Product Selling vs. Pay-Per-Use Service: A Strategic Analysis of Competing Business Models

We present a model that suggests possible explanations for the observed proliferation of “pay-per-use” (PPU) business models over the last two decades. Delivering “fractions” of a product as a service offers a cost advantage to customers with lower usage but requires extra delivery costs. Previous research focused on information goods (with negligible production costs) and predicted that PPU, when arising as a differentiation to selling in equilibrium, would fundamentally achieve lower profits than selling. We extend the theory by covering goods with any production cost in duopolistic competition. We show that PPU business models can be more profitable than selling (especially at midrange production costs), as long as their delivery costs are not too high, a requirement that is more easily fulfilled as new technologies reduce these costs. Moreover, if firms are imperfectly informed about their customers’ usage profiles, PPU’s effective pricing of customers’ varying usage offers an additional advantage over selling. This requires companies to employ accounting methods that do not inappropriately allocate production costs over stochastic usage levels. If PPU service provision suffers from queueing inefficiencies, this does not fundamentally change the relative profitability of the PPU and selling models, provided that PPU providers can attract sufficiently high demand to benefit from pooling economies. This paper was accepted by Charles Corbett, operations management.

Reproductive Performance and Partial Budget Analysis of a Prostaglandin or a Modified Ovsyn3ch Protocol in Autumn Calving Dairy Herds

In autumn calving dairy herds, treatment of cattle not observed in estrus prior to the breeding season is common. Routinely, a single prostaglandin or a modified Ovsynch (MOFT) protocol are used—without evidence of their relative effectiveness. This study compares the effects on conception, associated timing, and profitability of administering cows with prostaglandin or MOFT treatment. A hundred and ninety-two Holstein-Friesian cows from three herds without an observed estrus within 28-days before mating start date were randomly treated with d-cloprostenol (PGOD) or an 8-day MOFT protocol. The association of treatment and calving-breeding start-date interval (CBSI) on the risk of conception were investigated. Partial budget, sensitivity analysis, and Monte Carlo simulation was used to assess economic performance, identify critical input variables, and explore the effects of input uncertainties on model output. There was a significant association between MOFT treatment and conception during 21 and 84 days after mating start date, compared to PGOD. MOFT treatment was associated with a mean net benefit of £58.21 (sd £19.42) and £27.29 (sd £17.75) per cow for herds with a fixed or variable dry-off date, respectively. The relative profitability of an MOFT protocol is dependent on its effects on barren rate and herd dry-off strategy.

Economic and Social Benefits of Growing Peanut Instead of Boro Rice in a Sweet Water Scarce Area of Coastal Bangladesh

This study assessed the relative profitability and social impact of peanut cultivation over Boro rice production in a polder of coastal Bangladesh where there is a scarcity of sweet water for crop cultivation in the Rabi season. Sixty samples from a village namely Sekendarkhali of Amtali Upazila under Barguna district were randomly selected for the study. Data were collected through face-to-face interviews, focus group discussion, and key informant interviews, and different quantitative and qualitative methods were used to explain the data. Cost and return analysis was performed to assess the relative profitability of the two crops. Major findings of the study show that per hectare total costs, gross return, gross margin, and net returns for peanut and Boro production were Tk. 116170 and Tk. 91632; Tk. 132648 and Tk. 52419; Tk. 28540 and Tk. -27628; and Tk. 16478 and Tk. -39203, respectively, which indicate that peanut was more profitable than Boro rice. Moreover, benefit-cost ratios (BCR) of peanut and Boro rice production were found 1.14 and 0.57, respectively indicating peanut production is profitable for farmers in the study area but not the Boro rice production. It was also found that peanut cultivation has some positive social impacts. Adoption of peanut cultivation as a Rabi crop increases the cropping intensity of the study area, creates employment opportunities for both men and women, helps to ensure better nutritional status and better health of the farmers, helps the farmers to stay in the village and to build a better social relationship, increases the income of the farmers, and ensures a better standard of living. The study also identified some problems and constraints faced by the peanut growing farmers and suggested some recommendations to improve the present production of peanuts so that adoption and per hectare yield of peanut would possibly be increased.

Pastures, crops, and inequality: Questioning the inverse relationship between farm size and productivity in Colombia

The Colombian countryside has long been dominated by grass and inequality. Economic theory (i.e., the inverse relationship between farm size and productivity) holds that the monopolization of land by ranchers is irrational since farming is more productive than ranching and small farms often produce more per area than large ones. Traditional explanations for the predominance of grass and the country’s agrarian structure focus on extra-economic coercion and the status associated with owning land and cattle. By contrast, this study explores the relative profitability of ranching and the limitations of peasant agriculture, which generated contrasting capacities to accumulate. It thus suggests that land markets, and the productive advantages of cattle, offer an alternative explanation.

