This paper proposes that there is a dynamic relationship between interest and inflation rates that are jointly determined due to the dual existence of Fisher and Wicksell processes. The Fisher process is the positive relationship between inflation and interest rates wherein causality runs from inflation to interest rates. By contrast, the Wicksell process is the negative relationship between the two rates with causality from interest to inflation rates. While Fisher and Wicksell theories are ex ante relationships, empirical tests employ ex post interest and inflation rate series after the full realization of both Fisher and Wicksell effects. This ex post estimation procedure has led to less than unity Fisher coefficients, known as the Fisher puzzle. We derive linkages between ex ante and ex post coefficients in the Fisher and Wicksell equations and propose methods for recovering ex ante coefficients from ex post estimated relationships. Application of these methods to U.S. data and several other advanced economies supports both Fisher and Wicksell theories of interest and inflation rates and helps to explain the Fisher puzzle.
{"title":"Dynamics of Interest and Inflation Rates","authors":"Ali Anari, J. Kolari","doi":"10.2139/ssrn.2888596","DOIUrl":"https://doi.org/10.2139/ssrn.2888596","url":null,"abstract":"This paper proposes that there is a dynamic relationship between interest and inflation rates that are jointly determined due to the dual existence of Fisher and Wicksell processes. The Fisher process is the positive relationship between inflation and interest rates wherein causality runs from inflation to interest rates. By contrast, the Wicksell process is the negative relationship between the two rates with causality from interest to inflation rates. While Fisher and Wicksell theories are ex ante relationships, empirical tests employ ex post interest and inflation rate series after the full realization of both Fisher and Wicksell effects. This ex post estimation procedure has led to less than unity Fisher coefficients, known as the Fisher puzzle. We derive linkages between ex ante and ex post coefficients in the Fisher and Wicksell equations and propose methods for recovering ex ante coefficients from ex post estimated relationships. Application of these methods to U.S. data and several other advanced economies supports both Fisher and Wicksell theories of interest and inflation rates and helps to explain the Fisher puzzle.","PeriodicalId":125760,"journal":{"name":"Texas A&M University Mays Business School Research Paper Series","volume":"27 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2016-12-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"131258948","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The growing importance of online social networks provides fertile ground for researchers seeking to gain a deeper understanding of fundamental constructs of human behavior, such as trust, forgiveness, and their linkage to social ties. Through a field experiment that uses data from the Facebook API to measure social ties that connect our subjects, we separate forward-looking instrumental trust from static intrinsic trust and show that the level of instrumental trust and forgiveness, and the effect of forgiveness on deterring future defections, crucially depend on the strength of social ties. We find that the level of trust under social repeated play is greater than the level of trust under anonymous repeated play, which in turn is greater than the level of trust under anonymous one shot games. We also uncover forgiveness as a key mechanism that facilitates the cooperative equilibrium being more stable in the presence of social ties: If the trading partners are socially connected, the equilibrium is more likely to return to the original cooperative one after small disturbances.
