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The precise choice of the local time at 0 for a Bessel process with dimension d ∈ ]0,2[ plays some role in explicit computations or limiting results involving excursion theory for these processes. Starting from one specific choice, and deriving the main related formulae, it is shown how the various multiplicative constants corresponding to other choices made in the literature enter into these formulae.

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The relationship of managerial bonuses and profit maximization is interesting both from an economic and a managerial viewpoint. Our contribution to this literature is showing that progressive managerial bonuses can increase profits in a spatial Bertrand competition, and furthermore they can help collusion.

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In this article, we study the effect of disutility of consumers who do not buy certain durable goods at the present time with income variations on the behaviour over time of prices in the context of a Durable Goods Monopoly facing a continuous demand. If consumers do not foresee future changes in their income, price always decreases. However, greater disutility contributes to softening the price fall in the present, never reaching marginal cost at that moment. Consumers’ perspective for future changes to income has two major implications: 1) the durable goods monopoly, depending on disutility, can set a price equal to marginal cost at the present time if the perspective is for income growth in the future, something which never happens if reduced income is foreseen; and 2) it increases the tendency of a rise in price depending on disutility. We conclude that a price rise may be obtained for quite small disutility when the predicted increase in income is moderate and for moderate disutility, when the predicted increase in income is high.

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Literature on firms’ entry and exit decisions provides empirical evidence that industries with many exits also have many entries. We present a paper that merges some different approaches to the entry and exit of firms and which proposes a new method for looking at the entrepreneurial decision. Our model theoretically supports what empirical evidence has shown and holds; that databases are not yet developed enough to understand the whole exit process. We demonstrate that the possibility of recovering some share of investment costs makes entry more than just a production decision. Within a defined time horizon, a firm can enter the market despite making a loss from production output since the firm’s return consists of both sales and investment cost recovery. Entry may be the optimal strategy even when the unit cost is higher than the market price.

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The article introduces a research that examined the impact of family on the cooperation of individual family members in family-owned businesses by applying a theoretical framework based on family therapy, family business research and social value research. Firstly, it presents a model based on blending family therapy and social research on the individual’s value preferences with the aim of exploring the internal structure of this family effect. It also shows a possible family business consulting method in order to observe and handle the dynamics of this internal structure. Then, testing of the described model and consulting method is conducted by multiple-embedded case study research. Based on the results, refining statements are formulated regarding the applicability of family therapy in family business consulting and social value research.

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The soft budget constraint

An introductory study to volume IV of the Life’s Work series

Acta Oeconomica
Author: János Kornai

The author’s ideas on the soft budget constraint (SBC) were first expressed in 1976. Much progress has been made in understanding the problem over the ensuing four decades. The study takes issue with those who confine the concept to the process of bailing out loss-making socialist firms. It shows how the syndrome can appear in various organizations and forms in many spheres of the economy and points to the various means available for financial rescue. Single bailouts do not as such generate the SBC syndrome. It develops where the SBC becomes built into expectations. Special heed is paid to features generated by the syndrome in rescuer and rescuee organizations. The study reports on the spread of the syndrome in various periods of the socialist and the capitalist system, in various sectors. The author expresses his views on normative questions and on therapies against the harmful effects. He deals first with actual practice, then places the theory of the SBC in the sphere of ideas and models, showing how it relates to other theoretical trends, including institutional and behavioural economics and theories of moral hazard and inconsistency in time. He shows how far the intellectual apparatus of the SBC has spread in theoretical literature and where it has reached in the process of “canonization” by the economics profession. Finally, he reviews the main research tasks ahead.

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During the last decades numerous studies have pointed out that good quality goods and satisfied customers are not the only two ingredients in the strive for profitability; it is rather the issue of loyal customers and loyalty that need to be placed in focus. What is loyalty and how can it be measured? Is there a general model, or are there various factors influencing customer behaviour and attachment? In which factors does the measurement of loyalty have validity and is it worth to apply these for organisations enjoying a monopolistic market position? The paper seeks to find answers to these questions, and besides exploring the theoretical background it also presents the findings of an empirical study of the loyalty of customers in the energy sector in Hungary. This study shows that this particular market consists of customers of various attitudes, which means that in order to study their loyalty different marketing methods are needed.

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Small and medium-sized enterprises (SMEs) have been the target of supportive government policies since economic transformation began in Hungary although the birth of a strong and healthy layer of SMEs has not been observed in the country up to now. In this article the issue of why this has not happened is addressed. Empirical evidence suggested that Hungarian SMEs are not usually driven by the corporate values of Max Weber’s “protestant ethics”; instead, they aim at short-term financial enrichment. Hungarian SMEs cannot usually “climb the ladder” and turn into large enterprises – indeed, their survival period is relatively short.

Nickell (1996) argued that (total factor) productivity rather than profitability would reflect a company’s efficiency level. Using frontier production and frontier profit functions there is an attempt here to prove that “technical (or allocative) efficiency” and “profit efficiency” both have a distinct role to play in explaining a firm’s economic performance; and by applying limited information maximum likelihood models of SME profit gaps it will be shown that cost inefficiencies and unfavourable market conditions — alongside the inefficient allocation of factors of production — inevitably lead to the fairly low level of SME profitability.

The most important finding of the analysis is that employment has been a crucial factor in explaining the profit deviation of companies. Building on the results of Köllő (2001) the article argues that SMEs regard labour as flexible stock. Companies will seek out new labour if they find new market opportunities — but until these appear, they tend to remain in the arena of diminishing returns, this being the easiest way for them to maximise profits. Downgraded production activities do not attract substantial external financing. Yet a lack of financial resources when new market opportunities do emerge will prevent an SME from exploiting the chance.

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Competitiveness is defined at the level of firms, clusters, regions, and nations. Although researchers have extensively explored the concept of competitiveness in each of these respective categories, an understanding of the relationship between levels of competitiveness is lacking. The simple aggregation of indicators to approximate broader categories of competitiveness is challenged as a robust solution. This paper proposes an alternative solution to aggregating firm-level competitiveness, based on the profit—growth nexus. Using data collected from SMEs in two ICT clusters, the size— profit—growth relationships were tested. Based on 83 Hungarian and 71 Australian responses, positive relationships were found in both samples, demonstrating high cluster-level competitiveness. It is argued that this outcome better represents cluster-level competitiveness based on firm-level data, than other — linear and additive — aggregation methods. However, a comparative examination of the data across the clusters showed significant differences between the results of the two samples, ascertaining limitations for the generalisability of the results.

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The basic institutions and legal frames of a market economy were established quite quickly after the regime change in East-Central Europe, including Hungary. But there has been a much slower change in the behaviour of economic actors. The purpose of the research was to show the extent to which the competitive attitude and the cooperative behaviour both essential to market economies have developed in the nearly two decades since the regime change.* Are the actors in the economy capable of a positive response to the appearance of foreign competitors, or has the old, anti-competitive attitude still been prevailing? How is the behaviour of the competitors influenced by state intervention? The answers to these questions are based on 71 semi-structured interviews and on their comparison to the data of some international surveys. In the paper we were searching for links between the picture developing from the interviews and the age of the interviewees, the market position and the size of their firms.

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