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We analyze contract choices, loan-repayment behavior, and welfare in a model of a competitive credit market when borrowers have a taste for immediate gratification. Consistent with many credit cards and subprime mortgages, for most types of nonsophisticated borrowers the baseline repayment terms are cheap, but they are also inefficiently front loaded and delays require paying large penalties. Although credit is for future consumption, nonsophisticated consumers overborrow, pay the penalties, and back load repayment, suffering large welfare losses. Prohibiting large penalties for deferring small amounts of repayment-akin to recent regulations in the US credit-card and mortgage markets-can raise welfare.

Copyright © 2012 by the American Economic Association.

To date, few firms have used a customer-focused approach to serve the world's poorest people - a full two-thirds of the world's total population at the so-called 'bottom of the economic pyramid' (BOP). Much more prevalent has been a mass-produced approach that assumes that the poor in developing economies can only afford basic, cheap products emphasising functionality. In this classic product approach, often little more is done than push existing or barely adapted products onto shantytown dwellers and rural villagers. Consequently, real value that opens up new market spaces for companies and produces longer-term value for the customer has been lost. Our research reveals that contemporary enterprises that have taken the leap to the customer-focused way of doing business in the developing world grow markets and their stake in them, outperforming traditional enterprise and industry product approaches. The crucial steps in this approach are becoming better known but deserve much more attention.

© 2010 London Business School

In our paper, the target of a proposed merger, by setting a reserve price, is able to screen prospective acquirers according to their (expected) ability to generate merger-specific synergies. Both empirical evidence and many merger models suggest that the difference between high and low-synergy mergers becomes smaller during booms. Thus, a target's opportunity cost for sorting out relatively less fitting acquirers increases and, hence, targets screen less tightly during booms, which leads to a hike in merger activity. Our screening mechanism not only predicts that merger activity is intense during booms and subdued during recessions but is also consistent with other stylized facts about takeovers and generates novel testable predictions.

© The Author 2011. Published by Oxford University Press on behalf of The Review of Economic Studies Limited.

Anna Frisch has tried to initiate change at Aesch AG, a large global provider of medical devices for the healthcare industry. As marketing director, she has identified major shifts in German healthcare that demand that Aesch changes its ways of approaching customers. Instead of targeting the specific needs of doctors in hospitals, Aesch should rather address the new decision makers: the CEOs, CFOs, or CIOs of hospitals, who have a different buying logic. In Aesch's matrix organization (global product responsibility, supported by regional sales) Anna wants to convince the heads of marketing for the different product businesses to change. She seems to be able to quickly convince her colleagues of what she calls "C-level marketing." However, as soon as work is supposed to start, she realizes that commitments were less strong than she assumed. A few weeks later, Anna is clearly told that there will be no support for her.
The short case study is set when Anna realizes the failure of her change initiative. The case discussion allows analyzing and discussing various mistakes in the areas of:
-defining an attractive vision and strategy,
-reading and playing the organizational culture, power and politics,
-communicating a change initiative successfully,
-managing the stakeholders.
The case is supported by a 6-minute video showing Anna reflecting on the events, her analysis of failure, and her personal preferences as of December 2008.

We study a two-player dynamic investment model with information externalities and provide necessary and sufficient conditions for a unique switching equilibrium. Within this setup, we ask whether policymakers should interfere when better informed agents make individual investment decisions. We find that when the public information is sufficiently high and a social planer therefore expects an investment boom, investments should be taxed. Conversely, any positive investment tax is suboptimally high if the public information is sufficiently unfavorable. We also show that an investment tax may increase overall investment activity.

The hedonic value of an outcome can be influenced by the alternatives to which it is
compared, which is why people expect to be happier with outcomes that maximize
comparative value (e.g., the best of several mediocre alternatives) than with outcomes
that maximize absolute value (e.g., the worst of several excellent alternatives). The
results of five experiments suggest that affective forecasters overestimate the importance
of comparative value because forecasters do not realize that comparison requires
cognitive resources, and that experiences consume more cognitive resources than do
forecasts. In other words, because forecasters overestimate the extent to which they will
be able to think about what they didn't get while experiencing what they got.

With permission of Elsevier