paired comparison and contingent valuation approaches to morbidity risk valuation abstract this research uses an experimental approach for eliciting consumer valuations of morbidity risk reductions associated with safter chemical products and introduces the paired comparison questions approach to non market valuation in four applications the paired comparisons approach yields higher morbidity valuations than the more familiar contingent valuation approach however both methodologies produce large values of morbidity reduction benefits in comparison to estimates derived from wage hedonic studies explanations for the difference in the estimates and their magnitudes are suggested along with the public policy implications

from evidence to calibration for starting point bias willingness to pay for treated mosquito nets in gujarat india this study uses a bidding format to assess households willingness to pay wtp for treated mosquito nets tmns it tests for starting point bias by allocating respondents randomly to three different starting bids rs 50 rs 75 and rs 100 and following this response with one further closed bid offer and a final open ended wtp question there is a clear presence of starting point bias by undertaking a simulated market experiment sme this study attempts to measure the magnitude and direction of the bias so that the necessary calibration factor can be calculated with which to adjust the mean willingness to pay value it was observed that the true mean wtp adjusted for starting point bias rs 56 26 is not very different from the unadjusted mean wtp of rs 57 38 it is concluded that the presence of starting point bias even in carefully designed wtp studies using a bidding format cannot be ruled out however the existence of starting point bias itself does not reflect the magnitude of the problem it

implicit understandings in channels of distribution formal agreements can be used to achieve coordination among channel members these agreements work by exerting explicit control over the members who make the agreements however implicit understandings can be used as a partial substitute for more formal agreements in this paper we show that implicit understandings can develop as channel members learn about each other s behavior we show that this learning leads to the use of the implicit influence each channel member has over the other s behavior the learning leading to an implicit understanding requires some form of experimentation or historical observation this learning results in an oscillating retail price when only one channel member learns the other s behavior both channel members obtain greater profits than when neither member learns and both channel members obtain less profits than when both members learn however the member who does not learn obtains more profits than the member who learns we also show that implicit understandings r

searching for the correct benefit estimate empirical evidence for an alternative perspective this paper contrasts the results of the contingent valuation hedonic price and property damages avoided valuation techniques each technique was used to estimate the value of flood risk reduction from the construction of a flood control project voting behavior in a referendum called specifically for the provision of the project was used to further interpret the results from the three valuation studies substantial differences were found between the estimates in explaining these differences an alternative perspective on the current debate over the validity and accuracy of nonmarket value estimates is offered

valuing non market goods using contingent valuation abstract contingent valuation is a technique being developed by economists for the valuation of environmental commodities not traded in markets this paper discusses the major problem areas associated with this method of value estimation these comprise bias strategic hypothetical and design biases the discrepancy between willingness to pay and compensation demanded the aggregation procedure the choice of question format and non use values some evidence from comparative studies is reported and comments made on the accuracy of contingent valuation answers finally the conditions under which contingent valuation seems to operate best are set out

measuring price elasticities of demand and supply of water entitlements based on stated and revealed preference data estimates of price elasticities of water entitlements known as permanent water or water rights in the united states are complicated by data limitations and problems of endogeneity to overcome these issues we develop an approach to generate stated preference data and combine them with revealed preference data to estimate price elasticities from various types of water entitlement sales in the southern murray darling basin australia our results suggest that price elasticities of demand and supply of high security water entitlements are inelastic in the relevant market price range between aud 1 700 to 2 100 per mega liter and that supply is relatively more inelastic than demand for lower reliability water entitlements the price elasticity of demand is estimated to be even more inelastic than high security water entitlements the price elasticity of supply for general security water entitlements is similar to high security water entitlements while the supply of low reliability water entitlements is extremely inelastic for our data set the comparison between the stated and revealed preference data provides strong evidence of support for a data fusion approach nevertheless some differences in water sale preferences were found for irrigators choosing not to sell all of their water the consistency of our results signals support for the use of this methodology in other water basins around the world

information effects in contingent markets information bias in contingent markets is poorly understood in this paper testable hypotheses concerning beneficial contingent market information effects are developed conceptually perspective information and relative expenditure information were expected to increase comprehension and increase bids provision cost information was expected to counteract free riding behavior and also increase bids hypothesis tests using experimental markets suggested that each information type induced small statistically insignificant bid increases however the combined effect of the three information types induced a desirable statistically significant increase in bids this result supports the contention that not all contingent market information effects are biases

