Finance and Pensions & Investments Blog

Why are more expensive air tickets to come the day of travel while theater tickets are sold at half price in Leicester Square the day of the show? In a recent article in the journal Economic Journal, entitled “Advance Purchase Discounts Clearance Sales versus (discounts for advance purchase against settlements), teachers of the Department of Economics UC3M, Marc Möller and Makoto Watanabe, study prices products can be purchased in advance, ie long before the date of consumption itself. Other examples are seasonal products like modern skiing equipment or a place to participate in a marathon.

According to what they have learned in this study, there are two factors determining the optimal planning of prices. On the one hand, when you buy soon, consumers are faced with doubts about their future needs. “When we booked our flight to London weeks before we have to reckon with the possibility that unforeseen circumstances arise that prevent us from traveling to London,” say the authors of the study. “To get consumers to take risks – still – the airlines offer discounts for advance purchase. As a result the price of tickets increases the closer the flight date,” they explain.

The dynamics of the ideal pricing strategy depends on the interaction of individual demand, uncertainty and risk to skimp. In contrast, the risk of sparing depends on the comparison of demand and supply, and therefore the ability of the seller. Differences in dynamic pricing can be explained by differences in ability. Marc Möller and Makoto Watanabe show that discounts for early purchase will be used by vendors with a relatively small capacity compared to demand, while the settlements are optimal when the capacities are higher. Therefore, differences in ticket prices and tickets can be explained by the fact that flights to London are a relatively small market, while tickets to musicals that have long been in the West End of London is probably not exhausted.

This article also shows that it is more likely to abide by the payments that advance purchase discounts in markets where prices can be committed in advance, temporary capacity limits are difficult to implement and resale is feasible. These results provide further explanations for observed differences in prices.

Furthermore, in its ongoing investigation, Makoto Watanabe has found evidence that air tickets are at their lowest price about eight weeks before the date of travel, although this empirical work has not yet been published in a scientific journal. Furthermore, it appears that tickets are cheaper if purchased in the afternoon instead of morning. “Distinguish between the airline business travelers who book their tickets at work and leisure travelers who book at home? This question will be answered in future research.

“The rankings that had been done so far on the banking sector revolve around a single variable such as size, number of assets or number of deposits, which lack an overview of the organization,” says SINC Fernando Garcia, author of the study and researcher at the UPV.

The study, published in the journal Mathematical and computer modeling, presents a method of “goal programming” that takes into account the efficiency savings, solvency and size from the 2007 annual accounts. “This method has been applied to cases under the current circumstances, and concentrations that will occur in the future,” says the researcher.

According to research, the new classification provides an overview of the box “more accurate”, and discloses the relative position of each of the financial institutions, as well as what his position on potential mergers.

Regardless of the chosen value, the savings banks that are always among the top of the 40 analyzed are BBK, Cajastur, La Caixa, and Caja Murcia. The same applies to the lowest in the ranking, which repeats the position of Caixa d’Estalvis de Sabadell, Caixa Girona, Caixa Penedes, Manlleu Caixa, Caixa Tarragona, Spain Fund, Cajasol, Caja Canarias and Cajasur.

The eternal intermediate

For his part, and IberCaja Caixanova, Caja Duero, Caja Segovia, Caja Cantabria and Caixa Caja Granada Ontiyent are always in the middle.

“For management purposes, these ratings help to know the relative position of companies within the sector and used to know how the list is improved from one year to another,” says the researcher.

On the other hand, the Spanish government has now modified the legal status of savings banks. First Deputy Prime Minister Maria Teresa Fernandez de la Vega, has said in the meeting of the Council of Ministers to change the legal status of savings banks will contribute to further strengthening our strong financial system and stability of our economy.

“We have examined the emotional traits of low intensity. In this sense, the higher the negative emotional traits, fewer risks assumed by entities managing directors, “he told SINC Juan Bautista Delgado García, co-author of the study and researcher at the UBU.

The work, published in the British Journal of Management, was developed from a survey sent in 2004 to all chief executives and managing directors of banks and Spanish savings banks (70 banks and 46 boxes). The survey had a response rate of 48.3% and contained a set of questions related to affective traits and demographic characteristics of the executives.

Also, to assess the level of economic risk and savings banks, were used several measures related to overall risk, credit risk and loan portfolio (commercial loans, secured loans and leases), information obtained from the annual accounts of banks.

The methodology employed by the scientists tried to condense two emotional traits, both positive and negative, from a commonly used scale, the scale of PANAS negative affective traits (such as nervousness or anger) and positive (such as interest or enthusiasm).

“It should be noted that while it may appear otherwise, these two types of emotional traits are two separate dimensions of the character of any individual. An individual may be highly emotional, unemotional, or very emotional traits and nothing positive in the negative and vice versa, “says Delgado.

Experts analyzed two measures of global risk, the variability of results and credit risk in three main types of credit: commercial, loans with a collateral (with any related collateral such as mortgages) and finally , leases (those who expected that his lessee assumes substantially all the benefits, costs and risks inherent in the property).

“What we see is that the greater the negative emotional traits of managers, a greater proportion of loans with collateral and the bank is under finance leases. In the case of commercial loans not found any influence of emotions, “said the expert.

A higher level of risk studies are undertaken

The research also compares the relationship between business risk with respect to previous experience in banking, education, executive experience in a risk area and its ownership.

“The most significant of these is the education level of managers, ie, influences whether the manager has a diploma, a degree, a master’s or doctoral thesis. The more, the higher the level of risk assumed by the bank run, “said Delgado.