utility covariances and context effects in conjoint mnp models experimental conjoint choice analysis is among the most frequently used methods for measuring and analyzing consumer preferences the data from such experiments have been typically analyzed with the multinomial logit mnl model however there are several problems associated with the standard mnl model because it is based on the assumption that the error terms of the underlying random utilities are independent across alternatives choice sets and subjects the multinomial probit model mnp is well known to alleviate this assumption of independence of the error terms accounting for covariances in utilities in modeling choice experiments with the mnp is important because variation of the coefficients in the choice model may occur due to context effects previous research has shown that subjects utilities for alternatives depend on the choice context that is the particular set of alternatives evaluated simonson and tversky s tradeoff contrast principle describes the effect of the choice context on attribute importance and patterns of choice they distinguish local contrast effects which are caused by the alternatives in the offered set only and background contrast effects which are due to the influence of alternatives previously considered in choice experiments these effects are hypothesized to cause correlations in the utilities of alternatives within and across choice sets respectively the purpose of this study is to develop an mnp model for conjoint choice experiments this model is important for a more detailed study of choice patterns in those experiments in developing the mnp model for conjoint choice experiments several hurdles need to be taken related to the identification of the model and to the prediction of holdout profiles to overcome those problems we propose a random coefficients rc model that assumes a multivariate normal distribution of the regression coefficients with a rank one factor structure on the covariance matrix of these regression coefficients the parameters in this covariance matrix can be used to identify which attributes and levels of attributes are potentional sources of dependencies between the alternatives and choice sets in a conjoint choice experiment we present several versions of this model moreover for each of these models we allow utilities to be either correlated or independent across choice sets the independent probit ip model is used as a benchmark given the dimensionality of the integrations involved in computing the choice probabilities the models are estimated with simulated likelihood where simulations are used to approximate the integrals involved in the choice probabilities we apply and compare the models in two conjoint choice experiments in both applications the random coefficients mnp model that allows choices in different choice sets to be correlated rc displays superior fit and predictive validity compared with all other models we hypothesize that the difference in fit occurs because the rc model accommodates correlations among choice sets that are caused by background contrast effects whereas the model that treats choice sets as independent irc accounts for local contrast effects only the irc model shows superior model fit compared with the ip model but its predictions are worse than those of the ip model we find differences in the importance of local and background contrast effects for choice sets containing different numbers of alternatives the background contrast effect may be stronger for smaller choice sets whereas the local contrast effect may be stronger for bigger choice sets we illustrate the differences in simulated market shares that are obtained from the rc irc and ip models in three hypothetical situations product modification product line extension and the introduction of a me too brand in all of those situations substantially different market shares are predicted by the three models which illustrates the extent to which erroneous predictions may be obtained from the misspecified irc and ip models

optimal admission and scholarship decisions choosing customized marketing offers to attract a desirable mix of customers each year in the postsecondary education industry schools offer admission to nearly 3 million new students and scholarships totaling nearly 100 billion this is a large understudied targeted marketing and price discrimination problem this problem falls into a broader class of configuration utility problems cups which typically require an approach tailored to exploit the particular setting this paper provides such an approach for the admission and scholarship decisions problem the approach accounts for the key distinguishing feature of this industry schools value the average features of the matriculating students such as percent female percent from different regions of the world average test scores and average grade point average thus as in any cup the value of one object i e student cannot be separated from the composition of all of the objects other students in the enrolling class this goal of achieving a class with a desirable set of average characteristics greatly complicates the optimization problem and does not allow the application of standard approaches we develop a new approach that solves this more complex optimization problem using an empirical system to estimate each student s choice and the focal school s utility function we test the approach in a field study of an mba scholarship process and implement adjusted scholarship decisions using a holdout sample we provide evidence that the methodology can lead to improvements over current management decisions finally by comparing our solution to what management would do on its own we provide insight into how to improve management decisions in this setting

relative prices consumer preferences and the demand for food shocks to world commodity prices and the depreciation of sterling led to a large increase in the price of food in the uk it also resulted in large changes in the relative prices of different foods we document these changes and consider how they affected the composition of households shopping baskets we isolate the impact of changes in relative food prices from variation in preferences using data on purchasing decisions made by a representative panel of british households we show that changes in relative food prices led to a worsening in the nutritional quality of households shopping baskets though this was partially mitigated by offsetting changes in preferences

the augmented latent class model incorporating additional heterogeneity in the latent class model for panel data abstract marketing researchers have actively sought to account for the heterogeneity in households preferences and responses to marketing mix elements e g price promotion when analyzing scanner panel data this is because not doing so biases response coefficient estimates that can potentially alter the conclusions drawn from such analyses in this article the authors present an extension to the latent class model lcm that accounts for additional heterogeneity by allowing households preferences to be a continuous mixture of segment level preferences the authors show how their model generalizes the lcm by the mere addition of s 1 parameters where s refers to the number of segments because a limitation of the traditional lcm is that it does not adequately account for heterogeneity in responses across households the authors model mitigates this criticism leveled at the lcm they then compare their model with the traditional lcm and the equivalent continuous mixture random effects models in

