Breaking the Cycle: How the News and Markets Created a Negative Feedback Loop in COVID-19
New research from CBS Professor Harry Mamaysky reveals how negativity in the news and markets can escalate a financial crisis.
New research from CBS Professor Harry Mamaysky reveals how negativity in the news and markets can escalate a financial crisis.
Adapted from “Global Value Chains in Developing Countries: A Relational Perspective from Coffee and Garments,” by Laura Boudreau of Columbia Business School, Julia Cajal Grossi of the Geneva Graduate Institute, and Rocco Macchiavello of the London School of Economics.
Adapted from “Online Advertising as Passive Search,” by Raluca M. Ursu of New York University Stern School of Business, Andrey Simonov of Columbia Business School, and Eunkyung An of New York University Stern School of Business.
This paper from Columbia Business School, “Meaning of Manual Labor Impedes Consumer Adoption of Autonomous Products,” explores marketing solutions to some consumers’ resistance towards autonomous products. The study was co-authored by Emanuel de Bellis of the University of St. Gallen, Gita Johar of Columbia Business School, and Nicola Poletti of Cada.
Co-authored by John B. Donaldson of Columbia Business School, “The Macroeconomics of Stakeholder Equilibria,” proposes a model for a purely private, mutually beneficial financial agreement between worker and firm that keeps decision-making in the hands of stockholders while improving the employment contract for employees.
At Columbia Business School, our faculty members are at the forefront of research in their respective fields, offering innovative ideas that directly impact the practice of business today. A quick glance at our publication on faculty research, CBS Insights, will give you a sense of the breadth and immediacy of the insight our professors provide.
As a student at the School, this will greatly enrich your education. In Columbia classrooms, you are at the cutting-edge of industry, studying the practices that others will later adopt and teach. As any business leader will tell you, in a competitive environment, being first puts you at a distinct advantage over your peers. Learn economic development from Ray Fisman, the Lambert Family Professor of Social Enterprise and a rising star in the field, or real estate from Chris Mayer, the Paul Milstein Professor of Real Estate, a renowned expert and frequent commentator on complex housing issues. This way, when you complete your degree, you'll be set up to succeed.
Columbia Business School in conjunction with the Office of the Dean provides its faculty, PhD students, and other research staff with resources and cutting edge tools and technology to help push the boundaries of business research.
Specifically, our goal is to seamlessly help faculty set up and execute their research programs. This includes, but is not limited to:
All these activities help to facilitate and streamline faculty research, and that of the doctoral students working with them.
If an investor wants to form a portfolio of risky assets and can exert effort to collect information on the future value of these assets before he invests, which assets should he learn about? The best assets to acquire information about are ones the investor expects to hold. But the assets the investor holds depend on the information he observes. We build a framework to solve jointly for investment and information choices, with general preferences and information cost functions.
We examine how cheap talk communication between managers within the same firm depends on the type of decisions that the firm makes. A firm consists of a headquarters and two operating divisions. Headquarters is unbiased but does not know the demand conditions in the divisions’ markets. Each division manager knows the demand conditions in his market but is also biased towards his division. The division managers communicate with headquarters, which then sets either the prices or quantities for each division.
Infinitely repeated games is the pre-dominant paradigm within which economists study long-term strategic interaction. The standard framework allows players to condition their strategies on all past actions; that is, assumes that they have unbounded memory. That is clearly a convenient simplification that is at odds with reality. In this paper we restrict attention to one-period memory and characterize all totally mixed equilibria. In particular, we focus on strongly mixed equilibria. We provide conditions that are necessary and sufficient for a game to have such an equilibrium.
Organized groups face a fundamental problem of how to distribute resources fairly. We found people view it as less fair to distribute resources equally when the allocated resource invokes the market by being a medium of exchange than when the allocated resource is a good that holds value in use. These differences in fairness can be attributed to being a medium of exchange, and not to other essential properties of money (i.e., being a unit of account or a store of value).
