Do business density and variety determine retail performance?

Outlet location plays a crucial role in retail strategy. In this paper we study the relationship between spatial density (concentration) of retailers in the trade area and their economic performance. This analysis will help managers figure out the economic potential of starting a retail business in a given area, reducing business start-up risks. We find that retail businesses located in high and low retail density zones enjoy higher performance levels, consistent with competitive advantage arising from agglomeration economies and local market power respectively. We also find that retail businesses located in intermediate density areas use a differentiation strategy based on business variety (diversification across stores). Outlets located in areas with the highest variety enjoy performance levels similar to those achieved in the agglomeration and low density areas. The results suggest that retail companies should jointly consider variety and density to determine location

Optimal duration of magazine promotions

The planning of promotions and other marketing events frequently requires manufacturers to make decisions about the optimal duration of these activities. Yet manufacturers often lack the support tools for decision making. We assume that customer decisions at the aggregated level follow a state-dependent Markov process. On the basis of the expected economic return associated with dynamic response to stimuli, we determine the ideal length of marketing events using dynamic programming optimization and apply the model to a complex promotion event. Results suggest that this methodology could help managers in the publishing industry to plan the optimal duration of promotion event

Magazine sales promotion : a dynamic response analysis

This paper studies the impact and effectiveness of a type of non-price promotion often used in the European periodical magazines industry to stimulate sales, in which a value pack is sold containing the magazine issue plus another product. Magazines are sold simultaneously with and without promotion at different prices, and promotions are serialized by fractioning the additional product across different issues of the magazine. We find that promoted magazines contemporarily cannibalize non-promoted sales; but this loss is compensated by a medium term increase of non-promoted sales. These results show that this sales promotion strategy is an effective way to diminish the decline rate of periodical sales

Computing continuous-time growth models with boundary conditions via wavelets

This paper presents an algorithm for approximating the solution of deterministic/stochastic continuous-time growth models based on the Euler's equation and the transversality conditions. The main issue for computing these models is to deal efficiently with the boundary conditions associated. This approach is a wavelets-collocation method derived from the finite-iterative trapezoidal approach. Illustrative examples are give

Valuation of boundary-linked assets

This article studies the valuation of boundary-linked assets and their derivatives in continuous-time markets. Valuing boundary-linked assets requires the solution of a stochastic differential equation with boundary conditions, which, often, is not Markovian. We propose a wavelet-collocation algorithm for solving a Milstein approximation to the stochastic boundary problem. Its convergence properties are studied. Furthermore, we value boundary-linked derivatives using Malliavin calculus and Monte Carlo methods. We apply these ideas to value European call options of boundary-linked asset

Worst-case estimation and asymptotic theory for models with unobservables

This paper proposes a worst-case approach for estimating econometric models containing unobservable variables. Worst-case estimators are robust against the adverse effects of unobservables. In contrast to the classical literature, there are no assumptions about the statistical nature of the unobservables in a worst-case estimation. This method is robust with respect to the unknown probability distribution of the unobservables and should be seen as a complement to standard methods, as cautious modelers should compare different estimations to determine robust models. The limit theory is obtained. A Monte Carlo study of finite sample properties has been conducted. An economic application is included

The relative richness of the poor? natural resources, human capital, and economic growth

Are natural resources a blessing or a curse? The authors present a model in which natural resources have a positive effect on the level of income and a negative effect on its growth rate. The positive and permanent effect on income implies a welfare gain. There is a growth effect stemming from a composition effect. However, the authors show that this effect can be offset by having a large level of human capital. They test their model using panel data for the period 1970-90. They extend the usual specifications for economic growth regressions by incorporating an interaction term between human capital and natural resources, showing that high levels of human capital may outweigh the negative effects of the natural resource abundance on growth. The authors also review the historical experience of Scandinavian countries, which in contrast to Latin America, another region well-endowed with natural resources, shows how it is possible to grow fast based on natural resources.Capital Markets and Capital Flows,Economic Theory&Research,Decentralization,Environmental Economics&Policies,Banks&Banking Reform,Economic Theory&Research,Environmental Economics&Policies,Economic Growth,Inequality,Governance Indicators

The Relative Richness of the Poor? Natural Resources, Human Capital and Economic Growth

What is the role of natural resources in economic performance? Are there any special conditions in which natural resources can act as the engine of growth? Are natural resources a curse? In this paper we present a model where natural resources have a positive effect on level of income and a negative effect on its growth rate. However, we show that this effect can be ameliorated by having a large level of human capital. We test our model using panel data for the period 1970-1990. We extend the usual specifications for economic growth regressions by incorporating an interaction term between human capital and natural resources, showing that countries high levels of human capital may more than offset the negative effects of the natural resource abundance on growth. We also review the historical experience of Scandinavian countries, which in contrast to Latin America, another region well endowed with natural resources, which shows how it is possible to grow fast based on natural resources. Overall the em pirical evidence is consistent with the main predictions of the model.

DO BUSINESS DENSITY AND VARIETY DETERMINE RETAIL PERFORMANCE?

Outlet location plays a crucial role in retail strategy. In this paper we study the relationship between spatial density (concentration) of retailers in the trade area and their economic performance. This analysis will help managers figure out the economic potential of starting a retail business in a given area, reducing business start-up risks. We find that retail businesses located in high and low retail density zones enjoy higher performance levels, consistent with competitive advantage arising from agglomeration economies and local market power respectively. We also find that retail businesses located in intermediate density areas use a differentiation strategy based on business variety (diversification across stores). Outlets located in areas with the highest variety enjoy performance levels similar to those achieved in the agglomeration and low density areas. The results suggest that retail companies should jointly consider variety and density to determine location.