analysis of new product diffusion using a four segment trial repeat model a four segment trial repeat model is developed to model sales of a frequently purchased product in the early stage of the product s life cycle the model can be calibrated using aggregate data alone two versions of the model one emphasizing the competitive aspect of marketing communications and another emphasizing the informative aspect are estimated from data on 21 newly launched pharmaceutical products the model provides valuable diagnostics such as an early estimate of the long run market share of the new product a decomposition of total sales into trial sales due to marketing activities trial sales due to word of mouth and repeat sales the changing composition of the trial market and repeat market over time and the time when the trial market is expected to be saturated in addition the effectiveness of the entrant s marketing efforts word of mouth communication and buyers trial experience are analyzed with the model a cross sectional analysis based on the empirical estimation results of our model reveals interesting insights into product introduction strategies we find that 1 the effectiveness of the firms communication activities on trial is related mainly to product quality attributes and market growth whereas that of word of mouth is associated with product class characteristics and market competitiveness and 2 the effect of product trial on repeat purchases is related mainly to product quality attributes and various market characteristics such as size growth competitiveness and familiarity

consumption experience and sales promotion expenditure an economic theory of habit formation through consumption learning is developed to explain order differences in relative sales promotion expenditures among brands the theory applies to consumer brands in equilibrium markets where consumer information from sources other than advertising sales promotion and previous consumption experience is negligible three propositions are derived from the theory brands with more consumption experience 1 spend proportionately less on sales promotion as well as 2 on advertising and promotion combined and 3 place proportionately more emphasis on advertising relative to sales promotion these propositions are formulated as hypotheses and tested against empirical data from the pims project it is found that the data are generally consistent with the propositions in order to examine the robustness of the results the hypotheses are subjected to three different empirical tests each with different assumptions the findings are shown to be reasonably robust with re

pricing and lot sizing polices for perishable goods when the demand depends on selling price displayed stocks and expiration date abstract price is a major factor on the demand based on marketing and economic theory in addition the demand for perishable products also depends on its freshness moreover it is a well known fact that increasing stock display e g fresh fruits vegetables baked goods may encourage consumers to purchase more this paper first proposes an inventory model that stipulates the demand explicitly in a multivariate function of price freshness and displayed stocks it may be profitable to have a closeout sale at a markdown price and always keep on hand displayed stocks fresh and plentiful if the demand is freshness and stock dependent hence the traditional assumption of zero ending inventories is relaxed to a non zero ending inventory as a result the objective is to determine three decision variables i e unit price cycle time and ending inventory level in order to maximize the total profit then it is demonstrated that the total profit is strictly pseudo concave in those three decision variables which reduces the search for solutions to a unique local maximum finally numerical examples to illustrate the theoretical results and to highlight managerial insights are presented

quality and competition in recent years the practitioner literature in operations management has seen a dramatic surge in articles on quality management it reflects the increased emphasis on quality by u s firms which has been attributed largely to increased competition faced by them the question of how quality is influenced by competitive intensity however has not received much attention either in the practitioner or the academic research literatures the notion of competitive intensity itself has not been defined precisely in this paper we develop formal models of oligopolistic competition to investigate whether equilibrium levels of quality increase as competition intensifies we consider three different competitive settings i asymmetric duopolistic competition where the dominant firm s intrinsic demand potential decreases ii a symmetric duopoly where the firms are precluded from cooperating in setting quality levels and iii symmetric oligopolistic competition where the number of firms increases we find that the relation between equilibrium quality and competitive intensity depends on what is understood by increased competition and in addition the relation is contingent on the values of parameters describing the cost and demand structure for the industry

comparing the post earnings announcement drift for surprises calculated from analyst and time series forecasts post earnings announcement drift is the tendency for a stock s cumulative abnormal returns to drift in the direction of an earnings surprise for several weeks following an earnings announcement we show that the drift is significantly larger when defining the earnings surprise using analysts forecasts and actual earnings from i b e s than when using a time series model based on compustat earnings data neither compustat s policy of restating earnings nor the inclusion of special items in reported earnings contribute significantly to the disparity in drift magnitudes rather our results suggest that this disparity is attributable to differences between analyst forecasts and those of time series models or at least to factors correlated with these differences further we document that analyst forecasts lead to return patterns around future earnings announcements that differ from those observed when using time series models suggesting that the two types of surprises may capture somewhat different forms of mispricing

