How to Auction a Bottleneck Monopoly When Underhand Vertical Agreements are Possible

A seaport is awarded in a Demsetz auction to the operator bidding the lowest cargo-handling fee. The competitive auction is irrelevant if the port operator integrates into shipping and sabotages competitors, thus providing a motive for a ban on vertical integration. The paper shows that such a ban increases welfare even when underhand agreements with shippers are possible. For this result to attain, the auction must be combined with a sufficiently high floor on the cargo-handling fee that operators can bid in the auction. With no floor, a Demsetz auction is worse than an unregulated bottleneck monopoly.     

The Surge in Capital Inflows to Developing Countries: An Analytical Overview

After being excluded from world capital markets during the debtcrisis, many developing countries have experienced large capitalinflows during the past five years. The challenges that theseinflows pose for domestic policy in recipient countries havegenerated a substantial literature. This article presents anoverview of that literature, describing the characteristicsof the new inflows, analyzing the policy issues they raise,assessing their causes and likely sustainability, and evaluatingpotential policy responses. The desirable policy response istied to characteristics of the flows themselves as well as tothe characteristics of the recipient economy.     

An Empirical Analysis of Tijuana Water Consumption

This paper examines time series characteristics of water consumption in Tijuana, a large manufacturing center and port city located in Northwestern Mexico. Home to more than 700 maquiladora assembly plants, it is one of the fastest growing metropolitan economies in Mexico. That growth places intense demands on the municipal water grid. Because it is located in a semi-arid region, Tijuana also faces supply constraints. Given the nature of the problems faced by water authorities, this research uses time series econometric techniques to analyze monthly information on grid hook-ups and per meter water consumption. Empirical estimation results are fairly satisfactory. Out-of-sample simulation results are mixed and indicate that care should be used if these equations are employed for planning purposes. Lag structures in the equations do, however, suggest several policy implications with respect to drought surcharges and rate hikes.      

Viasystems Group,inc.

Viasystems Group, Inc. (Viasystems) is an international supplier of electromechanical assemblies and components. It specializes in manufacturing printed circuits and assembling electric cables and industrial metal cabinets. The case concerns the Printed Circuit Division at Viasystems and its need to adapt its costing system to the relocation of its manufacturing activities to China under its strategic planning, begun in 2001. Planning and controlling operating costs and the presentation of the financial statements have therefore become major issues. The case is set in 2006, six years after the start of progressive offshoring of manufacturing to China. It describes: 1) how external environmental pressures and the need for profitability have led to a critical strategic decision; and 2) how this new business model has changed upper management's informational needs, leading them to rethink their costing system, particularly at the Chinese plants. Setting the case in 2006, when all the plants have been relocated to China, enables discussions of the challenges that management will have to cope with in the future, after the operations transfer has been completed and the consequences on the management control system.     

Loss aversion and the price of risk

This paper derives a simple theoretical relationship between the degree of loss aversion, the concavity/convexity of the value function, and the equilibrium market price of risk. We show that while the degree of loss aversion is key in determining the market price of risk, the convexity/concavity of the value function is much less important in this respect. The theoretical relationship obtained is tested empirically by using international data from 16 different countries during over 100 years, as documented by Dimson et al. [Triumph of the Optimists: 101 Years of Global Investment Returns, 2002 (Princeton University Press)]. The empirical data yield an estimate of λ=2.3 for the loss aversion index. This value is in striking agreement with estimates obtained in the very different methodology of laboratory experiments of individual decision-making.     

Procedural justice in managerial performance evaluation: Effects of subjectivity,relationship quality,and voice opportunity

This study investigates the effect of subjectivity in performance evaluation on managerial perceptions of procedural justice. Using survey data from a sample of 317 managers, we examine two forms of subjectivity: use and weight of subjective performance measures and ex post flexibility in the weighting of multiple performance measures. We also examine the interaction effects of two contextual factors, superior–manager relationship quality and voice opportunity, on the association between subjectivity and perceived procedural justice. The results suggest that only the superior's use of ex post flexibility in weighting multiple performance measures adversely affects managers' perceptions of procedural justice. Moreover, superior–manager relationship quality reduces the negative effects of ex post flexibility in weighting multiple performance measures on procedural justice, whereas voice opportunity amplifies this negative effect. These findings have practical and theoretical implications, as they shed new light on the trade-off between the informative benefits and perceived unfairness of incorporating subjectivity into performance evaluation.     

Privatizing Highways in the United States

We review the experience of both private toll-roads built in the United States during the 1990s, and argue that the problems they encountered could have been avoided if the length of the franchise contract would adapt to demand realizations. We also argue in favor of adjudicating private toll-roads via BOT-type contracts in competitive (Demsetz) auctions. The lessons of this paper are relevant since growing congestion and troubled government finances have made private toll-roads increasingly attractive in the United States.     

Emerging trends in retail pricing practice: implications for research

This article represents the first of several editorials to appear in the Journal of Retailing designed to examine the nexus between retail practice and research, with the goal of stimulating further research. This essay on emerging trends in pricing discusses recent advances in retail pricing optimization. We begin with a review of how retailers typically make pricing decisions using time-honored heuristics and attempt to infer the optimal decisions. However, current methods are suboptimal because they do not consider the affects of advertising, competition, substitute products, or complementary products on sales. Most fail to take into account how price elasticity changes over time, particularly for fashion merchandise, or how market segments react differentially to price changes. In addition, many retailers find it difficult to know how to price merchandise when their suppliers offer temporary “deals.” They are also generally unaware of how their pricing strategy influences their overall image. As these issues demonstrate, optimal pricing is not a static problem. Retailers must be able to react quickly to changes in the environment or sales patterns. This paper also provides examples of the more sophisticated pricing techniques that are currently being tested in practice. Finally, we conclude with a discussion of the critical components that must be incorporated into retail pricing.