frictionless commerce a comparison of internet and conventional retailers there have been many claims that the internet represents a new nearly frictionless market our research empirically analyzes the characteristics of the internet as a channel for two categories of homogeneous products books and cds using a data set of over 8 500 price observations collected over a period of 15 months we compare pricing behavior at 41 internet and conventional retail outlets we find that prices on the internet are 9 16 lower than prices in conventional outlets depending on whether taxes shipping and shopping costs are included in the price additionally we find that internet retailers price adjustments over time are up to 100 times smaller than conventional retailers price adjustments presumably reflecting lower menu costs in internet channels we also find that levels of price dispersion depend importantly on the measures employed when we compare the prices posted by different internet retailers we find substantial dispersion internet retailer prices differ by an average of 33 for books and 25 for cds however when we weight these prices by proxies for market share we find dispersion is lower in internet channels than in conventional channels reflecting the dominance of certain heavily branded retailers we conclude that while there is lower friction in many dimensions of internet competition branding awareness and trust remain important sources of heterogeneity among internet retailers

using a policy mix for pollution control a review of economic literature this article provides a review of economic studies analyzing the use of multiple policies a socalled policy mix to cope with single pollution problems to guide and structure the review an analytical framework is developed and applied the framework integrates transaction costs into the analysis of pollution problems and policies to overcome them moreover it understands a pollution externality not only as a market failure but more generally as the failure of private governance structures based on this insight two rationales for using a policy mix are identified first a policy mix may help to correct for multiple reinforcing failures of private governance structures such as pollution externalities and technological spillovers second a policy mix can be employed if the implementation of single first best policies brings about high transaction costs e g when marginal pollution damages are heterogeneous or polluters are unlikely to comply with the policy for each rationale the relevant literature is presented based on the review avenues for future research are identified

the decomposition of promotional response an empirical generalization price promotions are used extensively in marketing for one simple reason consumers respond the sales increase for a brand on promotion could be due to consumers accelerating their purchases i e buying earlier than usual and or buying more than usual and or consumers switching their choice from other brands purchase acceleration and brand switching relate to the primary demand and secondary demand effects of a promotion gupta 1988 captures these effects in a single model and decomposes a brand s total price elasticity into these components he reports for the coffee product category that the main impact of a price promotion is on brand choice 84 and that there is a smaller impact on purchase incidence 14 and stockpiling 2 in other words the majority of the effect of a promotion is at the secondary level 84 and there is a relatively small primary demand effect 16 this paper reports the decomposition of total price elasticity for 173 brands across 13 different product categories on average we find that 25 of the elasticity is due to primary demand expansion i e purchase acceleration and 75 to secondary demand effects or brand switching thus while gupta s finding that the majority of promotional response stems from brand switching is supported the average magnitude of the effect appears to be smaller than first thought more important there is ample evidence that promotions have a significant primary demand effect the relative emphasis on purchase acceleration and brand switching varies systematically across categories and the second goal of the paper is to explain this variation as a function of exogeneous covariates in doing this we recognize that promotional response is the consumer s reaction to a price promotion and therefore develop a framework for understanding variability in promotional response that is based on the consumer s perspective of the benefits from a price promotion these benefits are posited to be a function of i category specific factors ii brand specific factors and iii consumer characteristics the framework is formalized as a generalized least squares meta analysis in which the brand s price elasticity is the dependent variable several interesting results emerge from this analysis category specific factors brand specific factors and consumer demographics explain a significant amount of the variance in promotional response for a brand at both the primary and secondary demand levels category specific factors have greater influence on variability in promotional response and its decomposition than do brand specific factors there are several instances where exogenous variables do not affect total elasticities yet significantly affect individual components of total elasticity in fact the lack of a significant relationship between the variables and total elasticity is often due to offsetting effects within two or more of the three behavioral components of elasticity this is particularly true for brand specific factors which typically have no effect on total elasticity yet have important effects on the individual behaviors there is some evidence to suggest that not all promotion related increases in primary demand are due to forward buying in some cases promotions appear to increase consumption we use these results to illustrate how category and brand specific factors work to drive primary and secondary demand elasticities in different directions in short this paper offers an empirical generalization of a key finding on promotional response how elasticities decompose across brand choice purchase incidence and stockpiling and new insights into factors that explain variance in promotional response these findings are likely to be of interest to researchers who are concerned with theory development and the generalizability of marketing phenomena and to managers who plan promotion campaigns

efficient non contractible investments in large economies abstract do investors making complementary investments face the correct incentives especially when they cannot contract with each other prior to their decisions we present a two sided matching model in which buyers and sellers make investments prior to matching once matched buyer and seller bargain over the price taking into account outside options efficient decisions can always be sustained in equilibrium we characterize the inefficiencies that can arise in equilibrium and show that equilibria will be constrained efficient we also show that the degree of diversity in a large market has implications for the extent of any inefficiency journal of economic literature classification numbers c78 d41 d51

resource and waste taxation in the theory of the firm with recycling activities the management of solid waste has become an urgent problem in nations with a great population density accordingly waste reduction through source reduction and recycling has become increasingly important our purpose is to show how prevention recycling and disposal of waste could be part of a theory of the firm we first derive efficient production functions from production processes with waste as a by product waste obtained as new scrap can partially be recycled by using additional inputs in order to cut back the purchase of virgin material waste not completely recyclable will leave the firm as disposal which also entails cost to the firm we use the dual cost function approach to develop a theory of the firm under solid residual management since the producer does not bear the full cost of disposal there will be a bias toward virgin materials and away from recycling the goal of the government is to stimulate the firms to recycle with respect to the preservation of exhaustible resources an incentive to recycle is a tax on resources or on waste in order to determine the tax levels the government maximizes welfare subject to the dynamic constraint for decumulation of land fill for waste deposits this gives the user cost and its time profile for taxing waste disposal or virgin material in a comparative statics analysis we compare the effect of taxes on waste vs virgin material on effort to produce in a resource saving manner on the quantity of recycled material on output and on the reduction of waste since the impact of environmental regulation on employment is important our model detects seven effects on labor demand as part of resource conservation policy we finally carry out a comparative statics analysis of waste intensive firms operating in different market structures of interest is the impact of a resource or waste taxation on market volume on the number of firms on resource saving effort and on profit

scrap prices waste and recycling policy this study examines the effect of waste and recycling policy on scrap prices and the importance of scrap price feedbacks as a determinant of policy costs price effects and direct and indirect channels of waste reduction are decomposed for deposit refund advance disposal fee and recycling subsidies scrap price feedbacks decrease the cost of advance disposal fees increase the cost of recycling subsidies and have an ambiguous effect on the cost of deposit refund simulation analysis finds that scrap price feedbacks substantially affect the costs of the policies and alter the ranking of instruments jel q53 q58

