optimal dynamic price selection under attraction choice models abstract we present a single resource finite horizon markov decision process approach for a firm that seeks to maximize expected revenues by dynamically adjusting the menu of offered products and their prices to be selected from a finite set of alternative values predetermined as a matter of policy consumers choose among available products according to an attraction choice model a special but widely applied class of discrete choice models the fractional substructure inherent to attraction choice models enables the derivation of structural properties that significantly simplify the computation of an optimal policy we show that the more capacity or less time is remaining the lower are the optimal prices we develop an exact solution procedure for preprocessing and recursively solving price selection problems that clearly outperforms current revenue management approaches with respect to computational complexity furthermore we demonstrate that the potential revenue improvements from dynamic compared to fixed pricing can be significant ranging from 4 5 up to 149 for selected examples from the literature extensions to multiple resources and to related discrete choice models are discussed

not all price endings are created equal price points and asymmetric price rigidity abstract we document an asymmetry in the rigidity of 9 ending prices relative to non 9 ending prices consumers have difficulty noticing higher prices if they are 9 ending or noticing price increases if the new prices are 9 ending because 9 endings are used as a signal for low prices price setters respond strategically to the consumer heuristic by setting 9 ending prices more often after price increases than after price decreases 9 ending prices therefore remain 9 ending more often after price increases than after price decreases leading to asymmetric rigidity 9 ending prices are more rigid upward than downward these findings hold for both transaction prices and regular prices and for both inflation and no inflation periods

a new look at the returns and risks to pharmaceutical r d this study investigates the returns to r d for 100 new drugs introduced into the united states during the decade of the 1970s in contrast to prior studies it incorporates several significant structural changes that have occurred in the pharmaceutical industry during the 1980s these include higher real drug prices and a greater degree of generic competition a major finding is that the return on r d for the average new drug is approximately equal to the 9 percent industry cost of capital however the performance of new drugs introduced during the latter half of the 1970s was markedly better than that of early 1970s introductions this latter finding is consistent with the more rapid rate of industry growth in real r d expenditures the study also finds that the variation in returns is highly skewed with only the top 30 drugs covering mean r d costs on a fully allocated basis finally it is shown that real drug price increases in the 1980s were necessary for the average new drug introduction to recover its r d costs

cognitive limitation and investment performance evidence from limit order clustering we hypothesize that cognitive limitation may be manifested in a disproportionately large volume of limit orders submitted at round number prices if investors use these numbers as cognitive shortcuts using detailed limit order data in the taiwan futures exchange we find that investors with lower cognitive abilities defined as higher limit order submission ratios at round numbers suffer greater losses in their round numbered and non round numbered limit orders market orders and round trip trades the positive correlation between cognitive ability and investment performance is monotonic and robust across futures and options markets in addition past trading experience helps mitigate cognitive limitation

industry and firm specific factors of innovation novelty this article investigates the underlying factors that might shape the firm s choices with respect to degrees of innovation novelty using a sample of 2983 firms observed under the portuguese community innovation survey we assess the relative relevance of a set of firm and industry specific factors in explaining firms choices about incremental or radical innovation the results indicate that both the firm s idiosyncratic historical factors giving rise to heterogeneous r d capabilities and the industry context have power to shape the firm s innovation choices even though firm specific factors appear to be more powerful the estimated impacts on firm s innovation novelty are nonetheless significantly moderated by the type of firm and industry

penny wise and pound foolish the left digit effect in price cognition through five experiments we provide a cognitive account of when and why nine ending prices are perceived to be smaller than a price one cent higher first this occurs only when the leftmost digits of the prices differ e g 2 99 vs 3 00 second the left digit effect also depends on the numerical and psychological distances between the target price and a competing product s price the closer the two prices being compared the more likely is the left digit effect third the left digit effect is not restricted to the domain of prices it also manifests with other multidigit numbers

do subjects from high and low context cultures attribute different meanings to tourism services with 9 ending prices abstract four symbolic meanings have been associated with 9 ending prices discount price enhanced value low quality and misleading action scales were developed to measure each meaning and the relative strength of these meanings in influencing tourists purchases among samples from the u s korea and china was investigated the analyses found no differences in the likelihood of tourists selecting 9 ending rather than even ending prices when purchasing a sandwich a pizza or show tickets in their relative importance across cultures or in the influence on purchase decisions of different symbolic meanings associated with 9 endings however a 9 ending discount was perceived to be more effective when compared to even ended price discounts in the context of a hotel room again however its effectiveness could not be explained by the different symbolic meanings associated with 9 ending prices