a satisfactory benefit cost indicator from contingent valuation abstract standard economic concepts are used to develop a model of individual behavior when subject to the constraints of the contingent valuation choice context the model yields refutable consequences that are consistent with previously reported empirical findings including some that have been thought to be anomalous the model is used to show that different contingent valuation formats have predictably different performance characteristics notably the hicksian compensating measures are satisfactory benefit cost indicators when elicited using any one of several formats identified in the text of the formats examined one form of a policy referendum appears to have the most satisfactory characteristics overall we conclude that contingent valuation is a progressing research program

estimating the demand for protecting freshwater lakes from eutrophication in any discussion of the valuation of public goods particularly environmental amenities contingent valuation travel cost and hedonics are commonly cited as methods for estimating hicksian or marshallian welfare freeman while contingent valuation and travel cost are widely employed we know of very few applications where hedonic demand functions have been estimated palmquist 1984 and parsons estimated second stage hedonic demands for characteristics of housing units both used the approach of estimating separate hedonic price functions for different real estate markets to identify demand parameters for housing characteristics the research reported here is the first to use separate real estate markets to identify demand parameters for an environmental amenity the specific application is water clarity in selected lakes in maine reduced water

managing channel profits a channel of distribution consists of different channel members each having his own decision variables however each channel member s decisions do affect the other channel members profits and as a consequence actions a lack of coordination of these decisions can lead to undesirable consequences for example in the simple manufacturer retailer consumer channel uncoordinated and independent channel members decisions over margins result in a higher price paid by the consumer than if those decisions were coordinated in addition the ensuing suboptimal volume leads to lower profits for both the manufacturer and the retailer this paper explores the problems inherent in channel coordination we address the following questions what is the effect of channel coordination what causes a lack of coordination in the channel how difficult is it to achieve channel coordination what mechanisms exist which can achieve channel coordination what are the strengths and weaknesses of these mechanism what is the role of nonprice variables e g manufacturer advertising retailer shelf space in coordination does the lack of coordination affect normative implications from in store experimentation can quantity discounts be a coordination mechanism are some marketing practices actually disguised quantity discounts we review the literature and present a simple formulation illustrating the roots of the coordination problem we then derive the form of the quantity discount schedule that results in optimum channel profits this article was originally published in marketing science volume 2 issue 3 pages 239 272 in 1983

the role of uncertainty in the relationship between fairness evaluations and willingness to pay participants in contingent valuation studies may be uncertain about a number of aspects of the policy and survey context the uncertainty management model of fairness judgments states that individuals will evaluate a policy in terms of its fairness when they do not know whether they can trust the relevant managing authority or experience uncertainty due to insufficient knowledge of the general issues surrounding the environmental policy similarly some researchers have suggested that not knowing how to answer wtp questions participants convey their general attitudes toward the public good rather than report well defined economic preferences these contentions were investigated in a sample of 840 residents in four urban catchments across australia who were interviewed about their wtp for stormwater pollution abatement four sources of uncertainty were measured amount of prior issue related thought trustworthiness of the water authority insufficient scenario information and wtp response uncertainty a logistic regression model was estimated in each subsample to test the main effects of the uncertainty sources on wtp as well as their interaction with fairness and proenvironmental attitudes results indicated support for the uncertainty management model in only one of the four samples similarly proenvironmental attitudes interacted rarely with uncertainty to a significant level and in ways that were more complex than hypothesised it was concluded that uncertain individuals were generally not more likely than other participants to draw on either fairness evaluations or proenvironmental attitudes when making decisions about paying for stormwater pollution abatement

