unionization and labor market institutions in advanced capitalism 1950 1985 this article examines the depedence of unionization on labor market institutions and long run trends in inflation unemployment and the sectoral composition of the labor force in 18 oecd countries the large number of contending explanations highlights the difficulty in comparative sociology of drawing confident conclusions when there are few cases to compare this problem is addressed through diverse evidence a review of the comparative historical record and a time series analysis to form a bayesian prior distribution which is combined with a cross sectional data set to sharpen conventional estimates of economic and institutional effects this analysis indicates working class organization in trade unions expanded in the postwar period where labor acquired an institutional influence over capitalist labor markets

linear pigovian taxes and the optimal size of a polluting industry confusion surrounding the appropriateness of long run considerations in effluent regulation has arisen in the literature and recently carried over into textbooks we use a factor input model under oligopsony to show that when firms can influence the level of marginal damages a linear pollution tax does not satisfy the long run entry exit condition previous results to the contrary are shown to depend on restrictive assumptions efficient policy design requires a lump sum refund or any one of various non linear pricing schemes jel classification q2 l1 il y a beaucoup de confusion dans les debats qui entourent la reglementation des effluents et son caractere plus ou moins appropriea long terme tant dans la litterature specialisee que dans les manuels les auteurs tentent d eliminer cette confusion en analysant les emissions a l aide d un modele standard de demande d intrant quand les entreprises peuvent influencer la valeur presente des dommages marginaux un impot lineaire sur la pollution n entraine pas necessairement les decisions appropriees d entree et de sortie on peut corriger le probleme a l aide d un remboursement forfaitaire ou de l une ou l autre des formes de tarification non lineaire

persuasive advertising and product differentiation in a hotelling type differentiated products duopoly model we distinguish between three alternative ways that persuasive advertising may affect consumer perferences we illustrate the implications of our theory an contrast with results from models of informative advertising by analysing the relationship between the degree of product differentiation and equilibrium levels of advertising the analysis suggests that an positive relationship between equilibrium levels of advertising and inherent product substitutability is consistent only with advertising that increases perceived product differences

dual distribution channels the competition between rental agencies and dealers managerial decisions involving marketing channels are among the most critical that an organization must make part of the reason for this importance is that relationships between manufacturers and their intermediaries usually involve long term commitments that are difficult to change on the other hand in order to respond to the realities of the market place an organization must be ready to adapt its distribution practices sometimes under considerable uncertainty about the long term consequences such a problem faces the u s automobile industry which has led manufacturers to experiment with various channel structures when manufacturers first changed their distribution policies they were clear about the short term effect on sales but were unsure about its longer term impact on profitability in this article we develop a model to analyze the marketing of durable products through multiple channels our analysis suggests that even though it was not apparent at the time manufacturers were indeed behaving optimally when they changed their policies our model provides insights not only to automobile manufacturers but also to practitioners and academics who are interested in understanding the unique problems associated with marketing durable products through multiple channels we develop a two period model by assuming that a single manufacturer markets a durable product through two retailers a rental agency and a dealer the rental agency focuses mainly on renting the product in a daily rental market while the dealer focuses on selling the product to a different set of customers in the sales market to model the development of channels in the u s automobile industry we analyze three different channel structures the first structure a separate channel reflects the state of the industry through most of the 1980s when rental agencies were franchised solely to rent and dealers solely to sell the cars in response to a decrease in overall sales manufacturers encouraged rental agencies to sell their slightly used rental cars in the consumer market resulting in the second structure an overlapping channel dealers did not like this arrangement however and in the next experiment a buyback channel some manufacturers began buying back used rental cars and selling them through dealers in terms of the consumer side of the model we assume that consumers are heterogeneous and have product valuations that are distributed uniformly between a low and a high value in addition they recognize that as the durable depreciates with use its secondhand market value decreases while both sold and rented goods depreciate with use we assume based on an analysis of market prices that sold goods depreciate at a higher rate than rented goods given these different depreciation rates and consumers underlying utility functions we develop the market demand functions in the dealer s and rental agency s markets then for each of the channel structures we solve the intermediaries and manufacturer s problems the main contribution of this article is that it allows us to evaluate the profitability associated with various channel structures for all the players in our analysis the dealer the rental agency and the manufacturer in terms of the intermediaries we find that the overlapping channel is the most profitable structure for the rental agency on the other hand it is the least profitable for the dealer in terms of manufacturer profitability our model suggests that the separate channel is the least profitable and the overlapping channel is the most profitable it is interesting to note that the distribution structure in existence today is more akin to a buyback channel this strikes us as a compromise channel which alleviates dealer concerns with the overlapping channel and yet does not harm rental agencies as much as a separate channel these are surprising results because conventional wisdom has been that the overlapping channel was competing away profits for all players this suggests to us that automobile manufacturers were indeed on the right track when they began experimenting with the structure of their distribution channels

