economic deregulation days of reckoning for microeconomists economic deregulation of american industry is one of the most important experiments in economic policy of our time 1 in 1977 17 percent of u s gnp was produced by fully regulated industries 2 by 1988 following ten years of partial and complete economic deregulation of large parts of the transportation communications energy and financial industries that total had been cut significantly to 6 6 percent of gnp 3 the political forces behind the decision to change the market conditions under which roughly 600 billion of u s output is produced were strong and varied but according to political scientists martha derthick and paul quirk 1985 p 36 deregulation would never have occurred if economists especially microeconomists had not generally supported it through their research 4 in retrospect it is fair to ask were microeconomists able to develop a theoretical and empirical framework to explain regulation and its effects and to form predictions of deregulation s effects were they able to predict the actual effects of deregulation this paper surveys the evidence to address these questions and of

financing and funding health care optimal policy and political implementability health care financing and funding are usually analyzed in isolation this paper combines the corresponding strands of the literature and thereby advances our understanding of the important interaction between them we investigate the impact of three modes of health care financing namely optimal income taxation proportional income taxation and insurance premiums on optimal provider payment and on the political implementability of optimal policies under majority voting considering a standard multi task agency framework we show that optimal health care policies will generally differ across financing regimes when the health authority has redistributive concerns we show that health care financing also has a bearing on the political implementability of optimal health care policies our results demonstrate that an isolated analysis of optimal provider payment rests on very strong assumptions regarding both the financing of health care and the redistributive preferences of the health authority

retail price regulation and innovation reference pricing in the pharmaceutical industry our paper is a first attempt to evaluate the long run impact of reference pricing on pharmaceutical innovation health and expenditures the model is based on a dynamic game involving three types of agents pharmaceutical firms consumers and a regulatory entity pharmaceutical firms choose the level of research investment and its innovative content then negotiate introductory prices for new drugs with the regulator reference pricing affects negatively the intensity of research and it also modifies the types of innovations that are brought to the market deterring small innovations the model is calibrated with a small data on statins in france our results suggest that reference pricing typically generates a decline in health whereas discounted expenditures may decrease or increase depending on the degree of deterrence of cost reducing innovations

the visible hand demand effects of recommendation networks in electronic markets online commercial interactions have increased dramatically over the last decade leading to the emergence of networks that link the electronic commerce landing pages of related products to one another our paper conjectures that the explicit visibility of such product networks can alter demand spillovers across their constituent items we test this conjecture empirically using data about the copurchase networks and demand levels associated with more than 250 000 interconnected books offered on amazon com over the period of one year while controlling for alternative explanations of demand correlation using a variety of approaches our findings suggest that on average the explicit visibility of a copurchase relationship can lead to up to an average threefold amplification of the influence that complementary products have on each others demand levels we also find that newer and more popular products use the attention they garner from their network position more efficiently and that diversity in the sources of spillover further amplifies the demand effects of the recommendation network our paper presents new evidence quantifying the role of network position in electronic markets and highlights the power of basing virtual shelf position on consumer preferences that are explicitly revealed through shared purchasing patterns this paper was accepted by pradeep chintagunta marketing

does price elasticity vary with economic growth a cross category analysis abstract how does price sensitivity change with the macroeconomic environment the authors explore this question by measuring price elasticity using household level data across 19 grocery categories over 24 quarters for each category they estimate a separate random coefficients logit model with quarter specific price response parameters and control functions to address endogeneity this specification yields a novel set of 456 elasticities across categories and time that are generated using the same method and therefore can be directly compared on average price sensitivity is countercyclical it rises when the macroeconomy weakens however substantial variation exists and a handful of categories exhibit procyclical price sensitivity the authors show that the relationship between price sensitivity and macroeconomic growth correlates strongly with the average level of price sensitivity in a category they examine several explanations for this result and conclude that a category s share of wallet is th

short run needs and long term goals a dynamic model of thirst management beverage consumption occurs many times a day in response to short run needs that fluctuate we develop a model in which consumers are heterogeneous in self regulating consumption by balancing short run needs e g hydration and mood with long term goals e g health the model has two novel features 1 utility depends on the match between occasion specific needs and product attributes and 2 dynamics of consumption and stockpiling are at the level of product attributes we estimate the model using unique intraday beverage consumption activity and psychological needs data we find that only a third of individuals do not self regulate of the two thirds who self regulate over 40 self regulate adaptively based on past choice whereas 25 self regulate both adaptively and anticipating future needs our attribute need match model enables us to assess unmet demand for new products with attributes that match co occurring occasion specific needs specifically we find that a product satisfying a combination of health hydrating needs expands overall beverage consumption by as much as 5 our framework of modeling heterogeneity in self regulation by balancing short run needs with long term goals is more broadly applicable in contexts where situational needs vary and long term effects are gradual and hard to discern e g nutrition smoking and preventive health care

quality and quantity in primary care mixed payment models evidence from family health organizations in ontario abstract we study the impact of a mixed capitation model the family health organization fho on quality and quantity outcomes among primary care physicians in ontario using a panel of administrative data covering one year before and two years after the fho model was introduced we find that physicians in the fho model provide about 6 to 7 fewer services and visits per day but are between 7 and 11 more likely to achieve preventive care quality targets these results suggest that the mixed capitation model with contractible quality indicators may be welfare improving relative to the ffs model

retrieving unobserved consideration sets from household panel data the authors propose a new model to capture unobserved consideration from discrete choice data this approach allows for unobserved dependence in consideration among brands easily copes with many brands and accommodates different effects of the marketing mix on consideration and choice as well as unobserved consumer heterogeneity in both processes an important goal of this study is to establish the validity of the existing practice to infer consideration sets from observed choices in panel data the authors show with experimental data that underlying consideration sets can be reliably retrieved from choice data alone and that consideration is positively affected by display and shelf space next the model is applied to information resources inc panel data the findings suggest that promotion effects are larger when they are included in the consideration stage of the two stage model than in a single stage model the authors also find that consideration covaries across brands and that this covariation is mainly driven by unobserved consumer heterogeneity finally the authors show the implications of the model for promotion planning relative to a more standard model of choice

optimal category pricing with endogenous store traffic we propose a dynamic programming framework for retailers of frequently purchased consumer goods in which the prices affect both the profit per visit in the current period and the number of visitors i e store traffic in future periods we show that optimal category prices in the infinite horizon problem also maximize the closed form sum of a geometric series allowing us to derive meaningful analytical results modeling the linkage between category prices and future store traffic fundamentally changes optimal pricing policy optimal pricing must balance current profits against future traffic under general conditions optimal long run prices are uniformly lower across all categories than those that maximize current profits this result explains the empirical generalization that category demand in grocery stores is inelastic parameterizing profit per visit and store traffic reveals that as future traffic becomes more sensitive to price retailers should increasingly lower current prices and sacrifice current profits we also determine how the burden of drawing future traffic to the store should be distributed across categories this is the foundation for a new taxonomy of category roles

