product and price competition in a duopoly this paper examines the role of consumer preferences costs and price competition in determining the competitive product strategy of a firm in the model studied here there are two identical firms competing on product quality and price they face consumers who prefer a higher quality product to a lower quality product but differ in how much they are willing to pay for quality the consumers can also choose a substitute if they don t like the product price offerings of the two firms for the firms a higher quality product costs more to produce than a lower quality product the paper shows that the equilibrium strategy for each firm should be to differentiate its product from its competitor with the firm choosing the higher quality choosing the higher margin as well this differentiation however is not efficient that is it is possible to choose two other products and offer them at prices that cover their marginal cost and still satisfy consumers needs better in the aggregate a monopolist by contrast would differentiate his product line efficiently this suggests that cannibalization has different effects on product strategy than competition the paper also shows that if one firm enters the market first then it can defend itself from later entrants and gain a first mover advantage by preempting the most desirable product position

product introduction decisions in a duopoly abstract in this paper we model a dynamic environment with two firms that fight for share of industry sales and profit in a market with constant size they capture share by repeatedly introducing new products price changes from period to period reflecting each firm s learning we formulate the problem as a repeated game where each player s decision at each period is to introduce a new product we find that in general each firm s frequency of product introductions clockspeed in equilibrium decreases as its fixed product introduction cost increases further we find that a higher rate of manufacturing learning results in a higher clockspeed and in a higher market share and also results in significantly worse profits for the competitor the results underscore the importance of manufacturing expertise in a firm s ability to introduce new products

minimum market share this paper analyzes a specific model of oligopolistic competition involving product differentiation marketing activities and economies of scale in production this model is consistent with sales response models which have been justified on theoretical and empirical bases it is shown that at a nash equilibrium each firm must have market share equal to zero or greater than a threshold value this result has implications for determination of minimum firm size the effectiveness of a low market share strategy entry barriers and the likelihood of concentration in an industry the paper explores these implications and relates them to various theories and hypotheses in industrial organization and strategic planning

invariance in growth theory and sustainable development abstract this paper analyzes the general concept of sustainability from a different point of view than that generally found in the literature if sustainability is defined as the requirement to keep something constant or at least non decreasing throughout time the choice of the thing to be preserved is controversial neo classical models mainly assume that sustainability requires that consumption or a utility level has to be preserved in this paper we object to this a priori conception of sustainability and define all the quantities that can be preserved in neo classical optimal growth models we thus wonder if invariant quantities can be found along the optimal paths defined by a classical representation of an economy with an exhaustible resource we use the noether theorem to determine the conservation laws of dynamic systems we examine under which conditions there is such invariance and how it could be interpreted as a sustainability indicator we emphasize the limits of the economic growth theory for coping with the sustainability issue

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

equilibrium characteristics of multinomial logit market share models previous research suggests that a multinomial logit model of market share can be used in optimization or equilibrium analyses of marketing decision making however there are significant problems w

multinomial logit market share models equilibrium characteristics and strategic implications we specify and analyze the conditions under which the mnl market share models are appropriate for equilibrium analysis our results show that a linear price response function as is often used in empirical research in conjunction with the typical concavity assumed in a large range of marketing response functions would yield an interior equilibrium solution we then consider the optimal reactions on pricing and marketing spending to entry and potential market expansion in the context of the mnl models we demonstrate that the entry of a new brand evokes a decrease in the equilibrium prices of the existing brands as a defensive reaction this is true in both an expanding market as well as a fixed market however while new entry into a fixed market would trigger the incumbents to lower the marketing expenditure we show that firms tend to raise marketing activities as they experience market expansion consequently there exist distinct possibilities that marketing efforts for the existing brands increase in view of entry in an expanding market further managerial and marketing implications for endogeneity of the number of firms are explored

the reasonableness of non constant discounting abstract the typical method for valuing the future goods and harms of a public policy alternative is by means of a constant annual discount rate this paper examines the reasonableness for public policy analysis of non constant discounting methods that unlike constant discounting can accord considerable importance to outcomes in the distant future we examine temporal consistency and economic efficiency as reasons for the use of constant discounting and we argue that these reasons do not apply for a public policy choice whose effects are long range and irreversible

on the effects of consumer search and firm entry in a multiproduct competitive market this paper studies a model in which consumers search among multiple competing firms for products that match their preferences at a reasonable price we focus on how easier search possibly due to the adoption of search facilitating technologies such as the internet influences equilibrium prices assortments firm profits and consumer welfare conventional wisdom suggests that easier search creates a competition intensifying effect that puts pressure on firms to lower their prices and reduce assortments however in our model we demonstrate that search also exhibits a market expansion effect that encourages firms to expand their assortment easier search means that each firm is searched by more consumers because of broader assortments consumers are more likely to find products that better match their ideal preferences improving the efficiency of the market in fact we demonstrate that the market expansion effect can even dominate the competition intensifying effect potentially leading to higher prices broader assortments more profits and expanded welfare

stochastic asymmetric blotto games an experimental study we consider a model where two players compete for n items having different common values in a blotto game players must decide how to allocate their common budgets across all n items the winner of each item is determined stochastically using a lottery mechanism which yields a unique equilibrium in pure strategies we analyze behavior under two competing payoff objectives found in the blotto games literature that have not been previously compared i players aim to maximize their total expected payoff and ii players maximize the probability of winning a majority value of all n items we report results from an experiment where subjects face both payoff objectives and we find support for the differing theoretical predictions

