Columbia Business School Research

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.

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 paper extends the classic two-armed bandit problem to a many-agent setting in which N players each face the same experimentation problem. The main change from the single-agent problem is that an agent can now learn from the current experimentation of other agents. Information is therefore a public good, and a free-rider problem in experimentation naturally arises.

This paper addresses the simultaneous determination of pricing and inventory replenishment strategies in the face of demand uncertainty. More specifically, we analyze the following single item, periodic review model. Demands in consecutive periods are independent, but their distributions depend on the item's price in accordance with general stochastic demand functions. The price charged in any given period can be specified dynamically as a function of the state of the system. A replenishment order may be placed at the beginning of some or all of the periods. Stockouts are fully backlogged.

This paper develops methods for relating the prices of discrete- and continuous-time versions of path-dependent options sensitive to extremal values of the underlying asset, including lookback, barrier, and hindsight options. The relationships take the form of correction terms that can be interpreted as shifting a barrier, a strike, or an extremal price. These correction terms enable us to use closed-form solutions for continuous option prices to approximate their discrete counterparts.

Different theories, areas of substantive interest, and methods are needed to prevent consumer behavior from becoming increasingly isolated and of marginal relevance in market research. More progress will be made by focusing on relatively underresearched areas, such as: 1. focus on time, 2. the adaptive consumer, and 3. relevant dependent variables. Avenues for substantive focus include: 1. important decisions, 2. not just price and advertising, and 3. the impact of major events. Issues that arise with respect to the methods used to study consumer behavior include: 1.

The authors argue that cultures differ in implicit theories of individuals and groups. North Americans conceive of individual persons as free agents, whereas East Asians conceptualize them as constrained and as less agentic than social collectives. Hence, East Asian perceivers were expected to be more likely than North Americans to focus on and attribute causality to dispositions of collectives. In Study 1 newspaper articles about "rogue trader" scandals were analyzed, and it was found that U.S.

In this paper we develop a residual-income model showing how taxes on dividends affect the relative valuation of retained earnings versus contributed equity, as well as the value of expected future earnings. Tests of predictions from our model for a sample of Compustat firms from 1975-94 suggest that overall firm value, and the relative valuation weights investors assign to retained earnings, contributed equity, and current earnings, all critically depend on dividend taxes.

This paper considers whether stock price elasticity affects corporate financial decisions. Basic economic principles and the existing theoretical literature predict that firms choosing the Dutch auction instead of the fixed price tender offer should be those firms expecting to face greater stock price elasticity.

This paper describes a family of discrete-review policies for scheduling open multiclass queueing networks. Each of the policies in the family is derived from what we call a dynamic reward function: such a function associates with each queue length vector q and each job class k a positive value r_k(q), which is treated as a reward rate for time devoted to processing class k jobs. Assuming that each station has a traffic intensity parameter less than one, all policies in the family considered are shown to be stable.

We analyze a general model of dynamic vehicle dispatching systems in which congestion is the primary measure of performance. In the model, a finite collection of tours are dynamically dispatched to deliver loads that arrive randomly over time. A load waits in queue until it is assigned to a tour. This representation, which is analogous to classical set-covering models, can be used to study a variety of dynamic routing and load consolidation problems.

The paper provides early evidence on the informativeness of commodity price risk measures required by the Securities and Exchange Commission's new market risk disclosure rules (SEC 1997). I use existing disclosures of oil and gas producers (O&G) to obtain proxies for the tabular and sensitivity analysis disclosures required by the new SEC rules. I find that proxies for the tabular and the sensitivity analysis format are significantly associated with O&G firms' stock return sensitivities to oil and gas price movements.

This paper develops methods for fast estimation of option price sensitivities in Monte Carlo simulation of term structure models. The models considered are based on discretely compounded forward rates with proportional volatilities. The efficient estimation of option deltas, gammas, and vegas are investigated in this setting.

The bottleneck in a production-inventory network is commonly taken to be the facility that most limits flow through the network and thus the most highly utilized facility. A further connotation of "bottleneck," however, is the facility that most constrains system-wide performance or the facility at which additional resources would have the greatest impact.

The following two articles, "Market Transparency: Who Wins and Who Loses?" by Robert Bloomfield and Maureen O'Hara and "Quote Disclosure and Price Discovery in Multipele Dealer FInancial Markets" by Mark D. Flood, Ronald Huisman, Kees G. Koedijk, and Ronald J. Mahieu are the first two experimental microstructure articles that the Review of Financial Studies (RFS) has published. We, the editors of the RFS, hope that they are not the last. Therefore I take the unconventional step of introducing the two articles.

