THE REVENUE‐SHARING RULE FOR INTERCONNECTION CHARGES*

In this paper we explore the economic principle behind the revenue‐sharing rule for interconnection charges. Our main finding is that symmetric firms can collude by splitting the revenues equally. We further characterize the optimal revenue‐sharing ratio and discuss the relationship between optimal ratio and the optimal access price. We also show that the revenue‐sharing rule can have the perverse effect of inducing a firm to raise its own costs in order to gain a higher share of revenues.     

Culture and the Star-Power Strategy: Comparing American and Korean Response to Celebrity-Endorsed Advertising

ABSTRACT

Given the wide interest in celebrity endorsements in advertising, it is surprising that there are no quantitative cross-cultural studies on their effectiveness across target audiences. Previous content-analytic research makes assumptions about effectiveness, but has not examined these assumptions. Our article fills this gap by comparing American versus Korean student samples’ response to celebrity-endorsed ads. We find these cultures diverge in purchase intentions after viewing celebrity-endorsed ads. We also find the emphasis of intuitive moral domains drives purchase intentions. Our discussion focuses on marketing implications as well as outlining future directions for this surprisingly underexplored research area.     

Divergence of Cash Flow and Voting Rights,Opacity, and Stock Price Crash Risk: International Evidence

This study investigates whether and how the deviation of cash flow rights (ownership) from voting rights (control), or simply the ownership‐control wedge, influences the likelihood that extreme negative outliers occur in stock return distributions, which we refer to as stock price crash risk. We do so using a comprehensive panel data set of firms with a dual‐class share structure from 20 countries around the world for the period of 1995–2007. We predict and find that opaque firms with a large wedge are more crash prone than opaque firms with a small wedge. In addition, we predict and find that the positive relation between the wedge and crash risk is less pronounced for firms with more effective external monitoring and for firms with greater growth opportunities. The results of this study are broadly consistent with Jin and Myers’s theory that agency costs, combined with opacity, exacerbate stock price crash risk.