Economics Insights @ CBS

We consider a general class of network revenue management problems, where mean demand at each point in time is determined by a vector of prices, and the objective is to dynamically adjust these prices so as to maximize expected revenues over a finite sales horizon. A salient feature of our problem is that the decision maker can only observe realized demand over time, but does not know the underlying demand function which maps prices into instantaneous demand rate.

An fMRI study was conducted with unfamiliar and familiar (strong and weak) brands to assess linguistic encoding and retrieval processes, and the use of declarative and experiential information, in brand evaluations. As expected, activations in brain areas associated with linguistic encoding were higher for unfamiliar brands, but activations in brain areas associated with information retrieval were higher for strong brands. Interestingly, weak brands were engaged simultaneously in both processes.

This paper argues that there is a Coasean Bargain available to banks, Long-term Investors, and Bank Regulators around a particular form of "Contingent Capital." By purchasing rights to issue equity in crisis events at a pre-specified price from Long-term Investors, banks can ensure that they will have sufficient regulatory capital available when they need it most: in a crisis. By selling these rights (effectively, a form of crisis insurance) long-term investors can monetize their counter-cyclical investments strategies in banks and, thus, obtain an adequate return as long-term investors.