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This article describes how a government failing to protect against insurgents may or may not be rescued by the international community. We find that when intervention is less probable, the insurgent and government fight harder and the insurgent more likely succeeds. Conversely, when intervention is more probable, the insurgent fights less expecting subsequent intervention, and the government protects less expecting international community rescue. Higher contest intensities cause comparably matched players to fight harder. The international community intervenes if its unit intervention cost is low weighted against the benefits of intervention.

To determine the optimal allocation of responsibilities in disease interventions, and in designing commitment mechanisms, the paper develops a five-period game comprising policy makers, the international community providing financial aid, and nature as expressed by the population. When the international community provides funds, the policy maker free rides by not funding additionally. We determine which factors impact how the policy maker allocates funding between disease prevention and treatment. If the policy maker provides funds substantially, the international community free rides by funding less. We quantify how more allocation of funds by the policy maker to disease prevention causes lower disease contraction probability and higher probability that a person remains sick or dies, and how the international community's funding impacts these two probabilities. We derive seven assertions from the properties of the model and test against empirical African data. The results show consistency between the theoretical model and empirical estimates.

The provision of outsourcing services creates relationships between knowledge vested with the supplier and the viability of outsourcing arrangements. Knowledge accumulation by the outsourcee can reach a level where it poses a market entry or takeover risk to the outsourcer. Knowledge translates into cash flows interpreted as asset values modelled as geometric Brownian motion accounting for uncertainty, drift, and volatility. We present this argument within a principal-agent theoretical perspective which embeds a real options analysis to represent risk growth. As an alternative to a complicated analysis of the benefits and costs to the agent and principal of a takeover, we propose that takeover of the principal by the agent can be expected if the agent's discounted cash flows is larger than the principal's discounted cash flows. The probability of the takeover of the principal's market by the agent is expressed as an 'optimal stopping time' probability problem.

Many companies confronted with 'make or buy' decisions adopt the mid-way option of engaging in collaborative relationships (CRs) with suppliers rather than in internal production or the purchasing of parts through a process of competitive bidding. Engaging in CRs requires evaluations of when to enter such relationships and when to abandon them. Traditional incremental cost analysis does not readily allow such analysis for the establishment of supplier networks and relationships. This paper develops a real options-based model that focuses on the cost implications of learning curves and timing concerns. It provides an optimal timing valuation approach to establishing/abandoning a CR that incorporates differential learning rate payoffs and that assesses the contingencies embedded in a CR. A standard illustration of the application of the model is provided.

This investigation assesses the associations between strategy and experiences with activity based costing (ABC). Experience with ABC has two elements – processes and outcomes. The study considers strategy based process contingencies in relation to the decision to implement ABC, as well as the extent and speed of implementation. Outcome contingency is considered in terms of the perceived success of ABC implementation. A questionnaire was developed to collect information on corporate costing experiences and strategic orientation across organisations in seven countries. The results of the study suggest the prevalence of outcome based rather than process based dependencies between ABC and corporate strategy orientation.

Liability exposure is now such a major concern for auditors that any discussion of equilibrium audit fee structures needs to take account of the expected costs of liability exposure. We develop a model of audit litigation risk and then proceed to apply insights gained from the application of finance theory to show how liability exposure is related to guarantee provision. Given auditors wish to incorporate the expected cost of guarantees when planning and pricing services, we apply contingent claims analysis to derive valuation equations for expected (litigation) costs. We then proceed to consider wider regulatory issues. Whereas the above analysis assumes stable legal liability rules, we subsequently consider the auditor incentive effects of parametric variation in the rules. Since the quality of audits is unobservable, we consider how the rules could be set so as to ensure auditors are not tempted to provide a low degree of care and collude with management. To illustrate the applicability of this approach we also consider whether recent proposals to reform auditor liability to a proportional basis will always provide appropriate incentives.