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SMU 2015 research efforts broadly noted in a variety of ways for world-changing impact

SMU scientists and their research have a global reach that is frequently noted, beyond peer publications and media mentions.

By Margaret Allen
SMU News & Communications

It was a good year for SMU faculty and student research efforts. Here is a small sampling of public and published acknowledgements during 2015:

Simmons, Diego Roman, SMU, education

Hot topic merits open access
Taylor & Francis, publisher of the online journal Environmental Education Research, lifted its subscription-only requirement to meet demand for an article on how climate change is taught to middle-schoolers in California.

Co-author of the research was Diego Román, assistant professor in the Department of Teaching and Learning, Annette Caldwell Simmons School of Education and Human Development.

Román’s research revealed that California textbooks are teaching sixth graders that climate change is a controversial debate stemming from differing opinions, rather than a scientific conclusion based on rigorous scientific evidence.

The article, “Textbooks of doubt: Using systemic functional analysis to explore the framing of climate change in middle-school science textbooks,” published in September. The finding generated such strong interest that Taylor & Francis opened access to the article.

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Research makes the cover of Biochemistry
Drugs important in the battle against cancer were tested in a virtual lab by SMU biology professors to see how they would behave in the human cell.

A computer-generated composite image of the simulation made the Dec. 15 cover of the journal Biochemistry.

Scientific articles about discoveries from the simulation were also published in the peer review journals Biochemistry and in Pharmacology Research & Perspectives.

The researchers tested the drugs by simulating their interaction in a computer-generated model of one of the cell’s key molecular pumps — the protein P-glycoprotein, or P-gp. Outcomes of interest were then tested in the Wise-Vogel wet lab.

The ongoing research is the work of biochemists John Wise, associate professor, and Pia Vogel, professor and director of the SMU Center for Drug Discovery, Design and Delivery in Dedman College. Assisting them were a team of SMU graduate and undergraduate students.

The researchers developed the model to overcome the problem of relying on traditional static images for the structure of P-gp. The simulation makes it possible for researchers to dock nearly any drug in the protein and see how it behaves, then test those of interest in an actual lab.

To date, the researchers have run millions of compounds through the pump and have discovered some that are promising for development into pharmaceutical drugs to battle cancer.

Click here to read more about the research.

SMU, Simpson Rowe, sexual assault, video

Strong interest in research on sexual victimization
Teen girls were less likely to report being sexually victimized after learning to assertively resist unwanted sexual overtures and after practicing resistance in a realistic virtual environment, according to three professors from the SMU Department of Psychology.

The finding was reported in Behavior Therapy. The article was one of the psychology journal’s most heavily shared and mentioned articles across social media, blogs and news outlets during 2015, the publisher announced.

The study was the work of Dedman College faculty Lorelei Simpson Rowe, associate professor and Psychology Department graduate program co-director; Ernest Jouriles, professor; and Renee McDonald, SMU associate dean for research and academic affairs.

The journal’s publisher, Elsevier, temporarily has lifted its subscription requirement on the article, “Reducing Sexual Victimization Among Adolescent Girls: A Randomized Controlled Pilot Trial of My Voice, My Choice,” and has opened it to free access for three months.

Click here to read more about the research.

Consumers assume bigger price equals better quality
Even when competing firms can credibly disclose the positive attributes of their products to buyers, they may not do so.

Instead, they find it more lucrative to “signal” quality through the prices they charge, typically working on the assumption that shoppers think a high price indicates high quality. The resulting high prices hurt buyers, and may create a case for mandatory disclosure of quality through public policy.

That was a finding of the research of Dedman College’s Santanu Roy, professor, Department of Economics. Roy’s article about the research was published in February in one of the blue-ribbon journals, and the oldest, in the field, The Economic Journal.

Published by the U.K.’s Royal Economic Society, The Economic Journal is one of the founding journals of modern economics. The journal issued a media briefing about the paper, “Competition, Disclosure and Signaling,” typically reserved for academic papers of broad public interest.

The Journal of Physical Chemistry A

Chemistry research group edits special issue
Chemistry professors Dieter Cremer and Elfi Kraka, who lead SMU’s Computational and Theoretical Chemistry Group, were guest editors of a special issue of the prestigious Journal of Physical Chemistry. The issue published in March.