hospital profits the effects of reimbursement policies this paper provides a theoretical and empirical analysis of the effect of cost based reimbursement cbr on hospital costs and charges it takes issue with previous analyses which have treated cbr as paying economic costs plus a mark up and have concluded that the mark up is too small to significantly distort hospital decision making the basic thesis here is that if reimbursement is based on costs accounting costs become a price to cost paying patients and will be optimized to maximize revenue a hospital serving both cost and charge paying private patients can set two price schedules accounting profits ratio of charges to costs are not a measure of economic profit but of relative prices to these two groups of patients in the absence of constraints from regulation or patient co payment the optimum level of accounting costs would be infinite in practice the medicare reimbursement formula links allowable costs to charges received from charge paying patients this formula creates incentives for the hospital to raise charges above the single price profit maximizing monopoly level this inflationary effect of the medicare formula does not presuppose that medicare pays less than full cost the empirical analysis of hospital laboratory costs and charges generally supports the predictions for other departments the conclusions are consistent but more tentative because of data limitations overall evidence suggests minimal cross subsidy between cost and charge paying patients comparisons of cost and charge levels in for profit voluntary non profit and government hospitals are presented but it is emphasized that inferences about relative efficiency and profitability cannot be drawn from accounting data given the incentives created by cbr

london and property markets a long term view this paper examines the relationship between investment in built structures economic growth and economic cycles in the uk from the middle of the 19th century and relates its findings to the development of london a rising price of built structures relative to investment in equipment has existed throughout virtually all of the time period this it is argued has encouraged suburbanisation in addition a long term rise in demand for housing is putting additional pressure on living space in the city london has benefited however from the high level of building investment in modern economies particularly in attracting key building intensive activities like financial services long phases of building activity are shown in the data and they are argued to have a destabilising effect on london s economic growth these relationships between the relative price of investment goods long phases of higher and lower activity in their provision and the london economy reinforce the need for a london wide planning a

health insurance without single crossing why healthy people have high coverage standard insurance models predict that people with high risks have high insurance coverage it is empirically documented that people with high income have lower health risks and are better insured we show that income differences between risk types lead to a violation of single crossing in an insurance model where people choose treatment intensity we analyse different market structures and show the following if insurers have market power the violation of single crossing caused by income differences and endogenous treatment choice can explain the empirically observed outcome our results do not rely on differences in risk aversion between types

quality vs quantity in military procurement it is often argued that the same expenditures on military procurement would produce a more effective defense if larger numbers of less sophisticated and thus cheaper weapons were purchased this paper shows that such a result can occur even if the military derives no private consumption value from technically sophisticated weapons rather the organization of the decision making process itself can produce this result this suggests some possible solutions through organizing decision making in a different fashion copyright 1990 by american economic association

purchasing health care services from providers with unknown altruism cost sharing rules for paying physicians have been advanced as a way of generating incentives for the provision of quality care while recognizing their potential negative effects on production efficiency however the optimal sharing rate typically depends on the degree to which the physician acts in the interest of the patient what we identify as the physician s altruism since the degree of altruism is likely to vary across physicians and to be private information the standard rules for setting the cost sharing rate are unlikely to be optimal this paper derives conditions for the optimal non linear cost sharing mechanism in the presence of asymmetric information about altruism and shows how it can sometimes be implemented through a menu of linear cost sharing schemes the model can be used to rationalize the design of the fund holder system for general practictioners that operated in the 1990s in the united kingdom

space time approach to commercial property prices valuation there exists three ways of approaching real estate prices the cost approach the market data approach and the income capitalization approach in this article we propose an improvement of the market data approach that takes into account the spatial component in particular we propose a modified market data approach based on interpolation being the structure of the spatial correlation between the prices of properties the main factor to obtain the weights interpolation methods have been widely used for estimating real estate prices but they do not take into account the structure of their spatial dependence although this drawback is overcome by kriged estimation in the case of the prices of commercial properties they do not provide good estimates because the scarceness of the market information this is why auxiliary information is needed and cokriging methods are used to obtain estimates that are more accurate the aim of this article is the comparison of cokriged estimation of premises prices in tw

a discrete continuous model for multicategory purchase behavior of households abstract this article provides an integrated utility maximizing framework for households multicategory purchase incidence brand choice and purchase quantity decisions on a store visit households maximize utility across several categories subject to an overall budget constraint then they choose to purchase a subset of categories in which they select a specific brand and an associated quantity level under their assumptions for the stochastic terms in the specification the authors obtain closed form expressions for the household demands the marginal and joint purchase incidence and the brand choice probabilities along with conditional purchase quantities the authors show that the modeling framework accounts for both coincidence and complementarity substitutability across categories in addition it accounts for unobserved heterogeneity in the estimation thus the three key features of multicategory models proposed in the literature are all reflected in the framework the authors provide an empi

a direct utility model for asymmetric complements a symmetric complements refer to goods where one good is more dependent on the other yet consumers receive enhanced utility from consuming both examples include garden hoses and sprinklers chips and dip and routine versus personalized services where the former has a broader base for utility generation and the latter is more dependent on the other s presence measuring asymmetric effects is difficult when all that is observed are the purchase quantities present in a consumer s market basket we propose a direct utility model with a latent decision sequence for measuring asymmetric effects that allows us to capture differential responses to cross category purchases and inventories scanner panel data of milk and cereal purchases are used to investigate the presence of asymmetric complementarity and implications are explored through counterfactual analyses involving cross price elasticities and spillover effects of merchandising variables

search and price dispersion in online grocery markets abstract consumers often purchase multiple products at a time from retailers creating multi product incentives for search in this paper we consider how product variety affects consumer search intensity and the dispersion of prices in multi product retail markets we employ online grocery pricing data from four large retailers in the uk to estimate search costs and equilibrium price dispersion for food products under circumstances where i consumers search for single products and ii consumers search for multiple products at once we compare estimates in each case between a model in which utility increases with product variety and a model in which utility is not a function of variety relative to our preferred specification with variety effects in utility we find estimates of both search cost and search frequency to be biased upwards in single product settings when variety effects are ignored however we find estimates of search costs are biased upwards while search frequency is biased downwards in multi product settings when variety effects in utility are ignored

consumers price sensitivities across complementary categories in this paper we examine the pattern of correlation among consumer price sensitivities for customer purchase incidence decisions across complementary product categories we use a hierarchical bayesian multivariate probit model to uncover this pattern we estimated this model using purchase incidence data for six categories involving three pairs of complementary products our results show a new and interesting pattern of correlation among price parameters of complementary products for example we find that the correlation of own price sensitivities of complementary products is negative these results are consistent across the three complementary pairs of products we also investigate the reason for this counterintuitive result finally we present some managerial implications of our model we show how our model can be used for cross category targeting decisions by retailers we find that compared to nontargeted discounting the average profitability gain from customized discounting across the three category pairs is only 1 29 when complementarity is ignored but this gain improves to 8 26 when full complementarity is taken into account we also investigate whether ignoring the complex pattern of correlation has implications for managerial actions regarding targeting and optimal discounting we find that retailers can make misleading inferences about the impact of targeted discounts when they ignore cross category effects in modeling

