advertising random sales response and brand competition some theoretical and econometric implications this paper examines implications for the firm s advertising decisions under conditions of random sales response to advertising within the context of multibrand competition the competitive environment assumed is characterized not only by interactions among different companies within a given industry but also by inter actions among different brands produced by a single company a theoretical model is first formulated to examine the effect of uncertainty in the sales advertising relations and that of the firm s attitude toward risk on its advertising the theoretical results are then assessed by estimating an econometric model using the cigarette data copyright 1987 by the university of chicago

the arbitrage pricing model and returns on assets under uncertain inflation the impact of inflation on equilibrium returns in capital markets has been the subject of several articles in recent years chen and boness 1 friend landskroner and losq 4 long 7 and roll 13 have all constructed general equilibrium models which incorporate the impact of uncertain inflation on returns all of these authors have derived models in a mean variance world utilizing methodologies similar to that first utilized by mossin 9 or merton 8 the basic underlying tenet of mean variance analysis is that for any given level of expected return investors wish to minimize the variance of return in mean variance equilibrium models the only risk that cannot be diversified away is the covariance of an asset s return with the market return assets which have the same covariance with the market have the same equilibrium required return thus in a mean variance world if each member of the following pairs of assets had the same covariance with the market each member would have the same expected return a a stock which was a perfect hedge against inflation versus one which was not b a stock which was a perfect hedge against oil price changes versus one which was not c a security that hedged against interest rate changes versus one which did not in this article we break out of the limitations of the mean variance assumptions by utilizing the arbitrage pricing theory apt of ross 15 16 17 this

inflation risk and international asset returns abstract we show that inflation risk is priced in international asset returns we analyze inflation risk in a framework that encompasses the international capital asset pricing model icapm of adler and dumas 1983 in contrast to the extant empirical literature on the icapm we relax the assumption that inflation rates are constant we estimate and test a conditional version of the model for the g5 countries france germany japan the uk and the us over the period 1975 1998 and find evidence of statistically and economically significant prices of inflation risk in addition to priced nominal exchange rate risk our results imply a rejection of the restrictions imposed by the icapm in an extension of our analysis to 2003 we show that even after the termination of nominal exchange rate fluctuations in the euro area in 1999 differences in inflation rates across countries entail non trivial real exchange rate risk premia

treasury bill factors and common stock returns capital asset pricing theory gives a linear ex ante relationship between a security s return and one special portfolio return the return on all assets this linear equation is called the capital asset pricing model capital asset pricing theory alone provides no empirical hypotheses because it is derived and defined wholly with expectations tests of empirical hypotheses with historical data require an additional proposition that relates ex ante and ex post returns a model for this second proposition is called a return generating equation arbitrage pricing theory gives a more compact method for deriving a linear ex ante security return model in the arbitrage theory developed by ross 6 the return generating equation is the basis for the ex ante return relationship briefly an approximate linear expected return equation is derived directly from the return generating equation so two separate models are not required in addition the ex ante return equation is defined in terms of an arbitrary number of special factor portfolio returns rather than a single market portfolio return in this sense arbitrage pricing theory has richer implications and a simpler structure than capital asset pricing arbitrage pricing theory starts with a linear return generating equation for each security

modeling asymmetric competition the effects of the marketing actions of one brand can be distributed among its competitors market shares in a complex manner this paper presents and illustrates methods for modeling brand competition and brand strategies in markets where competitive effects can be differentially and asymmetrically distributed we discuss the empirical specification parameter estimation and competitive strategy implications of the models proposed price and advertising competition among eleven brands of an australian household product is used to illustrate the application of these procedures

endogeneity and simultaneity in competitive pricing and advertising a logit demand analysis in this article we use four data sets to provide a benchmark study of the effects of accounting for endogeneity and simultaneity in estimating marketing mix effects in a logit demand framework we compare the results obtained from accounting for endogeneity only to those from accounting for both endogeneity and simultaneity and in the latter case we allow for more general models of firm behavior to examine the consequences of imposing assumptions about the behavior of firms we find that accounting for both endogeneity and simultaneity not only affects the parameter estimates but also results in efficiency gains that affect the statistical significance of the estimates

using game theory to model competition the article is an exposition of the basic concepts of noncooperative game theory and their application to advertising product and price competition

a theory of dynamic oligopoly iii cournot competition abstract we study the markov perfect equilibrium mpe of an alternating move infinite horizon duopoly model where the strategic variable is quantity we exhibit a pair of difference differential equations that when they exist differentiable mpe strategies satisfy for quadratic payoff functions we solve these equations in closed form and demonstrate that the mpe corresponding to the solution is the limit of the finite horizon equilibrium as the horizon tends to infinity we conclude with a discussion of adjustment costs and endogenization of the timing