The Computational and Theoretical research group, called CATCO for short, is a union of computational and theoretical chemistry scientists at SMU. Their focus is research in computational chemistry, educating and training graduate and undergraduate students, disseminating and explaining results of their research to the broader public, and programming computers for the calculation of molecules and molecular aggregates.

The special issue of Physical Chemistry included 40 contributions from participants of a four-day conference in Dallas in March 2014 that was hosted by CATCO. The 25th Austin Symposium drew 108 participants from 22 different countries who, combined, presented eight plenary talks, 60 lectures and about 40 posters.

CATCO presented its research with contributions from Cremer and Kraka, as well as Marek Freindorf, research assistant professor; Wenli Zou, visiting professor; Robert Kalescky, post-doctoral fellow; and graduate students Alan Humason, Thomas Sexton, Dani Setlawan and Vytor Oliveira.

There have been more than 75 graduate students and research associates working in the CATCO group, which originally was formed at the University of Cologne, Germany, before moving to SMU in 2009.

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Vertebrate paleontology recognized with proclamation
Dallas Mayor Mike Rawlings proclaimed Oct. 11-17, 2015 Vertebrate Paleontology week in Dallas on behalf of the Dallas City Council.

The proclamation honored the 75th Annual Meeting of the Society of Vertebrate Paleontology, which was jointly hosted by SMU’s Roy M. Huffington Department of Earth Sciences in Dedman College and the Perot Museum of Science and Nature. The conference drew to Dallas some 1,200 scientists from around the world.

Making research presentations or presenting research posters were: faculty members Bonnie Jacobs, Louis Jacobs, Michael Polcyn, Neil Tabor and Dale Winkler; adjunct research assistant professor Alisa Winkler; research staff member Kurt Ferguson; post-doctoral researchers T. Scott Myers and Lauren Michael; and graduate students Matthew Clemens, John Graf, Gary Johnson and Kate Andrzejewski.

The host committee co-chairs were Anthony Fiorillo, adjunct research professor; and Louis Jacobs, professor. Committee members included Polcyn; Christopher Strganac, graduate student; Diana Vineyard, research associate; and research professor Dale Winkler.

KERA radio reporter Kat Chow filed a report from the conference, explaining to listeners the science of vertebrate paleontology, which exposes the past, present and future of life on earth by studying fossils of animals that had backbones.

SMU earthquake scientists rock scientific journal

Modelled pressure changes caused by injection and production. (Nature Communications/SMU)
Modelled pressure changes caused by injection and production. (Nature Communications/SMU)

Findings by the SMU earthquake team reverberated across the nation with publication of their scientific article in the prestigious British interdisciplinary journal Nature, ranked as one of the world’s most cited scientific journals.

The article reported that the SMU-led seismology team found that high volumes of wastewater injection combined with saltwater extraction from natural gas wells is the most likely cause of unusually frequent earthquakes occurring in the Dallas-Fort Worth area near the small community of Azle.

The research was the work of Dedman College faculty Matthew Hornbach, associate professor of geophysics; Heather DeShon, associate professor of geophysics; Brian Stump, SMU Albritton Chair in Earth Sciences; Chris Hayward, research staff and director geophysics research program; and Beatrice Magnani, associate professor of geophysics.

The article, “Causal factors for seismicity near Azle, Texas,” published online in late April. Already the article has been downloaded nearly 6,000 times, and heavily shared on both social and conventional media. The article has achieved a ranking of 270, which puts it in the 99th percentile of 144,972 tracked articles of a similar age in all journals, and 98th percentile of 626 tracked articles of a similar age in Nature.

It has a very high impact factor for an article of its age,” said Robert Gregory, professor and chair, SMU Earth Sciences Department.

The scientific article also was entered into the record for public hearings both at the Texas Railroad Commission and the Texas House Subcommittee on Seismic Activity.

Researchers settle long-debated heritage question of “The Ancient One”

The skull of Kennewick Man and a sculpted bust by StudioEIS based on forensic facial reconstruction by sculptor Amanda Danning. (Credit: Brittany Tatchell)
The skull of Kennewick Man and a sculpted bust by StudioEIS based on forensic facial reconstruction by sculptor Amanda Danning. (Credit: Brittany Tatchell)

The research of Dedman College anthropologist and Henderson-Morrison Professor of Prehistory David Meltzer played a role in settling the long-debated and highly controversial heritage of “Kennewick Man.”