a hierarchical bayes model of primary and secondary demand product design pricing policies and promotional activities influence the primary and secondary demand for goods and services brand managers need to develop an understanding of the relationships between marketing mix decisions and consumer decisions of whether to purchase in the product category which brand to buy and how much to consume knowledge about factors most effective in influencing primary and secondary demand of a product allows firms to grow by enhancing their market share as well their market size the purpose of this paper is to develop an individual level model that allows an investigation of both the primary and secondary aspects of consumer demand unlike models of only primary demand or only secondary demand this more comprehensive model offers the opportunity to identify changes in product features that will result in the greatest increase in demand it also offers the opportunity to differentially target consumer segments depending upon whether consumers are most likely to enter the market increase their consumption level or switch brands in the proposed hierarchical bayes model an integrative framework that jointly models the discrete choice and continuous quantity components of consumer decision is employed instead of treating the two as independent the model includes parameters that capture individual specific reservation value attribute preference and expenditure sensitivity the model development is based upon the microeconomic theory of utility maximization heterogeneity in model parameters across the sample is captured by using a random effects specification guided by the underlying microeconomic model this requires that some of the effects are strictly positive this is accommodated through the use of a gamma distribution of heterogeneity for some of the parameters a normal distribution of heterogeneity is used for the remaining parameters gibbs sampling is used to estimate the model the key methodological contribution of this paper is that we show how to specify a hierarchical bayes continuous random effects model that integrates consumer choice and quantity decisions such that individual level parameters can be estimated individual level estimates are desirable because insights into primary demand involve nonlinear functions of model parameters for example consumers not in the market are those whose utilities for the choice alternatives fall below some reservation value the proposed methodology yields individual specific estimates of reservation values and expenditure sensitivity which allow assessment of the origins of demand other than the switch ing behavior of consumers the methodology can also be used to help identify changes in product features most likely to bring new customers into a market our work differs from previous research in this area as we lay the framework needed to obtain individual level parameter estimates in a continuous random effects model that integrates choice and quantity the methodology is demonstrated with survey data collected about consumer preferences and consumption for a food item for the data available a large response heterogeneity was observed across all model parameters in spite of limited data available at the individual level a majority of the individual level estimates were found to be significant predictive tests demonstrated the superiority of the proposed model over existing latent class and aggregate models particularly significant gains in predictive accuracy were observed for the no buy behavior of the respondents these gains demonstrate that by structurally linking the choice and quantity models results in a more accurate characterization of the market than existing finite mixture approaches that model choice and quantity independently we show that our joint model makes more efficient use of the available data and results in better parameter estimates than those that assume independence finally the individual level demand analysis is illustrated through a simple example involving a 1 00 price cut we demonstrate practical usefulness of the model for targeting by developing the demographic attitudinal and behavioral profiles of consumer groups most likely to increase consumption enter the market or switch brands because of a price cut decision

modeling consumer demand for variety consumers are often observed to purchase more than one variety of a product on a given shopping trip the simultaneous demand for varieties is observed not only for packaged goods such as yogurt or soft drinks but in many other product categories such as movies music compact disks and apparel multinomial mn choice models cannot be applied to data exhibiting the simultaneous choice of more than one variety the random utility interpretation of either the mn logit or probit model uses a linear utility specification that cannot accommodate interior solutions with more than one variety alternative chosen to analyze data with multiple varieties chosen requires a nonstandard utility specification standard demand models in the economics literature exhibit only interior solutions we propose a demand model based on a translated additive utility structure the model nests the linear utility structure while allowing for the possibility of a mixture of corner and interior solutions where more than one but not all varieties are selected we use a random utility specification in which the unobservable portion of marginal utility follows a log normal distribution the distribution of quantity demanded the basis of the likelihood function is derived from these log normal random utility errors the likelihood function for this class of models with mixtures of corner and interior solutions is a mixed distribution with both a continuous density portion and probability mass points for the corners the probability mass points must be calculated by integrals of the log normal errors over rectangular regions we evaluate these high dimensional integrals using the ghk approximation we employ a bayesian hierarchical model allowing household specific utility parameters our utility specification related to the approach of wales and woodland 1983 who employ a translated quadratic utility function wales and woodland were only able to study at the most three varieties because there was no practical way to evaluate the utility function at that time in addition the quadratic utility specification is not a globally valid utility function making welfare computations and policy experiments questionable hendel 1999 and dube 1999 present an alternative approach in the utility function which is constructed by summing up over unobservable consumption occasions while only one variety is consumed on each occasion the marginal utilities of varieties change over the consumption occasions giving rise to a simultaneous purchase of multiple varieties our bayesian inference approach allows us to obtain individual household estimates of utility parameters household utility estimates are used to compute the value of each variety we compute a compensating value for the removal of each flavor that is we compute the monetary equivalent of the household s loss in utility from removal of a flavor these calculations show that households highly value popular flavors and would incur substantial utility losses from removal of these flavors from the yogurt assortment next we consider the implications of our model for retailer assortment and pricing policies given limited shelf space only a subset of the possible varieties can be displayed for purchase at any one time if consumers value variety then a retailer with lower variety must compensate the consumers in some way such as a lower price level we see this trade off between price and variety across different retailing formats discount or warehouse format retailers often have both lower variety and lower prices to measure this trade off we explore the utility loss from reduction in variety and find the reductions in price that will compensate for this utility loss these price reduction calculations must be based on a valid utility structure heterogeneity in tastes is critical in these utility computations and policy experiments we find that a relatively small fraction of households with extreme preferences dominate the compensating value computations that is some households are observed to purchase mostly or exclusively one variety these households must be heavily compensated for the removal of this variety from the assortment in some retailing contexts customization of the assortment is possible at the customer level we show that such customization virtually eliminates any utility loss from reduction in variety

a multicategory model of consumers purchase incidence quantity and brand choice decisions methodological issues and implications on promotional decisions abstract the authors propose a multicategory model of consumers purchase incidence quantity and brand choice decisions the model specification allows for cross category promotion effects in both components of the primary demand incidence and quantity decisions and uses a flexible functional form of consumer s utility to accurately measure those cross category effects to demonstrate the importance of the methodology the authors investigate two issues of relevance to retailers namely how retailers should 1 allocate promotional expenditures across brands in a category and 2 coordinate timing of promotions of brands across categories the authors estimate the proposed model using consumers purchases in pasta sauce and pasta categories the results reveal that using restrictive functional forms of utilities or ignoring cross category effects in incidence and quantity decisions leads to incorrect assessments on relative allocation of promotional expenditures across brands furthermore retailers

