No abstract

Hot spot policing is a popular policing strategy that addresses crime by assigning limited police resources to areas where crimes are more highly concentrated. We evaluate this strategy using a game theoretic approach. The main argument against focusing police resources on hot spots is that it would simply displace criminal activity from one area to another. We provide new insights on the nature of the displacement e¤ect with useful implications for the econometric analysis of crime-reduction e¤ects of police reallocation.We also propose alternative place-based policies that display attractive properties in terms of geographic spillovers of crime reduction via optimal police reallocation.JEL codes: D7, K4, R1,

This article derives a dynamic model of the …rm with endogenous investment and leverage ratio within the framework of the dividend discount model. Our valuation model incorporates both managerial ‡exibility and long-run growth. We derive closed-form solutions for the optimal policies and …rm value, which allow us to compute the value of the real options as well as secular growth in a systematic way. A standard parameterization of the model suggests that the value of the real options can account for more than 8% of the market value of equity, while the present value of growth opportunities can represent more than 10% of share price. We also characterize the type of industries where traditional valuation models lead to considerable underpricing of securities.JEL classi…cation: G31, G32

Purpose – The purpose of this paper is to investigate the phenomena of convergence and stability of leverage reported by Lemmon et al. (2008). Design/methodology/approach – A dynamic trade-off model of the firm was used to simulate investment, leverage, and payout decisions for different types of firms. From an econometric standpoint, the Efficient Method of Moments was used to recover the structural parameters. Findings – The structural model generates a leverage ratio that oscillates around a long-run, time-invariant level and consistently reproduces the convergence and stability of leverage reported by Lemmon et al. (2008). The model also suggests the causes of those observed properties of the data. That is, convergence is due to the mean-reversion of profits while stability is due to the different fundamental characteristics (e.g. capital elasticity, volatility of profits, etc.) of the firm. Practical implications – Determining the optimal capital structure of a firm is a complex problem that has challenged academics and practitioners for a long time. Understanding leverage decisions is of great importance not only for financial managers, but also for investors, such as banks, debt-holders, equity-holders, and other capital providers, who need to understand how firms make capital structure decisions in order to achieve an efficient allocation of funds. Originality/value – The author shows that the firm-specific fixed effects in leverage regressions are not related to the usual determinants (e.g. profitability, market-to-book ratio), but to the primitive characteristics of the firm (e.g. elasticity of capital in the production function, the volatility of profits, the capital depreciation rate, the income tax rate, etc.)

We study a choice made by over 20,000 U.S. military personnel annually between the High-3 and Redux retirement plans. Compared to High-3, Redux offers a $30,000 current lump sum payment in exchange for lower future annuity payments.Despite break-even discount rates between 10% and 25%, about 40% of individuals chose Redux. The likelihood of choosing Redux is decreasing with the break-even discount rate and is related to individual demographics. The implied personal discount rates from this choice are around 9.2%, much lower than found previously.Offering this choice has already saved the government over $2 billion in future retirement payments.JEL Codes: H55; D91; H56