a model of advertising competition using a dynamic model of advertising rivalry between competitors in a duopoly the author obtains analytical results for the case of pure market share rivalry in a mature market a more general mod

assessing the investment performance of swedish timberland a capital asset pricing model approach this paper evaluates the investment performance of swedish timberland during the last three decades using the capital asset pricing model capm results suggests that swedish timberland investments show diversification potential and can serve as a hedge against inflation furthermore the analysis suggests that the return on timberland is higher than on investment alternatives in the same risk class the results are in line with similar studies performed in other countries

on the robustness of the roll and ross arbitrage pricing theory roll and ross 6 have written what has quickly become the classic article on testing the arbitrage pricing theory apt originally proposed by ross 8 they presented methods both for estimating the return generating process and for testing whether particular elements factors in the return generating process were priced in equilibrium they found that more factors are priced than one would expect to be priced if the capital asset pricing model capm were held

analytical models of competition with implications for marketing issues findings and outlook the authors review a representative cross section of analytical models of competition using a framework for competitive analysis developed from a marketing perspective models are classified by the

three factors interest rate differentials and stock groups motivated by the single period capital asset pricing model e g sharpe 33 for years research centered on the use of a single factor model where the single factor represented the return on the market portfolio subsequently multifactor models were derived in a generalized capm setting by sharpe 34 long 23 merton 25 etc as well as in the arbitrage pricing theoretic framework by ross 30 31 merton 25 in the context of continuous time intertemporal asset pricing derives what we might call a two factor model where the additional factor is a portfolio which is perfectly negatively correlated with changes in the risk free rate the general intertemporal asset pricing models developed by long 23 or more recently by cox ingersoll and ross 5 can also be interpreted as multifactor models on the empirical side numerous studies were finding systematic ex post dependence in the residuals from single factor models e g agmon and lessard 1 arnott 2 basu 4 estep 7 farrell 8 9 levy 20 rosenberg and

differential game models of advertising competition abstract differential game methodology combines two attractive features that are critical to the study of advertising competition dynamics and multi competitor decision making a focused review of two decades of differential game modeling of advertising competition indicates that insights gained to date while valuable are of a limited nature and research in the area needs to extend beyond present limits four recent studies are offered as examples of possible directions to follow in continued research

the pricing of interest rate risk evidence from the stock market this paper addresses the issue of whether firms are required to pay an ex ante premium to investors for bearing the risk of interest rate changes a two factor apt model with the market and changes in the yield on long term government bonds as factors is employed the paper shows that empirically most of the interest sensitive stocks are in the utility industries and that there is reasonable evidence that the interest factor is priced in the sense of the apt several sources for the interest sensitivity are considered and regulatory lags are focused on as a likely candidate some firms exhibit ex post sensitivity in their stock returns to unanticipated changes in interest rates are these firms required to pay investors ex ante for bearing this risk of interest rate changes the framework for examining pricing of unanticipated interest rate changes is a two factor apt model with the market and changes in the yield on long term government bonds as factors the issue is whether the interest rate change premium is significant to study this the paper uses full information maximum likelihood fiml estimation on groups of twenty five individual firms with both cross equation constraints and withinequation nonlinear constraints on the parameters as mandated by the apt model whether the risk of unanticipated changes in interest rates is priced in the market is of particular interest with regard to regulated firms regulated firms especially electric utilities turn out to comprise the big majority of firms that are sensitive to unanticipated interest rate changes after some preliminary investigation the analysis focuses on electric utilities much empirical work on the apt relies on factor analysis e g roll and ross 30 bower bower and logue 5 use factor analysis in comparing the apt and the capm to explain utilities returns the present paper however uses observable variables at the macro level chan chen and hsieh cch 7 and chen roll and ross crr 8 also examine apt models with specific macroeconomic factors cch and crr use a traditional fama macbeth type of cross sectional estimation approach in the premia calculations rather than a fiml approach gibbons and stambaugh have applied fiml techniques to models using only the market as an explanatory variable gibbons 20 used a noniterative algorithm on portfolios of firms equivalent to a two step cross sectional approach stam

an empirical analysis of dynamic nonprice competition in an oligopolistic industry this article develops a dynamic model of nonprice competition in an oligopolistic industry and uses it to analyze advertising competition in the u s cigarette industry the model generalizes existing studies by allowing advertising to affect both firm market shares and the total size of the market the model also allows dynamic conjectural variations to arise from the intertemporal links created by the durability of advertising we use these dynamic conjectural variations to distinguish alternative models of competitive interaction we estimate the complete model of firm production demand and advertising choice by using data for u s cigarette producers the results indicate that firm advertising primarily affects the level of market demand with a firm s effect on rival firms market shares arising through variations in the number of brands sold empirical results on firm behavior suggest that firms act as if their advertising choices will alter the future advertising choices of rival firms in both the high tar and low tar cigarette markets