economic efficiency effects of alternative policies for reducing waste disposal abstract reducing the amount of municipal solid waste that is disposed of has become an important policy goal previous research argued that a virgin material tax offered an efficient method of meeting this goal and it continues to be considered as a policy option today this paper demonstrates however that a virgin material tax is not an efficient method of reducing waste but that an alternative policy a combined disposal tax and reuse subsidy is the combined disposal tax and reuse subsidy is theoretically consistent with unit based household charges for waste disposal but may have advantages in some situations

please or squeeze brand performance implications of constrained and unconstrained multi item promotions existing research on price promotions typically investigates the effects of single product promotions however brand managers often promote multiple items simultaneously to bolster the performance of a complete brand line this paper investigates the brand performance implications of such multi item promotions we distinguish between two types of multi item promotions traditional unconstrained multi item promotions that grant a discount irrespective of the size or composition of the purchase set and constrained multi item promotions that require consumers to purchase specific quantities self bundling or even predetermined combinations fixed bundling of promoted items using a normative consumer decision model the authors analyze the relative effectiveness of these promotions in terms of unit sales and revenue impact and show that promotion performance is moderated by consumers preference for variety the authors find that unconstrained multi item promotions outperform single item promotions especially in markets without variety seeking in markets with variety seeking unconstrained multi item promotions are not as effective in stealing extra sales from competition because consumers prefer to spread their purchases across all items including competitive ones however in those markets self bundling promotions are particularly effective because they force consumers to adopt larger amounts of the promoted items at the expense of competitors finally in neither type of market does fixed bundling substantially improve promotion performance

endogeneity in brand choice models applications of random utility models to scanner data have been widely presented in marketing for the last 20 years one particular problem with these applications is that they have ignored possible correlations between the independent variables in the deterministic component of utility price promotion etc and the stochastic component or error term in fact marketing mix variables such as price not only affect brand purchasing probabilities but are themselves endogenously set by marketing managers this work tests whether these endogeneity problems are important enough to warrant consideration when estimating random utility models with scanner panel data our results show that not accounting for endogeneity may result in a substantial bias in the parameter estimates

dynamic conversion behavior at e commerce sites this paper develops a model of conversion behavior i e converting store visits into purchases that predicts each customer s probability of purchasing based on an observed history of visits and purchases we offer an individual level probability model that allows for different forms of customer heterogeneity in a very flexible manner specifically we decompose an individual s conversion behavior into two components one for accumulating visit effects and another for purchasing threshold effects each component is allowed to vary across households as well as over time visit effects capture the notion that store visits can play different roles in the purchasing process for example some visits are motivated by planned purchases while others are associated with hedonic browsing akin to window shopping our model is able to accommodate these and several other types of visit purchase relationships in a logical parsimonious manner thepurchasing threshold captures the psychological resistance to online purchasing that may grow or shrink as a customer gains more experience with the purchasing process at a given website we test different versions of the model that vary in the complexity of these two key components and also compare our general framework with popular alternatives such as logistic regression we find that the proposed model offers excellent statistical properties including its performance in a holdout validation sample and also provides useful managerial diagnostics about the patterns underlying online buyer behavior

testing the rational expectations hypothesis in a secondary materials market abstract in the context of a supply demand model for wastepaper in the united states it is demonstrated that the estimated low adjustment rate associated with the hypothesis of adaptive expectations on price changes translates into an almost instantaneous adjustment in terms of price levels further it is shown that the rational expectations hypothesis is an acceptable framework to analyze this market and that using this hypothesis the price elasticity of supply is estimated to be 0 23 which is nearly twice the value obtained using adaptive expectations

optimal inventory policies when ordering prices are random we consider a single item inventory model with deterministic demands at the beginning of each period a random ordering price is received according to a known distribution function a decision must be made as to how much if any of the item to order in each period so as to minimize total expected costs while satisfying all demands we show that in each period a sequence of critical price levels determines the optimal ordering strategy so that it is optimal to satisfy the demands of the next n periods if and only if the random price falls between the nth and the n 1st levels we derive recursive expressions that describe the critical price numbers and demonstrate the relationship of these expressions to minimal expected cost we study finite horizon as well as infinite horizon models and show that the critical number strategy is also average cost optimal

the marriage squeeze interpretation of dowry inflation a comment in a recent paper rao 1993 advanced a marriage squeeze explanation to the secular rise in real dowries so called dowry inflation witnessed in india arguing that the relevant ages with respect to marriage are 10 19 for women and 20 29 for men rao found that the ratio of women to men in those age groups had increased over time moreover this sex ratio was found to have a positive and significant impact on dowry when one controls for differences in traits of brides and grooms the empirical results presented here suggest that rao s findings are not robust using the same data i fail to replicate his main result that is that the sex ratio women 10 19 men 20 29 has a positive impact on dowries moreover rao s specification regressing dowries on differences in spouses traits bride s minus groom s imposes the restriction that attributes influence dowries in a symmetrical fashion ignoring compelling evidence against that assumption i find that regressing dowry on individual traits instead of differences improves the model fit considerably

why dowry payments declined with modernization in europe but are rising in india in contrast to most dowry oriented societies in which payments have declined with modernization those in india have undergone significant inflation over the last five decades this paper explains the difference between these two experiences by focusing on the role played by caste the theoretical model contrasts caste and non caste based societies in the former there exists an inherited component to status caste that is independent of wealth and in the latter wealth is the primary determinant of status modernization is assumed to involve two components increasing average wealth and increasing wealth dispersion within status or caste groups the paper shows that in caste based societies the increases in wealth dispersion that accompany modernization necessarily lead to increases in dowry payments whereas in non caste based societies increased dispersion has no real effect on dowry payments and increasing average wealth causes the payments to decline

manufacturer allowances and retailer pass through rates in a competitive environment a commonly held belief has grocery and mass merchandise retailers gaining power relative to the upstream consumer package goods manufacturers one of the major justifications for this belief is that manufacturers are now giving retailers more side payments such as trade allowances slotting allowances etc however a number of researchers have shown that these concessions have not translated into increased profit for the retailer relative to the manufacturer this paper explores via an analytic model why one might see retailers getting concessions from the manufacturer without being able to translate them into high profits we do this by representing the interaction between the channel members as a one period profit maximizing game where manufacturers decide on how large a side payment i e a concession to give to each retailer and retailers decide on how much of this side payment to use to promote the manufacturer s product at the heart of our model is a demand function for each product offering i e a specific brand sold by a specific retailer this demand function is linear in own and other s prices but based on empirical evidence is assumed to be nonlinear in the effects of merchandising activities e g short term price discounts better shelf space advertising etc specifically merchandising effects are modeled with a square root function that also acknowledges most short term promotional effects result in brand or store switching versus increase category volume the model is composed of six parameters these are the inherent popularity of the brand at a particular outlet own price sensitivity cross but within the store price sensitivity customer s sensitivity to within store promotion activities customer s sensitivity to between store promotional activities and the degree to which promotional activities yield incremental product category sales we use our underlying demand formulation to find the equilibrium solution to the full information stackelberg leader game for different store and brand loyalty environments as captured by our six parameters these parameters are chosen based on empirical evidence to span possible market conditions that each channel member might have our findings and modeling efforts should be of interest to analytic channel modelers and scholars interested in the mass merchandising and grocery store industries for a theoretical point of view we build upon the case 4 model of lee and staelin 1997 to allow for promotional activities from a substantive point of view we show that manufacturers will freely give retailers side payments even though they know these retailers will pocket a substantial portion of this concession moreover we identify conditions within our model that lead to larger allowances lower pass through rates and lower retail profits outcomes that are compatible with recent industry trends in addition we highlight the difference in effect on profits prices etc of changes in consumers sensitivity to inter store differences in storewide merchandising activities one of the more counter intuitive results of these analyses is that it is in the manufacturer s best interest to help retailers increase their spatial monopoly by decreasing consumers tendency to cross store shop because of merchandising activities

