family earnings and wage inequality early in the life cycle a bstract this article proposes an explanation for the fact that while wages of married women contribute to equalizing the distnrbution of family wages the equalizing effect declines during the early stages of the married life cycle the explanation is based on the interaction between on the job accumulation of human capital and labor supply behavior empirical results from the nls panel data suggest that the explanation is plausible and also show that in contrast to the results of previous cross section studies there is no decline over time in the equalizing effect of wives earnings on the distribution of family earnings

estimation of consumer demand with stock out based substitution an application to vending machine products the occurrence of temporary stock outs at retail is common in frequently purchased product categories available empirical evidence suggests that when faced with stock outs consumers are often willing to buy substitute items an important implication of this consumer behavior is that observed sales of an item no longer provide a good measure of its core demand rate sales of items that stock out are right censored while sales of other items are inflated because of substitutions knowledge of the true demand rates and substitution rates is important for the retailer for a variety of category management decisions such as the ideal assortment to carry how much to stock of each item and how often to replenish the stock the estimated substitution rates can also be used to infer patterns of competition between items in the category in this paper we propose methods to estimate demand rates and substitution rates in such contexts we develop a model of customer arrivals and choice between goods that explicitly allows for possible product substitution and lost sales when a customer faces a stock out the model is developed in the context of retail vending an industry that accounts for a sizable part of the retail sales of many consumer products we consider the information set available from two kinds of inventory tracking systems in the best case scenario of a perpetual inventory system in which times of stock out occurrence and cumulative sales of all goods up to these times are observed we derive maximum likelihood estimates mles of the demand parameters and show that they are especially simple and intuitive however state of the art inventory systems in retail vend ing provide only periodic data i e data in which times of stock out occurrence are unobserved or missing for these data we show how the expectation maximization em algorithm can be employed to obtain the mles of the demand parameters by treating the stock out times as missing data we show an application of the model to daily sales and stocking data pooled across multiple beverage vending machines in a midwestern u s city the vending machines in the application carry identical assortments of six brands since the number of parameters to be estimated is too large given the available data we discuss possible restrictions of the consumer choice model to accomplish the estimation our results indicate that demand rates estimated naively by using observed sales rates are biased even for items that have very few occurrences of stock outs we also find significant differences among the substitution rates of the six brands the methods proposed in our paper can be modified to apply to many nonvending retail settings in which consumer choices are observed not their preferences and choices are constrained because of unavailability of items in the choice set one such context is in store grocery retailing where similar issues of information availability arise in this context an important issue that would need to be dealt with is changes in the retail environment caused by retail promotions

do pharmacists buy bayer informed shoppers and the brand premium we estimate the effect of information and expertise on consumers willingness to pay for national brands in physically homogeneous product categories in a detailed case study of headache remedies we find that more informed or expert consumers are less likely to pay extra to buy national brands with pharmacists choosing them over store brands only 9 percent of the time compared to 26 percent of the time for the average consumer in a similar case study of pantry staples such as salt and sugar we show that chefs devote 12 percentage points less of their purchases to national brands than demographically similar nonchefs we extend our analysis to cover 50 retail health categories and 241 food and drink categories the results suggest that misinformation and related consumer mistakes explain a sizable share of the brand premium for health products and a much smaller share for most food and drink products we tie our estimates together using a stylized model of demand and pricing

retail chains corporate social responsibility communication this study examines determinants of retail chains corporate social responsibility csr communication on their web pages the theoretical foundation for the study is signaling theory which suggests that firms will communicate about their csr efforts when this is profitable for them and when such communication makes it possible for outsiders to distinguish good from bad performers based on this theory i develop hypotheses about retail chains csr signaling the hypotheses are tested in a sample of 208 retail chains in the norwegian market as hypothesized i find that foreign chains chains using private brands and vertically integrated chains are more likely to signal but i find no relationship between pricing and signaling in further analysis using chains csr memberships and certifications as the measure of signals only the relationship between organizational form and signaling is replicated in total the findings give partial support to signaling theory

expectations drift and volatility in evolutionary games abstract this paper proposes an evolutionary model of learning in simple coordination games where expectations are the driving force of the process as time proceeds agents adjust their expectations through some possibly different updating rules whose only requirement is that of consistency with long stationary evidence sporadically expectations are also subject to arbitrary perturbation the main point of the paper is that due to the possibility of random drift on expectations the evolutionary process will be subject to high volatility across equilibria specifically every nash equilibrium even if risk or payoff dominated will have significant positive weight in the long run invariant distribution journal of economic literature classification numbers c73 d83 d84

