...Overview Combined water and sewer rates in Portland, Oregon are among the highest in the United States. A 2007 survey by Black & Veatch put Portland No. 1 on the list of 50 largest cities water and wastewater survey and No. 6 in 2010.[1] A proposed five year rate increases which started in July, 2011 by the Portland Water Bureau is likely to push Portland's water bills significantly above the average for the 50 largest U.S cities. Portland's combined water and sewer bill would likely total $346 by the year 2015.[2] Quarterly bills for typical residential customers have risen from $74 to $84 in July 2011 following a 13% increase by the Portland Water Bureau.[3] These spiking increases are as a result of a Federal regulation by the Environmental Protection Agency effective 2014 which requires drinking water sources to be guarded against the chlorine-resistant parasite, cryptosporidium which Public Water Bureau of Portland believe to be non-existent in the pristine waters of the Bull Run. About 25 percent of the water rate increases is tied to the Environmental Protection Agency's mandates that Portland deal with cryptosporidium which the City of Portland initially contested but lost. The argument of Portland city authorities is that the city’s water which is drawn from the pristine Bull Run watershed which is pure and clean and does not need any expensive treatment to eliminate any pathogens which evidently is not present in the water.[4] The EPA is however not taking any...
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...The Nature of Risk Preferences: Evidence from Insurance Choices Levon Barseghyany Francesca Molinari Cornell University Cornell University Ted O’ Donoghue Joshua C. Teitelbaum Cornell University Georgetown University July 21, 2010 Abstract We use data on households’ deductible choices in auto and home insurance to estimate a structural model of risky choice that incorporates "standard" risk aversion (concave utility over …nal wealth), loss aversion, and nonlinear probability weighting. Our estimates indicate that nonlinear probability weighting plays the most important role in explaining the data. More speci…cally, we …nd that standard risk aversion is small, loss aversion is nonexistent, and nonlinear probability weighting is large. When we estimate restricted models, we …nd that nonlinear probability weighting alone can better explain the data than standard risk aversion alone, loss aversion alone, and standard risk aversion and loss aversion combined. Our main …ndings are robust to a variety of modeling assumptions. JEL classi…cations: D01, D03, D12, D81, G22 Keywords: deductible, loss aversion, probability weighting, risk aversion We are grateful to Darcy Steeg Morris for excellent research assistance. For helpful comments, we thank Matthew Rabin as well as seminar and conference participants at Berkeley, UCLA, the Second Annual Behavioral Economics Conference, the Summer 2010 Workshop on Behavioral/Institutional Research and Financial...
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...Revere Street Working Paper Series Financial Economics 272-18 Mean-Variance Analysis versus Full-Scale Optimization Out of Sample First Version: November 11, 2005 This Draft: December 13, 2005 Timothy Adler Windham Capital Management, LLC 5 Revere Street Cambridge, MA 02138 617 234-9459 tadler@windhamcapital.com Abstract For three decades, mean-variance analysis has served as the standard procedure for constructing portfolios. Recently, investors have experimented with a new optimization procedure, called full-scale optimization, to address certain limitations of mean-variance optimization. Specifically, mean-variance optimization assumes that returns are normally distributed or that investor preferences are well approximated by mean and variance. Full-scale optimization relies on sophisticated search algorithms to identify the optimal portfolio given any set of return distributions and based on any description of investor preferences. Full-scale optimization yields the truly optimal portfolio in sample, whereas the mean-variance solution is an approximation to the insample truth. Both approaches to portfolio formation, however, suffer from estimation error. Mean-variance analysis requires investors to estimate the means and variances of all assets and the covariances of all asset pairs. To the extent the out-of-sample experience of these parameters departs from the in-sample parameter values, the mean-variance approximation will be even less accurate. Full-scale optimization...
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...Revere Street Working Paper Series Financial Economics 272-18 Mean-Variance Analysis versus Full-Scale Optimization Out of Sample First Version: November 11, 2005 This Draft: December 13, 2005 Timothy Adler Windham Capital Management, LLC 5 Revere Street Cambridge, MA 02138 617 234-9459 tadler@windhamcapital.com Abstract For three decades, mean-variance analysis has served as the standard procedure for constructing portfolios. Recently, investors have experimented with a new optimization procedure, called full-scale optimization, to address certain limitations of mean-variance optimization. Specifically, mean-variance optimization assumes that returns are normally distributed or that investor preferences are well approximated by mean and variance. Full-scale optimization relies on sophisticated search algorithms to identify the optimal portfolio given any set of return distributions and based on any description of investor preferences. Full-scale optimization yields the truly optimal portfolio in sample, whereas the mean-variance solution is an approximation to the insample truth. Both approaches to portfolio formation, however, suffer from estimation error. Mean-variance analysis requires investors to estimate the means and variances of all assets and the covariances of all asset pairs. To the extent the out-of-sample experience of these parameters departs from the in-sample parameter values, the mean-variance approximation will be even less accurate. Full-scale optimization...
