Columbia Business School Research

The financial payback to the City of Boston from the development of Faneuil Hall Marketplace provides a starting point for analyzing the benefits of public-private downtown project development deals.

In this paper, we develop the control rules for job shop scheduling based on the Flow Rate Control model. We derive optimal control results for job shops with work station in series (transfer line). We use these results to derive rules which are suboptimal, robust against random events, and easy to implement and expand.

The PDF above is a preprint version of the article. The final version may be found at The Annals of Operations Research.

Cet article s'articule le long de trois thèmes progressant de la nécessité d'étudier en marketing les reactions affectives jusqu'á une mise en evidence des spécificités de leurs mesures.

Analyzing the location choices of the post-1964 U.S.

The behavior of emerging market returns differs sharply from the behavior of developed equity market returns. While forecasts of expected returns and volatilities in emerging markets have been extensively studied, a paper focuses primarily on skewness and kurtosis. It is examined whether these moments have changed over time and what drives their cross-sectional variation. Finally, the implications for asset allocation are detailed.

A bilateral moral-hazard problem provides a rationale for "up-or-out" employment contracts. The employer sets a wage higher than opportunity cost to induce the worker to invest in firm-specific capital. If the individual does not make the grade, it is in the firm's interest ex post to fire him. Had the initial arrangement not included provisions for firing individuals, the firm would underreport the value of the employee, wrecking the incentive scheme. The basic model permits both firm and worker to be risk neutral.

This paper considers an M/G/c queueing system serving a finite number (J) of distinct customer classes. Performance of the system, as measured by the vector of steady-state expected waiting times of the customer classes (the performance vector), may be controlled by adopting an appropriate priority discipline.

We provide a deterministic example in which parties sign a contract which they anticipate will be subsequently renegotiated. The renegotiation is socially desirable. In the example, the cost of writing and enforcing contracts increases their complexity.

What are feasible paths of debt for a government that borrows either internally or externally? The question is suggested by recent concerns about the international debt crisis and high federal budget deficits in the U.S. In this paper, we analyze the benchmark case in which all market participants have perfect foresight, so that only risk-free lending is done. We study the conditions under which the borrower's opportunities include strategies with positive net present value.

A great deal of research on the empirical behavior of inventories examines some variant of the production smoothing model of finished goods inventories. The overall assessment of this model that exists in the literature is quite negative: there is little evidence that manufacturers hold inventories of finished goods in order to smooth production patterns. This paper examines whether this negative assessment of the model is due to one or both of two features: costs shocks and seasonal fluctuations.

This paper presents a strategic theory of contract renegotiation. In this theory, suboptimal contracts are put in place initially to protect one party against undesirable actions by another party and are renegotiated once the danger is past. We develop a model to establish the cases in which simple contracts cannot achieve desirable outcomes, so that only a complicated contract or renegotiation will serve. Unlike most previous accounts of contract renegotiation, this theory does not rely on exogenous uncertainty to motive renegotiation.

This paper develops an empirical model of exchange rates in a target zone. The distribution of exchange rate changes is conditioned on a latent jump variable where the probability and size of a jump vary over time as a function of financial and macroeconomic variables. When there is no jump, the target zone is credible and exchange rate changes are constrained to remain within the target zone band.

An analysis of 1979-1984 panel data for 169 US defense industry firms shows that the federal government promotes research and development (R&D) investment by awarding major contracts through the competitive procurement process. In this process, the government reveals its demand for certain technological innovations and encourages private firms to sponsor the necessary R&D. The firms will recover the R&D expenses by being awarded the government contract.

This paper develops and implements a technique for estimating a model of the bid/ask spread. The spread is decomposed into two components, one due to asymmetric information and one due to inventory costs, specialist monopoly power, and clearing costs. The model is estimated using NYSE common stock transaction prices in the period 1981-1983. Cross-sectional regression analysis is then used to relate time-series estimated spread components to other stock characteristics.

We consider single-server loss systems with exponential service times and non-stationary Poisson input. We prove that if the arrival rate is given by a periodic function, the proportion of lost customers is convex increasing in the amplitude.

This papers introduces a market-based typology of corporate strategy, which builds on previous typologies (Rumelt 1974, 1982). We argue that, because different markets require different skills for success, firms which concentrate in one market area (consumer or industrial), at given levels of diversification, should achieve superior performance. Empirical tests with a sample of manufacturing firms support this proposed relationship between diversification strategy and financial performance.