strategic pricing signalling and costly information acquisition abstract consider a market where an informed monopolist sets the price for a good or asset with a value unknown to potential buyers upon observing the price buyers may pay some cost for information about the value before deciding on purchases under a belief restriction which generalizes the idea of the cho kreps intuitive criterion we establish a version of the grossman stiglitz paradox there is no separating equilibrium with fully revealing prices yet we also resolve the paradox there is a unique equilibrium and as the cost of information becomes small the equilibrium approaches the full information outcome and prices become perfectly revealing

market structure and media diversity i introduction information on news and current affairs can raise political awareness and promote a range of ideas under the assumption that unregulated media markets supply too little variety many societies have charged regulators with ensuring there are sufficient opportunities for different new and independent viewpoints diversity and that media respond to the interests of their local communities localism 1 the federal communications commission fcc has traditionally limited the amount of common and cross ownership of newspapers radio and television tv stations recently the fcc relaxed ownership rules and refocused their attention on market forces for example consumer preferences and new media such as satellite the internet and smartphone in order to achieve their diversity and localism goals given the increase in choices through new media supporters of greater ownership concentration argue that traditional media should be free to consolidate and use the efficiencies to provide more diverse and local news programming opponents question whether such efficiencies are achievable and argue that large consolidated media corporations are not flexible enough to serve the interests of local and minority communities in this paper we estimate consumer preferences for their local news and current affairs news service described by the offerings from newspapers radio tv the internet and smartphone news service characteristics are diversity of opinion in the reporting of information coverage of multiculturalism issues amount of information on community news and events and amount of space or time devoted to advertising we use our demand estimates to calculate the impact on consumer welfare from a change in media market structure that reduces the number of independent tv stations in the market by one specifically we employ the willingness to pay wtp construct to measure the expected consumer welfare effects between the news service supplied to the consumer before the change in market structure and the service supplied after the change we focus on broadcast tv stations because they are the main news for most households and because the fcc has direct oversight of their ownership we estimate our demand model with data obtained from a nationwide survey of households during march 2011 results show that the representative consumer is willing to pay from 18 to 26 per month for an increase in diversity of opinion and slightly more for community news from a low to a medium level but only an additional 6 to 7 to move to a high level of diversity of opinion or community news the representative consumer also values an improvement in information that reflects the interests of women and minorities from low to medium 7 the representative consumer is willing to pay about 5 to avoid a change from a low to a medium level of advertising but the much higher amount of 20 to avoid a change from a medium to a high level using fcc 2011 data on media market structure we present evidence that indicates the amount of diversity localism and advertising in the news services supplied to consumers is lower in markets with one fewer independent tv station as a result the average small market i e five or fewer tv stations consumer loses 83 per month whereas the average large market i e 20 or more tv stations consumer loses 37 per month these losses are equivalent to 45 million annually for all small market households in the united states and 13 million for large market households if the change in market structure occurs in all markets aggregate losses nationwide would be about 681 million other studies have measured the relationship between information on news and current affairs and market structure flowever these studies measure supply from just one of the media sources that comprise the consumer s news service for example milyo 2007 gentzkow 2007 and gentzkow and shapiro 2010 for newspapers and siegelman and waldfogel 2001 and crawford 2007 for radio and tv

monopolistic competition with experience goods this paper constructs a model of monopolistic competition where consumers cannot directly verify product quality prior to an initial purchase instead consumers base initial purchases on observed prices which perfectly signal firms qualities both in and out of equilibrium equilibrium quality is less than efficient but generally bounded away from the minimum quality with free entry observable product variety exceeds what would prevail with perfect information as repeat purchases become large relative to initial purchases or as firms become small relative to the size of the market equilibrium product quality rises and the market converges to the full information equilibrium

markets in equilibrium with firms out of equilibrium a simulation study abstract we explore the effect of the limited ability to process information on the convergence of firms toward equilibrium in the context of a cournot oligopoly with a unique and symmetric nash equilibrium firms are modeled as adaptive economic agents through a genetic algorithm computational experiments show that while market production is close to equilibrium firm production is relatively far from the individual equilibrium level this pattern of firm heterogeneity is not an artifact of random elements built into the decisional process instead it comes from the market interaction of firms with cognitive limitations

factors affecting levels and growth rates in the wage rates of women evidence from nursing using data from two surveys of nurses 1981 and 1989 the study examines the factors affecting the levels and growth rates in the wage rates paid to women especially married women who were licensed as registered nurses our results indicate that the influence of such household characteristics as marital status age and number of children and spouse s characteristic tended to diminish over the 1980s the evidence further suggests that the penalties for frequent switches in employment state were larger at the end of the decade than at the beginning further wages paid to nurses with baccalaureates were statistically the same as those paid to nurses with lesser formal education the return to the baccalaureate appears to be in the form of the higher wages and salaries earned by those who obtain post baccalaureate degrees

