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Working Papers | 2006

Is India Ready for Online Dispute Resolution?

Anurag K. Agarwal

The Indian judicial system is marred by delays. Businesses suffer because disputes are not resolved in a reasonable time. Even with the use of methods of alternative dispute resolution a fair number of high value disputes end up in a court. Thus, courts hardly have any time for taking up disputes of lower value. Also, in a country of continental dimensions, every disputant cannot afford to travel and contest in a court of law. Online Dispute Resolution (ODR) has emerged as a new method which may be beneficial in a geographically large country and also where a large number of B2B or B2C disputes are significantly of low value. ODR is the best available method for resolving such business disputes. But there are a number of hurdles like access, technology, cultural and language issues, and above all trust with a new un-tested system. Of late, ODR has been successfully used by the National Internet Exchange of India (NIXI) and the judiciary has also shown perceptible shift towards use of new technology and methods in resolution of disputes. The paper examines the hurdles faced by ODR in India, discusses its future and makes a few suggestions for its success.

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Working Papers | 2006

Degree of Instant Competition: Estimation of Market Power in India Instant Coffee Market

Satish Y. Deodhar and Pandey Vivek

The new competition policy of the Government of India seeks to promote competition to protect consumer interests and increase market efficiency. In fact, the degree of price transmission between farmers and final consumers also depends on the degree of competition in the processing sector. Moreover, policy of trade liberalization too is expected to have impact on domestic markets. It becomes imperative, therefore, that one knows the degree of competition in various domestic industries. Instant coffee market in India is a duopoly of Nestlé and Hindustan Lever for decades. They also differentiate their products through branding. At the same time, however, incumbents might have perceived potential competition from another firm, Tata Coffee. In fact, instant coffee can be considered as a part of a larger beverage market with numerous competing products. With trade liberalization, imports have also started trickling in. Thus, circumstantial evidence regarding degree of competition or the market power in the instant coffee market is rather mixed one. By econometrically estimating the perceived first-order supply relation and the demand function, we calculate the market power parameter. Results indicate that the market is not characterized by collusive behaviour. It is quite close to perfectly competitive behaviour although we cannot reject the Cournot-Nash behaviour as well. The econometric study may be complemented by in-depth case study on coffee procurement, processing, and pricing by leading producers. Similar estimations of market power and case studies may be undertaken for other industries as well.

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Working Papers | 2006

Risk Mitigation In Indian Film Industry: A Concept Note

Rajanish Dass, Kumar Sumit, and Rungta Alok

The motion pictures business in India has certain unique aspects which pose challenges in front of those whose fortunes are linked with the industry. The shelf life of a movie is short whereas the cost of producing and marketing it along with the financial risks associated with its success are very high. The concept of hedging risks is in a very nascent state in the Indian Film Industry. The business, done in a traditional way, exposes producers, distributors and financers to undue risks. In this paper we have looked at the Indian film industry (typically the Mumbai based Hindi film industry), and the risks and challenges that the industry faces. We have analyzed various risks faced by the industry like the risk of a flop movie, financing risks, political risks, and competition from regional film industry and also competition from Hollywood movies which are gaining popularity in India to name a few. A number of these risks, it seems, looms large due to lack of proper visibility of right information due to existing information bottlenecks. We have categorized these risks into certain broad categories and looked at various ways to mitigate them. We have also analyzed the applicability of various financial instruments like options to hedge the risk of low business by a movie and looked at a novel idea of securitization of box office returns and float bonds with those returns as underlying to generate short term financing.

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Working Papers | 2006

The Adoption and Economics of Bt Cotton in India: Preliminary Results from a Study

Vasant P. Gandhi and Namboodiri N V

The paper presents preliminary results from a study of the economics and adoption of Bt cotton in India. Biotech crops, which made their appearance in the world about a decade ago, have gained substantial popularity and acceptance in many parts of the world including US, China, Australia, Mexico, Argentina and South Africa. However, their introduction in India has been relatively late and controversial and they still have considerable ground to cover in the country. Cotton is a major commercial crop in India but has substantial problems particularly from extensive pest damage and poor yields. Bt cotton offers a promising solution to these serious problems. Data from the survey, which covered the important cotton states of Gujarat, Maharashtra, Andhra Pradesh and Tamil Nadu, and 694 farmers, indicates that Bt cotton offers good resistance to bollworms as well as several other pests. The incidence of these pests is reported to be considerably lower in Bt cotton as compared to Non-Bt cotton. The yields of Bt cotton are found to be higher and the yield increase/ difference statistically significant in all the states under both irrigated and rain-fed conditions. As a result, given the good market acceptance of the product, the value of output per hectare is higher in all the states and conditions. The question of higher cost of cultivation exists, and is confirmed, mainly because of high seed cost and not commensurate reduction in pesticide cost. However, the profit is found to be higher in all the states to the estimated extent of about 80-90 percent on an average when the effects of associated inputs are included. The returns are highest in Maharashtra followed by Gujarat and then Andhra Pradesh. Subjective assessment indicates that farmers see advantage in Bt cotton in pest incidence, pesticide cost, cotton quality, yield and profit. Almost all farmers indicate that they plan to plant Bt cotton in the future. To increase the benefits from the technology, the farmers strongly urge reduction in the seed cost, greater field extension and demonstration work on the correct practices, and more Bt cotton varieties to suit the diverse agro-ecological settings.

