externalities expectations and pigouvian taxes this article derives pigouvian type corrective measures for reciprocal externalities when non nash behavior characterizes the participants these reciprocal externalities may involve various kinds of environmental pollutants such as acid rain a comparison between corrective measures for nash and non nash behavior demonstrates that positive conjectures regarding the other agent s externality generating activity have an expectation internalizing influence that usually reduces the required corrective measures negative conjectures e g free riding expectations however have an expectation externalizing effect that increases the required corrective measures the article analyzes both two person and n person externalities 13 references 3 figures 1 table

advertising learning and consumer choice in experience good markets an empirical examination this article empirically analyzes different effects of advertising in a nondurable experience good market a dynamic learning model of consumer behavior is presented in which i allow both informative effects of advertising and prestige or image effects of advertising this learning model is estimated using consumer level panel data tracking grocery purchases and advertising exposures over time empirical results suggest that in this market advertising s primary effect was that of informing consumers the estimates are used to quantify the value of this information to consumers and evaluate the welfare implications of an alternative advertising regulatory regime

the theory of public goods non nash behaviour abstract most treatments of equilibrium public goods provision assume zero conjectural variations in the sense that each individual regards the behaviour of the rest of the community as independent of his own this paper introduces nonzero conjectural variations into the model a diagram is introduced which can depict both the individual s and the community s equilibrium in the presence of nonzero conjectural variations equilibrium and optimal outcomes are compared and a specific functional form is used to investigate the effect of community size on the nature of equilibrium finally we discuss the requirement that conjectures should be consistent

search with learning for differentiated products evidence from e commerce this article provides a method to estimate search costs in a differentiated product environment in which consumers are uncertain about the utility distribution consumers learn about the utility distribution by bayesian updating their dirichlet process prior beliefs the model provides expressions for bounds on the search costs that can rationalize observed search and purchasing behavior using individual specific data on web browsing and purchasing behavior for mp3 players sold online we show how to use these bounds to estimate search costs as well as the parameters of the utility distribution our estimates indicate that search costs are sizable we show that ignoring consumer learning while searching can lead to severely biased search cost and elasticity estimates

the value and applicability of bargaining in an intergenerational setting abstract this paper considers the effectiveness of a variation of coasian bargaining as a policy instrument for internalizing one or multiple intergenerational externalities the variation involves appointing a contemporary party to represent the interests of the affected parties who are currently unable to represent themselves potential criticisms of such a policy are considered and addressed and precedents to such a policy are put forth to test the value of such a policy a two period model in which two externalities exist in the production consumption decisions and with representative agents is used to compare the welfare effects of four scenarios 1 agents in each period optimize their period specific utility 2 a benevolent social planner chooses allocations in both periods to maximize a social welfare function 3 the externalities are internalized using a bargaining policy and 4 the externalities are internalized using a tax and subsidy policy i find that contrary to general consensus in the literature coasian bargaining can be adapted in such a way as to make it applicable in an intergenerational framework

gender differences in a market with relative performance feedback professional tennis players abstract recent studies have found that females are less competitive than men these studies have all relied on a similar framework where individuals have little information about their relative abilities compared to other potential competitors it has also been found that performance feedback leads to more efficient choices for students and in experimental settings professional athletes competing in individual sports typically have access to performance feedback and good information about the quality of their potential competitors when choosing to enter competitive tournaments in this paper i use data from the international tennis federation itf on tournament entry decisions by professional players to study gender differences in tournament entry and preferences in this competitive labor market i find that even among this highly competitive population gender differences exist in performance and tournament entry in terms of performance i find that men exhibit a hot hand effect that can last for multiple periods while females are affected by only their performance in their last tournament this effect is obvious in tournament entry where both men and women are more likely to enter tournaments after doing well but women are affected by their last tournament while men s previous performance can affect entry beyond the next tournament the gender difference from feedback is more striking when taking into account whether individuals actually played in a tournament in that case higher ability females respond positively to performance from their last tournament while males do not but both genders see similar effects from previous performance in the short term and the effects are larger for worse ranked individuals thus in very competitive settings of same sex tournaments females and males respond differently to performance feedback information suggesting that information has very different gender specific effects for competitions and may be largely dependent on the length of time that has elapsed from the competition that the feedback is coming from

