Moral Hazard and Risk Management in Agri‐environmental Policy

This paper develops the key finding of Ozanne, Hogan and Colman (2001) that risk aversion among farmers ameliorates the moral hazard problem in relation to agrienvironmental policy compliance. It is shown that risk averse farmers who face uncertainty in their production income are more likely to comply with such a policy as a means of risk management. In addition, it is shown that a principal who has control over both the level of monitoring and the size of penalty, if detected, can reduce non‐compliance by adjustments to these instruments which increase the variance of farmers' income but leave the expected penalty unchanged. It is concluded that risk management by both principals and agents has the potential to diminish the moral hazard problem, especially given proposed developments in agri‐environmental policy in the European Union.     

Subjective Uncertainty over Behavior Strategies: A Correction

In order to model the subjective uncertainty of a player over the behavior strategies of an opponent, one must consider the player's beliefs about the opponent's play at information sets that the player thinks have probability zero. This corregendum uses “trembles” to provide a definition of the convex hull of a set of behavior strategies. This corrects a definition we gave in [E. Dekel, D. Fudenberg, and D. K. Levine, 1999, J. Econ. Theory89, 165-185], which led to two of the solution concepts we defined there not having the properties we intended. Journal of Economic Literature Classification Numbers: C72, D82, C610.     

Dynamic modelling of pollution abatement in a CGE framework

This paper deals with the specification of pollution abatement in dynamic computable general equilibrium (CGE) models and analyses the dynamic feedback mechanisms between economy and abatement in the context of environmental policy. A Ramsey-type economic model is presented, in which bottom-up technical and economic information on abatement techniques is integrated in a top-down dynamic CGE context. The practical suitability of the specification is illustrated by an empirical application for climate change and acidification in the Netherlands. The results show that a mixture of some slowdown of economic growth, a substantial restructuring of the economy and implementation of most technical abatement measures is optimal.     

Seasonality and Markov switching in an unobserved component time series model

It is generally acknowledged that the growth rate of output, the seasonal pattern, and the business cycle are best estimated simultaneously. To achieve this, we develop an unobserved component time series model for seasonally unadjusted US GDP. Our model incorporates a Markov switching regime to produce periods of expansion and recession, both of which are characterized by different underlying growth rates. Although both growth rates are time-varying, they are assumed to be cointegrated. The analysis is Bayesian, which fully accounts for all sources of uncertainty. Comparison with results from a similar model for seasonally adjusted data indicates that the seasonal adjustment of the data significantly alters several aspects of the full model. First Version Received: January 2001/Final Version Received: February 2002 Send offprint requests to: Rob Luginbuhl?Correspondence to: Rob Luginbuhl     

Decision making for business model development: a process study of effectuation and causation in new technology-based ventures

This study investigates the decision-making logics used by new ventures to develop their business models. In particular, they focussed on the logics of effectuation and causation and how their dynamics shape the development of business models over time. They found that the effectual decision-making logic was used dominantly to generate a viable value proposition for a specific customer segment. Causal logic is then used dominantly to define the other business model components in relation to the value proposition and customer segment. When a shortage of resources emerges, causal logic is replaced by an increase in effectual decision-making again. They concluded that before investing significant resources in a business model it was crucial for firms to reduce, as far as possible, technological and market uncertainty through effectual strategies to avoid high re-configuration costs later.     

Improving retirement adequacy through asset class prioritization

Highly risk-averse retirees are generally advised to adopt a fixed spending strategy such as the 4% withdrawal rule. To prevent the premature depletion of a retirement portfolio, the rule attempts to proxy as the ‘safe withdrawal rate’. But a constant withdrawal rate means that retirees accumulate unspent surpluses when markets outperform and face spending shortfalls when markets underperform. While a safe withdrawal rate can prevent spending shortfalls, the opportunity cost of unspent surpluses associated with this strategy can be extreme. We apply a range of basic investment decision rules to a retirement portfolio applying various withdrawal rates and examine the probability of shortfalls over a retirement horizon. Using a block bootstrap simulation technique, we examine decision rules relating to stock and bond investments. Our results show that retirement portfolios with a bias towards stocks coupled with a decision rule that sources withdrawals from bonds and cash before stocks significantly outperforms alternative withdrawal strategies, despite the inherent increase in volatility. This finding is in direct contrast to the safe withdrawal rate conventions used in contemporary financial advice models.     

New development: Information for localism? Policy sense-making for local governance

Recent policy changes in the UK emphasising localism, as opposed to centrally-driven performance management, have potentially significant implications for the use of information in local policy-shaping. This article explores the challenges that this implies for framing the problem and in terms of the current and future uses of information for local governance.     

Relative importance and combined effects of attributes on customer satisfaction

Customer satisfaction with a service experience is often determined by several critical attributes. Prior studies have suggested that food, physical environment, and employee service impose an important effect on diners' satisfaction with restaurant services. Although much research has looked at the direct effect of these attributes individually, little is known about them when they are considered together. This study investigates the relative importance and combined effects of the determinants of customer satisfaction in China's hospitality industry. The results show that food taste, employee service, and physical environment (in that order) all significantly contribute to diners' satisfaction, and that one attribute may substitute for another attribute in the satisfaction formation process. Generally, humanic attributes (employee service) can effectively substitute for less humanic attributes (physical environment).     

Franchisor Insolvency in Australia: Profiles,Factors, and Impacts

Franchisor failure is enduring and important in terms of cost, nationally and internationally. This article presents research into Australian franchisor firms that went into a form of bankruptcy protection known in Australia as “voluntary administration.” The research was driven by the commonality and divergence of the interests of franchisors and franchisees. The article provides an insight into franchisor failure and its effect on franchisees. It presents the substantial literature survey that was used to frame questions for franchisor administrators to understand issues associated with franchisors in administration. The limited data demonstrate diversity in the treatment of franchisees during the franchisor's administration. In Australia, franchisees remain a captive, financially committed counterparty during insolvency and potentially deliver a great financial benefit to the franchisor's creditors. The article concludes that administration of franchisors does not take into account the distinct relationship between franchisors and their franchisees and provides policy recommendations to address this matter.