do pharmacists buy bayer informed shoppers and the brand premium we estimate the effect of information and expertise on consumers willingness to pay for national brands in physically homogeneous product categories in a detailed case study of headache remedies we find that more informed or expert consumers are less likely to pay extra to buy national brands with pharmacists choosing them over store brands only 9 percent of the time compared to 26 percent of the time for the average consumer in a similar case study of pantry staples such as salt and sugar we show that chefs devote 12 percentage points less of their purchases to national brands than demographically similar nonchefs we extend our analysis to cover 50 retail health categories and 241 food and drink categories the results suggest that misinformation and related consumer mistakes explain a sizable share of the brand premium for health products and a much smaller share for most food and drink products we tie our estimates together using a stylized model of demand and pricing

a probabilistic choice model for market segmentation and elasticity structure marketing scholars commonly characterize market structure by studying the patterns of substitution implied by brand switching though the approach is useful it typically ignores the destabilizing

the individual travel cost method with consumer specific values of travel time savings the treatment of the opportunity cost of travel time in travel cost models has been an area of research interest for many decades our analysis develops a methodology to combine the travel distance and travel time data with respondent specific estimates of the value of travel time savings vtts the individual vtts are elicited with the use of discrete choice stated preference methods the travel time valuation procedure is integrated into the travel cost valuation exercise to create a two equation structural model of site valuation since the travel time equation of the structural model incorporates individual preference heterogeneity the full structure model provides a travel cost site demand model based upon individualized values of time the methodology is illustrated in a study of recreational birdwatching more specifically visits to a stork village in poland we show that the usual practice of basing respondents vtts on 1 3 of their wage rate is largely unfounded and propose alternatives including a separate component of the travel cost survey aimed at valuation of respondents vtts or as a second best asking if they wish if their journey was shorter and for those who do use full hourly wage as an indicator of their vtts

who participates in household scanning panels we compare two widely used household scanning panels maintained by the nielsen company and information resources inc to a random sample of the u s population results indicate that the demographic characteristics of the random sample more closely match the census bureau data than the household scanning panels we also show that after controlling for demographic differences participants in the household scanning panels are slightly more price sensitive than participants in the random sample the two household scanning panels yield similar results in relation to one another which suggests that the household scanning panels may suffer from sample selection and participation biases

experimenting with purchase history based price discrimination many purchases of differentiated goods are repeated giving sellers the opportunity to engage in price discrimination based upon the shopper s previous behavior by either offering loyalty discounts to repeat buyers or introductory rates to new customers recent theoretical work suggests that loyalty discounts can be profitable to sellers when customer preferences are not stationary and sellers can pre commit to prices for repeat buyers but otherwise returning customers can be expected to pay the same or more than new buyers this paper reports behavior in controlled laboratory experiments designed to empirically test the impact of these factors on pricing strategies the results generally support the comparative static predictions of the theoretical model when customer preferences are fixed over time sellers attempt to lure customers from their rival price pre commitment for repeat shoppers when buyer preferences vary over time resulted in modest loyalty pricing but the discounts are not as prevalent as predicted as sellers rarely price below cost behaviorally price pre commitment to loyal customers is found to reduce prices overall

customized advertising via a common media distributor we show that when a single media content distributor such as a television cable company or an internet provider delivers advertising messages on behalf of multiple competing brands it can sometimes utilize customized advertising to implement monopoly pricing even though such monopolistic pricing can be implemented with varying degrees of customization of commercials product revenues and consumer surplus are highest when the distributor chooses the highest level of customization feasible consumers would obviously prefer aggressive price competition in product markets however given that collusion on prices is facilitated anyway when the distributor acts as a common agent the welfare of consumers is enhanced when commercials are better aligned with their preferences

dynamic targeted pricing with strategic consumers abstract we investigate in this paper whether dynamic targeted pricing based on consumer purchase history could benefit a practicing firm even when consumers are strategic in that they actively seek to avail themselves of a low price in the future such strategic behavior on the part of consumers has been shown in the literature to render such dynamic targeted pricing unprofitable even for a monopoly firm we show that dynamic targeted pricing can benefit competing firms when they actively pursue customer recognition based on consumer purchase history this is because in order to pursue customer recognition competing firms need to price high to screen out price sensitive consumers and hence price competition is moderated as a result all competing firms can become better off with targeted pricing than without even when consumers behave strategically interestingly because of this competition moderation effect the paradoxical outcome occurs where dynamic targeted pricing may not benefit a monopolist but it may benefit competing firms we also show that dynamic targeted pricing can expand the market such that social welfare unambiguously improves

