The decline of the traditional travel agent model

This article analyzes the struggle between traditional travel agencies and airlines to gain control of the Spanish airline services market. Also analyzed is the strong emergence of a third player, online travel portals that act as online travel agencies. We use a multinomial logit model to study the influence of 27 socio-economic factors and trip attributes on passenger purchase channel choice. The results show that the profile of a passenger who has a greater likelihood of making his/her bookings online is that of a young person, a student or educated to a high level, a habitual traveler, booking a simple journey and using an LCC. The factors linked to an increased likelihood of making purchases by phone include: being male, middle-aged, on a business or short trip, and the passengers usually use a travel agency. Finally, passengers who are over 65 years of age, with a lower academic level, who use a travel agency and are going to make a more complicated journey, are more likely to purchase their tickets in-store.     

Valuing American-style options under the CEV model: an integral representation based method

Review of Derivatives Research - This article derives a new integral representation of the early exercise boundary for valuing American-style options under the constant elasticity of variance (CEV)...     

How Companies Can Use Hedging to Create Shareholder Value

This article provides a framework for designing and evaluating corporate risk management and hedging programs. Corporate risk management has the potential to create substantial shareholder wealth by protecting companies from unexpected events that could force them to put their strategic investment plans on hold or even endanger their existence. However, assessing the performance of risk management, and how it is expected to increase the value of the enterprise, is a difficult undertaking because the costs of risk management tend to be much easier to quantify—indeed, they often appear directly on the firm's bottom line—than the benefits. The author begins by discussing how to evaluate the benefits and costs of a risk management program in general terms, and then focuses more directly on the assessment of corporate hedging programs, which are generally conducted with derivatives. In practice, there are many obstacles to designing and carrying out a successful hedging program. But one of the most common has been the tendency of top managements to insist that hedging programs be “costless.” The author argues that just as the purchase of fire insurance is not viewed as waste of funds or a bad investment if the insured house does not burn down, the use of derivatives in a well‐designed hedge should not be viewed as a mistake if the derivative position produces losses. To guard against this mistake, the people who design and implement risk management strategies must ensure that their CEOs and boards understand the possible outcomes of the strategy—including losses on derivatives position—and how the strategy itself increases the (expected) value of the firm. Further, management should attempt to communicate the principles underlying its risk management program and the value created by its hedging strategy to the investment community.     

Symmetry and Bates’ rule in Ornstein–Uhlenbeck stochastic volatility models

We find necessary and sufficient conditions for the market symmetry property, introduced by Fajardo and Mordecki (Quant Finance 6(3):219–227, 2006), to hold in the Ornstein–Uhlenbeck stochastic volatility model, henceforth OU–SV. In particular, we address the non-Gaussian OU–SV model proposed by Barndorff-Nielsen and Shephard (J R Stat Soc B 63(Part 2):167–241, 2001). Also, we prove the Bates’ rule for these models.     

Measuring scale effects in the allocative profit efficiency

This paper provides an approach to the measurement of the “scale effects” in the allocative profit efficiency. To be specific, we evaluate the improvements of profit that can be accomplished by means of a change in the scale size, once technical efficiency is achieved. New decompositions of the allocative efficiency into a scale effect component and the corresponding residual mix effect component are derived.     

Collective bargaining under perfect information. The negotiation of national agreements

We structurally estimate a perfect information bargaining model of collective negotiations using data on national agreements for Spain. The model is a stochastic model of sequential bargaining in which we allow for the possibility of negotiations ending without agreement, a common feature in the data. Delays in equilibrium are the result of uncertainty about the surplus to be divided among the players and not of information asymmetries. The model fits the data well regardless of the limitations imposed by the parametric specification adopted. Our results show that agents are patient and that the advantage from proposing is large.JEL Classification: J50, C73, C78We thank Fabian Marquez, Sergio Santillan and Jose Maria Zufiaur for helping us to create the data base on Spanish National Agreements. We also thank Cesar Alonso, Juanjo Dolado, Gautam Gowrisankaran, Maia Guell, Antonio Merlo and participants at the 1999 European Meeting of the Econometric Society for very helpful comments. Jose E. Galdon thanks financial support from the following institutions: European Commission for a TMR Marie Curie Fellowship, Spanish Ministerio de Ciencia y Tecnologia for project BEC2002-00954 and Spanish Ministerio de Educacion, Cultura y Deporte for project PR2004-0057. He also thanks the hospitality of STICERD (LSE) and the IR Section (Princeton University) where part of this work was completed. The usual disclaimers apply.     

A metafrontier directional distance function approach to assessing eco-efficiency

This paper uses directional distance functions to extend the non-parametric metafrontier approach to efficiency measurement proposed by O’Donnell et al. (Empir Econ 34:231–255, 2008) to the assessment of technological differences in eco-efficiency between groups of producers. Furthermore, eco-efficiency is assessed at the level of specific environmental pressure management. This methodology is applied to a sample of Spanish olive producers that belong to both traditional mountain and traditional plain growing systems. We find great potential for both olive growing systems to reduce environmental pressures. In terms of pressures on natural resources, the most eco-efficient technology is the traditional plain system, while the traditional mountain system is the most eco-efficient when considering pressures on biodiversity. These results might help policymakers design strategies to improve the performance of olive growing and meet the demands of society regarding the economic and ecological functions of this farming activity.