Decreasing Impatience: A Criterion for Non‐stationary Time Preference and "Hyperbolic" Discounting

Despite recent interest in hyperbolic discounting, there has been little discussion of exactly what property of time preferences is instantiated by hyperbolic or quasi‐hyperbolic functional forms. The paper revives an earlier proposal in Prelec (1989) that the key property is Pratt–Arrow convexity of the log of the discount function, which corresponds to decreasing impatience(DI) at the level of preferences. DI provides a natural criterion for assessing the severity of departure from stationarity in that greater DI is equivalent to more choices of dominated options in two‐stage decision problems, as well as greater convexity of the log of the discount function. Inefficient choices may arise as intentional precommitments, or as unintended reversals of preference by “naïve” agents.     

Improving the Precision of Analysts' Earnings Forecasts by Adjusting for Predictable Bias

This research demonstrates that publicly-available information can be used to develop estimates of analysts' optimistic bias in earnings forecasts. These bias estimates can be used to produce more accurate forecasts, resulting in significant reductions of both cross-sectional mean forecast error and error variance. When bias estimates are based on past observations of forecast error alone, however, reductions in mean forecast error are smaller, and forecast precision is unimproved. Further tests provide evidence of a significant association between returns and the bias predictable from contemporaneously-available information, suggesting that predictable bias is only partially discounted by market participants. This study has significant implications for researchers and investors. The pricing of predictable bias in analysts' forecasts may add error toinferences which are based on the association between returns and analyst forecast errors, and knowledge of the market's partial discounting of predictable bias may help investors to make more efficient resource allocations.     

An economic reappraisal of the Melamchi water supply project - Kathmandu,Nepal

This paper examines whether the benefits of the Melamchi water supply project in Nepal are likely to exceed its costs, assuming that high-quality municipal water services can be delivered to households and firms in the urbanized part of the Kathmandu Valley. Monte Carlo simulations are used to explore the sensitivity of the net present value and economic internal rate of return calculations to a wide range of assumptions and input parameters. We find that extreme assumptions are not required to generate large differences in economic feasibility; quite plausible differences in the values of some key parameters can lead to large differences in the economic attractiveness of the project. The results reveal that the three most important influences on net present value and economic internal rate of return are: (i) the discount rate and discounting procedure; (ii) the magnitude of monthly benefits for households connected to the new water system; and (iii) the annual growth rate in monthly benefits of connected households after the project comes on line. Our contribution lies in illustrating, with an actual case study in a developing country, the degree to which cost-benefit calculations of large infrastructure projects are influenced by key economic modeling assumptions and input parameters.JEL Classification: H42, H43, H54, Q25, Q56 Correspondence to: Dale WhittingtonWe would especially like to thank Keiichi Tamaki (ADB) and Ian Hill (Acres International) for their guidance and assistance with this project. We would also like to thank the following individuals for their help during our mission to Kathmandu in May, 2003: Richard W. A. Vokes, Kathie M. Julian, Raj Kumar Malla, Madan Shankar Shrestha, Suman Prasad Sharma and Noor Kumar Tamrakar.     

Obesity and Hyperbolic Discounting: Evidence and Implications

Efforts to use nutrition education to combat the growing obesity problem in the USA have been largely unsuccessful. One possible reason for the persistence of the obesity problem is the presence of consumers who discount hyperbolically. To counter this phenomenon, sophisticated agents may try to employ commitment devices to protect long–term health goals from short–term consumption decisions. This study uses data from the Continuing Survey of Food Intakes by Individuals to examine the impact of hyperbolic discounting and use of commitment devices on individuals’ caloric consumption. The results suggest that obese dieters display behavior consistent with hyperbolic discounting.