on the dynamics of recycling and natural resources we study the dynamic impact of recycling through its effect on the production set of the economy and its relationship with natural resources the contribution of renewable and recyclable resources for sustainability is studied although in the short run recycling may alleviate resource scarcity in the long run it is not enough to compensate for the exhaustibility of non renewable resources and the possibility of obtaining non decreasing output paths crucially depends on the extent to which production rests on renewable resources furthermore recycling interacts with natural resource growth surprisingly not always favoring sustainability the production and recycling function is a generalization of the traditional production function providing an integrated view of regular production and recycling and representing the production set of the economy when a recycling technology is available

analyzing the relationship between organic and sponsored search advertising positive negative or zero interdependence the phenomenon of paid search advertising has now become the most predominant form of online advertising in the marketing world however we have little understanding of the impact of search engine advertising on consumers responses in the presence of organic listings of the same firms in this paper we model and estimate the interrelationship between organic search listings and paid search advertisements we use a unique panel data set based on aggregate consumer response to several hundred keywords over a three month period collected from a major nationwide retailer store chain that advertises on google in particular we focus on understanding whether the presence of organic listings on a search engine is associated with a positive a negative or no effect on the click through rates of paid search advertisements and vice versa for a given firm we first build an integrated model to estimate the relationship between different metrics such as search volume click through rates conversion rates cost per click and keyword ranks a hierarchical bayesian modeling framework is used and the model is estimated using markov chain monte carlo methods our empirical findings suggest that click throughs on organic listings have a positive interdependence with click throughs on paid listings and vice versa we also find that this positive interdependence is asymmetric such that the impact of organic clicks on increases in utility from paid clicks is 3 5 times stronger than the impact of paid clicks on increases in utility from organic clicks using counterfactual experiments we show that on an average this positive interdependence leads to an increase in expected profits for the firm ranging from 4 2 to 6 15 when compared to profits in the absence of this interdependence to further validate our empirical results we also conduct and present the results from a controlled field experiment this experiment shows that total click through rates conversions rates and revenues in the presence of both paid and organic search listings are significantly higher than those in the absence of paid search advertisements the results predicted by the econometric model are also corroborated in this field experiment which suggests a causal interpretation to the positive interdependence between paid and organic search listings given the increased spending on search engine based advertising our analysis provides critical insights to managers in both traditional and internet firms

is 75 of the sales promotion bump due to brand switching no only 33 is abstract several researchers have decomposed sales promotion elasticities based on household scanner panel data a key result is that the majority of the sales promotion elasticity approximately 74 on average is attributed to secondary demand effects brand switching and the remainder is attributed to primary demand effects timing acceleration and quantity increases the authors demonstrate that this result does not imply that if a brand gains 100 units in sales during a promotion the other brands in the category lose 74 units the authors offer a complementary decomposition measure based on unit sales the measure shows the ratio of the current cross brand unit sales loss to the current own brand unit sales gain during promotion the authors report empirical results for this measure they also derive analytical expressions that transform the elasticity decomposition into a decomposition of unit sales effects these expressions show the nature of the difference between the two decompositions to ga

conditionally predictive supply elasticity estimates secondary materials obtained from municipal residuals abstract new capital intensive waste processing plants have been developed that can recover secondary materials and energy from the municipal solid waste stream resulting in lower disposal costs than traditional methods the potential supply of secondary glass ferrous metals aluminum and energy is estimated using an engineering cost model of secondary materials and energy supply under alternative prices for energy and materials econometric estimates of the own and cross price elasticities of supply for the materials and energy are then estimated from the data set significant cross price effects are shown

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

the cross price effect on willingness to pay estimates in open ended contingent valuation abstract previous literature has shown that potential buyers use a reference price or product to form their opinion about the value of a new product therefore the pricing decision is an interactive process we investigate the two generalizations of the cross price effect the neighborhood price effect and the asymmetric price effect on consumer willingness to pay wtp for multiple similar products in an open ended contingent valuation context results show that the cross price effect on wtp is prominent with the neighborhood price effect holding in contingent valuation no conclusions are reached about the asymmetric price effect

garbage recycling and illicit burning or dumping abstract with garbage and recycling as the only two disposal options we confirm prior results that the optimal curbside fee for garbage collection equals the direct resource cost plus external environment cost when illicit burning or dumping is a third disposal option that cannot be taxed directly the optimal curbside tax on garbage changes sign the optimal fee structure is a deposit refund system a tax on all output plus a rebate on proper disposal through either recycling or garbage collection the output tax helps achieve the first best allocation even though it affects the choice between consumption and untaxed leisure

modeling the supply of wastepaper abstract utilizing a price expectations model of wastepaper supplies edwards j environ econ manag 6 332 334 1979 claims to be able to explain certain anomalies in earlier empirical work while reaffirming the view that wastepaper supply is generally price inelastic this paper presents evidence to show that the price expectations model does not offer an adequate explanation of the state of affairs in the u k wastepaper market the low price elasticity of supply findings are however confirmed

consumer demand for fair trade evidence from a multistore field experiment abstract we provide new evidence on consumer demand for ethical products from experiments conducted in a u s grocery store chain we find that sales of the two most popular coffees rose by almost 10 when they carried a fair trade label as compared to a generic placebo label demand for the higher priced coffee remained steady when its price was raised by 8 but demand for the lower priced coffee was elastic a 9 price increase led to a 30 decline in sales while consumers attach value to ethical sourcing there is significant heterogeneity in willingness to pay for it

