A New Method for Estimating Market Power with an Application to Norwegian Sawmilling

In this paper we apply an innovative econometric tool to estimate mark-ups in an output market. The contribution of the paper is in the novel use of the stochastic frontier approach that is widely used to estimate efficiency. We show that this method, which we call the stochastic frontier estimator of market power, can be used both in the dual cost function framework and in the primal framework, and that mark-ups can be estimated with or without constant returns to scale. We apply this method to the Norwegian sawmilling industry, 1974–91.     

New product success in the consumer packaged goods industry: A shopper marketing approach

Marketing activities that influence shoppers along the various stages of their path-to-purchase are gaining attention from both manufacturers and retailers. Using a dataset with detailed information on 105 new products (NPs) launched in the U.K. by 44 leading brands and sold across 13 major retail banners, we provide strong support for the prominent role of both upper- and lower-funnel marketing actions that influence consumers before (upper) or during (lower) their shopping trip. We show which of these shopper-marketing instruments have the largest effect on NP performance at a retailer, and whether and how their effect is moderated by the retailer's store context. When it comes to NP success, the lifeblood of CPG companies, the lower-funnel marketing actions targeting shoppers directly at the point-of-purchase predominantly decide your fate. Thus, manufacturers should work ever harder to collaborate with retailers and push the store-specific shopper-marketing instruments in a favorable direction through information sharing and tailoring of their marketing program to individual retailers. Indeed, not all news is bleak for brand manufacturers. We identify five pieces of good news that brand manufacturers can use to their advantage.     

Confucius Institute’s effects on international travel to China: do cultural difference or institutional quality matter?

This article uses a panel data of China’s inbound tourist flows from 2005 to 2015 to investigate Confucius Institute (CI)’s influence on China’s tourism. We find that CI, as a comprehensive platform for China’s foreign cultural exchange, has a significant positive effect on China’s tourist flows. The effects of CI on China’s inbound tourism are transmitted through bridging cultural gaps and promoting Chinese language, which reduces psychic distance and transaction costs. CI also stimulates China’s inbound tourist flows via reducing information asymmetry caused by different levels of institutional quality. Interestingly, we find that the heterogeneous effects of CI on China’s inbound tourism depend on institutional quality, and the effects of CI to boost China’s tourists are more prominent in departure countries with larger cultural difference.     

Uncertainty and liquidity in corporate bond market

We examine the uncertainty–liquidity connection in the corporate bond market. Using monthly corporate bond data from 2005 to 2010, we construct proxies for parameter uncertainty by using firm-level parameters generated from a structural model of corporate debt. We find that uncertainty about firm parameters decreases trading volume but increases bid-ask spreads and price bouncing in the cross-section and across time. In addition, the panel VAR results show that parameter uncertainty has negative forecasting power for future bond liquidity, with greater uncertainty in the current month leading to lower trading volume, higher bid-ask spreads and higher price fluctuations on subsequent months. We conclude that parameter uncertainty is one of the underlying factors giving rise to the high level of illiquidity in the corporate bond market.     

Electronic word-of-mouth (eWOM) on WeChat: examining the influence of sense of belonging,need for self-enhancement,and consumer engagement on Chinese travellers’ eWOM

‘Friends’ circles’ on WeChat have helped make eWOM more easily accessible and influential than ever. Drawing from the social identity theory, literature on consumer engagement and eWOM, this study presents the first research that examines the influence of two personality traits, sense of belonging and need for self-enhancement, on consumer engagement and in turn leads to eWOM intention. The results suggest that the need for self-enhancement positively influences Chinese travellers’ engagement with WeChat. In addition, a partial positive relationship between consumer engagement and eWOM intention was identified: only dedication towards WeChat is directly related to travellers’ intention to engage in eWOM on WeChat. Dedication was found to mediate the influence of need for self-enhancement on eWOM intentions. Sense of belonging, however, does not have a significant impact on consumer engagement. These mixed results demonstrate changing cultural values of contemporary Chinese society. Theoretical and practical implications are discussed.     

Multiperiod Strip Hedging of Forward Commitments

This paper empirically compares two multiperiod hedging strategies—a strip hedge and a stack-and-roll hedge—to hedge a forward commitment. The multiperiod strip hedge is found to outperform the stack-and-roll hedge when forward prices are subject to multiple sources of price uncertainty and to perform no better when only one source of uncertainty is present. Moreover, the relative superiority of the strip hedge increases with the presence of multiple sources of uncertainty. Last, the strip hedge is found to be more costly to trade than the stack-and-roll hedge; however, its cost varies directly with its superiority at reducing risk.     

Alternative settlement methods and Australian individual share futures contracts

Individual share futures contracts have been introduced in Australia since 1994. Initially, the contracts were settled in cash. In 1996, cash settlement was gradually replaced by physical delivery. This study investigates the effects of the settlement method change on Australian individual stock and its futures markets. Specifically, we examine whether return and volatility of each market, correlation between the two markets, basis behavior, and hedging performance of futures markets differ across cash settlement period and physical delivery period. We find that, after the switch from cash settlement to physical delivery, the futures market, the spot market, and the basis all become more volatile. However, each individual share futures contract becomes a more effective hedging instrument. The improvement in hedging effectiveness is particularly impressive for the most recently established individual share futures contracts.     

Effects of skewness and kurtosis on production and hedging decisions: a skewed t distribution approach

This paper assumes that the spot price follows a skewed Student t distribution to analyze the effects of skewness and kurtosis on production and hedging decisions for a competitive firm. Under a negative exponential utility function, the firm will not over-hedge (under-hedge) when the spot price is positively (negatively) skewed. The extent of under-hedge (over-hedge) decreases as the forward price increases. Compared with the mean-variance hedger, the producer will hedge more (less) when negative (positive) skewness prevails. In addition, an increase in the skewness reduces the demand for hedging. The effect of the kurtosis, however, depends on the sign of the skewness. When the spot price is positively (negatively) skewed, an increase in kurtosis leads to a smaller (larger) futures position.