Publication Type: Conference Paper/Unpublished Manuscript
Abstract: An assumption in traditional economics is that managers do not have social relationships (they are “atomists”). Although unreasonable, this assumption is still considered useful by many economists even without empirical proof, i.e. it is a postulate. In this article we present unique findings of bonds of friendship among managers in rival companies and analyze the impact these relationships have on competition and price setting. The analysis builds on personal interviews of 190 store managers in the clothing business in 18 towns and urban areas throughout Norway.

We report that managers meet often and exchange business information. Many possess information about aspects of their competitors that are not known publicly; for example, the mark-up factor they apply. Most managers have at least tenuous friendships with all local managers of competing stores competitors, while about one out of four managers know each other very well. The postulate in economics that actors are atomistic is therefore refuted.

Furthermore, we find that friendship among managers in competing stores reduce the degree of price competition by between 9 and 15 percent. The empirical material also indicates that strong friendships have more of an effect on reducing the degree of price competition than do weak friendships, and that friendship does not lead to higher prices on local markets.

Publication Type: Conference Paper/Unpublished Manuscript
Abstract: As states seek to maintain and enhance their security in the international system, they often attempt to secure access to strategic resources. When states lack indigenous supplies, they have two broad options to rectify their deficiency: trade and coercion. Trading utilizes a state?s comparative advantages to purchase resources on the open market. Trade relations, however, can change, which adds a level of long-term risk and uncertainty. As a way to mitigate risk, states can employ their coercive capacity to force trades at favorable rates or simply take physical possession of the resource in question. What affects a state?s decision to use force as opposed to trade? How do these changes in state behavior affect the international system? One important factor is price. As the price of a resource increases, the long-term benefits of owning it increases as well as the costs associated with trade, which increases the incentive of states to substitute coercion for trade. Examining the pattern of systemic violence (both wars and militarized interstate disputes) from 1816 to 2000, this study finds that periods of high prices experience increased amounts of international violence. In addition, the analyses find a concurrent drop in international trade when prices are high as states substitute coercion for trade.

Publication Type: Student Paper
Review Method: Peer Reviewed
Abstract: We explore the theoretical and numerical application of local regular-
ization methods to an inverse problem rising from financial option pricing.
Our purpose is to find the volatility function from noisy call option prices.
This is an important problem not only in theory but also for practitioners
working in the financial world. However, it has been shown that finding
the volatility function from option prices is an ill-posed inverse problem.
That is, very small noise in the observed data will lead to huge deviation
in the solution (instability). Whenever faced with ill-posed problems due
to instability, we need to apply some regularization methods in order to
stabilize the problem. However, the existing methods such as Tikhonov
regularization, do not take the special structure (causal structure) of this
option pricing problem into consideration which leads to nontrivial com-
putational costs. In this paper, we apply local regularization to the option
pricing problem. In addition, we discretize the problem and show our re-
sults through numerical examples.

Publication Type: Conference Paper/Unpublished Manuscript
Abstract: Retailers normally use price promotion strategies to drive consumer traffic. In this paper two price promotion Strategies are studied -Price Matching Guarantees (PMG) and Everyday Low Prices (EDLP)- in terms of their effects on the Consumer’s Process of Perception and Search Behavior. Results suggest that both strategies increase the Low Prices Perception and Purchase Intention. However, if both strategies are compared, EDLP dominates over PMG. On the other hand, when consumers receive 2 or more signals (Price Promotion Strategies) instead of one (EDLP or PMG), they reduce their purchase intentions for a specific store and increase search intentions. The results are then consistent with signaling theory, and as suggested signals´ effects (e.g. price promotion strategies) diminish with the number of signals that consumers receive.

Publication Type: Conference Paper/Unpublished Manuscript
Review Method: Peer Reviewed
Abstract: Following the embeddedness literature, I address the problem of negotiated order in price setting practice. I treat price as an artifact that firm members construct in response to their perceptions of the position of their firm against competing firms. Following recent work in the sociology of work, I demonstrate how the situated activities and roles shape the interests and understandings of price among firm members. Those different understandings and interests lead to different definitions of price and customer and different approaches to shared goals. When the firm members need to reduce prices, these differences lead to a dispute over how to reduce prices. The firm members use the different solutions to define the value of other firm members. I argue that rather than eliminate the problem of social order between organizations, the price system depends on the negotiated order within the organization. That order is in turn shaped by the logic of efficiency behind the price system. Price theory endures because it serves as a rational myth which individuals can use to shape their perceived value in the firm. I illustrate the argument using qualitative data from a two-year study of the pricing practice at a Midwest industrial manufacturer.