modeling multiattribute utility risk and belief dynamics for new consumer durable brand choice this paper proposes a brand choice model to aid in the prelaunch management of a new consumer durable entry in an existing category the model contributes to theory by integrating the critical phenomena of multiattribute preference risk and dynamics in an individual level expected utility framework the integration is based on established theoretical constructs in utility bayesian decision analysis and discrete choice theory measurement and estimation procedures are presented an application is described and the managerial relevance of this work as a planning and forecasting tool is examined

trade in and save a two period closed loop supply chain game with price and technology dependent returns abstract consumers evaluate the convenience of changing their products according to the price paid as well as the technology quality level when the consumers wish to capitalize the products residual value they should return them as early as possible accordingly we develop a model of closed loop supply chain clsc where consumers seek to gain as much as possible from their returns and the return rate is a function of both price and quality we model a two period stackelberg game to capture the dynamic aspects of a clsc where the manufacturer is the channel leader we investigate who namely manufacturer or retailer should collect the products in the market thus we identify the best clsc structure to adopt when the return rate is both price and quality dependent our results demonstrate that it is always worthwhile for companies to collect products and adopt an active return approach for returns we investigate the effect of retail competition in both forward and backward channels and show the impact of eliminating the double marginalization on market outcomes

information uncertainty and the post earnings announcement drift in europe investigating the effect of earnings announcement abnormal return and of abnormal trading volume on future returns for a large sample of european companies with both annual and interim announcements over 1997 2010 the author found that the two measures of market surprise are positively related to future abnormal returns especially when information uncertainty is high these two effects also appear to be complementary in that each retains some incremental predictive power for future returns

a new product growth for model consumer durables this article originally appeared in management science january 1969 volume 15 number 5 pp 215 227 published by the institute of management sciences a growth model for the timing of initial purchase of new products is developed and tested empirically against data for eleven consumer durables the basic assumption of the model is that the timing of a consumer s initial purchase is related to the number of previous buyers a behavioral rationale for the model is offered in terms of innovative and imitative behavior the model yields good predictions of the sales peak and the timing of the peak when applied to historical data a long range forecast is developed for the sales of color television sets

how valuable is on farm work to farmers in this article we estimate a rural household model that allows specific tastes for working on farm and can fit the data as well as the general model of lopez we use two samples that are matched by individual characteristics and adopt the method for matched surveys proposed by arellano and meghir we replicate using french data the empirical finding of elhorst who reports evidence that implicit wages of on farm family labor are significantly below off farm wages we then provide estimates of the lower bounds for preferences for on farm work for males and females which are significant and positive

investigating the sensitivity of equilibrium profits to advertising dynamics and competitive effects the author investigates the validity of the flat maximum principle the insensitivity of a firm s profits to changes in its optimal advertising level in a duopolistic market in which advertising by the two firms has carryover effects two alternative competitive scenarios are examined i in which total industry sales are allowed to vary over time and ii where firms are engaged in market share rivalry for i the open loop nash equilibrium advertising strategies for the firms are derived assuming a specific sales response function and an infinite time horizon a numerical analysis of the sensitivity of firms profit functions to advertising expenditures is performed at different levels of the a discount rate b advertising elasticity and c advertising decay rate an empirical illustration from the pharmaceutical industry is provided special cases of the model formulation are examined analytically in order to highlight the intuition behind the flatness of the maximum and to study the sensitivity of results obtained to choice of equilibrium strategy closed loop vs open loop for the market share game closed loop policies are considered and the flat maximum principle is illustrated in the context of coke pepsi rivalry in the soft drinks market

diseconomies of size with fixed managerial ability managerial ability has important implications for farm growth in this article we first show in a production model that increasing output with a fixed level of managerial ability can lead to a decrease in profits next we discuss the effect that managerial ability has on economies of size in the empirical part economies of size are estimated for a sample of dairy farms using a proxy for managerial ability which is calculated as a technical efficiency index the results show that increasing farm size while holding managerial ability constant can be an important source of diseconomies of size copyright 2003 oxford university press