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Working Papers | 2006

Wheat Marketing and its Efficiency in India

Vasant P. Gandhi and Abraham Koshy

The study examines the marketing of wheat in India, focusing on the private marketing system, the marketing efficiency and quality. Wheat is now a major food staple in India, crucial to India's food economy and security. With production reaching 70 to 75 million tons and a large demand, India's wheat economy is the second largest in the world. The efficiency of marketing is crucial to farmer incomes, consumer welfare, as well as government budgets and the economy. Substantial changes are taking place in the marketing of wheat. The study finds that the farmers now almost invariably sell in the nearby primary markets rather than to village traders. The farmer choice of varieties is now becoming market oriented with quality and market acceptance becoming as important as yield. The typically market intermediary provides hardly any special, value adding or developmental services in return for the commissions and margins. The farmers see considerable scope for improvement in the marketing system. The consumer demand for wheat varies considerably across the country. But wheat has made inroads into food consumption in the east and the south. The retailers are increasingly conscious of consumer demand and quality, and keep a varietiy of wheat and wheat products. Direct buying of wheat grain, storing, and own recourse to processing are common in the north and the west, whereas direct purchase of wheat products such as flour is the norm in the east and the south. The trend is towards direct purchase of processed wheat products, and within this from loose to packaged branded wheat products. The estimated average total marketing cost of wheat is found to be of the order of Rs. 266 per quintal, and in this transport has the largest share of 40 percent, commission and taxes make up 25 percent, and wastage another 15 percent. When compared to the consumer-farmer price spread, the marketing costs account for 74 percent of the spread, leaving 26 percent for margins-this is fairly efficient but there is significant scope for improvement. On an average, the farmers receive 66 percent of what the consumer pays. The government channel marketing cost is reported to be Rs. 309 per quintal, but this does not cover the whole chain and is not strictly comparable. Examination of the question of market integration for wheat is difficult due to data and quality difference problems. Co-integration analysis using monthly price data for eight markets for the period April 1997 to June 2004 indicates that nationally the markets are integrated but the LOP (Law of One Price) does not hold, and the presence of six common stochastic trends implies the absence of full pair-wise co-integration.

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Working Papers | 2006

Economic Liberalization and Rural Land and Labour Markets in India: A Study

Vasant P. Gandhi

The paper examines the rural land and labour markets in the context of economic liberalization in India. Land and labour are the two fundamental resources available to the rural people for income generation. The access to land and to employment for labour become basic determinants of well-being for the rural households. Reforms are often seen as hostile to rural areas and the poor, although they should be beneficial not only for overall growth, but also rural growth and poverty alleviation. The study based on primary household data examines the land and labour markets in the reform period and the underlying linkages of these to different characteristics of the household. The study finds that over the reform period in India the land markets are leading to less landlessness rather than more, and growth in marginal and medium farm sizes rather than large. Lease markets are leading to operated land in more hands. Land purchase behaviour is related to less land, more education, greater crop diversification, and higher crop and livestock revenues. Leasing-in is also related to many of the same variables and is showing great diversity in lease agreements involving outputs, inputs and rent. Labour-employment is showing diversity of occupations but the primary dependence on agriculture is still about 80 percent. There has been some change in the occupational structure. Non-farm employment is associated with higher overall employment. Own-farm employment is strongly related to crop diversification and livestock activity; other farm employment to number of male and female family members and irrigation; and non-farm employment to education. Broadly, liberalization does not show adverse consequences but rather some positive impact on rural land and labour markets.