Also known as “The Ancient One,” the 8,400-year-old male skeleton discovered in Washington state has been the subject of debate for nearly two decades. Argument over his ancestry has gained him notoriety in high-profile newspaper and magazine articles, as well as making him the subject of intense scholarly study.

Officially the jurisdiction of the U.S. Army Corps of Engineers, Kennewick Man was discovered in 1996 and radiocarbon dated to 8500 years ago.

Because of his cranial shape and size he was declared not Native American but instead ‘Caucasoid,’ implying a very different population had once been in the Americas, one that was unrelated to contemporary Native Americans.

But Native Americans long have claimed Kennewick Man as theirs and had asked for repatriation of his remains for burial according to their customs.

Meltzer, collaborating with his geneticist colleague Eske Willerslev and his team at the Centre for GeoGenetics at the University of Copenhagen, in June reported the results of their analysis of the DNA of Kennewick in the prestigious British journal Nature in the scientific paper “The ancestry and affiliations of Kennewick Man.”

The results were announced at a news conference, settling the question based on first-ever DNA evidence: Kennewick Man is Native American.

The announcement garnered national and international media attention, and propelled a new push to return the skeleton to a coalition of Columbia Basin tribes. Sen. Patty Murray (D-WA) introduced the Bring the Ancient One Home Act of 2015 and Washington Gov. Jay Inslee has offered state assistance for returning the remains to Native Tribes.

Science named the Kennewick work one of its nine runners-up in the highly esteemed magazine’s annual “Breakthrough of the Year” competition.

The research article has been viewed more than 60,000 times. It has achieved a ranking of 665, which puts it in the 99th percentile of 169,466 tracked articles of a similar age in all journals, and in the 94th percentile of 958 tracked articles of a similar age in Nature.

In “Kennewick Man: coming to closure,” an article in the December issue of Antiquity, a journal of Cambridge University Press, Meltzer noted that the DNA merely confirmed what the tribes had known all along: “We are him, he is us,” said one tribal spokesman. Meltzer concludes: “We presented the DNA evidence. The tribal members gave it meaning.”

Click here to read more about the research.

Prehistoric vacuum cleaner captures singular award

Paleontologists Louis L. Jacobs, SMU, and Anthony Fiorillo, Perot Museum, have identified a new species of marine mammal from bones recovered from Unalaska, an Aleutian island in the North Pacific. (Hillsman Jackson, SMU)
Paleontologists Louis L. Jacobs, SMU, and Anthony Fiorillo, Perot Museum, have identified a new species of marine mammal from bones recovered from Unalaska, an Aleutian island in the North Pacific. (Hillsman Jackson, SMU)

Science writer Laura Geggel with Live Science named a new species of extinct marine mammal identified by two SMU paleontologists among “The 10 Strangest Animal Discoveries of 2015.”

The new species, dubbed a prehistoric hoover by London’s Daily Mail online news site, was identified by SMU paleontologist Louis L. Jacobs, a professor in the Roy M. Huffington Department of Earth Sciences, Dedman College of Humanities and Sciences, and paleontologist and SMU adjunct research professor Anthony Fiorillo, vice president of research and collections and chief curator at the Perot Museum of Nature and Science.

Jacobs and Fiorillo co-authored a study about the identification of new fossils from the oddball creature Desmostylia, discovered in the same waters where the popular “Deadliest Catch” TV show is filmed. The hippo-like creature ate like a vacuum cleaner and is a new genus and species of the only order of marine mammals ever to go extinct — surviving a mere 23 million years.

Desmostylians, every single species combined, lived in an interval between 33 million and 10 million years ago. Their strange columnar teeth and odd style of eating don’t occur in any other animal, Jacobs said.

SMU campus hosted the world’s premier physicists

The SMU Department of Physics hosted the “23rd International Workshop on Deep Inelastic Scattering and Related Subjects” from April 27-May 1, 2015. Deep Inelastic Scattering is the process of probing the quantum particles that make up our universe.

