The Proportionality Hypothesis in Capital Theory: an Assessment of the Literature

It  is  found  that  the  hypothesis  of  a  constant  replacement  investment  capital  stock  ratio  has several  fundamental  shortcomings.  It  conflicts  with  most  of  the  available  theoretical  and empirical evidence. It is alien to researchers in other fields of economics and related areas; and, perhaps most importantly, it has restrained progress in economic theory and econometric applications  based  on  more  realistic  conceptualizations  of  the  time  structure  of  capital.  On these grounds it is concluded that its abandonment is long overdue

The Theorem of Proportionality in Mainstream Capital Theory: An Assessment of its Conceptual Foundations

It is ascertained that the theorem of proportionality, which maintains that replacement investment is a constant proportion of the outstanding capital stock, has several fundamental shortcomings. It derives from a model founded on assumptions that are highly restrictive and unlikely to hold in reality. It is alien to the thinking of researchers in industrial organization and other neighboring fields to economics that treat the durability of capital goods as a choice variable. It ignores several thorny conceptual and methodological issues and, perhaps most important, it may have restrained seriously the progress towards developing models based on more realistic approaches of production. However, despite its shortcomings, the theorem continues to dominate mainstream capital theory, most probably because of: a) its simplicity, and b) the lack of a model that might yield a better theorem in terms of standard criteria, like explanatory and predictive power, simplicity, fruitfulness, etc. For this reason attention is drawn to recent research which shows that a model centered on the heterogeneous structure of capital and the useful lives of its components is both feasible and exceedingly rich in theoretical and empirical implications.Capital longevity, replacement, depreciation, scrappage, maintenance, utilization, obsolescence.

Regime Shifts and Uncertainty in Pollution Control

We develop a simple model of managing a system subject to pollution damage under risk of an abrupt and random jump in the damage coefficient. The model allows the full dynamic characterization of the optimal emission policies under uncertainty. The results, that imply prudent behavior due to uncertainty, are compared with the ambiguous outcomes reported in the literature for similar models. The differences are explained in terms of the properties of the damage function associated with each model. The framework is used to analyze the adaptation vs. mitigation dilemma and provides a simple criterion to determine whether adaptation activities should be undertaken promptly, delayed to some future date, or avoided altogether.environmental pollution, optimal management, catastrophic transitions, uncertainty, adaptation, mitigation

Оцінка коливань показників ефективності роботи обладнання, що функціонує в умовах мінливого завантаження

AbstractsThe dynamic model of change in the performance indicators of sophisticated equipment was proposed. The proposed model consists of two parts. The first part concerns modeling of a random process of changes in the level of equipment loading and is described by the stochastic equation in the form of Ito (5). The second part concerns modeling of dynamics of equipment wear depending on changing in the levels of its loading and is described by the differential equation. As a result, the stochastic dynamic model of changes in performance indicators of sophisticated equipment, which takes into account random fluctuations of equipment loading, was obtained. Using the proposed model, we analyzed dynamics of average total specific costs of equipment in the case when a degree of equipment loading is subject to random changes. Quantitative ratios of average total specific costs of equipment, level of fluctuations of these costs during possible random changes in loading and terms of equipment replacement were established. Studies have demonstrated that changes in average total specific costs of equipment can be insignificant for a certain time. In this case, the spread range of the level of costs of equipment within the same time range can increase significantly. That is why it makes sense to reduce the service term of equipment. This would lead to an insignificant increase in the mean values of equipment performance indicators, however, their stability level will improve considerably.Исследовано влияние физического износа сложного портового оборудования на динамику показателей эффективности его использования. Получены оценки колебаний средних затрат на единицу времени службы оборудования, функционирующего в условиях неустойчивого грузопотока. Предложена методика обоснования сроков обновления оборудования, при которых достигается баланс между минимальностью и устойчивостью суммарных удельных расходов на оборудованиеДосліджено вплив фізичного зносу складного портового обладнання на динаміку показників ефективності його використання. Отримано оцінки коливань середніх витрат за одиницю часу служби обладнання, що функціонує в умовах нестійкого вантажопотоку. Запропоновано методику обґрунтування термінів оновлення обладнання, за яких досягається баланс між мінімальністю та стійкістю сумарних питомих витрат на обладнанн