sales and firm entry the case of wal mart temporary price reductions or sales have become increasingly important in the evolution of the price level we present a model of repeated price competition to illustrate how entry causes incumbents to alternate between high and low prices using a six year panel of weekly observations from a grocery chain we find that individual stores employ more sales as the distance to wal mart falls moreover the increase in the frequency of sales was concentrated on the most popular products suggesting the use of a loss leader strategy

asymmetric cost pass through empirical evidence on the role of market power search and menu costs abstract we estimate cost pass through rates based on data for store level retail prices and wholesale costs for up to 90 different brands of milk sold in 327 retail stores across germany the abundance of the data allows us to identify heterogeneity in pass through across retailers and relate it to underlying explanatory factors such as retailer market power measures of consumer search and menu costs results from a threshold error correction process clearly provide empirical support for the rockets and feathers phenomenon prices increase more quickly than they decrease in contrast to much of the existing literature which explains the rockets and feathers phenomenon as a result of retailers exercising market power we find the opposite result the degree of asymmetry in prices is negatively related to market power decreases with the lerner index our measure of cross product search costs does not account for observable differences in asymmetric cost pass through rates between products the rockets and feathers observation is better explained by product specific differences in menu costs mistake costs and costs associated with stock outs which can lead to a loss of consumer goodwill

the behavior of the exchange rate in the genetic algorithm and experimental economies this paper studies the behavior of the exchange rate in the kareken wallace overlapping generations economy with two currencies in which decision rules are updated using the genetic algorithm the analysis shows that a stationary monetary equilibrium of the kareken wallace model is not stable under the genetic algorithm dynamics the fluctuations in the genetic algorithm exchange rate are driven by fluctuations in the portfolio fractions which change over time in response to the inequality between the rates of return on two currencies further both the genetic algorithm simulations and the experiments with human subjects were characterized by continuing fluctuations of the exchange rate with first period consumption values close to a stationary value

access prices unbundling and product variety in european internet markets abstracta fundamental policy in european broadband regulation is unbundled access to the local loop of the incumbent telephone company we present comparative static results that show as the access price decreases the retail price decreases the variety of plans offered by internet service providers increases and the quantity of each variety increases when a threshold condition is met using data from 18 european countries from 2006 to 2012 we find empirical support for these results when internet product variety is measured by variation in download speeds

a life cycle analysis of family income distribution the question of whether working wives widen or narrow the income gap between rich and poor families is examined using a life cycle analysis data are from the 1973 u s national survey of family growth and concern 5901 currently married women under 45 years of age the results suggest that the employment of wives tends to reduce inequality particularly among white families but to a different degree at different stages of the family life cycle annotation

note the newsvendor model with endogenous demand this paper considers a firm s price and inventory policy when it faces uncertain demand that depends on both price and inventory level the authors extend the classic newsvendor model by assuming that expected utility maximizing consumers choose between visiting the firm and consuming an exogenous outside option the outside option represents the utility the consumer forgoes when she chooses to visit the firm before knowing whether or not the product will be available the authors investigate both the case in which the firm s price is exogenous and the case in which price is chosen optimally the paper makes two contributions first the authors show that the firm holds more inventories provides a higher fill rate attracts more customers and earns higher profits when it internalizes the effect of its inventory on demand second the authors show that in the endogenous price case the firm s two dimensional decision problem can be reduced to two sequential single variable optimizations as a result the endogenous price case is as easy to solve as the exogenous price case

product quality and competition evidence from the broadband industry abstractaccess to high quality broadband internet is important in many different respects such as in communication education commerce and information acquisition we investigate the relationship

does demand for product quality increase worker training abstract we uniquely examine the relationship between firm organized training and the sensitivity of consumer demand to product quality cross section panel fixed effect and instrumental variable estimates confirm that british workplaces provide more intensive training when their product demand is more sensitive to product quality robustness checks including using alternative key variable definitions and a counterfactual analysis examining the importance of competing on price support this confirmation

a learning approach to auctions we analyze a repeated first price auction in which the types of the players are determined before the first round it is proved that if every player is using either a belief based learning scheme with bounded recall or a generalized fictitious play learning scheme then for sufficiently large time the players bids are in equilibrium in the one shot auction in which the types are commonly known