validation of empirical measures of welfare change a comparison of nonmarket techniques since the passing of the flood control act of 1936 the attention of many resource economists has been directed towards measuring the benefits and costs of alternative uses of natural resources increasingly it has been recognized that the value of some of these uses is not explicitly determined through market transactions this has led to the focus of much attention upon the development of nonmarket methods to estimate the value of these uses in the 1940s the groundwork for the travel cost method was established by hotelling prewitt 1949 following this in the 1960s davis initiated the basic foundation for bidding methods davis 1963 which were later to be subsumed under the heading of contingent valuation methods brookshire randall and stoll 1980 schulze d arge and brookshire 1981 thayer 1981 both of these methods will be further discussed below in addition to these two methods a third approach the unit day value method has been recognized as acceptable but not preferred for the valuation of recreational uses of water and related land resources dwyer kelley and bowes 1977 u s water resources council 1979 given the existence of alternative methods of estimating the value of resource uses several obvious questions arise one of the first of these is under what circumstances is each method most appropriate existing literature has focussed sufficiently on this question and pointed out limitations of each especially the travel cost method and unit day value methods brookshire ives and schulze 1976 dwyer kelly and bowes 1977 freeman 1979 mcconnell 1975 randall ives and eastman 1977 schulze d arge and brook

improving channel coordination through franchising in this paper we explore the role of franchising arrangements in improving coordination between channel members in particular we focus on two elements of the franchising contract namely the royalty structure and the monitoring technology we begin with a simple analysis where a manufacturer distributes its product through a retailer and the retail demand is affected by the retail price and the service provided by the retailer in this context we show that neither royalty payments nor monitoring are needed for full coordination we then extend the model to allow for free riding by franchisees and show that although monitoring helps affect the behavior of the franchisees royalty payments are still unnecessary to coordinate the activities of the franchisor and the franchisees finally we show that in environments where factors affecting retail sales are controlled by both the franchisor and the franchisee royalty payments provide the necessary incentives for the franchisor while monitoring systems are used to ensure that franchisees also behave in the best interest of the channel our general results are found to be consistent with those in brickley and dark 1987 and norton 1988 who conclude that franchising is affected by principal agent problems our theory finds special support in the work of lafontaine 1988 where it is concluded that the incidence of franchising is related to cost of monitoring and the importance of franchisor investments

mail versus mall a strategic analysis of competition between direct marketers and conventional retailers consumers now purchase several offerings from direct sellers including catalog and internet marketers these direct channels exist in parallel with the conventional retail stores the availability of multiple channels has significant implications for the performance of consumer markets the literature in marketing and economics has however been dominated by a focus on the conventional retail sector this paper is an effort toward modeling competition in the multiple channel environment from a strategic viewpoint at the outset a parsimonious model that accommodates the following consumer and market characteristics is introduced first the relative attractiveness of retail shopping varies across consumers second the fit with the direct channel varies across product categories third the strength of existing retail presence in local markets moderates competition fourth in contrast with the fixed location of the retail store that anchors its localized market power the location of the direct marketer is irrelevant to the competitive outcome the model is first applied in a setting where consumers have complete knowledge of product availability and prices in all channels in the resulting equilibrium the direct marketer acts as a competitive wedge between retail stores the direct presence is so strong that each retailer competes against the remotely located direct marketer rather than against neighboring retailers this outcome has implications for the marketing mix of retailers which has traditionally been tuned to attract consumers choosing between retail stores in the context of market entry conditions under which a direct channel can access a local market in retail entry equilibrium are derived our analysis suggests that the traditional focus on retail entry equilibria may not yield informative or relevant findings when direct channels are a strong presence next the role of information in multiple channel markets is modeled this issue is particularly relevant in the context of direct marketing where the seller can typically control the level of information in the marketplace sometimes on a customer by customer basis e g by deciding on the mailing list for a catalog campaign when a certain fraction of consumers does not receive information from the direct marketer the retailers compete with each other for that fraction of the market the retailer s marketing mix has to be tuned in this case to jointly address direct and neighboring retail competition the level of information disseminated by the direct marketer is shown to have strategic implications and the use of market coverage as a lever to control competition is described even with zero information costs providing information to all consumers may not be optimal under some circumstances in particular when the product is not well adapted to the direct channel the level of market information about the direct option should ideally be lowered the only way to compete with retailers on a larger scale with a poorly adapted product is by lowering direct prices which lowers profits lowering market information levels and allowing retailers to compete more with each other facilitates a higher equilibrium retail price in turn this allows a higher direct price to be charged and improves overall direct profit on the other hand when the product is well adapted increasing direct market presence and engaging in greater competition with the retail sector yields higher returns the finding that high market coverage may depress profits raises some issues for further exploration first implementing the optimal coverage is straightforward when the seller controls the information mechanism as in the case of catalog marketing the internet in contrast is an efficient mechanism to transmit information but does not provide the sellers with such control over the level of market information a key reason is that the initiative to gather information on the internet lies largely with consumers the design and implementation of mechanisms to control aggregate information levels in electronic markets can therefore be an important theme for research and managerial interest second direct marketers have traditionally relied on the statistical analysis of customer records to decide on contact policies the analysis in this paper reveals that these policies can have significant strategic implications as well research that integrates the statistical and strategic aspects could make a valuable contribution the paper concludes with a discussion of issues for future research in multiple channel markets including avenues to model competition in settings with multiple direct marketers

