a decline in the distance coefficient over time. The distance puzzle, thus, arises from a growing bias of OLS estimates. The latter is explained by an increase in the importance of the bias from omitting the number of heterogeneous exporting firms relative to the bias from omitting zero trade flows. Furthermore, we show that including zero trade flows cannot solve the distance puzzle when using HMR. The HMR estimates are strongly correlated with the time pattern in freight costs reported by Hummels (2007).     

A Sample Survey Based Linguistic MADM Method with Prospect Theory for Online Shopping Problems

In MADM problems, the attributes are often rated in linguistic variables, some researchers transform them into numerical values through some formulas. However, it might be inconsistent with real human thinking in some extent. In order to deal with such problems, a sample survey based MADM method with prospect theory is proposed. Firstly, through sampling survey, we collect the data in single point format corresponding to the words, and establish the codebook by mapping words into fuzzy sets, after that fuzzy operation rules are suitable for them. Secondly, based on the reference points, the gain and/or loss matrix is obtained, in accordance with the value function, the prospect value matrix is constructed. Finally, if the attributes are independent, the weighted prospect value of each alternative is computed, if the attributes are dependent, the Choquet integral based prospect value of each alternative is computed. The alternatives are ranked in descending order respect to the defuzzified values. The first alternative is chosen as the best decision result. The feasibility of the proposed method is illustrated through an application in online shopping problem from real life.     

The unrealized value of incentivized eWOM recommendations

While companies have recognized the perceived economic benefits of encouraging and managing electronic word-of-mouth (eWOM), the benefits may be understated. Companies take into account the influence on the audience. But, what about any effects on the person who communicates the eWOM? We explore the impact that incentivized eWOM has on communicator attitude. Using the saying is believing effect as our theoretical foundation, we suggest that providing eWOM induces a change in the communicator’s attitude. By generating and providing a biased recommendation, the communicator will believe the biased recommendation. Furthermore, the communicator is likely to remember the biased recommendation and will use it to update their attitude. We examine how valence of recommendations (negative versus positive) and the number of opportunities to recommend affect the change in attitude. Our findings indicate that providing recommendations changes communicator’s attitude. Implications of the results are discussed.     

Response style corrected market segmentation for ordinal data

Survey data collected for market segmentation studies is typically ordinal in nature. As such, it is susceptible to response styles. Ignoring response styles can lead to market segments which do not differ in beliefs, but merely in how segment members use survey answer options and which possibly occur in addition to the belief segments. We propose a finite mixture model which simultaneously segments and corrects for response styles, permits heterogeneity in both beliefs and response styles, accommodates a range of different response styles, does not impose a certain relationship between the response style and belief segments, and is suitable for ordinal data. The performance of the model is tested using both artificial and empirical survey data.     

A Sealed-Bid Two-Attribute Yardstick Auction Without Prior Scoring

We analyze a two-attribute single item procurement auction that uses yardstick competition to settle prices. The auction simplifies the procurement process by reducing the principal’s articulation of preferences to simply choosing the most preferred offer as if it was a market with posted prices. This is done simply by replacing the submitted sealed bids by yardstick bids, computed by a linear weighting of the other participants’ bids. We show that there is only one type of Nash equilibria where some agents may win the auction by submitting a zero price-bid. Using a simulation study we demonstrate that following this type of equilibrium behavior often leads to winner’s curse. The simulations show that in auctions with more than 12 participants the chance of facing winner’s curse is around 95 %. Truthful reporting, on the other hand, does not constitute a Nash equilibrium but it is ex post individually rational. Using a simulation study we demonstrate that truthful bidding may indeed represent some kind of focal point.     

Normative Self-Interest or Moral Hypocrisy?: The Importance of Context

We re-examine the construct of Moral Hypocrisy from the perspective of normative self-interest. Arguing that some degree of self-interest is culturally acceptable and indeed expected, we postulate that a pattern of behavior is more indicative of moral hypocrisy than a single action. Contrary to previous findings, our results indicate that a significant majority of subjects (N = 136) exhibited fair behavior, and that ideals of caring and fairness, when measured in context of the scenario, were predictive of those behaviors. Moreover, measures of Individualism/Collectivism appear more predictive of self-interested behavior than out-of-context responses to moral ideals. Implications for research and practice are discussed. George W. Watson received his Ph.D. from Virginia Tech, his M.B.A. from California State at Fullerton, an M.S. in Systems Management from the Naval Postgraduate School in Monterey, an a B.A. in Business Administration from the University of Washington, Seattle. His teaching focus is on corporate social responsibility and ethics. Dr.Watson’s current research interests include moral psychology,ethical decision making, and ideology. He has published in Business Ethics Quarterly, Business and Society, and the Journal of Business Ethics. Farooq Sheikh received his BS in Physics from Indiana University of Pennsylvania, and his Ph.D. from Smeal College of Business, Penn State University. He is currently Assistant Professor of Operations Management, School of Business at the State University of New York at Geneseo. Dr. Sheik’s research interests include rational and behavioral models in business operations, bounded-rational behavioral models in population games, social norms, game theory and cross-disciplinary research involving behavioral models.     

Network ties and entrepreneurial orientation: Innovative performance of SMEs in a developing country

This study investigates the role of intra-cluster ties, extra-cluster ties, and entrepreneurial orientation in shaping firms’ innovative performance. We conduct our analysis on a primary data set of 120 small and medium enterprises located in the Cibaduyut footwear-manufacturing cluster, Indonesia. We explore the effectiveness of knowledge acquisition through intra-cluster ties and extra-cluster ties on innovative performance. We find that extra-cluster ties mediate the relationship between proactiveness and innovative performance. Also, a combination of high extra-cluster ties and risk taking exert a positive impact on innovative performance. Surprisingly, we find that risk taking negatively moderates the influence of intra-cluster ties on innovative performance. Over-reliance on within-cluster knowledge sharing may result in the diffusion of redundant knowledge rather than making new knowledge available to the firm. Overall, our findings point to the synergistic effects of entrepreneurial orientation and extra-cluster ties on innovative performance.     

Sequential versus Bundle Auctions for Recurring Procurement

We compare sequential and bundle procurement auctions in a framework of successive procurement situations, where current success positively or negatively affects future market opportunities. We find that in bundle auctions procurement cost is lower and less risky than in sequential standard auctions, but still higher than in the optimal sequential auction. Only a sequential second price auction leads to the efficient outcome.     

Market Shares and Concentration in the EU Auditing Industry: the Effects of Andersen’s Demise

This paper describes and analyses changes at the concentration level of the audit services markets in 15-EU member-countries. The sample consists of 2,862 clients of auditing firms for the period 1998 to 2004. The findings of the research show that concentration in the aggregate sample increased over time. Concentration in the audit markets of the EU-15 member-countries exhibits substantial variation across countries while average concentration, before and after Arthur Andersen’s dissolution, has increased in 12 and declined in three countries. Results segmented by economic sectors indicate that the concentration increased in all sectors except Energy, which is the sector with the highest concentration. Overall, the empirical results suggest that there are complexities in our understanding of auditing services markets for competition purposes.

Strategic approximations of discontinuous games

An infinite game is approximated by restricting the players to finite subsets of their pure strategy spaces. A strategic approximationof an infinite game is a countable subset of pure strategies with the property that limits of all equilibria of all sequences of approximating games whose finite strategy sets eventually include each member of the countable set must be equilibria of the infinite game. We provide conditions under which infinite games admit strategic approximations.