optimal pricing and advertising in a durable good duopoly abstract this paper analyzes dynamic advertising and pricing policies in a durable good duopoly the proposed infinite horizon model while general enough to capture dynamic price and advertising interactions in a competitive setting also permits closed form solutions we use differential game theory to analyze two different demand specifications linear demand and isoelastic demand for symmetric and asymmetric competitors we find that the optimal price is constant and does not vary with cumulative sales while the optimal advertising is decreasing with cumulative sales comparative statics for the results are presented

quasi fixed inputs in u s and japanese manufacturing a generalized leontief restricted cost function approach in this paper a generalized leontief variable cost function is develope d which permits analytical derivation of steady state levels of quasi fixed inputs and capacity output and does not require specification of a numeraire input this framework is then used to evaluate the fa ctor demand patterns of japanese and u s manufacturing based on bot h one quasi fixed capital input and two quasi fixed capital and la bor input specifications and both static and dynamic optimization t he findings provide evidence of considerable flexibility of demand re sponses in japan which may have contributed to japan s relatively st rong economic performance in the volatile 1970s copyright 1988 by mit press

animal health inputs endogenous risk general infrastructure technology adoption and industrialized animal agriculture abstract this paper develops a microeconomic model of concentrated animal feeding operations that admits roles for all of animal health inputs genetic profile choices and the pertaining economic infrastructure the basic model emphasizes how time on feed feed density and biosecurity choices interact as well as how these choices respond to i input prices and ii attributes regarding animal productivity parameters that might be influenced by policy choices such as animal welfare strictures and restraints on use of medication we show that ostensibly substituting inputs in protecting against animal health risks may in fact be complements and that the model s production choices come as a complementary package we then extend the model to endogenize the choice of animal genetics a finding is that innovations in general infrastructure encourage herd owners to choose more feed efficient but less hardy animals higher feed conversion efficiency then induces the use of denser feed rations accelerated finishing and greater levels of biosecurity actions at farm perimeters our theory provides a coherent framework for explaining associations among inputs and outcomes that are linked with confined animal agriculture it also explains how animal protein supply chain technology adoption and performance can differ according to a region s state of infrastructure why responses to a change in infrastructure may be large and why public sector efforts to reduce production risk may beget private sector effort to do so

exploratory evidence on the behavior of quality costs this study examines the time series behavior of quality costs reported by 49 manufacturing units of 21 companies analyses using both pooled annual data and plant specific quarterly data indicate that the majority of units in the sample achieved ongoing reductions in nonconformance costs while maintaining or reducing reported prevention and appraisal costs these findings are consistent with recent quality based learning and continuous improvement models which suggest that once an effective quality program is established companies can reduce nonconformance costs over time with little or no subsequent increase in conformance expenditures

dynamics of competing with quality and advertising based goodwill goodwill formation is a complex process and many factors influence the formation of goodwill of a firm the implications of advertising enabled goodwill formation are reported in several articles in the research literature in this paper we extend this stream of research by including quality in the goodwill formation process we adopt a dynamic model of competition utilizing a differential game approach and derive expressions for open loop markovian nash equilibrium investments in advertising and quality the insights gained from the analysis of our model and from the equilibrium solutions are presented in the form of research propositions

sustaining cooperation in a differential game of advertising goodwill accumulation abstract the paper suggests a differential game of advertising competition among three symmetric firms played over an infinite horizon the objective of the research is to see if a cooperative agreement among the firms can be sustained over time for this purpose the paper determines the characteristic functions value functions of individual players and all possible coalitions we identify an imputation that belongs to the core using this imputation guarantees that in any subgame starting out on the cooperative state trajectory no coalition has an incentive to deviate from what was prescribed by the solution of the grand coalition s optimization problem

pricing strategies in a dynamic duopoly a differential game model we formulate a differential game model for dynamic pricing in a duopolistic market firms demand functions are derived from utility maximizing behavior of consumers with the demand for a brand given by the logit model preferences for brands are assumed to evolve over time in the market in a manner akin to learning models postulated in the marketing literature we derive the differential equations governing the equilibrium open loop price paths over time and show that in steady state the brand with the higher preference level charges the higher price the formulation is extended to include the effects of consumer heterogeneity and equilibrium steady state prices are compared with those obtained when heterogeneity is ignored a comparison of steady state dynamic prices with myopic prices is provided an empirical example is discussed to show how steady state model predictions may be obtained from actual longitudinal purchase data

