David Austen Smith

Austen-Smith, David. 2003. Majority Preference for Subsidies over Redistribution. Journal of Public Economics. 87(7): 1617-1640.

Among other activities, democratic governments redistribute resources directly through tax schemes that explicitly benefit the poor and indirectly through subsidizing particular goods and services that do not. Indeed, in some cases the effective redistribution under subsidy policies is clearly away from the poor. This paper studies when a majority might prefer subsidy policies over direct income redistribution in economies with mean greater than median income. The main result is a set of necessary and sufficient conditions for subsidies to be majority preferred to direct redistribution: in sum, subsidies are strictly majority preferred to redistribution when the gap between median and mean incomes is not too great.

Austen-Smith, David, Daniel Diermeier and Eitan Zemel. 2011. Unintended Acceleration: Toyota’s Recall Crisis. Case 5-311-504 (KEL598).

In late 2009 Toyota became the subject of media and U.S. government scrutiny after multiple deaths and injuries were attributed to accidents resulting from the unintended and uncontrolled acceleration of its cars. Despite Toyota’s voluntary recall of 4.2 million vehicles for floor mats that could jam the accelerator pedal and a later recall to increase the space between the gas pedal and the floor, the company insisted there was no underlying defect and defended itself against media reports and regulatory statements that said otherwise. As the crisis escalated, Toyota was further criticized for its unwillingness to share information from its data recorders about possible problems with electronic throttle controls and sticky accelerator pedals, as well as braking problems with the Prius. By the time Toyota Motor Company president Akio Toyoda apologized in his testimony to the U.S. Congress, Toyota’s stock price had declined, in just over a month, by 20 percent—a $35 billion loss of market value.

Austen-Smith, David, Adam Galinsky, K. H. Chung and C. LaVanway. 2007. Unilever’s Mission for Vitality. Case 5-307-501 (KEL364).

Dove and Axe were two highly successful brands owned by Unilever, a portfolio company. Dove was a female-oriented beauty product brand that exhorted “real beauty” and not the unachievable standards that the media portrayed. In contrast, Axe was a brand that purportedly “gives men the edge in the mating game.” Their risqué commercials always portrayed the supermodel-type beauty ideal that Dove was trying to change. Unilever had always been a company of brands where the consumer knew the brands but not the company; but recently there had been the idea to unify the company with an umbrella mission for all of its brands. This would turn Unilever into a company with brands, potentially increasing consumer awareness and encourage cross-purchases between the different brands. However, this raised the question about conflicting messages between the brands’ marketing campaigns, most notably between Unilever’s two powerhouse brands, Dove and Axe.

The case starts with COO Alan Jope thinking about an upcoming press meeting in New York City to discuss Unilever’s current (2005) performance and announce Unilever’s decision to create an umbrella mission statement for the company. The case is focused on the central question of whether or not consistency between brand messages is necessary or inherently problematic.

The Unilever’s Mission for Vitality case was created to help students and managers develop an appreciation for how the values underlying a marketing campaign can affect and alter an organization’s culture. The case focuses on how two products/marketing campaigns that express conflicting underlying values (as reflected in the Dove Real Beauty and the Axe Effect campaigns) within the same corporation can give rise to a number of unintended organizational and marketing complications.The learning objective of the case is to develop, first, an appreciation of how the expressed values underlying a marketing campaign can affect internal corporate culture and, therefore, how two products with conflicting underlying values (in this case, those reflected in the Dove and Axe campaigns) within a given corporation (in this case, Unilever) can give rise to organizational and marketing complications. And second, to explore how managers might best anticipate and respond to the conflicts inherent in such complications.

Austen-Smith, David and Jeffery C Burrell. 2012. Micawber Capital: For Mission or Profit?. Case 5-112-005 (KEL712).

In July 2010 Robert Drake, senior director at Micawber Capital, one of India’s largest microfinance organizations, needed to recommend a corporate structure and organization for Micawber after its scheduled IPO in August 2010.

The IPO would bring to Micawber new stakeholders, primarily financial institutions. Drake was skeptical that the new investors shared Micawber’s commitment to help alleviate poverty in rural India through microcredit loans; he assumed their primary interest was a good return on their investments. The two objectives—increasing ROI and meeting the financial needs of the poor—seemed at odds with each other.

Drake had to consider how the interests of clients and investors would be represented in strategic decisions so that they balanced the conflicting values of the stakeholders.