Using a birth and death process as an illustrative example, we introduce the notion of alternative representations of stochastic processes and discuss its importance for infinitesimal perturbation analysis derivative estimation. Through a different choice of representation, we are led to an IPA algorithm for a birth and death process better than one discussed by other authors.

This paper considers general (single facility) queueing systems with exponential service times, dealing with a finite number J of distinct customer classes. Performance of the system, as measured by the vector of steady state expected sojourn times of the customer classes (the performance vector) may be controlled by adopting an appropriate preemptive priority discipline.

Often the timing of certain activities has a strong periodic element. Due to circumstances an activity is sometimes made outside the regular cycle, but it does not break the cycle. Thus, the timing of future activities is highly predictable. We provide a stochastic model where the data are not seasonal yet the optimal behaviour has a strong periodic element.

Radial patterns of optical flow produced by observer translation could be used to perceive the direction of self-movement during locomotion, and a number of formal analyses of such patterns have recently appeared. However, there is comparatively little empirical research on the perception of heading from optical flow, and what data there are indicate surprisingly poor performance, with heading errors on the order of 5 degrees–10 degrees.

We consider the polymatroidal flow network model which incorporates two important extensions of the standard maximal flow problem: general concave objective functions of the vector of supplies to a collection of sinks, as well as polymatroidal capacity restrictions on sets of arcs emanating from or pointing to a common node. A number of important applications are reviewed.

We present an exact solution method for a single-server queueing system which alternates between periods in which service can be provided (on-periods) and periods in which the server is out of operation (off-periods). The arrival process is Poisson, on-periods are assumed to have a phase-type distribution, and service times and off-periods are assumed to be arbitrary.

The bid-ask spread can be decomposed into two parts: one part due to asymmetric information and the other part due to other factors such as monopoly power. The part due to asymmetric information attenuates statistical biases in mean return, variance, and serial covariance. Thus, using spread data to adjust for biases in return moments requires knowing not only the spread but the composition of the spread. Furthermore, any spread-estimation procedure using transaction prices must estimate two spread components.

We acknowledge that the behavior of the OSHA and EPA is complex and cannot be explained by simple capture theories, we nonetheless find ample evidence of OSHA and EPA actions that unnecessarily exacerbate or even artificially create indirect effects for political purposes (what we call enforcement asymmetries). Furthermore, despite mounting evidence of the inefficiency of OSHA and EPA, Congress has continued to be uninterested in adequate monitoring of regulatory effect, much less in regulatory reform.

This paper studies the relation between Value Line's successful record in predicting relative stock price movements and the firm size effect. The data suggest little direct relation between the two phenomena. Value Line tends not to rank small firm stocks, and small firm stocks that are ranked are more likely to receive a low rank than large firm stocks. Within each size-sorted quintile of the market, the mean payoffs on costless positions constructed according to Value Line's recommendations are positive.

The authors propose a likelihood-ratio test of the hypothesis that the minimum-variance frontier of a set of K assets coincides with the frontier of this set and another set of N assets. They study the relation between this hypothesis, exact arbitrage pricing, and mutual fund separation. The exact distribution of the test statistic is available. The authors test the hypothesis that the frontier spanned by three size-sorted stock portfolios is the same as the frontier spanned by thirty-three size-sorted stock portfolios.

Heuristic solution methods for combinatorial optimization problems are often based on local neighborhood searches. These tend to get trapped in a local optimum and the final result is often heavily dependent on the starting solution. Simulated annealing methods attempt to avoid these problems by randomizing the procedure so as to allow for occasional changes that worsen the solution. In this paper we provide probabilistic analyses of different designs of these methods.

We consider general queueing models dealing with multiple classes of customers and address the question under what conditions and in what (stochastic) sense the marginal increase in various performance measures, resulting from the addition of a new class of customers to an existing system, is larger than if the same class were added to a system dealing with only a subset of its current customer base.

We consider a class of loss systems with exponential service times and a Poisson arrival process with a rate that varies periodically among N levels called seasons. For two special cases, we derive transient and steady-state solutions and provide simple proofs that losses are minimized when the arrival rates for all seasons are equal. In the general case, we describe a straightforward procedure to derive the steady-state probabilities. We also prove that when S=1, the server is generally busier during the high arrival rate seasons.