on the nature and magnitude of cost economies in hog production in this article we assess the impact of farm size on production cost and evaluate the marginal costs and margins by considering that input prices may change with the scale of production by using french hog farm data we estimate a system of equations including a feed price function input demand functions and an output supply function based on a technology approximated by a combined generalized leontief quadratic form our results suggest that the marginal costs are over estimated when the adjustment of the feed unit prices to a change in farm size is not controlled for more specifically the cost economies for large farms enjoying the highest profits arise primarily from lower feed prices with technological scale economies having little impact in contrast farms with no hired labor exhibit technological scale economies and reach higher price cost margins compared to larger farms

dynamic measures of scope and scale economies an application to german agriculture static concepts of multiproduct economies of scale and scope are extended into a dynamic setting within the cost of adjustment framework important properties of the dynamic measures are developed and the foundations of a dynamic theory of the firm generalizing static neoclassical theory are presented dynamic measures of scope and scale as well as shadow costs are estimated empirically for multiple output multiple input german dairy farms operating under a production quota causes of scope economies are explored and a conceptual model to predict the evolution of the production structure of german farms is formulated

a larger slice or a larger pie an empirical investigation of bargaining power in the distribution channel this research aims to provide insights into the determinants of channel profitability and the relative power in the channel by considering consumer demand and the interactions between manufacturers and retailers in an equilibrium model we use the nash bargaining solution to determine wholesale prices and thus how margins are split in the channel equilibrium margins are a function of demand primitives and of retailer and manufacturer bargaining power bargaining power is itself a function of exogenous retail and manufacturer characteristics the parties bargaining positions are determined endogenously from the estimated substitution patterns on the demand side the more they have to lose in a negotiation relative to an outside option the weaker the bargaining position we use the proposed bargaining model to investigate the role of the three main factors that have been blamed for the power shift from manufacturers to retailers in recent years firm size increases store brand introductions and service level differentiation in our empirical analysis of the german market for coffee we find that bargaining power varies among the different manufacturer retailer pairs this result suggests that bargaining power is not an inherent characteristic of a firm but rather depends on the negotiation partner we are able to confirm empirically previous theoretical findings that there can be cases where the slice of the pie that goes to one of the channel members may decrease but the overall pie increases and compensates for the smaller share of profits

autocorrelation structure of forecast errors from time series models alternative assessments of the causes of post earnings announcement drift abstract this paper demonstrates that the evidence supporting the hypothesis that post earnings announcement drift pead is caused by investors failure to incorporate the implications of current earnings for future earnings is also consistent with researchers over differencing an already stationary time series specifically we show the evidence is driven by a subset of firms where over differencing of quarterly earnings in estimating earnings surprises is most likely to have occurred given the persistence of the pead over time our alternative explanation suggests that the prior research investigating the causes for the pead overestimates investors naivete

quality effects in different advertising models an impulse control approach abstract in this paper we integrate quality as a control variable in three classical dynamic optimal control models of advertising namely nerlove arrow vidale wolfe and ozga models quality refers to design quality which may deteriorate over time we assume that decisions in quality improvement can only be made at some exogenously given instants of time and consequently we use the formalism of impulse optimal control to determine optimal advertising and quality investments we report numerical results for the three models and discuss the impact of adding quality on the results

scale economies and inefficiency of u s dairy farms this study employs data drawn from the 2000 agricultural resource management survey a u s department of agriculture sponsored farmers survey the article estimates returns to scale relationships across dairy farms of different sizes and across different regions incorporating variables hypothesized to influence farm performance results point to significant scale economies in u s dairy farms and underscore the importance of taking account of inefficiency when estimating scale economies contrary to previous research the preferred cost function specification does not show a region of decreasing returns to scale this finding helps explain why the average size of dairy farms has been increasing

