The Damoclean tax and innovation

The paper presents a novel tax that is designed to improve the performance of research and development (R&D) investments. Ideally, the tax allows the technical efficiencies of monopoly while bringing about the desirable effects of the competitive pressure of R&D rivalry. Thus, with the tax, the state can sanction a monopoly of R&D investment in order to attain technical efficiencies and yet avoid the underinvestment in R&D that would result without competitive pressures. A critique of the tax emphasizes the problems of implementing it and offers a more practical alternative that would achieve the same desirable effects.     

TESTS OF THE BLACK-SCHOLES AND CONSTANT ELASTICITY OF VARIANCE CURRENCY CALL OPTION VALUATION MODELS

An adaptation of the Cox-Ross/Emanuel-MacBeth call option valuation model for constant elasticity of variance diffusion processes is tested here against an adaptation of the Black-Scholes call option valuation model for the pricing of call currency options. Synchronized transactions data supplied by the Philadelphia Exchange are used. A maximum likelihood estimation procedure indicates a significant association between currency return variances and exchange rate levels. The constant elasticity of variance model exhibits significantly superior pricing accuracy for predictive intervals of three or fewer trading days.     

Influences on consumer use of word-of-mouth recommendation sources

This article reports the development and testing of a theoretical model of the initial stages of recommendation-based decision making by consumers. Although consumers use a variety of recommendation sources, they have different motivations for the use of different sources. The model focuses on the factors that influence the likelihood of consumers using strong-tie sources (e.g., friends and family) and weak-tie sources (e.g., acquaintances or strangers) or recommendations. The factors used in the model are the prior knowledge level of the consumer about the product being considered, the perceived decision task difficulty level, and the type of evaluative cues sought by the consumer. Hypotheses are tested using data collected in an extensive field study with consumers. Two paths or routes of influence on the use of recommendation sources are proposed and confirmed in the study. His work has been published in theJournal of the Academy of Marketing Science, Journal of Marketing, andJournal of Marketing Research. His research interests center on consumer decision making and marketing education. He has published previously in theJournal of the Academy of Marketing Science, Journal of Advertising, Strategic Change, The International Executive, andMarketing Education Review. His research interests include research methodology, quantitative methods, and competitive intelligence. His work has appeared in theJournal of Marketing Research, Journal of Marketing, andJournal of the Academy of Marketing Science. His publications have appeared in numerous journals. His books includeConsumer Behavior (Harcourt Brace Jovanovich, 1986) andMarketing Management (Simon & Schuster).     

An Examination of Option-Implied S&P 500 Futures Price Distributions

Expected S&P 500 futures price distributions are derived using no-arbitrage option pricing models. These distributions are parameterized both as the lognormal and as a less restrictive three-parameter Burr-XII distribution. The resulting option-based probability assessments display some evidence of miscalibration very near to expiration and far from expiration, but are accurate over intermediate time ranges. The means of the implied price distributions correspond closely to the contemporaneous futures prices for both distributions, although marginally better with the Burr-XII. The Burr-XII distribution also performs better than the lognormal based on calibration statistics, and hence, is used to recalibrate estimated distributions.     

Rate Setting in the Utilities Industry: Does Size Make a Difference?

This study provides evidence that the “size effect,”which has been investigated extensively in the literature, has not been considered by regulators in the utility rate setting process. In essence, the results indicate the rates assigned to both large and small utilities have not differed significantly in the past, statistically. However, to be consistent with the behavior observed in the competitive financial markets, the rates regulators set should be significantly higher for small utilities compared to large utilities. The fact that this was not observed might suggest inequities exist in the rate-setting process.     

An Investigation of the Effect of the 1990 Reserve Requirement Change on Financial Asset Prices

In 1990, the Federal Reserve reduced reserve requirements on large, nonpersonal time deposits and net Eurocurrency liabilities. In this article we provide evidence on who gained from the reduction in this tax. No evidence is found to suggest that large depositors gained by way of higher yields. Rather, evidence indicates a decline in Eurodollar interest rates relative to other money market rates. Evidence further shows that bank shareholders were recipients of abnormal share price appreciation following the announcement. There is little evidence to indicate that shareholders outside of the banking industry experienced similar abnormal gains.     

Transgenic varieties and productivity of smallholder cotton farmers in China

Genetically modified cotton varieties have greater production efficiency for smallholders in farming communities in China. We also find that the adoption of Bacillus thuringiensis (Bt) cotton varieties leads to a significant decrease in the use of pesticides. Hence, we demonstrate that Bt cotton appears to be an agricultural technology that improves both production efficiency and the environment. In terms of policies, our findings suggest that the government should investigate whether or not they should make additional investments to spread Bt to other cotton regions and to other crops.     

Principles involving marketing policies: An empirical assessment

We examined nine marketing textbooks, published since 1927, to see if they contained useful marketing principles. Four doctoral students found 566 normative statements about pricing, product, place, or promotion in these texts. None of these statements were supported by empirical evidence. Four raters agreed on only twenty of these 566 statements as providing meaningful principles. Twenty marketing professors rated whether the twenty meaningful principles were correct, supported by empirical evidence, useful, or surprising. None met all the criteria. Nine were judged to be nearly as correct when their wording was reversed.The authors thank the many people who commented on early drafts, including Eileen Bridges, Fred Collopy, Douglas Dalrymple, Alan Dubinsky, Andrew Ehrenberg, Jonathan Freeman, Raymond Hubbard, William Perreault, William Ross, Steven Schnaars, and Gerald Zaltman. Jennifer L. Armstrong, Gina Bloom, and Phan Lam provided editorial assistance.