Columbia Business School Research

The article presents a study using the Euler equation for capital accumulation by individual business firms. First, authors' use an estimation strategy based on the Euler equation representation of firms' investment decisions. This strategy reflects reservations with standard investment models based on the q theory with adjustment costs. In particular, there are well-known problems in measuring marginal q, as well as concerns that observed stock market valuations may not accord with the predictions of the efficient markets hypothesis.

We empirically explore the accuracy of the simple stationary peak hour approximation (SPHA) for estimating peak hour performance in multiserver queuing systems with exponential service times and periodic (sinusoidal) Poisson arrival processes. We show that the SPHA is very good for a range of parameter values corresponding to a reasonably broad spectrum of real systems. However, we do find and document that there are many situation in which this approximation will be very inaccurate.

The authors describe a model of the effects of advertised and observed quality on consumer expectations about new product quality. They test the model using data from two computer-controlled shopping experiments. In both studies, quadratic and gamma specifications for the effect of advertising claim discrepancy on expectation change fit better than a linear model. Furthermore, the adaptive expectations framework describes the updating of consumer expectations when the consumer observes the quality of the new product.

In most dynamic planning problems, one observes that an optimal decision at any given stage depends on limited information, i.e. information pertaining to a limited set of adjacent or nearby stages. This holds in particular for planning problems over time, where an optimal decision in a given period depends on information related to a limited future time horizon, a so-called forecast horizon, only. In this paper we identify a general class of dynamic programs in which an efficient forward algorithm can be designed to solve the problem and to identify minimal forecast horizons.

We consider limits of first passage times to indexed families of nested sets in regenerative processes. The sets are exponentially rare, in the sense that the probability that the process reaches an indexed set in a cycle vanishes exponentially fast in the indexing parameter. Under appropriate formulations of this hypothesis, we prove strong laws, iterated logarithm laws and limits in distribution, both for the index of the rarest set reached in a cycle and for the time to reach a set.

Bundling of products is very prevalent in the marketplace. For example, travel packages include airfare, lodging, and a rental car. Considerable economic research has focused on the change in profits and consumer surplus that ensues if bundles are offered. There is relatively little research in marketing that deals with bundling, however. In this article we concentrate on some tactical issues of bundling, such as which types of products should be bundled, what price one can charge for the bundle, and how the price of the bundle should be presented to consumers to improve purchase intent.

This paper seeks to establish a parametric linkage between fuzzy set theoretic techniques and commonly used preference formation rules in psychology and marketing. Such a linkage helps to benefit both fields. We accomplish this objective by using a linear model with interaction term which nests many common preference protocols; conjunction (fuzzy and), disjunction (fuzzy or), counterbalance (fuzzy xor) and linear compensatory.

We consider the control of a production facility subject to multiple failure modes. Motivated by a work of Akella-Kumar (1986) and Bielecki-Kumar (1988) on single-failure-mode models, we study hedging-point policies, in which production is controlled to its maximum rate whenever inventory is below a critical level and set to zero whenever inventory is above that level. The maximum production rate varies with the state of the machine.

Micro data studies of household saving often find a significant group in the population with virtually no wealth, raising concerns about heterogeneity in motives for saving. In particular, this heterogeneity has been interpreted as evidence against the life cycle model of saving. This paper argues that a life cycle model can replicate observed patterns in household wealth accumulation after accounting explicitly for precautionary saving and asset-based, means-tested social insurance.

We model the effects of variety-seeking and marketing-mix variables on consumers' purchases of coffee using a nested logit model. We premise that on any given purchase occasion, the utilities of brands other than the one purchased on the previous occasion may be correlated due to the consumer's tendency to seek variety or to avoid variety. This results in a two-level hierarchical model where choice on any purchase occasion is conditioned on the brand purchased on the immediately preceding occasion.

This article addresses the problem of valuing American call options with caps on dividend-paying assets. Since early exercise is allowed, the valuation problem requires the determination of optimal exercise policies. Options with two types of caps are analyzed: constant caps and caps with a constant growth rate. For constant caps, it is optimal to exercise at the first time at which the underlying asset's price equals or exceeds the minimum of the cap and the optimal exercise boundary for the corresponding uncapped option.

We analyze the performance of an importance sampling estimator for a rare-event probability in tandem Jackson networks. The rare event we consider corresponds to the network population reaching K before returning to ø, starting from ø, with K large. The estimator we study is based on interchanging the arrival rate and the smallest service rate and is therefore a generalization of the asymptotically optimal estimator for an M/M/1 queue.

Examines how the benefits to managers of corporate control affect the relationship between managerial ownership and the stock returns of acquiring firms. Examination of mergers between 1985 and 1991; Characteristics of agency costs to equity in various levels of managerial ownership.

We consider a production/distribution system represented by a general directed acyclic network. Each node is associated with a specific "product" at a given location and/or production stage. An arc (i, j) indicates that item i is used to "produce" item j. External demands may occur at any of the network's nodes. These demands occur continuously at item-specific constant rates. Components may be assembled in any given proportions. The cost structure consists of inventory carrying, viable, and fixed production/distribution costs.

Beneath the pounding of the percussion and sonority of the strings, beyond the reach of the conductor's gesticulations and exhortations, behind the serenity of the crowd's spirit looms the daunting, incessant, and necessary process of funding a symphony orchestra, of creating and maintaining a public for its music.

A decade of work in marketing meta-analysis has produced empirical generalizations concerning parameters in models of advertising, price, diffusion, and consumer behavior. Results from these meta-analyses should replace the now discredited zero null hypotheses of such parameters in future work. Probably more important than nonzero "grand mean" average effects is an approach called Parametric Adjustability, which provides estimated parameter values for specific conditions reflecting markets and research technologies.

This article develops a return-based measure of market integration for nineteen emerging equity markets. It then examines the relation between that measure, other return characteristics, and broadly defined investment barriers. Although the analysis is exploratory, some clear conclusions emerge. First, global factors account for a small fraction of the time variation in expected returns in most markets, and global predictability has declined over time. Second, the emerging markets exhibit differing degrees of market integration with the U.S.

We consider the problem of simultaneously allocating servers and demands in a service system with independent multiple facilities. We assume a fixed number of facilities and total servers which must service a given Poisson arrival stream. We also assume that service times are identically distributed and independent of the server or facility. The allocation decision is one of simultaneously determining the number of servers and the fraction of the total arrival stream for each facility in order to optimize a givne performance measure.

We investigate the stability of discrete-event systems modeled as generalized semi-Markov processes with event epochs that satisfy (max, +) recursions. We obtain three types of results, under conditions: We show that there exists for each event a cycle time, which is the long-run average time between event occurrences; we characterize the rate of convergence to this limit, bounding the error for finite horizons; and we give conditions for delays (i.e., differences between event epochs) to converge to a stationary regime.

A unique dataset collected from the personnel records of a large company is used to study the relationship between on-the-job training and worker productivity. The analysis shows how information contained in a company database is useful for eliminating heterogeneity bias in the estimation of training's impact on wages and job performance.

The question of whether lay attributors are biased in their discounting of 1 cause given an alternative cause has not been resolved by decades of research, largely due to the lack of a clear standard for the rational amount of discounting. The authors propose a normative model in which the attributor's causal schemas and discounting inferences are represented in terms of subjective probability.