E-Capital Buildup
Yahoo!, Amazon.com, and America Online were established through an upsurge in investment, and Steven Kaplan said that the larger business-to-business e-commerce market is now experiencing similar buildup. “The investments made in the next year or two are going to determine what happens over the next 30 years,” Kaplan told the Chicago Tribune in a February 1 article, “Entrepreneurs Have No Shortage of Funding Sources.” Kaplan is Neubauer Family Professor of Entrepreneurship and Finance.

Is Amazon a Disaster.com?
Amazon.com erred by expanding its operations beyond exclusively selling books into offering other products such as tapes, gifts, and tools, according to James Schrager, clinical professor of entrepreneurship and strategic management. In his article “The Next Wal-Mart” in the December 20 Industry Standard, Schrager likened Amazon’s error to Wal-Mart’s miscalculation when it attempted to expand its growth by developing a grocery business. “Amazon is in big trouble,” Schrager said, because it is endeavoring “to be all things to all people on the Web—the megastore for every purchase. Who would want just to shop in one place?” Cnet.com, an Internet news site, also quoted Schrager on the subject for a January 31 article on e-commerce. The reason the model used by Amazon—and most e-commerce companies —doesn’t work, he said, is that they have “discovered that the more they sell, the more they lose. All the numbers are going backwards.”

Efficient E-Commerce
The February 12 Economist featured Steven Kaplan’s research on business-to-business e-commerce. Kaplan discussed aggregation and matching as two ways that online exchanges, or eHubs, can improve economic efficiency. The term aggregation, Kaplan said, means bringing together an enormous number of buyers and sellers with a fixed menu of prices and cutting transaction costs through one-stop shopping. He defined matching as interaction between buyers and sellers that continues until they find the best fit between what a buyer desires and what a seller can supply. Kaplan is Neubauer Family Professor of Entrepreneurship and Finance.

Happy Online Shoppers
If state taxes had been collected on Internet purchases, online sales in 1998 would have been 25 to 30 percent lower, according to associate professor Austan Goolsbee, whose research was featured in the January 29 Economist. Goolsbee also spoke to several other publications on this hot topic. He said in the January 17 Business Week that taxing Internet sales might reduce the number of e-consumers by up to 24 percent, and he was featured in the February 5 Washington Post, stating that e-commerce presents less of a threat to sales tax than catalogue shopping—at least for the next few years.

Invest in Internet Stocks?
Should investors rush to purchase Internet stocks? “I wouldn’t buy them,” said Eugene Fama, Robert R. McCormick Distinguished Service Professor of Finance. “The expected returns on these expensive [Internet] growth stocks are very low right now.” Fama was quoted in the January 24 Fortune.

Are You Too Comfortable?
Like gamblers, investors tend to risk more when they think they hold an advantageous position, according to Richard Thaler, who was quoted in the January 17 Business Week. The security forged by years of prosperity, the story argued, most likely explains investors’ increasing comfort with financial risk. The article discussed an experiment Thaler conducted in which he gave some people $30 and others nothing. People with $30, Thaler observed, gambled more often when offered the chance to flip a coin for $9 than those people with nothing. Thaler is Robert P. Gwinn Professor of Behavioral Science and Economics.

Indian Intermediation
Raghuram Rajan said the inability of banks to promote intermediation has fostered India’s financial woes. Rajan, Joseph L. Gidwitz Professor of Finance, examined the problems facing India’s banking system in the December 23 issue of the India-based Financial Express.

A Case for Microsoft
Limiting Microsoft’s ability to compete will also limit its incentives to create new products, professor of economics Steven Davis told the New York Times. In the January 10 article, “Economists Debate Solutions for Microsoft Case,” Davis told the Times, “Any remedy that restricts the ability of Microsoft to compete in complementary software would raise prices to consumers, lower profits, and reduce incentives to innovate.”

Investigating Investors
Nicholas Polson, professor of econometrics and statistics, developed an index that enables the online brokerage firm Ameritrade to measure how individual investors are participating in the stock market. Ultimately, it facilitates the firm’s ability to determine the top 10 stocks customers buy and sell. The Dow Jones News Service and the Reuters News Service published the story.

Kashyap on Markets
The upcoming October election in Japan explains why Japanese politicians are undermining needed financial liberalization, said Anil Kashyap in a February 21 article in the Asian Wall Street Journal. The opinion piece on Japanese financial markets, which Kashyap coauthored, appeared in the February 22 issue of the Wall Street Journal Europe. Kashyap also was quoted in the January 21 Wall Street Journal. The changing structure of the financial markets may be altering the risks for the economy, according to Kashyap. On January 26, he was quoted by the international financial news wire Bridge News on “the startling Dow-NASDAQ divergence.” Kashyap argued that the length of the current economic expansion will be a more significant factor than any action the Fed might take in changing this divergence. Kashyap is professor of economics.

The Dow’s Decline
Behavioral factors can explain the rise in stock prices and thus the decline in the Dow Jones Industrial Average, according to assistant professor of finance Nicholas Barberis. “A little bit of a rise in stock prices is justified, but not as much as we’ve seen,” he said in the February 22 Wall Street Journal. The article examined whether stock prices had exceeded economic fundamentals in recent years, contributing to the waning of the Dow.
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