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Working Papers | 2006

Does the Gravity Model Explain India Direction of Trade? A Panel Data Approach

Bhattacharyya Ranajoy and Tathagata Banerjee

In this paper we apply the gravity model to the panel consisting of India's yearly bilateral trade data with all its trading partners in the second half of the twentieth century. The main conclusions that emerge from our analyses are: (1) The core gravity model can explain around 43 per cent of the fluctuations in India's direction of trade in the second half of the twentieth century (2) India's trade responds less than proportionally to size and more than proportionally to distance (3) Colonial heritage is still an important factor in determining India's direction of trade at least in the second half of the twentieth century (4) India trades more with developed rather than underdeveloped countries, however (5) size has more determining influence on India's trade than the level of development of the trading partner.

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Working Papers | 2006

Scaling Sparse Constrained Nonlinear Problems for Iterative Solvers

Gajulapalli Ravindra S and Lasdon Leon S

We look at scaling a nonlinear optimization problem for iterative solvers that use at least first derivatives. These derivatives are either computed analytically or by differncing. We ignore iterative methods that are based on function evaluations only and that do not use any derivative information. We also exclude methods where the full problem structure is unknown like variants of delayed column generation. We look at related work in section (1). Despite its importance as evidenced in widely used implementations of nonlinear programming algorithms, scaling has not received enough attention from a theoretical point of view. What do we mean by scaling a nonlinear problem itself is not very clear. In this paper we attempt a scaling framework definition. We start with a description of a nonlinear problem in section (2). Various authors prefer different forms, but all forms can be converted to the form we show. We then describe our scaling framework in section (3). We show the equivalence between the original problem and the scaled problem. The correctness results of section (3.3) play an important role in the dynamic scaling scheme suggested. In section (4), we develop a prototypical algorithm that can be used to represent a variety of iterative solution methods. Using this we examine the impact of scaling in section (5). In the last section (6), we look at what the goal should be for an ideal scaling scheme and make some implementation suggestions for nonlinear solvers.

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Working Papers | 2006

Scaling Sparse Matrices for Optimization Algorithms

Gajulapalli Ravindra S and Lasdon Leon S

To iteratively solve large scale optimization problems in various contexts like planning, operations, design etc., we need to generate descent directions that are based on linear system solutions. Irrespective of the optimization algorithm or the solution method employed for the linear systems, ill conditioning introduced by problem characteristics or the algorithm or both need to be addressed. In [GL01] we used an intuitive heuristic approach in scaling linear systems that improved performance of a large scale interior point algorithm significantly. We saw a factor of 10*3* improvements in condition number estimates. In this paper, given our experience with optimization problems from a variety of application backgrounds like economics, finance, engineering, planning etc., we examine the theoretical basis for scaling while solving the linear systems. Our goal is to develop reasonably "good" scaling schemes with sound theoretical basis. We introduce concepts and define "good" scaling schemes in section (1), as well as explain related work in this area. Scaling has been studied extensively and though there is a broad agreement on its importance, the same cannot be said about what constitutes good scaling. A theoretical framework to scale an m x n real matrix is established in section (2). We use the first order conditions associated with the Euclidean metric to develop iterative schemes in section (2.3) that approximate solution in O(mn) time for real matrice. We discuss symmetry preserving scale factors for an n x n symmetric matrix in (3). The importance of symmetry preservation is discussed in section (3.1). An algorithm to directly compute symmetry preserving scale factors in O(n2) time based on Euclidean metric is presented in section (3.4) We also suggest scaling schemes based on rectilinear norm in section (2.4). Though all p-norms are theoretically equivalent, the importance of outliers increases as p increases. For barrier methods, due to large diagnal corrections, we believe that the taxicab metric (p = 1) may be more appropriate. We develop a linear programming model for it and look at a "reduced" dual that can be formulated as a minimum cost flow problem on networks. We are investigating algorithms to solve it in O(mn) time that we require for an efficient scaling procedure. We hope that in future special structure of the "reduced" dual could be exploited to solve it quickly. The dual information can then be used to compute the required scale factors. We discuss Manhattan metric for symmetric matrices in section (3.5) and as in the case of real matrices, we are unable to propose an efficient computational scheme for this metric. We look at a linearized ideal penalty function that only uses deviations out of the desired range in section (2.5). If we could use such a metric to generate an efficient solution, then we would like to see impact of changing the range on the numerical behavior.

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Working Papers | 2006

A New Algorithm for Continuous Optimization

Desai Tejas A

We present a new algorithm for continuous, nonlinear or linear, and constrained or unconstrained optimization. After proving its convergence, we apply it to unconstrained and constrained maximum likelihood estimation, and compare its performance to that of the Newton-Raphson algorithm.

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