closed loop advertising strategies in a duopoly using the lanchester model to describe the dynamics of the market where two firms compete for customers by advertising we solve the problem of determining an optimal advertising strategy for maximum discounted profits we develop both open and closed loop strategies and explain the relationship between them using a new mathematical approach we prove that our closed loop solution is a global nash equilibrium the closed loop strategy is time variant and depends linearly on the actual market share the time variant coefficient incorporates the discount factor its computation requires the solution of a backward differential equation and a set of two nonlinear differential equations for an initial value problem the closed loop advertising expenditures are proportional to the open loop advertising expenditures and to the square of the competitor s actual market share this provides a very practical adaptive control rule that allows the manager to adjust the actual advertising expenditure and to deviate f

content vs advertising the impact of competition on media firm strategy media firms compete in two connected markets they face rivalry for the sale of content to consumers and at the same time they compete for advertisers seeking access to the attention of these consumers we explore the implications of such two sided competition on the actions and source of profits of media firms one main conclusion we reach is that media firms may charge higher content prices in a duopoly than in a monopoly this happens because competition for advertisers can reduce the return per customer impression from the ad market making each firm less willing to underprice content to increase demand greater competitive intensity may thus increase content profits and decrease ad profits these findings are in sharp contrast to those in a regular one sided product market in which competition typically lowers product prices and profits we extend the framework to examine competition across different media e g between magazines and cable tv and show that firms in a duopolistic medium may benefit from more intense competition from a monopolist in another medium we characterize the conditions for each firm in the duopoly medium to bundle more ads and earn greater total profits than the rival firm in the monopoly medium

the economics of worldwide stagflation the last fifteen years have witnessed dramatic changes in economics not only in the manner in which the economics profession views economics but also in the manner in which the general public views economics and economists by the late 1960 s there had emerged more or less a consensus macroeconomic framework that is an agreed upon structure to be used to study economic problems at the aggregate level robert solow stated as quoted in leijonhufvud 1968

risk premiums for decision regret some people find decision making under uncertainty difficult because they fear making the wrong decision wrong in the sense that the outcome of their chosen alternative proves to be worse than could have been achieved with another alternative these people may be willing to pay a premium to avoid consequences that produce this decision regret this paper continues an earlier investigation into the normative implications of decision regret and looks at situations where the joint probability distribution of consequences between alternatives is not specified at the time of the decision it includes a discussion of cases where the outcomes produced by alternatives not chosen are never resolved a consequence of this model of preferences for risky situations is that two components of risk aversion may be identified decreasing marginal value and regret aversion

platform intermediation in a market for differentiated products we study a two sided market where a platform attracts firms selling differentiated products and buyers interested in those products in the subgame perfect equilibrium of the game the platform fully internalises the network externalities present in the market and firms and consumers all participate in the platform with probability one the monopolist intermediary extracts all the economic rents generated in the market except when firms and consumers can trade outside the platform in which case consumers obtain a rent that corresponds to the utility they would get if they did trade outside the platform the market allocation is constraint efficient in the sense that the monopoly platform does not introduce distortions over and above those arising from the market power of the differentiated product sellers an increase in the number of retailers increases the amount of variety in the platform but at the same time increases competition as a result the platform lowers the firm fees and raises the consumer charges in contrast an increase in the extent of product differentiation raises the value of the platform for the consumers but weakens competition in this case the platform raises both the charge to the consumers and the fee for the firms

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

costs and benefits of inducing intrabrand competition the role of limited liability when is inducing intrabrand competition via nonexclusive distribution an optimal strategy to address this issue a static model is developed to examine two settings the manufacturer uses exclusive distributors in the first setting and nonexclusive distributors in the second the analysis indicates that the choice of distribution rests critically on whether the manufacturer can effectively extract surplus from the distributors due to a variety of institutional reasons the distributors liability is often limited in performing on behalf of the manufacturer such limited liability restricts how much of the distributors surplus can be extracted when the distributors surplus cannot be fully extracted the manufacturer may prefer nonexclusive distribution even when distributors can free ride on each other s efforts

tv wars exclusive content and platform competition in pay tv the article examines incentives for exclusive distribution of premium television programming static analysis shows that a vertically integrated operator with premium programming always supplies this content to the rival distributor using per subscriber fees to soften competition in a dynamic setting with switching costs exclusivity confers a market share advantage benefiting the operator in the future under certain conditions this future benefit outweighs the opportunity cost of forgone wholesale fees making exclusivity the preferred choice alternative dynamic mechanisms are explored identifying essential features the analysis explains the observed incidence of content exclusivity in pay tv and provides guidance for policy makers

