measuring image spillovers in umbrella branded products umbrella branding the practice of labeling more than one product with a single brand name is commonly used by multiproduct companies spillovers occur when information about one product affects the demand for other products with the same brand name this article provides a methodology to analyze spillovers and uses it to measure two instances of spillover effects the study shows that negative spillovers resulted from the audi 5000 s problems with sudden acceleration and that positive spillovers resulted from jaguar s first major model change in seventeen years copyright 1990 by the university of chicago

animal breeding and productivity growth of dairy farms we introduce genetic based technical change into a malmquist productivity index and measure the growth in productivity caused by bovine breeding because breeding is likely to affect milk quality we adjust milk quantities for quality differences we use panel data on icelandic dairy farms from 1997 to 2006 to estimate an input distance function the malmquist productivity index shows that the average productivity growth rate is 1 6 scale effects are the most important source of this growth but 19 of the productivity growth rate is due to breeding if quality differences are ignored the average productivity growth rate is reduced by 83

on the use of econometric models for policy simulation in marketing abstract in this article the author discusses the properties of useful econometric models for marketing phenomena with particular attention on models for policy simulations the author addresses model diagnostics parameter stability exogeneity and the lucas critique he also presents the results of a search through the 1998 2003 issues of the journal of marketing research finally the author offers practical guidelines

asymmetric promotion effects and brand positioning several studies have shown that promotions of national brands yield more effect than those of store brands e g allenby and rossi 1991 blattberg and wisniewski 1989 however the evolution of price quality data available from consumer reports over the last 15 years seems to reveal a reduction of the quality gap between store brands and national brands while price differences remain substantial simultaneously the share of private label brands has increased progressive grocer 1994 in this context we study whether we can maintain a view of the world where national brands may easily attract consumers from store brands through promotions whereas store brands are relatively ineffective in attracting consumers from national brands by such means we analyze consumer reactions to price discounts in a parsimonious preference model featuring loss aversion and reference dependence along dimensions of price and quality hardie johnson and fader 1993 tversky and kahneman 1991 the key result of our analysis is that given any two brands there is an asymmetric promotion effect in favor of the higher quality higher price brands if and only if the quality gap between the brands is sufficiently large in comparison with the price gap thus the direction of promotion asymmetry is not unconditional it depends uniquely on the value of the ratio of quality and price differences compared to a category specific criterion which we call if the ratio of quality and price differences is larger than this criterion the usual asymmetry prevails if such is not the case the lower quality lower price brands promote more effectively more precisely our model predicts that cross promotion effects depend on two components of brand positioning in the price quality quadrant first we define a variable termed positioning advantage that indicates whether relative to the standards achieved by another brand a given brand is underpriced positive advantage or overpriced negative advantage promotion effectiveness is increasing in this variable second cross promotion effects between two brands depend on their distance in the price quality quadrant this variable impacts promotion effectiveness negatively and symmetrically for any pair of brands positioning advantage and brand distance are orthogonal components of brand positioning irrespective of the degree of correlation between available price and quality levels in the market empirically we investigate the role of brand positioning in explaining cross promotion effects using panel data from the chilled orange juice and peanut butter categories we compute the independent positioning variables positioning advantage and brand distance from readily available data on price and quality positioning after obtaining our estimates of we next measure promotion effectiveness by estimating choice share changes in response to a price discount using a choice model that does not contain any information about quality price ratios finally we test the relation between the two positioning variables and the promotion effectiveness measures the data reveal that in the orange juice category lower quality lower price brands generally promote more effectively than higher quality higher price brands in the peanut butter data the opposite asymmetry holds in both cases inter brand promotion patterns are well explained by the positioning variables an attractive feature of our model is that in addition to the direction of promotion asymmetries it also explains the extent of those asymmetries a further interesting aspect of this approach is that we go beyond a categorization of brands into price tiers for instance lower tier brands in our data may promote more effectively than one national brand but less effectively than another consistent with our theoretical predictions the data presented here seem to confirm that such cases occur because the lower tier brand offers a favorable trade off of price and quality differences compared with one national brand and a less favorable trade off compared with the other the content of this paper is potentially relevant for brand managers or retailers concerned with predicting the impact of their promotions the paper is of particular interest to marketing scientists who study the performance of store brands versus national brands and may also appeal to those who wish to explore the marketing implications of behavioral decision theory finally our investigation does not reject blattberg and wisniewski s 1989 finding shared by allenby and rossi 1991 and hardie johnson and fader 1993 that national brands have a principle advantage in promotion effectiveness rather it formalizes when this principle advantage is overruled by positioning disadvantages of such brands

