Decision Making & Negotiations

We examine the ability of a dynamic asset-pricing model to explain the returns on G7-country stock market indices. We extend Campbell's (1996) asset-pricing model to investigate international equity returns. We also utilize and evaluate recent evidence on the predictability of stock returns. We find some evidence for the role of hedging demands in explaining stock returns and compare the predictions of the dynamic model to those from the static CAPM. Both models fail in their predictions of average returns on portfolios of high book-to-market stocks across countries.

This paper deals with Markov decision processes with a countable state space. We demonstrate that a single, relatively simple condition suffices to guarantee that the value-iteration method converges and that an optimal policy can be computed via this method, once the existence of a solution to the average cost optimality equation has been established via any of the many available sets of existence conditions.

Marketers all over the world agree that the Internet will have a major impact on the way firms do business. What changes will exactly occur, however, is hard to predict as the Internet is in a phase of rapid growth and constant change. Patterns are difficult to isolate, especially since despite its explosive growth, today, the Net is still in its infancy, only being available to a small proportion of people. In spite of this general lack of reliable patterns, one consensus among managers seems to be that the Internet is likely to intensify price competition.

Previous research has shown that wages in industries characterized by higher rates of technological change are higher. In addition, there is evidence that skill-biased technological change is responsible for the dramatic increase in the earnings of more educated workers relative to less educated workers that took place during the 1980s.

Conventional wisdom and decades of psychological research have linked the provision of choice to increased levels of intrinsic motivation, greater persistence, better performance, and higher satisfaction. This investigation examined the relevance and limitations of these findings for cultures in which individuals possess more interdependent models of the self. In two studies, personal choice generally enhanced motivation more for American independent, than for Asian interdependent selves.

This article examines the time between product development and market launch, and its relation to the subsequent diffusion of consumer durables. We find that this "incubation time" is long. Further, it is a useful predictor of the shape of the subsequent sales diffusion curve. Using the Bass model as a base, we find that the longer the incubation time, the lower the coefficient of innovation (p) and the longer the time to peak sales. Further, using the incubation time in a Bayesian forecasting model significantly improves forecasts early in the life cycle.

This international best-selling book explores the revolution in marketing that focuses on the experiences of customers. Moving beyond the traditional "features-and-benefits" marketing that was developed by marketing scientists for the industrial age, Schmitt presents a revolutionary approach for the branding and information age. Schmitt shows how managers can create experiences for their customers through sensory, affective and creative associations as well as lifestyle and social identity campaigns.

We provide a simple binomial framework to value American-style derivatives subject to trading restrictions. The optimal investment of liquid wealth is solved simultaneously with the early exercise decision of the nontraded derivative. No-short-sales constraints on the underlying asset manifest themselves in the form of an implicit dividend yield in the risk-neutralized process for the underlying asset. One consequence is that American call options may be optimally exercised prior to maturity even when the underlying asset pays no dividends.