analysis of environmental efficiency variations a nutrient balance approach recent literature has argued that environmental efficiency ee which is built on the materials balance mb principle is more suitable than other ee measures in situations where the law of mass conversation regulates production processes in addition the mb based ee method is particularly useful in analysing possible trade offs between cost and environmental performance identifying determinants of mb based ee can provide useful information to decision makers but there are very few empirical investigations into this issue this article proposes the use of data envelopment analysis and stochastic frontier analysis techniques to analyse variation in mb based ee specifically the article develops a stochastic nutrient frontier and nutrient inefficiency model to analyse determinants of mb based ee the empirical study applies both techniques to investigate mb based ee of 96 rice farms in south korea the size of land fertiliser consumption intensity cost allocative efficiency and the share of owned land out of total land are found to be correlated with mb based ee the results confirm the presence of a trade off between mb based ee and cost allocative efficiency and this finding favouring policy interventions to help farms simultaneously achieve cost efficiency and mp based ee

market and cost structure in the u s beef packing industry a plant level analysis a resurgence of consolidation in the u s meat packing industry in the past few decades has stimulated academic and policy debate issues raised include the role of cost economies in driving these patterns and the effects on the agricultural sector cattle producers from market power here plant level cost and revenue data for u s beef packing plants are used to estimate a cost based model incorporating cattle and output market pricing behavior the robust results indicate little market power exploitation in either the cattle input or beef output markets and that any apparent evidence is counteracted by cost efficiencies such as utilization and scope economies copyright 2001 oxford university press

the impact of competitive entry in a developing market upon dynamic pricing strategies this paper analyzes dynamic pricing strategies for new durable goods in a two period context the first period is characterized as a monopoly market structure for a new product having dynamic demand the second period begins when a new firm enters the market and thereby changes the market structure to a duopolistic one we begin by analyzing the pricing strategies of three types of monopolists nonmyopic myopic and surprised a nonmyopic monopolist is a first entrant who perfectly predicts the competitive entry a myopic monopolist totally discounts the duopolistic period and a surprised monopolist is a first entrant who has the longer time horizon of the nonmyopic monopolist but who does not foresee the competitive entry our results indicate that the nature of these pricing strategies may be quite different it is optimal for the nonmyopic firm to price its product at a higher level than the myopic monopolist additional results indicate under what circumstances the surprised monopolist will p

short run returns to scale farm size and economic efficiency this paper analyzes the effects of returns to scale farm size technical allocative and scale inefficiencies on the profitability of utah dairy farms it derives the conditions necessary to compare the profitability of farms within and between different size classifications as small medium and large some comparative static results regarding increases in input prices and a decrease or withdrawal of price support on profitability of small medium and large farms are presented copyright 1993 by mit press

arbitrage risk and post earnings announcement drift this study examines whether the magnitude of post earnings announcement drift is related to the risk faced by arbitrageurs who may view the anomaly as a trading opportunity consistent with this hypothesis the magnitude of the drift is strongly related to the arbitrage risk measure developed by wurgler and zhuravskaya 2002 the effect of arbitrage risk is statistically and economically significant in a range of specifications the results support the view of post earnings announcement drift as an underreaction to earnings information

the relation between price changes and trading volume a survey this paper reviews previous and current research on the relation between price changes and trading volume in financial markets and makes four contributions first two empiri cal relations are established volume is positively related to the magnitude of the price change and in equity markets to the price change per se second previous theoretical research on the price volume relation is summarized and critiqued and major insights are emphasized third a simple model ofthe price volume relation is proposed that is consis tent with several seemingly unrelated or contradictory observations and fourth several directions for future research are identified

can the small dairy farm remain competitive in us agriculture smaller dairy farms in the us are observed to have higher costs than larger farms and whether those higher costs are due to technology or inefficiency has implications for policy to address the small farm if high cost of production on smaller farms is due to a higher cost frontier then to make small farms competitive would require research to devise and design technology that is suitable for small farms if instead high cost is due to inefficiency then educational approaches are needed to ensure small dairy farms use technology efficiently to determine the cause of higher costs on small farms the cost of milk production by farm size was decomposed into frontier and efficiency components with a stochastic cost curve using data on usa dairy farms although the frontier cost of production decreases with farm size that cost reduction is not as pronounced as a cost curve that includes inefficiency the higher cost of production on many smaller farms is caused by inefficiency rather than technology