a dynamic multinomial probit model for brand choice with different long run and short run effects of marketing mix variables in this paper we propose a dynamic multinomial probit model in order to estimate the long run and short run effects of marketing mix variables on brand choice the latent variables which contain the unobserved perceived utilities follow a first order vector error correction autoregressive process of order 1 with current and lagged explanatory variables the unrestricted autoregressive parameter matrix concerns the intertemporal correlation in perceived utilities of households over purchase occasions and indicates the persistence in brand choice as explanatory variables we consider relative prices and promotional activities like feature and display an important and novel feature of our model is that it allows for different long run and short run effects of promotional activities thereby extending the models that are currently available in the literature additionally to account for different base preferences for brands across households we allow for consumer heterogeneity our application concerns a panel of households choosing among several brands of a fmcg our estimated model turns out to be an improvement over a static model and over a model with only short run effects in terms of in sample fit and out of sample forecasts copyright 2000 john wiley sons ltd

managing advertising and promotion for long run profitability in recent years manufacturers have become increasingly disposed toward the use of sales promotions often at the cost of advertising yet the long term implications of these changes for brand profitability remain unclear in this paper we seek to offer insights into this important issue we consider the questions of i whether it is more desirable to ad vertise or promote ii whether it is better to use frequent shallow promotions or infrequent deep promotions and iii how changes in regular prices affect sales relative to increases in price promotions additional insights regarding brand equity the relative magnitude of short and long term effects and the decomposition of advertising and promotion elasticities across choice and quantity decisions are obtained to address these points we develop a heteroscedastic varying parameter joint probit choice and regression quantity model our approach allows consumers responses to short term marketing activities to change in response to changes in marketing actions over the long term we also accommodate the possibility of competitive reactions to policy changes of a brand the model is estimated for a consumer packaged good category by using over eight years of panel data the resulting parameters enable us to assess the effects of changes in advertising and promotion policies on sales and profits our results show that in the long term advertising has a positive effect on brand equity while promotions have a negative effect furthermore we find price promotion elasticities to be larger than regular price elasticities in the short term but smaller than regular price elasticities when long term effects are considered consistent with previous research we also find that most of the effect of a price cut is manifested in consumers brand choice decisions in the short term but when long term effects are again considered this result no longer holds last we estimate that the long term effects of promotions on sales are negative overall and about two fifths the magnitude of the positive short term effects finally making reasonable cost and margin assumptions we conduct simulations to assess the relative profit impact of long term changes in pricing advertising or promotion policies our results show regular price decreases to have a generally negative effect on the long term profits of brands advertising to be profitable for two of the brands and increases in price promotions to be uniformly unprofitable

gold and silver health plans accommodating demand heterogeneity in managed competition abstract new regulation of health insurance markets creates multiple levels of health plans with designations like gold and silver the underlying rationale for the heavy metal approach to insurance regulation is that heterogeneity in demand for health care is not only due to health status sick demand more than the healthy but also to other taste related factors rich demand more than the poor this paper models managed competition with demand heterogeneity to consider plan payment and enrollee premium policies in relation to efficiency net consumer benefit and fairness the european concept of solidarity specifically this paper studies how to implement a silver and gold health plan efficiently and fairly in a managed competition context we show that there are sharp tradeoffs between efficiency and fairness when health plans cannot or may not because of regulation base premiums on any factors affecting demand enrollees do not choose the efficient plan when taste e g income can be used as a basis of payment a simple tax can achieve both efficiency and fairness when only health status and not taste can be used as a basis of payment health status based taxes and subsidies are required and efficiency can only be achieved with a modified version of fairness we refer to as weak solidarity an overriding conclusion is that the regulation of premiums for both the basic and the higher level plans is necessary for efficiency