the dynamics of technological innovation the sector of antibacterial medicines abstract this is an empirical and historical study of the dynamics of technological innovation in antibacterial medicines a key sector of the pharmaceutical industry it is based on an analysis of all the innovations that were introduced over the period 1935 1987 from prontosil the first sulphonamide through penicillin and the semisynthetic antibiotics to the monobactams and the quinolones of the mid 1980s in the historical section we describe the influence that antibacterial medicines have had on the structure and research intensity of the innovating companies and through them on the pharmaceutical industry and its geography we also describe the catalytic role played by government agencies and universities in the empirical section the innovations are evaluated in terms of originality and market performance and are classified into four technological trajectories their distribution over time and among technological trajectories companies and countries the relation between originality and market performance of individual innovations the interplay between social needs market demand and technological innovation the role of market successful radical innovations in the launching of technological trajectories the orientation of subsequent academic and industrial research and the establishment of corporate technology traditions provide insights in both innovation theory and the dynamics of technological innovation

round prices and price rigidity evidence from outlawing odd prices abstract this paper exploits a legal change in israel that banned the use of non zero digit price endings e g 6 99 to study the relationship between digit price endings and price rigidity we compare the propensity of product prices to change before and after the ban while distinguishing between products whose prices ended with a zero and products whose prices did not end with a zero digit before the ban we find that before the ban zero digit price endings were more likely to change typically upward compared with products with non zero digit price endings after the legal change these differences disappeared overall these findings support the price point theory blinder 1991

the politics of digits evidence of odd taxation from the concept of odd pricing i e setting rightmost price digits below a whole number this paper advances the political counterpart of odd taxation using a panel of danish municipal taxes first the distribution of tax decimals is non uniform and resembles the distribution of price endings data second nine ending and other higher end decimals are found to be over represented which echoes odd pricing research it suggests that incumbents take voters biases into account and apply odd taxes to minimize the political costs of taxation while maximizing revenue attention should be given to how policy digits are arranged to exploit voters cognitive biases

sources procedures and microeconomic effects of innovation fabio arcangeli paul david frank engelman christopher freeman massimo moggi richard nelson luigi orsenigo nathan rosenberg michele salvati g n von tunzelman two anonymous referees and the participants at the meeting of the committee on distribution growth and technical progress of the italian national research council cnr rome november 16 1985 have helped with various redraftings a particularly grateful acknowledgment is for the insightful and patient help of moses abramovitz this work has been undertaken at the science policy research unit spru university of sussex as part of the research program of the designated research centre sponsored by the economic and social research council esrc earlier support to the research that led to this paper by the italian national research council cnr is also gratefully acknowledged the statistical research has been undertaken with the assistance of stephano brioschi ilaria fornari and giovannu prennushi

innovation regimes r d and radical innovations in telecommunications abstract by introducing the concept of innovation regimes the aim of this article is to show how the rapid pace of technological development in the telecom sector may be explained by the close links between the sector s own r d and the creation of numerous innovations many of which are radical in contemporary innovation theory a theoretical antinomy exists whereas the creation of incremental innovations is variously explained in terms of rational responses to markets dynamics of technological regimes dominant design etc radical innovations in contrast are explained in terms of serendipity chance or haphazard scientific discoveries evidence from analysis of innovations in the telecom sector suggests that innovation regimes have provided a capability of coordination direction and leadership in the creation of many of the radical technological innovations that have emerged in the sector thus one may claim that the strong innovation regimes and high r d intensity of the telecom sector at least until recently have provided a capability of creating innovations on purpose for a purpose the policy implications of this contradict some of the assumptions on which the prevailing market oriented r d governance models and policies are based and which are supported by contemporary innovation theories