As noted by the CERN Courier — the news magazine of the CERN Laboratory in Geneva, which hosts the Large Hadron Collider, the world’s largest science experiment — more than 250 scientists from 30 countries presented more than 200 talks on a multitude of subjects relevant to experimental and theoretical research. SMU physicists presented at the conference.

The SMU organizing committee was led by Fred Olness, professor and chair of the SMU Department of Physics in Dedman College, who also gave opening and closing remarks at the conference. The committee consisted of other SMU faculty, including Jodi Cooley, associate professor; Simon Dalley, senior lecturer; Robert Kehoe, professor; Pavel Nadolsky, associate professor, who also presented progress on experiments at CERN’s Large Hadron Collider; Randy Scalise, senior lecturer; and Stephen Sekula, associate professor.

Sekula also organized a series of short talks for the public about physics and the big questions that face us as we try to understand our universe.

Click here to read more about the research.

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Survey finds executive cybersecurity decisions are evolving from compliance to proactive cyber-risk management

SMU Darwin Deason Institute for Cyber Security releases new study on how financial, retail, healthcare and government sectors manage cyber risks

cybersecurity, IBM, SMU, chang,

A new research study from SMU’s Darwin Deason Institute for Cyber Security finds that executives are changing the way they manage and invest in cybersecurity, moving away from limited, reactive approaches and adopting systemic risk management frameworks that combine hardware, software and operations protocols to mitigate cyber risk.

The study, Identifying How Firms Manage Cybersecurity Investment, was sponsored by IBM Security and based on a semi-structured survey of 40 executives across financial, retail, healthcare and government sectors. Participants, most of whom were chief information security officers (CISOs), were selected primarily from large firms.

The study revealed several signs of increasing support for cybersecurity programs, including:

  • More than 80 percent of those interviewed reported broad and increasing support among senior-level management and corporate boards for their cybersecurity efforts.
  • Eighty-eight percent of respondents reported that their security budgets have increased.
  • The majority of respondents cited news coverage of large and harmful security breaches as the driver of that support.
  • In an interesting twist of perception, while 46 percent of interview subjects believe their organization is spending the right amount of money on cybersecurity, 64 percent reported that their peers were spending too little.

While most of those surveyed said getting funding for their cybersecurity efforts is not a hurdle, many executives talked about the difficulty they experience in finding and hiring skilled cybersecurity personnel. And while findings were similar across most of those interviewed from the private sector, the relatively small number of government executives surveyed noted that the lengthy budgeting processes they must work through make it difficult to react quickly to the emergence of new threats.

“Cybersecurity is more than a technology challenge,” said Fred Chang, director of the Deason Institute in SMU’s Bobby B. Lyle School of Engineering. “Dealing with the landscape as it exists today means making decisions within specific management cultures and understanding what drives the decision-making process. By explaining the move from compliance to risk-based cybersecurity programs we see in many C-suites, this report connects the dots for people making important decisions about what it takes to maintain privacy, financial security and operating capability — all of which are vulnerable.”

The widespread use of security frameworks shows a general maturation of cyber risk management, the study notes.

“Companies are realizing that simply checking the box for compliance requirements is no longer a sufficient security strategy,” said Bob Kalka, Vice President, IBM Security. “Hackers are becoming increasingly sophisticated in the battle for corporate data, and the survey results show that companies are evolving their security to keep pace. The increasing use of strategic, risk-based frameworks is a huge step forward in protecting these organizations’ most critical assets.”

“This report is powerful information for anyone guiding cybersecurity decisions today,” Chang said. “And it’s a good example of the kind of interdisciplinary focus the Deason Institute brings to the table.”

Chang joined SMU’s Lyle School of Engineering in September 2013 with the goal of creating a cybersecurity program that takes an interdisciplinary approach to what is frequently perceived as a strictly technical issue. The Deason Institute, launched in January 2014, provides SMU and the Lyle School with the critical resources to advance that goal. Chang’s career spans service in the private sector and in government, including as the former Director of Research at the National Security Agency.

The research team for this study also included Deason Institute Principal Investigator Tyler Moore and Scott Dynes, a visiting scholar at the Institute. Moore’s research focuses on the economics of information security, the study of electronic crime and the development of policy for strengthening security. Dynes’ research addresses how firms identify and manage cyber risks at the firm and sector levels, and he is well published on topics related to incentives for firms to invest in information security, as well as the economic consequences of information security failures.