a strategic analysis of dual channel supply chain design with price and delivery lead time considerations abstract this paper extends the work of chiang et al 2003 by investigating how price and delivery lead time decisions affect channel configuration strategy under either the manufacturer owned or the decentralized mode we show the choice of channel structure depends on customer acceptance of the online channel and the cost parameters following a threshold policy in both forms of ownership we prove that the strategic use of direct marketing to mitigate the double marginalization the major finding in chiang et al 2003 still holds even in this general situation moreover pareto zone exists where both manufacturer and retailer outperform their counterparts in the traditional indirect channel only case thus indicating that mitigating double marginalization may bring mutual benefits we also compare pricing and delivery lead time decisions between different forms of ownership or between different channel structures under the same form of ownership the manufacturer adopts a slow down deliver later approach and speeds up delivery to serve customers with a higher sensitivity to delivery lead time when he owns the whole indirect channel but chooses to stay fast and brag about better services and surprisingly slows down the speed of service when customers are more sensitive to delivery lead time due to the internal competition between two channels in the decentralized mode

contingent valuation techniques for assessing environmental impacts further evidence abstract this paper provides further evidence on the development and application of the iterative bidding technique used to assess environmental impacts three specific issues the hypothetical nature of the survey technique the questionnaire information structure and the bidding procedure starting point are examined theoretically and empirically to determine their effect on individual bid behavior the empirical results indicate that the importance of these influences may have been overstated in earlier studies

direct marketing indirect profits a strategic analysis of dual channel supply chain design the advent of e commerce has prompted many manufacturers to redesign their traditional channel structures by engaging in direct sales the model conceptualizes the impact of customer acceptance of a direct channel the degree to which customers accept a direct channel as a substitute for shopping at a traditional store on supply chain design the customer acceptance of a direct channel can be strong enough that an indepent manufacturer would open a direct channel to compete with its own retailers here direct marketing is used for strategic channel control purposes even though it is inefficient on its own and surprisingly it can profit the manufacturer even when so direct sales occur specifically we construct a price setting game between a manufacturer and its independent retailer direct marketing which indirectly increases the flow of profits through the retail channel helps the manufacturer improve overall profitability by reducing the degree of inefficient price double marginalization while operated by the manufacturer to constrain the retailer s pricing behavior the direct channel may not always be detrimental to the retailer because it will be accompanied by a wholesale price reduction this combination of manufacturer pull and push can benefit the retailer in equilibrium finally we show that the mere threat of introducing the direct channel can increase the manufacturer s negotiated share of cooperative profits even if price efficiency is obtained by using other business practices

channel coordination when retailers compete this paper explores channel coordination by a manufacturer that sells through competing retailers and that treats these retailers equally as required by the robinson patman act the authors show that in general there exists no single two part tariff with a constant per unit charge that will duplicate the behavioral results i e prices quantities and channel profits that are obtained by a vertically integrated system that is the channel cannot be coordinated except in the trivial cases of identical or noncompeting retailers however an appropriately specified quantity discount schedule will enable the channel to earn the same profits generated by a vertically integrated system conditions are derived under which a manufacturer will prefer to offer various two part tariffs with constant per unit charges instead of the channel coordinating quantity discount schedule the authors also establish the existence of a menu of two part tariffs that mimics all results of a vertically integrated system however only under stringent conditions will retailers select the appropriate tariff from the menu when these conditions are not satisfied the channel is worse off than in the case of a single second best tariff it is also demonstrated that under a wide range of parametric values the manufacturer will prefer to offer the second best two part tariff rather than a menu of two part tariffs that could maximize channel profits

