Using performance-based warranties to influence consumer purchase decisions

Abstract

Traditional warranty analysis focuses on the reliability of a product and offers warranty designs that compensate a consumer if the item fails. We introduce the concept of a performance-based warranty (PBW) that guarantees that a product will operate at or above some baseline level of performance, such as a minimum energy efficiency for an appliance. We illustrate how consumer behavior can change in the presence of a PBW and define the parameters for which a manufacturer may increase revenue. Finally, we present an algorithm to solve for the optimal PBW design given a consumer’s belief about the expected performance of the product.     

COVID-19 and business renewal: Lessons and insights from the global airline industry

The emergence of the COVID-19 pandemic has adversely affected the fortunes of multiple companies around the globe. Accordingly, questions are increasingly being asked about how organizations can revitalize during and after a crisis. Yet, we have limited understanding of how organizations renew themselves during crises over time. We explore this question through the lens and examination of two South-Asian airlines: Pakistan International Airlines and Sri Lankan Airlines. The cases offer important insights into the reasons behind underperformance of state-controlled enterprises and renewal activities. We shed light on strategic renewal (SR) in the wake of increasing liberalization and deregulations in the global airline industry. To this end, we propose a four-stage approach towards renewing such underperforming organizations to respond effectively to black swan events and external shocks.     

Human resource management practices and voluntary turnover: a study of internal workforce and external labor market contingencies

We tested relationships between employee quit rates and two bundles of human resource (HR) practices that reflect the different interests of the two parties involved in the employment relationship. To understand the boundary conditions for these effects, we examined an external contingency proposed to influence the exchange-based effects of HR practices on subsequent quit rates – the local industry-specific unemployment rate – and an internal contingency proposed to shape employees’ conceptualization of their exchange relationship – their employment status (i.e. full-time, part-time and temporary employment). Analyses of lagged data from over 200 Canadian establishments show that inducement HR practices (e.g. extensive benefits) and performance expectation HR practices (e.g. performance-based bonuses) had different effects on quit rates, and the former effect was moderated by unemployment rate. The effects of HR practices on quit rates did not differ between FT and PT employees, but a different pattern of main and interactive effects was found among temporary workers. These findings suggest that employees’ exchange-based decisions to leave may be less affected by the number of hours they expect to work each week, and more by the number of weeks they expect to work.     

Hedonic pricing and the role of stud fees in the market for thoroughbred yearlings in Australia

Using data from one of Australia's largest thoroughbred auction houses, we investigate the price determinants of thoroughbred yearlings sold at auction. We include novel key variables to construct hedonic pricing models and examine the relative role of stud fees compared to the wide range of attributes in the pricing of yearlings. We find that the price effect of stud fees is influenced by the value buyers place on both the characteristics of sires and the characteristics of sire side siblings. The findings imply that the quality of dams a sire has been matched within the breeding market has consequential effects on yearling prices through the sire's stud fee and progeny.     

Getting the Most Out of a Mandatory Subordinated Debt Requirement

Recent advances in asset pricing—the reduced-form approach to pricing risky debt and derivatives—are used to quantitatively evaluate several proposals for mandatory bank issue of subordinated debt. We find that credit spreads on both fixed- and floating-rate subordinated debt provide relatively clean signals of bank risk and are not unduly influenced by nonrisk factors. Fixed-rate debt with a put is unacceptable, but making the putable debt floating resolves most problems. Our approach also helps to clarify several different notions of “bank risk.”     

Can the New Deal’s three Rs be rehabilitated? A program-by-program, county-by-county analysis

We examine the importance of Roosevelt’s “relief, recovery, and reform” motives to the distribution of New Deal funds across over 3000 US counties, program by program. The major relief programs most closely followed Roosevelt’s three Rs. Other programs were tilted more in favor of areas with higher incomes. For all programs spending for political advantage in upcoming elections was a significant factor. Roosevelt’s successful reelections were based on developing specific programs for a broad range of constituents, delivering on his stated goals, but also spending more at the margin for political purposes.     

Exploring the interaction between incubators and industrial clusters: the case of the itri incubator in Taiwan

This article aims to explore the interaction between incubators and industrial clusters, which is an important linkage for local development but has not been analyzed in the literature. A model is proposed to describe this interaction. The Industrial Technology Research Institute (ITRI) Incubator within the Hsinchu industrial cluster, the core of Taiwan's technology industries, is considered to be an empirical case. This case is investigated with the proposed model and methods including data analysis, in–depth interviews, manager surveys and stakeholder analysis. It was found that the clustering effect in the Hsinchu industrial cluster is main factor in the ITRI Incubator's development. The ITRI Incubator in turn reinforces the cluster in some aspects as feedback. This result confirms the existence and importance of this interaction in local development. It is recommended that government officials and incubator managers take account of this interaction in operating an incubator program and utilize the proposed model to analyze the incubator's contributions to its industrial cluster.     

Are the Best Small Companies the Best Investments?

Previous research finds that large companies previously judged to be excellent growth companies have subsequently been poor investments. We examine small companies selected by Business Week on the basis of multiple criteria used in annual articles featuring highly rated growth companies. We study the investment performance over the three years before eleven annual Business Week publications and the three years after publication. We find positive excess returns in the pre‐publication period, but negative excess returns in the post‐publication period. This reversal in investment performance appears to be due to a mean‐reversion tendency in operating performance, in which the earnings and the past rates of return on capital of such companies subsequently decrease significantly.     

Following the money: The globalization of capital flows and private equity

Global capital flows have long been the domain of the developed nations. The emerging markets, at best, have been nominal players. Today, the tables have begun to turn. The developing nations have become bigger players as global growth increasingly shifts toward the Middle East, Asia, Central Europe, and Latin America. Accordingly, global capital flows are slowly being reconfigured; in the future, flows will increasingly take the form of north‐south movements, or flows between the developed and developing nations. They will also become south‐south in nature, as well as south‐north. Private equity, long driven by U.S. players, will become less U.S.‐centric in the future. © 2008 Wiley Periodicals, Inc.