Abstract We study the link between timing of cash flows and expected returns in general equilibrium production economies. Our model incorporates (i) heterogenous exposure to aggregate productivity shocks across capital vintages, and (ii) an endogenous stock of growth options. Our economy features a V-shaped term structure of aggregate dividends in which dividend yields decrease with maturity up to ten years, consistent with the empirical findings of

Abstract Central to a firm's growth and marketing policy is the revenue and profit potential of its customer assets. As a result, there has been a recent proliferation of work regarding customer lifetime value. However, extant research in this area is silent regarding how to assess the profitability of customers in a networked setting. In such settings, the presence of one type of customer can affect the value of another. Examples of such settings include job agencies (whose customers include both job seekers and listers), realtors (whose clients include home sellers and purchasers), and auction houses (whose customers include buyers and sellers). Customers such as buyers of an auction house pay no fees to the firm making their value difficult to compute. Yet these customers generate value to the firm because their presence attracts fee-paying sellers. In this paper we consider the value of a customer in these types of networked setting. We compute the value of customers by developing a joint model of buyer and seller growth. This growth comes from three sources -marketing actions (price and advertising), direct network effects (e.g., buyer to buyer effects), and indirect network effects (e.g., buyer to seller effects). Using this growth model we concurrently solve the firm's problem of choosing optimal pricing and advertising subject to constraints on customer growth. By relaxing constraints on growth by one customer, we can then impute their lifetime value to the firm. We apply our model to data from an auction house. Our results show that there are strong direct and indirect network effects present in our data. We find that in the most recent period buyers have a value of about $550 and the sellers have a value of around $500. We also find that our approach leads to estimates of firm value that are more accurate than models that fail to consider network effects. Finally, price and advertising elasticities are low (-0.16 and 0.006) and decrease over time as network effects become increasingly important.

and seminar participants at Duke (Fuqua School of Business) and London Business School for useful discussions. The opinions expressed in the paper are those of the authors and do not reflect the views of Sorin Capital Management. All remaining errors are our responsibility.

The Pratt-Arrow measure of local risk aversion is generalized for the n-dimensional state-preference model of choice under uncertainty in which the decision maker may have inseparable subjective probabilities and utilities, unobservable stochastic prior wealth, and/or smoothnonexpected-utility preferences. Local risk aversion is measured by the matrix of derivatives of the decision maker’s risk-neutral probabilities, without reference to true subjective probabilities or riskless wealthpositions, and comparative risk aversion is measured without requiring agreement on true probabilities. Risk-neutral probabilities and their derivatives are shown to be sufficient statistics for approximately optimal investment and financing decisions in complete markets for contingent claims.

across markets lead to less frequent episodic illiquidity, but cause contagion when cooperation breaks down. * Bruce Ian Carlin, Miguel Sousa Lobo, and S. Viswanathan are from the Fuqua School of Business at Duke University. The authors would like to thank

herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research. Wesley Cohen also thanks the Fuqua School of Business, Duke University, for research support. NBER working papers are circulated for discussion and comment purposes. They have not been

I owe a great deal of thanks to my faculty advisor, Professor David B. Ridley of the Fuqua School for business, for his deep insights, excellent guidance and unwavering support throughout the year. I would also like to sincerely thank Professor Kent Kimbrough, for his constructive criticism

to conservative debt usage. Conservative debt policy is persistent. Graham is at the Fuqua School of Business, Duke University. Early conversations with Rick Green, Eric Hughson, Mike Lemmon, and S.P. Kothari were helpful in formulating some of the ideas in this paper. I thank Peter Fortune

half-space. Many econometric studies of auction markets are seen to be flawed in their identification of the number of bidders. I thank the Fuqua School of Business at Duke Univeristy and the Olin School of Business at Washington University for their hospitality during the writing of this paper

of firms with large boards were less efficient than the investment and debt policies of firms with smaller boards. participants at the Fuqua School of Business for useful suggestions. I acknowledge financial support from the John W. Hartman