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One of the most important aspects of growing and improving business education is replacing departed faculty members. As the baby-boom generation approaches retirement, the supply of available replacement faculty members is diminishing. The result is a competitive market for replacement faculty that features increasing starting salary levels. In particular, faculty lines that have been occupied for extended time periods need to be marked to market salary levels because annual salary increases rarely keep pace with inflation in the labor market. The authors report the results of a national survey to determine the amount of salary premium required to bring vacated management faculty lines back up to competitive market levels. As business schools struggle to replace retiring and departing faculty, budgets have to account for these premium increases to succeed in an increasingly competitive market for faculty labor.

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The concept of option pricing is used to develop an alternative model for pricing services that have a fixed availability and expiration. The binomial option pricing model and abandonment theory are financial models used to demonstrate that the option to cut price contributes positively to a service’s expected profitability. Pricing of hotel rooms is used to demonstrate in a marketing context the use of this option model approach. Airline seats, events, and vacation house rentals are some of the many other alternative applications among consumer services, as broadcast time is a similar example among industrial services.

No abstract