are sale signs less effective when more products have them we analyze data from a variety of sources including historical data from a women s clothing catalog a field study in that catalog survey responses to catalog stimuli and grocery store data for frozen juice toothpaste and tuna the analysis yields three conclusions first sale signs are less effective at increasing demand when more items have them second total category sales are maximized when some but not all products have sale signs third placing a sale sign on a product reduces the perceived likelihood that the product will be available at a lower price in the future but the effect is smaller when more products have sale signs by ruling out alternative hypotheses the findings suggest that moderation of the sale sign effect is in part due to reduced credibility when they are used on more products the credibility argument is motivated in part by a recent paper that presented an equilibrium model predicting that customers who lack knowledge of market prices rely on point of purchase sale signs to help evaluate posted prices anderson and simester 1998 the model predicts that sale signs increase demand but that the increase is smaller when more products have them this moderating effect regulates how many sale signs stores use and makes customer reliance on these cues an equilibrium strategy to evaluate whether the number of sale signs moderates their effectiveness we compare demand for items with sale signs when varying the number of sale signs on other products for this comparison we use two datasets describing demand for products in a women s clothing catalog the first dataset describes customer orders for the same set of items across three sequential issues of the catalog the second dataset is a field test conducted by mailing different versions of the catalog to randomly selected customer samples reassuringly although the datasets do not share the same limitations the findings are consistent and indicate that sale signs are less effective when more products have them in addition to the credibility explanation there are at least two alternative explanations for this result first using a sale sign to make a product more attractive may lead to substitution of demand from other sale items within a store and so demand may vary even if there is no change in the credibility of the sale signs to discriminate between the substitution and credibility explanations we evaluate whether total category demand is maximized when some but not all products in the category have sale signs the credibility explanation implies that adding another sale sign will eventually decrease total category sales when many items already have sale signs in contrast if adding a sale sign to an item leads solely to substitution from other products within or outside the category we will not observe a decrease in total category demand we test the total category sales prediction using grocery store scan data describing total category demand for frozen juice toothpaste and canned tuna the findings reveal that in all three categories there is a significant reduction in aggregate demand a second alternative explanation is that sale signs focus customer attention on products with these cues distinguishing between the attention and credibility explanations is a difficult task they both imply that sale signs deliver less information when there are too many sale signs the credibility argument predicts that this occurs because the signs are noticed but not believed the attention explanation predicts that the signs are less likely to be noticed when attention is diluted by a large number of sale signs to discriminate between the credibility explanation and this attention effect we use survey measures to evaluate a third hypothesis this hypothesis predicts both that placing a sale sign on a product reduces the perceived likelihood that the product will be available at a lower price in the next period and that this effect is smaller when more items have them in an attempt to control for the attention effect we focus subjects attention on a set of focal items under these conditions it is unlikely that subjects overlook sale signs on these items more important the likelihood of overlooking sale signs on the focal items is unlikely to depend on how many other items also have sale signs the results confirm both that the presence of a sale sign reduced subjects expectations that an item would be available at a lower price in the future and that this effect is smaller when more items have sale signs

present at the biotechnological revolution transformation of technological identity for a large incumbent pharmaceutical firm abstract management of successful incumbent firms experience difficulty in recognizing the need for and effecting change in the firm s technological identity after an externally generated shift in the industry s technological trajectory nonetheless some large pharmaceutical firms have transformed their technological identity in drug discovery from a chemical random screening to biological drug design model we report how one of the world s most successful incumbents transformed technically sophisticated senior management championed the transformation it was achieved primarily through hiring many new scientists embodying biotechnology existing personnel acquired the expertise or left continual self transformation is part of the corporate ethos some differences in incumbent and entrant technology remain incumbents use a wider range of techniques consistent with their complementary assets publication and incentive compensation policies are driven by the need to attract and retain the best scientists professor firm collaborations are ubiquitous often non public and best identified in quantitative analyses by co publishing collaborations with new biotechnology firms are used primarily to substitute for developing internal expertise judged of marginal value no drug discovery collaborations exist with other major incumbents we identify another seven or eight incumbents similarly transforming as indicated by top scientific talent and patenting success

penny wise dollar foolish buy sell imbalances on and around round numbers this paper provides evidence that stock traders focus on round numbers as cognitive reference points for value using a random sample of more than 100 million stock transactions we find excess buying selling by liquidity demanders at all price points one penny below above round numbers further the size of the buy sell imbalance is monotonic in the roundness of the adjacent round number i e largest adjacent to integers second largest adjacent to half dollars etc conditioning on the price path we find much stronger excess buying selling by liquidity demanders when the ask falls bid rises to reach the integer than when it crosses the integer we discuss and test three explanations for these results finally 24 hour returns also vary by price point and buy sell imbalances are a major determinant of that variation across price points buying selling by liquidity demanders below above round numbers yield losses approaching 1 billion per year this paper was accepted by brad barber teck ho and terrance odean special issue editors

academic research and industrial innovation the purpose of this study is to estimate the extent to which technological innovations in various industries have been based on recent academic research and the time lags between the investment in recent academic research projects and the industrial utilization of their findings because no attempt to my knowledge has been made to estimate the social rate of return from academic research we also make some rough and tentative estimates of this sort while the results are subject to many limitations discussed below they should be of interest to public policy makers concerned with science and technology as well as to

knowledge sources patent protection and commercialization of pharmaceutical innovations abstract this paper investigates different types of innovations from radical to incremental in the pharmaceutical industry by studying bibliometric data of drugs approved by the united states food and drug administration fda looking at time to market aspects knowledge sources of these innovations and protection strategies scientific knowledge stemming from the public sector is found to be important for all innovations nevertheless radical innovations build on a higher degree on basic research and they build on a significantly higher share of own prior scientific research than do incremental innovations furthermore each drug is shown to be accompanied by on average about 19 journal publications and 23 additional patents additional patent filings peak when the commercialization of the drug is in reach firms do not differ among the various types of innovations regarding the amount of additional patent filings but rather with the speed of filing these patents finally this work contributes to the improvement of future econometric analyses that aim to link bibliometric indicators such as patent or publication counts to firm success

when more seems like less differential price framing increases the choice share of higher priced options four experiments supported by six supplemental studies show that premium but higher priced products e g direct flights larger capacity data storage devices are more popular when the additional

