Restaurant Prices and the Mexican Peso

Of prime interest to border economies is exchange rate performance and currency valuation. Commonly used tools for this task include purchasing power parity (PPP) nominal benchmarks, and inflation-adjusted trade-weighted indices. The latter have the advantage of relying on commonly available international macroeconomic data but overlook microeeonomic information that may offer additional insight to issues surrounding exchange rate policy debates. Other efforts have utilized small samples of international product price comparisons to shed light on currency valuation questions. This paper develops one such tool by repeated sampling of prices charged for identical menu items sold at restaurant franchises in El Paso, Texas, and Ciudad Juárez, Chihuahua. A battery of statistical tests indicate that the international currency value of the peso consistently differed from the exchange rate implied by the border region restaurant price ratios in 1997, 1998, and 1999.     

Imperfect Competition in Auction Designs

We study the competition between two owners of identical goods who wish to sell them to a pool of potential buyers. The sellers compete simultaneously setting reserve prices for their second price sealed bid auctions. Upon observing the set reserve prices, the buyers decide simultaneously in which auction to bid. We show that this game has (at least) one equilibrium and that all equilibria are inefficient: reserve prices are not driven to zero (cost). We also discuss where and why the parallel between optimal auction design and optimal pricing in the case of monopoly breaks down for oligopoly.     

Multinationals and plant exit: Evidence from Chile

This paper investigates three main questions: are affiliates of foreign multinationals more likely to exit than domestic firms? Does the exit probability of multinationals depend on its export orientation?, and Does the presence of multinationals affect the survival of other firms in the economy? Our results show that foreign plants are more likely to exit the economy, controlling for other firm and industry characteristics, only during the late 1990s, a period when the Chilean economy experience a massive slowdown. Our data also suggest that only domestic market oriented multinationals responded to this negative shock by being more “footloose”. We also find that the presence of multinationals has a positive effect on plant survival in the early 1990s. This positive effect, however, is fully captured by productivity, once controlling for TFP in our exit regressions we do not find any further impact of multinational presence on a plant's probability of exit.     

Exploring the Relationships Between Product Development and Environmental Turbulence: The Case of Mobile TLC Services*

Managing innovation in turbulent environments (e.g., in environments with extreme uncertainty and complexity in market needs and technological opportunities) is a major challenge. A recent stream of studies in the management literature has suggested that when facing turbulent environments, firms should deploy more flexible development processes. This paper approaches this issue by looking at the Italian mobile telecommunications (TLC) industry. Nine in‐depth case studies were conducted in five different companies. Data analysis showed some important results. First of all environmental turbulence should be considered to be project specific rather than company or industry specific. Moreover, it can come from both shift in the market needs and in the technology. Nevertheless, it seems clear that having rapid changes is not enough to have environmental turbulence. If rapid changes can be somehow foreseen, there is no turbulence at all. Hence, when approaching projects in potentially turbulent environments, managers should assess both rapidity and unpredictability of the environment. Finally, looking at the in‐depth cases, the paper points out what of the main practices to increase flexibility that are described in literature are actually adopted by companies. In case of turbulence (both in the market and/or in the technology) companies delay concept freezing point. Moreover, in the case of technological turbulence, they also leverage on rapid project iterations, whereas in case of market turbulence they more likely adopt early experiments involving customers, formal and cross‐functional project teams, and flat organizational structures.     

Short-Term Water Consumption Patterns in Ciudad Juárez, Mexico

Water utility planning efforts are becoming increasingly difficult throughout the world. Located in a semi-arid region, Ciudad Juárez, Mexico is a fast growing municipality that faces both physical infrastructure and water supply constraints. This paper examines monthly water consumption in Ciudad Juárez utilizing a linear transfer function procedure (LTF). Analysis is carried out for per customer usage and for the total number of municipal water system accounts. Models estimated for both series are subjected to a series of simulation benchmark tests. Findings suggest that water consumption in Ciudad Juárez reacts quickly to changes in economic and weather conditions. Out-of-sample simulation results are mixed. Per customer usage forecasts do not fare as well those for total customers relative to random walk benchmarks.Financial support for this research was provided by Southwest Center for Environmental Research Policy Grant W-04-03. Additional financial support was provided by El Paso Electric Company, Wells Fargo Bank of El Paso, and National Science Foundation Grant SES-0332001. Helpful comments and suggestions were provided by Cely Ronquillo, Brian Kelley, and Cesar Olivas. Econometric research assistance was provided by Marycruz De Leon and Irma Torres.     

Entry and Exit in International Markets: Evidence from Chilean Data*

Several studies examine the patterns and determinants of entry and exit in manufacturing industries. Not much work exists on entry and exit in international markets. This paper uses Chilean data to analyze the industry‐level determinants of entry and exit in export markets. First, we show as stylized facts that entry and exit rates differ across industries, vary over time, and are positively correlated. Then, we study the main determinants of these patterns. Our econometric analysis shows that within‐industry heterogeneity, measured by differences in productivity or other firm characteristics, has a significant effect on plant turnover in international markets. Our findings reveal that trade costs, factor intensities, and fluctuations in the real exchange rate play a minor role explaining entry and exit. This last result is consistent with hysteresis in international markets.     

Italian Business Ills and Cures

The world’s press may have lost interest in the ongoing enquiry into the deep-rooted corruption in Italian business. But what exactly was going on, and what can be done to improve matters? The writers of this authoritative study are Faculty members of the prestigious Italian Business School, SDA Bocconi, Via F. Bocconi 8, 8-20136 Milano, where Umberto Lago lectures in Strategy and Roberto Castoldi in Accounting. They both lecture on the Business Policy course at Bocconi University.     

THE EFFECT OF VOLUNTARY CORPORATE LIQUIDATION ON SHAREHOLDER WEALTH

This paper presents an analysis of the shareholder wealth effect of voluntary corporate liquidation, the extreme form of corporate divestiture classified as a “selloff.” For a sample of 37 firms that liquidated during the 1970–1982 period, the liquidation announcement is associated with statistically and economically significant stock price increases.     

Tax-induced Dissimilarities Between Domestic and Foreign Mutual Funds in Italy

Using data from Italy over the period 1998–2002, this study investigates whether tax effects can account for differences in return patterns between domestic and foreign mutual funds, and if this dissimilarity translates into performance. The paper presents evidence that much of the difference between domestic and foreign funds is explained by the different tax systems. The asymmetry between the two groups, due to the fact that domestic funds are obliged to pay taxes on a daily basis while foreign funds are taxed when capital gains are collected, also affects performance. We prove that comparing pre-tax returns, Italian funds are virtually indistinguishable from their foreign counterparts in terms of risk-adjusted returns, while when comparing after-tax returns, foreign funds outperform.