the temporal and spatial dimensions of price search insights from matching household survey and purchase data abstract price promotions are pervasive in grocery markets a household can respond to price promotions by effectively cherry picking through 1 spatial price search across stores and 2 temporal price search across time however extant research has analyzed these two dimensions of price search only separately and therefore underestimates both the consumer response to price promotions and the impact of promotions on retail profit in this article the authors introduce an integrated analysis of spatial and temporal price search they seek answers to three questions first what are the predictors of household decisions to perform either spatial or temporal price search second how effective are the temporal spatial and spatiotemporal price search strategies in obtaining lower prices and third what is the impact of alternative price search strategies on retailer profit the authors use a unique data collection approach that combines household surveys with observed purchase data to address these que

category management and coordination in retail assortment planning in the presence of basket shopping consumers this paper studies the assortment planning problem with multiple merchandise categories and basket shopping consumers i e consumers who desire to purchase from multiple categories we present a duopoly model in which retailers choose prices and variety level in each category and consumers make their store choice between retail stores and a no purchase alternative based on their utilities from each category the common practice of category management cm is an example of a decentralized regime for controlling assortment because each category manager is responsible for maximizing his or her assigned category s profit alternatively a retailer can make category decisions across the store with a centralized regime we show that cm never finds the optimal solution and provides both less variety and higher prices than optimal in a numerical study we demonstrate that profit loss due to cm can be significant finally we propose a decentralized regime that uses basket profits a new metric rather than accounting profits basket profits are easily evaluated using point of sale data and the proposed method produces near optimal solutions

asymmetric substitutability theory and some applications economists usually describe goods as being either gross complements or gross substitutes yet what is less known is that one good may be a gross substitute for a second good while the second good is a gross complement to the first good this paper shows the existence of asymmetric gross substitutability and shows some potential examples and applications

investigating consumer purchase behavior in related technology product categories we present a framework of durable goods purchasing behavior in related technology product categories that incorporates the following aspects unique to technology product purchases first it accounts for consumers anticipation of declining prices or increasing quality over time second the durable nature of technology products implies that even if two categories are related as complements consumers may stagger their purchases over several periods third the forward looking consumer decision process as well as the durable nature of technology products implies that a consumer s purchase in one category will depend on the anticipated price and quality trajectories of all categories as a potential aid to future researchers we also lay out the data requirements for empirically estimating the parameters of our model and the consequences of not having various elements of these data on our ability to estimate the parameters the data available for our empirical analysis are household level information on category level first time adoption decisions in three categories personal computers digital cameras and printers our results reveal a strong complementary relationship between the three categories policy simulations based on a temporary price decrease in any one category provide interesting insights into how consumers would modify their adoption behavior over time and also across categories as a consequence of the price decrease

reimbursing health plans and health providers efficiency in production versus selection the tradeoff between an insurer s or medical provider s incentives to select good risks and to produce efficiently is governed by the supply price analog to the demand price tradeoff between moral hazard and risk aversion under a variety of models the optimum supply price is a mixture of capitation and fee for service payments empirical literature shows that pure capitation payment leaves strong incentives for selection that are acted upon the presence of contracting costs in a rothschild stiglitz model means a limited pooling equilibrium can exist and that poor risks will not be at their preferred outcome

lying to level the playing field why people may dishonestly help or hurt others to create equity unethical and dishonest behavior has increasingly attracted the attention of scholars from various disciplines recent work has begun to focus on a previous overlooked factor predicting dishonest behavior the beneficiary or victim of dishonest acts in two laboratory experiments we manipulate the level of resources allocated to our participants their wealth and investigate whether perceived inequity from wealth that is randomly or subjectively assigned leads individuals to cross ethical boundaries through helping or hurting others the results show that dishonest behavior is influenced by positive and negative inequity that motivates helping and hurting acts furthermore a third experiment shows that people tend to discount the wrongness of crossing ethical boundaries to hurt or help others when the action restores equity

understanding responses to contradictory information about products although prior literature has examined reactions to drastic negative news we examine the situation in which decision makers receive contradictory information about products and they have to decide whether to persist with or abandon product usage we investigate physician reactions to conflicting information concerning the cardiovascular risk of avandia a diabetes drug we examine how beliefs about both drug effectiveness and drug safety are updated and speculate that experience expertise and self efficacy impact how such information is integrated with current quality beliefs unlike previous bayesian learning models we consider that some signals such as positive and negative news releases and the firm s marketing effort may be biased in that they provide an opinionated point of view the results show interesting differences in how physician types specialists hospital based primary care physicians heavy and light prescribers update their beliefs and the information sources they use to do so we find evidence that safety issues about avandia resulted in spillover concern to close competitor actos the results have implication for determining who should be targeted and what vehicles should be used if a firm is faced with a situation where consumers are in a quandary because of receiving conflicting messages

pricing of demand related products can ignoring cross category effect be a smart choice abstract this paper studies pricing strategies of competing retailers offering substitutable products in multiple product categories for such retailers in addition to accounting for within category pricing effects cross category effects can also influence consumers purchase decisions and thereby impact the retailers optimal pricing strategies we model consumers utility for purchasing substitutable products from the same category and from other categories as well we then solve a game theoretic model to identify the retailers optimal prices and profits our results show that accounting for cross category effects largely influences the retailers pricing and profitability in particular cross category effects influence the sensitivity of prices to within category substitution levels while cross category effects have an impact on retailers equilibrium strategies this effect is only relevant when within category substitution effects are present we also find that intentionally ignoring cross category effects leads to lower prices for categories that are either substitutable or highly complementary and to higher prices otherwise when not accounting for the fact that the two categories are demand related implies lower prices than when this information is accounted for then at least one retailer chooses to disregard the cross category effect at equilibrium finally we find evidence for prisoner s dilemma situations where both retailers ignore cross category effect at equilibrium while accounting for it would yield them higher profits

the shopping basket a model for multicategory purchase incidence decisions consumers make multicategory decisions in a variety of contexts such as choice of multiple categories during a shopping trip or mail order purchasing the choice of one category may affect the selection of another category due to the complementary nature e g cake mix and cake frosting of the two categories alternatively two categories may co occur in a shopping basket not because they are complementary but because of similar purchase cycles e g beer and diapers or because of a host of other unobserved factors while complementarity gives managers some control over consumers buying behavior e g a change in the price of cake mix could change the purchase probability of cake frosting co occurrence or co incidence is less controllable other factors that may affect multi category choice may be unobserved household preferences or observed household demographics we also argue that not accounting for these three factors simultaneously could lead to erroneous inferences we then develop a conceptual framework that incorporates complementarity co incidence and heterogeneity both observed and unobserved as the factors that could lead to multi category choice we then translate this framework into a model of multi category choice our model is based on random utility theory and allows for simultaneous interdependent choice of many items this model the multivariate probit model is implemented in a hierarchical bayes framework the hierarchy consists of three levels the first level captures the choice of items for the shopping basket during a shopping trip the second level captures differences across households and the third level specifies the priors for the unknown parameters we generalize some recent advances in markov chain monte carlo methods in order to estimate the model specifically we use a substitution sampler which incorporates techniques such as the metropolis hit and run algorithm and the gibbs sampler the model is estimated on four categories cake mix cake frosting fabric detergent and fabric softener using multicategory panel data the results disentangle the complementarity and co incidence effects the complementarity results show that pricing and promotional changes in one category affect purchase incidence in related product categories in general the cross price and cross promotion effects are smaller than the own price and own promotions effects the cross effects are also asymmetric across pairs of categories i e related category pairs may be characterized as having a primary and a secondary category thus these results provide a more complete description of the effects of promotional changes by examining them both within and across categories the co incidence results show the extent of the relationship between categories that arises from uncontrollable and unobserved factors these results are useful since they provide insights into a general structure of dependence relationships across categories the heterogeneity results show that observed demographic factors such as family size influence the intrinsic category preference of households larger family sizes also tend to make households more price sensitive for both the primary and secondary categories we find that price sensitivities across categories are not highly correlated at the household level we also find some evidence that intrinsic preferences for cake mix and cake frosting are more closely related than preferences for fabric detergent and fabric softener we compare our model with a series of null models using both estimation and holdout samples we show that both complementarity and co incidence play a significant role inpredicting multicategory choice we also show how many single category models used in conjunction may not be good predictors of joint choice our results are likely to be of interest to retailers and manufacturers trying to optimize pricing and promotion strategies across many categories as well as in designing micromarketing strategies we illustrate some of these benefits by carrying out an analysis which shows that the true impact of complementarity and co incidence on profitability is significant in a retail setting our model can also be applied to other domains the combination of item interdependence and individual household level estimates may be of particular interest to database marketers in building customized cross selling strategies in the direct mail and financial service industries