competitive maps the structure underlying asymmetric cross elasticities a special case of three mode factor analysis is used to portray the systematic structure underlying asymmetric cross elasticities for a broad class of market share attraction models analysis of the variation over retail outlets and weeks reveals competitive patterns corresponding to sales for the major brands in the market as well as patterns reflecting shelf price competition analysis of the brand domain results in a joint space one set of brand positions portrays how brands exert influence over the competition the other set of points portrays how brands are influenced by others the interset distances angles provide direct measures of competitive pressures maps are formed as spatial representations of each of the competitive patterns discovered

time preference the discounted utility model and health the constant rate discounted utility model is commonly used to represent intertemporal preferences in health care program evaluations this paper examines the appropriateness of this model and argues that the model fails both normatively and descriptively as a representation of individual intertemporal preferences for health outcomes variable rate discounted utility models are more flexible but still require restrictive assumptions and may lead to dynamically inconsistent behaviour the paper concludes by considering two ways of incorporating individual intertemporal preferences in health care program evaluations that allow for complementarity of health outcomes in different time periods

assessing the influence of campaign expenditures on voting behavior with a comprehensive electoral market model this paper extends previous single equation econometric modeling efforts of the sales advertising relationship in elections operating within the perspective of the general demand context of voting behavior it develops a comprehensive electoral market model that takes account of potential simultaneous relationships among votes cast campaign expenditures and voting participation turnout the model is estimated using 3sls techniques with aggregate electoral district data from each of eight canadian provincial elections the model appears to yield consistent and therefore generalizable empirical results across the eight election events chief among the empirical results is the expected relationship between campaign efforts and voting behavior own communications efforts as proxied by campaign expenditures have a positive impact on votes received while competitive communications efforts draw votes away from a candidate

election goals and the allocation of campaign resources this paper compares the equilibrium behavior and outcomes in a model of two party competition for legislative seats under two different assumptions about the parties goals 1 parties maximize the expected number of seats won and 2 parties maximize the probability of winning a majority of the seats the two goals may lead to qualitatively different behavior and studying the differences yields insights into the relationship between the goals and the role of assymetries between the parties

the innovative behavior of spanish enterprises and its impact on salaries our aim was to analyze the effects of firms innovative behavior on their employees salaries in the spanish manufacturing industry we found a premium in the wage paid by innovative firms regardless of size however when taking company size into account we found that the effect of innovations was greater in small medium enterprises sme contrary to what was expected the inferences of the models estimated suggest that the higher the market concentration the weaker the appropriability regime especially for smes however at the same time a firm s innovations reduce the impact of market concentration on wages making innovating firms more autonomous than non innovating ones even more to be able to innovate firms have to isolate their employees salaries from the product market these results hold regardless of firm s size but have a greater impact on the small medium group of firms finally our analysis backs the assumption that salaries in both large and small medium firms are generated by two distinct economic regimes supporting the proposition that an sme is not simply a scaled down large firm

contests with limited resources abstract many interesting phenomena electoral competition r d races lobbying are instances of multiple simultaneous contests with unconditional commitment of limited resources specifically the following game is analyzed two players compete in a number of simultaneous contests the players have limited resources budgets and must decide how to allocate these to the different contests in each contest the player who expends more resources than his adversary wins a corresponding prize mixed strategy equilibria are characterized in the case of identical values and budgets and the connections with the classical blotto game are analyzed

the structure of equilibria in market share attraction models a market share attraction model of competitive effort allocation by two firms is formulated as a constant sum two person game the dependence of optimal competitive effort allocations on factors such as gross profit margins relative effectiveness of effort and attraction elasticity of effort is studied two versions of the model are developed in the first version effort budgets of both competitors are exogenously fixed in the second the competitors each choose both budget levels and allocations in each version of the model an important function of the parameters called the competitive advantage ratio indicates when it is optimal to either increase or decrease effort allocated in a market in response to changes in various measures of effectiveness implications of differences in the cost associated with each competitor s budget on equilibrium allocations are derived

attraction versus linear and multiplicative market share models an empirical evaluation linear and multiplicative market share models are compared with the attraction specification on the basis of both predictive and descriptive measures the data used represent 15 brands in three dif

primaries and the new hampshire effect candidates for u s presidential elections are determined through sequential elections in single states the primaries we develop a model in which candidates can influence their winning probability in electoral districts by spending money on campaigning the equilibrium replicates several stylized facts very well campaigning is very intensive in the first district the outcome of the first election then creates an asymmetry in the candidates incentives to campaign in the next district which endogenously increases the equilibrium probability that the first winner wins in further districts on the normative side our model oers a possible explanation for the sequential organization it leads in expectation to a lower level of advertising expenditures than simultaneous elections moreover if one of the candidates is the more eective campaigner sequential elections also perform better with regard to the selection of the best candidate

anomalies in intertemporal choice evidence and an interpretation research on decision making under uncertainly has been strongly influenced by the documentation of numerous expected utility eu anomalies behaviors that violate the expected utility axioms the relative lack of progress on the closely related topic of intertemporal choice is partly due to the absence of an analogous set of discounted utility du anomalies we enumerate a set of du anomalies analogous to the eu anomalies and propose a model that accounts for the anomalies as well as other intertemporal choice phenomena incompatible with du we discuss implications for savings behavior estimation of discount rates and choice framing effects

an ex ante view of household portfolio choice the role of expected capital gains this paper highlights an issue not previously addressed in portfolio balance modelling the impact of assetspecific expected capital gains on the composition of the household wealth portfolio we extend the brainard tobin portfolio choice model to incorporate the distinction between expected and unexpected capital gains and estimate two versions of the model while our specification is more appealing on a theoretical basis we were unable to distinguish clearly between the ex ante and ex post models given currently available data

