Strategy

Airlines typically claim that air traffic delays are due to such adverse factors as weather or airport congestion. Although such factors are predictable on average, airlines often fail to account for them in setting schedules. Using data on nearly 67 million flights between 1988 and 2000, we show that airlines schedule flight times well below expected travel time. Although much of the variation in travel time across seasons or years is due to deviations in average push-back delays—aircraft leaving their gates late—airlines do not account for push-back delays in setting their schedules.

Interest rate swap pricing theory traditionally views swaps as portfolios of forward contracts with net swap payments discounted using the LIBOR curve. Current market practices of marking-to-market and collateralization question this view. Collateralization and marking-to-market affects discounting of swap payments (through altered default characteristics) and introduces intermediate cash-flows. This paper provides a theory of swap valuation under collateralization and we find evidence supporting the presence of costly collateral.

This research focuses on the diffusion patterns of the adjacent generations of technology and its relation to the time that elapses between them (intergeneration time). The authors analyze 45 new technologies in 15 industries and find that the adoption curves systematically vary across generations from 2 years for dynamic random-access memory (DRAM) chips to more than 30 years for steelmaking. The longer the intergeneration time, the slower the adoption of the subsequent technology.

The chapter has two main sections. The first one describes various violations of the Law of One Price. The section that follow it considers a related, but very different and fundamental issue: Why do people trade?

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Previous research, assuming linear pricing, has argued that telecommunications networks may use a high access charge as an instrument of collusion. I show that this conclusion is difficult to maintain when operators compete in nonlinear pricing: (i) As long as subscription demand is inelastic, profits can remain independent of the access charge, even when customers are heterogeneous and networks engage in second-degree price discrimination.

We consider a two-echelon distribution system in which a supplier distributes a product to N competing retailers. The demand rate of each retailer depends on all of the retailers' prices, or alternatively, the price each retailer can charge for its product depends on the sales volumes targeted by all of the retailers. The supplier replenishes his inventory through orders (purchases, production runs) from an outside source with ample supply. From there, the goods are transferred to the retailers.

Increasingly, the greatest source of economic value for many companies is a set of intangible assets that, typically, are not reflected on their balance sheets. Whereas for B2C companies these intangible assets are often dominated by brand value, for many B2B companies these assets are a set of relationships with a core group of powerful customers. When these relationships are well-developed and ongoing, they produce sustainable returns to shareholders.

This paper studies dynamic competition in markets characterized by the introduction of technologically advanced next-generation products. Firms invest in new product effort in an attempt to attain industry leadership, thus securing high profits and benefiting from advantages relevant for the success of future product generations. The analysis reveals that when the current leader possesses higher research and development (R&D) competence, it tends to invest more in R&D than rivals and to retain its lead position.