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

structural distortions and decentralized fiscal policies in emu the combination of discretionary monetary policy labor market distortions and nominal wage rigidity yields excessive inflation as monetary policy tries to exploit nominal wage contracts to address labor market distortions an inflation target reduces inflation but creates a conflict between monetary policy and discretionary fiscal policy if fiscal policy is set at a higher frequency than nominal wages are preventing the associated excessive accumulation of public debt calls for debt ceilings if countries differ substantially in terms of structural distortions uniform debt ceilings must be complemented by country specific debt targets in order to prevent decentralized fiscal authorities from employing debt policy strategically

negotiations and exclusivity contracts for advertising exclusive advertising on a given media outlet is usually profitable for an advertiser because consumers are less aware of competing products however for such arrangements to exist media must benefit as well we examine conditions under which such exclusive advertising contracts benefit both advertisers and media outlets referred to as stations by illustrating that exclusive equilibria arise in a theoretical model of the media advertisers and consumers who participate in both the product and media markets in the model stations sell advertising space to advertisers and broadcast advertising messages to consumers conditions leading to higher equilibrium levels of advertising can be unprofitable for advertisers because high levels of advertising make consumers better informed and thus lead to fiercer product price competition as a result media stations may be less profitable as well because their payoff is determined as a fraction of the advertiser surplus generated in the product market stations mitigate this effect by offering advertisers exclusive advertising contracts with such contracts consumers are less informed about competing products yielding higher producer surplus it is profitable for stations to offer exclusivity when commercial advertising is an important means for advertisers to inform consumers about their products

toward privatization of public sector output decentralized contracting for public and private goods abstract public sector goods and services can be produced in the private sector the challenge is to provide incentives for allocative and technological efficiency either of two mechanisms is proposed to accomplish this to ensure allocative efficiency the proposed mechanisms require knowledge of the complete schedule of benefits alternatively they can use information available on benefits in an efficient manner costs need not be known to authorities profit maximization leads to efficient private sector responses to cost changes over time either mechanism can be combined with the demand revealing process to circumvent the need for ex ante information on benefits

paying positive to go negative advertisers competition and media reports this paper analyzes a two sided market for news where two rival advertisers may pay a media outlet to conceal negative information about the quality of their own product paying positive to avoid negative and or to disclose negative information about the quality of their competitor s product paying positive to go negative we show that competition in the product market does not necessarily prevent the emergence of commercial media bias whether or not competing advertisers end up having negative consequences on news accuracy ultimately depends on the extent of correlation in the quality of their products the lower the correlation the higher the expected accuracy of the media outlet s reports these findings provide a rationale to explain the observed differences in the extent of commercial media bias across seemingly similar industries or products within the same media market the results are robust to the presence of multiple media outlets and to asymmetries between the advertisers overall the paper provides theoretical insights for media regulators and for the empirical literature examining the link between advertising and news contents

real wage adjustment and employment policies in the nordic countries nordic employment lars calmfors and ragnar nymoen sweden and norway but also finland have managed to avoid the general western european rise in unemployment the article discusses to what extent this can be explained by a smoothly functioning wage setting system and by active labour market policies the analysis confirms earlier findings of an unusually large responsiveness of wages to unemployment in sweden and norway it is however questionable whether this can be explained by centralized bargaining nor do the authors find any evidence that corporatist tax wage bargains should have contributed to wage restraint the absence of hysteresis effects may be one explanation of why unemployment rises were easily reversed the most controversial finding is that active labour market policies may have strong wage raising effects if so labour market programmes may actually reduce regular employment and even increase open unemployment the authors argue that a reduced rather than an increased emphasis on labour market policies may have been an important factor for real wage restraint especially in sweden this may be an important lesson for those who regard extensive labour market programmes of the swedish type as a blueprint to follow

advertising in a distribution channel conventional wisdom suggests that one of the goals of manufacturer advertising is to reduce the cross price elasticity between products make one s own and rivals products appear to be less substitutable in the eyes of consumers conventional wisdom also suggests that all else being equal retailers will be able to obtain better terms of trade from manufacturers the more substitutable are the manufacturers products it follows that retailers should be opposed to advertising that has the effect of reducing cross price elasticities and thus that manufacturer advertising can be a source of channel conflict we show that these conventional wisdoms need not hold when only some consumers are exposed to the advertising messages using a hotelling model of demand we show that 1 manufacturers can be worse off from advertising that reduces the cross price elasticities between their products 2 channel conflict need not arise even when the sole purpose of advertising is to affect cross price elasticities and 3 depending on its bargaining power a retailer can be better off when the manufacturers products are perceived to be less substitutable

a bargaining theory of distribution channels abstract a critical factor in channel relationships between manufacturers and retailers is the relative bargaining power of both parties in this article the authors develop a framework to examine bargaining between channel members and demonstrate that the bargaining process actually affects the degree of coordination and that two part tariffs will not be part of the market contract even in a simple one manufacturer one retailer channel to establish the institutional and theoretical bases for these results the authors relax the conventional assumption that the product being exchanged is completely specifiable in a contract they show that the institution of bargaining has force and it affects channel coordination when the complexity of nonspecifiability of the product exchange is present the authors find that greater retailer power promotes channel coordination thus there are conditions in which the presence of a powerful retailer might actually be beneficial to all channel members the authors rec

news consumption and media bias bias in the market for news is well documented recent research in economics explains the phenomenon by assuming that consumers want to read watch news that is consistent with their tastes or prior beliefs rather than the truth the present paper builds on this idea but recognizes that i besides biased consumers there are also conscientious consumers whose sole interest is in discovering the truth and ii consistent with reality media bias is constrained by the truth these two factors were expected to limit media bias in a competitive setting our results reveal the opposite we find that media bias may increase when there are more conscientious consumers however this increased media bias does not necessarily hurt conscientious consumers who may be able to recover more information from multiple media outlets the more the outlets are biased we discuss the practical implications of these findings for media positioning media pricing media planning and the targeting of advertising