understanding store brand purchase behavior across categories this paper investigates whether the tendency to buy store brand is category specific or an enduring consumer trait we develop a multicategory brand choice model with a factor analytic structure on the covariance matrix of the coefficients the methodology allows us to elicit the basic latent tendency for a household to buy store brands while controlling for other causes such as price sensitivity the model is applied to a set of ten food and nonfood product categories we find strong evidence of correlations in household preferences for store brands across categories using a two dimensional factor structure we find that one of the factors explains a substantial amount of variation in store brand preference while the other factor explains price sensitivity consistently across categories the presence of these factors in all categories indicates that there are unobservable household level traits that are non category specific i e stable across product categories using data from five holdout categories we find that household estimates of these latent factors are very useful in predicting demand for store brands in new categories other potential applications for store managers are discussed

the price of owning a car an analysis of auction quota premium in singapore faced with dilemmas parallel to countries besieged by road congestions and limited land resources singapore has chosen to adapt a vehicle quota system vqs whereby car owners are required to bid for a licence in an auction before their vehicles are allowed onto the road in this study the behaviour of vqs auction prices is examined using a structural time series approach for outliers that are not observable from innovations auxiliary residuals with dummy variables are used to supplement the analysis in general prices exhibit a fairly constant seasonal pattern the inclusion of monthly vqs quotas released by the transport regulatory body and the national stock market index is not useful in explaining the observed price behaviour interestingly a basic structural model with stochastic components seems to fit the data best

a model of brand choice and purchase quantity price sensitivities many consumer decisions involve a discrete choice and a continuous outcome examples of such decisions are whether to own a home or rent one and how much to spend which brand of orange juice to buy and how many ounces to buy in cases like these the choice decision is typically modeled separately say using a logit model and the continuous outcomes modeled separately using regression analysis however the continuous outcomes may not be independent of the discrete choice and vice versa and modeling the two decisions independently can lead to inefficient choice parameter estimates and biased and inconsistent regression parameter estimates in this paper we present a methodology from the limited dependent variable literature to model the dependence between the choice and quantity decisions our substantive interest is in the role of price in the choice and quantity decisions when choosing among alternatives we argue that consumers consider prices of all the competitive brands in the quantity decision on the other hand only the price of the chosen alternative is expected to impact how much of the alternative is purchased the analysis of three brands using disaggregate level panel data strongly supports our hypothesis about the role of competitive prices in the choice and quantity decisions

profit or patients health benefit exploring the heterogeneity in physician altruism abstract this paper investigates physician altruism toward patients health benefit using behavioral data from hennig schmidt et al s 2011 laboratory experiment in the experiment medical students in the role of physicians decide on the provision of medical services the experimental setup allows us to identify the influence of profits and patients health benefit on the choice of medical treatment we estimate physician altruism the weight individuals attach to patients health benefit by fitting mixed logit and multinomial logit regression models to the experimental data estimation results provide evidence for physician altruism we find however substantial variation in the degree of physician altruism we also discuss some implications of our results for the design of physician payment schemes in the light of the theoretical literature

technical note sequential multiproduct price competition in supply chain networks we analyze a general model in which at each echelon of the supply process an arbitrary number of firms compete offering one or multiple products to some or all of the firms at the next echelon with firms at the most downstream echelon selling to the end consumer at each echelon the offered products are differentiated and the firms belonging to this echelon engage in price competition the model assumes a general set of piecewise linear consumer demand functions for all products potentially brought to the consumer market where each product s demand volume may depend on the retail prices charged for all products consumers preferences over the various product retailer combinations are general and asymmetric similarly the cost rates incurred by the firms at the most upstream echelon are general as well we fully characterize the equilibrium behavior under linear price only contracts and we show how all equilibrium performance measures can be computed via a simple recursive scheme moreover we establish how changes in the model parameters in particular exogenous cost rates or intercept values in the demand functions impact the system wide equilibrium these comparative statics results allow for the quantification of cost pass through effects and the measurement and characterization of the firms brand value lastly we illustrate what qualitative impacts various changes in the structure of the supply chain network may bring forth

prices promotions and channel profitability was the conventional wisdom mistaken abstract because of the lack of empirical evidence supporting the shift of economic power from manufacturers to retailers it has been claimed that the conventional wisdom that retailers benefit more from the use of consumer promotions was mistaken this paper assesses this claim and examines how two different pricing approaches during manufacturers instant price promotions targeted at consumers impact on channel profits in a bilateral monopoly we found that manufacturers should only offer rebates when they keep their prior to promotion wholesale prices unchanged consistent with the conventional wisdom retailers do indeed take the lion s share of the promotion incremental profits surprisingly however we found that in the largest part of the parameter space manufacturers still earn more total channel profits than retailers over time the theoretical and managerial implications of these findings are discussed

the incidence of mandated maternity benefits i consider the labor market effects of mandates which raise the costs of employing a demographically identifiable group the efficiency of these policies will be largely dependent on the extent to which their costs are shifted to group specific wages i study several state and federal mandates which stipulated that childbirth be covered comprehensively in health insurance plans raising the relative cost of insuring women of childbearing age i find substantial shifting of the costs of these mandates to the wages of the targeted group correspondingly i find little effect on total labor input for that group jel 118 j32 h51 in an era of tight fiscal budget constraints mandating employer provision of workplace benefits to employees is an attractive means for a government to finance its policy agenda consequently in recent years there has been a growth of interest in mandated benefits as a tool of social policy for example the centerpiece of president bill clinton s health care proposal is mandated employer provision of health insurance and more than 20 states have man

