Demographic Factors and Price Distortions in Insurance

Few papers have analyzed the potential linkages between price distortions and the specific demographic and political traits of customers. The existence of price distortions may have adverse and potentially unintended impacts on certain demographic groups, leading to significant public policy concerns. The current study uses census tract data and rating factors to examine age, income, and race demographics in an effort to determine if any subgroups of the population are adversely impacted by the price distortions of property insurance. The results suggest that Hispanics, lower income households, and specific age groups pay relatively more for insurance coverage than comparison groups.     

Equilibrium prices in the presence of delegated portfolio management

This paper analyzes the asset pricing implications of commonly used portfolio management contracts linking the compensation of fund managers to the excess return of the managed portfolio over a benchmark portfolio. The contract parameters, the extent of delegation, and equilibrium prices are all determined endogenously within the model we consider. Symmetric (fulcrum) performance fees distort the allocation of managed portfolios in a way that induces a significant and unambiguous positive effect on the prices of the assets included in the benchmark and a negative effect on the Sharpe ratios. Asymmetric performance fees have more complex effects on equilibrium prices and Sharpe ratios, with the signs of these effects fluctuating stochastically over time in response to variations in the funds' excess performance.     

A demand‐based perspective on sustainable competitive advantage

We develop an approach to analyzing the sustainability of competitive advantage that emphasizes demand‐side factors. We extend the added‐value approach to business strategy by introducing an explicit treatment of how firms create value for consumers. This allows us to characterize how consumer heterogeneity and marginal utility from performance improvements on the demand side interact with resource heterogeneity and improving technologies on the supply side. Using this approach, we address a variety of questions including whether technology substitutions will be permanent or transitory; the sequence in which new technologies attack different market segments; how rents from different types of resources change over time; whether decreasing marginal utility and imitation give rise to similar rent profiles; the extent of synergies within a firm's resource portfolio; the emergence of new generic strategies; and the conditions that support strategic diversity in a market. Our focus on consumer utility and value creation complements the traditional focus in the strategy literature on competition and value capture. Copyright © 2006 John Wiley & Sons, Ltd.     

The Incidence of the Land Use Regulatory Tax

Land use regulation has been found to impose a substantial tax on housing within select U.S. metropolitan areas. In this article, we develop hypotheses regarding the incidence of this tax by income class and racial group within these areas. Parcel‐level data from Miami‐Dade County, Florida, are used to test our hypotheses. We find that, while the tax rises with a household's permanent income, this rise is less than proportional, making it a regressive tax. We also find, controlling for household permanent income, that the tax is a higher percentage of the price of homes located in black neighborhoods in comparison to those located in white or Hispanic neighborhoods.     

Market uncertainty,market sentiment,and the post-earnings announcement drift

Post-earnings announcement drift (PEAD) which was first identified over 40 years ago seems to be as much alive today as it ever was. Numerous attempts have been made to explain its continued existence. In this paper we provide evidence to support a new explanation: that the PEAD is a reflection of the level of market uncertainty and sentiment that prevails during the post-announcement period. The overriding conclusion from our analysis is that both uncertainty and sentiment play a central role in determining investor behaviour and it is this behaviour that ultimately determines the pricing that is observed in financial markets.     

An Institutional Theory Perspective on Corruption: The Case of a Developing Democracy

The purpose of this paper is to use quantitative data to describe corruption in the SANPS, and use Luo's ( 2005 ) institutional theory to gain insights into how corruption develops and remains entrenched despite the introduction of anti‐corruption legislation. A total of 1,500 questionnaires were distributed to public servants in nine provinces, but predominantly in Kwa Zulu Natal and Gauteng. There were 702 returned giving a response rate of 47%. We conclude that the findings discussed in this paper lend support for Luo's theoretical model being able to provide insight into the development of corruption, its consequences and possible remedies.     

Unintended Consequence of Centralized Public School Funding in Michigan Education

As part of the movement to create greater spending equity among school districts, states have centralized funding for public education and instituted funding formulas where high-spending districts are often constrained in their operational expenditures. However, these school districts often maintain local discretion over capital expenditures financed by the sale of bonds. In this study, we find that Michigan's high-spending school districts have a greater probability of issuing bonds after centralizing public school funding, indicating that debt financing of capital expenditures may have become a mechanism to allow these school districts to circumvent the policy's intent for greater spending equity.     

Measuring the Economic Effects of Competition Law Enforcement

Summary  Together with a move from a rules-based legal approach to a more economic approach in competition cases, the economic effects of competition law enforcement have received increasing attention. Measuring these effects is important for external accountability of the Competition Authority, for quality control of its decisions and for evaluating the effectiveness of the competition law. This raises many issues in measurement, including the choice of counterfactual, the choice of effects to be measured, and the proper use of available data. The papers in this Special Issue of De Economist discuss these and related issues, based on a broad range of experience in competition law enforcement.      

Shareholder Wealth Effects of the Private Securities Litigation Reform Act of 1995

This paper investigates the reaction ofstock prices to enactment of the Private Securities LitigationReform Act of 1995 (PSLRA). Based on a sample of 489 high-technologyfirms, we find that the PSLRA was wealth-increasing, on average,and that the market reaction is more positive for firms at greatestrisk of being sued in a securities class action. However, wealso show that the PSLRA was less beneficial for firms likelyto be the subject of a meritorious lawsuit. Collectively, ourevidence implies that shareholders generally benefit from restrictionson private securities litigation, although these benefits aremitigated when other mechanisms for curbing fraudulent activityare inadequate.     

The origins and evolution of scenario techniques in long range business planning

Scenario Planning has been around for more than 30 years and during this period a multitude of techniques and methodologies have developed, resulting in what has been described as a ‘methodological chaos’ which is unlikely to disappear in the near future (A. Martelli, Scenario building and scenario planning: state of the art and prospects of evolution, Futures Research Quarterly Summer (2001)). This is reflected in the fact that literature reveals an abundance of different and at times contradictory definitions, characteristics, principles and methodological ideas about scenarios. It has been suggested that a pressing need for the future of scenarios is amongst other things, to resolve the confusion over ‘the definitions and methods of scenarios’. This paper makes a beginning at this need by tracing the origins and growth of scenarios and the subsequent evolution of the various methodologies; a classification of the methodologies into three main schools of techniques is given and the salient features of these schools are compared and contrasted.