Interviews with the 40 executives cited in the survey were conducted in person or by phone with one or two researchers, and lasted from 30 minutes to an hour. The interviews were semi-structured in that researchers worked from a list of common questions in every interview, but allowed the answers to those questions to serve as a launching point for follow-ups. Of the participants, 33 represented U.S. organizations and the remaining seven were international.

Interview questions included:

  • What methods and inputs do you use to prioritize cyber investment?
  • Do you feel you have adequate information in managing overall cyber risk?
  • Is your management supportive? Do you have sufficient budget?
  • What factors are driving cybersecurity investment at your firm?
  • How do you decide among offerings in the marketplace?

A key study finding was the central role that frameworks now play in defining how executives perceive risk, and how much money they are willing to spend to mitigate that risk. “Using these frameworks provides a platform for CISOs to make an understandable, compelling case for specific cybersecurity products and operations,” Moore said. Or as one interviewed executive put it, “Security has to be able to have a basis to argue its point of view in a compelling story with some thought behind it, rather than ‘I want to get these things because it’s the next cool security thing that’s out there.’”

Worth noting, Moore added, is that the lack of qualified, available cybersecurity professionals creates its own set of problems. “In some cases, CISOs say their senior management wants to fund cybersecurity measures more quickly than they can staff them,” Moore said. “In other cases, senior management is hesitant to fully fund proposed cybersecurity projects because they fear the CISO doesn’t have the personnel available to implement them.”

The interviews were conducted between February and October 2015 and participants were assured anonymity for themselves and their firms. The authors note that the advantage of the semi-structured interview methodology is that it enables the researcher to glean detailed contextual information that would not be possible under a more structured interview scenario. The disadvantage, they note, is that the contextual findings do not generalize to the profession as a whole.

The findings described in the report, Identifying How Firms Manage Cybersecurity Investment, are not to be construed as an endorsement of any person, product or company by the Darwin Deason Institute for Cyber Security at SMU. Note that the respondent opinions presented in the report do not necessarily reflect the opinions of the study authors or the study sponsor, IBM. The study’s objective is to relay as accurately as possible the statements of the interview subjects.

Read an independent analysis based on the Deason Institute report by sponsor IBM Security at this link. — Kim Cobb

The mission of the Darwin Deason Institute for Cyber Security in SMU’s Bobby B. Lyle School of Engineering is to advance the science, policy, application and education of cyber security through basic and problem-driven, interdisciplinary research. The Lyle School, founded in 1925, is one of the oldest engineering schools in the Southwest. The school offers eight undergraduate and 28 graduate programs, including masters and doctoral degrees.

SMU is a nationally ranked private university in Dallas founded 100 years ago. Today, SMU enrolls approximately 11,000 students who benefit from the academic opportunities and international reach of seven degree-granting schools.

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SMU Tower Center, Latino Center for Leadership Development create new strategic policy program

New center will be hub for social-scientific issues, with research that will inform policymaking locally and nationally

SMU’s John G. Tower Center for Political Studies and the Dallas-based Latino Center for Leadership Development announced a strategic new academic policy institute at SMU Sept. 15. Speakers were, from left, Thomas DiPiero, dean of SMU’s Dedman College of Humanities and Sciences; Jorge Baldor, Latino Center founder and SMU alumnus; Joshua Rovner, acting director of SMU’s Tower Center; and Miguel Solis, Latino Center.
SMU’s John G. Tower Center for Political Studies and the Dallas-based Latino Center for Leadership Development announced a strategic new academic policy institute at SMU Sept. 15. Speakers were, from left, Thomas DiPiero, dean of SMU’s Dedman College of Humanities and Sciences; Jorge Baldor, Latino Center founder and SMU alumnus; Joshua Rovner, acting director of SMU’s Tower Center; and Miguel Solis, Latino Center. (Hillsman Jackson)

SMU’s John Goodwin Tower Center for Political Studies has formed a strategic academic partnership with the Latino Center for Leadership Development, Latino CLD.