providers affiliation insurance and collusion abstract this paper provides a theoretical analysis of the benefits for an insurance company to develop its own network of service providers when insurance fraud is characterized by collusion between policyholders and providers in a static framework without collusion exclusive affiliation of providers allows insurance companies to recover some market power and to lessen competition on the insurance market this entails a decrease in the insured s welfare however exclusive affiliation of providers may entail a positive effect on customers surplus when insurers and providers are engaged in a repeated relationship in particular while insurers must cooperate to retaliate against a fraudulent provider under non exclusive affiliation no cooperation is needed under exclusive affiliation in that case an insurer is indeed able to reduce the profit of a malevolent provider by moving to collusion proof contracts when collusion is detected and this threat may act as a deterrent for fraudulent activities this possibility may supplement an inefficient judicial system it is thus a second best optimal anti fraud policy

controlling selection incentives when health insurance contracts are endogenous the paper examines the nature of health insurance contracts when insurance companies pool high and low risk individuals in a spatial product differentiation model the normal forces of competition induce quality provision but selection incentives induce insurers to under provide quality to offset selection incentives the government can reimburse some of the insurers costs however such a subsidy can in some cases reduce quality further as well as discourage production efficiency in such cases the optimal reimbursement rate is negative 2001 elsevier science b v all rights reserved

cost incentives for doctors a double edged sword abstract if doctors take the costs of treatment into account when prescribing medication their objectives differ from their patients objectives because the patients are insured this misalignment of interests hampers communication between patient and doctor giving cost incentives to doctors increases welfare if i the doctor s examination technology is sufficiently good or ii marginal costs of treatment are high enough if the planner can costlessly choose the extent to which doctors take costs into account he will opt for less than 100 optimal health care systems should implement different degrees of cost incentives depending on type of disease and or doctor

assessing the effect of marketing investments in a business marketing context recent research has empirically characterized the buyer seller relationship as dynamically evolving from one discrete state to another conventional wisdom would suggest that a customer in a higher relationship state that has a higher transaction value would also have greater lifetime value to the firm however recent evidence suggests that higher relationship states can be ephemeral hence the link between transaction value and lifetime value is not obvious in this study we seek to understand within a specific empirical context i the relationship between a customer s transaction value and that customer s lifetime value and ii the relationship between the lifetime value of a customer and the optimal level of marketing activity that needs to be directed at that customer to this end we develop a trivariate tobit hidden markov model that allows for a transitions among relationship states b possible synergies between the various products that the supplier firm offers c endogeneity in marketing activity d heterogeneity in model parameters and e the presence of the no purchase option our results reinforce recent findings by schweidel et al schweidel d a e t bradlow p s fader 2011 portfolio dynamics for customers of a multiservice provider management sci 573 471 486 that higher relationship states can be short lived importantly for the supplier firm a customer in the highest relationship state in a given period does not yield the highest lifetime value to the firm hence the relationship between transaction value i e relationship state and lifetime value can be nonmonotonic at the same time we also find a nonmonotonic relationship between the optimal expenditures that should be directed at a customer and that customer s lifetime value i e the optimal level of marketing contacts is not the highest for customers with the highest lifetime value furthermore we find that the optimal marketing expenditures for myopic agents are 14 33 lower than the corresponding values for forward looking agents therefore not accounting for the long term effects of marketing contacts would lead to suboptimal marketing budgets moreover a comparison with the current marketing expenditures suggests that the current practice is closer to the myopic policy than to the forward looking one

strategic integration of hospitals and physicians a striking development in the healthcare market place has been the formation of strategic relationships between hospitals and physicians hospital physician integration appears to be a response to rapidly expanding managed care health insurance we examine whether integration lead to efficiency gains from transaction cost economies thereby allowing providers to offer managed care insurance plans lower prices or whether integration is really a strategy to improve bargaining power and thereby increase prices we find that integration has little effect on efficiency but is associated with an increase in prices especially when the integrated organization is exclusive and occurs in less competitive markets

hospital competition in hmo networks abstract we develop a framework for analyzing bargaining relationships between hospitals and hmos under selective contracting using a unique dataset on hospitals in the los angeles area from 1990 to 1993 we estimate the determinants of actual negotiated prices paid to hospitals by two major hmos we find that a hospital s bargaining power and thus its price decrease when the hmo can readily turn to alternative networks that exclude the hospital we simulate the effect of hypothetical hospital mergers on bargaining power and find that some hospital mergers even in urban areas with many nearby hospitals can lead to significant price increases

investigating consumers purchase incidence and brand choice decisions across multiple product categories a theoretical and empirical analysis we propose a framework to investigate consumers brand choice and purchase incidence decisions across multiple categories where both decisions are modeled as an outcome of a consumer s basket utility maximization we build the model from first principles by theoretically explicating a general model of basket utility maximization and then examining the reasonable restrictions that can be placed to make the solution tractable without sacrificing its flexibility comparing with prior models we show why prior multicategory purchase incidence models overemphasize the role of the cross effects of a market mix of brands in other categories on the purchase incidence decision of a given category additionally we show that prior single category models are a special case of the proposed model when further restrictions are placed on the basket utility structure we estimate the model on household basket data for the laundry family of categories we show i why prior single category and multicategory models would systematically bias the estimates of the own and cross price promotional purchase incidence elasticities and ii how the market mix of each brand in each category affects the purchases across all categories which can help retailers make promotional decisions across a portfolio of products

optimal product line design when consumers exhibit choice set dependent preferences in a market of consumers with varying willingness to pay using product line as a discrimination tool may extract higher profits than serving all consumers with a single product local context effects however point to yet another consideration in designing product lines how the appeal of a product changes with the context provided by other products in the choice set i present a model of product line design that incorporates both discrimination and context management goals and offers recommendations for the variety and positioning of products to this end the model makes use of a framework that allows preferences to be choice set dependent given this framework i study how the firm manages externalities between products created by such dependencies the firm creates distortions above and beyond those resulting from discrimination motives alone for example in a vertically differentiated market for quality quality distortions exist even for the consumers with the highest valuations the range of quality provisions given the number of products is compressed as the relative importance of unfavorable comparisons among products increases surprisingly this compression may even lead the firm to forego discrimination among consumers regardless of the cost of offering distinct products

optimal health insurance and provider payment the authors derive optimal insurance for patients and payment method for physicians when neither the input decided by the patient quantity of treatment nor the input decided by the physician effort are contractible the equilibrium in this third best regime may sometimes be second best in which both the physician input and the report of treatment are verifiable otherwise truthful reporting forces a third best characterized by provider prospective payment and suboptimal effort while consumers demand becomes excessive the authors also analyze how professional ethics alters the equilibrium finally collusive reporting mechanisms imply more stringent constraints while competition among physicians relaxes them copyright 1997 by american economic association

