Absorption versus direct costing: the relevance of opportunity costs in the management of congested stochastic production systems

This paper investigates the relative performance of absorption versus direct costing procedures. Traditionally, absorption costing procedures have been defended on the basis of them acting as a proxy for hard to measure opportunity costs. We question the validity of this traditional defence by explicitly considering the extent to which absorption costing-based accounting calculations actually provide good proxies. Our analysis shows that in some situations absorption costing so over estimates opportunity costs that it would be preferable to use direct costing even though this implicitly assumes opportunity costs are zero. Thus, given that we establish that one can notalwaysuse the existence of opportunity costs as a defence for the adoption of absorption costing procedures we next identifyspecificconditions for which if satisfied, we can unambiguously defend the adoption of absorption costing. We develop an ‘open acceptance condition’ which if satisfied insures that a production system directed by absorption costs out performs a system based upon direct costs.     

Fractal structures and naive trading systems: Evidence from the spot US dollar/Japanese yen

This study investigates whether daily logarithmic returns on the spot US dollar/Japanese yen (USD/Yen) for the period 3 March 1987 to 8 September 1993 displayed an underlying fractal structure. The analysis employed a rescaled range (R/S) technique, and revealed USD/Yen persistence which favoured continued depreciation of the USD. The results suggest the presence of time or memory effects in the currency. These effects were arbitrageable by speculators who by holding long Yen positions were able to earn positive returns.     

The Impacts of Changes in Key Economic Variables on Crop Rotational Choices on Ontario Cash-Cropping Farms

This study is a sequel to one providing a methodological framework for evaluating the economic and soil-erosion effects associated with different crop rotational systems involving corn on southern Ontario cash-cropping farms. A multi-period linear programming (MPLP) model is used to estimate the impact on rational crop rotational choices, fam-level profitability and soil-erosion rates of having different values for the more important economic variables. The variables examined are relative cash-crop prices, fossil fuel energy-related production costs, discount rates, and values attached to soil lost through erosion. The MPLP model is solved in turn for each of a range of values for one of the economic variables at a time, the selection of values being based upon recent historical experience. Where no change in rotational system is prompted within the range, the MPLP model is used to find the value of each economic variable that would be required to trigger the choice of some alternative rotational system. Each of these model runs is performed for the case where yields of all crops over a 20-year time horizon are firstly assumed constant, and secondly assumed to suffer a cumulative decline. Cet article fait suite à une étude méthodologique dont le but a été d'valuer les effets économiques et érosifs de systémes de production produisant essentiellement du maïs en rotation avec d'autres cultures. Cette méthode d'analyse est appliquée à des exploitations agricoles localisées dans le Sud de I'Ontario et specialisées dans les cultures commerciales. Pour ce faire, un modéle linéaire multi-période (MPLP) est utilisé pour estimer I'impact d'un changement dans les principales variables économiques sur le choix des rotations culturales, le niveau de rentabilité des systémes de production et les taux d'érosion des sols. Les variables économiques prises en compte sont les prix relatifs des cultures commerciales, les coûts de production associés à la consommation d'énergie fossile, les taux d'actualisation et les pertes absolues en sol dues à l'érosion. Le modéle linéaire (MPLP) est de nouveaurésolu pour chaque variable économique en les paramétrisant sur un intervalle de valeurs selectionnées à partir de donntes historiques récentes. Lorsqu'il n'y a aucun changement dans la rotation culturale, le modéle détermine le niveau de chaque variable qui entrainerait la prise en considération d'une rotation culturale alternative. Toutes les simulations ont été effectuées sur une période de vingt ans en adoptant deux variantes sur I'tvolution des ren-dements des cultures commerciales: premierèment, les rendements restent constants durant toute la période, et deuxiémement, les rendements décroissent de maniére cumulative.     

Cost reductions or reputation enhancement as motives for mergers: The logic of multihospital systems

This paper examines two motives for the formation of local multihospital systems: cost reduction and reputation enhancement. Systems may reduce costs by eliminating redundancies and reducing administrative costs. Integration may also lower costs for consumers seeking consistently high qualiiy. We hypothesize that if systems achieve either cost or reputation benefits, then member hospitals will ‘look’ different from random collections of hospitals. We find that local systems do not appear to have lower costs but do appear to enjoy reputation benefits over nonsystem hospitals. Our findings challenge the assumptions behind popular health reform initiatives.     