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

stochastic asymmetric blotto games some new results stochastic asymmetric blotto games some new results john duffy abstract blotto games alexander matros we develop some new theoretical results for stochastic asymmetric keywords colonel blotto game contests resource allocation lotteries jel classification nos c72 c73 d72 d74 1 introduction the colonel blotto game borel 1921 is a two player non cooperative game in which players decide how to allocate their given resources across battlefields in borel s original version of this game the player who allocates the most resources to any given battlefield wins that battlefield with certainty the players objective function is either to maximize the sum of the value of the battlefields won or to win a majority value of the battlefields in this paper we study stochastic asymmetric versions of the blotto game under both of these objective functions in an asymmetric blotto game the values of the battlefields may di er from one another though these di erent values are common to all players in the stochastic asymmetric version of the blotto game the deterministic rule for determining which player wins each battlefield is replaced by a lottery contest success function where the chances of winning a given battlefield are increasing with the amount of resources devoted to that battlefield this stochastic lottery specification makes the payo function continuous as a result if a nash equilibrium exists it is unique and in pure strategies as opposed to the multiplicity of typically mixed strategy equilibria that arise in deterministic versions of the blotto game there are two main theoretical papers about stochastic asymmetric blotto games 1 the first one friedman 1958 considers two players who seek to maximize their expected total payo we show that friedman s result can be extended to any number of players the second paper lake 1979 was the first to study the stochastic asymmetric majority rule blotto game 2 this version of the game is particularly relevant to understanding electoral competitions in two party systems e g the electoral college system for electing the u s president lake studied only the case of equal budget constraints we show that if players budgets are the same as in lake or if they are su ciently similar and the number of items battlefields is not too large then resource allocation under the majority rule version of the stochastic asymmetric blotto game is proportional to the banzhaf power index for each item while more generally resource allocation for a particular item will not be proportional to each item s banzhaf power index our findings thus generalize those of lake 1979 department of economics university of california irvine email du y uci edu moore school of business university of south carolina and lancaster university management school email alexander matros gmail com see kovenock and roberson 2012 for a broader survey of the blotto game literature we discovered lake s 1979 paper only after we had completed our analysis his proofs are di erent from ours but his main result coincides with our prediction for the case of equal budgets we thank steve brams for providing this reference

product assortment in a triopolgy producers of super premium ice cream such as haagen dazs offer a smaller assortment of flavors than the producers of lesser quality ice cream examples of this phenomenon can be found in other industries as well in many industries the producers of higher quality products offer a smaller assortment of flavors colors sizes patterns textures fragrances tones styles models designs types or other options this paper explores when and why producers of super premium products should find it profitable to offer a smaller assortment than the producers of nonpremium products we derive a nash equilibrium both on prices and product assortments for a triopoly at the nash equilibrium we show that additional product quality increased consumer price sensitivity and greater assortment costs discourages product assortment we also show that a larger market potential greater competitive costs and sharper competition encourage more assortment by the super premium producer

sh a r p shelf allocation for retailers profit shelf space is the retailer s scarcest resource space management tools are thus badly needed for that purpose commercial computer packages and optimal allocation models have been developed building on the work of corstjens and doyle we elaborate a general theoretical shelf space allocation model which focuses on the demand interdependencies prevailing across and within product groups rules of thumb are compared to the derived optimal allocation the sh a r p model is introduced as a simplified yet realistic variant and validated against data collected in a dutch supermarket chain subsequently the feasibility of its implementation has been experimented in various belgian chains case studies demonstrate the profit potential of sh a r p

on modeling the advertising operations interface under asymmetric competition abstract using a market share attraction structure of advertising competition and following a supermodular game approach this article demonstrates for an asymmetric oligopoly the directional impact of changes in model parameters on the marketing controlled variables of all rivals advertising budgets and the operations controlled variables of all rivals ordered quantities importantly the various changes are examined analytically empirically and numerically in both non dominated and dominated asymmetric oligopolies in this regard the results indicate that firms in a dominated oligopoly one firm of market share larger than or equal to 50 behave differently compared to firms in a non dominated oligopoly each firm of market share less than 50 in response to changes in model parameters furthermore changes in model parameters are investigated in terms of their relative influential impact on a variety of equilibrium measures in this regard the findings indicate that for the analyzed model the marketing parameters exert much more influence on the equilibrium measures than the operations parameters additionally a change in the mode of competition from non cooperation oligopoly to cooperation joint ownership dictates that strong asymmetric firms of favorable marketing and operations parameters continue advertising but at lower levels and weak asymmetric firms of less favorable parameters cease advertising altogether

an equilibrium analysis of defensive response to entry using a coupled response function model we determine the optimal response to competitive entry in a market characterized by a market share attraction model the response of an incumbent is limited to changes in prices advertising and distribution expenditures brand positions are assumed to be fixed we also assume that the entrant s position is chosen exogenously and that the sales potential of the market is constant after proving the existence of a unique nash equilibrium we show that the optimal response depends on the relative market share of the incumbents the response by nondominant brands with market shares less than 50 mirrors the prediction by decoupled response function models reduce price advertising and distribution spending for the dominant brand having a market share of 50 the response is to reduce price and increase marketing spending this finding explains previous empirical results that could not be addressed by the decoupled models