rounding up in reported eps behavioral thresholds and earnings management abstract reported earnings per share eps are frequently rounded to the nearest cent this paper provides evidence that firms manipulate earnings so that they can round up and report one more cent of eps specifically we examine the digit immediately right of the decimal in the calculated eps number expressed in cents evidence is presented that firms are more likely to round up when managers ex ante expect rounding up to meet analysts forecasts report positive profits or sustain recent performance further investigation provides evidence that working capital accruals are used to round up eps

price endings left digit effects and choice past research has found that changes in price endings can result in left digit effects whereby the magnitude of an item s price relative to the price of a reference product is influenced by the leftmost digits of both prices we extend this work by investigating the impact of changes in price endings and associated leftmost price digits on choice findings indicate that assigning different combinations of price endings to two products e g 2 00 and 2 99 vs 1 99 and 3 00 vs 2 00 and 3 00 can shift choice share toward the lower or higher priced alternative we also find that changes between just below e g 29 99 and 39 99 and round e g 30 00 and 40 00 pricing affect choice with just below pricing shifting share toward lower priced alternatives the latter effects are found to be moderated by price level and shopping goals a three path mediation model reveals the processes underlying the influence of price endings on choice

price clustering of chinese ipos the impact of regulation cultural factors and negotiation abstractduring june 2009 may 2012 the china securities regulatory commission csrc suspended window guidance that limits issue prices using this regime change as a natural experiment we test th

market price variation perceived price variation and consumers price search decisions for durable goods previous studies have consistently found that most consumers undertake relatively little prepurchase search for durable goods and do even less price comparison shopping despite the reported importance of price to consumers purchase decisions this article proposes and tests two possible explanations for why consumers willingness to engage in price search does not increase concomitantly with the price variation of durable goods the first potential explanation that consumers simply underestimate the market price variation was not supported the second possible explanation which builds upon weber s law of psychophysics and thaler s transaction utility theory was supported the data indicate that the psychological utility that a consumer derives from saving a fixed amount of money is inversely related to the price of the item in this case even if consumers believe that the price variation of more expensive items tends to be greater their motivation to spend time in price comparison shopping for these items may not increase as much as expected

accounting for changing prices the value relevance of historical cost price level and replacement cost accounting in mexico this paper investigates the value relevance of historical cost price level and replacement cost accounting using a sample of mexican firms from 1989 to 1995 it contributes to prior research by distinguishing between two distinct aspects of changing prices 1 the change in the general price level and 2 the change in the value of specific non monetary assets i select mexico to examine because it is unique in requiring and disclosing separately price level and replacement cost adjustments a sample of mexican firms also addresses a key reason cited for mixed results in previous assessments of the usefulness of price level and replacement cost accounting using united states data the effects of inflation are too weak to detect high rates of inflation in mexico ranging between 7 and 52 during the sample period mitigate that potential problem results indicate that replacement cost adjustments are relatively and incrementally relevant beyond historical cost and price level measures while price level adjustments are incrementally value relevant beyond historical measures

the price precision effect evidence from laboratory and market data we examine two questions does the roundness or precision of prices bias magnitude judgments if so do these biased judgments affect buyer behavior results from five studies suggest that buyers underestimate the magnitudes of precise prices we term this the precision effect the first three studies are laboratory experiments designed to test the existence of the precision effect and examine the underlying psychological processes in study 1 we find that precise prices are judged to be smaller than round prices of similar magnitudes for example participants in this experiment incorrectly judged 395 425 to be smaller than 395 000 in study 2 we show that precision is more likely to affect magnitude judgments under conditions of uncertainty study 3 demonstrates that manipulating prior experience with the pattern of roundness and precision in numbers can moderate the precision effect studies 4 and 5 examine whether the precision effect influences buyers willingness to pay for negotiated purchases e g houses in study 4 we conduct an experiment on a nationally representative sample of homeowners to demonstrate that participants are willing to pay more for houses when the sellers use precise e g 364 578 instead of comparable round e g 365 000 prices in study 5 we analyze data from residential real estate transactions in two separate markets and find that buyers pay higher sale prices when list prices are more precise these empirical results enrich our understanding of the psychological processes that underlie price magnitude judgments and have substantive implications for buyer and seller behavior

evidence on income measurement properties of asr no 190 and sfas no 33 data a number of studies have tested the association between security returns or levels of market value and current cost accounting data as reported under sec accounting series release no 190 asr 190 and statement of financial accounting standards no 33 sfas 33 for example beaver griffin and landsman 1982 henceforth bgl beaver and landsman 1983 henceforth bl and olsen 1985 found no association while bublitz frecka and mckeown 1985 henceforth bfm and murdoch 1986 found a weak association 1 in this paper we estimate cross section regressions of security returns on historical cost net income and holding gains as was done previously but with several extensions first we define our variables in terms of realizations of returns income and holding gains rather than in terms of unexpected changes thus we