selected works of michael wallerstein centralized bargaining and wage restraint the literature on corporatism has presented much evidence associating highly centralized systems of collective bargaining with wage restraint and relatively successful macroeconomic performance in addition centralized bargaining is associated with relatively small wage differentials this paper presents a model of the impact of centralized wage setting on both real wages and relative wages the central assumption is that the centralization of wage setting at the national level unites unions who are complements in production since a wage increase for one group of workers negatively affects the welfare of other workers who are complements in production centralized wage setters choose wages below the equilibrium of decentralized wage setting it is also shown that if the union confederation maximizes a utilitarian welfare function with equal weights centralized wage setting decreases wage dispersion while low paid workers clearly gain from centralized bargaining high paid workers may prefer that bargaining be decentralized

practice prize reports the practice prize reports consist of one article with two parts as follows sinha ashish j jeffrey inman yantao wang joonwook park attribute drivers a factor analytic choice map approach for understanding choices among skus and tellis gerard j rajesh k chandy deborah macinnis pattana thaivanich modeling the microeffects of television advertising which ad works when where for how long and why

strategic underinvestment in informative advertising the cases of substitutes and complements the authors analyze the strategic pricing and informative advertising decisions made by firms in duopolistic contexts they show that whether the products are substitutes or complements there exist strategic settings in which firms keep potential consumers uninformed about their products even if the advertising cost is zero

the wage curve convexity kinks and composition effects a detailed analysis is provided of the shape of the wage curve using annual time series for norwegian manufacturing the main results are summarized as follows unemployment affects wages significantly and we provide evidence in favour of a monotonically decreasing but highly non linear wage curve the long term unemployed exert less of a wage dampening effect than do recently laid off workers and real wage responsiveness to unemployment seems also to be stronger with higher inflation

the return of lockouts down under in comparative perspective globalization the state and employer militancy virtually unheard of since the great depression lockouts have reemerged strongly in australia and new zealand just as they have all but disappeared in germany the decline of lockouts in germany is convincingly attributed to the enhanced vulnerability of firms to stoppages in certain circumstances amid globalization but the small open economies of australia and new zealand are equally subject to these pressures using macro and micro level data this article illustrates that neoliberal legislative reforms and institutional change have reconfigured the risks costs and payoffs associated with lockouts amid globalization in doing so some flaws in the varieties of capitalism dual convergence literature are highlighted in particular the post hoc classification of the antipodes as liberal market economies bypasses the role of legislative reform in reconstituting employer interests and the differences in electoral party and state structures that impeded facilitated the rise of neoliberal reformers in

the existence and uniqueness of optimal pollution policy in the presence of victim defense measures abstract it is to be expected that rational people defend themselves against pollution externalities at the very least through spatial separation from the source but even in the simplest models defensive behaviour generates nonconvexities multiple optima and inconclusive policy guidance this raises serious questions for the theory of environmental policy which have been largely ignored this paper derives a sufficient condition for a uniquely optimal emissions level in the presence of defensive activity the condition has an intuitive and in principal empirically testable interpretation two strategies for implementation are discussed an iterative tax rule and a non iterative demand revealing mechanism

partially independent central banks politically responsive governments and inflation theories of central bank independence have more exact implications regarding inflation in different political economic environments than generally understood or empirically examined they imply that inflation in any given country time will be a weighted average of what it would be if the central bank completely controlled monetary policy and what it would be if the government completely controlled it with the degree of central bank independence weighting the former an equation embodying this theoretical expectation is estimated by constrained least squares from a time series cross section of inflation rates in developed democracies since the bretton woods era the results confirm that the antiinflationary benefit of central bank independence is not constant but rather depends on every variable in the broader politicaleconomic environment to which wholly autonomous central banks and governments would respond differently conversely the inflationary impacts of all such political economic variables depend on the degree of central bank independence