embedded premium promotion why it works and how to make it more effective in this paper we define an embedded premium ep as an enhancement that involves a social cause added on to a product or service we characterize ep as a sales promotion strategy and juxtapose it with traditional approaches such as discounts and rebates across three experiments using a nationwide internet panel and employing stated measures and model based inference we find that at low denominations ep is more effective than an equivalent price discount we describe how an ep s social association may influence consumer choice quite differently than price promotions and contrary to the asymmetric price promotion effect documented in the promotions literature we find that ep benefits an unknown brand more than a known brand our hierarchical bayes approach uncovers heterogeneity in ep effectiveness that can be explained by affinity toward the focal charity personal motivations and demographic markers an identifiable segment of individuals prefer the other over self suggesting possible ep optimization and segmentation strategies two such strategies customization and coverage are empirically tested and the former is shown to be very effective our findings have broad implications for brand managers with regard to resource allocation and ep program return on investment roi as well as important social welfare implications

intertemporal pricing and consumer stockpiling we study a dynamic pricing problem for a class of products with stable consumption patterns e g household items staple foods consumers may stock up the product at current prices for future consumption but they incur inventory holding costs we model this situation as a dynamic game over an infinite time horizon in each period the seller sets a price and each consumer chooses how many units to buy we develop a solution methodology based on rational expectations by endowing each player with beliefs we decouple the dynamic game into individual dynamic programs for each player we solve for the rational expectations equilibrium where all players make optimal dynamic decisions given correct beliefs about others behavior in equilibrium the seller may either charge a constant fixed price or offer periodic price promotions at predictable time intervals we show that promotions are useful when frequent shoppers are willing to pay more for the product than are occasional shoppers we also develop several model extensions to study the impact of consumer stockpiling on the seller s inventory production and rationing strategies

the rising price of husbands a hedonic analysis of dowry increases in rural india dowries in south asia have steadily risen over the last 40 years and now often amount to over 50 percent of a household s assets this paper attempts to investigate the reasons behind this increase it adapts rosen s implicit market model to the indian marriage market and tests predictions from the model with data from six villages in south central india and from the indian census it is found that a marriage squeeze caused by population growth resulting in larger younger cohorts and hence a surplus of women in the marriage market has played a significant role in the rise in dowries

the rational effect of price promotions on sales and consumption we explore the rational effect of price variation on sales and consumption in markets where consumers are uncertain about the future price of goods we first derive an optimal ordering policy which expresses the amount a consumer should purchase and consume in a given period as a function of the observed price of the good the distribution of future prices and the nature of his or her inventory this policy extends previous normative models of inventory control such as those by golabi 1985 and kalymon 1970 to the case where the amount to consume in a given period is an explicit decision variable and prices follow a first order stochastic process we then use this model to explore how changes in the long run frequency and temporal correlations of price promotions should normatively affect the contemporaneous relationship between purchase consumption and price among the predictions which follow from the model are that consumption should rationally increase with the size of existing inventories the short term sensitivity of sales to prices should be greater than that of consumption to price and this discrepancy increases with decreases in the temporal correlation of price deals and the long term relative frequency of price deals

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

upstream pollution downstream waste disposal and the design of comprehensive environmental policies abstract many policymakers are shifting their focus from media specific pollution problems to product specific life cycle environmental problems in this paper we develop a model of production and consumption that incorporates life cycle externalities and use it to solve for alternative policies to achieve a social optimum in general we find that no single instrument can solve multiple problems contrary to what some observers have suggested however we find that there are alternative ways of reaching the social optimum we also discover that an integrated approach to policy appears to be important no matter what policy options are adopted and finally we find that there is only a limited role for so called product life cycle assessments

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 price elasticity of selective demand a meta analysis of econometric models of sales the author describes a meta analysis of econometric studies that estimated the elasticity of selective sales or market share to price the literature review yielded 367 suitable price elasticities

muslim family law prenuptial agreements and the emergence of dowry in bangladesh we explain trends in dowry levels in bangladesh by drawing attention to an institutional feature of marriage contracts previously ignored in the literature the mehr or traditional islamic brideprice we develop a model of marriage contracts in which mehr serves as a barrier to husbands exiting marriage and a component of dowry as an amount that ex ante compensates the groom for the cost of mehr we investigate how mehr and dowry respond to exogenous changes in the costs of polygamy and divorce and show that our model gives a dierent set of predictions than traditional models we show that major changes in dowry levels took place precisely after the legal changes corresponding to simultaneous changes in levels of mehr

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

a comparison of public policies for lead recycling policies that encourage recycling may be used to reduce environmental costs from waste disposal because direct restrictions on disposal are difficult to enforce four recycling policies have been advanced i taxes on the use of virgin materials ii deposit refund programs iii subsidies to recycled material production and iv recycled content standards in this article i analyze the structure of these policies and their cost effectiveness in achieving reductions in disposal i then examine the policies in the empirical context of the recycling of lead from automobile batteries in order to calculate the effects of recycling programs i estimate the elasticities for primary and secondary lead supply and demand my results suggest that price based policy mechanisms can be successful in increasing lead recovery and that the difference in efficiency between the four approaches is similar

household consumption when the marriage is stable we develop a novel framework to analyze the structural implications of the marriage market for household consumption we de ne a revealed preference characterization of e cient household consumption when the marriage is stable stability means that the marriage matching is individually rational and has no blocking pairs we characterize stable marriage with intrahousehold consumption transfers but without assuming transferable utility we show that our revealed preference characterization generates testable conditions even with a single consumption observation per household and heterogeneous individual preferences across households the characterization also allows for identifying the intrahousehold decision structure including the sharing rule under the same minimalistic assumptions an application to dutch household data demonstrates the usefulness of our theoretical results we nd that the female gets a higher income share when her relative wage increases which we can give a structural interpretation in terms of outside options from marriage that vary with individual wages

natural shocks and marriage markets fluctuations in mehr and dowry in muslim marriages we examine how mehr a conditional payment from husbands to wives in the event of divorce and dowry a transfer from the bride s family to the groom at the time of marriage have fluctuated in bangladesh due to natural shocks we develop a model of the marriage market in which dowry acts as a groom price whereas mehr serves to deter inefficient divorces our comparative statics results show that mehr and dowry are both increasing decreasing in shocks that raise lower income we then exploit several natural experiments in bangladesh including the green revolution in the 1960s war of independence in 1971 and famine of 1974 to explain fluctuations in the value of mehr and dowry observed in muslim marriages using two household survey datasets we find partial support for our theoretical predictions to rule out alternative explanations particularly the effect of legal changes we use household survey data from the indian state of west bengal that experienced a similar increase in agricultural productivity but none of the legal changes affecting bangladesh these results demonstrate that natural shocks may affect social institutions

no return no refund an analysis of deposit refund systems firms and governments in developed economies frequently employ deposit refund systems to promote return and reuse of product packages and containers we analyze a model of monopoly facing heterogeneous consumers in which recycling package return by consumers generates an external benefit it is shown that when consumer s preferences over recycling differ the monopolist can price discriminate between consumers leading to socially suboptimal recycling in the absence of any externalities the analysis can be viewed as a model of couponsor mail in rebateswhich work as price discrimination devices the role of government subsidies and additional deposits to eliminate suboptimal recycling is also analyzed finally the model is extended to incorporate hustling i e allowing consumers to recycle packages discarded by other consumers 2001 elsevier science