the impact of bse on the demand for beef and other meats in great britain indices of media coverage of bse are incorporated in a dynamic aids model of meat demand the publicity which bse has received is found to have had significant effects on the allocation of consumer expenditure among the meats a short run impact has been identified which accounts in large part for the discernible drop in the market share of beef in the early 1990s and more important there also appears to be a significant long run impact of bse which by the end of 1993 has reduced the beef market share by 4 5

impacts of meat product recalls on consumer demand in the usa the impact of meat product recall events on consumer demand beef pork poultry and other consumption goods in the usa is tested empirically beef pork and poultry recall indices are constructed from both the food safety inspection service s meat recall events and from newspaper reports over the period 1982 1998 following previous product recall studies recall indices are incorporated as shift variables in consumers demand functions estimating an absolute price version of the rotterdam demand model findings indicate that food safety inspection service s meat recall events significantly impact demand and newspaper reports do not moreover although elasticities related to recall events are significant they are small in magnitude relative to price and income effects any favourable effects on the demands of meat substitutes for a recall are offset by a more general negative effect on meat demand the general negative effect indicates a shift out of meat to non meat consumption goods

structural modeling and policy simulation a primary goal of research in marketing is to evaluate and recommend optimal policies for marketing actions or instruments in the terminology of franses 2005 in this respect marketing is a very policy oriented field and it is ironic that so much published research skirts the issue of policy evaluation franses s article draws much needed attention to the question of what sort of model is usable for policy simulation and evaluation our perspective on what constitutes a valid model for policy evaluation differs from franses s view but we believe our view complements his in many important respects we also strongly believe that marketing has much to contribute to the literature on structural modeling we outline some of what we believe are the advantages for marketing scholars of using structural modeling for policy evaluations and some of the challenges presented by marketing problems franses focuses on a reduced form sales response model in which the outcome variable yt is modeled conditional on marketing variables xt if customers anticipate future marketing actions and take these into account in responding to the environment at time t an additional equation is appended to the system to describe the evolution of the xt variables in franses s view this system can be used for policy simulation if both the y and x equations have timeinvariant parameters that is the lucas critique which implies that parameters of reduced form models change if the policy regime changes does not apply according to franses a model must pass standard diagnostics possess good predictive properties and exhibit parameter stability to be useful for policy simulation we applaud the attention franses is bringing to model diagnostics we believe that structural work in both marketing and economics should pay close attention to the central features of the data increased use of model diagnostics will help ensure that structural models are capable of capturing these features however we do not believe that all the criteria proposed by franses such as out of sample validity and parameter stability are either necessary or sufficient to render a model useful for policy simulation reduced form models can pass all diagnostics including out of sample validation and still provide misleading predictions about the effects of policy changes reduced form

regulatory balancing and the efficiency of green r d we identify and analyse several dynamic implications of setting environmental standards such as to balance marginal costs and benefits the adoption of such a regulatory approach is shown to effect i the speed of improvement of abatement technologies ii the direction in a sense to be defined of that improvement iii its source and the distribution of the rents from it and iv the rate of development of defensive averting technologies existing views are thoroughly synthesised in the context of a simple diagrammatic model several new results are derived and at least one conventional wisdom questioned the message of the analysis for legislators and regulators is that cost benefit balancing should be done with care