on the anti competitive effects of quantity discounts abstract we analyze the competitive effects of quantity discounts in an asymmetric duopoly we find that for a sizeable set of parameter values quantity discounts harm the smaller firm and reduce consumers surplus they can even decrease social welfare i e the sum of producers and consumers surpluses however the circumstances in which quantity discounts may decrease social welfare are limited and difficult to identify in practice

pure strategy nash equilibria in an advertising game with interference abstract two manufacturers produce substitutable goods for a homogeneous market the advertising efforts of the two manufacturers determine the demand for the goods and interfere negatively with each other the demand of each good is a piecewise linear function of the product goodwill and the latter is a linear function of advertising efforts in a game with two competing profit maximizing manufacturers who have access to a set of several advertising media the pure strategy nash equilibria are characterized and their existence is shown

how much do farmers value their independence a farmer s decision to contract or produce independently depends on the distribution of income and the nonpecuniary attributes associated with both business arrangements the benefits to growers from contracting such as risk reduction may be overestimated if the nonpecuniary benefits enjoyed by independent producers such as the right to make management decisions and own the commodity produced are not accounted for this study uses data from a u s national survey of hog producers to estimate 1 the difference in expected net returns between contracting and independent production 2 the premium a representative farmer would pay for the risk reduction provided by a contract and 3 the premium a farmer would pay for the nonpecuniary benefits associated with independent production results indicate that growers have a strong preference for autonomy with moderately risk averse growers being willing to pay more for the attributes of independent production than they would for the risk reducing benefits of a contract

does regulation of manure land application work against agglomeration economies theory and evidence from the french hog sector the well known increase in the geographical concentration of hog production suggests the presence of agglomeration economies related to spatial spillovers and inter dependencies among industries in this paper we examine whether the restrictions on land application of manure may weaken productivity gains arising from the agglomeration process we develop a model of production showing the ambiguous spatial effect of land availability and the restriction on the manure application rate indeed while the regulation of manure application triggers dispersion when manure is applied to land as a crop nutrient it also prompts farmer to adopt manure treatment that favors agglomeration of hog production estimations of a reduced form of the spatial model with a spatial hac procedure applied to data for french hog production for 1988 and 2000 confirm the ambiguous effect of land limitations induced by the restrictions on manure application it does not prevent spatial concentration of hog production and even boosts the role played by spatial spillovers in the agglomeration process

quality improvement vs advertising support which strategy works better for a manufacturer abstract we consider a marketing channel with a single manufacturer and a single retailer where both advertising and quality improvement contribute to the build up of goodwill in a non coop scenario the retailer controls the advertising efforts while the manufacturer controls the quality improvements and wholesale price although improving quality positively contributes to goodwill it also increases the production cost thereby reducing the manufacturer s profit in a coop scenario the manufacturer supports the retailer s advertising while decreasing his investments in quality we investigate the conditions under which a coop program is beneficial when such a trade off occurs our results demonstrate that only when advertising significantly contributes to goodwill the manufacturer has an incentive to cooperate and a coop program turns out to be pareto improving conversely the retailer is always better off with a coop program moreover the channel is operational and marketing driven when quality effectiveness is high independent of advertising effectiveness or when both quality and advertising effectiveness are large in all other cases the channel is marketing driven

optimal pricing and advertising policies for new product oligopoly models in this paper our previous work on monopoly and oligopoly new product models is extended by the addition of pricing as well as advertising control variables these models contain bass s demand growth model and the vidale wolfe and ozga advertising models as well as the production learning curve model and an exponential demand function the problem of characterizing an optimal pricing and advertising policy over time is an important question in the field of marketing as well as in the areas of business policy and competitive economics these questions are particularly important during the introductory period of a new product when the effects of the learning curve phenomenon and market saturation are most pronounced we consider first the monopoly case with linear advertising cost exponential demand and three different pricing rules the optimal variable pricing the instantaneous marginal pricing and the optimal constant pricing rules several theoretical results are established for these rules including the facts that the instantaneous marginal pricing rule is a myopic version of the optimal pricing rule and the optimal constant pricing rule is a weighted average over time of the instantaneous marginal pricing rule another surprising result is that after the market is at least half saturated a pulse of advertising must be preceded by a significant drop in price numerical solutions of a number of examples are discussed oligopolistic models are analyzed as nonzero sum differential games in the rest of the paper the state and adjoint equations are easy to write down but impossible to solve in closed form hence we describe how to reformulate these models as discrete differential games and give a numerical algorithm for finding open loop nash solutions the latter was used to solve three triopoly models in each case it was found that optimal prices and advertising rates start high and steadily decline

