Columbia Business School Research

It is common to apply multipliers to both earnings and book value to calculate approximate equity values. However, applying a price-earnings multiplier or a price-to-book multiplier typically produces two valuations and the analyst is left with the question of how to combine them into one valuation. This paper calculates weights that combine the valuations and shows that these weights vary over the difference between earnings and book value, doing so systematically over time.

Bid-prices are becoming an increasingly popular method for controlling the sale of inventory in revenue management applications. In this form of control, threshold—or "bid"—prices are set for the resources or units of inventory (seats on flight legs, hotel rooms on specific dates, etc.) and a product (a seat in a fare class on an itinerary or room for a sequence of dates) is sold only if the offered fare exceeds the sum of the threshold prices of all the resources needed to supply the product.

This article investigates the performance of real estate auctions relative to negotiated sales. It uses a repeat-sales methodology to control for unobserved differences in the quality of auction properties. Properties auctioned in Los Angeles during the 1980s boom sold at an estimated discount of 0%-9%, while sales in Dallas following the oil bust obtained discounts of 9%-21%.

The accelerated pace of technological change has led to rapid obsolescence of productive capacity in electronics and other industries. Managers must consider the impact of future technologies while making acquisition and replacement decisions in such environments. We consider a problem where a sequence of technological breakthroughs are anticipated but their magnitude and timing are uncertain. A firm, operating in such an environment, must decide how much capacity of the current technology to acquire to meet future demand growth.

It is common to apply multipliers to both earnings and book value to calculate approximate equity values. However, applying a price-earnings multiplier or a price-to-book multiplier typically produces two valuations and the analyst is left with the question of how to combine them into one valuation. This paper calculates weights that combine the valuations and shows that these weights vary over the difference between earnings and book value, doing so systematically over time.

In this article, we argue that the time has come to begin to integrate the Coasian view of the firm--which is concerned with the interactions between ownermanagers--and the Bede and Means perspective--which emphasizes the separation of ownership and control in most corporations.

A commentary on Barbara E. Kahn's article, Dynamic Relationships with Customers: High-Variety Strategies, published in the winter 1998 issue of Journal of the Academy of Marketing Sciences is provided. The purpose is to question Kahn's assumptions and hence to suggest some implications for research.

In this paper we address periodic base-stock policies for stochastic economic lot scheduling problems. These represent manufacturing settings in which multiple items compete for the availability of a common capacity source, in the presence of setup times and/or costs, incurred when switching between items, and in the presence of uncertainty regarding demand patterns, production, and setup times. Under periodic base-stock policies, items are produced according to a given periodic item-sequence.

Arya, Glover, and Sunder (AGS) contribute to the earnings management literature along two dimenstion. First, they classify existing explanations for earnings manipulation, based on the assumption of the revelation principle that is violated. Second, they introduce a model where allowing a manager to manipulate earnings serves as a commitment device. They show that both the owners and the manager can benefit from earnings management (a Pareto improvement). My discussion first deals with the general phenomenon of earnings management and then with the specifics of the AGS model.

The effects of tax reform on corporate financial decisions help determine whether reform will increase capital formation and simplify the tax system. This paper describes the effects of fundamental tax reform on corporate tax planning and summarizes economists' knowledge of the magnitude of these effects. We analyze both income tax reform, consisting of integrating the corporate and personal income taxes, and moving to a broad-based consumption tax. As prototypes of reform, we use the U.S.

This paper studies the trade-off between inventory levels and the delivery leadtime offered to customers in achieving a target level of service. It addresses the question of how much a delivery leadtime can be reduced, per unit increase of inventory, at a fixed fill rate. We show that for a class of assemble-to-order models with stochastic demands and production intervals there is a simple linear trade-off between inventory and delivery leadtime, in a limiting sense, at high fill rates.

We determine the minimum cost of super-replicating a nonnegative contingent claim when there are convex constraints on portfolio weights. We show that the optimal cost with constraints is equal to the price of a related claim without constraints. The related claim is a dominating claim, that is, a claim whose payoffs are increased in an appropriate way relative to the original claim. The results hold for a variety of options, including some path-dependent options.

