Determining fixed crane areas in rail–rail transshipment yards

To enable rapid container transshipment between freight trains in modern rail–rail transshipment yards efficient computerized scheduling procedures are indispensable. This paper proposes a dynamic programming approach, which determines yard areas for gantry cranes, so that the workload is evenly spread among cranes and, thus, train processing is accelerated. In a straightforward simulation of transshipment yard operations, the effect of optimal crane areas vs. equally sized areas is studied, the latter being a common real-world policy. The results indicate a remarkable speed-up of train processing if optimal crane areas are applied.     

The principal-agent problem with smooth ambiguity

We study a principal-agent model in which the (effort-dependent) realisation of output levels is ambiguous, and the agent is ambiguity averse (while the principal is ambiguity neutral). We show that introducing ambiguity aversion will lower profits if the action that the principal wants to implement is the most ambiguous one, while they may increase otherwise. Regarding the design of the optimal contract, we show that under ambiguity aversion the optimal incentive scheme may not be monotone even if a natural generalization of the monotone likelihood ratio property is satisfied, and illustrate how this fact could affect the design of contracts in an applied economic context. We also find that the individual rationality constraint need not bind in the presence of ambiguity aversion unless preferences satisfy constant absolute ambiguity aversion.     

Estimating the basis risk of index-linked hedging strategies using multivariate extreme value theory

This paper studies the empirical quantification of basis risk in the context of index-linked hedging strategies. Basis risk refers to the risk of non-payment of the index-linked instrument, given that the hedger’s loss exceeds some critical level. The quantification of such risk measures from empirical data can be done in various ways and requires special consideration of the dependence structure between the index and the company’s losses as well as the estimation of the tails of a distribution. In this context, previous literature shows that extreme value theory can be superior to traditional methods with respect to estimating quantile risk measures such as the value at risk. Thus, the aim of this paper is to conduct an empirical analysis of basis risk using multivariate extreme value theory and extreme value copulas to estimate the underlying risk processes and their dependence structure in order to obtain a more adequate picture of basis risk associated with index-linked hedging strategies. Our results emphasize that the application of extreme value theory leads to better fits of the tails of the marginal distributions in the considered stock price sample and that traditional methods in regard to estimating marginal distributions tend to overestimate basis risk, while basis risk can in contrast be higher when taking into account extreme value copulas.     

The effect of ambiguity aversion on reward scheme choice

We test the implications of ambiguity aversion in a principal–agent problem with multiple agents. Models of ambiguity aversion suggest that, under ambiguity, comparative compensation schemes may become more attractive than independent wage contracts. We test this by presenting agents with a choice between comparative reward schemes and independent contracts, which are designed such that under uncertainty about output distributions (that is, under ambiguity), ambiguity averse agents should typically prefer comparative reward schemes, independent of their degree of risk aversion. We indeed find that the share of agents who choose the comparative scheme is higher under ambiguity.     

Risk management using index-linked catastrophic loss instruments

One way for insurance companies to ensure against high losses due to catastrophic events is the purchase of index-based catastrophic loss instruments. The payoff of these instruments is strongly related to the development of an index, which implies that the degree and type of dependence between the insurer’s losses and the index is crucial for their hedging effectiveness. In addition, management strategies on the asset side play an important role for risk management. In this paper, effects of investment decisions and index-based risk transfer instruments on an insurer’s solvency capital requirements are investigated with special focus on the impact of the degree and type of dependence between relevant processes.     

Can Socialism Use Markets?

In Economic Affairs, January-March 1985, the Editor invited socialist writers of varying kinds to debate the extent to which markets are workable under socialism or capitalism. Two British commentators - the Political Editor of the New Statesman, and a Fellow of Ruskin College, Oxford - and the President of the Hungarian Economics Association discuss the compatibility of choice in the market with state.     

Human resource management standardisation and adaptation in franchises

Franchising is synonymous with standardisation and control, to achieve system-wide efficiencies and consistency in the brand image. Scholarly literature on human resource management (HRM) in this context has, to date, been relatively one-dimensional, discussing standardisation of HRM from the franchisor’s perspective with insufficient consideration of the role and experiences of franchisees. This article seeks to extend the concept of core and peripheral franchising components to HRM activities, presenting findings from a three-case study of Australian coffee franchises. The findings suggest reframing HRM in franchises as two separate but potentially overlapping systems managed by franchisor and franchisee, with core and peripheral elements that may or may not align. Subsequent outcomes of misalignment for the franchise relationship are considered, and resulting franchisee HRM behaviours are illustrated in a Franchisee HRM Response Matrix.     

Decaf or double shot? The strength of franchisor control over HRM in coffee franchises

The franchise relationship presents a unique composition of autonomy and control. Franchisee autonomy is located somewhere between employed managers and independent business owners, while the franchisor regulates core processes such as marketing and product development. While heavy franchisor control over certain functions is customary and in fact integral to the franchise model, the delineation of HRM responsibilities in the franchise relationship is less clear. Using qualitative data from three Australian coffee chains, we examine the role of the corporate HR and the degree to which HRM activities are centralised, and develop a typology of franchisor HRM control. We find substantial variation between cases and demonstrate that it is the franchisor's strategic decision to prioritise brand protection or liability avoidance that ultimately determines whether their control over HRM can be described as ‘decaf’ weak or ‘double shot’ strength.