Firm size and export performance

Economic analysis based on the Theory of the Firm shows that the exporting firm can be conceptualized as a discriminating monopolist, facing several demand curves. The analysis shows that under these conditions, and assuming certainty, the larger the firm, the higher the ratio of exports to total sales.When uncertainty is introduced into the model, the conclusion regarding the relationship between size and the ratio of exports to sales is reinforced. Large firms can afford to assume more risks than small ones; in addition, their risks from foreign operations are less than those of small firms because the large firms benefit from economies of scale in foreign marketing. Consequently, the risk premium demanded by large firms from foreign marketing is less than the premium insisted upon by small firms. Large firms therefore tend to export a higher share of their output. These theoretical constructs are confirmed by empirical analysis performed on a sample of several hundred firms from six industries in Denmark, Holland and Israel. The figures confirm, with few exceptions, that the size of firms is indeed positively correlated with the ratio of exports to sales.The normative conclusion which can be drawn from the above is that economic policy-makers who wish to increase the export potential of industrial firms, should adopt policies which will encourage large firms to come into being through mergers, take-overs or simply fast growth.     

Quantity and price controls by the firm under demand uncertainty and welfare implications

A monopoly facing an uncertain demand can affect its profit distribution through the choice of ex ante controls. This paper compares two modes of behavior - price-setting and quantity-setting - in the context of a mean-variance model. The main results are: (a) With nonlinear cost, the monopoly will not be indifferent between the two modes. In the particular case of quadratic cost, conditions for the dominance of price-setting over quantity-setting behavior are derived. (b) Whereas it is well-known that the risk averse, quantity-setting monopoly will produce less under uncertainty than under certainty (or risk neutrality), the price-setting monopoly increases its expected output when faced by uncertain demand, possibly exceeding even the competitive output under uncertainty. (c) Using expected social surplus as a welfare criterion, price-setting emerges as the welfare-dominant behavior when there is a conflict between the privately and the socially preferred modes. (d) Finally, there exist conditions where price-setting monopolies welfare-dominate a competitive industry facing the same random demand.     

How important is appearance? Consumer preferences for mandarins in Indonesia

The purpose of this research was to determine consumer preferences for attributes of mandarins in Indonesia, in particular the preferences between domestic and imported mandarins. A focus group was conducted to identify some salient attributes of mandarins to Indonesian consumers. Intrinsic fruit attributes that are important to consumers include the appearance, taste, texture and overall quality of fruit segments and skin colour. Based on the results of the focus group, a survey questionnaire was developed and used in the interview process with the consumers. Evaluations were made on a seven‐point intensity scale for two domestic lines of mandarins and one imported line. Respondents did not know the origins of the fruit when evaluating the intrinsic qualities of mandarins. The results from 113 respondents in the city of Surabaya showed that domestic mandarins were rated higher on all intrinsic attributes. Imported mandarins were rated the best only on skin colour as domestic fruit are normally green or only partially orange when ripe. The fact that imported mandarins continue to command premium prices in the Indonesian market is an interesting phenomenon. Two possible explanations are suggested. The prestige of supermarket retailers (where imported produce is mostly sold) may advantage imported fruits. Alternatively, consumers may hold persistently favourable perceptions of imported fruits. Whether this represents the influence of subjective psychological and status factors requires further investigation.     

A method for reducing inter-departure time variability in serial production lines

The inter-departure time variability is an important measure in production lines. Higher variability means added work-in-process and less predictability in output. It can be a primary obstacle towards achieving on-time delivery. The effects of line parameters (e.g., line length or buffer capacity) on inter-departure time variability have been studied in recent years but no method has been proposed for its reduction. In this paper, such a strategy is proposed and studied via simulation. Results indicate that significant reductions (of more than 20%) in inter-departure time variability can be achieved for as little as 0.5% increase in the mean inter-departure time or without any increase at all, for a majority of the line parameter values experimented. This was found to be the case for symmetrical (uniform) processing time distributions as well as for asymmetrical skewed (exponential) distributions. Similar results have also been obtained in the application of the proposed strategy for the case when one station has a higher variance than the others. Therefore, in situations where output predictability is more of a problem than capacity, this strategy constitutes an effective alternative.