modeling response to advertising and pricing changes for v 8 cocktail vegetable juice this paper is based on a series of studies undertaken for v 8 cocktail vegetable juice over a five year period the studies were a consequence of management questions regarding the effectiveness of a new advertising campaign the best media mix for this campaign and the apparent wear out of the advertising copy the studies included controlled experimentation estimation of advertising response functions and exploration of price sensitivity following major price increases by v 8 it was found that the short term response to advertising was s shaped and that the new creative approach rather than expenditure levels alone accounted for by far the largest component of the impact of advertising on sales it was also found that for a short period following the major price increases v 8 became extremely price sensitive however after about six months the marginal impact of price returned to historical levels the application of results at campbell soup company their relationship to the literature and their implications for both researchers and practitioners are discussed

a two stage sales forecasting procedure using discounted least squares the authors develop a two stage forecasting methodology for estimating the sales responses to marketing and environmental variables when it is likely that their impacts will change unpredictably over time the methodology is based on an integrated least squares procedure that uses regression analysis in stage 1 to estimate the coefficients of the controllable and environmental variables in combination with a stage 2 discounted least squares smoothing procedure that updates key parameters in response to changing market conditions the effectiveness of the methodology is demonstrated by applying it to weekly sales data from a major retail chain

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

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

predicting advertising pulsing policies in an oligopoly a model and empirical test given that firms pulse in advertising should firms pulse in or out of phase it is shown that out of phase maximizes the oligopoly profits and is also the markov perfect equilibrium of the infinite horizon game the basic intuition for this result comes from the following fact it is more profitable to increase consideration when the competitor s consideration is lower evidence from several product categories seems to support this theoretical result

value functions for infinite period planning cost benefit and risk analysis studies that model tradeoffs between the present and the distant future by means of present value discounting have been criticized for according the future and thus future generations far too little importance this paper presents an alternative means of modeling tradeoffs between different periods that accords the future far more importance than present value discounting and that is no more difficult to apply the paper also presents a means of modeling the preference issue of concern for equity or stability between different periods

a multiattribute model of consumer choice during product learning the processes of consumer preference formation during product learning are analyzed a hypothesis about how individuals form attribute expectations is used to derive a dynamic multinomial logit model of individual choice which endogenously recognizes product learning the model and its underlying assumptions are then tested in the context of an interactive grocery store learning game the results support most elements of the proposed model structure an assumption of temporal stationarity in attribute salience however could not be supported approaches to implementation of the model are discussed and implications for marketing management and research in individual choice modeling are addressed

dynamic optimal control models in advertising recent developments this paper presents a review of recent developments that have taken place in the area of dynamic optimal control models in advertising subsequent to the comprehensive survey of the literature by sethi in 1977 the basic problem underlying these models is that of determining optimal advertising expenditures and possibly other variables of interest over time for a firm or a group of competing firms under consideration this optimization is done subject to some dynamics that define how these variables translate into sales and in turn into profits the purpose of this update is twofold on the one hand new contributions in the areas already treated in the earlier survey are reviewed on the other hand new trends in the advertising literature since 1977 such as quality as an additional marketing instrument cumulative sales models pulsing advertising and advertising as a part of corporate models of the firm are discussed the models covered in this update are organized under six headings models with ca

a retailer promotion policy model considering promotion signal sensitivity recent research suggests that the signal e g sign or marker with a point of purchase promotion will stimulate a significant sales increase regardless of whether or not that signal is accompanied by a price cut this paper develops a model of retailer profitability that incorporates this promotion signal sensitivity in a field test the profitability of the promotion policy prescribed by this model is compared to the profitability of two other promotion policy setting paradigms a model based policy that does not consider promotion signal sensitivity and one prescribed by industry experts the test results support the proposed model its policy generates 11 more category profit per unit than the model based policy and 12 more than the industry experts implications for retailers and future research are discussed

a minimum discrimination information estimation of multiattribute market share models multiattribute market share models mmsm using supplier product and buyer attributes as explanatory variables generally use a logit model structure the literature indicates two basic types of approaches for estimating coefficients regression type approaches generally using log share ratios and a nonregression approach which is based on maximum likelihood principles this article discusses a nonregression estimation approach a minimum discrimination information mdi whose formulation differs from mdi procedures previously applied to the marketing literature the mdi formulation enables researchers to estimate a logit model with proportions as the dependent variable and is computationally easy because it uses the same estimators as an mle approach which assumes independence of trials equivalence between mdi and mle estimates under certain conditions are discussed the estimation methods are applied to a real world data set the results indicate the mdi mle method does best in predicting the market shares of the suppliers according to some basic error criteria both at disaggregate and aggregate levels

competition under generalized attraction models applications to quality competition under yield uncertainty we characterize the equilibrium behavior in a broad class of competition models in which the competing firms market shares are given by an attraction model and the aggregate sales in the industry depend on the aggregate attraction value according to a general function each firm s revenues and costs are proportional with its expected sales volume with a cost rate that depends on the firm s chosen attraction value according to an arbitrary increasing function whereas most existing competition papers with attraction models can be viewed as special cases of this general model we apply our general results to a new set of quality competition models here an industry has n suppliers of a given product who compete for the business of one or more buyers each of the suppliers encounters an uncertain yield factor with a given general yield distribution the buyers face uncertain demands over the course of a given sales season the suppliers compete by selecting key characteristics of their yield distributions either their means their standard deviations or both these choices have implications for their per unit cost rates