The baggage system at Denver: prospects and lessons

This article discusses the fundamental design difficulties of the fully automated baggage system originally planned for the New Denver Airport, and their implications for airport and airline management. Theory, industrial experience, and the reality at Denver emphasize the difficulty of achieving acceptable standards of performance when novel, complex systems are operating near capacity. United Airlines will thus make the Denver system ‘work’ by drastically reducing its complexity and performance. Automated baggage systems are risky. Airlines and airports considering their use should assess their design cautiously and far in advance, and install redundant, supplemental systems from the start.     

Demographic versus expenditure flexibility in Engel curves

We consider the effects of demographic and expenditure variables on consumer demand in a system of Engel curves using a smooth coefficient semiparametric model where the expenditure effects on the budget shares vary nonparametrically with demographic variables such as the age of head and number of children in the household. Our findings, based on UK micro data, suggest that with a smooth coefficient semiparametric model there is no need for nonlinear logarithmic expenditure effects in the budget shares. Furthermore, we find evidence of a trade-off between demographic and expenditure effects in Engel curves and that a rank-2 system of Engel curves where the logarithmic expenditure effects are allowed to vary with demographic characteristics either nonparametrically or as a third degree polynomial function cannot be rejected against a rank-3 (quadratic logarithmic) model. The implications on household behavior and welfare are also examined. We would like to thank an anonymous referee and Baldev Raj, the editor, for useful comments and suggestions. We would also like to thank the University of Cyprus for financial support, Theofanis Mamuneas for stimulating discussions and the Office of National Statistics for making available the UK Family Expenditure Survey data through the ESRC Data Archive. The last author would also like to acknowledge the financial support from SSHRC of Canada.     

Consistent representative democracy

We study axioms which define “representative democracy” in an environment in which agents vote over a finite set of alternatives. We focus on a property that states that whether votes are aggregated directly or indirectly makes no difference. We call this property representative consistency. Representative consistency formalizes the idea that a voting rule should be immune to gerrymandering. We characterize the class of rules satisfying unanimity, anonymity, and representative consistency. We call these rules “partial priority rules.” A partial priority rule can be interpreted as a rule in which each agent can “veto” certain alternatives. We investigate the implications of imposing other axioms to the list specified above. We also study the partial priority rules in the context of specific economic models.     

Latent Consideration Sets and Continuous Demand Systems

This paper develops a theoretically consistent continuous demand system model that incorporates latent, probabilistic consideration sets. In contrast to existing discrete choice consideration models, the proposed model is econometrically tractable with consumption data for many goods. The model’s empirical properties are illustrated with an 89-site recreation data set from the 1994 National Survey of Recreation and the Environment (NSRE). Parameter and welfare estimates suggest that the latent consideration set models fit the data better and may imply a bias-variance tradeoff relative to traditional models.      

Operations management perspectives and the hospitality industry

This paper examines the links between operations management principles developed in manufacturng industry and problems presented by service industries, such as the hospitality industry. The value and applicability of O.M. perspectives is discussed and several examples of recent and potential application are given.     

Race to the top or bottom? Corporate governance,freedom of reincorporation and competition in law

Summary This paper investigates the governance structure choices of firms when there is competition between legal systems. We study the impact of the allocation of control over choice of governance and reincorporation on firms’ technologies and technological specialization of countries in the context of a model of the firm in which there are agency conflicts between shareholders and managers. We show that the allocation of control over firms’ reincorporation decisions determines the corporate governance choice ex ante and the outcome of the competition between legal regimes ex post. When managers have control over reincorporation then competitive deregulation and “runs to the bottom” ensue. When shareholders have partial or full control then there is diversity in governance structures. Runs to the bottom are not necessarily socially undesirable but they have a feedback effect on firms’ choices of technologies that may make the party in control worse off ex ante. We show that it is impossible for any country to achieve social welfare maximization of its existing and new enterprises. With competition between legal regimes, start-up and mature companies incorporate in different jurisdictions even when reincorporation is correctly anticipated.