learning to bid the design of auctions under uncertainty and adaptation we examine auction design in a context where symmetrically informed adaptive agents with common valuations learn to bid for a good despite the absence of private valuations asymmetric information or risk aversion bidder strategies do not converge to the bertrand nash equilibrium strategies even in the long run deviations from equilibrium strategies depend on uncertainty regarding the value of the good auction structure the agents learning model and the number of bidders although individual agents learn nash bidding strategies in isolation the learning of each agent by flattening the best reply correspondence of other agents blocks common learning these negative externalities are more severe in second price auctions auctions with many bidders and auctions where the good has an uncertain value ex post

bargaining under incomplete information this paper presents and analyzes a bargaining model of bilateral monopoly under uncertainty under the bargaining rule proposed the buyer and the seller each submit sealed offers that determine whether the good in question is sold and the transfer price the nash equilibrium solution of this bargaining game implies an offer strategy of each party that is monotonic in its own reservation price and depends on its assessment of the opponent s reservation price issues of relative bargaining advantage and efficiency are examined for a number of special cases finally we discuss the appropriateness of the nash solution concept

state dependence serial correlation and heterogeneity in intertemporal labor force participation of married women a dynamic search framework is developed to analyze the intertemporal labor force participation behavior of married women using longitudinal data to allow for a rich dynamic structure the sensitivity to alternative distributional assumptions is evaluated using linear probability and probit models the dynamic probit models are estimated using maximum simulated likelihood msl estimation to overcome the computational difficulties inherent in maximum likelihood estimation of models with nontrivial error structures the results find that participation decisions are characterized by significant state dependence unobserved heterogeneity and negative serial correlation in the error component the hypothesis that fertility decisions are exogenous to women s participation decisions is rejected when dynamics are ignored however there is no evidence against this hypothesis in dynamic model specifications women s participation response is stronger to permanent than current nonlabor income reflecting unobserved taste factors

what do inventories tell us about news driven business cycles there is widespread disagreement over the quantitative contribution of news shocks to business cycle fluctuations this paper provides a simple identifying restriction based on inventory dynamics that tightly pins down this contribution structural models predict that finished good inventories should fall when there is an increase in consumption and investment induced by news shocks a structural var with these sign restrictions indicates that news shocks account for at most 20 percent of output volatility since inventories comove positively with consumption and investment in the data shocks that generate negative comovement cannot account for the bulk of fluctuations

quality differences third degree price discrimination and welfare we propose a model with two markets to analyze the welfare implications of price discrimination with quality differences in each market a local firm that operates in that market only competes against a global firm that operates in both markets local firms produce higher quality goods than the global firm if the quality levels of the local firms products are the same price discrimination is never welfare decreasing if they differ discrimination is welfare increasing if quantity increases because of a positive allocation effect of price discrimination there are parameter values such that welfare increases while total output decreases with price discrimination jel d43 d60

auctions with artificial adaptive agents abstract experiments on auctions find that subjects make systematic bidding errors that cannot be explained within the context of nash equilibrium bidding models experimenters and others have conjectured that learning by subjects could lead to errors consistent with those observed here we create and analyze a model of adaptive learning and demonstrate that such a model can capture the bidding patterns evident among human subjects in experimental auctions moreover our model provides a variety of insights into the nature of learning across different auction institutions journal of economic literature classification numbers c7 c9

analyzing structure of two echelon closed loop supply chain for pricing quality and recycling management abstract this paper analyzes the effects of recycling and product quality level on pricing decision in a two echelon closed loop supply chain clsc where demand is sensitive with price and quality level of the product under stackelberg game setting this paper considers three possible collection activities of used product for recycling viz retailer led collection manufacturer led collection and third party led collection it is found that third party s involvement in used product collection activity is always disadvantageous in this proposed model cost parameters of the reverse channel play an important role in determining best channel structure quality level and price of the product directly vary with recycling a threshold of collection effort determines which party between manufacturer and retailer can provide the best quality product at least price to resolve channel conflict and to distribute surplus profit the concepts of sub game perfect equilibrium and alternative offer bargaining strategy are used the analysis reveals that the subgame perfect equilibrium retail price cuts out channel conflict and depicts particular profit split irrespective of the offering party the proposed model is also justified by illustrating numerical examples

genetic algorithm learning and the cobweb model this paper presents the cobweb model in which competitive firms in a market for a single good use a genetic algorithm to update their decision rules about next period production and sales the results of simulations show that the genetic algorithm converges to the rational expectations equilibrium for a wider range of parameter values than other algorithms frequently studied within the context of the cobweb model price and quantity patterns generated by the genetic algorithm are also compared to the data of experimental cobweb economies it is shown that the algorithm can capture several features of the experimental behavior of human subjects better than three other learning algorithms that are considered

