Generic Advertising of Intermediate Goods: Theory and Evidence on Free Riding

We develop a model of generic advertising in the context of vertically dependent markets wherein producers of an intermediate good financially support, through voluntary contributions, a generic advertising campaign aimed at consumers of a final product. The Nash equilibrium is characterized by free riding on the part of upstream firms because of the nature of generic advertising, leading to its underprovision with respect to joint, industry-wide profit maximization. We test the model in the U.S. fluid milk industry focusing on the effects of generic advertising on the intermediate demand for milk, since dairy farmers support the generic advertising. Taking this approach, we find that generic advertising had a positive influence on farm-level demand for milk, but did not achieve joint profit maximization.     

Optimizing the number of industrial salespersons

The objective of this article is to examine the major alternative methods currently used for optimizing the industrial sales force size and to assess their applicability in industrial firms. The article examines in detail the main difficulties facing an industrial firm trying to optimize its sales force, discussing some of the factors that affect industrial selling strategy and policy. The five alternative major techniques for optimizing the number of industrial salespersons, are then discussed in detail, presenting the basis of each approach/method, its advantages and disadvantages for an industrial firm, and when the method is applicable in an industrial marketing situation.     

Housing Supply,Land Costs and Price Adjustment

We analyze relationships between housing supply elasticities, land costs and house price dynamics, contributing three main insights. First, higher housing supply elasticities help contain short‐run price spikes following demand shocks. Second, land price dynamics influence this relationship; supply responses are lessened and house price spikes are exacerbated as land prices increase. Third, we estimate a system of regional equations modeling housing supply using a Tobin's‐q specification (incorporating construction and land costs) and show that regional price dynamics are a function of the region's supply elasticity.     

Systemic absorptive capacity: creating early-to-market returns through R&D alliances

For most complex emergent technologies, product-market success depends on efficient linkages between changing lead innovators within the R&D process. In this paper, our unit of analysis is a complex high technology product and the system of alliance linkages formed to progress a product through R&D milestones. We present a model and evidence for advancing our understanding of how achieving early-to-market returns depends on systemic absorptive capacity. This systemic absorptive capacity is the cumulative efficiency in the use of absorptive capacity to link changing lead innovators across successive milestones in R&D product development. We advance propositions of how systemic absorptive capacity can explain performance differences between rival product development systems competing for early-to-market returns with similar products through accelerating speed to market, cost and quality advantages. These explanations are contrasted with the conclusions of previous studies that have focused on absorptive capacity of single firms or single alliances in R&D.     

The Effects of Technological Change on the Economic Impact of Agricultural Drought in Manitoba

A series of physical and economic models is used to simulate the effects of drought and two drought-mitigating cropping strategies on the performance of Manitoba's agricultural sector. A drought scenario, defined in terms of the weather events of 1936–37, is compared with anormal weather scenario, consisting of the average soil moistures of 1961 to 1982. Results simulated under 1979–80 economic/technological conditions indicate that, in the absence of drought-mitigating measures, two years of drought followed by three more “normal” years (1938 to 1940 weather) result in an average annual crop revenue loss of 10%, most of which accrues in the calendar year following the year of most severe drought. Examination of two potential drought-mitigating strategies – conservation tillage in conjunction with one million acres of winter wheat, and two irrigation projects – suggests that their revenue-enhancement effects predominate. The alternative strategies would result in significantly increased gross (but not necessarily net) sales revenues over the entire simulation period, but the variance of these revenues over time would not be attenuated. Nous avons eu recours à une série de modèles physiques et économiques pour simuler les effets de la sécheresse et de deux stratégies culturales visant à réquire ces effets sur le rendement du secteur agricole du Manitoba. Un scénario de sécheresse fondé sur les conditions observées en 1936–1937 a été comparé à un scénario normal fondé sur les conditions ?humidité moyenne du sol observées de 1961 à 1982. La combinaison de ces donnés et des conditions économiques et technologiques qui existaient en 1979–1980 laissent conclure qu'en ?absence de mesures de lutte contre la sécheresse, deux années de sécheresse suivies par trois années “normales” (conditions observées de 1938 à 1940) entraînent une perte moyenne annuelle des revenus des cultures de 10%, la majeure partie de cette perte survenant au cours de ?année civile suivant immédiatement ?année de la sécheresse la plus grave. ?étude de deux stratégies possibles de lutte contre la sécheresse (méthode de travail du sol favorisant la conservation et ensemencement ?un million ?acres en blé ?hiver et deux projets ?irrigation) laisse conclure que les effets ?augmentation du revenu prédominent. Les stratégies de rechange ont laissé voir des hausses sensibles des recettes brutes (mais pas nécessairement des recettes nettes) sur ?ensemble de la période de simulation mais la variance correspondant à ces recettes n'a pas été atténuée.     

Predicting Farm Tractor Values through Alternative Depreciation Methods

This study compares a variety of farm tractor depreciation methods to determine which most accurately estimates farm tractor values. These alternative depreciation methods consider different factors for estimating remaining value and vary in difficulty of use. Pairwise comparisons of mean absolute percentage error and forecast accuracy regression models were used to evaluate the accuracy of the depreciation methods, which depend on age, intensity of use, and manufacturer. Based on the results of this study, the Cross and Perry method was generally the most accurate.     

Use of Public Perceptions of Groundwater Quality Benefits in Developing Livestock Management Options

In this study, a dichotomous choice model is used to determine the compensating welfare measure for water quality improvements stemming from livestock waste management in the Abbotsford region of southwestern British Columbia. The benefits of improving water quality are compared with the net costs of composting manure on a large scale, the option for handling livestock wastes preferred by the provincial government. The results indicate that the costs of composting manure exceed the revenue from selling manure (compost) plus the off-site damages avoided.     

The influence of CEO and CFO power on accruals and real earnings management

In this study, we examine the effect of CEO and CFO power on both accruals and real earnings management (AEM and REM, respectively), and the extent to which CEO and CFO power mitigate the effect of one another on AEM and REM. We further examine whether the passage of the Sarbanes-Oxley Act (SOX) altered these effects. In the pre-SOX period, we find that AEM (REM) is greater when the CEO (CFO) is powerful relative to the CFO (CEO). In the post-SOX period, however, we find that the effect of relative CEO power on AEM subsides, whereas the effect of relative CFO power on REM persists. Additionally, we find evidence to suggest that powerful CFOs inhibit the AEM preferences of powerful CEOs in both the pre- and post-SOX periods. Finally, we find evidence to suggest that powerful CEOs inhibit the REM preferences of powerful CEOs in the pre-SOX period, but not in the post-SOX period. Collectively, our results suggest that the power of the CEO relative to the CFO is an important factor in the both the type and magnitude of earnings management.

     

Estimating Loan‐to‐Value Distributions

We estimate a model of house prices, combined loan‐to‐value ratios (CLTVs) and trade and foreclosure behavior. House prices are only observed for traded properties and trades are endogenous, creating sample‐selection problems for existing approaches to estimating CLTVs. We use a Bayesian filtering procedure to recover the price path for individual properties and produce selection‐corrected estimates of historical CLTV distributions. Estimating our model with transactions of residential properties in Alameda, California, we find that 35% of single‐family homes are underwater, compared to 19% estimated by existing approaches. Our results reduce the index revision problem and have applications for pricing mortgage‐backed securities.