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...CHAPTER 2 ECONOMISTS’ VIEW OF BEHAVIOR CHAPTER SUMMARY This chapter uses the cheating scandal at Merrill Lynch to illustrate how a manager’s view of behavior can affect decision making. It summarizes the economic view of behavior and contrasts it with other views. The chapter presents a graphical analysis of utility maximization and decision making under uncertainty. The concepts in this chapter are an important foundation for subsequent material in the book. CHAPTER OUTLINE ECONOMIC BEHAVIOR: AN OVERVIEW Economic Choice Marginal Analysis Managerial Application: Marginal Analysis of Customer Profitability Opportunity Costs Managerial Application: Opportunity Costs and V-8 Creativity of Individuals Managerial Application: Creative Gaming of the System GRAPHIC TOOLS Individual Objectives Indifference Curves Constraints Individual Choice Changes in Choice MOTIVATING HONESTY AT MERRILL LYNCH MANAGERIAL IMPLICATIONS Managerial Application: Medicare Creates Perverse Incentives for Doctors ALTERNATIVE MODELS OF BEHAVIOR Only-Money-Matters Model Happy-Is-Productive Model Managerial Application: Happy-Is-Productive versus Economic Explanations of the Hawthorne Experiments Good-Citizen Model Managerial Application: Culture and Behavior Product-of-the-Environment Model WHICH MODEL SHOULD MANAGERS USE? ...
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...ISSN 0378-5254 Journal of Family Ecology and Consumer Sciences, Vol 31, 2003 The importance of apparel product attributes for female buyers Ernest J North, Retha B de Vos and T Kotzé OPSOMMING Die doel van hierdie artikel is om die bevindinge van ‘n empiriese ondersoek te rapporteer wat uitgevoer is om vroulike verbruikers se aankoopbesluite vir ‘n kledingstuk te ontleed wat gebaseer is op die waarde wat hulle aan sekere eienskappe van die produk heg. Alhoewel menige studies in die verlede verbruikers se houdings jeens produkte en hul eienskappe gemeet het, is die moontlikheid van die effek van interaksie tussen die attribute oorgesien. In die Suid-Afrikaanse konteks het die literatuurstudie getoon dat daar ‘n behoefte is aan ‘n studie om te bepaal wat die waarde is wat vroulike verbruikers aan sekere produkeienskappe heg voordat aankoopbesluite gefinaliseer word. ‘n Vraelysopname is as primêre data-insamelingsmetode gebruik waartydens die respondente versoek is om aan te toon wat hul voorkeure is vir dertig gepaarde kombinasies van die produk en sy eienskappe. Hierdie studie het op vier eienskappe, naamlik handelsmerk, styl, kleinhandelaar en prys gefokus. Hipoteses is geformuleer en voorkeurkeuse-ontleding (“conjoint analysis”) is vir die ontleding van data gebruik. Die bevindinge toon aan dat daar beduidende verskille is in die waardes wat vroulike verbruikers heg aan die eienskappe van ‘n kledingstuk voordat aankoopbesluite geneem word. INTRODUCTION Although the apparel...
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...Choice Modeling: Marketing Engineering Technical Note 1 Table of Contents Introduction Description of the Multinomial Logit (MNL) Model Properties of the MNL Model S-shaped response function Inverted “U” Marginal response Elasticity of response Proportional Draw Logit Model Estimation via Maximum Likelihood Using Logit Models for Customer Targeting Using Logit Models for Customer Segmentation Determining the number of latent segments in MNL models Summary References Introduction Firms today have access to increasing amounts of market response data at the level of individual customers, including data from scanner panels, direct marketing efforts, online retailing, loyalty programs, and the like. These data include both the marketing effort directed at a customer (e.g., price discount, or specific email sent to that customer) and the associated specific behaviors (e.g., purchase, customer support) of that customer. Consequently, there is also increasing interest among marketers in developing and using response models specified at the individual level. Analyses of individual-level data are useful for firms even for making decisions about aggregate marketing actions, such as TV advertising. After all, markets are composed of individuals, and acknowledging This technical note is a supplement to the materials in Chapter 1,2, and 7 of Principles of Marketing Engineering, by Gary L. Lilien, Arvind Rangaswamy, and Arnaud De Bruyn (2007). © (All rights reserved) Gary L. Lilien...