a simulation analysis of alternative pricing strategies for dynamic environments the implicit assumption of the classical economic model of price determination is that the firm maximizes short run profits however one of the key implications of strategy research of the past decade is that short run profit maximization is not an appropriate criterion for many market situations instead market share has been proposed as the key to long term profitability see e g buzzell gale and sultan 1974 abell and hammond 1979 this proposition has had a strong impact on both marketing practice and research hopkins 1981 reports that 88 of industrial firms surveyed spell out market share goals in detail the emphasis on market share in practice has been reflected in the theoretical side also where numerous market share forecasting and maximizing models have been published long term profitability has also become a research interest in its own right more than a dozen papers have appeared in major journals since 1975 the impetus to this activity has been the recognition of the existence of intertemporal effects in the environment for example on the demand side a consumer s purchasing in a given time period may preclude purchasing in the future because of the durability of the good or personal inventory loading on the supply side added current production early in new product introduction may reduce the cost of future proresearchers of the strategic implications of the well known demand e g adoption and diffusion and supply e g experience effects dynamics have typically sought analytical solutions their success in this has been achieved partly by limiting the richness of the dynamics considered this paper describes a simulation modeling capability simstrat which trades off analytical solutions for richer more realistic representations of supply and demand we present the model and then the results of our initial investigations using simstrat when joined with new computer graphics capabilities the model is successful in identifying conditions conducive to skimand penetration pricing strategies

market share pioneering advantage a theoretical approach in this paper we present an industry in which a pioneer has entered accumulated capital in the form of goodwill and in his monopoly period has also reduced his cost of production as a result of some form of learning by doing at some later date a newcomer enters his production cost is higher than that of the monopolist at that date however due to diffusion of information the costs of the two firms equate at some future date once the new firm enters the market a duopolistic game begins in which the firms choose prices and investment rates analyzing this game we discover the conditions under which the final market shares no longer depend on the order of entry the initial cost advantage the length of the monopoly period or the length of time it took the newcomer to overcome the pioneer s cost advantage we analyze the speed and pattern of convergence to the final market shares and the capital path of the pioneer in his monopoly period depending on his beliefs concerning the possibility of entry

recent developments in dynamic advertising research a variety of continuous time differential functions have been developed to investigate dynamic advertising problems in business and economics fields since major dynamic models appearing before 1995 have been reviewed by a few survey papers we provide a comprehensive review of the dynamic advertising models published after 1995 which are classified into six categories i nerlove arrow model and its extensions ii vidale wolfe model and its extensions iii lanchester model and its extensions iv the diffusion models v dynamic advertising competition models with other attributes and vi empirical studies for dynamic advertising problems for each category we first briefly summarize major relevant before 1995 models and then discuss major after 1995 models in details we find that the dynamic models reviewed in this paper have been extensively used to analyze various advertising problems in the monopoly duopoly oligopoly and supply chain systems our review reveals that the diffusion models have not been used to analyze advertising problems in supply chain operations which may be a research direction in the future moreover we learn from our review that very few publications regarding dynamic advertising problems have considered the supply chain competition we also find that very few researchers have used the diffusion model to investigate the dynamic advertising problems with product quality as a decision variable and the pricing decision has not been incorporated into any extant lanchester model the paper ends with a summary of our review and suggestions on possible research directions in the future

marketing and investment policies of duopolists in a growing industry abstract this article deals with the analysis of the investment price and advertising policies of two firms competing over time the problem is stated as a differential game where each firm tries to maximize its net present value the open loop equilibrium of the game defines the policies to be implemented by the competitors over the horizon the results show how the combination of competition and growth has a relevant influence on the policies of the firms