uncertainty resolution and the theory of depreciation measurement this paper examines how a firm s depreciation policy influences the relation between the resulting accounting numbers and the market value of the firm s equity traditional financial accounting theory conceptualizes depreciation measurement as a cost allocation procedure that matches an investment s cost with the flow of benefits it produces as has long been recognized in a setting with certain future cash flows and zero net present value npv investments investment costs can be allocated using standard present value techniques to yield at each date book values equal to market values and accounting earnings equal to economic earnings 2 the resulting book value and accounting earnings numbers are such that for all periods the book rate of return equals the cost of

an empirical analysis of price endings with scanner data several consumer behavior theories have been offered to explain the preponderance of prices that end in the digit 9 this study attempts to incorporate these proposed behaviors into the implicit utility function of consumer choice models resulting in both a more accurate tool for managerial decision making and additional insights into how consumers actually behave toward price endings an attempt is made to compensate for both level effects those effects in which consumers may underestimate the value of a price and image effects those effects in which consumers may infer meaning from the right hand digits the models are estimated using scanner panel data for two frequently purchased products tuna and yogurt the results support the importance of accounting for the digits in consumer choice models providing evidence for both image effects and level effects

tobin s q and the importance of focus in firm performance using tobin s q as a measure of performance we seek to estimate the relative importance of industry focus and share effects in determining firm performance our methods are analogous to those of richard schmalensee and like him we find that industry effects account for the majority of the explained variance however we also find that firm effects exist in the form of focus effects that is narrowly diversified firms do better than widely diversified firms we interpret this finding as consistent with profit maximization by firms with different factor endowments

prices for cash and cash for prices theory and evidence on convenient pricing a transaction between a seller and a buyer incurs a payment cost the payment cost is borne by the seller depending on the payment instrument the buyer chooses cash or card card payment is more costly than cash payment so the seller prefers that the buyer pays cash in this article we study the strategy of the seller setting a convenient price which simplifies transactions and pushes the buyer to pay cash the theoretical analysis which models both the seller and the buyer in a game setting derives two propositions 1 the seller is more likely to set a more convenient price and 2 the buyer is more likely to pay cash a more convenient price the empirical analysis supports both propositions thus sellers adopt a convenience pricing strategy prices for cash and this strategy pushes buyers to pay cash cash for prices

what percentage of innovations are patented empirical estimates for european firms abstract a 1993 survey on the innovative activities of europe s largest industrial firms obtained useable results on patenting activities for 604 respondents the data are used to calculate the sales weighted propensity rates for 19 industries the propensity rates equal the percentage of innovations for which a patent application is made the propensity rates for product innovations average 35 9 varying between 8 1 in textiles and 79 2 in pharmaceuticals the average for process innovations is 24 8 varying from 8 1 in textiles to 46 8 for precision instruments only four sectors have patent propensity rates for both product and process innovations combined that exceed 50 pharmaceuticals chemicals machinery and precision instruments regression results that control for the effect of industry sector show that patent propensity rates increase with firm size and are higher among firms that find patents to be an important method for preventing competitors from copying both product and process innovations the effect of secrecy is not so straightforward firms that find secrecy to be an important protection method for product innovations are less likely to patent as expected but secrecy has little effect on the propensity to patent process innovations the r d intensity of the firm has no effect on patent propensity rates for both product and process innovations the sector of activity has a strong influence on product patent propensities but very little effect on process patent propensities after controlling for the effect of other factors

why do firms do basic research with their own money abstractthe question to be addressed is why do private firms perform basic research with their own money interest in this question derives from both analytical and utilitarian considerations there is empirical evidence in the united states which provides the main context for this paper supporting the view that basic research makes a significant contribution to the productivity growth of the economy 4 7 it is widely held that social returns from basic research are significant and higher than private returns and it is for this reason that most such activities continue to be financed by the taxpayer this also implies that measures aimed at increasing basic research by the private sector will be welfare improving in the united states the federal government in the years since the second world war has provided the vast majority of all funds devoted to basic research although the federal share has been declining in recent years and although that share is at its lowest level in about 20 years it still constitutes about two thirds of the total 10 this abstract was borrowed from another version of this item

price endings when prices signal quality this paper provides a theoretical explanation for why firms behave as though they use round prices to signal quality by replacing the linear demand curve in bagwell and riordan s 1991 price as a signal of quality model with a kinked demand curve and analyzing what price endings firms are most likely to use the following observations can be made 1 firms that are using high prices to signal quality are more likely to set those prices at round numbers and 2 price endings themselves are not necessarily signals of quality a simulation was conducted to demonstrate that these findings generally hold true even in the presence of demand spikes at 9 ending prices e g schindler and kibarian 1996 finally empirical evidence is provided to demonstrate that firms tend to use more round prices for higherquality products and that this relationship is even stronger for product categories where consumers are less able to detect the true level of quality prior to purchase