a competitive dynamic pricing model when demand is interdependent over time abstract in this study we contribute to the dynamic pricing literature by developing a finite horizon model for two firms offering substitutable and nonperishable products with different quality levels customers can purchase and store the products even if they do not need them at the time in order to use them in future the stockpile of the products generated by customers affects the demand in future periods therefore the demand for each product not only is a function of prices and quality levels but also of the products stockpile levels in addition the stockpile levels change the customers consumption behavior more product in a stockpile leads to more consumption therefore we address not only the price and demand relationship but also the stockpiling and consumption relationship in a competitive environment the decision variable of each firm at the beginning of each period is its unit sale price we use a deterministic dynamic program to calculate the equilibrium prices at the beginning of each period by assuming that the market stockpile is public information we show the existence of a unique nash equilibrium we next consider the case when the firms do not know the market stockpile we then develop appropriate heuristics to calculate the optimal prices in each case a numerical study is also provided to calculate the price levels in different scenarios and compare their performances

the effect of promotion on consumption buying more and consuming it faster the authors empirically demonstrate the existence of flexible consumption rates in packaged goods products how this phenomenon can be modeled and its importance in assessing the effectiveness of

price induced patterns of competition this research focuses on how price changes influence the observed pattern of brand competition the paper begins with a basic utility model formulation and examines the implications of three major classes of preference distributions on the expected patterns of competition a price tier model is proposed to operationalize the theory and to allow predictive testing the price tier model is estimated on 28 brands across four product categories the results show a specific asymmetric pattern of price competition higher price higher quality brands steal share from other brands in the same price quality tier as well as from brands in the tier below however lower price lower quality brands take sales from their own tier and the tier below brands but do not steal significant share from the tiers above the results are consistent with a bimodal preference distribution with the regular price indifference point being located toward the lower quality end of the preference distribution for the categories analyzed

the relationship between market characteristics and promotional price elasticities many empirical studies in marketing and economics have estimated brand price elasticities for specific products in markets their results indicate that price elasticities seem to differ across brands product categories retail outlets and regions however there has been very little research which examines the factors associated with these observed differences this paper focuses on the promotional price elasticities of established major brands in stable categories it identifies some characteristics of markets which may be associated with differences in price elasticities for frequently purchased nondurables a cross sectional model of the effect of these market characteristics on price elasticities is developed and estimated utilizing own price elasticity estimates for brands at twelve stores the results indicate market characteristics such as brand market share couponing activity display activity and feature activity explain a substantial amount of the variation in promotional price elasticities

product design and efficient management of recycling and waste treatment abstract using a general equilibrium model where material is first extracted then used for producing a consumption good recycled and finally treated to reduce environmental damage we study efficiency restoring policies when one or more of the constituent markets are inactive the material is modeled as being embodied in the output and forms an important aspect of green product design if all markets for embodied material per unit output fail and if recycling benefit exceeds environmental damage the policy instruments needed for green design are a tax on the consumption good supply and a subsidy on the demand for material input

competing premarital investments this paper studies premarital parental investments in children s wealth where spousal wealth is a public good in marriage by investing in their children s wealth parents increase the wealth of their children and the quality of the spouses that their children can marry in large marriage markets the hedonic return to investment internalizes all the external benefits of premarital investment in wealth so that the competitive equilibrium is efficient marriage market competition also increases investments in small marriage markets relative to no competition but equilibrium investments are not efficient

dowry and intrahousehold bargaining evidence from china this paper analyzes the relationship between a woman s intrahousehold bargaining position and her welfare within marriage using household data from rural china simultaneity problems are overcome by using dowry to proxy for bargaining position omitted variable bias is addressed by using grain shocks in the year preceding marriage as an instrument for dowry instrumented dowry positively impacts numerous measures of a wife s welfare including household purchases the time allocation of household members and the woman s satisfaction with life offering strong evidence in support of collective models of the household

a decision support system for planning manufacturers sales promotion calendars a common event in the consumer packaged goods industry is the negotiation between a manufacturer and a retailer ofthe sales promotion calendar determining the promotion calendar involves a large number of decisions regarding levels of temporary price reductions feature ads and in store displays each executed at the level of individual retail accounts and brand skus over several months or a year though manufacturers spend much of their marketing budget on trade promotions they lack decision support systems to address the complexity and dynamics of promotion planning previous research has produced insights into how to evaluate the effectiveness of promotional events but has not addressed the planning problem in a dynamic environment this paper develops a disaggregate level econometric model to capture the dynamics and heterogeneity of consumer response by modeling the purchase incidence timing choice and quantity decisions of consumers we decompose total sales into incremental and nonincremental baseline plus borrowed the response model forms the basis of a market simulator that permits us to search for the manufacturer s optimal promotion calendar subject to a set of constraints some of them imposed by the retailer via the simulated annealing algorithm calendar profits are the net result of the contribution from incremental sales minus the opportunity cost from giving away discounts to nonincremental sales and the fixed costs associated with implementing promotional events e g retagging features displays incremental sales result from promotion induced switching the acceleration and quantity promotion effects on those switchers increased consumption and the carryover effect from purchase event feedback we applied our approach to the promotion planning problem of a large consumer packaged goods company in a nonperishable staple product category suggested by company executives canned tomato sauce subject to a retailer pass through constant rate of 80 provided to us by the collaborating firm the optimal promotion calendar produced by the modeling system followed a pattern of frequent and shallow temporary price reductions with no feature or display activity we also analyze how that result would change under different retailer pass through scenarios our findings indicated that the manufacturer could substantially improve the profitability of its sales promotion activity and that there would be a concurrent positive effect on retailer profit and volume levels management reported to us that the insights from the use of the system were implemented in their promotion planning process and produced positive results a validation analysis on follow up data for one market showed that promotion activity could be significantly reduced as recommended with no adverse effect on the brand s market share as predicted to generalize the model beyond the specific category where it was implemented we conducted a sensitivity analysis on the profile of the calendar i e frequency depth and duration of deals with respect to changes in market response competitive activity and retailer pass through first we found that the optimal depth frequency and timing of discounts is stable for price elasticities ranging from near zero to around four in absolute magnitude we also found no systematic impact of competitive promotions on the profile of the optimal calendar for example variation in competitive activity did not affect the optimal depth or frequency of discounts lastly we found changes in retailer pass through to have a significant effect on the optimal depth and number of weeks of trade promotion that a manufacturer should offer this emphasizes the importance to manufacturers of having accurate estimates of pass through for purposes of promotion budgeting and planning