when good news about your rival is good for you the effect of third party information on the division of channel profits the internet has led to a large number of third party sources that offer high quality information about firms s products at little or no cost to consumers as a result many of these sources have grown in popularity extending well beyond the usual reach of traditional third parties such asconsumer reports andkelly s blue book for example the online version ofedmunds offers at no cost to consumers information about new products existing products long term tests and buyers guides all relating to the automotive industry avweb com delivers weekly aviation news and new product reviews to its readers and a large number of websites follow developments on computer platforms such as the apple macintosh in this paper we analyze how the provision of third party information affects the division of profits in a multiproduct distribution channel to illustrate consider the competition between microsoft and apple in the operating systems os market and their channel relationship to compusa a retailer that sells both macs and windows based pcs consider two pieces of thirdparty information first suppose that cnet an internet technology site reviews the newest upgrade of the macos and writes that the new user interface is even easier to use than previously second suppose that an article in the technology section of thewall street journal notes that changes in apple s networking support now enable macs to be better integrated into pc networks these two pieces of information are similar in the sense that they both express good news about the macos and thus they both can be expected to benefit apple by increasing consumer demand for macs one might also expect that in both cases compusa will capture some of the gains that come from the increased demand for macs and that microsoft will lose because the good news about the macos will induce some consumers to choose macs over windows based pcs however we will show that this intuition is incorrect the two reviews can have surprisingly different implications for the profits of microsoft and compusa the reason is that the two reviews differ on one crucial dimension the group of customers for whom they are primarily relevant the cnet review talks about improvements in the customer interface precisely what apple score consumers care about thewall street journal review talks about compatibility with prevailing pc standards important to consumers who care relatively more about compatibility and who are thus more likely to prefer windows apple snoncore consumers we show that good news about the macos that is more relevant to apple s core consumers the cnet review benefits microsoft but harms compusa while good news about the macos that is more relevant to apple s noncore consumers thewall street journal review has the opposite effect it harms microsoft but benefits compusa stated more generally our main result is that when third party information affects consumers product valuations the type of information that induces the change is critical to understanding which firms gain and which firms lose in particular depending on the type of third party information we find that 1 a retailer can be harmed by good news about a product that it carries 2 a manufacturer can gain from good news about a rival s product and 3 good news about a product category need not benefit all the manufacturers in that category there are three novel features of the analysis first we derive the equilibrium division of profit among firms when a retailer sells the products of competing manufacturers and we have done so while placing few restrictions on the feasible set of contracts second we show how this equilibrium division of profit lends itself to a simple graphical interpretation that depicts which firms gain and which firms lose from third party information third we provide a taxonomy of information types and identify the key features of each type that cause profit incentives to vary in particular we conceptualize information as having three components namely 1 the products to which the information pertains 2 whether the information is positive or negative and 3 the consumers to whom the information is relevant we show that all three information components play a role in determining the change in each firm s profit our framework can also be used to analyze a variety of other settings of interest for example it can be used to analyze profit incentives when the retailer has bargaining power when there is downstream competition and when there are non information based changes in consumers valuations in addition our framework may be used both to analyze the effects on profits of persuasive advertising and to predict advertising content

is having more channels really better a model of competition among commercial television broadcasters competitive behavior in commercial television broadcasting is modeled to examine program choice and the effects of more channels being available on firm strategy specifically broadcasters compete by selecting both the type and quality level of a program to offer but do not compete on price we obtain five major results first a comparison of monopoly and duopoly markets indicates that broadcasters in an industry with a larger number of competitors may provide programs of lower quality compared to broadcasters in an industry with a smaller number second in terms of viewer welfare having more channels available is not necessarily better third broadcasters tend to choose an intermediate level of differentiation in terms of the types of programs they provide resulting in a counterprogramming strategy in other words avoidance of price competition is not required for competitors to differentiate themselves from each other fourth if one broadcaster starts the evening with a higher quality higher rated program than its competitor its second program should also be of higher quality finally a broadcaster s first program should be of equal or higher quality than its second program put another way it always behooves a broadcaster to lead with its best

environmental policy a la carte letting firms choose their regulation under uncertainty the optimal choice between price and quantity instruments depends on the technology of the regulated firms which is often private information we consider an environmental policy that delegates the prices versus quantities decision to the firms by offering them the choice between an emissions tax and permit trading such an approach is currently used in swiss climate policy we provide a detailed characterization of the optimal policy and show that this approach reduces expected social costs compared to a pure tax or permit trading regime we demonstrate that an optimal allocation of firms to instruments can be achieved despite substantial informational constraints and that all firms gain from the introduction of the instrument choice compared to optimally designed single instrument policies furthermore we discuss the conditions under which this approach is likely to be preferable to a hybrid regulation

differentiation with user generated content this paper studies competition between firms whose products content are generated by their customers users video sharing sites social networks online games etc all rely heavily on user generated content and have been growing significantly in the last decade we model a hotelling style market in which consumers have heterogeneous tastes along a circular city in a first step we consider two ex ante identical firms whose offerings entirely depend on user generated content consumers contribute content to the firm they join and benefit from the content provided by the others their valuation being higher the closer the content contributor is to the content consumer i e there are local network effects in such a setting we show that ex ante identical firms can acquire differentiated market positions that spontaneously emerge from user generated content moreover such differentiation may take interesting patterns wherein a firm simultaneously attracts multiple distinct consumer segments that are isolated from each other greater segregation measured by the number of disjoint segments in each platform reduces consumer valuation for content but interestingly it intensifies firm competition we show that this insight can help us refine the set of possible equilibria in a second step we consider firms that explicitly differentiate their offerings by generating some content on their own we show that user generated content may strengthen or defeat firms intended positioning i e firms attract consumers located opposite to their chosen positions and consumer surplus may be higher in the latter case finally we allow multihoming by consumers and show that the previous equilibrium patterns remain valid but in most equilibria a subset of consumers located between rival firms core clienteles are multihomers more multihoming consumers imply reduced differentiation and higher degree of platform competition we relate these findings to anecdotal evidence and explore their strategic implications for competing firms relying on user generated content this paper was accepted by j miguel villas boas marketing

