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What's in a Name? Hotelling's Valuation Principle and Business School Namings.

  • Academic Journal
  • Journal of Business; Jul2005, Vol. 78 Issue 4, p1111-1135, 25p, 2 Charts, 3 Graphs
  • Almost 50 prominent business schools were "named" in the 1980s and 1990s, in exchange for sizable donations. We view this as an interesting example of the exhaustible resource market examined in Hotelling (1931). Schools face a trade-off that involves a possible benefit from waiting (to receive a larger gift) against the (opportunity) cost of delay. We find schools wait to accept a name until the annualized rate of increase in offered gifts is around 5%, in keeping with Hotelling's principle and a market in school names. We also find, generally, lower-ranked schools receive smaller gifts and delay their namings longer. [ABSTRACT FROM AUTHOR]
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