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

a hierarchical bayes error correction model to explain dynamic effects of price changes abstract the authors put forth a sales response model to explain the differences in immediate and dynamic effects of promotional prices and regular prices on sales the model consists of a vector autoregression that is rewritten in error correction format which allows the authors to disentangle the immediate effects from the dynamic effects in a second level of the model the immediate price elasticities the cumulative promotional price elasticity and the long term regular price elasticity are correlated with various brand specific and category specific characteristics the model is applied to seven years of data on weekly sales of 100 different brands in 25 product categories the authors find many significant moderating effects on the elasticity of price promotions brands in categories that are characterized by high price differentiation and that constitute a lower share of budget are less sensitive to price discounts deep price discounts increase the immediate price sensitivity of customers the

greenhouse gas emissions waste and recycling policy abstract this paper examines least cost policies for waste reduction incorporating upstream greenhouse gas externalities associated with the production of consumption goods from various materials in particular we decompose the effect of deposit refund advance disposal fees and recycling subsidies on upstream greenhouse gas emissions we find that the benefits of reducing greenhouse gas emissions are of the same order as or larger than the benefits of reducing solid waste disposal implying larger optimal total waste reduction than previous studies furthermore the least cost intervention levels will be material specific and vary substantially across materials finally despite the reductions in emissions implied by increased recycling rates direct recycling subsidies are more costly and generate less emissions reductions than a deposit refund or advance disposal fee

comparing environmental markets with standards this paper argues that the traditional approach to comparing environmental markets and standards can be enhanced in two ways the first is by providing a more realistic assessment of the impact of various uncertainties on policy outcomes the second is by providing a more realistic assessment of the political constraints that limit the range of feasible policies the analysis examines how the introduction of these enhancements could affect instrument choice comparisons

revenue management through dynamic cross selling in e commerce retailing we consider the problem of dynamically cross selling products e g books or services e g travel reservations in the e commerce setting in particular we look at a company that faces a stream of stochastic customer arrivals and may offer each customer a choice between the requested product and a package containing the requested product as well as another product what we call a packaging complement given consumer preferences and product inventories we analyze two issues 1 how to select packaging complements and 2 how to price product packages to maximize profits we formulate the cross selling problem as a stochastic dynamic program blended with combinatorial optimization we demonstrate the state dependent and dynamic nature of the optimal package selection problem and derive the structural properties of the dynamic pricing problem in particular we focus on two practical business settings with the emergency replenishment model and without the lost sales model the possibility of inventory replenishment in the case of a product stockout for the emergency replenishment model we establish that the problem is separable in the initial inventory of all products and hence the dimensionality of the dynamic program can be significantly reduced for both models we suggest several packaging pricing heuristics and test their effectiveness numerically

an empirical analysis of the relationship between brand loyalty and consumer price elasticity this empirical paper explores the relationship between consumer brand preference or loyalty and price elasticity in purchase behavior this behavior is conceptualized as resulting from two distinct but related decisions namely a brand choice decision and a purchase quantity decision we argue that loyal consumers will be less price sensitive in the choice decision than nonloyal consumers however this direction is expected to be reversed in the quantity decision with loyal consumers expected to be more price sensitive than nonloyal consumers we model the choice and quantity decisions jointly using the limited dependent variable framework described in krishnamurthi and raj the data used are diary panel data on a frequently purchased product class from burke and caffeinated ground coffee scanner data from iri we show that loyals are less price sensitive than nonloyals in the choice decision but more price sensitive in the quantity decision managerial implications of the differing elasticities are disc

empirical evidence on the role of non linear wholesale pricing and vertical restraints on cost pass through abstract how a cost shock is passed through to final consumer prices may relate to nominal price stickiness and rigidities the existence of nonadjustable cost components strategic markup adjustments or other contract terms along the supply distribution chain this paper presents a simple framework to assess the potential role of nonlinear pricing contracts and vertical restraints such as resale price maintenance or wholesale price discrimination in the supply chain in explaining the degree of pass through from upstream cost shocks in the ground coffee category to downstream retail prices we find that resale price maintenance increases pass through rate

rational shopping behavior and the option value of variable pricing when a product s price fluctuates at a store how should rational cost minimizing shoppers shop for it specifically how frequently should they visit the store and how much of the product should they buy when they get there would this rational shopping behavior differ across every day low price edlp and promotional pricing hilo stores if shoppers are rational which retail price format is more profitable edlp or hilo to answer these questions we develop a normative model that shows how rational customers should shop when the price of the product is random we derive a closed form expression for the optimal purchasing policy and show that the optimal quantity to purchase under a given price scenario is linearly decreasing in the difference between the price under that scenario and the average price this purchase flexibility due to price variability has a direct impact on shopping frequency indeed the benefit of this purchase flexibility can be captured via an option value that implicitly reduces the fixed cost associated with each shopping trip consequently rational shoppers should shop more often and buy fewer units per trip when they face higher price variability our results suggest that if two stores charge the same average price for a product rational shoppers incur a lower level of expenditure at the store with a higher price variability since stores with different price variabilities coexist in practice we expect stores with higher price variability to charge a higher average price thus given two stores a higher relative mean price for a given item should be indicative of higher price variability and vice versa these model implications are tested using multicategory scanner panel data from 513 households and pricing data for three stores two edlp stores and one hilo store and 33 product categories over a two year period we find strong empirical support for the model implications

intertemporal substitution and storable products storable products allow consumers to time their purchases to exploit price fluctuations it has been documented that during promotions consumers buy more the additional purchases are potentially intended not only for current use but to be stockpiled for future consumption this paper discusses the predictions of a consumer inventory model and reviews the available evidence we then discuss the implications for demand estimation and present estimates of jel lo l4 dl d4 the economic magnitude of the dynamic effect of storability jel lo l4 dl d4 jel lo l4 dl d4

examining demand elasticities in hanemann s framework a theoretical and empirical analysis this paper examines demand elasticities using an integrated framework proposed by hanemann hanemann m w 1984 discrete continuous models of consumer demand econometrica52 3 541 561 which models the incidence brand choice and quantity decisions of a consumer as an outcome of her utility maximization subject to budget constraints although the hanemann framework has been the mainstay of earlier efforts to examine these decisions jointly empirical researchers who have used the it to study purchase behavior have often found that the quantity elasticities are around 1 regardless of the brand or category we attempt to uncover the underlying reasons for this finding and propose approaches to get as close to the true quantity elasticities as possible we do this by i analytically demonstrating how assumptions on the distribution of the brand specific econometrician s errors imply certain restrictions that in turn force quantity elasticities to 1 ii discussing how these restrictions can be alleviated by considering a suitable specification of unobserved parameter heterogeneity and iii using scanner data to empirically illustrate the impact of the restrictions on quantity elasticities and the relative efficacy of multiple specifications of unobserved heterogeneity in easing those restrictions we find that the specification of unobserved heterogeneity crucially influences estimates of quantity elasticities and that the mixture normal specification outperforms the alternatives