The new Latino CLD-SMU Tower Center Policy Program will identify and implement policy-focused solutions to the Latino community’s most pressing concerns, from educational and economic opportunities, to voting rights and immigration reform, to the under-representation of Latinos in elected and appointed roles at the federal, state and local levels, as well as corporate boards.

As part of the unique partnership, the Latino CLD will provide SMU’s Tower Center with $900,000 over five years. The funding will allow the new policy program to attract and engage scholars and thought leaders in an interdisciplinary think-tank, creating a framework to analyze and develop policy priorities, provide public forums and outreach, and support greater understanding and influence for the Latino community.

“America is in the midst of a fundamental, Latino-driven demographic shift,” said Latino CLD founder and SMU alumnus Jorge Baldor, citing Pew Research Center reports that Latinos will represent about 30 percent of the U.S. population by 2060.

“With the growing number of Latinos comes a reciprocal responsibility to lead,” Baldor said. “Latino CLD is focused on developing the next generation of those leaders.”

Dallas Mayor Mike Rawlings said research from the institute will inform policymaking locally and nationwide.

“I’m pleased the Latino Center for Leadership Development and SMU are joining forces for a premier Latino policy program,” Rawlings said. “The research it produces will be an asset for policy makers, allowing for in-depth analysis and creation of policies that will improve the lives of people across Texas and throughout the nation.”

SMU is becoming a major presence in Latino-focused research and education, said Thomas DiPiero, dean of Dedman College.

“It’s also a propitious moment to bring new expertise and scholarship to bear both nationally and locally,” DiPiero said, noting the Dallas-Fort Worth region, with 7 million people, is the nation’s fourth-largest population center, and growing rapidly.

“Looking ahead, the success of this program will allow SMU and the Latino CLD to contribute vital public policy research while based in DFW — a U.S. political and economic center of gravity with strong global connections,” DiPiero said.

The Latino CLD-SMU Tower Center Policy Program will work in three major areas:

  • Provide influential voices and data to support research on policy issues
  • Offer two-year appointments for postdoctoral scholars who will research and publish their findings on public policy issues
  • Provide research grants and public seminars to promote stronger community understanding and dialogue about key societal issues

The relationship between the new SMU policy program and Latino CLD also will allow promising leaders, such as those within the Latino CLD’s new Leadership Academy, “to develop as individuals and hone network skills necessary to assume positions of influence” while focused on policy and politics to help people from all spectrums of society, Baldor said.

“The Latino CLD-SMU Tower Center Policy Program will provide an excellent opportunity to combine our expertise to focus on contemporary policy matters of major interest to this country’s diverse, growing Latino community,” said Joshua Rovner, director of studies at the Tower Center in SMU’s Dedman College of Humanities and Sciences.

“As a hub for social-scientific issues, we will play a major role in cutting through the cacophony of numbers related to the Latino community, letting us take big issues and quickly drill down to ideas for thoughtful solutions and policy implementation,” Rovner said.

The announcement of the new policy program came on the first day of National Hispanic Heritage Month and follows on the heels of the Tower Center’s Sept. 8 launch of its new Texas-Mexico Program during Texas Gov. Greg Abbott’s historic visit to Mexico. — Denise Gee

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SMU is a nationally ranked private university in Dallas founded 100 years ago. Today, SMU enrolls nearly 11,000 students who benefit from the academic opportunities and international reach of seven degree-granting schools. For more information see www.smu.edu.

In the spirit of John Tower’s commitment to educate and inspire a new generation of thoughtful leaders, the Tower Center seeks to bridge the gap between the world of ideas, scholarship and teaching, as well as the practice of politics. The primary mission of the Tower Center is to promote the study of politics and international affairs and to stimulate an interest in ethical public service among undergraduates. The Tower Center is an academic center where all parties and views are heard in a marketplace of ideas, and the Center pursues its mission in a non-partisan manner.

Latino CLD is a privately funded foundation with a vision of developing future leaders with an understanding of Latino-focused policies and actionable items for solutions resulting from such partnerships as the Latino CLD–SMU Tower Center Policy Institute.

SMU has an uplink facility located on campus for live TV, radio, or online interviews. To speak with an SMU expert or book an SMU guest in the studio, call SMU News & Communications at 214-768-7650.