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...C H A P T E R 5 Uncertainty and Consumer Behavior CHAPTER OUTLINE 5.1 Describing Risk S o far, we have assumed that prices, incomes, and other variables are known with certainty. However, many of the choices that people make involve considerable uncertainty. Most people, for example, borrow to finance large purchases, such as a house or a college education, and plan to pay for them out of future income. But for most of us, future incomes are uncertain. Our earnings can go up or down; we can be promoted or demoted, or even lose our jobs. And if we delay buying a house or investing in a college education, we risk price increases that could make such purchases less affordable. How should we take these uncertainties into account when making major consumption or investment decisions? Sometimes we must choose how much risk to bear. What, for example, should you do with your savings? Should you invest your money in something safe, such as a savings account, or something riskier but potentially more lucrative, such as the stock market? Another example is the choice of a job or career. Is it better to work for a large, stable company with job security but slim chance for advancement, or is it better to join (or form) a new venture that offers less job security but more opportunity for advancement? To answer such questions, we must examine the ways that people can compare and choose among risky alternatives. We will do this by taking the following steps: 1. In order to compare the riskiness...
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...Theory of the Firm: Managerial Behavior, Agency Costs and Ownership Structure Michael C. Jensen Harvard Business School MJensen@hbs.edu And William H. Meckling University of Rochester Abstract This paper integrates elements from the theory of agency, the theory of property rights and the theory of finance to develop a theory of the ownership structure of the firm. We define the concept of agency costs, show its relationship to the ‘separation and control’ issue, investigate the nature of the agency costs generated by the existence of debt and outside equity, demonstrate who bears costs and why, and investigate the Pareto optimality of their existence. We also provide a new definition of the firm, and show how our analysis of the factors influencing the creation and issuance of debt and equity claims is a special case of the supply side of the completeness of markets problem. The directors of such [joint-stock] companies, however, being the managers rather of other people’s money than of their own, it cannot well be expected, that they should watch over it with the same anxious vigilance with which the partners in a private copartnery frequently watch over their own. Like the stewards of a rich man, they are apt to consider attention to small matters as not for their master’s honour, and very easily give themselves a dispensation from having it. Negligence and profusion, therefore, must always prevail, more or less, in the management of the affairs of such a company. — Adam Smith...
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...[pic] Ecole Supérieure Libre des Sciences Commerciales Appliquées Review of Literature Behavioral Finance Presented to Dr. Mohamed EL-Hennawy Group Assignment Prepared By Albert Naguib Noha Samir Wael Shams EL-Din Moshira Gamil Marie Zarif January 2012 | TABLE OF CONTENTS | | | |List of Table………………………………………………………………………….. | |List of Figure ………………………………………………………………………… | |List of Abbreviations/Acronyms ……………………………………………………. | |Introduction……………………………………………………………………….. | |2. Appearance of Behavioral Finance…………………………………………………… | |2.1. Important Contributors…………………………………………………. ………. | |3. Behavioral Biases…………………………………………………………………… ...
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...Theory of the Firm: Managerial Behavior, Agency Costs and Ownership Structure Michael C. Jensen Harvard Business School MJensen@hbs.edu And William H. Meckling University of Rochester Abstract This paper integrates elements from the theory of agency, the theory of property rights and the theory of finance to develop a theory of the ownership structure of the firm. We define the concept of agency costs, show its relationship to the ‘separation and control’ issue, investigate the nature of the agency costs generated by the existence of debt and outside equity, demonstrate who bears costs and why, and investigate the Pareto optimality of their existence. We also provide a new definition of the firm, and show how our analysis of the factors influencing the creation and issuance of debt and equity claims is a special case of the supply side of the completeness of markets problem. The directors of such [joint-stock] companies, however, being the managers rather of other people’s money than of their own, it cannot well be expected, that they should watch over it with the same anxious vigilance with which the partners in a private copartnery frequently watch over their own. Like the stewards of a rich man, they are apt to consider attention to small matters as not for their master’s honour, and very easily give themselves a dispensation from having it. Negligence and profusion, therefore, must always prevail, more or less, in the management of the affairs of such a company. — Adam Smith...
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...Decision and Risk Analysis for the evaluation of Strategic Options The process of evaluating and selecting options is complicated involving high stakes, a mount of diverse and dispersed data, multiple and conflicting objectives, uncertainty regarding the future and different stakeholders have different views and considerations. Strategy evaluation is a complex social-technical process=>decision and risk analysis is a powerful way to approach it. Understanding the decision situation Tool: scenarios planning, SWOT/TOWS analysis. The identification and develop fundamental objectives is typically informed by setting “strategic direction and goals “ element of the strategic development process. tool: use value tree (top down approach or bottom up approach: start from the attributes and them identify the objectives) associated attribute should be specified, three types of attributes: Quantitative direct ,Quantitative indirect, Qualitative attributes. Each attribute should follow five properties: Comprehensive: the upper and lower limits of attributes are well specified. Otherwise it will distort out trade-off When building a value tree, fundamental objectives must follow the following properties: Preferential independence: Sometimes, it’s difficult to avoid preferential independence. A practical way of dealing with preferential dependence is to redefine the objectives, usually aggregating two dependent objectives into single one. Notice also that statistical...
