The Effect of Probability Distribution Functions of Economic Life on Retirement Alternatives

Economic analysis, supported by computer hardware and software, can easily overwhelm a decision maker with data. However, this data can be organized in a readily understandable way using well-designed graphs. Some simple guidelines suggest substantial improvements over available examples from papers and textbooks. Although these graphs and sensitivity analyses are useful in many quantitative problems, the long-range focus of engineering economy and its concomitant uncertainty dramatically increase their value.     

The Empire strikes back. Counterrevolutionary strategies for industry leaders

Industry leaders frequently worry that their companies will fall victim to some revolutionary business model or disruptive technology. But new research shows that it's strategically better for incumbents to counter a revolution than to ignore or fully embrace it. Successful incumbents rely on one or more of five approaches to restrain, modify, or, if necessary, neutralize a revolutionary threat. A company that perceives a revolution in its earliest stages can use containment strategies. By throwing up roadblocks--raising switching costs, perhaps, or launching discrediting PR efforts--an incumbent can often limit the degree to which customers and competitors accept a nascent insurgency. And, sometimes, revolutions die there. If not, early containment buys a company some time to shape the revolution so that it complements, rather than supersedes, the incumbent's strengths. And even if shaping efforts fail, they can give an industry leader more time to work out how to absorb the threat by bringing the new competencies or technologies inside the firm in such a way that they don't destroy its existing strengths and capabilities. When revolutions have progressed too far to slow them down, incumbents must take a more aggressive tack. Neutralizing strategies meet a revolution head-on and terminate it--by, say, temporarily giving away the benefits offered by the challenger for free. Annulment strategies allow the market leader to leapfrog over or sidestep the threat. These five strategic approaches need not be used in isolation, as a detailed case study of the way Anheuser-Busch countered the craft-beer revolution dramatically demonstrates. Sensible industry leaders do not lead revolutions; they know they may not survive the attempt. Instead, they prefer to lead counterrevolutions.     

Dimensions of the public affairs/government relations function in major American corporations

The public affairs/government relations (PA/GR) function appears to be growing in importance in large corporations. A survey of the 500 largest U.S. industrial concerns was undertaken to ascertain their views and practices with regard to the PA/GR function. 130 of the 163 firms responding to the survey have a formalized PA/GR function in place. Survey data supports the idea that top corporate decision makers are allocating significant staff and decision making authority to the PA/GR function and that this activity differs significantly from the traditional lobbying and public affairs activities of the past.     

Insurance Derivatives: A New Asset Class for the Capital Markets and a New Hedging Tool for the Insurance Industry

The number and severity of natural catastrophes has increased dramatically over the last decade. As a result, there is now a shortage of capacity in the property catastrophe insurance industry in the U.S. This article discusses how insurance derivatives, particularly the Chicago Board of Trade's catastrophe options contracts, represent a possible solution to this problem. These new financial instruments enable the capital markets to provide the insurance industry with the reinsurance capacity it needs. The capital markets are willing to perform this role because of the new asset class characteristics of securitized insurance risk: positive excess returns and diversification benefits.
The article also demonstrates how insurance companies can use insurance derivatives such as catastrophe options and catastrophe-linked bonds as effective, low-cost risk management tools. In reviewing the performance of the catastrophe contracts to date, the authors report promising signs of growth and liquidity in these markets.