estimation of dynamic discrete choice models in continuous time with an application to retail competition this paper provides a method for estimating and solving dynamic discrete choice models in a continuous time framework that is computationally light the method is particularly useful in dynamic games in the proposed framework players face a standard dynamic discrete choice problem at decision times that occur stochastically the resulting stochastic sequential structure naturally admits the use of ccp methods for estimation and makes it possible to compute counterfactual simulations for relatively high dimensional games we apply our techniques to examine the impact of walmart s entry into the retail grocery industry showing that even the threat of entry by walmart has a substantial eect on market structure

the life cycle labor supply of married women and its implications for household income inequality i introduction there has been an abundance of papers on female labor supply over the years but most do not rigorously test the life cycle model of labor supply and none focus on the potentially important role of nonlabor income in shaping labor supply 1 their primary focus is on the wage elasticity and most recently on the intertemporal wage elasticity the intertemporal wage elasticity or the change in labor supply as wages change over the woman s life cycle is economically cleaner to interpret because it contains only a substitution effect the income effect is constant over the life cycle but this advantage comes at a cost we learn nothing about why labor supply varies across women such variability is extremely important for policy purposes because for example it has implications for income inequality the popular press often creates the impression that income inequality is worsening as upper income men marry upper income women the implication is that the rising labor force participation rate of women is increasing family income inequality on the other hand it is possible that the income of wealthy husbands exerts a negative income effect on their wives labor supply so income inequality is little changed or declines as participation rates of wives rise the objectives of this paper are twofold to estimate a life cycle labor supply model with panel data that emphasizes the husband s income effect on the wife s hours of work and to draw implications for family income inequality i provide new estimates of the income elasticity that nest the life cycle hypothesis of labor supply with the current income hypothesis the life cycle model suggests that it is the permanent income of the husband that matters not his current income yet nearly all models of female labor supply include only current income the exception is jakubson 1988 i include both and add a varying parameters specification for changes in tastes the implications for income inequality arise as an application of the life cycle labor supply model a summary of the empirical results is contained in the conclusion this paper is unusual in that it covers two relatively disparate topics though their linkage is important and demands their integration in one paper ii specification of the labor supply model following the standard life cycle labor supply model assume that an individual maximizes lifetime utility v where utility is separable over time and separable between consumption and leisure 2 mathematical expression omitted where c and l are consumption and hours of leisure for individual i rho is the rate of time preference gamma sub it reflects consumers tastes for home production leisure etc and omega is less than 1 is fixed across individuals the lifetime budget constraint is mathematical expression omitted for interest rate r wage rate w sub it hours of work h sub it and the present value of nonlabor income a sub i for an interior solution the leisure equation is 2 ln l sub it 1 omega 1 ln lambda sub i ln gamma sub it ln omega ln 1 r sup t 1 rho sup t ln w sub it where lambda sub i is the marginal utility of lifetime wealth the marginal utility of wealth lambda sub i is a fixed effect that captures all the permanent income effects that influence labor supply including expected lifetime potential wages and lifetime nonlabor income for the labor supply of a married woman the largest wealth effect is likely to be her husband s income as it enters through lambda an increase in the husband s lifetime earnings will decrease the marginal utility of lifetime wealth and decrease the wife s labor supply 3 incorporating this relationship in the parameterization of lambda mathematical expression omitted where mathematical expression omitted is the husband s lifetime income education e

on the convergence of genetic learning in a double auction market abstract we study the learning behavior of a population of buyers and a population of sellers whose members are repeatedly randomly matched to engage in a sealed bid double auction the agents are assumed to be boundedly rational and choose their strategies by imitating successful behavior and adding innovations triggered by random errors or communication with other agents this process is modelled by a two population genetic algorithm a general characterization of the equilibria in mixed population distributions is given and it is shown analytically that only one price equilibria are attractive for the ga dynamics simulation results confirm these findings and imply that in cases with random initialization with high probability the gain of trade is equally split between buyers and sellers

competition and the incentive to produce high quality previous literature indicates that when quality is a choice variable firms have an incentive to produce high quality to maintain their reputations with consumers the strategic interaction among firms and competition for market share is not considered this paper finds that when firms compete for market share perfect equilibria in which firms produce high quality goods need not exist competition for customers can eliminate the price premium needed to induce firms to maintain a reputation for high quality production in this case economists and policy analysts should pay greater attention to the interaction among firms and the institutions such as professional associations that structure interfirm relations when considering whether firms have an incentive to produce high quality goods

the sensitivity of an empirical model of married women s hours of work to economic and statistical assumptions this study undertakes a systematic analysis of several theoretic and statistical assumption s used in many empirical models of female labor supply using a singl e data set psid 1975 labor supply data the author is able to replic ate most of the range of estimated income and substitution effects fo und in previous studies in this field he undertakes extensive specif ication tests and finds that most of this range should be rejected du e to statistical and model misspecifications the two most important assumptions appear to be the tobit assumption used to control for sel f selection into the labor force and exogeneity assumptions on the wi fe s wage rate and her labor market experience copyright 1987 by the econometric society