After decades of research highlighting the fallibility of first impressions, recent years have featured reports of valid impressions based on surprisingly limited information, such as photos and short videos. Yet beneath mean levels of accuracy lies tremendous variance—some snap judgments are well-founded, others wrongheaded. An essential question for perceivers, therefore, is whether and when to trust their initial intuitions about others.
Why companies have had difficulties determining marketing ROI and how they should approach evaluating marketing ROI. (Reprinted from Columbia Ideas at Work, "Many Happy Returns on Marketing," 8/31/2009, pp. 1-2.)
Identity movements rely on a shared "we-feeling" amongst a community of participants. In turn, such shared identities are possible when movement participants can self-categorize themselves as belonging to one group. We address a debate as to whether community diversity enhances or impedes such protests, and investigate the role of racial diversity since it is a simple, accessible, and visible basis of community diversity and social categorization.
Financial crises appear to be a common and fairly constant feature of the economic cycle. Banking crises, a distinct subset of financial crises, consist either of panics, moments of temporary confusion about the unobservable incidence across the financial system of observable aggregate shocks, or severe waves of bank failures which result in aggregate negative net worth of failed banks in excess of one percent of GDP.
Using data on repurchase agreements by primary securities dealers, we show that three classes of securities (Treasury securities, securities issued by government-sponsored agencies, and mortgage-backed securities) can be formally ranked in terms of their collateral values in the general collateral (GC) market.
The intensity of modern business has increased pressure for innovation, which places greater emphasis on creativity. This article explores one of the central sites of creativity in the American corporate world, the advertising agency. We examine how creativity in agencies is managed, controlled, and channeled to produce advertisements. We contend that the brand advertised and the agency’s creative collaborations have properties of ritual symbols and that rituals mediate tension inherent in two forces, stability and change, which define the brand and the advertising collaboration.
The authors test methods, based on cognitively simple decision rules, that predict which products consumers select for their consideration sets. Drawing on qualitative research, the authors propose disjunctions-of-conjunctions (DOC) decision rules that generalize well-studied decision models, such as disjunctive, conjunctive, lexicographic, and subset conjunctive rules. They propose two machine-learning methods to estimate cognitively simple DOC rules. They observe consumers' consideration sets for global positioning systems for both calibration and validation data.
This article examines how managers' tendency to discuss new ideas with others in their professional networks depends on the density of shared ties surrounding a given relationship. Consistent with prior research which found that embeddedness enhances information flow, an egocentric network survey of mid-level executives shows that managers tend to discuss new ideas with those who are densely embedded in their professional networks. More specifically, embeddedness increases the likelihood to discuss new ideas by engendering affect-based trust, as opposed to cognition-based trust.
This article examines how managers' tendency to discuss new ideas with others in their professional networks depends on the density of shared ties surrounding a given relationship. Consistent with prior research which found that embeddedness enhances information flow, an egocentric network survey of mid-level executives shows that managers tend to discuss new ideas with those who are densely embedded in their professional networks. More specifically, embeddedness increases the likelihood to discuss new ideas by engendering affect-based trust, as opposed to cognition-based trust.
Marketing research and advertising strategic planning offer viable and financially attractive career options for anthropologists because many businesses seek deep understandings of consumer lifestyles and brand use. As professionally trained anthropologists operating in the corporate world, we see a bright future for anthropologists, but we believe that there are merits in broadening the typical anthropological approach to incorporate additional theory and methods from other social and behavioral sciences, particularly psychology.
It is now widely accepted that the institutional interventions of states are a foundational influence on the dynamics of organizational forms. But why do states act? In this paper, we apply the behavioral theory of the firm to develop an explanation of state actions based on the fact that they are boundedly rational rivals. The instrument of state competition we examine is the founding of business incubators, a primary tool in the entrepreneurial strategy of economic development.
Although established money managers operate in an environment which seems competitive, they also seem to be very profitable. The present value of the expected future profits from managing a collection of funds is equal to the value of the assets under management multiplied by the profit margin, assuming that the managed funds will remain in business forever, and that there will be zero asset flow into and out of the funds, zero excess returns net of trading costs, a fixed management fee proportional to the assets under management and a fixed profit margin for the management company.
