Discrete choice models of firms’ strategic decisions

This paper outlines the methods and applications related to the nascent area of empirical discrete games in marketing. Many key strategic decisions firms make involve discrete choices such as deciding the location of a new store, determining where in product space to position a product, or what options to offer in a service contract. These decisions are fairly complex and typically involve the consideration of a number of demand, cost, and competitive factors. What makes these discrete choices particularly interesting (and challenging to analyze) is that they are interrelated with the choices of other firms because firms take into account the actions of their competitors when making their own decisions. We describe the basic problem of dealing with interrelated discrete choices in a game-theoretic framework and present the various estimation methods available. A discussion of the existing applications and future research opportunities concludes the article.     

IMMUNITY

Legal provisions that protect elected politicians from prosecution have been common throughout history and still exist in most democracies. We provide the first systematic measurement of immunity and study, theoretically and empirically, its relation to corruption. Theory predicts that immunity is a double-edged sword. To test whether immunity is a vice or a virtue, we quantify immunity enjoyed by heads of government, ministers, and legislators in 90 countries. Controlling for standard determinants of corruption, we find that stronger immunity is associated with greater corruption. Instrumental variable estimations using immunity at the first democratic constitution suggest the effect could be causal.     

Missing in action: teacher and health worker absence in developing countries.

In this paper, we report results from surveys in which enumerators make unannounced visits to primary schools and health clinics in Bangladesh, Ecuador, India, Indonesia, Peru and Uganda and recorded whether they found teachers and health workers in the facilities.     

Understanding the Development of IOS-Based Trading Partner Relationships: A Structural Model with Empirical Validation

This study develops a research model that explains the interorganizational system (IOS) network development process in the buyer-supplier relationship. Particular attention is paid to the antecedents and consequences of two types of influence strategies— exercising power and offering IOS support—that a buyer firm often uses in increasing IOS usage with its suppliers. The research model is empirically tested with data obtained through a field survey from a sample of 233 suppliers, each exchanging electronic data interchange (EDI) documents with a nationally known retailing buyer in the United States. We find that the buyer's decision to offer EDI-related support to a supplier is negatively associated with the transaction volume with the supplier but positively with the supplier's IT capabilities as well as the supplier's transaction-specific investments made toward the relationship with the buyer. On the other hand, the buyer's decision to exercise power to a supplier is found to be negatively associated with the transaction volume between the trading partners. Our findings also indicate that offering EDI support, rather than exercising power, is more effectual in inducing greater EDI usage between the trading partners. Finally, the buyer's EDI support is found to be positively associated with suppliers' perceived benefits of using EDI in the relationship that, in turn contributes to more voluntary use of EDI with the buyer.     

The impact of local unemployment rates on reservation wages and the duration of search for a job.

Evidence about the relationship of local unemployment rates and individuals' reservation wages and duration of search for a job if unemployed is sparse and mixed. This study uses US data from the Panel Study of Income Dynamics (PSID) to test whether relatively high local unemployment rates reduce the reservation wages of area residents or increase the duration of search. Labour search theory provides the grounding for the sample selection corrected simultaneous equations econometric model. In neither OLS nor 2SLS results is evidence found that local unemployment rates affect either reservation wages or the duration of search. These results suggest that policies targeted at alleviating unemployment should focus on increasing the demand for labour rather than hope that such policies will be beneficial if pursued in high-unemployment areas because of their effects on labour force characteristics.     

Advertising Spending and Perceived Quality

Marketing Letters - In this paper we examine the relationship between advertising spending and perceived product quality. The questions we ask are: Does a product's advertising spending...     

TIME-VARYING TERM PREMIA AND THE BEHAVIOR OF FORWARD INTEREST RATE PREDICTION ERRORS

In this paper I examine the time-varying expected term premium argument for the failure of the expectations hypothesis of the term structure of U.S. interest rates. Using an unobserved components model to estimate expected term premia from March 1951 to January 1991, I find considerable variation in estimated premia and significant persistence in their volatility over time.     

Impact of institutional reforms and industry structural factors on market returns of emerging market rivals during acquisitions by foreign firms

This paper seeks to understand the joint impact of institutional reforms and industry structural factors on market returns earned by rivals in an emerging market during foreign acquisitions. We use a sample of 238 foreign acquisitions in India during the period 2004–2013 and find empirical evidence to support the notion that institutional reforms, foreign competition and business group competition positively impact the market returns of the rivals of acquired firms. Additionally, we find that the effects of foreign competition and business group competition on rivals’ market returns are shaped by the degree of institutional reforms in the industry, indicating that firms’ market returns in emerging markets during foreign acquisitions can be better understood through the incorporation of the joint role of industry structural factors and institutional reforms.