job creation or destruction labor market effects of wal mart expansion this paper estimates the effect of wal mart expansion on retail employment at the county level using an instrumental variables approach to correct for both measurement error in entry dates and endogeneity of the timing of entry i find that wal mart entry increases retail employment by 100 jobs in the year of entry half of this gain disappears over the next five years as other retail establishments exit and contract leaving a long run statistically significant net gain of 50 jobs wholesale employment declines by approximately 20 jobs due to wal mart s vertical integration no spillover effect is detected in retail sectors in which wal mart does not compete directly suggesting wal mart does not create agglomeration economies in retail trade at the county level

reputation and competition this paper shows how competition generates reputation building behavior in repeated interactions when the product quality observed by consumers is a noisy signal of firms effort level there are two types of firms and good firms try to distinguish themselves from bad firms although consumers get convinced that firms which are repeatedly successful in providing high quality are good firms competition endogenously generates the outside option inducing disappointed consumers to leave firms this threat of exit induces good firms to choose high effort allowing good reputations to be valuable but its uncompromising execution forces good firms out of the market jel c7 d8

asymmetric consumer learning and inventory competition we develop a model of consumer learning and choice behavior in response to uncertain service in the marketplace learning could be asymmetric that is consumers may associate different weights with positive and negative experiences under this consumer model we characterize the steady state distribution of demand for retailers given that each retailer holds a constant in stock service level we then consider a noncooperative game in steady state between two retailers competing on the basis of their service levels the demand distributions of retailers in this game are modeled using a multiplicative aggregate market share model in which the mean demands are obtained from the steady state results for individual purchases but the model is simplified in other respects for tractability our model yields a unique pure strategy nash equilibrium we show that asymmetry in consumer learning has a significant impact on the optimal service levels market shares and profits of the retailers when retailers have different costs it also determines the extent of competitive advantage enjoyed by the lower cost retailer

advertising and product quality in posted offer experiments advertising and product quality in posted offer experiments i introduction for years the federal trade commission ftc has attacked unfair and deceptive advertising recently it has turned its attention to errors of omission rather than commission by challenging agreements among sellers to limit advertising even when it is truthful one reason for eliminating advertising restrictions is to stimulate competition in the advertised dimension of the good or service for example price advertising may result in more price competition on the other hand professional associations argue that price competition causes product quality to deteriorate because sellers of high quality services are forced to match the lower prices of sellers of low quality products and through their codes professional associations have implicitly or explicitly discouraged some forms of advertising including price advertising restrictions of this nature still exist in some local markets although they have become the subject of ftc litigation 1 the quality deterioration argument of professional associations is plausible only when buyers are unable to observe quality prior to purchase 2 when buyers cannot distinguish quality moral hazard invites sellers to lower cost by providing lower quality adverse selection can result from price advertising causing lower cost products to drive out higher cost products as argued by akerlof 1970 the opposite point of view is that even when quality cannot be determined prior to purchase price advertising may enable sellers to signal quality and develop reputations 3 moreover transactions repeatedly involving the same buyers and sellers may enable buyers to form expectations about seller quality based on their experience that can make it worthwhile for a seller to provide higher quality the series of laboratory experiments described here permits the evaluation of market performance when buyers have very limited information the claim to be investigated is that price advertising prevents quality deterioration and improves market efficiency reputation formation through advertising is emphasized instead of other mechanisms such as warranties that may prevent quality deterioration 4 so that quality can be kept relatively neutral and easily understood by subjects we represent it as the grade of a commodity the structure underlying the experiments is based on holt s model of the determination of industry quality which is summarized in schmalensee 1979 demand is induced through the values for which buyers can redeem their purchases value is linearly related to grade so that no difference between average and marginal valuation of quality can arise to cause nonoptimal quality as it did in spence 1976 the production cost for each seller is quadratic in the grade selected by the seller therefore the efficient grade level is unique the most closely related experimental work on product quality decisions is reported in lynch miller plott and porter 1986 in their experiments sellers chose one of two quality levels prices were determined in an oral double auction efficient price and quality outcomes resulted when prospective buyers were given full information about quality removing the identities of sellers and allowing only post purchase quality information sometimes resulted in a lemons outcome in which sellers offer a low quality product even though the market would be more efficient with the production and sale of a high quality product private information tended to yield less efficient outcomes than full public information the posted offer experiments reported in this paper differ from the oral double auction experiments in lynch miller plott and porter because one of our objectives was to examine the effect of advertising restrictions on market efficiency in our experiments price advertising is implemented in a standard posted offer auction