optimal social health insurance with supplementary private insurance abstract this paper investigates the structure of a national health service in which there is compulsory social insurance covering a package of essentials a given part of individuals health expenditure and supplementary private policy topping up the remaining services the latter insurance contract provides for a co payment by patients limiting the so called third party payer effect thus an individual s health expenditure is divided into three parts the first covered by social insurance the second by a private policy and the third out of pocket such mixed system design has received increasing attention in recent years and has been adopted by several industrialized countries the conditions for optimal rates of social insurance coverage and of private coinsurance are analysed and discussed the optimality requirements refer to efficiency as well as equity concerns

determinants of store level price elasticity using weekly scanner data representing 18 product categories the authors estimated store specific price elasticities for a chain of 83 supermarkets they related these price sensitivities to a com

a combined approach for segment specific market basket analysis abstract market baskets arise from consumers shopping trips and include items from multiple categories that are frequently chosen interdependently from each other explanatory models of multicategory choice behavior explicitly allow for such category purchase dependencies they typically estimate own and across category effects of marketing mix variables on purchase incidences for a predefined set of product categories because of analytical restrictions however multicategory choice models can only handle a small number of categories hence for large retail assortments the issue emerges of how to determine the composition of shopping baskets with a meaningful selection of categories traditionally this is resolved by managerial intuition in this article we combine multicategory choice models with a data driven approach for basket selection the proposed procedure also accounts for customer heterogeneity and thus can serve as a viable tool for designing target marketing programs a data compression step first derives a set of basket prototypes which are representative for classes of market baskets with internally more distinctive complementary cross category interdependencies and are responsible for the segmentation of households in a second step segment specific cross category effects are estimated for suitably selected categories using a multivariate logistic modeling framework in an empirical illustration significant differences in cross effects and price elasticities can be shown both across segments and compared to the aggregate model

similarities in choice behavior across product categories differences between consumers in sensitivity to marketing mix variables have been extensively documented in the scanner panel data all studies of consumer heterogeneity focus on a specific category of products and ignore the fact that the purchase behavior of panel households is often observed simultaneously in multiple categories if sensitivity to marketing mix variables is a common consumer trait then one should expect to see similarities in sensitivity across multiple categories the goal in this paper is to measure the covariance of both observed linked to measured characteristics of households and unobserved heterogeneity in marketing mix sensitivity across multiple categories measurement of correlation in sensitivities across categories will serve to guide the interpretation of the literature on household heterogeneity if there is a large correlation one can be more confident that sensitivity to marketing variables is a fundamental household pr operty and not simply a category specific anomaly detection of correlation in sensitivities across categories requires an appropriate methodology that can handle the high dimensional covariance structures and properly account for uncertainty in estimatio n for example a simple approach might be to fit a brand choice model to each of the available categories in turn ignoring the data in the other categories for each category household parameter estimates could be obtained for the parameters corresponding to price display and feature sensitivity these parameter estimates could be viewed as data and the correlations across categories could be computed such a procedure could induce a downward bias in the estimation of correlation dueto the independent sampling errors which are present in each parameter estimate we develop a hierarchical model structure that introduces an explicit correlation structure across categories and utilizes the data in multiple categories at the same time to reduce the size of the covariance matrix we use a variance components approach we introduce household specific demographic variables to decompose the correlation across categories into that which can be ascribed to observable and unobservable sources shopping behavior variables such as shopping frequency and market basket size as well as intensity of shopping in a category are also included in the model using data on five categories we find substantial and statistically important correlations ranging from 32 for price sensitivities to 58 for feature sensitivity these correlations are much larger than the correlations obtained with the state of the art techniques available prior to our work we attribute our ability to detect substantial correlations to our method which involves the joint use of multiple category data in a parsimonious and efficient manner unlike previous studies with panel data household demographic variables are found to be strongly related to price sensitivity higher income households are less price sensitive and large families are more price sensitive shopping behavior variables are also important in explaining price sensitivity households that visit the store often are more price sensitive households with larger market baskets are less price sensitive confirming the view of bell and lattin 1998 heavy user households tend to be both less price sensitive and less display sensitive the evidence presented here of substantial correlations validates in part the notion that sensitivity to marketing mix variables is a consumer trait and is not unique to specific product categories it also opens the possibility of using information across categories in making inferences about consumer brand preference and marketing mix sensitivity providing a richer source of information for target marketing

measuring cross category price effects with aggregate store data our objective is to understand the cross category effects of marketing activities using aggregate store level scanner data for this we provide a framework derived from household utility maximizing behavior which assumes that a household chooses the bundle of products with the highest utility we use a second order taylor series approximation to an arbitrary utility function to represent bundle utility aggregate sales or shares in each category are derived under the assumption that households are heterogeneous in their preferences and in their sensitivities to marketing activities our estimation accounts for potential price endogeneity in demand using store level scanner data on four product categories liquid laundry detergents powdered laundry detergents liquid fabric softeners and sheet fabric softeners we find evidence for a complementary relationship between liquid softeners and both forms of detergents we also find that the magnitude of cross category elasticities are brand specific i e different brands in a category have a different price impact on the demand for a brand in another category the results have implications for retailers in terms of the potential need for cross category management as well as for manufacturers such as procter gamble that participate in all four categories we compare our model with a log log regression specification on three criteria estimated elasticities hold out sample predictions and retailer cross category pricing we find that the proposed model produces more reasonable estimates relative to the log log model it predicts better and is more useful for pricing purposes further in a simulation study we show that our proposed model can recover the elasticities from a data generating process that simulates household level joint outcomes across categories even after these data have been aggregated to brand level shares within each category by contrast the log log regression model is unable to do so

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

the treadmill effect in a fixed budget system abstract we examine the interaction in the market for physician services when the total budget for reimbursement is fixed physicians obtain points for the services they render at the end of the period the budget is divided by the sum of all points submitted which determines the price per point we show that this retrospective payment system involves compared to a fee for service remuneration system a severe coordination problem which potentially leads to the treadmill effect we argue that when market entry is possible a budget can be efficiency enhancing if in addition a price floor is used

the value of purchase history data in target marketing an important aspect of marketing practice is the targeting of consumer segments for differential promotional activity the premise of this activity is that there exist distinct segments of homogeneous consumers who can be identified by readily available demographic information the increased availability of individual consumer panel data open the possibility of direct targeting of individual households the goal of this paper is to assess the information content of various information sets available for direct marketing purposes information on the consumer is obtained from the current and past purchase history as well as demographic characteristics we consider the situation in which the marketer may have access to a reasonably long purchase history which includes both the products purchased and information on the causal environment short of this complete purchase history we also consider more limited information sets which consist of only the current purchase occasion or only information on past product choice without causal variables proper evaluation of this information requires a flexible model of heterogeneity which can accommodate observable and unobservable heterogeneity as well as produce household level inferences for targeting purposes we develop new econometric methods to implement a random coefficient choice model in which the heterogeneity distribution is related to observable demographics we couple this approach to modeling heterogeneity with a target couponing problem in which coupons are customized to specific households on the basis of various information sets the couponing problem allows us to place a monetary value on the information sets our results indicate there exists a tremendous potential for improving the profitability of direct marketing efforts by more fully utilizing household purchase histories even rather short purchase histories can produce a net gain in revenue from target couponing which is 2 5 times the gain from blanket couponing the most popular current electronic couponing trigger strategy uses only one observation to customize the delivery of coupons surprisingly even the information contained in observing one purchase occasion boasts net couponing revenue by 50 more than that which would be gained by the blanket strategy this result coupled with increased competitive pressures will force targeted marketing strategies to become much more prevalent in the future than they are today