the dynamics of technological innovation the case of the pharmaceutical industry abstract this paper examines the mechanisms and dynamics of the process of innovation in companies and sectors of the chemical industry it is based on analysis of science and technology output indicators namely patents and innovations evaluated in terms of originality and in the case of innovations in terms of market success as well radical innovation ri is identified as the kingpin for the evolution of technologies in both the micro and macro economic context not only because it provides a model for imitation but also because it turns out to be more profitable for the innovating companies than incremental innovation at the micro economic level this paper examines the significance of diverse driving forces which lead a company to the launching of projects aiming at ri measures the length of commitment to such projects and describes the dynamic effects generated by the introduction of a successful ri and how they affect the company s subsequent r d and market orientation at the macro economic level this paper identifies the stages of youth growth maturity and decline of the subsectors of the chemical industry examines the distribution of ri and market successful innovations over the development of a sector describes the influence of market demand and capital investment on technological advance and compares the development of national chemical industries the paper concludes with an account of the dynamics of technological innovation in the chemical industry over the period 1930 1985 which is based on the empirical findings of the previous sections

clustering in crude oil prices and the target pricing zone hypothesis abstract this paper studies the target pricing zone tpz hypothesis for crude oil by examining price clustering in the dollar digit it is hypothesized that price clustering occurs within an established tpz if opec is able to defend the upper and lower bounds through output changes the results show that prices strongly cluster around the dollar digit value of 9 within the tpz sub periods but not outside the sub periods furthermore the degree of clustering declines when production capacity utilization is high and when production significantly exceeds quotas consistent with opec s inability to defend the zone nine centered clustering also results in lower contemporaneous and next day volatility these results support the target pricing zone hypothesis of crude oil

marketing driven channel coordination with revenue sharing contracts under price promotion to end customers this paper explores the equilibrium behavior of a basic supplier retailer distribution channel with and without revenue sharing contracts under price promotion to end customers three types of promotional demand patterns characterized by different features of dynamic price sensitivity are considered to rationalize price promotional effects on end customer demands under such a retail price promotion scheme this work develops a basic model to investigate decentralized channel members equilibrium decisions in pricing and logistics operations using a two stage stackelberg game approach extending from the basic model this work further derives the equilibrium solutions of the dyadic members under channel coordination with revenue sharing contracts analytical results show that under certain conditions both the supplier and retailer can gain more profits through revenue sharing contracts by means of appropriate promotional pricing strategies moreover the supplier should provide additional economic incentives to the retailer furthermore a counter profit revenue sharing chain effect is found in the illustrative examples such a phenomenon infers that the more the retailer requests to share from a unit of sale the more it may lose under the revenue sharing supply chain coordination scheme

pricing in inflationary times the penny drops how does the frequency and magnitude of micro price rises and falls relate to macroeconomic crisis as well as moderation weekly micropricing behaviour in british groceries was investigated across three leading retailers over the moderation period 2004 7 and the crisis period 2008 10 we find significant price flexibility sharply distinguished from behaviour observed in most previous works downward price flexibility increased markedly in 2008 overall basket prices rise but significantly more individual prices fall than rise in the latter period tests of obfuscation in price setting suggested that large numbers of small price falls were used to disguise the basket price rises

a psychological reexamination of the bertrand paradox the bertrand paradox describes a situation in which two competing firms reach an outcome where both price at marginal cost in laboratory experiments this equilibrium is not generally observed existing empirical works on bertrand competition have found evidence for boundedly rational models we find that such models are useful in organizing behavior in early stages of the game but less so in later stages we show that a new model coarse grid nash equilibrium based on the assumption that subjects discretize the strategy space explains the data better

foreign currency translation and changing prices in perfect and complete markets our purpose is to explore some properties of the major methods of foreign currency translation under the assumptions of perfect and complete markets in doing so we identify a set of sufficient conditions under which the various methods possess properties claimed by their advocates moreover the role played by the controversial and elusive translation gain or loss becomes clearly defined neither the properties of the various methods nor the role of the translation gain or loss are obvious notwithstanding the considerable debate during the recent attempt to resolve the issue in the policy domain in order to interpret the disclosures under the various methods of translation it is necessary to make an assumption about the economic forces that induce changes in the exchange rates the perspective we adopt is that changes in exchange rates are driven solely by differential rates of inflation among the respective countries given this assumption we analyze the properties of three accounting models translation methods historical cost accounting with foreign denominated subsidiary financial statements translated at historical rates of exchange compre