on the superiority of pulsing under a concave advertising market potential function abstract the authors study the superiority of advertising pulsing policy turning advertising on and off in a cyclic fashion over its uniform constant spending counterpart that costs the same under the assumption that sales dynamics follow a modified vidale wolfe aggregate advertising model the authors show that pulsing can be superior if the product of the concave market potential function and the linear or concave advertising response function is convex in advertising similar to previous studies in the literature the average undiscounted profit over the infinite planning horizon is considered as a performance measure according to which alternative advertising pulsation policies are compared employing a well known data set relating advertising to sales the above convexity requirement is empirically supported and the superiority of pulsing is established numerically the performance of the proposed model is found to be superior to two rival models using a one step ahead forecasting procedure the analytical findings of the study are documented into six theoretical results for which proofs are relegated to a separate appendix managerial implications of the study and directions for future research are also discussed

the value of market share and the product life cycle a game theoretic model the paper presents a dynamic game theoretic model of marketing competition in an oligopoly the equilibrium solution to this model is used to investigate how a firm s optimal marketing expenditure per unit sold which can be interpreted as a measure of the value of market share depends on current and future market demand which in turn can be related to the product life cycle the results support and refine the conventional wisdom that the earlier it is the life cycle the greater is the value of the market share

testing for financial buffer stocks in sectoral portfolio models empirical implementation of the buffer stock money notion tends to concentrate either on the shock absorber aspects or the spillover disequilibrium money aspects but rarely combines both moreover a potential buffer role for nonmoney assets is usually precluded without explicit empirical testing this paper examines the role of financial buffers in an ex ante sectoral model of expenditure and portfolio behavior incorporating both the shock absorber and spillover aspects in terms of cross equation parameter restrictions these are tested for a range of different assets and liabilities using quarterly data for the u k personal sector copyright 1990 by mit press

advertising strategies in a dynamic oligopoly the author uses a dynamic model of oligopolistic advertising competition in which competitors are assumed to make a series of single period advertising decisions with salvage values attached to achieved sales in each period as the foundation for empirical analysis of the competitive situation involving the three largest ready to eat cereal manufacturers kellogg general mills and the post division of philip morris general foods the primary insight of the author s empirical analysis is that general mills places a higher future value on achieved sales than do the other competitors in the market

general blotto games of allocative strategic mismatch the colonel blotto game captures strategic situations in which players attempt to mismatch an opponent s action we extend colonel blotto to a class of general blotto games that allow for more general payoffs and externalities between fronts these extensions make blotto applicable to a variety of real world problems we find that like colonel blotto most general blotto games do not have pure strategy equilibria using a replicator dynamics learning model we show that general blotto may have more predictable dynamics than the original blotto game thus adding realistic structure to colonel blotto may paradoxically make it less complex

on the prediction power of market share attraction models logical consistency of market share models has received considerable attention in the recent marketing literature the reports suggest that at least theoretically attraction type specifications a

a hybrid conjoint model for price demand estimation abstract recent developments in conjoint analysis include the introduction of hybrid models in which part worths estimated from self explicated data are combined with information obtained from full profile evaluations this paper extends the hybrid approach to conjoint problems entailing multiple suppliers with particular emphasis on competitive price relationships

a theory of time preference grant a taylor this article proposes that people generally prefer present consumption to future consumption because their expected utility from consumption eventually falls as their mental and physical abilities eventually decline with age moreover contrary to the ubiquitous intertemporal formulation with a constant rate of time preference and contrary to three recent theories of time preference that predict decreasing discounting as people age this article asserts that discounting increases over the life cycle this hypothesis is supported by data from the panel study of income dynamics as well as evidence from numerous previous studies jel d91 1 introduction despite the almost universal assumption of time preference in models of intertemporal choice an adequate explanation of why people discount the future has not been provided 1 olsen and bailey 1981 make a convincing case for positive time preference by contradiction i e without time preference models of intertemporal choice do not yield predictions consistent with observed behavior but they do not explain why individuals would rationally discount the future 2 three recent studies have attempted to provide the explanation rogers 1994 argues that societies that discount the future at a rate of about 2 will be the long run survivors in an evolutionary fitness situation 3 posner 1995 argues that discounting occurs because individuals have multiple selves that is people are weighting their present consumption far more heavily than their future consumption because the present self and the future self are in some meaningful sense separate persons 92 becker and mulligan 1997 argue that discounting occurs because of a rational defective recognition of future utilities 730 but as will be shown these three theories are inconsistent with empirical evidence on consumption over the life cycle in at least one important aspect this article constructs and empirically supports a new theory of time preference the hypothesis is that people do not have an intrinsic preference for present consumption relative to future consumption instead the instantaneous utility function also known as the felicity function is expected to vary with age just as people s physical and mental abilities vary with age in other words the ability to enjoy consumption eventually deteriorates over the life cycle along with other abilities this life cycle view of the expected utility function causes people to rationally devalue consumption in periods of low expected felicity that is discount future consumption perhaps this is what is meant by the cliche don t wait until you are too old to enjoy it moreover this causes individuals implicit discount rates to vary systematically with age 4 in fact this provides the testable implication of the theory the standard specification of intertemporal preferences holds the discount rate constant over th e life cycle 5 to be more precise in the early stage of the life cycle the capacity to enjoy consumption may be expected to rise hence a young individual s discount rate may be negative figure 1 illustrates this possibility with a hypothetical adult life cycle marginal felicity function for a given level of consumption u sub c c a c denotes consumption and a denotes age and its corresponding discount rate function rho a the vast majority of wealth is held by older people that is those in the declining stage of their abilities thus the preference for present consumption over future consumption appears to hold in the aggregate this view of intertemporal preferences may at first seem inconsistent with practically all dynamic analyses which are based on the notion of stationary utility on further consideration however the hypothesis is quite consistent with modern consumer theory since becker 1965 it has been widely accepted that households derive utility from commodities that are produced with market goods combined with household time and skills i