empirical generalizations and marketing science a personal view marketing has matured to the point where it seems desirable to take stock of where we are what we have learned and fruitful directions for extending the knowledge base that has developed science is a process involving the interaction between empirical generalizations and theory an empirical generalization is a pattern or regularity that repeats over different circumstances and that can be described simply by mathematical graphic or symbolic methods one of the purposes of the empirical generalizations conference held at wharton on february 16 18 1994 was to develop a list of examples of such empirical generalizations in marketing empirical generalization can precede a theory to explain it or it can be predicted by a theory science is the process of interaction between theory and data that leads to higher level theories examples are provided here of empirical generalizations in marketing and their theoretical counterparts one example is provided of a higher level theory

estimating monopoly behavior with competitive recycling an application to alcoa this article develops a structural model of the aluminum industry during the period between world war i and world war ii it takes into account both the intertemporal nature of alcoa s cost minimization problem and the competitive recycling sector the model enables estimation of alcoa s degree of market power while allowing for the effect of competition from recycled aluminum previous work has emphasized alcoa s control over the size of the secondary sector in the long run as a source of market power for alcoa the results here indicate that alcoa could exert little influence in this regard but nonetheless had substantial market power

a simultaneous approach to the whether what and how much to buy questions consumer s purchase decisions of whether to buy what to buy and how much to buy are examined simultaneously based on a consumer utility maximization problem an unobservable threshold price about which a consumer pivots from nonpurchase to purchase can be deduced with any model specification the interrelationships between purchase decisions can be explicitly derived the model is applied to coffee purchasing data in addition by suppressing the nonpurchase options the model is compared with an alternative approach appearing in the marketing literature

dowry and wife s welfare a theotrical and empirical analysis becker attributes the existence of marital transfers to inflexibility in the division of joint product within the marriage if that were the only reason we would not have observed the coexistence of dowries and bride prices this paper offers an alternative analysis while becker s interpretation is retained for bride prices a dowry is now represented as a premortem bequest by altruistic parents for a daughter it not only increases the wealth of the new conjugal household but also enhances the bargaining power of the bride in the allocation of the output within the household thereby safeguarding here welfare using micro data from taiwan we found that a dowry improves the bride s welfare whereas a bride price has no effect these empirical results support the theoretical predictions of the model

the impact of a product harm crisis on marketing effectiveness product harm crises are among a firm s worst nightmares a firm may experience i a loss in baseline sales ii a reduced own effectiveness for its marketing instruments iii an increased cross sensitivity to rival firms marketing mix activities and iv a decreased cross impact of its marketing mix instruments on the sales of competing unaffected brands we find that this quadruple jeopardy materialized in a case study of an australian product harm crisis faced by kraft peanut butter we arrive at this conclusion by using a time varying error correction model that quantifies the consequences of this crisis on base sales and on own and cross brand short and long term effectiveness the proposed modeling approach allows managers to make more informed decisions on how to regain the brands pre crisis performance levels

commercial use of upc scanner data industry and academic perspectives the authors report the findings from an exploratory investigation of the use of upc scanner data in the consumer packaged goods industry in the u s the study examines the practitioner community s view of the use of scanner data and compares these views with academic research forty one executives from ten data suppliers packaged goods manufacturers and consulting firms participated in wide ranging in person interviews conducted by the authors the interviews sought to uncover key questions practitioners would like to answer with scanner data how scanner data is applied to these questions and the industry s perspective regarding the success that the use of scanner data has had in each area the authors then compare and contrast practitioners views regarding the resolution of each issue with academic research this produces a 2 2 classification of each question as resolved or unresolved from the perspectives of industry and academia along the diagonal of the 2 2 issues viewed as unresolved by both groups are important topics for future research issues deemed resolved by both groups are correspondingly of lower priority in the off diagonal cells industry and academics disagree these topics should be given priority for discussion information exchange and possible further research practitioners reported that scanner data analysis has had the most success and been most widely adopted for decision making in consumer promotions i e coupons trade promotions and pricing for example logit and regression models applied to scanner data have revealed very low average consumer response to coupons which has directly led to reduced couponing activity managers also reported high levels of comfort with and impact from analyses of trade promotions and price elasticities while industry views most of the issues in these areas to be resolved academic research raises concerns about a number of practices in common commercial use these include price threshold analysis and trade promotion evaluation using baseline and incremental sales in product strategy advertising and distribution management practitioners reported that the use of scanner data has had more limited development success and impact in the case of new product decisions scanner data use has been slow to develop due to the inherent limitations of historicaldata for these decisions and a heavy reliance on traditional primary research methods in advertising scanner data is widely analyzed with models but confusion among practitioners is very high due to controversies about methods e g what level of data aggregation is best and conflicting results in distribution and retail management scanner data use has tremendous potential but a mixed track record to date thus practitioners view the use of scanner data as unresolved for most issues in product strategy advertising and distribution this view is largely though not entirely consistent with academic research which has only begun to address many of the key questions raised by practitioners in light of the large number of unresolved issues and mixed record of scanner data use to date the authors offer aseries of specific recommendations for immediate and long term research priorities that are likely to have the greatest impact on commercial utilization of upc scanner data topics of immediate priority include price thresholds and gaps baseline and incremental sales base price elasticity competitive reactions measurement of advertising effects management of brand equity rationalization of product assortments and category management long term priorities include a greater emphasis on profitability versus sales or market share developing prescriptive models versus descriptive models and the need for industry standards

investigating purchase incidence brand choice and purchase quantity decisions of households we develop a comprehensive utility maximizing framework to study the impact of marketing variables on the category purchase brand choice and purchase quantity decisions of households for frequently purchased packaged goods the model allows for dependence among the three decisions while ensuring that these decisions provide in combination the greatest possible utility to the household by accounting for variations in reservation prices and intrinsic brand preferences across households the modeling framework explicitly captures the effects of unobserved heterogeneity on all three purchase decisions the principal empirical finding from analyzing the a c nielsen data for the yogurt product category is that the substantive implications for the effects of marketing variables are sensitive to whether these effects are determined conditional or unconditional on a product category purchase our results show that reservation prices and intrinsic brand preferences vary across households and not accounting for these variations in the estimation could lead to biased estimates for the coefficients of the marketing variables a comparison of our results to those obtained from a nested logit model of purchase incidence and brand choice reveals that our proposed model performs better using both a formal statistical test as well as the criterion of predictive validity in a holdout sample of panelists further the purchase quantity model compares favorably with two alternative models of quantity choice in the validation sample