are choice experiments incentive compatible a test with quality differentiated beef steaks this study compares hypothetical and nonhypothetical responses to choice experiment questions we test for hypothetical bias in a choice experiment involving beef ribeye steaks with differing quality attributes in general hypothetical responses predicted higher probabilities of purchasing beef steaks than nonhypothetical responses thus hypothetical choices overestimate total willingness to pay for beef steaks however marginal willingness to pay for a change in steak quality is in general not statistically different across hypothetical and actual payment settings

the impact of heterogeneity in purchase timing and price responsiveness on estimates of sticker shock effects the notion that individuals have an internal reference price against which they compare observed prices is well supported by several psychological theories empirically several papers in the marketing literature employing scanner panel data have modeled the impact of reference prices on brand choice via the sticker shock formulation in which consumers evaluate choice alternatives using differences between shelf prices and reference prices most of the studies reported thus far have not accounted for heterogeneity in price response among consumers and have typically imputed reference prices from the shelf prices of brands that a consumer is supposed to have observed on previous purchases in the category since category marketing activity can differentially affect the purchase timing of households we argue that this measure of reference price may follow certain systematic patterns across consumers and when combined with unaccounted for price response heterogeneity may result in a spurious sticker shock effect specifically we show that estimates of sticker shock are biased upward if households that are price sensitive in the brand choice decision are also more responsive to category promotion activity in their purchase timing decision we discuss some general conditions under which the bias occurs and conduct a simulation experiment to confirm our specific hypotheses our simulation results show that changes in purchase timing are a critical determinant of the bias in the sticker shock effect we also show that unaccounted for price response heterogeneity can in itself result in a biased sticker shock parameter however this requires very large differences in price sensitivities across consumers far greater than what is normally observed we develop a hierarchical bayes version of the nested logit model which models heterogeneity via individual level parameters in a continuous random effects framework we estimate the model on scanner panel data from the yogurt and ketchup categories we find in both categories that the 95 probability interval of the posterior distribution of the mean sticker shock coefficient contains the value zero therefore at least for the data used in this study there is no evidence for the sticker shock effect at the aggregate level in contrast the corresponding coefficient from a standard model which ignores this heterogeneity is highly significant and supports the existence of a possibly spurious sticker shock effect consistent with our explanation of the underlying cause of the bias households that are more price sensitive in the choice decision are also found to be more responsive to category promotion activity in their decision to purchase in the category the results highlight the measurement problems associated with imputing reference prices from past prices since the frequency duration and price level of a retailer s promotional program depend on its size and prevalence accurate estimates of the sticker shock effect are essential for formulating optimal promotion strategies an adequate accounting of consumer heterogeneity is critical to this effort

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

pension benefits and male female wage differentials female members of defined benefit pension plans will receive greater pension benefits than males with identical work and earnings histories since females have greater longevity yet females have higher turnover rates and lower earnings both of which serve to reduce pension benefits relative to those received by males we illustrate the net effect on pension benefits in defined benefit plans of gender differences in longevity turnover and wages we conclude that females tend to receive lower pension benefits and therefore that pension benefits are more likely to exacerbate than to reduce the male female wage gap

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

are male female earnings differentials related to life expectancy caused pension cost differences this paper argues that employers using defined benefit pension plans are forced by competitive conditions to lower females earnings to account for more costly pension liabilities resulting from longer life expectancy a newly constructed data set containing employee salary histories and pension plan descriptions from five firms is used to calculate how much more it costs to employ a female vs a male worker identical except for life expectancy it is demonstrated that each dollar of increased pension liabilities results in a reduction in females salaries by fifty five cents implications of these findings for the 1983 supreme court ruling involving sex linked pension benefits are discussed

what are corporate pension liabilities analyses of corporate pension plans often make unstated assumptions about an implicit labor contract an example of the effect of such an assumption is that many mistakenly believe that if a worker s benefits are tied to final salary he is protected against inflation until retirement also the value of a worker s claims is often considered to be independent of the status of the firm s pension fund these implicit contract assumptions are examined and questioned the implications of analyzed pension liabilities in a manner consistent with the analysis of other corporate liabilities are explored

discrete choice models with multiple unobserved choice characteristics since the pioneering work by daniel mcfadden utility maximization based multinomial response models have become important tools of empirical researchers various generalizations of these models have been developed to allow for unobserved heterogeneity in taste parameters and choice characteristics here we investigate how rich a specification of the unobserved components is needed to rationalize arbitrary choice patterns in settings with many individual decision makers multiple markets and large choice sets we find that if one restricts the utility function to be monotone in the unobserved choice characteristics then up to two unobserved choice characteristics may be needed to rationalize the choices

how closely do hypothetical surveys and laboratory experiments predict field behavior we compare the ability of three preference elicitation methods hypothetical choices nonhypothetical choices and nonhypothetical rankings and three discrete choice econometric models the multinomial logit mnl the independent availability logit ial and the random parameter logit rpl to predict actual retail shopping behavior in three different product categories ground beef wheat flour and dishwashing liquid overall we find a high level of external validity our specific results suggest that the nonhypothetical elicitation approaches especially the nonhypothetical ranking method outperformed the hypothetical choice experiment in predicting retail sales we also find that the rpl can have superior predictive performance but that the mnl predicts equally well in some circumstances experiment

