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Article
Publication date: 1 March 2021

Chadwick J. Miller and Daniel C. Brannon

The purpose of this paper is to investigate whether consumers in pre-owned durable goods markets (such as pre-owned automobiles) purchase products with higher premium

Abstract

Purpose

The purpose of this paper is to investigate whether consumers in pre-owned durable goods markets (such as pre-owned automobiles) purchase products with higher premium/luxury positioning in a vertical line-up compared to consumers in new durable goods markets. The moderating role of brand loyalty on choice is also investigated.

Design/methodology/approach

The hypotheses are tested using a data set that includes the sales of new and pre-owned vehicles from an independently owned automotive dealer in the Northwestern USA during the first nine months of 2017 (N = 200). An ordered logit regression is used to estimate the relationship between consumers’ purchase of pre-owned vs new vehicles and the premium-level of the model that they choose, while controlling for the vehicle price. Two experimental robustness tests are conducted to provide empirical evidence of the proposed theoretical process.

Findings

Consumers who purchased pre-owned vehicles chose models with higher premium/luxury positioning compared to consumers who purchased new vehicles, even when controlling for price. This effect was moderated by brand loyalty, such that consumers’ premium-level of purchase was magnified if they previously owned a vehicle of the same brand. The results of an experimental robustness test indicated that consumers’ preference for pre-owned vehicles with higher premium/luxury positioning was because of greater perceptions of the quality along the dimensions of versatility, performance and prestige.

Practical implications

Sellers of complex durable goods (e.g. automobiles) should consider segmenting their upselling strategies for pre-owned vs new products. They should specifically focus more effort on the upselling of pre-owned durables as buyers appear more likely to pursue premium/luxury alternatives compared to new durables. Further, they should focus upselling efforts for pre-owned durables on brand loyal consumers.

Originality/value

To the best of the authors’ knowledge, this work is the first to examine consumers’ desire for pre-owned durable goods with premium/luxury positioning in a vertical product line-up. Further, it is also the first to explore the role of brand loyalty in shaping consumer preferences for premium/luxury pre-owned durable goods. As such, it makes an important contribution to an emerging literature exploring the appeal of premium and luxury pre-owned goods. Much work in this area has focused on the motivations that consumers have for buying pre-owned premium and luxury nondurable goods, such as vintage clothing or accessories. By contrast, the present research investigates the appeal of premium/luxury positioning for complex, pre-owned durable goods (vehicles), which are more difficult for consumers to evaluate at the point-of-purchase.

Details

Journal of Product & Brand Management, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1061-0421

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Article
Publication date: 16 February 2021

Ruohan Wu, Mario Javier Miranda and Meng-Fen Yen

This paper aims to examine how the “wage premium,” the percentage by which wages earned by skilled workers exceed those of unskilled workers, varies across industries…

Abstract

Purpose

This paper aims to examine how the “wage premium,” the percentage by which wages earned by skilled workers exceed those of unskilled workers, varies across industries characterized by different levels of competitiveness.

Design/methodology/approach

A theoretical model employing constant elasticity of substitution (CES) utility function and constant returns to scale production function is developed and analyzed to derive the effects of industry competitiveness on the wage premium. Econometric methods are applied to Chilean manufacturing data to test implications of theoretical model.

Findings

Once the relative factor endowment is being controlled, market competition significantly reduces the wage premium. More specifically, given with the same relative factor endowment, the wage premium is significantly higher under oligopolistic competition than under monopolistic competition. Empirical evidence from Chilean manufacturers supports our theoretical conclusions.

Practical implications

During economic development, the reallocation of production factors from unskilled labor-intensive to skilled labor-intensive industries raises the wage premiums received by skilled workers. Besides, skilled workers will earn higher wages by working in more highly concentrated industries instead of more competitive industries. This needs to be considered by government policymakers who must balance promotion of technical change with prevention of extreme the income inequality.

Originality/value

This paper examines how market structure affects wage premiums, providing new insights into a well-established literature that largely maintains that wage premiums are primarily a function of relative factor endowments or international trade.

Details

Journal of Economic Studies, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 0144-3585

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Article
Publication date: 1 June 2006

Angela J. Black

This paper aims to examine the relationship between the conditional variance of the factors from the Fama–French three‐factor model and macroeconomic risk, where…

Abstract

Purpose

This paper aims to examine the relationship between the conditional variance of the factors from the Fama–French three‐factor model and macroeconomic risk, where macroeconomic risk is proxied by the conditional variance for a default risk premium and real gross domestic product (GDP) growth.

Design/methodology/approach

A generalised autoregressive conditional heteroscedastic model is used to generate the conditional volatilities and bivariate Granger causality tests are used to examine the empirical relationship between the risk measures.

Findings

Past values of the conditional variance for a default risk premium have information that is precedent to the conditional volatility for value premium and the small stock risk premium, and the conditional variance for the market risk premium has information about the future volatility of macroeconomic risk, as proxied by the conditional variance for GDP growth.

