Do security breaches matter? The shareholder puzzle

This article analyzes the effect of computer breaches on publicly traded equities from 2005 to 2017. An event study is performed and breaches analyzed conditioned on whether the breach announcement has been made in the mainstream media or through other channels. We find that in the period prior to the announcement date in the media, the mean abnormal return is negative, reflecting a likely leakage of information. In the period following the announcement date, the mean abnormal return is positive, often more than offsetting the previous declines. The findings have important implications for analysts, portfolio managers, institutional investors, and regulators.     

Price discrimination in service industries

This article outlines recent methods and applications directed at understanding the profit and consumer welfare implications of increasingly prevalent price discrimination strategies in the service sector. These industries are typically characterized by heterogeneity in consumers?? valuation and usage of the service, resale constraints, and a focus on price as the service??s key attribute. The article focuses on how firms use nonlinear pricing or bundling strategies to benefit from the heterogeneity in consumer demand. We describe the basic economic model commonly used in the literature to analyze such strategic choices and present recent methodological improvements to this benchmark. A discussion of existing applications and future research opportunities concludes the article.     

On modelling the informal sector

A recent plea by Robert Hackenberg to develop new conceptual models in order ‘to take full account of the new realities of the urban informal sector’ and ‘rid the field from divergent connotations’ is questioned. It seems that existing models easily lend themselves to analysis of the formal-/informal-sector interactions and that divergent conditions necessarily lead to ‘contradictions’. Thus, the existing arsenal of models cannot be held responsible for ‘analysis paralysis’. New research on the informal sector, rather than aiming at ultra-generalizations, should concentrate on issues such as identification of the determining factors of the urban production technologies and the nature of linkages and elasticity of substitution between formal and informal production.     

Do multiple parents help or hinder international joint venture performance? The mediating roles of contract completeness and partner cooperation

We develop a mediation model in which the number of partners in a joint venture affects venture performance through contract completeness and partner cooperation. In a sample of 224 international joint ventures, we find that the number of partners is negatively related to venture contract completeness and partner cooperation, both of which are positively related to joint venture performance. The number of partners is inversely related to joint venture performance and the relationship is mediated by contract completeness and partner cooperation. We discuss theoretical and managerial implications for joint venture research and practice. Copyright © 2007 John Wiley & Sons, Ltd.     

easyJet® pricing strategy: Should low-fare airlines offer last-minute deals?

easyJet, one of Europe’s most successful low-cost short-haul airlines, has a simple pricing structure. For a given flight, all prices are quoted one-way, a single price prevails at any point, and, in general, prices are low early on and increase as the departure date approaches. We observe from these policies and from the empirical section of this paper that easyJet employs three distinct strategies: 1) it does not offer last-minute deals, 2) it offers a single class and lets price be the sole variable that controls demand, and 3) it varies the time at which tickets are first offered for sale (duration of sale). The first two policies are in stark contrast to traditional airline pricing strategies. Many airlines offer last-minute deals, either directly or via resellers. Second, the current prevailing practice is to control demand via seat allocation to various classes rather than by offering a single class and letting price be the sole variable that controls demand. The main objective of this research is to study the conditions under which offering a last-minute deal is optimal under the single-price policy. We also learn how the duration of ticket sales is affected by consumer characteristics. We find that, for an intermediate capacity level, uncertainty with respect to the arrival of the business segment will cause the firm to offer last-minute deals and thus partially price-discriminate within the tourist segment. The same is true for uncertainty with respect to the actual behavior of the firm: if consumers are uncertain whether the firm will offer last-minute deals, then, in equilibrium, both in a one-shot game and in a repeated game, the firm will, with some probability, offer such deals. In addition, we found that for an intermediate capacity level, the larger the number of segments (that differ in price sensitivity), the longer the duration of the period in which tickets are offered for sale.

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Electronic supplementary material  The online version of this article (doi:) contains supplementary material, which is available to authorized users.

On the relationship between the number of a broker’s real estate listings and transaction outcomes

This paper documents that sellers who employ brokerage offices that list a large number of properties (“active brokerages”) obtain higher selling prices, smaller negotiated discounts from the corresponding list prices, and shorter times on the market for their listed properties. Sellers who employ active brokerages list their properties at prices that are closer to our hedonic model’s predicted prices. Interestingly, properties that are listed at discounts relative to their predicted prices are snapped up more quickly only if they are associated with brokerages that list a relatively small number of properties. In addition, properties listed by active brokerages are less likely to be listed “as is” and are more likely to have their defects repaired prior to being listed. Moreover, because the efficacy of brokerage services varies across brokerage offices, the results also suggest that the use of an indicator variable for the use of brokerage services is not sufficient to capture the complete impact of the use of a real estate broker on transaction outcomes. In addition, the Appendix discusses the concern for potential endogeneities between the number of brokerage listings and transaction outcomes. It documents that the Durban–Wu–Hausman test indicates that exogeneity cannot be rejected.     

On the evolutionary edge of migration as an assortative mating device

In a haystack-type representation of a heterogeneous population that is evolving according to a payoff structure of a prisoner’s dilemma game, migration is modeled as a process of ‘swapping’ individuals between heterogeneous groups of constant size after a random allocation fills the haystacks, but prior to mating. Migration is characterized by two parameters: an exogenous participation-in-migration cost (of search, coordination, movement, and arrangement-making) which measures the migration effort, and an exogenous technology—of coordinating and facilitating movement between populated haystacks and the colonization of currently unpopulated haystacks—which measures the migration intensity. Starting from an initially heterogeneous population that consists of both cooperators and defectors, a scenario is postulated under which ‘programmed’ migration can act as a mechanism that brings about a long-run survival of cooperation.

EBITDA and Managers' Investment and Leverage Choices

EBITDA is a commonly used performance measure for (i) valuation, (ii) debt contracting, and (iii) executive compensation. The widespread use of EBITDA by stakeholders may induce managers to focus their attention on EBITDA. Since EBITDA excludes various expenses, managers who fixate on EBITDA may underweight the excluded expenses when determining their firms' investments in capital and leverage levels. I find that managers who fixate on EBITDA overinvest in capital and overlever their firm relative to their industry peers. These results are robust to alternative proxies for managers' focus on EBITDA and alternative specifications. I also find that firms whose managers focus on EBITDA have weaker operating performance, which is attributed to higher depreciation expense. My primary proxy for managers' focus on EBITDA is whether they choose to disclose EBITDA in annual earnings announcements. I find that the use of EBITDA in setting executive compensation, the prevalence of EBITDA estimates by analysts, and the use of EBITDA‐based covenants in firms' debt contracts are all positively associated with the propensity to disclose EBITDA in earnings announcements. I find weaker evidence of opportunistic motives explaining EBITDA disclosure. These results are consistent with managers disclosing EBITDA to portray to investors that it is a metric they seek to maximize. Overall, this study suggests that while EBITDA is a widely used metric, there is a systematic cost to using this measure—it provides managers with incentives to overinvest in capital and to acquire excessive debt.