externalities pigouvian corrections and risk attitudes abstract we examine the influence of risk attitudes on the provision of an externality and on the proper size of pigouvian correction when the externality is a random variable whose distribution is affected by an observable externality generating activity an intervening technology relates changes in this observable activity to the probability distribution of the relevant externality unlike the now standard result in the theory of the firm involving the influence of risk attitudes on output levels we cannot conclude that increases in risk aversion will lead necessarily to a reduction in the level of the externality our results are applied to a wide range of market failures

decision making under uncertainty capturing dynamic brand choice processes in turbulent consumer goods markets we construct two models of the behavior of consumers in an environment where there is uncertainty about brand attributes in our models both usage experience and advertising exposure give consumers noisy signals about brand attributes consumers use these signals to update their expectations of brand attributes in a bayesian manner the two models are 1 a dynamic model with immediate utility maximization and 2 a dynamic forward looking model in which consumers maximize the expected present value of utility over a planning horizon given this theoretical framework we derive from the bayesian learning framework how brand choice probabilities depend on past usage experience and advertising exposures we then form likelihood functions for the models and estimate them on nielsen scanner data for detergent we find that the functional forms for experience and advertising effects that we derive from the bayesian learning framework fit the data very well relative to flexible ad hoc functional forms such as exponential smoothing and also perform better at out of sample prediction another finding is that in the context of consumer learning of product attributes although the forward looking model fits the data statistically better at conventional significance levels both models produce similar parameter estimates and policy implications our estimates indicate that consumers are risk averse with respect to variation in brand attributes which discourages them from buying unfamiliar brands using the estimated behavioral models we perform various scenario evaluations to find how changes in marketing strategy affect brand choice both in the short and long run a key finding obtained from the policy experiments is that advertising intensity has only weak short run effects but a strong cumulative effect in the long run the substantive content of the paper is potentially of interest to academics in marketing economics and decision sciences as well as product managers marketing research managers and analysts interested in studying the effectiveness of marketing mix strategies our paper will be of particular interest to those interested in the long run effects of advertising note that our estimation strategy requires us to specify explicit behavioral models of consumer choice behavior derive the implied relationships among choice probabilities past purchases and marketing mix variables and then estimate the behavioral parameters of each model such an estimation strategy is referred to as structural estimation and econometric models that are based explicitly on the consumer s maximization problem and whose parameters are parameters of the consumers utility functions or of their constraints are referred to as structural models a key benefit of the structural approach is its potential usefulness for policy evaluation the parameters of structural models are invariant to policy that is they do not change due to a change in the policy in contrast the parameters of reduced form brand choice models are in general functions of marketing strategy variables e g consumer response to price may depend on pricing policy as a result the predictions of reduced form models for the outcomes of policy experiments may be unreliable because in making the prediction one must assume that the model parameters are unaffected by the policy change since the agents in our models choose among many alternative brands their choice probabilities take the form of higher order integrals we employ monte carlo methods to approximate these integrals and estimate our models using simulated maximum likelihood estimation of the dynamic forward looking model also requires that a dynamic programming problem be solved in order to form the likelihood function for this we use a new approximation method based on simulation and interpolation techniques these estimation techniques may be of interest to researchers and policy makers in many fields where dynamic choice among discrete alternatives is important such as marketing decision sciences labor and health economics and industrial organization

the effect of price advertising on prices evidence in the wake of 44 liquormart the 44 liquormart decision eliminating rhode island s ban on liquor price advertising made rhode island the subject of a natural experiment for measuring the effect of advertising on prices using massachusetts prices as controls we find that advertising stores substantially cut only prices of the products that they advertise prices of other products at both advertising and nonadvertising stores do not change advertising stores cut their prices on products advertised by rivals while nonadvertising stores do not we find no reductions in price dispersion across stores newspaper advertising stores appear to draw a higher share of customers after they advertise

