Feasible fraud and auditing probabilities for insurance companies and policyholders

Insurance claims fraud is counted among the major concerns in the insurance industry, the reason being that excess payments due to fraudulent claims account for a large percentage of the total payments each year. We formulate optimization problems from the insurance company as well as the policyholder perspective based on a costly state verification approach. In this setting??while the policyholder observes his losses privately??the insurance company can decide to verify the truthfulness of incoming claims at some cost. We show simulation results illustrating the agreement range which is characterized by all valid fraud and auditing probability combinations both stakeholders are willing to accept. Furthermore, we present the impact of different valid probability combinations on the insurance company??s and the policyholder??s objective quantities and analyze the sensitivity of the agreement range with respect to a relevant input parameter. This contribution summarizes the major findings of a working paper written by Müller et?al. (Working Papers on Risk Management and Insurance (IVW-HSG), No. 92, 2011).     

Bottom-up or direct? Forecasting German GDP in a data-rich environment

In this paper, we investigate whether there are benefits in disaggregating GDP into its components when nowcasting GDP. To answer this question, we conduct a realistic out-of-sample experiment that deals with the most prominent problems in short-term forecasting: mixed frequencies, ragged-edge data, asynchronous data releases and a large set of potential information. We compare a direct leading indicator-based GDP forecast with two bottom-up procedures—that is, forecasting GDP components from the production side or from the demand side. Generally, we find that the direct forecast performs relatively well. Among the disaggregated procedures, the production side seems to be better suited than the demand side to form a disaggregated GDP nowcast.     

Commodity currencies and commodity prices: modelling static and time-varying dependence

This article employs the copula approach to study the relationship between exchange rates and commodity prices for large commodity exporters. Using data for the nominal exchange rates of four commodity currencies (Australian, Canadian and New Zealand dollars, and Norwegian krone) against the US dollar and the relevant country-specific commodity price indices, constructed on a daily basis, we find (1) a positive dependence between the values of commodity currencies and commodity indices, i.e. a commodity index increases when a respective currency appreciates and provides several explanations for this finding; (2) no major asymmetries in the tail dependence for most pairs of exchange rates and commodity indices and (3) a pronounced increase in the time-varying tail dependence following the global financial crisis.     

A cognitive model to predict domain-specific consumer innovativeness

Marketers who launch innovative products need to identify consumers who are willing to learn about, buy, and use these innovations. To optimize marketing campaigns, practitioners need to know the characteristics of this key segment in the diffusion process. Previous research, however, provides confounding results about antecedents of innovativeness because of two limitations: (1) previous studies have conceptualized innovativeness on different levels of abstraction (2) previous studies have not taken into account the influence of the product category. The present paper suggests a conceptual framework to overcome these shortcomings. Based on this framework, the paper suggests a theoretically founded cognitive model of domain-specific innovativeness for a product category with a utilitarian benefit. This model is empirically tested in the field of automotive interior. To this end, 521 German car drivers were surveyed. The results of structural equation modeling show that domain-specific innovativeness for utilitarian products is mainly influenced by specific need for cognition, special interest media usage and domain-specific opinion leadership.     

The effects of the high school curriculum on school dropout

High school dropouts and their lower employment prospects are a major concern for developed countries. This article answers the question whether the high school curriculum has the potential to affect students’ dropout decision. Focusing on the curriculum is also motivated by the manifold curriculum reforms or reform initiatives worldwide. Using a quasi-experimental evaluation design, we identify the effects of a curriculum reform on students’ probability to drop out of high school in the short run, i.e. for the first three cohorts graduating under the new curriculum requirements. The reform increased the curriculum requirements in high school, for instance, by reducing the freedom of choice in course selection. The results show that high school dropout rates increased for males and females alike.     

Do consumers value price transparency?

We examine the role of price transparency in consumer preferences and demand. We assemble a detailed dataset on the driving school industry in Portugal to quantify how firms present the price of the course of instruction, and its individual components, to potential students. Our unique data allows us to estimate a structural model of school choice and measure the impact of varying levels of price information on demand. The results show that consumers are willing to pay a significant amount for price transparency, on average 11% of the service price, and that consumer demographics drive heterogeneous preferences for transparency.     

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.     

Is renting the new buying? A quantitative investigation of the determinants of the rental-commerce intention

ABSTRACT

In recent years, there has been a growing interest of consumers and retailers in rental-commerce. When engaging in rental-commerce, consumers pay a contractually agreed monthly price for the duration of use and can then use the product to its full extent. Since the rental-commerce model is still relatively new, so far little is known about the drivers and barriers leading consumers to rent products online rather than buying them. The results of our quantitative study (N = 689) show that while, surprisingly, knowledge of terms of use has no significant influence on the behavioral intention, sustainability, economic benefits, trust, safety, complexity, and knowledge of rental-commerce serve as predictors of the intention to rent products via a rental-commerce website. Thereby, the results of earlier studies have been largely proven and additional new findings and implications for both, theory and rental-commerce retailers, can be derived.