1163 Nickel, Dime or Dollar: Breaking Down Broken Notions of Cost in Sleep Diagnostics

Introduction Home sleep apnea tests (HSATs) are convenient alternatives to in-lab polysomnograms (PSGs) but high non-diagnostic rates limit their utility. A clinical decision support tool (CDST) to triage patients to HSAT versus PSG was developed at the Greater Los Angeles VA Healthcare System (GLA-VAHS). It uses a random forest ensemble to reduce non-diagnostic HSAT rates by 46%. While prior studies have found PSGs to be more profitable than HSATs on a per unit basis, these analyses do not factor in relative profitability over time. Additionally, no prior studies have quantified the financial impact of a CDST in diagnostic sleep testing. Methods We performed an analysis of the overall profitability of HSATs and PSGs in 2018-2019 within GLA-VAHS which has 6 PSG beds. Revenue was calculated using 2019 Medicare reimbursement rates. Contribution margin (CM) analysis was used to factor out the high fixed costs of healthcare infrastructure, instead focusing on variable direct costs (VDCs). CM analysis is especially useful when calculated on a per diem basis instead of per study, adjusting for number of tests performed in a given day. CM was calculated by subtracting VDCs from revenue under two simulated conditions: with and without the CDST. Results PSGs were 2.5 times more profitable than HSATs on a per unit basis (CM $200/study vs. $81/study). However, on a per day basis, PSGs were only 1.4 times more profitable than HSATs at average nightly occupancy rates of 75% (CM $902/day vs. $646/day). Using the CDST to guide testing, 2.2 times more diagnostic HSATs could be performed per day. As a result, HSATs were 1.3 times more profitable than PSGs on a per day basis with CDST use (CM $1,211/day vs. $902/day). Conclusion This analysis demonstrates that implementing a CDST and maximizing utilization of HSATs allow hospitals to better allocate limited sleep lab resources, increase diagnostic throughput and generate higher profits. Analyzing costs using contribution margin avoids erroneous assumptions about profitability and leads to better-informed administrative decisions regarding sleep lab expansion. Support

What’s good for the goose ain’t good for the gander: heterogeneous innovation capabilities and the performance effects of R&D

We investigate the effects of R&D investment on performance outcomes (sales growth and relative profitability) for Indian manufacturing firms. Previous research shows contradictory results—while some studies find a positive effect of R&D on firm performance, some find that firms investing in R&D do not perform significantly better, in some cases, even perform worse than their noninvesting counterparts. We claim that the effects of R&D on performance are often misspecified. Indeed, innovation capabilities will probably simultaneously influence the decision to invest in R&D and also R&D’s expected benefits. We apply endogenous switching regression to tackle the issue of selection and censored data, and the results we observe are sharp: Firms investing in R&D would have had less growth and less relative profitability if they had not done so. Interestingly, firms that did not invest in R&D would not have benefited had they done so. We interpret this as evidence that firms need to have sufficiently developed management capabilities to be able to convert R&D investments into tangible results, and that not all firms are well positioned to benefit from R&D investment.

Long-term research needed to avoid spurious and misleading trends in sustainability attributes of no-till

ABSTRACTAgricultural management recommendations based on short-term studies can produce findings inconsistent with long-term reality. Here, we test the long-term relative profitability and environmental sustainability of continuous no-till agriculture practices on crop yield, soil moisture, and N2O fluxes. Using a moving window approach, we investigate the development and stability of several attributes of continuous no-till as compared to conventional till agriculture over a 29-year period at a site in the upper Midwest, U.S. We find that over a decade is needed to detect the consistent benefits of no-till on important attributes at this site. Both crop yield and soil moisture required periods 15 years or longer to generate patterns consistent with 29-year trends. Only marginally significant trends for N2O fluxes appeared in this period. Importantly, significant but misleading short-term trends appeared in more than 20% of the periods examined. Relative profitability analysis suggests that 10 years after initial implementation, 86% of periods recuperated the initial expense of no-till implementation, with the probability of higher relative profit increasing with longevity. Results underscore the essential importance of decade and longer studies for revealing the long-term dynamics and emergent outcomes of agricultural practices for different sustainability attributes and are consistent with recommendations to support the long-term adoption of no-till management.GRAPHICAL ABSTRACTHIGHLIGHTSWe test long-term effects of no-till on yield, soil moisture, and N2O fluxesWe examine 29 years of data with a moving window and relative profitability methodIt takes at least a decade to detect consistent benefits of no-tillShorter studies can produce significant but misleading findingsLong studies are essential to reveal the dynamics of agricultural management