designing transactions without framing effects in iterative question formats abstract several studies document that iterative question formats used in contingent valuation studies produce anomalies in respondent behavior that appear to threaten the validity of welfare estimates by decomposing iterative question formats into their ascending and descending sequences we show that these anomalies occur only in ascending sequences we describe the conditions under which comparable patterns of behavior are likely to be found in other iterative question formats that begin with a discrete willingness to pay question we then develop a unified explanation of these anomalies using our model of framing based on prospect theory we provide the first head to head test of rival explanations of these behavioral patterns by developing refutable hypotheses for the strategic behavior yea saying anchoring and cost expectations models finally based on our own statistically robust model we show how these anomalies can be eliminated without loss of the statistical efficiency of most iterative question formats

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

consumer s surplus without apology the purpose of this paper is to settle the controversy surrounding consumer s surplus and by so doing to validate its use as a tool of welfare economics i will show that observed consumer s surplus can be rigorously utilized to estimate the unobservable compensating and equivalent variations the correct theoretical measures of the welfare impact of changes in prices and income on an individual i derive precise upper and lower bounds on the percentage errors of approximating the compensating and equivalent variations with consumer s surplus these bounds can be explicitly calculated from observable demand data and it is clear that in most applications the error of approximation will be very small in fact the error will often be overshadowed by the errors involved in estimating the demand curve the results in no way depend upon arguments about the constancy of the marginal utility of income consequently this paper supplies specific empirical criteria which can replace the apologetic caveats frequently employed by those who presently apply consumer s surplus moreover the results imply that consumer s surplus is usually a very good approximation to the appropriate welfare measures to preview below i establish the validity of these rules of thumb for a

price and lead time decisions in dual channel supply chains abstract manufacturers today are increasingly adopting a dual channel to sell their products i e the traditional retail channel and an online direct channel empirical studies have shown that service quality we focus on the delivery lead time of the direct channel even goes beyond product price as one of the major factors influencing consumer acceptance of the direct channel delivery lead time has significant effects on demand profit and pricing strategy however there is scant literature addressing the decision on the promised delivery lead time of a direct channel and its impact on the manufacturer s and retailer s pricing decisions to fill this gap we examine the optimal decisions of delivery lead time and prices in a centralized and a decentralized dual channel supply chain using the two stage optimization technique and stackelberg game and analyze the impacts of delivery lead time and customer acceptance of a direct channel on the manufacturer s and retailer s pricing behaviours we analytically show that delivery lead time strongly influences the manufacturer s and the retailer s pricing strategies and profits our numerical studies reveal that the difference between the demand transfer ratios in the two channels with respect to delivery lead time and direct sale price customer acceptance of the direct channel and product type have great effects on the lead time and pricing decisions

option price estimates for water quality improvements a contingent valuation study for the monongahela river abstract we present the findings from a contingent valuation survey designed to estimate the option price bids for the improved recreation resulting from enhanced water quality in the pennsylvania portion of the monongahela river the findings are based on a survey design that used professional interviewers to conduct personal interviews determined from a representative sample of 393 households in addition the research suggests that protest bids and outliers be viewed similarly accordingly a new technique for identifying outlying responses is proposed the findings suggest that the question format affects the option price estimates and that criteria for determining the final sample of responses can have an important influence on contingent valuation results

a comparison of user benefits and costs of nature conservation at three nature reserves willis k g and benson j f 1988 a comparison of user benefits and costs of nature conservation at three nature reserves reg studies 22 417 228 benefits from conserving wildlife at three sites of special scientific interest are estimated using a travel cost method recording demand in terms of actual site visits these benefits are compared to the costs of nature conservation both the financial cost which is or could be incurred under the wildlife and countryside act 1981 and also the social costs of the agricultural output forgone after protective tariffs and subsidies of the common agricultural policy have been removed willis k g et benson j f 1988 une comparaison des avantages et des couts de la defense de l environnement aux usagers a trois reserves naturelles reg studies 22 417 228 on estime les avantages de la protection de la faune a trois sites d inter t scientifique special a partir d une methode qui calcule les frais de trajet enregistrant la demande en fonction des visi