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...P(Dome)=0.6, P(+|Dome)=0.99, P(-|No Dome)=0.85 Therefore, P(No Dome)=0.4, P(-|Dome)=0.01, P(+|No Dome)=0.15 P(Dome|+)= P(+|Dome )x P(Dome)/ P(+|Dome )x P(Dome)+ P(No Dome|+) x P(No Dome)= =(0.99 x 0.6)/(0.99 x 0.6)+ (0.15 x 0.4)=0.9083 P(Dome|-)= P(-|Dome )x P(Dome)/ P(-|Dome )x P(Dome)+ P(No Dome|-) x P(No Dome)= (0.01 x 0.6)/(0.01 x 06)+(0.85 x 0.4)=0.0173 P(DRY|dome)=P(Dry)+P(Dome)/P(dome)= If the test has positive result P(dry)=P(dry|dome +) x P(dome +)+ P(dry|No dome +) x P(No dome|+)= =(0.6 x 0.9083)+(0.85 x0.092)=0.54498+0.0782=0.6232 P(Low)= P(Low|dome +) x P(dome +)+ P(Low|No dome +) x P(No dome|+) (0.25 x 0.9083)+(0.125x0.092)=0.227075+0.0115=0.2386 P(High)= P(High|dome +) x P(dome +)+ P(High|No dome +) x P(No dome|+) (0.15 x 0.9083)+(0.025x0.092)=0.136245+0.0023=0.1385 EMV Site 1=0.6232 x (-100)+0.2386 x150+0.1385x500=-62.32+35.79+69.25=42.72 EMV Site 2= 0.2x(-200)+0.8x50=0 If the test has positive result Site 1 should be selected. If the test has negative result: Pr(No dome|-)= 1-0.0173= Pr(Dry)= Pr(dry|dome -) x Pr(dome -)+ Pr(dry|No dome -) x Pr(No dome|-)= =(0.6 x 0.0173)+(0.85 x 0.9827)=0.01038+0.835295=0.8457 Pr(Low)= Pr(Low|dome -) x Pr(dome -)+ Pr(Low|No dome -) x Pr(No dome|-)= =(0.25x 0.0173)+(0.125x0.9827)=0.004325+0.1228375=0.1272 Pr(High)= Pr(High|dome -) x Pr(dome -)+ Pr(High|No dome -) x Pr(No dome|-)= =(0.15x0.0173)+(0.025x0.9827)=0.002595+0.0245675=0.0272 EMV Site 1= 0.8457x(-100)+0.1272x 150+0.0272x500=-84...
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...a group’s opinion. Usually there are consumer expectations that help guide the normative price. For example, how many times have you heard that, ‘my water bill is too high!” This interaction between positive price and normative price is an ongoing phenomenon and of particular interest to marketers who attempt to create and sustain customer satisfaction. d. Competition and Competitors’ pricing strategies Third, if the firm functions in a market where there are many competitors offering similar products, the firm may not have a choice about what level price to seek. thus, we first assess buyers’ perception of how much they would expect to pay for a product or service based on the utility (or usefulness) they would expect to derive from product or service and combine these individual utility functions to create a demand curve for the product in question. The % of a consumer’s income allocated to spending on the good – goods and services that take up a high proportion of a household’s...
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...Running head: The VARK Analysis Paper The VARK Analysis Paper June 9, 2012 The VARK Analysis Paper The VARK questionnaire was created by Neil Fleming who taught about teaching and learning. VARK is an acronym for Visual, Aural, Read/Write, Kinesthetic. This survey can bring awareness to people about different learning strategies by offering simple information on studying tips. This analysis paper will focus on Sylvia Arias’s learning style, preferred learning style, and identified learning style using the VARK questionnaire. Learning Styles Sylvia’s current learning style is to read the learning material over and over until she understands it. When she does not know a word’s meaning, she uses an on-line dictionary and thesaurus for reference. If she does not understand the reading material after reviewing it several times, she will refer to the internet to look up other learning sources pertaining to the subject that may explain in a simpler way. Memorization has been a learning style of Sylvia’s but will only last temporarily. If she writes down what she is learning with notes and key words, this helps her to remember her subject material and it will be stored in her brain. In nursing school she studied by making note cards with pictures that was helpful for her. Tape recording class lectures and listening while driving or at home has been another learning style. Preferred Learning Strategy Sylvia’s preferred learning...
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