Robust planning: a new paradigm for demand chain planning

This paper proposes a new paradigm for tactical demand chain planning (DCP), called robust planning, based on risk assessment of the supply and demand chain. The concepts of supply chain management (SCM), and its extension demand chain management (DCM), have been at the center of much recent research. One of the reasons for this is that, over the last years, a significant number of information systems have emerged, which claim to support the concept. The paper argues that these systems mostly adopt a myopic view of planning, based on pure deterministic planning methods. It demonstrates that such an approach fails to coop with the considerable uncertainty of the planning information. The proposed robust planning paradigm is then introduced and its impact explained, using the well-known example of the beer game. It holds the promise of reducing the number of re-planning cycles, through a better characterization of the expected service level performance over a medium planning horizon. Finally, a case study will show the value of robust planning in a European chemical enterprise.     

The Cost of Debt

We use exogenous variation in tax benefit functions to estimate firm‐specific cost of debt functions that are conditional on company characteristics such as collateral, size, and book‐to‐market. By integrating the area between the benefit and cost functions, we estimate that the equilibrium net benefit of debt is 3.5% of asset value, resulting from an estimated gross benefit (cost) of debt equal to 10.4% (6.9%) of asset value. We find that the cost of being overlevered is asymmetrically higher than the cost of being underlevered and that expected default costs constitute only half of the total ex ante costs of debt.     

Mortgage timing

We study how the term structure of interest rates relates to mortgage choice at both household and aggregate levels. A simple utility framework of mortgage choice points to the long-term bond risk premium as distinct from the yield spread and the long yield as a theoretical determinant of mortgage choice: when the bond risk premium is high, fixed-rate mortgage payments are high, making adjustable-rate mortgages more attractive. We confirm empirically that the bulk of the time variation in both aggregate and loan-level mortgage choice can be explained by time variation in the bond risk premium, whether bond risk premia are measured using forecasters’ data, a vector autoregressive (VAR) term structure model, or a simple household decision rule based on adaptive expectations. The household decision rule moves in lock-step with mortgage choice, lending credibility to a theory of strategic mortgage timing by households.     

National differences in incentive compensation practices: The differing roles of financial performance measurement in the United States and the Netherlands

This paper describes the findings of a study aimed at providing an international replication of a US-based study by Gibbs et al. [Gibbs, M., Merchant, K., Van der Stede, W., & Vargus, M. (2004). Determinants and effects of subjectivity in incentives. The Accounting Review, 79(2), 409–436; Gibbs, M., Merchant, K., Van der Stede, W., & Vargus, M. (2006). The structure of incentive contracts: Evidence from auto dealerships. Working Paper, University of Chicago, University of Southern California, London School of Economics and University of Texas-Dallas] focused on the incentive compensation practices of firms in the automobile retailing industry. The purpose was to determine the extent to which these practices and their effects were similar across countries. Theory provides conflicting predictions as to whether international practices should reflect a situational “best fit” or “global best practices.” We collected a dataset comparable to that of Gibbs et al. from Dutch automobile retailers. The findings reveal dramatic differences in practices across the two countries. As compared to the US firms, the Dutch firms are much less likely to provide their managers with incentive compensation in any form. Where Dutch firms do offer incentive compensation, the payouts are smaller and their bonus awards are less likely to be based on profit measures of performance. But where the Dutch firms use incentive compensation, their performance/reward functions are more complex. Moreover, unlike in the US firms, in the Dutch firms the effects of the use of incentive compensation on net profit and pay satisfaction are negative.     

One Man Two Hats: What's All the Commotion!

We examine performance in publicly listed U.K. companies over a period that encompasses the issuance of the Cadbury Committee's Code of Best Practice, which calls for the abolition of the combined CEO/COB position. We find that companies splitting the combined CEO/COB position to conform to the Code's requirement did not exhibit any absolute or relative improvement in performance when compared to various peer‐group benchmarks. We do not necessarily scoff at mandated board structures, but the evidence suggests that this particular legislature coerced the abandonment of the combined CEO/COB position and appears to be wide of the mark.     

The scheduling and organization of periodic associative computation: Efficient networks

This paper characterizes the efficient decentralized networks for calculating the associative aggregate of cohorts of data of a fixed size that arrive periodically. Radner (1993) proposed this problem of periodic parallel associative computation as a model of the ongoing information processing and communication by the administrative staff of a large organization. For a simpler model in which the organization processes a single cohort of data – which is equivalent to the periodic model when the agents are paid only when busy – he found that the efficient networks are hierarchical but quite irregular, even though the computation problem and technology are each symmetric. In the periodic model in which managers are paid even when idle, it becomes important to minimize idle time when scheduling managers to processing tasks. Such scheduling appears more difficult when each problem is processed by an irregular hierarchy, which suggest that hierarchies might be more regular in the periodic model. However, we show that in a class of efficient networks for periodic computation that spans the efficiency frontier, the processing of each cohort is similar to the efficient processing of a single cohort, and the overall organizational structure is not even hierarchical. Received: 15 October 1994 / Accepted: 6 March 1997     

STABILIZATION WITH WAGE INDEXATION AND EXCHANGE RATE FLEXIBILITY

Abstract. This survey examines the role of wage indexation and exchange rate policy in dampening fluctuations in output around its target level. It is demonstrated that the appropriate choice for wage indexation and exchange rate flexibility is highly sensitive to the nature and the relative importance of the shocks impinging upon the economy, as well as to the relevant parameters in the economy. Moreover, the question of the desired flexibility of the exchange rate should be studied in the context of wage indexation, and vice versa. This interdependence raises the possibility of both policies being complements or substitutes to each other depending on the number of shocks that perturb the economy.     

Peasant agency in Ghana's oil palm sector: The impact of multiple markets on food sovereignty

This paper contributes to the debate on peasant differentiation and market integration in the food sovereignty literature by examining the smallholder‐oriented oil palm sector in Ghana's eastern region. Against the background of loosening entry barriers in global value chains, and through an analysis of farmers' different positions in palm oil's multiple markets, we witness peasant‐like patterning of production and strategic market participation among well‐situated non‐contract farmers. We propose that such interface settings where commodity relations are present, but do not penetrate fully offer valuable entry points for revisiting the role of global markets in peasant reproduction in the Global South. We consequently argue the need to replace the idealized category of “peasant” with an analytical category that can recognize social differentiation and reproduction through partial engagement with commodity markets.     

Transfers of landowner willingness to accept: A convergent validity and reliability test using choice experiments in two Canadian watersheds

We examined the reliability and validity of transferring estimates of marginal willingness to accept and compensating surplus. In doing so, we used data from two case studies applying choice experiments to elicit landowner preferences for incentive-based wetland conservation programs in two adjacent watersheds in Southern Ontario, Canada (Grand and Upper Thames Rivers in parallel in 2013). The choice experiment data were modeled in willingness to accept space using a generalized multinomial logit. Transfer reliability was investigated by calculating transfer errors, while validity was investigated by testing the equality of utility functions as well as by assessing the similarity of welfare estimates using traditional hypothesis tests and equivalence tests. The main findings are that transfers of willingness to accept are similar to existing transfers of willingness to pay in terms of validity and reliability. Additionally, a sensitivity analysis finds that including demographic variables in the choice model can lead to lower transfer validity though does not substantially affect reliability. Though further research is required, our results suggest that willingness to accept can be transferred as part of policy analyses.