asymmetric and neighborhood cross price effects some empirical generalizations this paper provides some empirical generalizations regarding how the relative prices of competing brands affect the cross price effects among them particular focus is on the asymmetric price effect and the neighborhood price effect the asymmetric price effect states that a price promotion by a higher priced brand affects the market share of a lower priced brand more so than the reverse the neighborhood price effect states that brands that are closer to each other in price have larger cross price effects than brands that are priced farther apart the main objective of this paper is to test if these two effects are generalizable across product categories and to assess which of these two effects is stronger while the neighborhood price effect has not been rigorously tested in past research the asymmetric price effect has been validated by several researchers however these tests of asymmetric price effect have predominantly used elasticity as the measure of cross price effect the cross price elasticity measures the percentage change in market share or sales of a brand for 1 change in price of a competing brand we show that asymmetries in cross price elasticities tend to favor the higher priced brand simply because of scaling effects due to considering percentage changes furthermore several researchers have used logit models to infer asymmetric patterns we also show that inferring asymmetries from conventional logit models is incorrect to account for potential scaling effects we consider the absolute cross price effect defined as the change in market share percentage points of a target brand when a competing brand s price changes by one percent of the product category price the advantage of this measure is that it is dimensionless hence comparable across categories and it avoids scaling effects we show that in the logit model with arbitrary heterogeneity in brand preferences and price sensitivities the absolute cross price effect is symmetric we develop an econometric model for simultaneously estimating the asymmetric and neighborhood price effects and assess their relative strengths we also estimate two alternate models that address the following questions i if i were managing the ith highest priced brand which brand do i impact the most by discounting and which brand hurts me the most through price discounts ii who hurts whom in national brand vs store brand competition based on a meta analysis of 1 060 cross price effects on 280 brands from 19 different grocery product categories we provide the following empirical generalizations 1 the asymmetric price effect holds with cross price elasticities but tends to disappear with absolute cross price effects 2 the neighborhood price effect holds with both cross price elasticities and absolute cross price effects and is significantly stronger than the asymmetric price effect on both measures of cross price effects 3 a brand is affected the most by discounts of its immediately higher priced brand followed closely by discounts of its immediately lower priced brand 4 national brands impact store brands more so than the reverse when the cross effect is measured in elasticities but the asymmetric effect does not hold with absolute effects store brands hurt and are in turn hurt the most by the lower priced national brands that are adjacent in price to the store brands 5 cross price effects are greater when there are fewer competing brands in the product category and among brands in nonfood household products than among brands in food products the implications of these findings are discussed

equality efficiency and market fundamentals the dynamics of international medical care reform public opinion surveys uniformly show low support for medical care systems in developed countries the longstanding conflict between equal access to care and efficient service provision partly explains this dissatisfaction but the trade off is particularly acute in medical care as new technologies developed over time have increased the cost of care and made the equity commitment even more expensive countries first dealt with rising costs by maintaining equal access and restricting total spending efficiency suffered however as a result many countries are considering a move away from spending controls and toward incentive based medical care reform

adoption of agricultural innovations in developing countries a survey this paper reviews various studies which have provided a description and possible explanation to patterns of innovation adoption in the agricultural sector the survey points out that the tendency of many studies to consider innovation adoption in dichotomous terms adoption nonadoption may not be appropriate in many cases where the actual decisions are defined over a more continuous range more attention needs to be given to the socio cultural and institutional environment in area studies so that their interrelation with economic factors affecting adoption can be inferred the presence of several interrelated innovations is another aspect that needs to be considered more carefully in future research since a number of simultaneous decisions may be involved furthermore the possibility of regular sequential patterns in adopting components of a new technological package should be specifically addressed in future studies finally the impact of differential adoption rates on land holding distribution merits attention in future research

innovation and performance evidence at micro level this empirical study aims to shed light on the link between innovation and economic performance at micro level based on a comprehensive survey among dairy and crop farms in the netherlands we estimate a structural multi stage model to deliver evidence on the effect of engagement and investment in innovation on the production of product process and organizational or marketing innovations as well as on the effect of such innovations on farm level productivity the results suggest various market and farm behaviour related factors to stimulate an increase in innovation engagement and production furthermore the study reveals that indeed a greater innovation investment per unit innovation input leads to a higher probability of producing at least one successful product process and or organizational or marketing innovation innovation output the production of process and organizational or marketing related innovation leads to significant productivity gains various recommendations towards a more effective and efficient innovation policy are finally given