do forest assets hedge inflation forest assets are commonly viewed as good hedges against inflation the view is based largely however on anecdotal evidence rather than empirical analysis this paper examines the historical relationship between forestry returns and inflation the results suggest that forests in the u s west and south have been superior hedges against higher than anticipated inflation forests in the northeast have been less effective inflation hedges the results also indicate that western and southern forests have been overvalued during periods of relatively high expected inflation markets for forests in the northeast however have been relatively efficient processors of inflation expectations

an oligopoly model of dynamic advertising competition abstract an oligopoly model is presented that allows the determination of feedback nash equilibrium advertising strategies for an oligopoly analyses of symmetric and asymmetric oligopolies with the model show that unit contribution and advertising effectiveness have positive effects on a competitor s own advertising and steady state sales while discount rate and decay rate have negative effects an asymmetric analysis further shows that unit contribution and advertising effectiveness affect positively and discount rate and decay rate negatively a competitor s rivals advertising but have effects in opposite directions regarding rivals steady state sales the symmetric and asymmetric analyses also show that steady state sales per competitor decline with the number of competitors in the oligopoly while total oligopoly steady state sales increase the model is applied empirically to the triopolistic competition involving anheuser busch sabmiller and molson coors in the beer industry

an empirical investigation of advertising strategies in a dynamic duopoly the equilibrium profit maximizing advertising policies of firms operating in a dynamic duopoly are derived by linking in a single framework the econometric estimation of the market response function and the technique of differential games that characterizes dynamic competitive behavior we use the lanchester model of combat to represent the system dynamics that capture the competitive shifts due to investments in advertising by the two market rivals we determine the equilibrium advertising levels using both closed and open loop policies we also compare these equilibrium advertising policies for each firm to those obtained using an optimal control theory formulation wherein the advertising spending levels of the rival are assumed to be known the empirical results obtained by analyzing the advertising rivalry between coke and pepsi for the period 1968 1981 under the above three alternative spending policies provide some interesting insights into the nature of competition between these two market rivals a significant contribution of this paper is to extend the existing literature on advertising competition by integrating theoretical and empirical analyses

the use of market data and accounting data in hedging against consumer price inflation this paper examines the use of alternative information sets in the construction of inflation hedge portfolios the study is motivated by consideration of the investor s problem in a multiperiod world several authors e g merton 1973 and breeden 1979 have shown that in a multiperiod setting optimal investment behavior will in general involve holding portfolios that can be used to hedge against changes in certain relevant states of nature one potentially relevant state of nature is the rate of inflation in general prices jones 1982 and elton gruber and rentzler 1983 in contrast to prior related research the empirical results indicate that it is possible to construct inflation hedge portfolios successfully if certain accounting information is used however portfolios constructed on the basis of historical security price information do not serve as effective hedges one contribution of this paper is to demonstrate the potential usefulness of accounting information to a price taking investor although financial statements play an important role in the setting of equilibrium

competitive dynamic advertising a modification of the case game abstract in this paper we consider a modified version of the advertising differential game of case 1979 we derive non cooperative nash equilibria for open loop controls as well as for feedback strategies we consider finite and infinite planning horizons the feedback equilibrium is shown to be robust against stochastic disturbances of the state equation

returns to farm real estate revisited barry s research on farm real estate returns suggests that when farm assets are viewed as a part of the nation s wealth portfolio returns are not persistently low as is commonly asserted in policy debates this paper extends barry s research by explicitly accounting for the effects of uncertain inflation using a broader market proxy and lengthening the sample period the results suggest farm real estate offers only slight not substantial premiums above those for systematic risk contributes little systematic risk to a well diversified portfolio and exhibits substantial risk due to uncertain inflation

empirical analysis of closed loop duopoly advertising strategies closed loop perfect equilibria in a lanchester duopoly differential game of advertising competition are used as the basis for empirical investigation two systems of simultaneous nonlinear equations are formed one from a general lanchester model and one from a constrained model two empirical applications are conducted in one involving coca cola and pepsi cola a formal statistical testing procedure is used to detect whether closed loop equilibrium advertising strategies are used by the competitors rather than open loop strategies in the second application involving anheuser busch and miller the general model is estimated results indicate that closed loop equilibria better explain dynamic advertising competition than do open loop equilibria also closed loop equilibrium advertising strategies implied by model estimates show that competitive advertising levels may or may not be monotonic in market share