secondary pharmaceutical patenting a global perspective abstract pharmaceutical firms use of secondary patents to extend periods of exclusivity generates concerns among policymakers worldwide in response some developing countries have introduced measures to curb the grant of these patents while these measures have received considerable attention there is limited evidence on their effectiveness we follow a large sample of international patent applications in the us japan the european patent office and corresponding filings in three developing countries with restrictions on secondary patents india brazil and argentina we compare primary vs secondary grant rates across countries consider the differential fates of twin applications filed in multiple countries and undertake detailed analyses of patent prosecution in the three developing countries our analyses indicate that measures to restrict secondary patents in developing countries are having limited impact in none of these three countries are specific policies toward secondary patents the principal determinant of grant rates our analyses also suggest the importance of other procedural aspects of patent systems beyond the formal policies targeting secondary applications that affect outcomes for these applications in developing countries

absorptive capacity coauthoring behavior and the organization of research in drug discovery we examine the interface between for profit and publicly funded research in pharmaceuticals firms access upstream basic research through investments in absorptive capacity in the form of in house basic research and pro publication internal incentives some firms also maintain extensive connections to the wider scientific community which we measure using data on coauthorship of scientific papers between pharmaceutical company scientists and publicly funded researchers connectedness is significantly correlated with firms internal organization as well as their performance in drug discovery the estimated impact of connectedness on private research productivity implies a substantial return to public investments in basic research

the use of odd ending numbers in the pricing of five tourism services in three different cultures abstract the study measured the extent to which the 1 through 9 digits were used as price endings by suppliers of five tourism services in three different cultures represented by new york city seoul and shanghai four results emerged the first confirmed the hypothesis but the other three results were contrary to expectations first 9 and 8 ending prices were dominant in new york city and in shanghai respectively second these culture specific endings were complemented by the universality of the 0 and 5 digit endings of prices which were ranked first and second respectively in seoul second and third in shanghai and third and second in new york third 9 ending prices were not used more frequently when they resulted in a lowering of the leftmost digit fourth dominant cultural specific price endings were not used more frequently in lower than in higher priced tourism services

the incremental information content of replacement cost earnings abstract the study explores the incremental explanatory power of replacement cost earnings variables derived from asr 190 data with respect to explaining cross sectional differences in security returns as such the study is a natural extension of previous research including analyses of the effect of security returns of asr 190 data at the time of disclosure investigations of cross sectional relationships between security returns and historical cost earnings and studies of multiple signals the basic finding is that pre holding gain net income provides no incremental explanatory powerm given knowledge of historical cost earnings however the converse does not hold taken together the findings are consistent with the contention that pre holding gain net income is a garbled version of historical cost earnings the basic finding is robust under several extensions of the initial research design the research design incorporates a two stage approach which permits a determination of the incremental explanatory power of collinear variables the findings are in contrast to those of a previous study by easman et al 1979 the nature of the difference in research design inducing the difference is identified potential reasons for the difference in findings are provided

end of 9 endings price recall and price perceptions prices that end with 9 also known as psychological price points are common comprising about 70 of the retail prices they are also more rigid than other prices we take advantage of a natural experiment to document an emergence of a new price ending that has the same effects as 9 endings in january 2014 the israeli government passed a new regulation prohibiting the use of non 0 ending prices bringing an end to 9 ending prices we find that seven months after 9 ending prices have disappeared 90 ending prices acquired the same status as 9 ending prices had before the new regulation was adopted thus 90 ending prices became the new psychological price points partially eliminating the regulation s intended effect

the influence of preciseness of price information on the travel option choice abstract 159 99 159 38 or 160 00 the phenomenon of pricing around a rounded number with apparent preciseness is commonly observed in the marketplace much research has been conducted in the general area and has established that the use of precise prices those without a zero ending tends to lead to increased sales and to a more positive customer attitude to date the best explanation offered is that most people read from left to right so the last numbers of a price may be less salient than the leading numbers in an endeavor to establish a better understanding of the phenomenon this research consists of five experiments in a tourism context to first clarify the phenomenon and account for possible alternative explanations and then to provide empirical evidence that different representations of price can imply different construal levels and thus influence consumers choice preference in tourism marketing

price points and price rigidity abstract we study the link between price points and price rigidity using two data sets weekly scanner data and internet data we find that 9 is the most frequent ending for the penny dime dollar and ten dollar digits the most common price changes are those that keep the price endings at 9 9 ending prices are less likely to change than non 9 ending prices and the average size of price change is larger for 9 ending than non 9 ending prices we conclude that 9 ending contributes to price rigidity from penny to dollar digits and across a wide range of product categories retail formats and retailers

patterns of rightmost digits used in advertised prices implications for nine ending effects analysis of the rightmost digits of selling prices in a sample of retail price advertisements confirmed past findings indicating the overrepresentation of the digits 0 5 and 9 the high cognitive accessibility of round numbers can account for the overrepresentation of 0 and 5 ending prices and suggests the existence of two effects that could account for the overrepresentation of 9 ending prices 1 a tendency of consumers to perceive a 9 ending price as a round number price with a small amount given back and 2 a tendency of consumers to underestimate a 9 ending price by encoding it as the first round number evoked during incomplete left to right processing analysis of the patterns of rightmost digits observed in the sample provides supportive evidence particularly for the second of these two 9 ending effects

