Conversion of ordinal attitudinal scales: An inferential Bayesian approach

The need for scale conversion may arise whenever an attitude of individuals is measured by independent entrepreneurs each using an ordinal scale of its own with possibly different numbers of (arbitrary) ordinal categories. Such situations are quite common in the marketing realm. The conversion of a score of an individual measured on one scale into an estimated score of a similar scale with a different range is the concern of this paper. An inferential Bayesian approach is adopted to analyze the situation where we believe the scale with fewer categories can be obtained by collapsing the finer scale. This leads to inferences concerning rules for the conversion of scales. Further, we propose a method for testing the validity of such a model. The use of the proposed methodology is exemplified on real data from surveys concerning performance evaluation and satisfaction.     

Exchange-rate flexibility,inflation, and structural change: Israel Under Alternative Regimes

The paper analyses the evolution of the Israeli exchange rate regime from the application of large discrete devaluations interspersed with gradual adjustments of export subsidies and import tariffs, through the adoption of a crawling peg (1975), and culminating in exchange decontrol and a float (1977). The main issues analysed in greater detail are the problem of maintaining an export-biased trade strategy, the role of devaluations in the inflationary process and the effect of alternative exchange rate regimes on expectations and capital-account transactions.     

Interrelationships between environmental dependencies: A basis for tradeoffs to increase autonomy

General managers of large industrial plants in Israel were asked to evaluate the effects of environmental dependencies on their freedom of action. It was found that most segments of the environment were perceived as homogeneous—affecting the firms' autonomy in similar ways. Different components of government, however, were perceived as having conflicting interests both within the segment and with other segments of the environment. When a segment of the environment is heterogeneous, it is possible that managers use a tradeoff strategy, in which pressures generated by one component of the environment can be used as a means to reduce pressure of the other components.     

The impact of fees on visitation of national parks

This study assesses the impact of the change in revenue management policy (namely the increased public land recreation fees) on the number of domestic and international travelers that visit the large, mostly well-known US National Park System sites. Baseline, multivariate demand models were developed based on secondary data from 10 years prior to the fee policy change, and were used to predict demand in years following the fee change. The predictions of the baseline demand models were then compared to the sites’ actual visitation. The differences between the actual and the predicted visitation are statistically significant, indicating that the change in the federal agencies’ revenue management policy might have had an adverse effect on the visitation of the largest US national sites.     

Do a firm's equity returns reflect the risk of its pension plan?

This paper examines the empirical question of whether systematic equity risk of US firms as measured by beta from the capital asset pricing model reflects the risk of their pension plans. There are a number of reasons to suspect that it might not. Chief among them is the opaque set of accounting rules used to report pension assets, liabilities, and expenses. Pension plan assets and liabilities are off-balance sheet and are often viewed as segregated from the rest of the firm, with its own trustees. Pension accounting rules are complicated. Furthermore, the role of the Pension Benefit Guaranty Corporation clouds the real relation between pension plan risk and firm equity risk. The empirical findings in this paper are consistent with the hypothesis that equity risk does reflect the risk of the firm's pension plan despite arcane accounting rules for pensions. This finding is consistent with informational efficiency of the capital markets. It also has implications for corporate finance practice in the determination of the cost of capital for capital budgeting. Standard procedure uses de-leveraged equity return betas to infer the cost of capital for operating assets. But the de-leveraged betas are not adjusted for the risk of the pension assets and liabilities. Failure to make this adjustment typically biases upward estimates of the discount rate for capital budgeting. The magnitude of the bias is shown here to be large for a number of well-known US companies. This bias can result in positive net present value projects being rejected.