Marketing to associations that specify or approve industrial products

This article introduces the concept of indirect marketing. It examines a situation where individuals, groups, and organizations other than the purchasing organization have a major say in the purchase decision. Implications for a marketing program to meet this situation are discussed.     

Decomposing Local: A Conjoint Analysis of Locally Produced Foods

Increasingly, foods are marketed as "locally grown." We use stated preference data from a choice-based conjoint instrument to address two issues surrounding consumer demand for locally produced goods: (1) what is the geographical extent of "local," and (2) is the value consumers place on "local" production distinct from other factors that are often confounded with locally produced foods such as farm size and product freshness? We find our subjects place similar value on products produced "in state" and "nearby" and that consumers' willingness to pay for local production is independent from values associated with product freshness and farm size.     

Give Macroeconomic Stability and Growth in Russia a Chance

This paper identifies and investigates conceptual and empirical links among Russia's disappointing growth performance of the mid-1990s, its costly and eventually unsuccessful stabilization, the macroeconomic meltdown of 1998 and the spectacular rise of non-payments. Non-payments developed into a system that flourished in an atmosphere of fundamental inconsistency between a macroeconomic policy geared at sharp disinflation and a microeconomic policy of bailing-out enterprises through soft budget constraints. It embodies a large volume of untargeted, implicit subsidies in the order of 7–10 per cent of GDP, which has stifled growth, contributed to the 1998 meltdown through its impact on public debt and made at best a questionable contribution to equity. The overwhelming priority at this point is to dismantle this system, thereby promoting enterprise restructuring and growth (by hardening budget constraints) and medium-term macroeconomic stability (by reducing the size of the subsidies).     

Do switching costs make markets more or less competitive? The case of 800‐number portability

Do switching costs reduce or intensify price competition if firms charge the same price to existing and new consumers? I study 800‐number portability to determine how switching costs affect price competition under a single price regime. AT&T and MCI reduced their toll‐free services prices in response to portability, implying that reduced switching costs increased competition. Despite rapid market growth, gains from higher prices to “locked‐in” consumers exceeded the incentives to capture new consumers. Prices on larger contracts dropped more, consistent with greater lock‐in for larger users. Price changes between portability's announcement and implementation are consistent with rational expectations.     

The British and American Rules: an Experimental Examination of Pre-trial Bargaining in the Shadowof the Law

A commonly held view is that the frequency and value of pre-trial settlements in civil disputes are greatly influenced by the cost allocation regime that is in place if the case goes to trial. There is a large and growing theoretical literature on this subject but almost no empirical evidence. This is due simply to the scarcity of relevant data owing to the confidentiality generally associated with such matters. However, the area is an ideal one to analyse experimentally. In this paper we consider the effect of the British and American rules for cost allocation using such an experimental methodology. We find that the two rules produce no difference in the frequency of pre-trial settlements but that the British rule produces higher settlements (pro-pursuer) if the probability of the pursuer winning is large.     

These Brands Build Community

NEW YORK For Tony Hsieh, CEO at Zappos, meeting up with a customer at a bar in midtown Manhattan was perfectly natural. Most execs with 1,600 employees and doing over $1 billion in annual sales would probably pass on having drinks with an individual customer, but Hsieh is not your typical CEO. In the past week alone he had given away shoes on Twitter, sent out an open invitation to a company barbecue and solved a service problem a customer left in a blog comment. If this seems exhausting, Hsieh sees it as part of a larger strategy to build Zappos into a brand on par with Virgin.     

Valuing and hedging fixed rate mortgage commitments

A fixed rate loan commitment that is binding on the lender but not on the loan applicant is equivalent to a put option. This article uses the Black-Scholes option pricing model to establish a value for fixed rate loan commitments and to derive the hedge ratio for the lending institution to hedge the interest rate risk associated with the commitments in the FHLMC forward market for mortgages. The effectiveness of the resulting hedge is tested in a simulation, where it is found that the result is a 71% reduction in the variance of the value of the lender's gain or loss associated with the commitment period.     

Is Beta Dead or Alive?

The debate about whether beta is dead or alive has heated up once again. We believe the empirical work supporting either side of the argument is limited because market frictions are not adequately addressed. This study clarifies the controversy about the issue by creating a new moving-average beta and analyzing two market anomalies: the turn-of-the-year and the Monday effects. What is discovered in this research is (1) that a fundamental source of the problem underlying the two types of market anomalies is the persistence of market frictions that retard the arbitrage process; (2) that beta is seriously ill if the effects of market frictions are ignored; and (3) that beta is alive and well if the effects of market frictions are accommodated. Also, we show, by using an optimal lead/lag structure, the moving-average beta provides significantly higher explanatory power for the turn-of the-year and the Monday effects than betas created from ordinary least squares regression and Scholes-Williams and Fama-French methods because the moving-average beta accommodates the effects of market frictions into the body of beta itself. This new type of beta, a moving-average beta, is demonstrated to be robust.     

The potential impact of abolishing company tax in Ciskei

The purpose of this paper is to examine the likely effect of the abolition of company tax on the Ciskeian economy. After considering the case for and against a corporate tax exemption, the issues involved are analysed on two levels. Using aggregate data, drawn from available census data, we find that most firms seem likely either to prefer the existing package of industrial concessions to the tax holiday, or to be indifferent to either option. Similarly, a recent survey of manufacturing enterprises in Ciskei indicated that the majority would prefer the incentive package. Firms that might be attracted by the tax‐free option are likely to be relatively profitable, subsidiaries of multinational companies, and enjoying a higher turnover per worker than firms opting for the incentive package.