{"title":"Repeated Interactions vs. Social Ties: Quantifying the Economic Value of Trust, Forgiveness, and Reputation Using a Field Experiment","authors":"R. Bapna, Liangfei Qiu, Sarah C. Rice","doi":"10.2139/ssrn.2506203","DOIUrl":"https://doi.org/10.2139/ssrn.2506203","url":null,"abstract":"The growing importance of online social networks provides fertile ground for researchers seeking to gain a deeper understanding of fundamental constructs of human behavior, such as trust, forgiveness, and their linkage to social ties. Through a field experiment that uses data from the Facebook API to measure social ties that connect our subjects, we separate forward-looking instrumental trust from static intrinsic trust and show that the level of instrumental trust and forgiveness, and the effect of forgiveness on deterring future defections, crucially depend on the strength of social ties. We find that the level of trust under social repeated play is greater than the level of trust under anonymous repeated play, which in turn is greater than the level of trust under anonymous one shot games. We also uncover forgiveness as a key mechanism that facilitates the cooperative equilibrium being more stable in the presence of social ties: If the trading partners are socially connected, the equilibrium is more likely to return to the original cooperative one after small disturbances.","PeriodicalId":125760,"journal":{"name":"Texas A&M University Mays Business School Research Paper Series","volume":"37 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2016-09-28","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"123175459","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Both developed and developing economies worldwide are becoming increasingly services-driven. By some estimates, the value of business-to-business (B2B) commerce dwarfs that of business-to-consumer (B2C). In particular, firms competing in business markets are constantly seeking to introduce service innovations to improve firm value. Yet, there is a paucity of research on B2B service innovations (B2B-SIs) and not much is known about their effects on firm value or firm risk. Furthermore, it is important to better understand how these effects differ from those of business-to-consumer service innovations (B2C-SIs). We empirically address these issues by developing a modeling system that relates B2B and B2C service innovations to firm value and firm risk, while controlling for both firm- and market-specific factors. We estimate our model using a unique panel data of 1668 service innovations across 14 industries over five years assembled from multiple data sources. The results show that B2B-SIs have a positive effect on firm value and an insignificant influence on firm risk. In contrast, B2C-SIs are associated with higher firm risk. B2B-SIs (B2C-SIs) have a higher effect on firm value in B2B (B2C)-dominant industries. In industries with a mix of business customers and consumers, B2B-SIs have slightly higher impact on firm value than B2C-SIs. Our findings offer executives important insights about the relative value of B2B service innovations.
{"title":"The Effects of B2B Service Innovations on Firm Value and Firm Risk: How Do They Differ from Those of B2C Service Innovations?","authors":"Thomas Dotzel, Venkatesh Shankar","doi":"10.2139/ssrn.2840454","DOIUrl":"https://doi.org/10.2139/ssrn.2840454","url":null,"abstract":"Both developed and developing economies worldwide are becoming increasingly services-driven. By some estimates, the value of business-to-business (B2B) commerce dwarfs that of business-to-consumer (B2C). In particular, firms competing in business markets are constantly seeking to introduce service innovations to improve firm value. Yet, there is a paucity of research on B2B service innovations (B2B-SIs) and not much is known about their effects on firm value or firm risk. Furthermore, it is important to better understand how these effects differ from those of business-to-consumer service innovations (B2C-SIs). We empirically address these issues by developing a modeling system that relates B2B and B2C service innovations to firm value and firm risk, while controlling for both firm- and market-specific factors. We estimate our model using a unique panel data of 1668 service innovations across 14 industries over five years assembled from multiple data sources. The results show that B2B-SIs have a positive effect on firm value and an insignificant influence on firm risk. In contrast, B2C-SIs are associated with higher firm risk. B2B-SIs (B2C-SIs) have a higher effect on firm value in B2B (B2C)-dominant industries. In industries with a mix of business customers and consumers, B2B-SIs have slightly higher impact on firm value than B2C-SIs. Our findings offer executives important insights about the relative value of B2B service innovations.","PeriodicalId":125760,"journal":{"name":"Texas A&M University Mays Business School Research Paper Series","volume":"12 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2016-09-14","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"126169984","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Julie S. Persellin, Mike Shaub, Michael S. Wilkins
ABSTRACT: This case requires students to apply accounting and ethical decision making within the context of a potential land impairment decision. Students are required to research the relevant professional literature and provide appropriate FASB codification references and IAS cites as they investigate the significant uncertainties that frequently are associated with valuation and impairment analyses. Students also are required to evaluate the ethical implications of the decisions that could be made regarding the necessity of impairment. The case provides an opportunity for students to extend their research and financial accounting abilities, to consider the consequences associated with a set of potentially reasonable accounting alternatives, and to begin to appreciate how the significant uncertainties that are present in many accounting and auditing situations require consistent technical and ethical decision making. The case could be used in Intermediate Accounting I, as well as in undergraduate and gra...