the rise in unemployment a multi country study one of the most remarkable features of recent economic history has been the remorseless rise in unemployment throughout the industrialized countries however while the trend to higher unemployment is universal the experience of individual countries also differs widely the increase is especially marked within the european community where unemployment rates rival those reached in the interwar years by contrast in the scandinavian countries and japan unemployment is lower and has risen very much less experience in the united states lies somewhere between these extremes and in the last few years unemployment there has fallen sharply

sleeping with the enemy should competitors share the same advertising agency the possibility of account conflicts is generally regarded as a very serious problem in the advertising industry the problem is that once an advertising agency works for a firm it learns private information which it can use strategically i e make available to the firm s competitors but in oligopolistic situations knowing more about a competitor may not necessarily be beneficial because the competitor may react to this knowledge similarly allowing the competitor to have more information may not necessarily be detrimental in fact the decision of whether to share the same agency depends on three effects which are identified here 1 the decision making framework effect 2 the strategic effect and 3 the uncertainty effect the first effect always favors sharing the same gency the direction of the latter two effects is ambiguous this ambiguity is resolved against the sharing of agencies when 1 the competitor s reaction to the firm s situation is especially harmful in that particular situation strategic effect and 2 the competitor s actions are increasingly harmful uncertainty effect

the many player advertising game this study extends the time variant closed loop strategy of fruchter and kalish 1997 to the n player advertising game we demonstrate that solving an n player game using 2 players results in overadvertising

a simple model of advertising and subscription fees abstract traditional and modern mass media such as television newspapers magazines and internet sites typically derive the bulk of their revenues from advertisements rather than subscriptions we present a simple model that explains this phenomenon

how strong is the macroeconomic case for downward real wage rigidity we explore the existence of downward real wage rigidity drwr at the industry level based on data from 19 oecd countries for the period 1973 1999 the results show that drwr compresses the distributions of industry wage changes overall as well as for specific geographical regions and time periods but there are not many real wage cuts that are prevented more important however drwr attenuates larger real wage cuts thus leading to higher real wages there is stronger evidence for downward nominal wage rigidity than for drwr real wage cuts are less prevalent in countries with strict employment protection legislation and high union density

optimal quasi market choice in the presence of pollution externalities when the relationship between emissions and ambient pollution is known it is possible to implement a program to achieve economically efficient pollution levels even when the control agency knows nothing about the victim s valuation of pollution damages or about emission abatement costs unlike a pigouvian tax the program provides the correct incentives for entry and exit whether or not marginal damages from a firm s emissions vary over the range of these emissions through the provision of missing markets sizable revenues are raised while allocative distortions are corrected 23 references 3 figures

informative advertising competition this paper investigates informative price advertising in an established product hotelling duopoly where firms compete for shares of a fixed market prices are uncertain because firms costs are private information for a sufficiently low cost of advertising advertising necessarily arises in equilibrium also the less balanced the initial distributions over costs the greater the potential for informative advertising moreover whenever firms use informative advertising it increases the firms expected profits and social welfare relative to the outcome without advertising

efficiency wages and local versus central wage bargaining abstract a simple efficiency wage model is extended to allow for the presence of unions the presence of unions aggravates the unemployment caused by efficiency wage considerations provided the labour demand elasticity is not too much larger than one local firm level wage bargaining gives a higher negotiated wage than central wage bargaining implying higher unemployment under local wage bargaining than under central wage bargaining

the governance of exclusive territories when dealers can bootleg a transaction cost approach is used to investigate a manufacturer s policy towards exclusive territory dealers who bootleg sell across their assigned territories we show that optimal enforcement policies will generally tolerate some level of bootlegging this tolerance is a natural consequence of the transaction cost principle that institutional arrangements are not fully enforceable and that self enforcing implicit agreements will require some degree of tolerance the actual degree of tolerance is determined by a the importance of reseller services b the reduction in margin realized from surreptitious sales and c the resellers beliefs about the manufacturer s long run commitment to the channel we also show that deploying exclusive territories is beneficial to the manufacturer because it safeguards reseller services and permits resellers to capitalize on their superior local information however the latter effect is contingent on being able to convince resellers of the manufacturer s long r

wait unemployment in europe unemployment michael burda the sustained increase in unemployment rates in western europe is a major policy problem not least because of the increasing significance of long term unemployment a large part of cross country differences in long term unemployment rates can be predicted by a simple model of wait unemployment potential workers may refuse low paying jobs and invest in unemployment if this increases the chance that they will subsequently be offered a higher paying job this investment decision is sensitive both to the level of unemployment benefit and to its duration and coverage of the labour force more generous unemployment benefit will tend to increase average unemployment rates the analysis can also explain how increases in the labour force contribute to unemployment and why service sector employment has grown more slowly in europe than in the us over the past 15 years unemployment benefit is not set in a vacuum the paper also considers forces governing the evolution of benefit rates and entitlements during the period