an industry equilibrium analysis of downstream vertical integration this paper investigates the effect of product substitutability on nash equilibrium distribution structures in a duopoly where each manufacturer distributes its goods through a single exclusive retailer which may be either a franchised outlet or a factory store static linear demand and cost functions are assumed and a number of rules about players expectations of competitors behavior are examined it is found that for most specifications product substitutability does influence the equilibrium distribution structure for low degrees of substitutability each manufacturer will distribute its product through a company store for more highly competitive goods manufacturers will be more likely to use a decentralized distribution system this article was originally published in marketing science volume 2 issue 2 pages 161 191 in 1983

household saving in the united states measurement and behavior official measures of u s personal saving incorporate conceptual errors relating to the measurement of both income and consumption this article identifies the errors computes an adjusted personal saving rate to correct the errors and estimates equations explaining personal saving the estimates support the adjustments and the adjusted series has more pronounced movements than the official series the movements being largely related to changes in income and wealth

discounting behavior a reconsideration we re evaluate the theory experimental design and econometrics behind claims that individuals exhibit non constant discounting behavior theory points to the importance of controlling for the non linearity of the utility function of individuals since the discount rate is defined over time dated utility flows and not flows of money it also points to a menagerie of functional forms to characterize different types of non constant discounting behavior the implied experimental design calls for individuals to undertake several tasks to allow us to identify these models and to several treatments such as multiple horizons and the effect of allowing for a front end delay on earlier payments the implied econometrics calls for structural estimation of the theoretical models allowing for joint estimation of utility functions and discounting functions using data collected from a representative sample of 413 adult danes in 2009 we draw striking conclusions assuming an exponential discounting model we estimate discount rates to be 5 6 on average this is significantly lower than all previous estimates using controlled experiments we also find no evidence to support quasi hyperbolic discounting or fixed cost discounting and only modest evidence to support other specifications of non constant discounting furthermore the evidence for non constant discounting while statistically significant is not economically significant in terms of the size of the estimated discount rates we undertake extensive robustness checks on these findings including a detailed review of the previous comparable literature

does manufacturer advertising crowd in or crowd out retailer advertising an application of an endogenous prize contest with asymmetric players when a manufacturer advertises what is the impact on retailer advertising i analyze a contest model of advertising where total advertising by the manufacturer and by retailers determines market size and the relative level of advertising by each retailer determines market share if retailers are symmetric i show that there is a crowding in effect so increased manufacturer advertising increases retail advertising but if one retailer is stronger then marginal increases in manufacturer advertising have a crowding out effect on retailer advertising while sufficiently large increases have a crowding in effect by jump starting competition between retailers for the larger market furthermore asymmetric abilities in such contests can lead the weaker player to effectively drop out of the contest thereby undermining the ability of increased prizes to increase effort by intensifying competition

cross disciplinary evidence for hyperbolic social discount rates researchers in different disciplines have independently found evidence to suggest that the social discount rate may be hyperbolic rather than exponential in nature both behaviorist research and some empirical economics studies support the hyperbolic discounting hypothesis u s and u k government discounting dispensations for some long run public development projects are explicable in terms of an underlying hyperbolic social discount rate a statistical aggregation argument demonstrates that even if the behaviorist economics and public choice evidence for hyperbolic discounting is not conclusive the social discount rate of a set of people who individually express time preferences best modeled by exponential discounting functions is nonetheless hyperbolic further empirical economics studies of discounting preferences are required comparisons of different national discounting practices would also be useful to see how widespread is the use of unusually low exponential rates of discount for long run projects the application of hyperbolic discounting would have most impact in long run benefit cost analyses however government agencies would require overwhelming evidence before switching from exponential to hyperbolic discounting

life cycle preferences over consumption and health when is cost effectiveness analysis equivalent to cost benefit analysis this paper studies life cycle preferences over consumption and health status we show that cost effectiveness analysis is consistent with cost benefit analysis if the lifetime utility function is additive over time multiplicative in the utility of consumption and the utility of health status and if the utility of consumption is constant over time we derive the conditions under which the lifetime utility function takes this form both under expected utility theory and under rank dependent utility theory which is currently the most important nonexpected utility theory if cost effectiveness analysis is consistent with cost benefit analysis it is possible to derive tractable expressions for the willingness to pay for quality adjusted life years qalys the willingness to pay for qalys depends on wealth remaining life expectancy health status and the possibilities for intertemporal substitution of consumption

estimation uncertainty and optimal advertising decisions in this paper we develop a normative model that is built on an empirically relevant foundation we observe that decision makers among them advertisers rely on estimated relationships in reaching resource allocation decisions and we investigate the normative implications of this process in particular we explore the effects of uncertainty stemming from the use of sample estimates of population parameters in general we find that ignoring this estimation related uncertainty leads to suboptimal decisions

optimal advertising strategies this paper considers advertising policies for a very general class of response functions it is shown that if a pulsing policy is used awareness or sales eventually settle down to a steady cycle and the average response over the cycle is a decreasing function of the length of the cycle when response shows increasing returns to scale it is possible in theory to use a device called chattering to replace the true response by a straight line which lies above the true response in the region in which chattering is used a numerical example is given to show how the optimal policy can be computed when part of the response is linear and the results obtained are compared with those of the best practicable approximation to chattering it is shown that the problem of maximising awareness or sales subject to a budget constraint is structurally identical with maximising profit after advertising with or without a constraint in either case it is possible that for part of the time the optimal policy involves chattering