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Why firms prefer not to disclose product quality — and how regulators might respond

“This is a really exciting area of research where game theory based models can provide direct insights into behavior of market participants.” — Roy

SMU, Santanu Roy, Economic Journal, price signaling, regulation

Rather than explicitly revealing information about the quality of their products and services, many firms prefer to signal quality through the prices they charge, typically working on the assumption that a high price indicates high quality.

New research by Maarten Janssen, University of Vienna, and Southern Methodist University economist Santanu Roy provides a new explanation for why firms choose not to disclose quality directly – and explains how prices that are set to signal quality can distort actual buying decisions.

Their study, “Competition, Disclosure and Signalling,” which is published in the February 2015 issue of the Economic Journal, shows that when firms compete on price, not disclosing product quality voluntarily can soften competition and boost profits.

“We often use prices to form ideas about product quality. Firms understand this,” said Roy, a professor in SMU’s Department of Economics in Dedman College of Humanities & Sciences. “As a result, their strategic decisions about pricing and direct disclosure of product characteristics become intricately linked. Our research explains why firms may prefer not to disclose quality attributes of their products and instead induce buyers to try to infer quality from prices: it allows firms to sustain high prices despite strong competition.”

Finding may be a case for imposing mandatory disclosure regulation
The finding has an important policy implication for regulators: even if consumers infer all relevant product information from prices (or other actions by firms), there may be a case for imposing mandatory disclosure regulation. Such regulation can reduce market power and the price and consumption distortions resulting from firms’ use of prices to signal product quality.

“If you regulate and force firms to directly disclose quality attributes, prices may fall and lead to better market outcomes,” Roy said. “This is a really exciting area of research where game theory based models can provide direct insights into behavior of market participants. Our current research studies some related issues such as the case for ‘truth in advertising’ regulation and penalizing false advertising of product attributes.”

The researchers begin by noting that in a large number of markets, ranging from educational and health services to consumer goods and financial assets, sellers have important information about the quality of their products. Quality attributes include satisfaction from consuming the product, durability, safety and potential health hazards as well as ethical and environmental attributes.

Information about these quality attributes is not always publicly available to potential buyers or competitors. In many of these markets, firms have the option of voluntarily disclosing product information in a credible and verifiable manner – for example, through independent certification, rating agencies or regulated advertising.

Without hard, credible information about products, buyers associate higher prices with better quality
But in practice, firms do not disclose product quality very often, even when there are relatively cost-effective mechanisms for credible disclosure and even when the product quality itself is not bad.

For example, empirical studies find that hospitals often do not disclose risk-adjusted mortality; schools often do not report standardized test scores; restaurants almost never disclose hygiene inspection reports; and so on.

In fact, the reluctance of firms to disclose voluntarily may discourage the emergence of rating agencies and certification intermediaries in many industries. This study provides a new explanation for why firms do not wish to disclose quality.

The researchers’ explanation is based on the commonplace observation that even when there is no hard and credible information about products on the market, buyers often associate higher prices with better quality and cheap products with low quality.

Such beliefs held by buyers are rational in markets where firms anticipate this and choose their actions (such as prices) to convey the hidden information. Economists call this “signaling”: it is an alternative way of communicating private information by firms.

The researchers argue that firms may not disclose product attributes voluntarily because they find it more profitable to signal their information indirectly.

Excessively high price makes it credible to buyers that product could not be low quality
This is somewhat paradoxical at first glance. Economists have long maintained that signalling is costly for firms. For example, to signal high quality through high prices, a firm may have to charge a much higher price than in a situation where product quality was observed or disclosed, leading to loss of sales and profit. The excessively high price is needed to make it credible to buyers that this could not be a low quality product as the producer of such a product would have lower costs and therefore prefer to sell high volume at low price.

Why then would a firm prefer to signal rather than disclose? The answer lies in the strategic behavior of firms and market competition. The researchers show that when firms compete on price, not disclosing product quality voluntarily, competing under a “veil of incomplete information” can soften competition, leading to higher profits and a more collusive outcome.

Firms’ incentives to lower prices to steal business from their rivals are disciplined by the fact that buyers may associate lower prices with lower quality. The resulting market outcome can be one with higher profits for the nondisclosing firm. The strategic incentive for nondisclosure may be strong even when a firm has a strong competitive advantage in the market.