planning media schedules in the presence of dynamic advertising quality a key task of advertising media planners is to determine the best media schedule of advertising exposures for a certainbudget conceptually the planner could choose to do continuous advertising i e schedule ad exposures evenly overall weeks or follow a strategy of pulsing i e advertise in some weeks of the year and not at other times previous theoretical analyses have shown that continuous advertising is optimal for nearly all situations however pulsing schedules are very common in practice either the pract ice of pulsing is inappropriate or extant models have not adequately conceptualized the effects of advertising spending over time this paper offers a model that shows pulsing strategies can generate greater total awareness than the continuous advertising when the effectiveness of advertisement i e adquality varies overtime specifically ad quality declines because of advertising wearout during periods of continuous advertising and it restores due to forgetting effects during periods of no advertising such dynamics make it worth while for advertisers to stop advertising when ad quality becomes very low and wait for ad quality to restore beforestarting the next burst again as is common in practice based on the extensive behavioral research on advertising repetition and advertising wearout we extend the classical nerlove and arrow 1962 model by incorporating the notions of repetition wearout copy wearout and ad quality restoration repetition wearout is a result of excessive frequency beca use ad viewers perceive that there is nothing new to be gained from processing the ad they withdraw their attention or they become unmotivated to react to advertising information copy wearout refers to the decline inad quality due to passage of time independent of the level of frequency ad quality restoration is the enhancement of ad quality during media hiatus as a consequence of viewers forgetting the details of the advertised messages thus making ads appear like new when reintroduced later the proposed model has the property that when wearout effects are present a strategy of pulsing is superior to continuous advertising even when the advertising response function is concave this is illustrated by a numerical example that compares the total awareness generated by a single concentrated pulse of varying duration blitz schedules and continuous advertising the even schedule this property can be explained by the tension between the pressure to spend the fixed media budget quickly to avoid copy wearout and the opposing pressure to spread out the media spending over time to mitigate repetition wearout the proposed model is empirically tested by using brand level data from two advertising awareness tracking studies that also include the actual spen ding schedules the first data set is for a major cereal brand while the other is for a brand of milk chocolate such advertising tracking studies are now a common and popular means for evaluating advertising effectiveness in many markets e g millward brown narketmind in the empirical tests the model parameters are estimated by using the kalman filter procedure which is eminently suited for dynamic models because it attends to the intertemporal dependencies in awareness build up and decay via the use of conditional densities the estimated parameters are statistically significant have the expected signs and are meaningful from both theoretical and managerial viewpoints the proposed model fits both the data sets rather well and better than several well known advertising models namely the vidale wolfe brandaid litmus and trackermodels but not decisively better than the nerlove arrow model however unlike the nerlove arrow model the proposed model yields different total awareness for different strategies of spending the same fixed budget thus allowing media planners to discriminate among several media schedules given the empirical support for the model the paper presents an implementable approach for utilizing it to evaluate large numbers of alternative media schedules and determine the best set of media schedules for consideration in media planning this approach is based on an algorithm that combines a genetic algorithm with the kalman filter procedure the paper presents the results of applying this approach in the case studies of the cereal and milk chocolate brands the form of the best advertising spending strategies in each case was a pulsing strategy and there were many schedules that were an improvement over the media schedule actually used in each campaign

preferred policies when there is a concern for probability of adoption abstract a theory of effective policy choice is developed that recognizes that the probability that a policy is adopted depends on who gains from it who loses and by how much ten pieces of recent environmental legislation are assessed to see how mechanisms such as coupling with other legislation phased implementation and the manipulation of uncertainty can spread benefits and costs several optimizing models are presented that explicitly incorporate the probability of adoption

oligopolistic pricing and advertising abstract n sellers advertise a homogeneous good to m buyers whose only source of information is this advertising there is a unique nash equilibrium ne in which sellers choose a common advertising level and mix over prices this ne approaches marginal cost pricing as advertising costs decrease and approaches monopoly pricing as advertising costs increase more sellers induce lower prices and less advertising per seller however the social welfare effect can be negative for some advertising technologies the ne advertising level is generically less than socially optimal journal of economic literature classification numbers d00 d4 d43 d8 d83 i00 i1 i13 m37

recent developments in dynamic advertising research a variety of continuous time differential functions have been developed to investigate dynamic advertising problems in business and economics fields since major dynamic models appearing before 1995 have been reviewed by a few survey papers we provide a comprehensive review of the dynamic advertising models published after 1995 which are classified into six categories i nerlove arrow model and its extensions ii vidale wolfe model and its extensions iii lanchester model and its extensions iv the diffusion models v dynamic advertising competition models with other attributes and vi empirical studies for dynamic advertising problems for each category we first briefly summarize major relevant before 1995 models and then discuss major after 1995 models in details we find that the dynamic models reviewed in this paper have been extensively used to analyze various advertising problems in the monopoly duopoly oligopoly and supply chain systems our review reveals that the diffusion models have not been used to analyze advertising problems in supply chain operations which may be a research direction in the future moreover we learn from our review that very few publications regarding dynamic advertising problems have considered the supply chain competition we also find that very few researchers have used the diffusion model to investigate the dynamic advertising problems with product quality as a decision variable and the pricing decision has not been incorporated into any extant lanchester model the paper ends with a summary of our review and suggestions on possible research directions in the future