{"title":"Arachnophobia: A Case on Impairment and Accounting Ethics","authors":"Julie S. Persellin, Mike Shaub, Michael S. Wilkins","doi":"10.2308/IACE-50890","DOIUrl":"https://doi.org/10.2308/IACE-50890","url":null,"abstract":"ABSTRACT: This case requires students to apply accounting and ethical decision making within the context of a potential land impairment decision. Students are required to research the relevant professional literature and provide appropriate FASB codification references and IAS cites as they investigate the significant uncertainties that frequently are associated with valuation and impairment analyses. Students also are required to evaluate the ethical implications of the decisions that could be made regarding the necessity of impairment. The case provides an opportunity for students to extend their research and financial accounting abilities, to consider the consequences associated with a set of potentially reasonable accounting alternatives, and to begin to appreciate how the significant uncertainties that are present in many accounting and auditing situations require consistent technical and ethical decision making. The case could be used in Intermediate Accounting I, as well as in undergraduate and gra...","PeriodicalId":125760,"journal":{"name":"Texas A&M University Mays Business School Research Paper Series","volume":"46 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2014-10-08","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"116244147","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Jiexin Wang, Xue Han, Emily J. Huang, Chris Yost-Bremm
Purpose The purpose of this paper is to investigate the impact of factor-based trading strategies on pricing and volume. Design/methodology/approach The authors employ a regression discontinuity approach to identify abnormalities in volume or pricing around expected portfolio changes. In addition, the authors characterize more granular effects on pricing and volume as a result of portfolio re-classification through Fama and Macbeth (1973) regressions. Findings The authors find that firms which are predicted to transfer among the factor portfolios of Fama and French (1993) exhibit strong and statistically significant short-term variation in stock price and volume. Short-term returns around the cutoff values comprising SMB and HML tend to be temporarily high if the firm is predicted to move into a long component of a factor-mimicking portfolio, and temporarily low if moving into a short component. Similar results are apparent when examining movement in and out of the 25 size and book-to-market sorted test asset portfolios. Practical implications The use of portfolio strategies formulated on the basis of sorting procedures, while once upon a time a niche market in the portfolio management industry, is now ubiquitous. The results of this study raise interesting methodological questions about the pricing implications arising from these common methodologies. Originality/value This study makes a number of contributions. First, it contributes to the idea that the publication or dissemination of trading strategies or – more generally – common portfolio sorting methods, leads to effects on pricing and volume through commonly motivated trading pressure. In other words, recipe-like discoveries of advantageous trading strategies lead to a synthetic creation of demand. Second, by noting that a lot of factor-focused trading activity begins around July and August of each year, the study relates to existing literature which documents seasonal variation in stock returns and volume. The findings raise questions about what guides institutional investors’ portfolio allocation decisions and whether these are optimal in aggregate.
{"title":"Abnormal Trading Around Common Factor Pricing Models","authors":"Jiexin Wang, Xue Han, Emily J. Huang, Chris Yost-Bremm","doi":"10.2139/ssrn.2492953","DOIUrl":"https://doi.org/10.2139/ssrn.2492953","url":null,"abstract":"\u0000Purpose\u0000The purpose of this paper is to investigate the impact of factor-based trading strategies on pricing and volume.\u0000\u0000\u0000Design/methodology/approach\u0000The authors employ a regression discontinuity approach to identify abnormalities in volume or pricing around expected portfolio changes. In addition, the authors characterize more granular effects on pricing and volume as a result of portfolio re-classification through Fama and Macbeth (1973) regressions.\u0000\u0000\u0000Findings\u0000The authors find that firms which are predicted to transfer among the factor portfolios of Fama and French (1993) exhibit strong and statistically significant short-term variation in stock price and volume. Short-term returns around the cutoff values comprising SMB and HML tend to be temporarily high if the firm is predicted to move into a long component of a factor-mimicking portfolio, and temporarily low if moving into a short component. Similar results are apparent when examining movement in and out of the 25 size and book-to-market sorted test asset portfolios.\u0000\u0000\u0000Practical implications\u0000The use of portfolio strategies formulated on the basis of sorting procedures, while once upon a time a niche market in the portfolio management industry, is now ubiquitous. The results of this study raise interesting methodological questions about the pricing implications arising from these common methodologies.