auditing claims in the insurance market with fraud the credibility issue abstract this paper characterizes the equilibrium of an insurance market where opportunist policyholders may file fraudulent claims we assume that insurance policies are traded in a competitive market where insurers cannot distinguish honest policyholders from opportunists the insurer policyholder relationship is modelled as an incomplete information game in which the insurer decides to audit or not the market equilibrium depends on whether insurers can credibly commit or not to their audit strategies we show that a no commitment equilibrium results in a welfare loss for honest individuals which may even be so large that the insurance market completely shuts down we also show that transferring monitoring costs to a budget balanced common agency would mitigate the commitment problem

physician reimbursement and technology adoption this study analyses the incentives of health care providers to adopt new technologies in a world with ex post moral hazard it is shown that in a second best efficient world with respect to insurance coverage a linear remuneration scheme implements the adoption of second best efficient technologies only in special cases under a third best standard coinsurance contract the adequate reimbursement rule is characterised depending on the characteristics of the technology and on patients demand elasticities with respect to monetary and non monetary costs a shift from fee for service to capitation is likely to display undesirable incentives for very severe illnesses by inducing a reduction in the technically feasible level of healing or an increase in non monetary costs of treatment

research note a cross category model of households incidence and quantity decisions this paper advances the literature on multicategory demand models by simultaneously handling more than one purchase decision of the household we propose a two stage bivariate logit model of incidence and quantity outcomes in multiple categories our results show that cross category promotional spillovers are asymmetric between the two product categories of bacon and eggs the total retail profit responds more to bacon price than to egg price promoting bacon is found to have a bigger impact on egg profit than the impact of egg promotion on bacon profit we decompose 1 the total retail profits as well as 2 the cross category profit impact of a price promotion into its two components and find that 1 23 67 of the total retail profit impact of a promotion on bacon eggs arises on account of quantity effects and 2 40 33 of the increase in egg bacon profit from promoting bacon eggs is on account of quantity effects

cycles and steps in british commercial property values this paper examines cyclical behaviour in commercial property values over the period 1956 to 1996 using a structural times series unobserved components approach the influence of the transition to short rent reviews during the late 1960s and the short and long term impacts of the 1974 and 1990 property crashes are also incorporated into the analysis via dummy variables it is found that once these variables are taken into account a fairly regular cyclical pattern can be discerned with a period of about 7 8 years furthermore the 1974 and 1990 property crashes are shown to have had a major long term impact on property value growth presumably via their influence on investors expectations

property in a global risk society towards marketing research in the office sector this paper suggests that the current uncertainty hovering over the property industry is not simply the result of an internal economic dynamic dooming the industry to damaging booms and slumps rather the novel sense of risk colouring contemporary development activities is the consequence of wider cultural technical and commercial shifts from which property development is not immune the current supply oriented interests of property research predominantly concerned with the collection and analysis of statistical data are unable to respond to these wider questions simply creating more data banks will not help the paper argues that in order to understand the shifting nature of demand property research needs to complement econometric modelling with a more occupier focused marketing research one that is sensitive to the dynamics of the risk society we now inhabit accordingly the paper provides a detailed account of structured market research which should form part of a broader property research agenda in particular structured demand analysis is shown to provide a framework for understanding the complex dynamics of the demand market so demonstrating how the supply industry can improve its efficiency the paper suggests that the scale of the latest property crash offers an opportunity for the industry to improve the efficiency of supply by blending intimate knowledge of changing market demand with established dynamics of provision such a research strategy may provide the key to a more stable mutually profitable property business appropriate to a rapidly changing world economy of risk

a choice model for packaged goods dealing with discrete quantities and quantity discounts utility maximizing solutions to economic models of choice for goods with either discrete quantities or non linear prices cannot always be obtained using standard first order conditions such as kuhn tucker and roy s identity when quantities are discrete there is no guarantee that derivatives of the utility function are equal to derivatives of the budget constraint moreover when prices are nonlinear as in the case of quantity discounts first order conditions can be associated with the minimum rather than the maximum value of utility in these cases the utility function must be directly evaluated to determine its maximum this evaluation can be computationally challenging when there exist many offerings and when stochastic elements are introduced into the utility function in this paper we provide an economic model of demand for substitute brands that is flexible parsimonious and easy to implement the methodology is demonstrated with a scanner panel data set of light beer purchases the model is used to explore the effects of price promotions on primary and secondary demand and the utility of product assortment

a general choice model for bundles with multiple category products application to market segmentation and optimal pricing for bundles abstract the attribute based approach to study customer choices cannot deal with bundles of heterogeneous components which are usually drawn from different product categories the authors develop the comparability based balance model which is a unified framework for modeling bundle choices the model can be employed for any bundle regardless of the heterogeneity of bundle components under a pure bundling strategy the conjoint model and balance model are special cases of the general model the authors use mixture distributions in a hierarchical bayesian framework to incorporate consumer heterogeneity in a more flexible manner than the extant approaches such as latent class and random coefficient models the empirical tests of the model show that most attribute effects are significant and consistent with the model s predictions the model is superior to those that do not consider the issues of comparability of attributes latent class structure and heterogeneity among respondents the authors show how

model of brand choice with a no purchase option calibrated to scanner panel data abstract in usual practice researchers specify and estimate brand choice models from purchase data ignoring observations in which category incidence does not occur i e no purchase observations this practice can be problematic if there are unobservable factors that affect the no purchase and the brand choice decisions when such a correlation exists it is important to model simultaneously the no purchase and the brand choice decisions the authors propose a model suitable for scanner panel data in which the no purchase decision depends on the price feature and display of each brand in the category and on household stock of inventory they link the no purchase model to the brand choice outcome through marketing mix covariates and through unobservables that affect both outcomes the authors assume that model parameters are heterogeneous across households and allow for a flexible correlation structure between the coefficients in the no purchase model and those in the brand choice model the model fo

multiple discreteness and product differentiation demand for carbonated soft drinks for several of the largest supermarket product categories such as carbonated soft drinks canned soups ready to eat cereals and cookies consumers regularly purchase assortments of products within the category consumers often purchase multiple products and multiple units of each alternative selected on a given trip this multiple discreteness violates the single unit purchase assumption of multinomial logit and probit models the misspecification of such demand models in categories exhibiting multiple discreteness would produce incorrect measures of consumer response to marketing mix variables in studying product strategy these models would lead to misleading managerial conclusions we use an alternative microeconomic model of demand for categories that exhibit the multiple discreteness problem recognizing the separation between the time of purchase and the time of consumption we model consumers purchasing bundles of goods in anticipation of a stream of consumption occasions before the next trip we apply the model to a panel of household purchases for carbonated soft drinks