Debt problems of developing countries

Much concern has been expressed in recent years over the mounting debt burden of developing countries. The increasing amounts of loans and their hardening terms have in many cases led to external debt servicing problems of alarming magnitudes. The following contribution addresses itself to evaluating these problems.     

Integration and underdevelopment in the Commonwealth Caribbean

While the integration process in the Caribbean Community and Common Market (Caricom) has only been in force for a few years, it is, in the author’s view, clear that the narrow free trade approach used so far will not be able to deal with the widening gap between the better-off and the less well-off member states or to provide a solution to fundamental problems facing the region as a whole.     

Construct validity of some unweighted product-count diversification measures

Construct validities are assessed for three simple-to-compute, unweighted, SIC-based continuous diversification measures and a recently proposed two-dimensional, SIC-based categorical diversification measure. Two of the three continuous measures are found to correspond strongly to Rumelt's categorical measures, suggesting that these two objective and easy-to-calculate measures are better suited for large sample, strategy research than has previously been assumed. No support is found for the two-dimensional measure.     

Residents’ perspectives of a newly developed ecotourism project: an assessment of effectiveness through the lens of an importance–performance analysis

Understanding the perceived importance and performance of various components of ecotourism to residents living in the area it is undertaken is crucial to the overall success of an ecotourism development project. This study examines residents’ perceptions of the importance and performance of ecotourism components (i.e. environmental conservation, economic wellbeing, promotion of local arts and culture, local participation, and fair share of resources), including overall ecotourism development, at the Gaurishankar Conservation Area (GCA) – a recently implemented ecotourism development project in Nepal. This study also examines the effect of socio-demographic, economic, and psychological factors on a perceived gap between the importance and the performance of ecotourism components. Findings suggest that the ecotourism development project at the GCA should concentrate on improving the economic wellbeing of residents, and on overall ecotourism development. Findings also suggest that residents’ inclusion in benefit-sharing mechanisms was associated with a reduced perceived gap between the importance and performance of ecotourism components. A comparison among different geographical segments of residents indicated that the perceived gap between importance and performance varies across different locations.     

Modeling Dependencies in Brand Choice Outcomes Across Complementary Categories

We build an econometric model of a household's contemporaneous brand choice outcomes in complementary product categories. This model explicitly captures cross-category dependencies in brand choice outcomes of a household. Such dependencies have not been modeled in existing multi-category demand models.Our model accommodates cross-category dependencies that arise on account of three component effects: (1) complementarity due to the additional utility that a household derives from the joint purchase of brands in complementary categories, (2) marketing spillovers due to the effects of brands’ prices in one category affecting the households’ latent utilities for brands in the complementary category, (3) unobserved dependencies due to correlations in households’ latent utilities for brands across categories.We estimate our proposed multi-category brand choice model using scanner panel data on cake mix and frosting categories. We find that complementarity accounts for the vast majority of the estimated cross-category effects in demand. We also find that as much as 55 percent of the total retail profit impact of price promotions arise on account of brand-level (focus of our study), as opposed to category-level (focus of previous studies), dependencies in household demand. Finally, we propose an easily interpretable visual representation – Largess and Free-Ride Plot – of cross-category price elasticities that summarizes the differential abilities of brands to influence, or be influenced by, brands in the complementary category.     

Impact of frequency of alignment of physical and information system inventories on out of stocks: A simulation study

Inaccuracy in the information system inventory as compared to the physical inventory may lead to out of stocks. Inaccuracy may occur for many reasons, a principal one being random losses such as theft. One way to reduce this inaccuracy is to adjust the inventory information in the systems at some regular frequency. Such alignments are quite expensive in practice. Thus how often to align the two inventories is the focus of this research. A simulation model is employed to investigate the effect of such loss defined by the stock loss parameter (λ) and the frequent alignment of physical and information system inventories on the stockout (S_out) and average inventory (I). A term to be called the effective value of stock loss parameter is introduced to signify the effect of frequency of alignment (f) on S_out. The results derived in this study provide a powerful tool in the hands of an inventory manager. It has been noted that, so far as stockout is concerned, by selecting a moderate value of alignment frequency (f), the effective value of stock loss parameter (λ_e) can be reduced to∼ λ/f. The accuracy of S_out and I values across a number of runs in the simulation studies, sensitivity of S_out and I on various parameters and the nature of stochastic demand distribution, and application of these results with or without deployment of RFID to reduce the loss due to stockout are also discussed. The results, verified under various scenarios, indicate that there is a significant reduction in stockout loss when the alignment is done monthly vs. annually, but it does not add much value beyond a monthly check.     

The Indirect Impact of Price Deals on Households’ Purchase Decisions Through the Formation of Expected Future Prices

We examine the indirect impact of price deals, which occurs through the formation of expected future prices, on households’ purchase decisions. Two competing learning processes of households’ formation of expected future deals that lead to opposite predictions are proposed. Under a deal-probability learning process, a current deal on a brand raises households’ expectations of a deal on the same brand in the immediate future, while under a deal-timing learning process, a current deal on a brand lowers households’ expectations of a deal on the same brand. We embed each learning specification within a comprehensive econometric framework that simultaneously examines three purchase decisions – incidence, brand choice and quantity – at the household level, while explicitly correcting for two sources of selectivity bias in discrete quantity outcomes. We estimate the proposed model using scanner panel data on paper towels, and find that (1) the deal-probability learning process better describes how households incorporate the deal information into the formation of future price expectations compared to the deal-timing learning process; (2) the indirect impact of price deals is greater for brand-loyals than for brand-switchers; (3) the indirect impact of price deals is greater for larger families, heavy users, less educated and less employed households, and infrequent shoppers. We also show that ignoring the indirect impact of price deals severely overstates the sales effects.     

THE DIVIDEND PAYOUTS OF PRIVATE FIRMS: EVIDENCE FROM TAX COURT DECISIONS

To study the dividend payouts of private firms we extend the agency cost/external financing cost trade-off model of dividend payouts to include the accumulated earnings tax (AET). The firm's optimal dividend policy trades off the benefits from lower agency costs against external financing costs and the AET. Information from tax court records reveals that private firms' payouts are influenced by both agency costs and the AET.     

INFORMATION ASYMMETRY AND OPTIONS TRADING

This paper demonstrates that options trading does not have a uniform impact on the volatility of underlying stocks. Although uninformed traders are able to hedge the risk of underlying stocks by maintaining opposite positions in the options market, informed traders hold outright options positions to capitalize on their information. This hedging behavior tends to reduce noise in the stock market, whereas the speculating behavior tends to generate noise in the stock market. As a result, stocks that were originally volatile, i.e., traded primarily by uninformed traders, will be stabilized by the introduction of options. Conversely, stocks that were more stable become destabilized by options trading.