This is a sample of what I have been doing so far:
Money-Back Guarantees and Market Experimentation (with W. Novshek)
- International Journal of Industrial Organization, vol. 22 (2004),
We study the use of money-back guarantees as a form of market experimentation in a market for experience goods with repeat purchases. We show that extending the customer base in the second period by using a money-back guarantee can be optimal only if a monopolist faces an uncertain distribution of buyers. Within the second period, a money-back guarantee allows the monopolist to discriminate between new and repeat purchasers while a pure price reduction does not. Thus, whenever money-back guarantees are feasible, an optimal experimentation strategy includes a money-back guarantee in the second period but not necessarily a price reduction.
The Impact of Culture on the Purchase of Life Insurance in Latin America
and the Caribbean (with J. Eck) - International Business and Economics
Research Journal, 5, 1 (Jan 2006), pp. 31-45.
This study attempts to determine the major reasons for the lack of success in marketing life insurance in Latin America and the Caribbean. Our results point at the importance of cultural variables of which the most significant is the percentage of the population that professes to be Catholic. We attribute this to a strong correlation between religious beliefs and risk preferences. The other major factor is the population's attitude toward financial instruments in general. Both results are robust to the model specification. The findings should be of interest to insurance companies attempting to market life insurance throughout the world.
To Disclose or Not? An Analysis of Software User Behavior (with
M.Thursby) - Information Economics and Policy, 19 (1), 43-64.
Earlier versions available as Washburn School of Business Working Paper No. 41, proceedings of the 2005 Workshop on Economics of Information Security and an SSRN working paper.
This paper addresses the ongoing debate over disclosing information about software vulnerabilities through an open public forum. Using a game-theoretic approach, we show that full public disclosure may be an equilibrium strategy in a game played by rational loss-minimizing agents. We provide conditions under which full public disclosure of vulnerabilities is desirable from a social welfare standpoint. We analyze the effect of several vendor and product characteristics and the composition of the pool of software users on the decisions to disclose and on social welfare. We also examine models in which users may spend effort to develop a fix or threaten vendors to disclose after a grace period. We show that to the extent that users are able to develop fixes for discovered vulnerabilities without inordinate effort, welfare is further improved. This is more likely the more familiar users are with the details of software providing an argument for "open source" software.
Attackers' Motivation and Security Investment (with M.Cremonini)
In: Contributions in Game Theory and Management, School of Management, St. Petersburg State University, Russia, 2007.
Earlier versions available as Washburn School of Business Working Paper No. 68, and as 2006 Workshop on Economics of Information Security presentation.
We model economic behavior of attackers when they are able to obtain complete information about the security characteristics of targets and when such information is unavailable. We find that when attackers are able to distinguish targets by their security characteristics and switch between multiple alternative targets, the effect of a given security measure is stronger. That is due to the fact that attackers rationally put more effort into attacking systems with low security levels. Ignoring that effect would result in underinvestment in security or misallocation of security resources. We also find that systems with better levels of protection have stronger incentives to reveal their security characteristics to attackers than poorly protected systems. Those results have important implications for security practices and policy issues.
Risks and Benefits of Signaling Information System Characteristics to
Strategic Attackers (with M.Cremonini) - Journal Of Management Information
Systems, 26 (3), Winter 2010, pp. 241-274.
An earlier version is available as Washburn School of Business Working Paper No. 95.
The paper uses a game-theoretic setting to examine the interaction between strategic attackers who try to gain unauthorized access to information systems, or "targets," and defenders of those targets. Our analysis of the attacker-defender interaction shows that well- protected targets can use signals of their superior level of protection as a deterrence tool. This is due to the fact that, all other things being equal, rational attackers motivated by potential financial gains tend to direct their effort toward less-protected targets. We analyze several scenarios differing in the scope of publicly available information about target parameters and discuss conditions under which greater defenders ability to signal their security characteristics may improve their welfare. Our results may assist security researchers in devising better defense strategies through the use of deterrence and provide new insight about the efficacy of specific security practices in complex information security environments.
Rent-A-Car: An Integrated Team-based Case Study for Managerial Economics (with D.Chulkov) - Journal Of Business Cases and Applications, 6, Spring 2012, pp. 1-14.
Courses in Managerial Economics face the challenge of having theoretical focus different from more applied disciplines in business school curricula. The case study method has been proposed as a means of enhancing student learning and motivation in these courses. This article presents an integrated case designed for a Managerial Economics course at the M.B.A. or the upper undergraduate level. The case study covers multiple learning outcomes and consists of several assignments designed to enhance understanding of both theoretical concepts and quantitative methods featured in the course over a semester. This case is particularly appropriate for a team-based learning curriculum.
Estimating the Effect of Changes in Kansas Liquor Retail Laws (with G. Baker) - Regional Business Review, 32, May 2013, pp. 1-19.