can downstream waste disposal policies encourage upstream design for environment design for environment takes place when firms explicitly incorporate environmental issues in their product design and manufacturing decisions joseph fiksel 1996 to reduce waste associated with consumer products for example firms can reduce product weight including the amount of packaging that comes with a product and make products easier and less costly to recycle the latter can be accomplished by changing the type of material used in a product avoiding mixing of materials in a single product coding and labeling when different materials are used and designing for ease of disassembly u s congress office of technology assessment 1992 fiksel 1996 an important debate centers around the question of whether design for environment dfe needs to be explicitly targeted using policy instruments focused upstream on producers or whether downstream instruments send sufficient signals back upstream one important downstream instrument is a disposal fee i e charging households a price per pound per bag or per can for their trash many observers feel that downstream instruments do not send appropriate signals back upstream some economists and others have suggested on the other hand that disposal fees can in theory send signals upstream to producers karen palmer and walls 1998 we find that disposal fees provide incentives for efficient dfe only when there is a fully functioning recycling market i e only when recyclers pay households a price for each of their recyclable items and that price varies with the degree of product recyclability in the real world transactions costs of paying households for each individual item recycled would be prohibitively high in a more realistic setting in which households may place some items in a recycling bin but are not paid for doing so a disposal fee by itself will not yield a social optimum it encourages households to place items in the bin but all items allowed in the bin are of equal value to the household i e there is no reason to prefer an easily recyclable aluminum can to a difficult to recycle plastic milk jug this means that there is no signal to producers to make products more recyclable if the government can set product taxes that vary with product recyclability the social optimum can be restored but this option is not practicable 2 we argue that the infeasibility of i paying households for recycling and ii taxing products according to their recyclability means that a first best outcome is no longer attainable instead we set up a constrained second best optimum and solve for policy instruments that achieve this outcome we find that a disposal school of economics and finance victoria university of wellington wellington new zealand walls is also a university fellow with resources for the future washington dc the helpful comments of karen palmer don fullerton and hilary sigman are greatlv appreciated 1 manufacturer take back requirements such as germany s well known packaging take back law were developed at least in part as a way to encourage dfe see www oecd org env epr index htm for updates from a series of oecd workshops held in 1997 1999 on the broader topic of extended producer responsibility in practice individual german producers do not actually take back their own products at end of life they have formed a consortium that arranges to collect members waste from households marked with a green dot and recycle it we do not address take back mandates in this paper 2 in calcott and walls 1999 we derive these taxes don fullerton and wenbo wu 1998 show that a direct subsidy to recyclability combined with other instruments can yield a social optimum this subsidy depends on production function parameters thus if firms differ the subsidy would vary across firms more i mportantly observing and measuring recyclability to determine subsidy payments would be virtually impossible

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

practice prize winner pricing digital content product lines a model and application for the national academies press we examine the problem of how a content provider specifically the national academies press nap can optimally price the different forms of its product print and pdf that it sells online whereas products in the traditional product line generally tend to be substitutes the different content product forms could range from being substitutes to being complements across customers thus the content provider can possibly sell bundles of the product forms leading to additional revenue we first discuss nap s decision context and describe the model we proposed for developing nap s optimal pricing policies for its different forms we describe the choice experiment we conducted on the publisher s website that maximally uses the online interface to collect relevant data needed to estimate our model we show how nap embraced the results from the model for developing a new business model and how it used the insights derived from the study to set pricing policies and monitor sales performance as a function of pricing finally we perform validation of the model and the implemented policies using dynamic modeling of sales data from nap s website the paper illustrates how e commerce technologies can lead to the development of optimal policies using marketing models

empowerment and efficiency tenancy reform in west bengal the paper analyzes the effect of agricultural tenancy laws offering security of tenure to tenants and regulating the share of output that is paid as rent on farm productivity theoretically the net impact of tenancy reform is shown to be a combination of two effects a bargaining power effect and a security of tenure effect analysis of evidence on how contracts and productivity changed after a tenancy reform program was implemented in the indian state of west bengal in the late 1970s suggests that tenancy reform had a positive effect on agricultural productivity there

the economics of dowry and brideprice payments between families at the time of marriage existed during the history of most developed countries and are currently pervasive in many areas of the developing world these payments can be substantial enough to affect the welfare of women and a society s distribution of wealth recent estimates document transfers per marriage amounting to six times the annual household income in south asia rao 1993 and four times in sub saharan africa dekker and hoogeveen 2002 this paper first establishes some basic facts about the prevalence and magnitude of marriage payments it then discusses how such patterns vary across countries depending upon economic conditions societal structures institutions and family characteristics such payments have also evolved within societies over time for example in some periods such payments have risen sharply in some cases payments have shifted from the grooms sides to the brides and vice versa also property rights over such payments have sometimes shifted between marrying partners and parental generations economists who have only recently begun to work on the topic have focused on explaining these facts the second part of the paper addresses this economic literature though considerable insight into many of the facts has been gained many of the existing economic explanations are weakly convincing and many puzzles remain one crucial difficulty is that solid data in this field have been extremely rare the descriptions of marriage payments in this paper are synthesized from a patchwork of studies across periods places and even epochs and there are doubtless numerous cases which remain undocumented thus the paper

property rights over marital transfers in developing countries the extent to which women possess property rights is shaped in large part by transfers received at the time of marriage focusing on dowry we develop a simple model of the marriage market with intra household bargaining in order to understand the incentives for brides parents to allocate the rights over the dowry between their daughter and her groom in doing so we clarify and formalize the dual role of dowry as a pre mortem bequest and as a market clearing price identified in the literature we use the model to shed light on the intriguing observation that in contrast to other rights women s rights over the dowry tend to deteriorate with development we show how marriage payments are utilized even when they are inefficient and how the marriage market mitigates changes in other dimensions of women s rights even to the point where women are worse off following a strengthening of such rights we also generate predictions for when marital transfers will disappear and highlight the importance of female human capital for the welfare of women

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

optimal policies for solid waste disposal taxes subsidies and standards abstract pricing trash collection and disposal services can be politically unpopular and may lead to increased illegal disposal of trash several studies have shown that deposit refund systems can act like disposal charges without the illegal disposal problem and thus can generate an optimal amount of solid waste disposal we assess the efficiency implications of an alternative policy currently in use in some states in the u s and considered at the federal level recycled content standards these are requirements that a certain fraction of total material use in production be comprised of secondary materials we find that such standards by themselves cannot generate the optimal amount of disposal but must be combined with additional taxes on both the final product and other inputs to production moreover the information requirements for setting the optimal standards and accompanying taxes are high the deposit refund approach would be preferred in most cases

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

a segment level hazard approach to studying household purchase timing decisions the increasing availability of customer level data and the willingness of marketers to customize the timing of their offers to consumers makes the accurate segment level description of household purchase timing decisions a compelling issue in this paper we employ a finite mixture accelerated failure time model to identify and characterize household segments in terms of their purchasing rates and their propensity to accelerate purchases due to marketing mix activities such an approach also promises to alleviate possible aggregation problems arising from the use of a common hazard rate for all households an application to household panel data suggested that infrequent buyers show higher propensity to accelerate than frequent buyers do and that positive duration effects are underestimated when not accounting for segment specific hazard rates copyright 2002 john wiley sons ltd