Barriers to IT Exit

All organizational information systems will at some point in time be decommissioned. Yet, current IS research is predominantly focused on the adoption and implementation of an information system. It pays scarce attention to the final phase of a working IT system and the substantial theoretical implications of its decommissioning. This research in progress draws on the broader notion of ‘exit’ and ‘barriers to exit’ to position the decommissioning of working IT systems in a wider theoretical framework. It seeks to develop a sound conceptualization of IT exit and its barriers by analyzing the exit literature from related business disciplines. The conceptualization identifies IT exit as multi-phased longitudinal process with extensible transition points. This refined understanding will provide the basis for an impending empirical investigation that identifies specific IT-specific barriers to exit and their impact on individual phases in the IT exit journey. The steps of this forthcoming investigation are outlined

The Theorem of Proportionality in Mainstream Capital Theory: An Assessment of its Conceptual Foundations

It is ascertained that the theorem of proportionality, which maintains that replacement investment is a constant proportion of the outstanding capital stock, has several fundamental shortcomings. It derives from a model founded on assumptions that are highly restrictive and unlikely to hold in reality. It is alien to the thinking of researchers in industrial organization and other neighboring fields to economics that treat the durability of capital goods as a choice variable. It ignores several thorny conceptual and methodological issues and, perhaps most important, it may have restrained seriously the progress towards developing models based on more realistic approaches of production. However, despite its shortcomings, the theorem continues to dominate mainstream capital theory, most probably because of: a) its simplicity, and b) the lack of a model that might yield a better theorem in terms of standard criteria, like explanatory and predictive power, simplicity, fruitfulness, etc. For this reason attention is drawn to recent research which shows that a model centered on the heterogeneous structure of capital and the useful lives of its components is both feasible and exceedingly rich in theoretical and empirical implications

The Theorem of Proportionality in Mainstream Capital Theory: An Assessment of its Conceptual Foundations

It is ascertained that the theorem of proportionality, which maintains that replacement investment is a constant proportion of the outstanding capital stock, has several fundamental shortcomings. It derives from a model founded on assumptions that are highly restrictive and unlikely to hold in reality. It is alien to the thinking of researchers in industrial organization and other neighboring fields to economics that treat the durability of capital goods as a choice variable. It ignores several thorny conceptual and methodological issues and, perhaps most important, it may have restrained seriously the progress towards developing models based on more realistic approaches of production. However, despite its shortcomings, the theorem continues to dominate mainstream capital theory, most probably because of: a) its simplicity, and b) the lack of a model that might yield a better theorem in terms of standard criteria, like explanatory and predictive power, simplicity, fruitfulness, etc. For this reason attention is drawn to recent research which shows that a model centered on the heterogeneous structure of capital and the useful lives of its components is both feasible and exceedingly rich in theoretical and empirical implications

After-sales service competition in a supply chain: Does uncertainty affect the conflict between profit maximization and customer satisfaction?

After-sales services are a key strategic tool in the durable consumer product market. They allow a manufacturer and a retailer to capture more sales and profit. Less obvious, however, is how the uncertainty of the customer\u27s needs for after-sales services influences after-sales service decisions. As an extension of Kurata and Nam\u27s 2010 (International Journal of Production Economics 127 (1), 136–146) work, in this paper we explore the effect of uncertainty on after-sales service decisions by comparing several information structures in a two-stage supply chain. The model presented in this paper demonstrates that uncertainty may temporally alleviate the discrepancy between customers’ optimal service level and a firm\u27s service decisions based on maximizing profits (referred to here as accidental outperformance). However, ultimately, uncertainty will never improve supply chain performance. We determine probabilities that such accidental outperformance may mislead the firm into making erroneous after-sales service decisions due to misunderstandings regarding uncertainty. In addition, our analysis shows that a firm\u27s effort to provide efficient service operations will increase the chance of accidental outperformance. Based on the analytical results, we also provide several practical insights for business