\u0000\u0000\u0000Originality/value\u0000This study makes a number of contributions. First, it contributes to the idea that the publication or dissemination of trading strategies or – more generally – common portfolio sorting methods, leads to effects on pricing and volume through commonly motivated trading pressure. In other words, recipe-like discoveries of advantageous trading strategies lead to a synthetic creation of demand. Second, by noting that a lot of factor-focused trading activity begins around July and August of each year, the study relates to existing literature which documents seasonal variation in stock returns and volume. The findings raise questions about what guides institutional investors’ portfolio allocation decisions and whether these are optimal in aggregate.\u0000","PeriodicalId":125760,"journal":{"name":"Texas A&M University Mays Business School Research Paper Series","volume":"52 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2014-09-08","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"133719566","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
I. Martinez-Moyano, David P. McCaffrey, Rogelio Oliva
This article integrates research on rule development, compliance, and organizational change to model rule development and compliance in organizations, using causal-loop modeling from system dynamics to articulate explicitly a few key underlying processes. We focus on financial markets as a case area, suggesting that recurring regulatory problems in financial markets in the United States over the past 60 years, although differing in specifics, are structurally similar. At the heart of the model is the tension between production goals that focus on short-term, certain, salient benefits and required adherence to production-constraining rules that attempt to mitigate long-term, uncertain, nonsalient risks. It describes systemically how organizations attend to rules depending on the nature of the benefits of production compared with those of rule compliance. The model captures the operative mechanisms responsible for the development of pressures for production and for rule compliance in organizations, providing a structural explanation both for problem-prone organizations characterized by erosion of standards and increased violations and for organizations following rules more reliably. Drawing on studies of institutional work, we conclude by suggesting research on how agency, through strategic and tactical choice, potentially modifies structure in rule compliance.
{"title":"Drift and Adjustment in Organizational Rule Compliance: Explaining the 'Regulatory Pendulum' in Financial Markets","authors":"I. Martinez-Moyano, David P. McCaffrey, Rogelio Oliva","doi":"10.1287/orsc.2013.0847","DOIUrl":"https://doi.org/10.1287/orsc.2013.0847","url":null,"abstract":"This article integrates research on rule development, compliance, and organizational change to model rule development and compliance in organizations, using causal-loop modeling from system dynamics to articulate explicitly a few key underlying processes. We focus on financial markets as a case area, suggesting that recurring regulatory problems in financial markets in the United States over the past 60 years, although differing in specifics, are structurally similar. At the heart of the model is the tension between production goals that focus on short-term, certain, salient benefits and required adherence to production-constraining rules that attempt to mitigate long-term, uncertain, nonsalient risks. It describes systemically how organizations attend to rules depending on the nature of the benefits of production compared with those of rule compliance. The model captures the operative mechanisms responsible for the development of pressures for production and for rule compliance in organizations, providing a structural explanation both for problem-prone organizations characterized by erosion of standards and increased violations and for organizations following rules more reliably. Drawing on studies of institutional work, we conclude by suggesting research on how agency, through strategic and tactical choice, potentially modifies structure in rule compliance.","PeriodicalId":125760,"journal":{"name":"Texas A&M University Mays Business School Research Paper Series","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2014-04-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"130580156","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Brant E. Christensen, Randal J. Elder, Steven M. Glover
Changes in the audit industry after Sarbanes-Oxley have potentially changed the nature and extent of audit sampling in the largest accounting firms. However, little academic evidence exists on current audit sampling policies in place at the largest accounting firms (Elder et al. 2013). As such, we administer an extensive, open-ended survey to the national office of the Big 4 and two other international accounting firms regarding their firm’s audit sampling policies. We find variation among the largest auditing firms’ policies in their use of statistical and nonstatistical sampling methods and in inputs used in the sampling applications that could result in different sample sizes. Sampling experts’ internal reviews indicate that responding to and resolving identified misstatements is one of the biggest difficulties that audit engagement teams face when using sampling techniques. Finally, we present evidence that some firms have significantly changed their approach to revenue testing due to PCAOB inspections. This evidence provides important insights into current sampling policies and presents opportunities for future research.