The new challenges that the 21st century brings to the field of marketing competition inspired the International Journal of Research in Marketing (IJRM) to sponsor a special section on the topic. This special section was preceded by a conference at the University of Mainz, co-sponsored by IJRM, MSI, SMU (Singapore) and the University of Mainz.
Five marked evolutions around the turn of the century present new challenges in marketing competition, which may lead to particularly fruitful streams of research.
Particle learning (PL) provides state filtering, sequential parameter learning and smoothing in a general class of state space models. Our approach extends existing particle methods by incorporating the estimation of static parameters via a fully-adapted filter that utilizes conditional sufficient statistics for parameters and/or states as particles. State smoothing in the presence of parameter uncertainty is also solved as a by-product of PL. In a number of examples, we show that PL outperforms existing particle filtering alternatives and proves to be a competitor to MCMC.
The preferred risk habitat hypothesis, introduced here, is that individual investors select stocks whose volatilities are commensurate with their risk aversion. The data, 1995-2000 holdings of over 20,000 clients at a large German broker, are consistent with the predictions of the hypothesis: the portfolios contain highly similar stocks in terms of volatility, when stocks are sold they are replaced by stocks of similar volatilities, and the more risk averse customers indeed hold and trade into less volatile stocks.
During a conversation, it is common for a speaker to describe a third-party that the listener does not know. These professed impressions not only shape the listener's view of the third-party but also affect judgments of the speaker herself. We propose a previously unstudied consequence of professed impressions: judgments of the speaker's power. In two studies, we find that listeners ascribe more power to speakers who profess impressions focusing on a third-party's conscientiousness, compared to those focusing on agreeableness.
As we contemplate the raft of regulatory reforms currently being proposed, it is important not only to consider the content of regulation, but also its structure. In particular, it is important to ask how the role of the Fed as a regulator should change, and how the targets and the tools of monetary and regulatory policy should adapt to new regulatory mandates. For example, some reform proposals envision a dramatic expansion of Fed regulatory authority, while others do not, and some proposals envision the Fed's using monetary policy to prick asset bubbles, while others do not.
Active investors provide entrepreneurs with risk-sharing and value-adding effort, e.g., in form of advising, networking and monitoring. However, holdup problems may create a conflict between two key objectives for high-quality entrepreneurs: to elicit investor effort and to credibly signal their firm type by retaining shares. As a result, pooling of startup firms of different types may arise, in particular when investor effort is essential. More established firms, with access to multiple signals, can always realize both of these objectives.
The fields of statistics and econometrics have developed powerful methods for testing the validity (specification) of a model based on its fit to underlying data. Unlike statisticians, managers are typically more interested in the performance of a decision rather than the statistical validity of the underlying model. We propose a framework and a statistical test that incorporates decision performance into a measure of statistical validity. Under general conditions on the objective function, asymptotic behavior of our test admits a sharp and simple characterization.
The fields of statistics and econometrics have developed powerful methods for testing the validity (specification) of a model based on its fit to underlying data. Unlike statisticians, managers are typically more interested in the performance of a decision rather than the statistical validity of the underlying model. We propose a framework and a statistical test that incorporates decision performance into a measure of statistical validity. Under general conditions on the objective function, asymptotic behavior of our test admits a sharp and simple characterization.
Hospital ambulance diversions are prevalent and increasing nationwide as emergency departments experience growing congestion. Using negative binomial regressions, this paper links the number of acute myocardial infarction (AMI) deaths to the level and extent of diversion in the five boroughs of New York City. The results indicate that both high levels of ambulance diversion and simultaneous diversion across hospitals are associated with increasing numbers of deaths from AMI.
The banking legislation of the 1930s took very little time to pass, was unusually comprehensive, and unusually responsive to public opinion. Ironically, the primary motivations for the main bank regulatory reforms in the 1930s (Regulation Q, the separation of investment banking from commercial banking, and the creation of federal deposit insurance) were to preserve and enhance two of the most disastrous policies that contributed to the severity and depth of the Great Depression — unit banking and the real bills doctrine.
