This article examines the transmission of world coffee prices to the price received by Ugandan coffee growers by means of Directed Acyclic Graphs which reveal the flow of information from the spot indicator price to the London futures price and then to the growers' price. A positive shock in the futures and indicator prices has respectively a positive and negative effect on the growers' price, and Forecast Error Variance Decomposition shows that uncertainty is attributable to own price, London futures price, and indicator price, in rank order. The article recommends that the Ugandan Coffee Development Authority should provide information on both futures and indicator prices to the growers.
This article describes how entrepreneurs face critical risks in terms of quality control and knowledge management while outsourcing software development to independent service providers. First, it is recommended that lump-sum payment contracts should be avoided since software development project involves uncertainty. Instead, a variable payment contingent on observed quality can induce the service provider to exert optimal effort on the project. Second, entrepreneurs must not overlook the importance of providing economic incentives. They can protect their intellectual property by withholding critical knowledge and paying information rents in terms of higher than market wages to the service providers. Third, a startling result is that a low wage nation is not necessarily the optimal location to outsource software development projects. Thus, high wage-strong IPR nations might be chosen instead of low wage-weak IPR nations. Finally, the article explains the apparent paradox that software projects are often outsourced to locations that are characterized by weak intellectual property rights regime and high propensity of imitation.
Optimism bias is a consistent feature associated with truck toll forecasts, à la Standard & Poor's and the NCHRP synthesis reports. Given the persistent problem, two major sources of this bias are explored. In particular, the ignorance of operating cost as a demand-side factor and lack of attention to user heterogeneity are found to contribute to this bias. To address it, stochastic dominance analysis is used to assess the risk associated with toll revenue forecasts. For a hypothetical corridor, it is shown that ignorance of operating cost savings can lead to upward bias in the threshold value of time distribution. Furthermore, dominance analysis demonstrates that there is greater risk associated with the revenue forecast when demand heterogeneity is factored in. The approach presented is general and can be applied to all toll forecasts and is not restricted to trucks.
Firms organize business activities either in-house or outsource them to independent service providers. When making their organizational choice, firms face a trade-off between efficiency and loss of intellectual property (IP) when outsourcing. It is found that companies may gain from outsourcing even if there is possibility of IP misappropriation and moral hazard due to shirking. It is recommended that firms use a variable payment scheme linked to project outcome that would incentivize service providers to exert optimal effort in outsourcing projects. Moreover, when a task is outsourced in a weak IP regime, the optimal contract must implement a carrot and stick strategy comprising of limited IP sharing in conjunction with adequate incentive payments to the service provider.
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