A Dynamic Model of Cross-Category Competition: Theory, Tests and Applications

Recent marketing studies use scanner data to diagnose the influence of a change in a brand's marketing mix on other brands in the same category. A few studies also use scanner data to model inter-category effects between substitutes (e.g., tea and coffee) or complements (e.g., tea and sugar). No study models the dynamic effects of cross-category competition though.We present a dynamic model that shows how different products in a typical market basket influence demand of one another. Empirical tests use single-source, market-level data for ice cream and some substitute and complement categories. On the basis of in-sample fit, out-of-sample forecasts, and formal causality tests, this study demonstrates that the marketing mix decisions for ice cream influence the sales and market shares of ice cream toppings and frozen yogurt. As a check on the predictive validity of the model, model parameters, using 16-month data, predict behavior in the subsequent 3 months.     

Multi-market trading in the Eurodollar futures market

On March 18, 2004, the London International Financial Futures and Options Exchange launched trading in Eurodollar futures contracts in an attempt to compete with a U.S. rival, the Chicago Mercantile Exchange. The Chicago Mercantile Exchange responded to the challenge by introducing several policy changes that aided the transfer of its trading volume in Eurodollar futures from open outcry to the electronic trading platform, Globex, thereby retaining its market share. We compare trading volume, effective spread, and price discovery in Eurodollar futures at the Chicago Mercantile Exchange before and after the London International Financial Futures and Options Exchange began trading the same contract. We find a general increase in trading volume on Globex beginning October 2003, way before the London International Financial Futures and Options Exchange launched its contract. Globex provides greater price discovery than open outcry during the entire time period under study. Our research thus supports the global trend of conversion of traditional open outcry systems into electronic exchanges.     

Endogenous effort in a Dynamic Model of Union–Firm Interaction

This paper studies the implications of union deviation by reducing effort in the context of a repeated game model. We find that a failure to account for the possibility of union deviation may lead to an overestimation of the possibility of cooperation. In contrast to the existing literature, we find that unions may reach the efficient outcome despite wage hikes because they work harder under cooperation. We also find that when effort is an endogenous variable, the cooperative wage is likely to be higher than otherwise. Finally, our model predicts that if the union alone deviates, effort will fall as the endgame approaches. However, wages could either rise or fall.     

Development policies in the presence of an informal sector: A note

We consider the model of Grinols (1991) which introduces an urban informal sector with a specific capital in an otherwise mobile capital Harris-Todaro model. In this paper, we analyze the welfare effect of various policies in the model of Grinols and compare the results with those obtained from the model of Corden and Findlay (1975).     

Distribution Costs and International Trade: A Ricardian Model

This paper studies the role of the distribution sector in determining a country's pattern and terms of trade. The effect of an improvement in distribution technology is analyzed using a Ricardian trade model with an endogenous distribution sector. The results are found to depend on the magnitude of distribution costs relative to manufacturing costs and preference for distribution services in the trading countries. This has important implications for the Structural Impediments Initiative, which maintains that a more efficient distribution sector in Japan would benefit both the USA and Japan.     

Forests, biomass use and poverty in Malawi

Malawi is one of the poorest countries in Africa and has faced significant deforestation over the years. This paper seeks to examine the nature of the relationship between poverty and forests in Malawi. We try to answer three sets of questions: a) what is the extent of biomass available for meeting the energy needs of the poor in Malawi and how is this distributed? b) To what extent does fuelwood scarcity affect the welfare of the poor? And c) do households spend more time in fuelwood collection in response to scarcity? We answer these questions by matching household surveys with remote-sensing data.Our analyses suggest that biomass scarcity is associated with small but significantly lower household welfare, particularly for the rural poor. At current high levels of scarcity, 80% of rural poor households are likely to benefit from an increase in biomass in the community. Rural women spend more time on fuelwood collection where biomass is scarce. The small decrease in welfare associated with biomass scarcity suggests that households cope with scarcity in a variety of ways. Any effort to reduce degradation and deforestation in Malawi has to build on a clear understanding of household adaptation to fuelwood scarcity.     

US Multinational Involvement in the International Hotel Sector An Analysis

This paper seeks to explain the structure of the international hotel industry and the involvement of US multinational hotel corporations in it. This involvement has taken the non-traditional form of management contracts and franchising agreements, with little, if any, direct investment. From the point of view of the multinational corporation this form of involvement can be explained by the desire to expand rapidly to gain a major share of the world market, while minimising capital outlay and the risk of operation in an uncertain environment. Obviously, however, such involvement by multinational corporations would not have been possible, had not host countries looked on it with favour. Interestingly, such involvement has not only been merely acceptable, but indeed desirable to host countries, for it maximises skills transfer and access to a global marketing system, while reducing the control of the multinational corporation on domestic industry.