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.

Social citizenship, housing wealth and the cost of social care: is the Care Act 2014 'Fair'?

This article assesses the extent to which it is ‘fair’ for the government to require owner-occupiers to draw on the equity accumulated in their home to fund their social care costs. The question is stimulated by the report of the Commission on Funding of Care and Support, Fairer Care Funding (the Dilnot Commission) and the subsequent Care Act 2014. The enquiry is located within the framework of social citizenship and the new social contract. It argues that the individualistic, contractarian approach, exemplified by the Dilnot Commission and reflected in the Act, raises questions when considered from the perspective of intergenerational fairness. We argue that our concerns with the Act could be addressed by inculcating an expectation of drawing on housing wealth to fund older age: a policy of asset-based welfare.

Do consumers want public or private bodies to monitor animal friendly production and marketing schemes? And does trust matter?

Producing according to enhanced farm animal welfare (FAW) standards increases costs along the livestock value chain, especially for monitoring certified animal friendly products. In the choice between public or private bodies for carrying out and monitoring certification, consumer preferences and trust play a role. We explore this issue by applying logit analysis involving socio-economic and psychometric variables to survey data from Italy. Results identify marked consumer preferences for public bodies and trust in stakeholders a key determinant.

Strategic trade policy, competition, and welfare: the case of voluntary export restraints between Britain and Japan (1971–2002)

I evaluate the voluntary export restraint placed on Japanese automobile exports from 1977 to 1999 by the UK. I show that the policy failed to assist the British domestic car industry. Instead, UK-based US multi-nationals and Japanese manufacturers were the primary beneficiaries, at a substantial cost to UK consumers. Whilst there are a number of caveats, the policy was on balance damaging to the UK economy in welfare terms.

Risks, costs and labour markets: explaining cross-national patterns of far right party success in European Parliament elections

What is the impact of the economy on cross national variation in far right-wing party support? This paper tests several hypotheses from existing literature on the results of the last three EP elections in all EU member states. We conceptualise the economy affects support because unemployment heightens the risks and costs that the population faces, but this is crucially mediated by labour market institutions. Findings from multiple regression analyses indicate that unemployment, real GDP growth, debt and deficits have no statistically significant effect on far right-wing party support at the national level. By contrast, labour markets influence costs and risks: where unemployment benefits and dismissal regulations are high, unemployment has no effect, but where either one of them is low, unemployment leads to higher far right-wing party support. This explains why unemployment has not led to far right-wing party support in some European countries that experienced the 2008 Eurozone crisis.

Consumer attitudes to injurious pecking in free range egg production

Free range egg producers face continuing problems from injurious pecking (IP) which has financial consequences for farmers and poor welfare implications for birds. Beak trimming has been practised for many years to limit the damage caused by IP, but with the UK Government giving notification that they intend to ban beak trimming in 2016, considerable efforts have been made to devise feasible housing, range and management strategies to reduce IP. A recent research project investigated the efficacy of a range of IP reducing management strategies, the mean costs of which came to around 5 pence per bird. Here, the results of the above project’s consumer survey are presented: consumers’ attitudes to free range egg production are detailed showing that, whilst consumers had a very positive attitude towards free range eggs, they were especially uninformed about some aspects of free range egg production. The contingent valuation technique was used to estimate the price premium consumers would be prepared to pay to ensure that hens do not suffer from IP: this was calculated as just over 3% on top of the prevailing retail price of free range eggs. These findings reinforce other studies that have found that whilst consumers are not generally well-informed about certain specific welfare problems faced by animals under free range conditions, they are prepared to pay to improve animal welfare. Indeed, the study findings suggest that producers could obtain an additional price premium if they demonstrate the welfare provenance of their eggs, perhaps through marketing the eggs as coming from birds with intact beaks. This welfare provenance issue could usefully be assured to consumers by the introduction of a mandatory, single, accredited EU-wide welfare-standards labelling scheme.

Mobile phones and radios: effects on transactions costs and market participation for households in Northern Ghana

The literature on agricultural markets suggests that transactions costs are the main obstacles preventing households from participating in agricultural markets. We examine the impact of the recent massive penetration of information communication technologies (ICTs), particularly mobile phones and radios, in developing countries to investigate the role of information in economic transactions and participation in food crop markets. To fully capture market participation behaviours, the current theoretical framework on market participation and transactions costs is extended to include those households that sell and buy in the same time period. We correct for endogeneity and selectivity throughout our models. We used a novel dataset of 393 households in northern Ghana with detailed information on market transactions and ICTs usage. Results show that receiving market information via mobile phones has a positive and significant impact on market participation, with a greater impact for households with a surplus of food crops. We find that radios have a larger impact on the quantity traded. This may reflect the nature of mobile phones in reducing searching costs, whereas radios provide an updated and regular flow of information which affects the pattern of crops consumed and sold. We also emphasise that the most significant factor is how ICTs are used, rather than their ownership.