informative advertising with differentiated products in this paper we study the role of promotional expenditures by sellers in a model of product differentiation advertising conveys full and accurate information about the characteristics of products heterogeneous consumers who have no source of information other than advertisements seek to purchase the products that best fit their needs despite the roles played by advertising in improving the matching of products and consumers and in increasing the elasticity of demand faced by each firm we find that the market determined levels of advertising are excessive given the extent of diversity in the market we derive a promotional equilibrium based on a specific information transmission technology paying explicit attention to the structure of consumer information and its impact on firms demand curves this allows us to study the effects of changes in the advertising technology including an increased ability to target messages to specific groups of consumers on the equilibrium in the product market we find that decreased advertising costs may reduce profits by increasing the severity of price competition

do women shy away from competition do men compete too much we examine whether men and women of the same ability differ in their selection into a competitive environment participants in a laboratory experiment solve a real task first under a noncompetitive piece rate and then a competitive tournament incentive scheme although there are no gender differences in performance men select the tournament twice as much as women when choosing their compensation scheme for the next performance while 73 percent of the men select the tournament only 35 percent of the women make this choice this gender gap in tournament entry is not explained by performance and factors such as risk and feedback aversion only playa negligible role instead the tournament entry gap is driven by men being more overconfident and by gender differences in preferences for performing in a competition the result is that women shy away from competition and men embrace it

tournament incentives and match outcomes in women s professional tennis our research examines the effect of prize money differentials in women s professional tennis tournaments on the probability that the favoured player wins the match this study adds to the existing literature on tournament theory through its focus on rosen s 1986 elimination style match play tournament model we estimate a standard probit model using a unique data set containing detailed information on prize money player specific characteristics and match play outcomes for all tournaments played during the 2004 tour sponsored by the women s tennis association wta our results support predictions by rosen s tournament model larger prize money differentials have a positive statistically significant effect on the favoured player s probability of winning the match in addition the number of stages remaining has a significant negative effect on winning consistent with tournament theory predictions associated with the number of contestants in a tournament

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

the effects of banning advertising in junk food markets we develop a structural model to analyze the eects of banning advertising on market equilibria and welfare in junk food markets we consider the impact on demand and prices and show how to quantify welfare eects when advertising might lead consumers to take decisions that are inconsistent with their underlying preferences we use transaction level data on the potato chips market and nd that banning advertising leads to a direct reduction in demand but also toughens price competition leading to lower prices and increased demand welfare increases as consumers benet from no longer making distorted

forecasting marketing mix responsiveness for new products abstract before a new product launch marketers need to infer how demand will respond to various levels of marketing mix variables to set an appropriate marketing plan a critical challenge in estimating marketing mix responsiveness from historical data is that the observed decisions were affected by private information possessed by managers about the heterogeneous effects of marketing mix variables on sales the authors refer to this as the slope endogeneity problem such endogeneity differs from the intercept endogeneity problem which has been widely acknowledged in the literature to correct for the slope endogeneity bias the authors develop a conceptually simple control function approach that is amenable to multiple endogenous variables and marketing mix carryover effects the method is applied to forecasting advertising responsiveness in the u s dvd market the results suggest that advertising responsiveness varies substantially across dvd titles and that estimated marketing mix elasticities w

a simple theory of advertising as a good or bad our analysis treats advertisements and the goods advertised as complements in stable metautility functions and generates new results for advertising by building on and extending the general analysis of complements by assimilating the theory of advertising into the theory of complements we avoid the special approaches to advertising found in many studies that place obstacles in the way of understanding the effects of advertising we also use this approach to evaluate advertising from a welfare perspective whether there is excessive or too little advertising depends on several variables the effects on consumer utility the degree of competition in the market for advertised goods the induced changes in prices and outputs of advertised goods and whether advertising is sold to consumers