We consider a distribution system consisting of a single warehouse and many geographically dispersed retailers. Each retailer faces demands for a single item which arise a deterministic, retailer specific rate. The retailers' stock is replenished by a fleet of vehicles of limited capacity, departing and returning to the warehouse and combining deliveries into efficient routes. The cost of any given route consists of a fixed component and a component which is proportional with the total distance driven. Inventory costs are proportional with the stock levels.

Past research has found that when people imagine how an outcome might have turned out differently, their "if only" thoughts consistently focus on particular types of antecedent conditions. The authors propose that one principle people follow is to focus on an antecedent that fails to correspond in magnitude to the imagined counterfactual outcome. Specifically, they propose that people focus on such antecedents and change them in the direction of increasing correspondence to the imagined counterfactual outcome.

This article proposes a method that overcomes a number of problems associated with new product diffusion models noted in the marketing literature. We illustrate the methodology in the context of better understanding global variances in new product adoption. Building on existing diffusion models and sample matching principles from international consumer research, we suggest a "staged estimation procedure." The procedure provides both sensible and robust estimates and remains usable even if the diffusion process is in its earliest stage in most or all countries.

Since technological change influences the rate at which human capital obsolesces and also increases the uncertainty associated with human capital investments, training may increase or decrease at higher rates of technological change. Using the National Longitudinal Survey of Youth, we find that production workers in manufacturing industries with higher rates of technological change are more likely to receive formal company training.

The current research investigates two factors that might moderate the effects of competitive demands and biased fairness perceptions on conflict resolution: the relationship between the negotiators and perspective taking. In an experiment, we found that negotiators in a positive relationship were more self-serving in aspirations and fairness judgments than negotiators in a negative relationship.

Marketers are making increasing use of very brief messages that mention just a brand name or a brand name with a short headline, as in event sponsorship and program endorsements. There has been debate over the effectiveness of these "advertising fragments." This paper introduces an approach for controlled testing of the effects of advertising fragments. Using a reaction-time based procedure, we show that a key effect of advertising fragments is to revive established brand associations, even though these associations are not explicitly communicated.

Effective communication requires that consumers attribute the message content to its intended source. The proposed framework distinguishes four types of source identification processes-cued retrieval, memory-trace refreshment, schematic inferencing, and pure guessing-and delineates their contingencies. Two experiments examine portions of the framework, and experiment 2 introduces a new methodology for decomposing multiple processes. Findings suggest that when cued retrieval fails, consumers try to refresh the original memory trace for the learning episode-a process that is effortful.

US cities capture public benefits from private developers under several bargaining frameworks: exactions, incentive zoning and public-private developments. These frameworks exist along a continuum of policy-intervention strategies, from passive regulation to active development, from a quid pro quo to incentive to investment policy posture. Each strategy defines a public position, structure and process for negotiation and parameters for the bargaining process.

This paper develops a model of the breakup or unification of nations. In each nation the decision to separate is taken by majority voting. A basic trade-off between the efficiency gains of unification and the costs in terms of loss of control on political decisions is highlighted. The model emphasizes political conflicts over redistribution policies.

A guiding principle in the efficient estimation of rare-event probabilities by Monte Carlo is that importance sampling based on the change of measure suggested by a large deviations analysis can reduce variance by many orders of magnitude. In a variety of settings, this approach has led to estimators that are optimal in an asymptotic sense. We give examples, however, in which importance sampling estimators based on a large deviations change of measure have provably poor performance.

We present simple adverse selection model in which a firm finds it advantageous to insure against bad outcomes and thereby improve its credit quality and reduce its cost of capital.

We define sources of heterogeneity in consumer utility functions related to individual differences in response tendencies, drivers of utility, form of the consumer utility function, perceptions of attributes, state dependencies, and stochasticity. A variety of alternative modeling approaches are reviewed that accommodate subsets of these various sources including clusterwise regression, latent structure models, compound distributions, random coefficients models, etc. We conclude by defining a number of promising research areas in this field.