《萨班斯-奥克斯利法案》(Sarbanes-Oxley)出台后，审计行业的变化可能改变了大型会计师事务所审计抽样的性质和范围。然而，关于目前大型会计师事务所的审计抽样政策的学术证据很少(Elder et al. 2013)。因此，我们对四大会计师事务所和其他两家国际会计师事务所的国家办事处进行了广泛的开放式调查，调查内容涉及其审计抽样政策。我们发现最大的审计公司在使用统计和非统计抽样方法以及在抽样应用中使用的输入方面的政策存在差异，这可能导致不同的样本量。抽样专家的内部审查表明，应对和解决已发现的错报是审计项目组在使用抽样技术时面临的最大困难之一。最后，我们提供的证据表明，由于PCAOB的检查，一些公司已经显著改变了他们的收入测试方法。这一证据为当前的抽样政策提供了重要的见解，并为未来的研究提供了机会。
{"title":"Behind the Numbers: Insights into Large Audit Firm Sampling Policies","authors":"Brant E. Christensen, Randal J. Elder, Steven M. Glover","doi":"10.2139/ssrn.2298632","DOIUrl":"https://doi.org/10.2139/ssrn.2298632","url":null,"abstract":"Changes in the audit industry after Sarbanes-Oxley have potentially changed the nature and extent of audit sampling in the largest accounting firms. However, little academic evidence exists on current audit sampling policies in place at the largest accounting firms (Elder et al. 2013). As such, we administer an extensive, open-ended survey to the national office of the Big 4 and two other international accounting firms regarding their firm’s audit sampling policies. We find variation among the largest auditing firms’ policies in their use of statistical and nonstatistical sampling methods and in inputs used in the sampling applications that could result in different sample sizes. Sampling experts’ internal reviews indicate that responding to and resolving identified misstatements is one of the biggest difficulties that audit engagement teams face when using sampling techniques. Finally, we present evidence that some firms have significantly changed their approach to revenue testing due to PCAOB inspections. This evidence provides important insights into current sampling policies and presents opportunities for future research.","PeriodicalId":125760,"journal":{"name":"Texas A&M University Mays Business School Research Paper Series","volume":"3 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2014-02-12","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"130224629","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We examine whether cobranding—the practice of using two established brand names on the same product— increases the market value of parent firms. Using data from the consumer packaged goods industry, we document that the average stock market reaction to the announcement of cobranded new products is approximately C1.0%. We hypothesize that this reaction is significantly higher than it would have been if these same products were single branded, and we find evidence consistent with this hypothesis. We also examine the determinants of this stock market reaction. We find that the consistency between the two brand images, the innovativeness of the product, and the exclusivity of the cobranding relationship significantly increase the market reaction to cobranding announcements. Our findings provide important managerial guidelines for enhancing firm value through cobranding partnerships.
{"title":"Wedded Bliss or Tainted Love? Stock Market Reactions to the Introduction of Cobranded Products","authors":"Zixia Cao, Alina Sorescu","doi":"10.1287/mksc.2013.0806","DOIUrl":"https://doi.org/10.1287/mksc.2013.0806","url":null,"abstract":"We examine whether cobranding—the practice of using two established brand names on the same product— increases the market value of parent firms. Using data from the consumer packaged goods industry, we document that the average stock market reaction to the announcement of cobranded new products is approximately C1.0%. We hypothesize that this reaction is significantly higher than it would have been if these same products were single branded, and we find evidence consistent with this hypothesis. We also examine the determinants of this stock market reaction. We find that the consistency between the two brand images, the innovativeness of the product, and the exclusivity of the cobranding relationship significantly increase the market reaction to cobranding announcements. Our findings provide important managerial guidelines for enhancing firm value through cobranding partnerships.","PeriodicalId":125760,"journal":{"name":"Texas A&M University Mays Business School Research Paper Series","volume":"20 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2013-12-04","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"133516930","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2013-07-01DOI: 10.1111/J.1937-5956.2012.01390.X
Michael E. Ketzenberg, Neil Geismar, R. Metters, E. van der Laan
An important difference between both manufacturing and wholesaling vs. retail is the information available concerning inventory. Typically, far less information characterizes retail. Here, an extreme environment of information shortfall is examined. The environment is technically termed “unattended points of sale,” but colloquially called vending machines. Once inventory is loaded into a machine, information on demand and inventory level is not observed until the scheduled reloading date. Technological advances and business process changes have drawn attention to the value of information (VOI) in retail inventory in many venues. Moreover, technology is now available that allows unattended points of sale to report inventory information. Capturing the value of this information requires changes in current business practice. We demonstrate the value of capturing information analytically in an environment with restrictive demand assumptions. Experiments in an environment with realistic demand assumptions and parameter values show that the VOI depends greatly on operating characteristics and can range from negligible effects to increasing profitability 30% or more in actual practice.