Research limitations/implications

The implications are that conditional volatility associated with default is related to current and future volatility in value premium; however, volatility associated with the market risk premium appears to be a predictor of future macroeconomic risk. A caveat is that the results are dependent on the proxies used for macroeconomic risk and more refined measures of macroeconomic risk may yield different results.

Practical implications

This paper suggests that examination of the relationship between the volatility of macroeconomic factors and the explanatory factors in asset‐pricing models will help to further understanding of the relationship between risk and expected return.

Originality/value

This paper focuses directly on the links between risk associated with the Fama–French factors and macroeconomic risk. This added knowledge is beneficial to practitioners and academics whose interest lies in asset price modelling.

Details

Managerial Finance, vol. 32 no. 6
Type: Research Article
ISSN: 0307-4358

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Article
Publication date: 25 May 2010

Sulaiman Mouselli

The aim of this paper is twofold. First, it aims to provide better understanding for the main sources behind the value premium in the UK. Second, given that the value…

Abstract

Purpose

The aim of this paper is twofold. First, it aims to provide better understanding for the main sources behind the value premium in the UK. Second, given that the value factor (HML) in the Fama‐French three‐factor model is itself a proxy for value premium, this paper seeks to illustrate the component of HML responsible for explaining UK portfolio returns.

Design/methodology/approach

For the period July 1991 to June 2006, value premium is broken into two components: one is related to small stocks and the other to big stocks. Then monthly time‐series regressions are used to test which component of value premium provides better explanatory power for UK portfolio returns.

Findings

The empirical results indicate that the value premium in average returns is due to small market capitalization stocks. Moreover, value stocks do not seem riskier than growth stocks according to their market beta. Furthermore, the significance of the value factor (HML) in explaining UK portfolio returns is mainly due to its small stock component (HMLS). The paper suggests a revision for the Fama‐French three‐factor model that replaces HML by HMLS.

Originality/value

Academics are interested in understanding the main sources of value premium and the reasons behind the significance of the value factor in explaining UK portfolio returns. Investors and fund managers who wish to exploit the value premium will tilt their portfolios towards value stocks that have low‐market capitalization. Both academics and practitioners may consider altering the Fama‐French model, as suggested by the paper, when estimating the cost of capital.

Details

The Journal of Risk Finance, vol. 11 no. 3
Type: Research Article
ISSN: 1526-5943

Keywords

Content available
Article
Publication date: 6 January 2021

Szymon Stereńczak

This paper aims to empirically indicate the factors influencing stock liquidity premium (i.e. the relationship between liquidity and stock returns) in one of the leading…

Abstract

Purpose

This paper aims to empirically indicate the factors influencing stock liquidity premium (i.e. the relationship between liquidity and stock returns) in one of the leading European emerging markets, namely, the Polish one.

Design/methodology/approach

Various firms’ characteristics and market states are analysed as potentially affecting liquidity premiums in the Polish stock market. Stock returns are regressed on liquidity measures and panel models are used. Liquidity premium has been estimated in various subsamples.

Findings

The findings vividly contradict the common sense that liquidity premium raises during the periods of stress. Liquidity premium does not increase during bear markets, as investors lengthen the investment horizon when market liquidity decreases. Liquidity premium varies with the firm’s size, book-to-market value and stock risk, but these patterns seem to vanish during a bear market.

Originality/value

This is one of the first empirical papers considering conditional stock liquidity premium in an emerging market. Using a unique methodological design it is presented that liquidity premium in emerging markets behaves differently than in developed markets.

Details

Studies in Economics and Finance, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1086-7376

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Article
Publication date: 8 January 2021

Manabu Miyao

This study aims to provide a comprehensive explanation of the linkage between premium segments and product innovation. While previous literature confirms that product…

Abstract

Purpose

This study aims to provide a comprehensive explanation of the linkage between premium segments and product innovation. While previous literature confirms that product innovation triggers premium segment emergence, and vice versa, there is no satisfactory explanation regarding the underlying mechanisms that drive the mutual shaping of premium segments and product innovation. This paper attempts to address this gap in literature.

Design/methodology/approach

This study employs a cognitive model of technology trajectories and empirically examines the Japanese rice cooker market using a mixed-methods approach. The methods used consist of content analyses of newspaper articles and press releases and case analyses of manufacturers' new product development.

Findings

Content analyses show the emergence of a premium segment within the Japanese rice cooker market as well as a simultaneous change in technology trajectories. Case analyses subsequently reveal the mechanisms that link the premium segment emergence and technology trajectory changes. The analyses also explore this linkage in detail; market actors' technological frames and interpretation processes mediate the mutual shaping of the premium segment and product innovations.

Originality/value

This study presents quantitative evidence indicating the emergence of a premium segment and changes in technology trajectories. It provides a qualitative explanation for the linkage between these two phenomena, which may serve as a viable foundation for future research in premium strategy.