the sensitivity of labor supply parameter estimates to unobserved individual effects fixed and random effects estimates in a nonlinear model using panel data life cycle models of labor supply predict the presence of an unobserved individual effect in the labor supply equation that is correlated with observed explanatory variables leading to an omitted variables bias in the cross section i examine the sensitivity of parameter estimates to the presence of these effects using fixed and random effect tobit models the estimated effects of children are too large in the cross section the estimated intertemporal substitution elasticity ranges from 1 1 to 1 7 the results are similar for fixed and random effects models and for models using different specifications of the dependent variable

the real product market impact of mergers i document sources of value creation in mergers by analyzing novel data on the quality and price of goods sold by merging firms when two competitors in a product market merge their products converge in quality and prices fall relative to the competition these effects take two to three years to be fully realized and are stronger in mature industries prices do not fall however when the acquirer is diversifying into a new product market this direct evidence of real changes induced by merger activity is consistent with consolidation by related merging firms to achieve operational efficiencies and lower costs

the impact of product market competition on training provision evidence from canada while standard models of training focus on how input market affects firms training decisions this paper investigates the impact of product market competition on training provision using the longitudinal data from statistics canada s workplace and employee survey we find that increased competition is strongly associated with more training provision this association is unlikely to be driven by unobserved heterogeneity specific measures used and other relevant factors to the extent that training is a significant source of human capital and industry competitiveness our results suggest that increasing training is an important channel through which competition raises productivity

the impact of pension benefits on the distribution of earned income using standard measures of income inequality and detailed pension benefit information on participants in the 1983 survey of consumer finances scf the authors investigate how pension benefits affected the distribution of earned income the results suggest that private pensions increased annual income inequality relative to inequality observed in the distribution of wage income by only about 2 among all employed individuals but by 21 among unionized workers further analysis indicates that private pensions raised annual income inequality primarily by increasing the rate of return to tenure possibly through pension backloading setting accruals to grow when earnings rise near retirement and the increasing incidence of pensions with age private pensions had little effect on estimates of the distribution of expected lifetime income but the addition to the analysis of social security benefits public pensions strongly reduced inequality in that distribution a renewed interest in the distribution of income has developed recently as new evidence suggests that income inequality has worsened over the past twenty years researchers suggest several reasons for rising inequality including an increase in the incomes of well educated men relative to other groups for example juhn murphy and pierce 1993 demographic changes resulting from the entrance of the baby boom generation into the work force lawrence 1982 and a sectoral shift away from manufacturing and toward the ser

the causes and consequences of wal mart s growth wal mart is the largest company in the world yet little is known about its economic impact this essay discusses what is known about wal mart s competitive advantage and its economic impact on local communities as well as the national and global economy and highlights the open questions to be addressed by future research

competition and product quality in the supermarket industry this article analyzes the effect of competition on a supermarket firm s incentive to provide product quality in the supermarket industry product availability is an important measure of quality using u s consumer price index microdata to track inventory shortfalls i find that stores facing more intense competition have fewer shortfalls competition from walmart the most significant shock to industry market structure in half a century decreased shortfalls among large chains by about a third the risk that customers will switch stores appears to provide competitors with a strong incentive to invest in product quality

competition and subsidies in the deregulated us local telephone industry the 1996 telecommunications act opened the monopolistic us local telephone industry to new entrants however substantial entry costs have prevented some markets from becoming competitive we study various subsidy policies designed to encourage entry we estimate a dynamic entry game using data on potential and actual entrants allowing for heterogeneous option values of waiting we find that subsidies to smaller markets are more cost effective in reducing monopoly markets but subsidies to only lower cost firms are less cost effective than a nondiscriminatory policy subsidies in only early periods reduce the option value of waiting and accelerate the arrival of competition

the impact of walmart supercenter conversion on consumer shopping behavior this paper presents an empirical study of the impact of walmart supercenter conversion on consumer shopping behavior by using a difference in difference estimator we find that walmart gains 41 in weekly revenue from the conversion decomposing the revenue gains into components attributable to store visits and per visit expenditures we find that the majority of these gains were due to larger expenditures with a much smaller impact from store visits by contrast among competing retailers grocery stores experience the most significant loss 20 weekly revenue mostly from fewer store visits with a much smaller impact attributable to per visit expenditure taken together these findings show that consumers may benefit from reduced shopping costs by making fewer overall trips and increasing their walmart basket sizes in addition we find that overall revenue gains for walmart from conversion outweigh the small cannibalization loss at the existing walmart supercenters located farther away finally fro