the dynamics of patent citations abstract the use of patent citations as a measure of patent quality increased dramatically in recent years i estimate the hazard of patent citation and find evidence of unobserved heterogeneity hazard estimation provides a means to separate patent quality from citation inflation

ever tried ever failed no matter on the demotivational effect of losing in repeated competitions abstract many important life goals require repeated confrontation with competitors losing in such competitions may discourage individuals and make them postpone further competitions thereby harming future prospects i use data on 44 799 amateur tennis players who are randomly paired in repeated competitions to study the causal effect of losing on the time to the next tournament participation results show that individuals wait on average 10 longer to enroll again after losing furthermore losing against relatively weaker opponents leads to a discontinuously larger effect than losing against relatively stronger opponents indicating that individuals do not rationally update beliefs about winning probabilities but instead use their ranking as reference point when evaluating defeats

an estimable dynamic stochastic model of fertility and child mortality this paper develops a finite horizon dynamic stochastic model of discrete choice with respect to life cycle fertility within an environment where infant survival is uncertain the model yields implications for the number timing and spacing of children a tractable estimation method is developed for the linear constraint quadratic utility case that is intimately tied to the dynamic optimization problem and the method is applied to malaysian household data estimation is based on integrating the numerical solution of the dynamic programming model of behavior with a maximum likelihood procedure

modeling multiple sources of heterogeneity in multinomial logit models methodological and managerial issues we offer a framework to specify and estimate various sources of heterogeneity in multinomial logit brand choice models we let each brand specific intercept and each parameter of the explanatory variable vector vary randomly across households in addition we distinguish loyal households from the rest our results suggest that incorporating multiple sources of heterogeneity improves the model fit and suggests higher impact of marketing mix elements on brand choice we highlight the importance of incorporating multiple sources of heterogeneity the model we implement yields valuable managerial insights

pigouvian taxation with administrative costs abstract this paper examines how the optimal pigouvian tax should be adjusted to reflect adminisrative costs several cases are examined depending on whether the administrative costs are fixed per firm taxed or are a function of the amount of tax collected and on whether such costs are borne by the government or by the taxed firm in some cases the presence of administrative costs leads to an optimal tax greater than the external cost while in other cases it leads to a tax less than the external cost

informing transforming and persuading disentangling the multiple effects of advertising on brand choice decisions prior behavioral research has suggested that advertising can influence a consumer s quality evaluation through informative and transformative effects the informative effect acts directly to inform a consumer of product attributes and hence shapes her evaluations of brand quality the transformative effect affects the consumer s evaluation of brand quality by enhancing her assessment of her subsequent consumption experience in addition advertising may influence a consumer s utility directly even without providing any explicit information this is the persuasive effect in this paper we propose a framework that formally models the processes through which all three effects of advertisements impact consumers brand evaluations and their subsequent brand choice decisions in particular we model source credibility confirmatory bias and bounded rationality on the part of consumers by appropriately modifying the standard bayesian learning approach our model conforms closely to prior behavioral literature and the experimental findings therein in our empirical analysis we get significant estimates of both informative and transformative effects across brands we find interesting temporal patterns across the effects for instance the importance of transformative effects seem to grow over time while that of informative effects diminishes finally we conduct policy experiments to examine the impact of increased ad intensity on advertising effects as well as the role played by consumption ambiguity

price and advertising signals of product quality we present a signaling model based on ideas of phillip nelson in which both the introductory price and the level of directly uninformative advertising or other dissipative marketing expenditures are choice variables and may be used as signals for the initially unobservable quality of a newly introduced experience good repeat purchases play a crucial role in our model a second focus of the paper is on illustrating an approach to refining the set of equilibria in signalling games with multiple potential signals