Towards a framework for supply chain finance for the supply side

Buyers increasingly offer financing alternatives to their suppliers – so called supply chain finance (SCF) practices for the supply side. Expected benefits however do not always materialize for involved actors. Guidance is needed when to provide these SCF practices to suppliers and why to select different types of practices. To provide this guidance, the paper involves an exploratory multiple-case study design including data within eight buyer-supplier-financial service provider triads. The findings explain contextual situations for the provision of SCF practices based on the contingency approach. They distinguish endogenous, relationship-related and exogenous contingencies within the aforementioned triads. Differentiation criteria are determined for the selection of SCF practices along the dimensions ‘time of financing’ (pre- versus post-shipment) and ‘source of funds’ (supply chain internal and external). Testable propositions and key learnings summarize the derived findings and form the basis to develop a contingency framework on SCF practices for the supply side.     

Spatial discounting of ecosystem services

The impact of conservation efforts targeted at preserving ecosystem services largely depend on the welfare implications associated with spatial variations in the provision of ecosystem services. While there is ample empirical evidence of spatial discounting or decay of the valuation of ecosystem services, there are still few underpinnings based on welfare economic theory. We establish a theory of spatial discounting that closely follows the concept of time discounting pertaining to climate change, and show spatial discount rates in the consumption, ecosystem service, and willingness to pay (WTP) numeraires. We consider the role of key parameters such as pure rate of spatial preference, consumption change, ecosystem services change, population density, and elasticity of marginal utility. We find that the spatial discount rate of WTP for ecosystem services that frequently appears in the empirical literature is the difference between the ecosystem service discount rate and consumption discount rate, where the ecosystem service discount rate includes both physical distance decay and welfare effects. Finally, we use numerical simulations to illustrate how the three different spatial discount rates vary with the spatial distance from the source of ecosystem services and with consumption patterns, implying many more possible spatial variations of WTP.     

Estimating cannibalizing effects of sales promotions: The impact of price cuts and store type

To evaluate the financial impact of supermarket sales promotions, managers must estimate how much new demand comes from cannibalizing the base product compared with other sources. However, investigations into cannibalization are scant. Using vector autoregression analytical framework applied to three years of supermarket scanner data, and sales promotions for pound cake, we estimate cannibalization effects for two common price reductions (10% and 15%), across large, medium and small supermarkets. The sales bumps varied across supermarkets for each price cut while cannibalization effects were substantial only in large supermarkets, with moderate effects in medium stores and no effects in small supermarkets.     

票据承兑和贴现业务差异化发展的特征、影响与政策建议

进入新世纪以来,人民银行货币政策调控的有效性、针对性和前瞻性不断增强,我国票据市场整体保持稳健发展,但票据承兑和贴现业务发展存在差异化现象,表现为票据承兑业务稳步增长,而贴现业务受金融调控影响显著。文章分析了其中的原因,探讨了两者差异化发展对市场运行的影响,并就票据市场的协调健康发展提出相关政策建议。     

Optimal equilibria for time‐inconsistent stopping problems in continuous time

For an infinite‐horizon continuous‐time optimal stopping problem under nonexponential discounting, we look for an optimal equilibrium, which generates larger values than any other equilibrium does on the entire state space. When the discount function is log subadditive and the state process is one‐dimensional, an optimal equilibrium is constructed in a specific form, under appropriate regularity and integrability conditions. Although there may exist other optimal equilibria, we show that they can differ from the constructed one in very limited ways. This leads to a sufficient condition for the uniqueness of optimal equilibria, up to some closedness condition. To illustrate our theoretic results, a comprehensive analysis is carried out for three specific stopping problems, concerning asset liquidation and real options valuation. For each one of them, an optimal equilibrium is characterized through an explicit formula.     

Absorptive Capacity,International Business Knowledge Transfer,and Local Adaptation: Establishing Discount Department Stores in Australia

This article examines the ways that Australia's largest retail firms accessed and adapted external knowledge flows, largely from the USA, to develop discount department store chains from the late‐1960s onwards. In doing so, it extends work on retail internationalisation by focusing on the importation, rather than the exportation of business models. The three firms – Coles, Myer and Woolworths – exhibited differing degrees of absorptive capacity in identifying and commercialising knowledge flows. This was reflected in fluctuating levels of success, the scope of store networks and relative positioning in the Australian market. Further, the role played by informal associations between managers in non‐competing firms in different markets during the development of discount department stores in Australia advances the case for socialising analyses of business knowledge transfer more broadly.