genetic algorithms and inflationary economies abstract this paper studies overlapping generations economies in which agents use genetic algorithms to learn correct decision rules the results of computer simulations show that a genetic algorithm converges to the unique monetary steady state in case of a constant money supply policy and to the low inflation stationary equilibrium in case of a constant real deficit financed through seignorage features of the genetic algorithm adaptation are compared to the performance of other learning algorithms and to the behavior observed in experiments with human subjects in the same olg environments

does wal mart sell inferior goods i feel we are well positioned for an economic downturn our low prices and low cost business model should give us an advantage over other retailers if things get more difficult for consumers wal mart s ceo lee scott kavilanz 2007 i introduction in this paper i test for the aggregate income elasticity of revenues at wal mart and target using panel data for 1997 2006 i find that wal mart s revenues fall during good times whereas target s rise during good times inferring income elasticities of demand from these estimated income elasticities of revenue consumers view purchases at wal mart as inferior goods whereas purchases at target are normal goods a well established cross sectional fact is that wal mart s shoppers have relatively low incomes compared to say target s shoppers 1 in a 2005 survey by the pew research center for the people and the press 53 of respondents reporting annual earnings below 20 000 said they shopped at wal mart regularly compared with 33 of respondents earning more than 50 000 pew research center for the people and the press 2005 the average annual household income among wal mart shoppers is 40 000 45 000 roughly equal to the u s median household income compared with 60 000 for target shoppers mui 2005 confirming this pattern figure 1 plots the frequency of shopping at wal mart and target often sometimes or never based on survey evidence for households with incomes below 40 000 and above 70 000 2 shopping frequencies at wal mart are higher for all income groups because the chain s penetration is higher but the likelihood of shopping at wal mart often falls with income whereas the likelihood of shopping at target often rises with income this cross sectional evidence does not establish that a given household increases its shopping at target and decreases its shopping at wal mart as its income rises if wal mart stores are located in lower income areas for example shopping at wal mart may be a normal activity and still consistent with the cross sectional evidence despite this distinction the claim has been made that wal mart sells inferior goods in the technical sense of the term goods for which demand increases when income falls the goal of this paper is to evaluate the inferiority of wal mart s goods using appropriate data and methods i use aggregate data on personal disposable income as a measure of consumer income and publicly available data on sales per store at both wal mart and target by construction the aggregate elasticity i estimate is a weighted average of individual households elasticities of expenditure and can be interpreted as the average household s income elasticity of expenditure on wal mart s and target s wares this elasticity of expenditure is an upper bound on the elasticity of demand at wal mart if wal mart s prices are not any more elastic with respect to income than other stores prices evidence presented in the appendix in this paper suggests that wal mart s prices are if anything less elastic with respect to income than prices at other stores which implies that the income elasticity of expenditure for wal mart s goods is even more negative than my estimates suggest figure 1 omitted holding relative prices constant two effects of income on store revenues work in opposite directions on the one hand a negative income shock may send some shoppers who normally shop at more upscale retailers to discounters thus increasing revenue at the discount retailers on the other hand people who already shop at discounters curtail their spending as well the aggregate effect depends both on the proportion of households of the two types and on the income elasticity of demand for each group if the income shocks are not uniform across types the relative size of the income shock matters too ideally this question would be addressed using household panel data in which household s time invariant characteristics as well as shoppers choice sets are controlled for and changes in income are matched with changes in purchasing patterns

competition in shared markets and major league baseball broadcast viewership abstractthis work evaluates the cross quality elasticity of related products in the context of local market nielsen local people meter ratings of major league baseball mlb regular season broadcasts from 2010 through 2013 from six teams in three shared markets we employ a fixed effects panel regression with multi way error clustering finding that fans exhibit nuanced behaviour related to the absolute quality and relative quality of the two local teams our estimates imply quality related competition for viewership between teams in the face of large disparities in quality however when both teams are of high quality viewership increased beyond what own team success would predict alone for the competing team the competitive effects are largely dominated by the spillover effects these findings point to complementary effects of team success beyond own team interest and bring about an important nuance in the literature on market definition competition and substitution in sport

quality uncertainty and price in monopoly markets this paper examines a monopoly firm s pricing strategy in a market in which consumers have varying and imprecise estimates of the quality of the firm s product it is shown that the firm s price declines in response to an increase in the level of consumer uncertainty about quality when consumer tastes for the product are sufficiently similar and their uncertainty about quality is sufficiently small when one or both of these conditions fails to hold however it is shown that the monopoly firm s price is positively related to the level of consumer uncertainty about quality copyright 1996 by blackwell publishing ltd