patents as options some estimates of the value of holding european patent stocks in many countries holders of patents must pay an annual renewal fee in order to keep their patents in force this paper uses data on the proportion of patents renewed and the renewal fees faced by post world war ii cohorts of patents in france the united kingdom and germany in conjunction with a model of patent holders renewal decisions to estimate the returns earned from holding patents in these countries since patents are often applied for at a nearly stage in the innovation process the model allows agents to be uncertain about the sequence of returns that will be earned if the patent is kept inforce formally then the paper presents and solves a discrete choice optimal stochastic control model derives the implications of the model on aggregate behaviour and then estimates the parameters of the model from aggregate data the estimates enable a detailed description of the evolution of the distribution of returns earned from holding patents over their life spans and calculations of both the annual returns earned from holding the patents still in force or the patent stocks in the alternative countries and the distribution of the discounted value of returns earned from holding the patents in a cohort this abstract was borrowed from another version of this item

the importance of relative performance feedback information evidence from a natural experiment using high school students we study the effect of providing relative performance feedback information on performance under piece rate incentives a natural experiment that took place in a high school offers an unusual opportunity to test this effect in a real effort setting for one year only students received information that allowed them to know whether they were above below the class average as well as the distance from this average we exploit a rich panel data set and find that the provision of this information led to an increase of 5 in students grades moreover the effect was significant for the whole distribution however once the information was removed the effect disappeared to rule out the concern that the effect may be driven by teachers within the school we verify our results using national level exams externally graded for the same students and the effect remains

stereotypes and tournament self selection a theoretical and experimental approach abstract we present a theoretical model in which agents have imperfect self knowledge about their abilities and have to self select into either a high paying or a low paying tournament the model shows that negative positive stereotypes generate underrepresentation overrepresentation of stereotyped agents in the high paying tournament even when the stereotype is false this is because stereotypes affect self assessment and consequently subsequent behavior we call this mechanism self stereotyping we run a lab experiment in which we use subjects beliefs about the gender bias of a real effort task to test the predictions of the theoretical model the results of the experiment are in line with the predictions of the model for men but not for women which partially validates the model and the self stereotyping mechanism

performance in competitive environments gender differences even though the provision of equal opportunities for men and women has been a priority in many countries large gender differences prevail in competitive high ranking positions suggested explanations include discrimination and differences in preferences and human capital in this paper we present experimental evidence in support of an additional factor women may be less effective than men in competitive environments even if they are able to perform similarly in non competitive environments in a laboratory experiment we observe as we increase the competitiveness of the environment a significant increase in performance for men but not for women this results in a significant gender gap in performance in tournaments while there is no gap when participants are paid according to piece rate this effect is stronger when women have to compete against men than in single sex competitive environments this suggests that women may be able to perform in competitive environments per se

job matching and occupational choice this paper presents a model of job matching the generalizes the existing literature by allowing for different jobs types or occupations such differences affect the value of job specific experience inducing a career profile where certain types are sampled before others more specifically the analysis shows that it is optimal for the young and inexperienced to gravitate toward jobs exhibiting a certain kind of risk then after deriving the equilibrium job turnover rate for an economy in which people do not switch occupations panel data are used to estimate its underlying parameters the hypothesis that people do not switch occupations is rejected against the alternative that they do thus providing empirical support for the theoretical extension undertaken here

tariff choice with consumer learning and switching costs abstract consumers choosing flat rate contracts tend to have insufficient usage to warrant the cost particularly for new products we propose and estimate a bayesian learning model of tariff and usage choice that explains this flat rate bias without relying on behavioral misjudgments or tariff specific preferences for new products consumers are uncertain about both their utility relative to the population mean and the mean itself we show that this latter uncertainty inflates prior variances which leads consumers to weight their private signals more heavily when updating beliefs posteriors are unbiased across products for a given product however the unknown mean yields a winner s curse consumers with high posteriors tend to overestimate their utility these consumers choose fixed rate tariffs and lower their usage as they correct their beliefs the flat rate bias arises when switching costs deter them from changing tariffs using the estimated model the authors find that tariff menus are ineff