{"title":"The Value of Information for Managing Retail Inventory Remotely","authors":"Michael E. Ketzenberg, Neil Geismar, R. Metters, E. van der Laan","doi":"10.1111/J.1937-5956.2012.01390.X","DOIUrl":"https://doi.org/10.1111/J.1937-5956.2012.01390.X","url":null,"abstract":"An important difference between both manufacturing and wholesaling vs. retail is the information available concerning inventory. Typically, far less information characterizes retail. Here, an extreme environment of information shortfall is examined. The environment is technically termed “unattended points of sale,” but colloquially called vending machines. Once inventory is loaded into a machine, information on demand and inventory level is not observed until the scheduled reloading date. Technological advances and business process changes have drawn attention to the value of information (VOI) in retail inventory in many venues. Moreover, technology is now available that allows unattended points of sale to report inventory information. Capturing the value of this information requires changes in current business practice. We demonstrate the value of capturing information analytically in an environment with restrictive demand assumptions. Experiments in an environment with realistic demand assumptions and parameter values show that the VOI depends greatly on operating characteristics and can range from negligible effects to increasing profitability 30% or more in actual practice.","PeriodicalId":125760,"journal":{"name":"Texas A&M University Mays Business School Research Paper Series","volume":"25 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2013-07-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"115869153","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Estimation of retail demand is critical to decisions about procuring, shipping, and shelving. The idea of Poisson demand process is central to retail inventory management and numerous studies suggest that negative binomial (NB) distribution characterize retail demand well. In this study we reassess the adequacy of estimating retail demand with the NB distribution. We propose two Poisson mixtures – the Poisson-Tweedie (PT) family and the Conway-Maxwell Poisson (CMP) distribution – as generic alternatives to the NB distribution. Based on the principle of likelihood and information theory, we adopt out-of-sample likelihood (OSL) as a metric for model selection. We test the procedure on consumer demand for 580 SKU-store sales datasets. Overall the PT family and the CMP distribution outperform the NB distribution for 70% of the tested samples. As a general case of the NB model, the PTF family has particularly strong performance for datasets with relatively small means and high dispersion. Our finding carries useful implications for researchers and practitioners who seek for flexible alternatives to the oft-used NB distribution in characterizing retail demand.
{"title":"Estimating Retail Demand with Poisson Mixtures and Out-of-Sample Likelihood","authors":"Howard Hao‐Chun Chuang, Rogelio Oliva","doi":"10.2139/ssrn.2018010","DOIUrl":"https://doi.org/10.2139/ssrn.2018010","url":null,"abstract":"Estimation of retail demand is critical to decisions about procuring, shipping, and shelving. The idea of Poisson demand process is central to retail inventory management and numerous studies suggest that negative binomial (NB) distribution characterize retail demand well. In this study we reassess the adequacy of estimating retail demand with the NB distribution. We propose two Poisson mixtures – the Poisson-Tweedie (PT) family and the Conway-Maxwell Poisson (CMP) distribution – as generic alternatives to the NB distribution. Based on the principle of likelihood and information theory, we adopt out-of-sample likelihood (OSL) as a metric for model selection. We test the procedure on consumer demand for 580 SKU-store sales datasets. Overall the PT family and the CMP distribution outperform the NB distribution for 70% of the tested samples. As a general case of the NB model, the PTF family has particularly strong performance for datasets with relatively small means and high dispersion. Our finding carries useful implications for researchers and practitioners who seek for flexible alternatives to the oft-used NB distribution in characterizing retail demand.","PeriodicalId":125760,"journal":{"name":"Texas A&M University Mays Business School Research Paper Series","volume":"81 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2013-03-06","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"124989589","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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