Economics at the FTC: Quantitative Analyses of Two Chemical Manufacturing Mergers

Review of Industrial Organization - Economists at the Federal Trade Commission support the agency’s competition and consumer protection missions in numerous ways. In this article, we discuss...     

Is the Term Premium a Risk Premium?

This paper explores whether excess holding period returns on long vis-a-vis short-term securities behave in a manner that is consistent with (1) market efficiency, (2) the time-varying-term-premium variant of the expectations hypothesis, and (3) theories of the term premium that view it as a reward for risk bearing. Both traditional and modern theories of the term premium imply that it should evolve fairly slowly over time as attitudes toward risk and/or perceived covariances with wealth or consumption change. This implies that this period's term premium should have some predictive ability for next period's. However, we find that this quarter's ex-post term premium has zero predictive ability. For monthly rates and returns, the evidence is less clear cut, but again the implied term premia do not behave in a manner consistent with existing theories.     

Experts and quacks

What happens when “type” is endogenous in a reputational setting? Here, customers cannot tell “experts” from imitative “quacks,” but gain information through repeated interaction. Firm incentives to invest in expertise vary nonmonotonically in how tolerant customers are of bad outcomes; more tolerant customers are both more forgiving, making expertise less necessary, and longer tenured, increasing the value of retaining them. In equilibrium, the proportion of expert firms is bounded away from one; some quacks are necessary to keep incentives of experts in line. The fraction of experts is decreasing in customers' switching costs and the relative cost of expertise over quackery.     

Disruptive technologies, stakeholders and the innovation value-added chain: a framework for evaluating radical technology development

Contemporary frameworks for evaluating technological innovations contend that innovative success is dependent upon the ability of firms to acquire and assimilate new knowledge without disrupting value chain members such as suppliers, customers and complementary innovators. These frameworks, however, provide little advice on how to deal with radical, controversial innovations that may also introduce new undesirable environmental, health, and social side affects. In addition to technological, commercial and organisational uncertainties, the developers of such technology typically must resolve social uncertainties, a particularly difficult activity because of the added complexities and often conflicting and/or difficult-to-reconcile concerns from secondary stakeholders. Attempts must be made to address the potential unintended and unforeseen consequences of the technology, as well as its potential benefits, if it is to be successfully applied. Using Monsanto's development of agricultural biotechnology as an illustration, we suggest an evaluation framework that incorporates stakeholder theory, innovation management concepts and Popper's evolutionary learning methodology of science and its extension to social issues.     

Private Placement of Common Equity and Earnings Expectations

We examine earnings forecast revisions by analysts subsequent to the announcement of private equity placements. Results show that analysts make significant upward revisions to their forecasts for current-year earnings. Furthermore, these forecast revisions are significantly related to announcement-period abnormal returns, but not to the risk changes accompanying the equity placement. These findings are consistent with the information hypothesis, which suggests that private equity placements convey favorable information about future earnings.     

An Analysis of Data Quality: Professional Panels,Student Subject Pools,and Amazon's Mechanical Turk

Data collection using Internet-based samples has become increasingly popular in many social science disciplines, including advertising. This research examines whether one popular Internet data source, Amazon's Mechanical Turk (MTurk), is an appropriate substitute for other popular samples utilized in advertising research. Specifically, a five-sample between-subjects experiment was conducted to help researchers who utilize MTurk in advertising experiments understand the strengths and weaknesses of MTurk relative to student samples and professional panels. In comparisons across five samples, results show that the MTurk data outperformed panel data procured from two separate professional marketing research companies across various measures of data quality. The MTurk data were also compared to two different student samples, and results show the data were at least comparable in quality. While researchers may consider MTurk samples as a viable alternative to student samples when testing theory-driven outcomes, precautions should be taken to ensure the quality of data regardless of the source. Best practices for ensuring data quality are offered for advertising researchers who utilize MTurk for data collection.     

Urban inoculation and the decline of smallpox mortality in eighteenth‐century cities—a reply to Razzell

Smallpox was probably the single most lethal disease in eighteenth‐century Britain but was reduced to a minor cause of death by the mid‐nineteenth century due to vaccination programmes post‐1798. While the success of vaccination is unquestionable, it remains disputed to what extent the prophylactic precursor of vaccination, inoculation, reduced smallpox mortality in the eighteenth century. Smallpox was most lethal in urban populations, but most researchers have judged inoculation to have been unpopular in large towns. Recently, however, Razzell argued that inoculation significantly reduced smallpox mortality of adults and older children in London in the last third of the eighteenth century. This article uses demographic evidence from London and Manchester to confirm previous findings of a sudden fall in adult smallpox mortality and a rise in the importance of smallpox in early childhood c. 1770. The nature of these changes is consistent with an increase in smallpox transmission in London and Manchester after 1770 and indicates that smallpox inoculation was insufficient to reduce smallpox mortality in large towns. It remains unclear whether inoculation could have operated to enhance smallpox transmission or whether changes in the properties of the smallpox virus drove the intensification of smallpox mortality among young children post‐1770.     

风险管理在企业财资管理中日趋重要

长远来看,我们预期风险管理议程会对企业决策起到更大作用。这将使财资管理者在制定业务策略过程中成为很有影响力的角色。风险管理在财资管理的每一项决策中都是必不可少的要素。虽然财资管理工作的一项经常任务就是风险