Paid placements on search engines reached sales of nearly $11 billion in the United States last year and represent the most rapidly growing form of online advertising today. In its classic form, a search engine sets up an auction for each search word in which competing websites bid for their sponsored links to be displayed next to the search results.
Wal-Mart has increasingly become the target of protests over its scale, manifested as contention over specific expansions. Often, the protests are local and led by local organizations, and as a result, chains face uncertainty whether local activists will organize a protest. We suggest that chain stores respond to this uncertainty through a "test for protest" approach. They use low-cost probes that take the form of proposals to open a store.
Although established money managers operate in an environment which seems com- petitive, they also seem to be very profitable. The present value of the expected future profits from managing a collection of funds is equal to the value of the assets under management times the profit margin, assuming that the managed funds will remain in business forever, zero asset flow into and out of the funds, zero excess returns net of trading costs, fixed management fee proportional to the assets under management and a fixed profit margin for the management company.
We characterize the equilibrium behavior in a broad class of competition models in which the competing firms' market shares are given by an attraction model, and the aggregate sales in the industry depend on the aggregate attraction value according to a general function. Each firm's revenues and costs are proportional with its expected sales volume, with a cost rate that depends on the firm's chosen attraction value according to an arbitrary increasing function.
Consumers learn quality of many durable products through word-of-mouth information while firms launch new and improved products frequently in these markets. This paper examines firm incentives to invest in R&D to compete for patents in markets where consumers rely on word-of-mouth information and have expectations about the new products before launch. When its loss due to a possible entry is above a threshold, an incumbent has more incentives than a potential entrant to invest in R&D for patents.
We consider a single product revenue management problem where, given an initial inventory, the objective is to dynamically adjust prices over a finite sales horizon to maximize expected revenues. Realized demand is observed over time, but the underlying functional relationship between price and mean demand rate that governs these observations (otherwise known as the demand function or demand curve), is not known.
We consider a single product revenue management problem where, given an initial inventory, the objective is to dynamically adjust prices over a finite sales horizon to maximize expected revenues. Realized demand is observed over time, but the underlying functional relationship between price and mean demand rate that governs these observations (otherwise known as the demand function or demand curve), is not known.
We analyze a planning model for a firm or public organization that needs to cover uncertain demand for a given item by procuring supplies from multiple sources. The necessity to employ multiple suppliers arises from the fact that when an order is placed with any of the suppliers, only a random fraction of the order size is usable. The model considers a single demand season with a given demand distribution, where all supplies need to be ordered simultaneously before the start of the season.
We consider a revenue maximizing make-to-order manufacturer that serves a market of price and delay sensitive customers and operates in an environment in which the market size varies stochastically over time. A key feature of our analysis is that no model is assumed for the evolution of the market size. We analyze two main settings: i) the size of the market is observable at any point in time; and ii) the size of the market is not observable and hence cannot be used for decision-making.
We consider a revenue maximizing make-to-order manufacturer that serves a market of price and delay sensitive customers and operates in an environment in which the market size varies stochastically over time. A key feature of our analysis is that no model is assumed for the evolution of the market size. We analyze two main settings: i) the size of the market is observable at any point in time; and ii) the size of the market is not observable and hence cannot be used for decision-making.
The silver lining effect predicts that segregating a small gain from a larger loss results in greater psychological value than does integrating them into a smaller loss. Using a generic prospect theory value function, we formalize this effect and derive conditions under which it should occur. We show analytically that if the gain is smaller than a certain threshold, segregation is optimal. This threshold increases with the size of the loss and decreases with the degree of loss aversion of the decision maker.
The silver lining effect predicts that segregating a small gain from a larger loss results in greater psychological value than does integrating them into a smaller loss. Using a generic prospect theory value function, we formalize this effect and derive conditions under which it should occur. We show analytically that if the gain is smaller than a certain threshold, segregation is optimal. This threshold increases with the size of the loss and decreases with the degree of loss aversion of the decision maker.