stated and revealed preferences for organic and cloned milk combining choice experiment and scanner data the u s food and drug administration s recent announcement that milk from cloned cows is as safe to drink as that from conventionally bred cows prompted interest among farmers food retailers and regulators in the market impacts of the introduction of milk from clones because milk from cloned animals is not currently labeled in the market we utilized a stated preference experiment to determine consumer preferences for the attribute but also sought to determine whether the survey based choices were consistent with people s revealed preferences given by scanner data our analysis indicates that a pooled model combining stated and revealed preference data exhibits overall better out of sample prediction performance than either data set used alone results from the pooled model indicate that consumers are willing to pay large premiums to avoid milk from cloned cows an amount that is over three times that for organic or rbst free milk the results are used to calculate the value of a mandatory labeling program

how to compute optimal catalog mailing decisions we develop estimate and test a response model of order timing and order volume decisions of catalog customers and derive a bayes rule for optimal mailing strategies the model integrates the when and how much components of the response incorporates the mailing decision of the firm and uses a bayesian framework to determine the optimal mailing rule for each catalog customer the bayes rule we propose for optimal mailing strategy allows for a broad set of objectives to be realized across the time horizon such as profit maximization customer retention and utility maximization with or without risk aversion we find that optimizing the objective function over multiple periods as opposed to a single period leads to higher expected profits and expected utility our results indicate that the cataloguer is well advised to send fewer catalogs than its current practice in order to maximize expected profits and utility

do hypothetical and actual marginal willingness to pay differ in choice experiments application to the valuation of the environment abstract in this paper we test the validity of choice experiments with donations for environmental projects in particular we test whether or not there are differences in preferences between a hypothetical and an actual choice experiment our experiments indicate no differences in addition internal tests of validity indicate transitive and stable preferences in both experiments although there are some indications of possible learning effects during the experiment

the gender gap in pensions and wages this study provides rationale for the underrepresentation of women in the pension sector and examines the consequences for the gender wage gap for a given set of observed characteristics a woman is 11 19 percent less likely than a man to have a pension of the unexplained portion of the gender wage gap 10 38 percent is due to unexplained differences in pension coverage finally consistent with a screening effect of pensions women are paid more equally in the pension sector copyright 1990 by mit press

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

imperfect price discrimination market structure and efficiency we introduce a flexible third degree price discrimination framework by modeling the information firms possess about consumers locations preferences on the salop circle as a partition higher information quality is translated into a partition refinement in the limit we obtain the perfect price discrimination paradigm we show that the free entry equilibrium number of firms exhibits a u shape as a function of the quality of information this implies that imperfect price discrimination generates the most efficient free entry outcome jel classification d43 l11 l43 discrimination imparfaite par les prix structure de marche et efficacite les auteurs produisent un cadre d analyse flexible de la discrimination par les prix au troisieme degre en modelisant l information que les firmes possedent a propos de la localisation preferences comme base de decoupage dans un cercle de salop une plus grande qualite d information se traduit par un decoupage plus fin a la limite on obtient le paradigme parfait de discrimination par les prix on montre que le nombre de firmes en equilibre quand l entree est libre est une fonction en forme de u dans son rapport avec la qualite de l information cela implique que la discrimination imparfaite par les prix engendre le resultat le plus efficace quand l entree est libre