coordination of channel members efforts and utilities in contract farming operations abstract one important driving force behind parties entering into contract farming agreements is to improve farmers production efforts e g buying agricultural machinery or using new planting techniques in this study we examine two widely used channel structures in contract farming operations namely firm farmer ff and firm cooperative farmer fcf structures to assess how each contract type influences the coordination of efforts and utilities by channel members first we study wholesale price and cost sharing contracts under the ff structure and find that the latter can result in a win win outcome for both channel members when the firm s cost sharing proportion is lower than a threshold level we also find that cost sharing contract effectively enlarges the opportunity of a successful ff contract farming agreement interestingly we show that the purchasing price offered by the firm has a unimodal pattern in its cost sharing proportion second under the fcf structure we consider two bargaining models based on the cooperative s commission contracts with the farmer we find that the farmer s production effort can achieve the system optimal level and the cooperative s high bargaining power helps ensure a steady fcf contract farming agreement we also find that there exists a win win win outcome for all three channel members when the cooperative s commission ratio is higher than a threshold level

oligopoly models for optimal advertising when production costs obey a learning curve business policy questions frequently involve competitive encounters among several different firms oligopoly theory in economics was devised to answer similar questions but its results so far are largely confined to cases of monopoly one firm duopoly two firms and many firms wheat farmers the cases with n firms where 3 n 10 are of great interest to business policy but are rarely treated in the economics literature because of their extreme difficulty the natural mathematical model for studying such questions is the theory of differential games originally devised by r isaacs isaacs r 1975 differential games robert e krieger publishing co huntington new york originally published by john wiley sons new york 1965 for pursuer evader games later it was extended by j case case j h 1979 economics and the competitive process new york university press new york to nonzero sum differential games for application to questions of economic competition the problem of characterizing an optimal advertising policy over time is an important question in the field of marketing it is especially important during the period of the introduction of a new product and it is also during this time that the production learning curve phenomenon is most pronounced in this paper we study oligopoly models which combine elements of bass s demand growth model bass f m 1969 a new product growth model for consumer durables management sci 15 january 215 227 the vidale wolfe vidale m l h b wolfe 1957 an operations research study of sales response to advertising oper res 5 370 381 and ozga ozga s 1960 imperfect markets through lack of knowledge quart j econom 74 29 52 advertising models with linear or quadratic costs and the production learning curve hirschmann w p 1964 profit from the learning curve harvard bus rev 42 january february 125 139 the boston consulting group 1972 perspectives on experience the boston consulting group boston in the monopoly case n 1 the optimal advertising function is derived by applying green s theorem in the duopoly n 2 and triopoly n 3 cases we use discrete differential game models and find nash equilibrium solutions in each of these models the form of the optimal policy is easy to find but because of the complicated nature of the resulting differential equations closed form solutions for the optimal state and control trajectories are impossible to find hence we use a computer to compute these optimal trajectories and plot them for various parameter settings because 13n parameters must be chosen to define a model with n players a complete search of the parameter space is clearly impossible we content ourselves in this paper with presenting computer plots of four different interesting encounters of the triopoly model our methods can be extended to work just as well for competitive encounters among n players where 1 n 10 we believe that in this paper we have opened up the way to studying oligopoly theory with a small number of participants and under widely varying conditions although the lack of closed form solutions may disappoint some readers we feel that the easy availability of graphical solutions is a more than adequate substitute

investment and harvest strategies of the finnish forest sector under different forest tax policies a differential game approach with computer based decision aid abstract this study deals with the simultaneous solution of the investment harvest and taxation problems of the finnish forest sector these strategic questions involve competitive and contradictory interests among forestry the forest industry and society we build a computer based decision aid to support a decision maker who wants to analyze the consequences of different forest tax policies it is essential to this computational approach that only minor mathematical manipulations are needed to produce equilibrium open loop nash harvest and investment strategies moreover as a differential game approach it allows us to study the tax incidence we solve our model under three alternative tax policies lump sum unit and yield taxes

monopolist pricing with dynamic demand and production cost this paper deals with pricing of a new product over time by a monopolist who maximizes the discounted profit stream the interdependency of cost and demand on cumulative production makes the problem inherently dynamic cost is assumed to be declining with cumulative production learning curve effect while demand is a function of price and cumulative sales representing word of mouth and saturation effects the paper addresses this problem in a general framework that includes several previous results as special cases and provides new insights in other situations while the learning curve and word of mouth effect cause prices to be lower than the price that maximizes immediate revenues the saturation factor has the opposite effect the price path over time is affected by these factors and the interest rate we characterize the price path under several different situations and interpret the results for policy guidelines