Evaluating the Effect of Affinity Card Programs on Customer Profitability Using Propensity Score Matching

Affinity card programs have become popular in recent times and account for one fifth of all credit card accounts. There is no research that links affinity card programs to customer profitability. Moreover, little is known about what type of affinity card programs would lead to higher profit. Using a large proprietary dataset we answer the above questions. We also apply propensity score matching, a relatively new technique, to control for selection bias in addressing the above issues. Contrary to previous research and common belief, we show that affinity card customers are no more profitable than non-affinity card holders. We also show that sports-based affinity programs are the least profitable and surprisingly, alumni-based affinity programs also do poorly relative to other types of affinity. On the positive side, affinity card customers are lower risk and help to lower the average risk of the portfolio of customers.     

Markets and the non‐monotonic relation between productivity and establishment size

Abstract A model of monopolistic competition is presented in which the relation between the productivity and input size of producers is non‐monotonic and bell‐shaped. The model predicts that markets matter and the average size of the producers is directly scaled by the size of the market. An indirect effect increases the cutoff productivity, making the bell narrower in larger markets or when the transportation cost falls. Empirical evidence from the concrete industry and a few other 4‐digit industries supports the model’s predictions. The bell‐shaped relation has especially important implications on how size distributions are formed across localized versus globalized market industries.     

Do manufacturing entrepreneurs in Australia have (or develop) a productivity advantage?

Journal of Productivity Analysis - Young firms are integral to productivity enhancing resources reallocation. However, manufacturing entrepreneurs in Australia are quite unproductive upon entry....     

Trends in Market Concentration of Australian Industries

A host of industrialised countries have seen concentration in their industries grow. This trend is fuelling concerns about falling competition. This article focuses on the changing pattern of market concentration in Australia from 2002 to 2017. On average, market concentration has been rising. However, beneath the aggregate statistics, the pattern is rather mixed, with concentration falling in several sectors. The study also detects a pattern of strong productivity growth alongside a shift towards capital intensive operation and increasing trade where concentration is growing. Overall, the implications of these findings point to the possibility that rising market concentration in some industries is technology driven and not due to a lack of competition.     

The role of spillovers in research and development expenditure in Australian industries

Using administrative data from firms in Australia that conduct research and development (R&;D), we examine how R&;D activity of other firms and public institutions affect a firm's own R&;D expenditure. We distinguish between the impact of peers, suppliers and clients. We examine whether geographical proximity and industrial clustering affect R&;D spillovers. Overall, we detect positive effects on R&;D expenditure from spillovers from peers and clients to firms that are nearby; within 25 or 50?km. R&;D expenditure by academia, unlike by government bodies, has a positive influence on a firm's own R&;D expenditure within state boundaries. We fail to find any significant role for industrial clusters in augmenting spillover effects.     

Changing Nature of Patents in Australia

Recent decades have seen substantial changes to the innovation systems of major economies, not least due to a paradigm shift caused by the digital revolution. Whether smaller advanced economies such as Australia have undergone a similar shift or moved to fill the void left by other countries is unclear. This issue is important as it sets the long-term growth path of these economies. I use Australian patent data and show that there has been a similar surge in Australia in patenting, mainly driven by medical and digital technologies. Australia, however, is showing more strength in a few niche areas. At the same time, the scope of patents, as one measure of basicness, narrowed over the years. This has been driven by private companies opting for applied research and also refocusing their innovation efforts away from chemical and material technologies and onto digital technologies and other applied areas.