distortion of price discount perceptions the right digit effect we use four experiments to examine consumers processing of comparative regular and sale price information in advertisements consistent with our hypothesized right digit effect we find that when consumers view regular and sale prices with identical left digits they perceive larger price discounts when the right digits are small i e less than 5 than when they are large i e greater than 5 as a result they may attribute greater value and increased purchase likelihood to higher priced lower discounted items we examine alternate processing explanations for this right digit effect as well as the moderating impact of price presentation format

hedge disclosures future prices and production distortions in this paper we identify social benefits to hedge accounting disclosures that have not previously been examined we show that from the perspective of price efficiency in the futures market the key information that is provided by hedge accounting is information about firms underlying risk exposures without this information the futures price confounds information regarding firms hedge motivated trades with their speculative trades making the futures price inefficient our model shows that an inefficient futures price causes significant externalities by distorting the production choices of an entire industry in the presence of hedge disclosures the futures price appropriately informs production decisions in the whole industry in addition to distortion in production choices we also investigate the effect of an inefficient futures price on the risk sharing role of the futures market we find that arijit mukherji passed away in october 2000 he was our colleague mentor advisor and friend we dedicate this paper to his memory and his contributions to the field of accounting he will be missed university of minnesota tuniversity of minnesota and federal reserve bank of minneapolis university of chicago we thank workshop participants at the 1998 accounting mini conference at minnesota the 2000 journal of accounting research conference berkeley columbia chicago the lse financial markets group northwestern ohio state penn state stanford ucla and the european and american accounting association annual meetings in particular we have benefited from the comments of regina anctil stan baiman mary barth margaret bray robert bushman ron dye frank gigler dan gode charles goodhart rachel hayes thomas hemmer jack hughes jim jordan bjorn jorgensen young kwon richard leftwich nobu kiyotaki rick lambert maureen mcnichols nahum melumad john o brien jim patell jim peck madhav rajan abbie smith phil stocken brett trueman igor vaysman robert verrecchia amir ziv and an anonymous referee the views expressed herein are those of the authors and not necessarily those of the federal reserve bank of minneapolis or the federal reserve system

valuation and accounting for inflation and foreign exchange inflation and foreign exchange raise new issues with respect to accounting representations of equity value for example inflation creates an earnings illusion as an artifact of the mismatching of expenses based on allocations of historical costs with current revenues in determining earnings this mismatching distorts mappings of aggregate earnings and book values into equity value such that value relevant information is lost in this article we consider the consequences of inflation and foreign exchange accounting policies including those contained in accounting standards on the value relevance of bottom line accounting numbers policies are identified that achieve efficient accounting in the sense that aggregate comprehensive earnings and book values are sufficient for an accounting representation of equity value the linear relations that emerge provide predictions on capitalization coefficients that help explain results of empirical inquiries as well our analysis provides a theoretical foundation for policies contained in accounting standards that contributes to the resolution of controversies such as that concerning foreign exchange accounting

memory and markets or why are you paying 2 99 for a widget the constraints introduced in the analysis of individual behavior in economics were mainly two income and time although we do sometimes find references to biological constraints like stomach capacity see becker 1971 p 54 it and other biological constraints implications on market behavior were not investigated the purpose of this paper is to show that consideration of the limited memory capacity of human beings sheds light both on specific features of literature and arts and on characteristics of advertising in section ii the formal model which is based on becker s 1965 approach is presented in section iii the subject of advertising is discussed while in section iv we focus on the evidence from literature and arts section v contains the conclusions

restructuring constructive processing of information displays in consumer choice this research examines the construction of information displays by consumers this aspect of constructive processing in which data may be transformed edited or inferred is termed restructuring subjects notes and verbal protocols generated during a study are used to examine restructuring behavior when making choices among brands these methods enable the examination of restructuring and its effect on evaluative processing throughout the course of making a choice results demonstrate that consumers do restructure that restructuring is done in a contingent opportunistic manner and that restructuring may influence the type of choice heuristic used e g alternative based vs attribute based

price clustering and natural resistance points in the dutch stock market a natural experiment abstract this paper focuses on the tendency of stock prices to cluster at round numbers like 10 20 30 etc and to a lesser extent 5 15 25 etc and the related effect of round number price barriers prices pass round numbers less frequently than other numbers two competing hypotheses are tested using data from the dutch stock market of the period 1990 2001 after 1 january 1999 stock prices were listed in euros while guilders were still the currency of daily life until 2002 the aspiration level hypothesis predicts that round number effects in guilders will only slowly disappear the odd price hypothesis predicts an abrupt change in round number effects after 1 january 1999 generally the results are consistent with the odd price hypothesis