discount rates inferred from decisions an experimental study two hundred and four students of economics and finance participated in an intertemporal choice experiment which manipulated three dimensions in a 4 4 4 factorial design scenario postponing a receipt postponing a payment expediting a receipt expediting a payment time delay 0 5 1 2 and 4 years and size of cashflow 40 200 1000 and 5000 individual discount rates were inferred from the responses and then used to test competitively four hypotheses regarding the behavior of discount rates the classical hypothesis asserting that the discount rate is uniform across scenarios time delays and sums of cashflow was flatly rejected a market segmentation approach was found lacking the results support an implicit risk hypothesis according to which delayed consequences are associated with an implicit risk value and an added compensation hypothesis which asserts that individuals require compensation for a change in their financial position

introduction to the special issue empirical generalizations in marketing it is our hope that some of the empirical generalizations presented in this volume would be of practical value to management some of the generalizations help codify our knowledge they are discussed in several papers some can serve as useful guidelines in the generation of strategic marketing options in addition we hope that this volume would stimulate additional research and actions by marketing scientists in industry and academia

distributive politics and electoral competition abstract within the framework of pure redistribution dividing one unit of a homo geneous good among identical individuals the paper analyses the redistribution that arises from downsian two party electoral competition it appears that the strategic behavior of vote maximizing parties leads them to propose divisions which are not far from the egalitarian one journal of economic literature classification numbers c72 d63 d72

chapter 6 market share models publisher summary this chapter describes that three basic principles motivate the specification of the market share models market share models should be competitive descriptive as well as predictive and profit oriented being fundamentally competitive implies that one cannot know the effect or effectiveness of a marketing action without accounting for the actions of competitors market share models are models for understanding how the marketing efforts of every brand impact the results in a competitive marketplace only by describing the influence of each marketing instrument can one gain a basis for marketing planning prediction alone is not enough time series models that forecast the future from the past sales provide no insight into how sales are generated the emphasis on being descriptive also embraces the need to understand the areas in which consumer choice probabilities are synonymous with market shares as well part of the goal of description transcends what can be done by market share models alone managers need to understand that their efforts have potentially competitive effects and potentially market expansive effects in sales response models these effects are comingled but by combining descriptive market share models for the competitive effects with descriptive category volume models for the market expansive effects managers obtain a much richer understanding of the market the profit oriented goal of market share analysis urges us to ask how the firm s allocations of resources to aspects of the marketing mix produce bottom line results

pork barrel politics targetable policies and fiscal federalism this article utilizes a simple model of redistributive politics with jurisdictional specific local projects to analyze the inefficiencies that arise under differing levels of targetability in both taxes transfers and local projects the ability to tactically target taxes transfers and or local projects leads political parties to engage in pandering to favored groups however in equilibrium we find that greater targetability in the set of available policies actually intensifies the competition between the political parties and so increases efficiency in the provision of local projects jel d72 h41

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

chapter 9 econometric and time series market response models publisher summary marketing has seen a rapid expansion in the widespread use of quantitative methods correlation and regression analysis were among the first techniques used as marketing research emerged as a discipline after world war ii in the early 1970s regression analysis became econometrics simultaneous equation systems could be estimated almost as easily as single regression equations while econometrics as a whole continues to flourish as new and more sophisticated estimation techniques and associated computer software have become available simultaneous equation systems have not become widely prevalent the dynamic structure of marketing variables themselves is addressed in the chapter followed by discussions of leads and lags among marketing variables and the assessment of the direction of causality dynamic properties of sales response functions have been discussed in more detail marketing generalizations that have been uncovered as well as empirical evidence on the shape of the sales response function is reported

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

product positioning under price competition this paper presents a consumer based methodology for new product pricing and positioning in the face of price competition the price competition is modelled as a nash equilibrium for which two complementary approaches are employed an analytical approach of duopoly provides qualitative insights into the competitive behavior and a numerical approach of general oligopoly provides quantitative solutions under a wide variety of market scenarios the optimal product positioning is formulated as a stackelberg nash leader followers equilibrium which can be solved numerically using recent advances in the field of variational inequalities a small example concerning analgesics is used to illustrate this methodology

strategic implications of market share attraction models market share attraction models which specify that a firm s market share is equal to the ratio of its attraction to the total attraction for all firms have received increasing attention in recent years however there has been little research investigating the practical implications of such models this paper presents a game theoretic analysis of such a model and deduces the strategic implications of a nash equilibrium solution to the model it is shown that these implications are consistent with previous empirical research in marketing and business policy

on the predictive power of market share attraction models the authors test naert and weverbergh s empirical finding that attraction type specifications are characterized by a predictive power greater than that of their nonrobust counterparts the empirica

sequential nonzero sum blotto allocating defensive resources prior to attack abstract the strategic allocation of resources across multiple fronts has long been studied in the context of blotto games in which two players simultaneously select their allocations however many allocation problems are sequential for example a state trying to defend against a terrorist attack generally allocates some or all of its resources before the attacker decides where to strike this paper studies the allocation problem confronting a defender who must decide how to distribute limited resources across multiple sites before an attacker chooses where to strike unlike many blotto games which only have very complicated mixed strategy equilibria the sequential nonzero sum blotto game always has a very simple pure strategy subgame perfect equilibrium further the defender always plays the same pure strategy in any equilibrium and the attacker s equilibrium response is generically unique and entails no mixing the defender minmaxes the attacker in equilibrium even though the game is nonzero sum and the attacker strikes the site among its best replies that minimizes the defender s expected losses