From warfare to welfare: veterans, military charities and the blurred spatiality of post-service welfare in the United Kingdom

The military offers a form of welfare-for-work but when personnel leave they lose this safety net, a loss exacerbated by the rollback neoliberalism of the contemporary welfare state. Increasingly the third sector has stepped in to address veterans’ welfare needs through operating within and across military/civilian and state/market/community spaces and cultures. In this paper we use both veterans’ and military charities’ experiences to analyse the complex politics that govern the liminal boundary zone of post-military welfare. Through exploring ‘crossing’ and ‘bridging’ we conceptualise military charities as ‘boundary subjects’, active yet dependent on the continuation of the civilian-military binary, and argue that the latter is better understood as a multidirectional, multiscalar and contextual continuum. Post-military welfare emerges as a competitive, confused and confusing assemblage that needs to be made more navigable in order to better support the ‘heroic poor’.

Agribusiness Opportunity Costs and Environmental Legal Protection: Investigating Trade-Off on Hotspot Preservation in the State of So Paulo, Brazil

Prior to deforestation, So Paulo State had 79,000 km(2) covered by Cerrado (Brazilian savanna) physiognomies, but today less than 8.5% of this biodiversity hotspot remains, mostly in private lands. The global demand for agricultural goods has imposed strong pressure on natural areas, and the economic decisions of agribusiness managers are crucial to the fate of Cerrado domain remaining areas (CDRA) in Brazil. Our aim was to investigate the effectiveness of Brazilian private protected areas policy, and to propose a feasible alternative to promote CDRA protection. This article assessed the main agribusiness opportunity costs for natural areas preservation: the land use profitability and the arable land price. The CDRA percentage and the opportunity costs were estimated for 349 municipal districts of So Paulo State through secondary spatial data and profitability values of 38 main agricultural products. We found that Brazilian private protected areas policy fails to preserve CDRA, although the values of non-compliance fines were higher than average opportunity costs. The scenario with very restrictive laws on private protected areas and historical high interest rates allowed us to conceive a feasible cross compliance proposal to improve environmental and agricultural policies.

Improved Road Design for Future Maintenance - Analysis of Road Barrier Repair Costs

The cost of a road construction over its service life is a function of the design, quality of construction, maintenance strategies and maintenance operations. Unfortunately, designers often neglect a very important aspect which is the possibility to perform future maintenance activities. The focus is mainly on other aspects such as investment costs, traffic safety, aesthetic appearance, regional development and environmental effects. This licentiate thesis is a part of a Ph.D. project entitled “Road Design for lower maintenance costs” that aims to examine how the life-cycle costs can be optimized by selection of appropriate geometrical designs for the roads and their components. The result is expected to give a basis for a new method used in the road planning and design process using life-cycle cost analysis with particular emphasis on road maintenance. The project started with a review of literature with the intention to study conditions causing increased needs for road maintenance, the efforts made by the road authorities to satisfy those needs and the improvement potential by consideration of maintenance aspects during planning and design. An investigation was carried out to identify the problems which obstruct due consideration of maintenance aspects during the road planning and design process. This investigation focused mainly on the road planning and design process at the Swedish Road Administration. However, the road planning and design process in Denmark, Finland and Norway were also roughly evaluated to gain a broader knowledge about the research subject. The investigation was carried out in two phases: data collection and data analysis. Data was collected by semi-structured interviews with expert actors involved in planning, design and maintenance and by a review of design-related documents. Data analyses were carried out using a method called “Change Analysis”. This investigation revealed a complex combination of problems which result in inadequate consideration of maintenance aspects. Several urgent needs for changes to eliminate these problems were identified. Another study was carried out to develop a model for calculation of the repair costs for damages of different road barrier types and to analyse how factors such as road type, speed limits, barrier types, barrier placement, type of road section, alignment and seasonal effects affect the barrier damages and the associated repair costs. This study was carried out using a method called the “Case Study Research Method”. Data was collected from 1087 barrier repairs in two regional offices of the Swedish Road Administration, the Central Region and the Western Region. A table was established for both regions containing the repair cost per vehicle kilometre for different combinations of barrier types, road types and speed limits. This table can be used by the designers in the calculation of the life-cycle costs for different road barrier types.