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

structural analysis of manufacturer pricing in the presence of a strategic retailer consumer goods manufacturers usually sell their brands to consumers through common independent retailers theoretical research on such channel structures has analyzed the optimal behavior of channel members under alternative assumptions of manufacturer retailer interaction vertical strategic interaction research in empirical industrial organization has focused on analyzing the competitive interactions between manufacturers horizontal strategic interaction decision support systems have made various assumptions about retailer pricing rules e g constant markup category profit maximization the appropriateness of such assumptions about strategic behavior for any specific market however is an empirical question this paper therefore empirically infers 1 the vertical strategic interaction vsi between manufacturers and retailer 2 the horizontal strategic interaction hsi between manufacturers simultaneously with the vsi and 3 the pricing rule used by a retailer the approach is particularly appealing because it can be used with widely available scanner data where there is no information on wholesale prices researchers usually have no access to wholesale prices even manufacturers who have access to their own wholesale prices usually have limited information on competitors wholesale prices in the absence of wholesale prices we derive formulae for wholesale prices using game theoretic solution techniques under the specific assumptions of vertical and horizontal strategic interaction and retailer pricing rules we then embed the formulae for wholesale prices into the estimation equations while our empirical illustration is using scanner data without wholesale prices the model itself can be applied when wholesale prices are available early research on the inference of hsi among manufacturers in setting wholesale prices using scanner data e g kadiyali et al 1996 1999 made the simplifying assumption that retailers charge a constant margin this assumption enabled them to infer wholesale prices and analyze competitive interactions between manufacturers in this paper we show that this model is econometrically identical to a model that measures retail price coordination across brands hence the inferred cooperation among manufacturers could be exaggerated by the coordinated pricing category management done by the retailer we find empirical support for this argument this highlights the need to properly model and infer vsi simultaneously to accurately estimate the hsi when using data at the retail level functional forms of demand have been evaluated in terms of the fit of the model to sales data but recent theoretical research on channels lee and staelin 1997 tyagi 1999 has shown that the functional form has serious implications for strategic behavior such as retail passthrough while the logit and linear model implies equilibrium passthrough of less than 100 lee and staelin call this vertical strategic substitute vss the multiplicative model implies optimal passthrough of greater than 100 vertical strategic complement vsc because passthrough rates on promotions have been found to be below or above 100 chevalier and curhan 1976 armstrong 1991 we empirically test the appropriateness of the logit vss and the multiplicative vsc functional form for the data we perform our analysis in the yogurt and peanut butter categories for the two biggest stores in a local market we found that the vss implications of the logit fit the data better than the multiplicative model we also find that for both categories the best fitting model is one in which 1 the retailer maximizes category profits 2 the vsi is manufacturer stackelberg and 3 manufacturer pricing hsi is tacitly collusive the fact that the retailer maximizes category profits is consistent with theoretical expectations the inference that the vsi is manufacturer stackelberg reflects the institutional reality of the timing of the game retailers set their retail prices after manufacturers set their wholesale prices note that in the stores and product categories that we analyze the two manufacturers own the dominant brands with combined market shares of about 82 in the yogurt market and 65 in the peanut butter market the result is also consistent with a balance of power argument in the literature the finding that manufacturer pricing is tacitly collusive is consistent with the argument that firms involved in long term competition in concentrated markets can achieve tacit collusion managers use decision support systems for promotion planning that routinely make assumptions about vsi hsi and the functional form the results from our analysis are of substantive import in judging the appropriateness of assumptions made in such decision support systems

retirement incentives contained in occupational pension plans and their implications for the mandatory retirement debate we find for the most prevalent type of pension plan in canada that plan provisions are not a close substitute for mandatory retirement special retirement pro visions which have a strong potential to discourage work typically do not come into play before age sixty and are far from universal the postponed retirement provision that has the greatest potential to discourage work beyond age sixty five has been deemed an unacceptable substitute for mandatory retirement in those jurisdic tions quebec manitoba government of canada which have banned mandatory retirement

employee evaluation of pension claims and the impact of indexing initiatives there is discussion in both canada and the united states of proposals which require private pension plans to provide indexed pension benefits this paper employs both an auction and an implicit contract model to identify the compensating wage differentials required of possible policy initiatives the contract model motivated by the prevalence especially in canada of ad hoc cost of living adjustments to pensions in pay presumes that workers have a call option on the investment earnings in excess of the interest rate assumption used to value the plan the analysis indicates that wage offsets are potentially quite large may be difficult to predict and may vary substantially across firms in addition the case for policy action would appear to rest largely on the implicit assumption that workers misperceive the value of their pension benefits

contingent valuation controversies and evidence contingent valuation cv has become one of the most widely used non market valuation techniques cv s prominence is due to its flexibility and ability to estimate total value including passive use value its use and the inclusion of passive use value in benefit cost analyses and environ mental litigation are the subject of a contentious debate this paper discusses key areas of the debate over cv and the validity of passive use value we conclude that many of the alleged problems with cv can be resolved by careful study design and implementation we further conclude that claims that empirical cv findings are theoretically inconsistent are not generally supported by the literature the debate over cv however has clarified several key issues related to nonmarket valuation and can provide useful guidance both to cv practitioners and the users of cv results

customer recognition in experience vs inspection good markets we study the effects of customer recognition and behavior based price discrimination bpd in a two period experience good duopoly with a discrete value distribution and we investigate the role of consumers ex ante valuation uncertainty in dynamic price competition through comparison with an inspection good duopoly several results are reached first the firms may reward repeat purchase when the probability of a high value is relatively low and when the high low value difference is large otherwise they may engage in poaching second bpd frequently increases each firm s total profits even in the poaching equilibrium these results contrast with the inspection good duopoly and the driver is that consumers period 2 product preference depends on their realized values in period 1 third consumers ex ante valuation uncertainty may increase or decrease firm profits without bpd and it weakly increases firm profits with bpd relative to the inspection good duopoly this paper was accepted by j miguel