multi player race abstract we present a model of race with multiple players and study players effort choices and expected prizes in equilibrium we show that in equilibrium once any two players win one battle each the remaining players do not exert any effort anymore this turns the continuation game into a two player race this is different than the results in previous two player models of race which report that all states of the game are reached with positive probabilities we also provide a set of comparative static results on the effects of the number of players and the victory threshold

a methodology for competitive advantage analysis and strategy formulation an example in a transitional economy industrial competitiveness has become the focal point of study in recent years as global competition has intensified although many studies are devoted to the topic they remain largely conceptual and descriptive and thus it is difficult to make them operational very recently several studies were conducted to model industrial competitiveness through quantitative analysis but few consider how to combine the degree and scope of determinant factors of competitive advantages dfcas and competitive strategic goals csgs to maximize a firm s competitiveness or how to analyze the main problems of creating competitive advantage the present study proposes a model based approach to competitive analysis and discusses its multi phased implementation in a large electronic plant in china the proposed model can provide a comprehensive analytical tool for industrial competitiveness and can yield useful insights for competitive strategy formulation

technical note pricing under the nested attraction model with a multistage choice structure we develop a solution approach to the centralized pricing problem of a nested attraction model with a multistage tree structure we identify conditions under which the optimal solution can be uniquely determined and we characterize the optimal solution as a fixed point of a single variable in the special case of a multistage nested logit model we show the impact of asymmetry in price sensitivity and adjustment index also known as the dissimilarity index and we derive a closed form solution when the tree structure is symmetric many existing results in the literature regarding the single or two stage nested attraction model are shown to be special cases of the results we have derived we show that the equal markup property which holds for the single stage logit model with symmetric price sensitivity in general does not hold for products that do not share the same immediate parent node in the nested choice structure even when price sensitivities are the same for all products

the behavior of u s short term interest rates since october 1979 short term interest rates in the united states have been too high since october 1979 in the sense that both unconditional and conditional forecasts based on an estimated vector autoregression model summarizing the prior experience under predict short term interest rates during this period although a non structural model cannot directly answer the question of why this has been so comparisons of alternative conditional forecasts point to the post october 1979 relationship between the growth of real income and the growth of real money balances as closely connected to the level and pattern of short term interestrates this finding is consistent with the authors earlier conclusion based on analysis of a small structural macroeconometric model that the high average level of interest rates has been due to a combination of slow growth of nominal money supply and continuing price inflation which together have kept real balances small in relation to prevailing levels of economic activity this abstract was borrowed from another version of this item

a blotto game with incomplete information we consider a blotto game with incomplete information a pure strategy symmetric monotonic bayesian equilibrium is found and its properties are discussed

measuring the average marginal tax rate from the individual income tax the economic effects of taxation depend on the configuration of marginal tax rates we consider here the appropriate measure of a marginal tax rate for the federal individual income tax which has a graduated rate structure and allows for numerous legal and illegal deductions from total income our conclusion is that the explicit marginal rate from the tax schedule is the right concept for many purposes hence we construct approximately weighted averages of these marginal tax rates for 1916 80 when weighted by adjusted gross income the arithmetic average of marginal tax rates is 5 in 1920 2 in 1930 6 in 1940 20 in 1950 23 in 1960 24 in 1970 and 30 in 1980 we also discuss the dispersion of marginal tax rates as well as the behavior of average tax rates and deductions from taxable income one noteworthy result concerns the fraction of adjusted gross income that accrues to families that face a marginal tax rate of at least 35 this fraction quadruples from 1964 to 1980 this abstract was borrowed from another version of this item

savings in new zealand during inflationary times measurement determinants and implications real rates of return predominantly as a result of in model of saving behavior is constructed to test the role creased price inflation and slow rates of economic growth for instance deane 1980 stated that inflation taxation and interest rate variables play in determining saving the estimation results are then the behaviour ofsaven in times of inflation is still one of the unsolved used to identify the implications for future economic mysteries of economics to the surprise of economists in the early growth in new zealand in terms of saving assuming 1970s when inflation was accelerating sharply in most western nations consumers saved a higher than expected percentage of the stressed in the literature their income p 377 that of releasing factors for capital formation

on the generalizability of advertising pulsation monopoly results to an oligopoly this paper introduces for the first time an analytical framework for modeling and analyzing sales response to advertising pulsation for competitive markets of mature products in continuous time for discrete piecewise policies that allow unequal cycle lengths employing a nash equilibrium solution concept this study supported with numerical analysis demonstrates that there is an oligopolistic as opposed to a monopolistic justification for advertising at a constant rate in the presence of concave response functions or advertising according to a pulsing policy in the presence of s shaped response functions the article employs a modeling framework whereby each of a set of competitors responses to advertising spending is governed mainly by lanchester type response is used to analyze the game resulting from cyclical advertising policies that are strictly adhered to by all players a non discounted averaged performance is used to assess the purported optimality of different variants of piecewise constant policies

comparative statics of contests and rent seeking games this paper develops the comparative statics properties of a contest encountered in patent races and rent seeking games the author shows that symmetric equilibrium expenditure and profit per player decrease with the number of competitors and the discount rate but increase with the value of the prize a fundamental lemma established in the paper shows that a stability condition usually imposed on the model is automatically satisfied the author identifies a class of likelihood or hazard rate functions for which aggregate expenditure increases with the number of competitors and total profits converge to zero copyright 1997 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association