Absence of voluntary disclosure does not mean that consumers make uninformed decisions
In contrast with previous research on this issue, the new explanation of nondisclosure is not based on disclosure being too costly or imperfect. The researchers show that no firm may disclose product quality (including the ones with the best product quality), even if the mechanism for voluntary disclosure is almost costless and frictionless.

The researchers’ analysis indicates that the absence of voluntary disclosure does not mean that consumers make uninformed decisions; nondisclosure arises precisely when buyers infer quality from the market behavior of firms.

But markets may well be inefficient as the prices that are set to signal quality distort actual buying decisions. This leads to the important policy implication that there may be a case for imposing mandatory disclosure regulation on firms. — Royal Economic Society and Southern Methodist University

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SMU is a nationally ranked private university in Dallas founded 100 years ago. Today, SMU enrolls nearly 11,000 students who benefit from the academic opportunities and international reach of seven degree-granting schools. For more information see www.smu.edu.

SMU has an uplink facility located on campus for live TV, radio, or online interviews. To speak with an SMU expert or book an SMU guest in the studio, call SMU News & Communications at 214-768-7650.

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CoinDesk: Research — Over $11 Million Lost in Bitcoin Scams Since 2011

The researchers painstakingly read forum threads post by post, even translating messages written in languages other than English.

Bitcoin, SMU, scammers, $11 million, Moore, Vasek

With the cryptocurrency Bitcoin increasingly popular for digital transactions, the digital currency news site CoinDesk covered the research of SMU Bitcoin experts Marie Vasek, lead researcher on the study, and Tyler W. Moore, both in SMU’s Computer Science and Engineering Department in the Lyle School of Engineering.

The study by Vasek and Moore, “There’s no free lunch, even using bitcoin: Tracking the popularity and profits of virtual currency scams,” found that fraudulent schemes have scammed at least $11 million in Bitcoin deposits from unsuspecting cyber customers over the past four years.

Bitcoin is the digital world’s most popular virtual currency, with millions in circulation.

The study is the first empirical study of its kind. Vasek and Moore found that hucksters used four different types of schemes through authentic-looking web-based investment and banking outlets to lure customers and heist deposits.

Vasek explained to CoinDesk journalist Joon Ian Wong how the researchers extracted Bitcoin addresses linked to the frauds, enabling them to look at transactions from victims to fraudsters recorded on the transaction addresses.

The CoinDesk article, Research: Over $11 Million Lost in Bitcoin Scams Since 2011, published Jan. 29, 2015.

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EXCERPT:

By Joon Ian Wong
CoinDesk

Scams promising bitcoin riches have netted swindlers at least $11m in the last four years, researchers have found.

Some 13,000 victims handed over their money unwittingly in 42 different scams over that time period, their data suggests.

However, the total amount of funds cheated from victims over this period is almost certainly higher than the estimated $11m the research identified.

A co-author of the research, Marie Vasek, said:

“There are a lot of scams that we couldn’t measure at all. There were scams we couldn’t find or verify … We think presenting our findings as they are, a lower bound, makes a lot of room for us and others to further quantify scams in this space.”

Vasek, who researches computer security at Southern Methodist University, co-wrote the paper with Tyler Moore, an assistant professor in computer science at the same institution.

Painstaking search
The paper, titled There’s No Free Lunch, Even Using Bitcoin: Tracking the Popularity and Profits of Virtual Currency Scams, has been presented at the Financial Cryptography and Data Security conference taking place in Puerto Rico this week.

Vasek and Moore combed online repositories of scam accusations, including a mega-thread of scams, hacks and heists on the Bitcointalk forum that has been maintained since 2012, as well as the subreddit r/bitcoin, BadBitcoin.org and CryptoHYIPs.com.

This process required the researchers to painstakingly go through forum threads post by post, even translating messages that were written in languages other then English, as well as visiting the websites that scammers created to publicise themselves.

“We went through every single post to determine if the scheme was a scam, any associated bitcoin addresses with the scheme, and any associated scams,” Vasek said.

Using this method they found 349 scams, which were then whittled down to 192 deceptions after excluding phishing, malware and pay-for-click websites, which fall outside the scope of the study.

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