individual marketing with imperfect targetability our research investigates the competitive ramifications of individual marketing and information management in today s information intensive marketing environments the specific managerial issues we address are as follows first what kinds of incentive environments do competing firms face when they can only target individual customers imperfectly second does the improvement in an industry s targetability intensify price competition in the industry such that all competing firms become worse off third should a firm share its customer knowledge so as to improve its rival s targetability fourth how should an information vendor sell its information that can improve a firm s targetability finally do competing firms have the same incentives to invest in their own targetability to answer those questions we develop a simple model a la narasimhan 1988 in which each of the two competing firms have their own loyal customers and compete for common switchers we assume that each firm can classify its own loyal customers and switchers correctly only with a less than perfect probability this means that each firm s perceived customer segmentation differs from the actual customer segmentation based on their perceived reality these two competing firms engage in price competition as an extension we also allow the competing firms to make their investment decisions to acquire targetability we show that when individual marketing is feasible but imperfect improvements in targetability by either or both competing firms can lead to win win competition for both even if both players behave noncooperatively and the market does not expand win win competition results from the fact that as a firm becomes better at distinguishing its price insensitive loyal customers from the switchers it is motivated to charge a higher price to the former however due to imperfect targetability each firm mistakenly perceives some price sensitive switchers as price insensitive loyal customers and charges them all a higher price these misperceptions thus allow its competitors to acquire those mistargeted customers without lowering their prices and hence reduce the rival firm s incentive to cut prices this effect softens price competition in the market and qualitatively changes the incentive environment for competing firms engaged in individual marketing a prisoner s dilemma occurs only when targetability in a market reaches a sufficiently high level this win win perspective on individual marketing has many managerial implications first we show that superior knowledge of individual customers can be a competitive advantage however this does not mean that a firm should always protect its customer information from its competitors to the contrary we find that competing firms can all benefit from exchanging individual customer information with each other at the nascent stage of individual marketing when firms targetability is low indeed under certain circumstances a firm may even find it profitable to give away this information unilaterally however as individual marketing matures as firms targetability becomes sufficiently high further improvements in targetability will intensify price competition and lead to prisoner s dilemma therefore it is not only prudent politics but also a business imperative for an industry to seize the initiative on the issue of protecting customer privacy so as to ensure win win competition in the industry second we show that the firm with a larger number of loyal customers tends to invest more in targetability when the cost of acquiring targetability is high however the firm with a smaller loyal base can through information investment acquire a higher level of targetability than the firm with a larger loyal base as long as the cost of acquiring targetability is not too high as the cost further decreases competing firms will all have more incentives to increase their investments in targetability until they achieve the highest feasible level third an information vendor should make its information available nonexclusively exclusively when its information is associated with a low high level of targetability when the vendor does sell its information exclusively it should target a firm with a small loyal following if it can impart a high level of targetability to that firm finally our analysis shows that an information intensive environment does not doom small firms in fact individual marketing may provide a good opportunity for a small firm to leapfrog a large firm the key to leapfrogging is a high level of targetability or customer knowledge

the labor contract and true economic pension liabilities most pension covered workers in the united states are covered solely or primarily by defined benefit plans in these plans workers are typically promised a pension that is proportional to their years of service in the firm and their final wage depending upon how workers pay for it the existence of a pension in the labor contract may play either an important role or no role at all in the worker firm relationship this paper addresses the issue how workers pay for the cumulating pension benefit over their tenure cycle in the firm and derives several economic implications for the worker firm contract while the theory itself has ambiguous implications the data confirm the longstanding presumption that pensions offer strong incentives for the worker to complete the normal tenure cycle in the firm not to quit early but if this intuitive notion is accepted it is shown that a perhaps less intuitive notion is also true firms make workers longterm bondholders in the firm the same flow of worker pension savings that tie workers to the firm are not accounted for in the pension trust fund pension plans are significantly underfunded in a true economic sense this is a peculiar characteristic of the labor contract which raises several unanswered questions the paper also shows that the nature of the pension contract can play an important role in determining the wage service profile and the capitalized value of the firm recent contributions to the literature pose an interesting and unconventional view of pensions one which leads to the conclusion that pensions play a relatively minor role in the worker firm contract the argument has been implicitly made by burt barnow and ronald ehrenberg 1979 and william sharpe 1976 but has recently been stated more directly by jeremy bulow 1982 2 in essence their views rest on a legal interpretation of pension liabilities namely since the firm can legally terminate its pension plan anytime the firm s pension liabilities cannot exceed the present value of the nominal pension promises it would owe workers if the firm terminated the plan immediately if workers believe the firm will exercise its legal right it is intuitively apparent and easy to show that workers will deposit only that amount of compensation into the pension plan that they expect to receive upon immediate termination using this interpretation of pension plan liabilities pensions have no influence on whether the worker leaves or remains in the firm moreover it will be shown that if the pension contract is written in nominal terms reflecting the legal view workers are not bondholders in the firm pension plans are excessively overfunded an alternative view is that the pension plan is an implicit contract between the worker and the firm see for example jack treynor 1977 an implicit contract theory implies that workers anticipating careers with a firm will consider the package of wage and pension benefits they expect to collect over their life cycle it is shown that these expectations lead quite directly to several implications that the pension contract is written in real terms that firms intend to meet their pension promises and that the firm will re u s department of labor s 4521 washington d c 20210 the views expressed in this paper are my own and do not necessarily represent the views of the department of labor the paper has substantially benefited from the comments of pauline ippolito and discussions with jeremy bulow i am also indebted to robert clark gary fields alan gustman olivia mitchell james pesando john turner michael ward and participants at the labor relations workshop at cornell university and the law and economics workshop at the university of chicago for comments see my 1985a book 2 the argument is also implicit in other related papers see for example martin feldstein and randall morck 1982