information gatekeepers on the internet and the competitiveness of homogeneous product markets we examine the equilibrium interaction between a market for price information controlled by a gatekeeper and the homogenous product market it serves the gatekeeper charges fees to firms that advertise prices on its internet site and to consumers who access the list of advertised prices gatekeeper profits are maximized in an equilibrium where a the product market exhibits price dispersion b access fees are sufficiently low that all consumers subscribe c advertising fees exceed socially optimal levels thus inducing partial firm participation and d advertised prices are below unadvertised prices introducing the market for information has ambiguous social welfare effects

a generalized utility model of disappointment and regret effects on post choice valuation in this paper we show that performance information about forgone alternatives i e alternative that were considered but not chosen can have a significant impact on post choice valuation our approach introduces a new and parsimonious way of looking at satisfaction that combines the literature on post choice valuation with research regarding generalized expected utility theory while the post valuation literature focuses on the selected brand as the valuation s basis e g anderson and sullivan anderson e w m w sullivan 1993 the antecedents and consequences of customer satisfaction for firms marketing sci 12spring 125 143 bolton and drew bolton r j drew 1991 a multistage model of customers assessments of service quality and value j consumer res 17 375 384 we draw on a stream of research in generalized expected utility theory that considers both chosen and forgone alternatives as the basis for valuation e g bell bell d 1983 risk premiums for decision regret management sci 29 1156 1166 and bell d 1985 disappointment in decision making under uncertainty oper res 33 1 27 loomes and sugden loomes g r sugden 1982 regret theory an alternative theory of rational choice under uncertainty the econom j 92 805 824 and loomes g r sugden 1986 disappointment and dynamic consistency in choice under uncertainty rev econom stud 53 271 282 the result is a combined model of post choice valuation that explicitly incorporates both concepts specifically we extend the existing paradigm of post choice valuation to include buyers regret concerning forgone alternatives proposing a generalized utility theory based treatment of post choice product assessment that uses the intuitively appealing concepts of disappointment and regret as the basis we propose a model for conceptualizing post choice valuation that is consistent with the existing literature discuss how this model extends the construct to consider the influence of forgone alternatives and report results of an empirical test that contrasts our model to important recent work in the area e g boulding et al boulding w a kalra r staelin v a zeithaml 1993 a dynamic process model of service quality from expectations to behavioral intentions j marketing res 30february 7 27 our generalized model of post choice valuation is based on the sum of three components that represent factors that may contribute to consumers assessment of a chosen product or service the first component is expected performance the second component is disappointment which captures the discrepancy between actual and expected performance much as the disconfirmation construct in traditional satisfaction research the third component is regret which captures the difference between the performance of the chosen product service and the performance of a forgone product service this perspective is useful in that risk is captured by the disappointment and regret terms providing an intuitively appealing decomposition of post choice valuation and offering several advances over previous representations of disappointment and regret we test our model via a choice experiment participants in the empirical study were asked to make choices between successive lottery pairs they were then given outcome feedback on the forgone alternative as well as on the chosen alternative in each lottery pair immediately following outcome feedback for each choice subjects were asked to evaluate their decision our results clearly suggest an effect of regret on post choice valuation information about the forgone alternative influenced subjects valuation of the chosen alternative we also find evidence that as predicted the effects of disappointment and regret on post choice valuation are asymmetric specifically the negative effect of disappointment on post choice valuation was greater than the positive effect of elation similarly the negative effect of regret was greater than the positive impact of rejoicing our research offers five contributions to the literature on post choice valuation first our results illustrate the advantage of using generalized utility theory as the basis for conceptualizing and modeling post choice valuation we derive a model of post choice valuation that formally captures the components of disappointment and regret and show that the outcome of both the chosen alternative through disappointment and a forgone alternative through regret can influence the chosen alternative s valuation second we formally integrate the concepts of disappointment and regret which have been examined separately for many years into a single model based on a multiattribute preference structure third we argue that the effects of disappointment and regret on post choice valuation are asymmetric and present empirical evidence in this regard fourth our results suggest that word of mouth regarding forgone alternatives may affect post choice valuation extending research that has not heretofore considered forgone outcomes role in this process finally our development provides a preconsumption measure of potential disappointment and regret in modeling choice at the time of choice consumers may visualize the feelings of disappointment and or regret that will be derived at consumption taking into account both the chosen brand and forgone brands our generalized utility theory based approach to the post choice valuation construct can be useful in examining the role of disappointment and regret as preconsumption constructs

business models for media firms does competition matter for how they raise revenue the purpose of this article is to analyze how competitive forces may influence the way media firms like tv channels raise revenue a media firm can either be financed by advertising revenue by direct payment from the viewers or the readers if we consider newspapers or by both we show that the scope for raising revenues from consumer payment is constrained by other media firms offering close substitutes this implies that the less differentiated the media firms content the larger is the fraction of their revenue coming from advertising a media firm s scope for raising revenues from ads on the other hand is constrained by how many competitors it faces we should thus expect that direct payment from the media consumers becomes more important the larger the number of competing media products