We investigate how making highly consequential, highly undesirable decisions affects emotions and preference for autonomy. We examine individuals facing real or hypothetical decisions to discontinue their infants' life support who either choose personally or have physicians choose for them. Findings from a multidisciplinary approach consisting of a qualitative analysis of in-depth interviews and three laboratory studies reveal that perceived personal causality for making tragic decisions generates more negative feelings than having the same choices externally made.
Long-term brand value depends on how well a firm understands and recognises the potential of a brand, as well as how well a firm capitalises on that brand potential in the marketplace. Realising this potential, in turn, depends on maximising long-term brand persistence and growth. Brand persistence comes from current customers maintaining their spending on the brand; brand growth results from current customers increasing their spending and from new customers being attracted to the brand in the future.
In this paper, I use anecdotal evidence and logical reasoning to suggest that, despite the use of an extensive database, it is not possible to conclude that passage of the Sarbanes Oxley Act did not have an impact on companies' delisting decisions. Moreover, the instrumental variables used to proxy for SOX effects are too weak and suffer from a significant endogeneity problem given that passage of SOX was driven by many of the economic and control problems that are used to control for market and company factors.
Health is a major component of well-being and quality of life (QOL) and an increasingly costly one. We examine the role of employers for promoting QOL. A meta-analysis examines the impact of fifty well-being programs, which address six health issues and use seven marketing approaches. The analysis indicates that well-being programs and marketing approaches significantly improve employee health and depend on company size and employee gender. Results, based on sixty studies, show there is significant opportunity to efficiently tailor corporate health programs.
Donald E. Sexton, PhD, a professor of marketing at Columbia University and president of The Arrow Group, Ltd., discusses one key way to link marketing activity to financial performance.
This paper studies the value of external commitment to policy reforms in the case of WTO/GATT accessions. The accessions often entail reforms that go beyond narrowly defined trade liberalization, and have to overcome fierce resistance in the acceding countries, as reflected in protracted negotiations. We study the growth and investment consequences of WTO/GATT accessions, with attention to a possible selection bias. We find that the accessions tend to raise income, but only for those countries that were subject to rigorous accession procedures.
We develop a model for the competitive interactions in service industries where firms cater to multiple customer classes or market segments with the help of shared service facilities or processes so as to exploit pooling benefits. Different customer classes typically have distinct sensitivities to the price of service as well as the delays encountered.
Cross-selling is becoming an increasingly prevalent practice in call centers, due, in part, to its unique capability to allow firms to dynamically segment their callers and customize their product offerings accordingly. This paper considers a call center with cross-selling capability that serves a pool of customers that are differentiated in terms of their revenue potential and delay sensitivity. It studies the operational decisions of staffing, call routing, and cross-selling under various forms of customer segmentation.
The diffusion of an innovation is governed by, among other things, word of mouth. In social systems, growth processes are considered strongly influenced by people who have large number of ties to other people. In the social network literature, such people are called influentials, opinion leaders, mavens, or sometimes hubs. Furthermore, when the marketing literature addresses such people, the focus is typically not on how they influence the overall market but rather on either assessing their influence on people they are in direct contact with or identifying their characteristics.
We develop a competitive pricing model which combines the complexity of time-varying demand and cost functions and that of scale economies arising from dynamic lot sizing costs. Each firm can replenish inventory in each of the T periods into which the planing horizon is partitioned. Fixed as well as variable procurement costs are incurred for each procurement order, along with inventory carrying costs. Each firm adopts, at the beginning of the planning horizon, a (single) price to be employed throughout the horizon.
This research investigates hypotheses about differences between Chinese and American managers in the configuration of trusting relationships within their professional networks. Consistent with hypotheses about Chinese familial collectivism, an egocentric network survey found that affect- and cognition-based trust were more intertwined for Chinese than for American managers. In addition, the effect of economic exchange on affect-based trust was more positive for Chinese than for Americans, whereas the effect of friendship was more positive for Americans than for Chinese.