Details

Asia Pacific Journal of Marketing and Logistics, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1355-5855

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Article
Publication date: 5 January 2021

Huy Will Nguyen, Zhu Zhu, Young Hoon Jung and Dong Shin Kim

What determines the level of acquisition premium? This paper aims to investigate the effect of acquirers’ social capital as reflected through their network position…

Abstract

Purpose

What determines the level of acquisition premium? This paper aims to investigate the effect of acquirers’ social capital as reflected through their network position (structural holes and network density) on the level of acquisition premiums.

Design/methodology/approach

This study predicts acquisition premiums using a panel data set of 324 mergers and acquisition (M&A) transactions including 161 unique acquirers over a 21-year timeframe. M&A and alliance information are obtained from the securities data company platinum database; firm financial data are obtained from the COMPUSTAT database.

Findings

The results show that alliance network social capital provides acquiring firms with information benefits, thus, reducing the acquisition premium. However, such information benefits are also contingent on target valuation uncertainty and acquirers’ structure exploitation tendency.

Practical implications

Different types of network structures provide different social capital influences: managers should be aware of their advantages and pitfalls when engaging in M&As. The findings suggest that firms should pay close attention to social capital when making decisions regarding acquisition premiums.

Originality/value

Past research has indicated that acquiring firms tend to overestimate the value of target firms. Still, little attention has been paid to organizational-level social capital in analyzing the determinants of acquisition premiums. This study offers insight into the effect of network structure on M&A acquisition premiums.

Details

Competitiveness Review: An International Business Journal , vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1059-5422

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Article
Publication date: 3 November 2020

Supriya Katti, Naval Verma, B.V. Phani and Chinmoy Ghosh

This study identifies the factors responsible for obtaining price premium on privately placed equity in a developing market.

Abstract

Purpose

This study identifies the factors responsible for obtaining price premium on privately placed equity in a developing market.

Design/methodology/approach

We examine a unique data set of a special case of private placement of equity, Qualified Institutional Placement (QIP) in India purchased at a premium. The study analyzed 188 equity issues offered between September 2006 and December 2014. On average, we find that QIP issues received a price premium of 4.38%. The study employed binary probit and ordinary least square regression models to analyze the probability and magnitude of the premium.

Findings

The study attributes the price premium of QIP to certification effect through group affiliation, signaling through promoters' ownership and monitoring effect through existing institutional investors. These factors influence the probability of premium for QIP issues. However, group affiliation and institutional ownership do not significantly influence the magnitude of the premium.

Originality/value

The private placement of equity is usually offered at a discount. Our findings contribute to the existing literature by evaluating the premium obtained on private placement as a unique scenario in emerging market supported through certification hypothesis, monitoring hypothesis and signaling.

Details

International Journal of Managerial Finance, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1743-9132

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Book part
Publication date: 25 February 2016

Elena Crivellaro

While there has been intense debate in the empirical literature over the evolution of the college wage premium in the United States, its evolution in Europe has received…

Abstract

While there has been intense debate in the empirical literature over the evolution of the college wage premium in the United States, its evolution in Europe has received little attention. This paper investigates the causes of the evolution of the college wage premium in 12 European countries from 1994 to 2009, assessing the relevance of the supply factor as a determinant of the college wage premium. I use cross-country variation in relative supply, demand, and labour market institutions to examine their effects on the trend in wage inequality. I address possible concerns of endogeneity of the relative supply using an IV strategy exploiting the differential legislations of university autonomy and their variations over time. Results show that the strong increase in the relative supply that European countries have experienced has decreased the college wage premium. The most relevant institution is the minimun wage, which significantly decreases college wage premium.

Details

Inequality: Causes and Consequences
Type: Book
ISBN: 978-1-78560-810-0

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Book part
Publication date: 20 March 2007

Joseph Heath

Few issues in business ethics are as polarizing as the practice of risk classification and underwriting in the insurance industry. Theorists who approach the issue from a…

Abstract

Few issues in business ethics are as polarizing as the practice of risk classification and underwriting in the insurance industry. Theorists who approach the issue from a background in economics often start from the assumption that policy-holders should be charged a rate that reflects the expected loss that they bring to the insurance scheme. Yet theorists who approach the question from a background in philosophy or civil rights law often begin with a presumption against so-called “actuarially fair” premiums and in favor of “community rating,” in which everyone is charged the same price. This paper begins by examining and rejecting the three primary arguments that have been given to show that actuarially fair premiums are unjust. It then considers the two primary arguments that have been offered by those who wish to defend the practice of risk classification. These arguments overshoot their target, by requiring a “freedom to underwrite” that is much greater than the level of freedom enjoyed in most other commercial transactions. The paper concludes by presenting a defense of a more limited right to underwrite, one that grants the legitimacy of the central principle of risk classification, but permits specific deviations from that ideal when other important social goods are at stake.

Details

Insurance Ethics for a More Ethical World
Type: Book
ISBN: 978-1-84950-431-7

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