observed and unobserved preference heterogeneity in brand choice models this paper extends the scanner based choice literature by explicitly incorporating individual level brand preference data we illustrate our model using a unique data set that combines survey and scanner data collected from the same individuals the addition of individual specific brand preference information significantly improves fit and prediction furthermore this observed heterogeneity better explains choice than does unobserved heterogeneity in the standard scanner model s parameters more importantly we find that the standard model underestimates the importance of consumers brand preferences and overestimates both brand loyalties and price sensitivities brand loyalty is overestimated because models without preference information confound state dependence heterogeneity and preference effects price sensitivities are inflated because the average preference based consumer is implicitly assumed to be more willing to switch from his preferred brand than is the real preference based consumer further standard models overestimate the heterogeneity in price and loyalty sensitivities and misidentify both price and loyalty sensitive consumers the managerial implications of our findings and the applicability of our methodology when survey data are collected infrequently and for only a subsample of consumers are pursued we demonstrate that even under these circumstances better populationwide pricing and promotion decisions are identified and more accurate targeting results

market segmentation and collusive behavior abstract the recent literature on oligopolistic third degree price discrimination has been primarily concerned with rival firms incentives to acquire customer specific information and the consequences of such information on firm profitability and welfare this literature has taken mostly a static view of the interaction between competing firms in contrast in this paper we investigate the impact of customer specific information on the likelihood of tacit collusion in a dynamic game of repeated interaction this issue is very important because competitive price discrimination usually leads to a cutthroat price competition prisoners dilemma among firms firms therefore may seek ways to soften competition and sustain higher prices our main result is that collusion becomes more difficult as the firms ability to segment consumers improves

an empirical analysis of internal and external reference prices using scanner data single source yogurt data are used to examine whether both internal and external reference prices affect purchase decisions internal reference prices are memory resident prices based on actual fair or other price concepts external reference prices are observed stimuli such as regular prices that stores may display along with a sale price for comparability discrete choice models with variables representing the two types of reference prices are estimated and both types of variables are found to have significant effects on purchase probabilities this suggests that consumers may use multiple reference points in evaluating price in purchase decisions in addition a model using an indicator of a sale price discount explains purchase probabilities as well as one that models the actual discount which suggests that consumers may be reacting to the indication of savings rather than to the amount of the discount

male female wage differentials and policy responses without implicating them for any of the contents of the paper i am grateful to the following for helpful discussions or comments andrea beller university of illinois david bloom harvard and columnbia glen cain university of wisconsin ron ehrenberg cornell victor fuchs stanford bob gregory australian national university jonathan leonard university of california berkeley roberta robb brock university and paul weiler harvard financial support of the humanities and social sciences committee of the research board of the universitu of toronto is eratefullu acknowlede ed

multichoice logit modeling incomplete preference rankings of classical concerts in this article we develop an econometric model to analyze data on incomplete information on preferences the available information consists of groups of alternatives that are preferred to other groups of alternatives only for the most preferred group is a full ranking observed the resulting model is estimated on data concerning preferences on classical concerts

practice prize winner a nested logit model of product and transaction type choice for planning automakers pricing and promotions we develop a consumer response model to evaluate and plan pricing and promotions in durable good markets we discuss its implementation in the u s automotive industry which spends about 45 billion each year in price promotions the approach is based on a random effects multinomial nested logit model of product e g a vehicle model such as hyundai tucson and transaction type choice transaction types include combinations of acquisition types e g purchase versus lease and pricing instruments cash rebates reduced apr financing lease payment discounts we estimate the model using hierarchical bayes methods to capture response heterogeneity at the local market level we find key characteristics unique to durable good markets first consumers are heterogeneous in both their brand and transaction type preferences second consumers differ in their overall price sensitivity as well as in their relative sensitivity to alternative pricing instruments e g cash discounts reduced monthly payments third the most effective pricing programs tend to be those in which automakers offer consumers a menu of options to choose from e g a choice among a cash discount reduced interest rate financing or a lease payment discount we illustrate the model through an empirical application to a sample of data drawn from j d power transaction records in the entry suv segment and discuss examples of actual implementations