This article analyzes how Knowledge Management (KM) is likely to affect competition in the management consulting industry. KM represents a fundamental and qualitative change in this industry's basic production technology. Because management consultants acquire information directly from their customers, for these firms, KM technology exhibits increasing returns to scale. As such, although KM clearly represents an opportunity for some consultants to build a sustainable competitive advantage, it is likely to lead to a shake-out.

To understand why e-mail negotiations break down, we investigated two distinct elements of negotiators' relationships with each other: shared membership in a social group and mutual self-disclosure. In an experiment, some participants negotiated with a member of an outgroup (a student at a competitor university), whereas others negotiated with a member of an ingroup (a student at the same university). In addition, some negotiators exchanged personal information with their counterparts, whereas others did not.

We analyze the performance of a splitting technique for the estimation of rare event probabilities by simulation. A straightforward estimator of the probability of an event evaluates the proportion of simulated paths on which the event occurs. If the event is rare, even a large number of paths may produce little information about its probability using this approach. The method we study reinforces promising paths at intermediate thresholds by splitting them into subpaths which then evolve independently.

This paper studies an incomplete contracting model to compare the effectiveness of alternative transfer pricing mechanisms. Transfer pricing serves the dual purpose of guiding intracompany transfers and providing incentives for upfront investments at the divisional level. When transfer prices are determined through negotiation, divisional managers will have insufficient investment incentives due to "hold-up" problems. While cost-based transfer pricing can avoid such "hold-ups", it does suffer from distortions in intracompany transfers.

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.

Consider a category of product variants distinguished by some attribute such as color or flavor. A retailer must construct an assortment for the category, i.e., select a subset variants to stock and determine purchase quantities for each offered variant. We analyze this problem using a multinomial logit model to describe the consumer choice process and a newsboy model to represent the retailer's inventory cost. We show that the optimal assortment has a simple structure and provide insights on how various factors affect the optimal level of assortment variety.

Contemporary management theories such as Just-in-Time and Total Quality Management emphasize variance reduction as a critical step in improving system performance. But little is said about how such efforts should be directed. Suppose a manager has only limited resources for variance reduction efforts. How should she allocate them among a set of competing activities? Which activity should receive highest priority?

We propose that face-to-face contact fosters the development of rapport and thereby helps negotiators coordinate on mutually beneficial settlements in mixed-motive conflicts. Specifically, we investigate whether, in a cooperative climate, negotiators' visual access to each other's nonverbal behavior fosters a dyadic state of rapport that facilitates mutual cooperation. Experiment 1 manipulated whether negotiators stood face-to-face or side-by-side (unable to see each other) in a simulated strike negotiation.

Among the factors contributing to the inability of environmental and economic interest groups to resolve conflicts are the processes of social perception and social decision making. This article identifies social psychological dynamics that cause opposing parties to misunderstand each other's interests and the facts presented to support them, thus hindering efficient conflict settlement. The authors review research elucidating the sources of these problems and potential remedies.

Consumers make multi-category decisions in a variety of contexts such as choice of multiple categories during a shopping trip. While complementarity gives managers some control over consumers' buying behavior, co-occurrence or co-incidence is less controllable. Other acts that may affect multi-category choice may be household preferences or household demographics. Not accounting for these 3 factors simultaneously could lead to erroneous inferences.

Creative ideation is a highly complex process, which is difficult to formalize and control. Evidently, even in a complex thinking context certain patterns of creativity may emerge. Relying on such observed patterns may help in "organizing" the creative process by promoting routes that have been proven to lead to productive ideas and avoiding those that do not.

We describe effective time partitioning heuristics for dynamic lot-sizing problems in multiitem and multilocation production/distribution systems. In a time-partitioning heuristic, the complete horizon of (say) N periods, is partitioned into smaller intervals. An instance of the problem is solved, to optimality, on each of these intervals, and the resulting solution coalesced into a solution for the complete horizon. The intervals are selected to be of a size which permits the use of exact and effective solution methods (e.g., branch-and-bound methods).

The author argues that trade liberalization must be balanced in agenda, process and outcomes, including not only sectors in which developed countries have a comparative advantage, like financial services, but also those in which developing countries have a special interest, like agriculture and construction services. Account must be taken of the marked disadvantage that developing countries have in participating meaningfully in negotiations.