a semi parametric model for asymmetric information in health plan markets i introduction there are two potential sources of asymmetric information that induce market failure in the health plan market the first adverse selection is analyzed by rothschild and stiglitz 1976 in their study individuals are exogenously assigned one of two possible illness probabilities only the individuals know their true illness probability under these conditions low risk consumers underinsure in environments where equilibrium exists adverse selection also occurs when plans can observe characteristics that affect risk but cannot adjust premiums to reflect these risks this type of adverse selection is discussed by cutler and reeber 1998 here plan premiums are constrained to be the same across all policyholders and therefore one cannot risk adjust on observable variables such as age or previous medical history similar to the first type of adverse selection the low and high risk policyholders sort themselves into different plans or plans attempt to cream skim by adjusting reimbursements that are more favorable to the profitable low risk policyholders death spirals can occur where the low risk consumers leave the more generous plans causing premiums of these plans to grow which in turn induces more members to leave these plans as the premiums grow more individuals leave the generous plan until it is no longer viable the second source of information asymmetry comes from the individual s choice of preventive effort much recent publicity has shown how individuals can reduce their probability of illnesses or accidents choices of eating drinking exercising smoking unprotected sexual activity driving behavior recreational drug use and sunscreen use are a few items from the long lists of decisions that affect the probability of illness health insurers cannot contract policyholders to exert a certain level of preventive effort because there is no mechanism to observe these efforts auto insurers can contract indirectly for effort by accessing public driving records and charging premium surcharges for traffic violations there are no counterpart records for health plans arnott and stiglitz 1988 and pauly 1974 discuss the welfare effects when preventive effort can reduce illness probabilities but the level of these efforts cannot be monitored and therefore cannot be written into a contract when this condition occurs full insurance is no longer feasible because no effort would be exerted under full insurance because health plans are not compensating individuals for the cost savings that come from preventive effort the individual s choice of effort is usually less than optimal therefore we call this information asymmetry moral hazard this moral hazard results in underinsurance for the entire population stewart 1994 looks at an economy where both adverse selection and moral hazard are present he finds that the welfare losses coming from both sources are subadditive i e the total welfare loss is less than the sum of the losses coming from both yet when both moral hazard and adverse selection are present the economy is still worse off by having both sources of asymmetric information instead of one of them in most of his simulations the low risk types substitute preventive effort for income protection although this is not a theoretically proven result his study shows that it is difficult to derive general results on the misallocation of effort and risk sharing when both sources are present because these misallocations depend on the individual s willingness to substitute the income savings from effort for the income protection that comes from insurance setting good health care policy requires knowing about the presence of these informational asymmetries unfortunately to date there is no consensus about the presence of informational asymmetries that come from either adverse selection or preventive effort most studies have attempted to determine only if adverse selection is present while ignoring the possible existence of preventive effort

the menu setting problem and subsidized prices drug formulary illustration the menu setting problem msp determines the goods and services an institution offers and the prices charged it appears widely in health care from choosing the services an insurance arrangement offers to selecting the health plans an employer proffers the challenge arises because purchases are subsidized and consumers or their physician agents may make cost ineffective choices the intuitively comprehensible msp model readily solved by computer using actual data helps structure thinking and support decision making about such problems the analysis uses drug formularies lists of approved drugs in a plan or institution to illustrate the framework

the interaction between forms of insurance contract and types of technical change in medical care a simple three parameter description of medical technology is introduced to investigate the relationships between technical change welfare and type of insurance contract the value of a particular change in technology depends on the existing form of contract the marginal equilibrium expected utility to consumers of different types of technical change hinges on the manner in which the insurance arrangement is designed to mitigate moral hazard these results open the way for a positive model of the effects of insurance arrangements on the types of technology that are adopted and the effects of technical changes on the prevalent forms of insurance contract