consumer shopping behavior how much do consumers save this paper documents the potential and actual savings that consumers realize from four particular types of purchasing behavior purchasing on sale buying in bulk at a lower per unit price buying generic brands and choosing outlets how much can and do households save through each of these behaviors how do these patterns vary with consumer demographics we use data collected by a marketing firm on all food purchases brought into the home for a large nationally representative sample of u k households in 2006 we are interested in how consumer choice affects the measurement of price changes in particular a standard price index based on a fixed basket of goods will overstate the rise in the true cost of living because it does not properly consider sales and bulk purchasing according to our measures the extent of this bias might be of the same or even greater magnitude than the better known substitution and outlet biases

milk by any other name consumer benefits from labeled milk this article uses revealed preferences of consumers to study the consumer benefits from rbst free and organic labeled milk the article specifies and estimates a quadratic aids demand system model for different milk types using u s supermarket scanner data the introduction of rbst free and organic milk is used to estimate consumer benefits that are decomposed into two components competitive and variety effects results show significant consumer benefits from organic milk and to a lesser extent from rbst free milk based on the findings we explore implications for present u s labeling standards th eu s food sector is going through rapid transformations in terms of new product introduction and innovations organic and genetically modified gm food products are leading the way in changing the landscape of available choices to consumers this rapid expansion of product space has taken place concomitantly with an increase in public policy concerns on issues of standardization labeling health risks and associated consumer welfare in this paper we explore these broader issues in the context of a specific product introduction the introduction of recombinant bovine somatotropin rbst free and organic milk in the u s market from a policy perspective understanding the market for organics and the various components of that demand i e what portion is for gm free and what is for other attributes of organics can help determine the value of creating a national standard and the potential welfare losses to consumers of weakening such a standard are consumers willing to pay extra for organic and rbst free milk if so how

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

the perils of behavior based personalization behavior based personalization has gained popularity in recent years whereby businesses offer personalized products based on consumers purchase histories this paper highlights two perils of behavior based personalization in competitive markets first although purchase histories reveal consumer preferences competitive exploitation of such information damages differentiation similar to the classic finding that behavior based price discrimination intensifies price competition with endogenous product design there is yet a second peril it emerges when forward looking firms try to avoid the first peril by suppressing the information value of purchase histories ideally if a market leader serves all consumers on day 1 purchase histories contain no information about consumer preferences however knowing that their rivals are willing to accommodate a market leader firms are more likely to offer a mainstream design at day 1 which jeopardizes differentiation based on this understanding i investigate how the perils of behavior based personalization change under alternative market conditions such as firms better knowledge about their own customers consumer loyalty and inertia consumer self selection and the need for classic designs

the role of prices in measuring the poor s living standards in this paper we revisit two pieces of conventional wisdom in the current debate about poverty paying close attention to the price data underlying these findings that the poor pay more than households of higher income for the goods and services they purchase and that poverty rates at least as measured by the u s census have remained essentially flat since the late 1960s raising questions about the success of the policies implemented to reduce poverty by examining scanner data on thousands of household purchases we find that the poor pay less not more for the goods they purchase and by extending the advances on price measurement in the recent decade back to the 1970s we find that current poverty rates are less than half of the official numbers

zooming in on paid search ads a consumer level model calibrated on aggregated data we develop a two stage consumer level model of paid search advertising response based on standard aggregated data provided to advertisers by major search engines such as google or bing the proposed model uses behavioral primitives in accord with utility maximization and allows recovering parameters of the heterogeneity distribution in consumer preferences the model is estimated on a novel paid search data set that includes information on the ad copy to that end we develop an original framework to analyze composition and design attributes of paid search ads our results allow us to correctly evaluate the effects of specific ad properties on ad performance taking consumer heterogeneity into account another benefit of our approach is allowing recovery of preference correlation across the click through and conversion stage based on the estimated correlation between price and position sensitivity we propose a novel contextual targeting scheme in which a coupon is offered to a consumer depending on the position in which the paid search ad was displayed our analysis shows that total revenues from conversion can be increased using this targeting scheme while keeping cost constant

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

viewpoint male female wage differentials how can that be abstract the paper outlines the main empirical procedures that are used to document the male female wage differential and the extent to which it reflects discrimination it then discusses the evidence on male female wage differentials their existence the extent to which they reflect discrimination their changes over time and the factors that influence the gap particular attention is paid to more recent studies that control for a wider range of conventionally unobserved factors theoretical perspectives are then outlined focusing on the issue of how discriminatory wage differentials can survive given the forces of competition the impacts of policy initiatives are also discussed

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

the importance of product reformulation versus consumer choice in improving diet quality improving diet quality has been a target of public health policy governments have encouraged consumers to make healthier food choices and firms to reformulate food products evaluation of such policies has focused on the impact on consumer behaviour firm behaviour has been less well studied we show that the recent decline in dietary salt intake in the uk was entirely attributable to product reformulation consumer switching between products worked in the opposite direction and led to a slight increase in grocery salt intensity these findings point to the important role that firms can play in achieving public policy goals