Two-way communication costs and the boundaries of the firm

Casson and Wadeson (International Journal of the Economics of Business, 1998, 5, pp. 5-27) have modelled the dialogue, or conversation, which customers have with their suppliers in order to convey their requirements, while taking production implications into account. They showed that this has important implications for the positioning of the boundaries of the firm. Unfortunately, their model has the restriction that communication is only costly in the direction of customer to supplier. This paper extends their model by introducing two-way communication costs. It shows that the level of communication cost in the direction of supplier to customer is a key additional factor in determining the nature of the dialogue that takes place. It also shows that this has important additional implications for the positioning of the boundaries of the firm. Custom computer software development is used as an example of an application of the theory.

Communication costs and the boundaries of the firm

Much has been written about where the boundaries of the firm are drawn, but little about what occurs at the boundaries themselves. When a firm subcontracts, does it inform its suppliers fully of what it requires, or is it willing to accept what they have available? In practice firms often engage in a dialogue, or conversation, with their suppliers, in which at first they set out their general requirements, and only when the supplier reports back on how these can be met are their more specific requirements set out. This paper models such conversations as a rational response to communication costs. The model is used to examine the impact of new information technology, such as CAD/CAM, on the conduct of subcontracting. It can also be used to examine its impact on the marketing activities of firms. The technique of analysis, which is based on the economic theory of teams, has more general applications too. It can be used to model all the forms of dialogue involved in the processes of coordination both within and between firms.

Establishing Lagrangian connections between observations within air masses crossing the Atlantic during the International Consortium for Atmospheric Research on Transport and Transformation experiment

The ITCT-Lagrangian-2K4 (Intercontinental Transport and Chemical Transformation) experiment was conceived with an aim to quantify the effects of photochemistry and mixing on the transformation of air masses in the free troposphere away from emissions. To this end, attempts were made to intercept and sample air masses several times during their journey across the North Atlantic using four aircraft based in New Hampshire (USA), Faial (Azores) and Creil (France). This article begins by describing forecasts from two Lagrangian models that were used to direct the aircraft into target air masses. A novel technique then identifies Lagrangian matches between flight segments. Two independent searches are conducted: for Lagrangian model matches and for pairs of whole air samples with matching hydrocarbon fingerprints. The information is filtered further by searching for matching hydrocarbon samples that are linked by matching trajectories. The quality of these "coincident matches'' is assessed using temperature, humidity and tracer observations. The technique pulls out five clear Lagrangian cases covering a variety of situations and these are examined in detail. The matching trajectories and hydrocarbon fingerprints are shown, and the downwind minus upwind differences in tracers are discussed.

Transport and distribution of lindane and simazine in a riverine environment: measurements in bed sediments and modelling

Aquatic sediments often remove hydrophobic contaminants from fresh waters. The subsequent distribution and concentration of contaminants in bed sediments determines their effect on benthic organisms and the risk of re-entry into the water and/or leaching to groundwater. This study examines the transport of simazine and lindane in aquatic bed sediments with the aim of understanding the processes that determine their depth distribution. Experiments in flume channels (water flow of 10 cm s(-1)) determined the persistence of the compounds in the absence of sediment with (a) de-ionised water and (b) a solution that had been in contact with river sediment. In further experiments with river bed sediments in light and dark conditions, measurements were made of the concentration of the compounds in the overlying water and the development of bacterial/algal biofilms and bioturbation activity. At the end of the experiments, concentrations in sediments and associated pore waters were determined in sections of the sediment at 1 mm resolution down to 5 mm and then at 10 mm resolution to 50 mm depth and these distributions analysed using a sorption-diffusion-degradation model. The fine resolution in the depth profile permitted the detection of a maximum in the concentration of the compounds in the pore water near the surface, whereas concentrations in the sediment increased to a maximum at the surface itself. Experimental distribution coefficients determined from the pore water and sediment concentrations indicated a gradient with depth that was partly explained by an increase in organic matter content and specific surface area of the solids near the interface. The modelling showed that degradation of lindane within the sediment was necessary to explain the concentration profiles, with the optimum agreement between the measured and theoretical profiles obtained with differential degradation in the oxic and anoxic zones. The compounds penetrated to a depth of 40-50 rum over a period of 42 days. (C) 2004 Society of Chemical Industry.

Threshold effects in price transmission: The case of Brazilian wheat, maize, and soya prices

Recent studies into price transmission have recognized the important role played by transport and transaction costs. Threshold models are one approach to accommodate such costs. We develop a generalized Threshold Error Correction Model to test for the presence and form of threshold behavior in price transmission that is symmetric around equilibrium. We use monthly wheat, maize, and soya prices from the United States, Argentina, and Brazil to demonstrate this model. Classical estimation of these generalized models can present challenges but Bayesian techniques avoid many of these problems. Evidence for thresholds is found in three of the five commodity price pairs investigated.