Currently in the state of Kansas sales of packaged alcohol is allowed only at specialized stores. This study attempts to estimate the potential effect the removal of this restriction would have on the retail sector structure and employment. We do this by examining the retail market structure across a sample of states with and without the restriction. Our results predict a modest increase in state employment and earnings due to deregulation of alcohol sales. However, that result has low statistical significance. Overall, we find no conclusive evidence of a positive effect of deregulation on Kansas economy.
Economics of Apple iPhone: Price Discrimination or Pricing Error? (with D. Chulkov) - Journal of the International Academy of Case Studies, 20 (1/2), 2014, pp. 49-54.
Apple has been a technology industry leader for a long time. Its launch of the original iPhone, however, was far from smooth. Just over two months after the launch of the device, Apple cut its price significantly, which led to customer dissatisfaction and loss in stock value. The present case examines Apple's pricing decisions and provides an opportunity to review the underlying principles of several non-trivial pricing strategies. It is designed to cover several learning outcomes in a Managerial Economics course at the M.B.A. or upper undergraduate level and has been tested in M.B.A. Managerial Economics classes at two business schools over several semesters.
Problem-based Learning in Managerial Economics with an Integrated Case Study (with D. Chulkov) - Journal of Economics and Economic Education Research, 16 (1), Jan 2015, pp.188-195.
Engaging students in managerial economics courses at the upper undergraduate and M.B.A. levels is challenging as these courses are often a theoretical standout compared with more applied business disciplines. This study describes the efforts to increase student learning with an interactive case integrated into a managerial economics course at multiple points over the semester. The underlying pedagogy utilizes principles of problem-based learning, a student-centered approach that structures learning around team-based problem solving. An analysis of assessment results suggests a positive and significant impact on student learning.
Bundling, Cord-cutting, and the Death of TV as We Know It (with D. Chulkov) - forthcoming at the Journal of the International Academy of Case Studies.
Firms in the paid-television industry, in particular cable TV companies, have relied heavily on the practice of bundling, selling only packages of channels to consumers. This pricing strategy is challenged by recent developments including the shift to internet streaming of television programs as well as rising costs of television programming content. Consumers respond to increasing options for obtaining video content as many of them abandon the traditional cable TV companies and "cut the cord". Consequently, the pay-TV industry is considering whether the ability to offer TV channels individually in an "a la carte" format is viable.
This case provides an opportunity to review the underlying principles of bundling and a-la-carte pricing strategies. An examination of the current industry trends also leads to the discussion of cable companies' optimal responses to higher costs of programming content and increased number of substitutes for consumers. The case is designed to cover a number of learning outcomes in a managerial economics course at the M.B.A. or upper undergraduate level. The content of this case may also be used in other business courses including marketing and strategic management.
Import Demand Elasticity and Exporter Responses to Anti-dumping Duties (with A. Skiba) - forthcoming at the International Trade Journal.
This paper investigates exporting firms’ decisions in the presence of anti-dumping (AD) duties, focusing especially on firm pricing. Similar to other trade barriers AD duties tend to increase the prices of imported goods. However, the mechanism of this relationship is different because the size of AD duties directly depends on import prices. Our model accounts for this important aspect and demonstrates the crucial role of import demand elasticity in exporting firms’ decisions. Exporters find it easier to increase the price when they face a less elastic demand. The theoretical predictions are supported empirically by relating product-level U.S. import demand elasticities and exporting firms’ reactions to duties inferred from a dataset on U.S. AD investigations from 1980 to 1995.
Work in progress:
Exploring the Effects of Cross-state Differences in Liquor Retail
Restrictions (with P. Byrne)
The most recent version is available as 2014 International Industrial Organization Conference presentation.
Laws regulating the retail sale of alcoholic beverages vary greatly by state. Whereas some states allow the sale of beer, wine and hard liquor at grocery stores and other retail establishments, others restrict the sale of one or more of the beverage categories to private or state-owned liquor stores. Increasingly states have considered the liberalization of alcoholic beverage sales. Although Washington is the only state to significantly liberalize their regulation of alcohol in recent years, several states across the country have also considered loosening existing restrictions. This paper examines the impact of retail restrictions on alcohol consumption as well as retail sector structure and employment using panel data from the fifty US states from 2001 to 2010. Preliminary results suggest that prohibiting wine and hard liquor sales at grocery and convenience stores reduces alcohol consumption and increases liquor store employment, but does not affect employment in grocery stores or other retail establishments. However, states that only prohibit hard liquor sales at grocery and convenience stores and states that prohibit all alcohol sales at such stores are not significantly different than unrestricted states in terms of overall alcohol consumption or liquor store employment. These results may contribute to the policy debate surrounding the liberalization of state alcohol retail laws.
Asymmetric Pass-through of Anti-dumping Duties (with A. Skiba) - Washburn School of Business Working Paper No. 157.
Warranty Provision in a Competitive Environment - Washburn
School of Business Working Paper No. 77.
Diagrammatic analysis of exporting firm's responses to anti-dumping duties