Investment in preventing and preparing for biological emergencies and disasters: social and economic costs of disasters versus costs of surveillance and response preparedness

Biological emergencies such as the appearance of an exotic transboundary or emerging disease can become disasters. The question that faces Veterinary Services in developing countries is how to balance resources dedicated to active insurance measures, such as border control, surveillance, working with the governments of developing countries, and investing in improving veterinary knowledge and tools, with passive measures, such as contingency funds and vaccine banks. There is strong evidence that the animal health situation in developed countries has improved and is relatively stable. In addition, through trade with other countries, developing countries are becoming part of the international animal health system, the status of which is improving, though with occasional setbacks. However, despite these improvements, the risk of a possible biological disaster still remains, and has increased in recent times because of the threat of bioterrorism. This paper suggests that a model that combines decision tree analysis with epidemiology is required to identify critical points in food chains that should be strengthened to reduce the risk of emergencies and prevent emergencies from becoming disasters.

A novel method for the transport and analysis of genetic material from polyps and zooxanthellae of scleractinian corals

We have developed a new simple method for transport, storage, and analysis of genetic material from the corals Agaricia agaricites, Dendrogyra cylindrica, Eusmilia ancora, Meandrina meandrites, Montastrea annularis, Porites astreoides, Porites furcata, Porites porites, and Siderastrea siderea at room temperature. All species yielded sufficient DNA from a single FTA(R) card (19 mug-43 ng) for subsequent PCR amplification of both coral and zooxanthellar DNA. The D1 and D2 variable region of the large Subunit rRNA gene (LSUrDNA) was amplified from the DNA of P. furcata and S. siderea by PCR. Electrophoresis yielded two major DNA bands: an 800-base pair (bp) DNA, which represented the coral ribosomal RNA (rRNA) gene, and a 600-bp DNA, which represented the zooxanthellar srRNA gene. Extraction of DNA from the bands yielded between 290 mug total DNA (S. siderea coral DNA) and 9 mug total DNA (P. furcata zooxanthellar DNA). The ability to transport and store genetic material from scleractinian corals without resort to laboratory facilities in the field allows for the molecular Study of a far wider range and variety of coral sites than have been studied to date. (C) 2003 Elsevier Science B.V. All rights reserved.

Exposing the myth of the 1:5:200 ratio relating initial cost, maintenance and staffing costs of office buildings

In an attempt to focus clients' minds on the importance of considering the construction and maintenance costs of a commercial office building (both as a factor in staff productivity and as a fraction of lifetime staff costs) there is an often-quoted ratio of costs of 1:5:200, where for every one pound spent on construction cost, five are spent on maintenance and building operating costs and 200 on staffing and business operating costs. This seems to stem from a paper published by the Royal Academy of Engineering, in which no data is given and no derivation or defence of the ratio appears. The accompanying belief that higher quality design and construction increases staff productivity, and simultaneously reduces maintenance costs, how ever laudable, appears unsupported by research, and carries all the hallmarks of an "urban myth". In tracking down data about real buildings, a more realistic ratio appears to depend on a huge variety of variables, as well as the definition of the number of "lifetime" years. The ill-defined origins of the original ratio (1:5:200) describing these variables have made replication impossible. However, by using published sources of data, we have found that for three office buildings, a more realistic ratio is 1:0.4:12. As there is nothing in the public domain about what comprised the original research that gave rise to 1:5:200, it is not possible to make a true comparison between these new calculations and the originals. Clients and construction professionals stand to be misled because the popularity and widespread use of the wrong ratio appears to be mis-informing important investment and policy decisions.

EOQ, JIT and fixed costs in the Ready-mixed concrete industry

The successful implementation of just-in-time (JIT) purchasing policy in many industries has prompted many companies that still use the economic order quantity (EOQ) purchasing policy to ponder if they should switch to the JIT purchasing policy. Despite existing studies that directly compare the costs between the EOQ and JIT purchasing systems, this decision is, however, still difficult to be made, especially when price discount has to be considered. JIT purchasing may not always be successful even though plants that adopted JIT operations have experienced or can take advantage of physical space reduction. Hence, the objective of this study is to expand on a classical EOQ with a price discount model to derive the EOQ–JIT cost indifference point. The objective was tested and achieved through a survey and case study conducted in the ready-mixed concrete industry in Singapore.