decomposition of productivity growth using distance functions the case of dairy farms in three european countries within an output distance function framework the total factor productivity growth index is decomposed into four components technical change technical and allocative efficiency and scale component we estimate stochastic translog output distance functions using panel data from dairy farms over the period 1991 94 for three european countries germany the netherlands and poland results indicate that the change in the productivity growth index in germany 6 and poland 5 are mainly dictated by the technical change component in contrast the productivity growth index in the netherlands 3 is influenced by allocative efficiency components

insurance and incentives for innovation in medical care economists have frequently pointed to the distorting effects of health insurance as a major contributor to rapidly increasing health costs relatively little is known however about the influence of changing medical technology on expenditures if increases in expenditures are in part the result of development of costly but worthwhile new technologies a common view among noneconomists failure to take account of this may lead to over statement of the distortive effects of insurance on the other hand some observers have questioned whether the benefits derived from expensive medical innovations always exceed the costs 18 others have suggested that resources devoted to the development of very expensive technologies might be better used for other kinds of medical research 16 3 in light of these arguments it appears that the relationships between medical insurance and technological change may be quite important if the extent of insurance coverage influences the rate and direction of technological change in medicine then the long run welfare effects of insurance are more complex than current models 5 6 allow it is sometimes argued informally that such an influence existsthat the presence of insurance biases the system toward innovations that expand capabilities while increasing expenditures and away from those that reduce costs 15 20 such a hypothesis has however never been developed as an implication of a formal economic model even the term bias in the argument is unclear it appears to be used in a normative sense but it has not been explained clearly why such a bias if it exists leads to welfare losses even if it is true for example that the presence of insurance leads to the adoption of a more costly mix of medical innovations than would otherwise occur this is not obviously undesirable to facilitate the purchase of costly but beneficial medical care is the purpose of insurance this paper defines bias in technological change in a normative sense it employs a simple model of insurance and profit maximizing innovators and develops sufficient

estimation of input distance functions a system approach this article offers a methodology to address the endogeneity of inputs in the input distance function idf formulation of the production processes we propose to tackle endogenous input ratios appearing in the normalized idf by considering a flexible simultaneous system of the idf and the first order conditions from the firm s cost minimization problem our model can accommodate both technical and input allocative inefficiencies amongst firms we also present the algorithm for quantifying the cost of allocative inefficiency we showcase our cost system based model by applying it to study the production of norwegian dairy farms during the 1991 2008 period among other things we find both an economically and statistically significant improvement in the levels of technical efficiency among dairy farms associated with the 1997 quota scheme change which a more conventional single equation stochastic frontier model appears to be unable to detect

health care costs on the rise again since 1999 health care costs have been growing faster than national income this rapid growth has occurred as the ability of private and public purchasers to reduce service utilization and bargain for lower prices has fallen insurers have recouped lost profits through higher premiums and new technologies have driven up costs throughout the sector private insurance market responses to these rising costs may lead to reductions in the number of people with insurance and to increased fragmentation of the insurance market over time technological change in medicine both increases costs and improves the quality of care the challenge for public policy is to maintain insurance and some degree of equity in the face of these rising costs

reimbursing health plans and health providers efficiency in production versus selection the tradeoff between an insurer s or medical provider s incentives to select good risks and to produce efficiently is governed by the supply price analog to the demand price tradeoff between moral hazard and risk aversion under a variety of models the optimum supply price is a mixture of capitation and fee for service payments empirical literature shows that pure capitation payment leaves strong incentives for selection that are acted upon the presence of contracting costs in a rothschild stiglitz model means a limited pooling equilibrium can exist and that poor risks will not be at their preferred outcome

health insurance and the demand for medical care evidence from a randomized experiment we estimate how cost sharing the portion of the bill the patient pays affects the demand for medical services the data come from a randomized experiment a catastrophic insurance plan reduces expenditures 31 percent relative to zero out of pocket price the price elasticity is approximately 0 2 we reject the hypothesis that less favorable coverage of outpatient services increases total expenditure for example by deterring preventive care or inducing hospitalization

medical insurance technological change and welfare concerns have been expressed about the welfare effects of expensive innovations in medical care financed largely through medical insurance this paper develops a model which considers such issues it is shown that even if insurance is purchased optimally subject to a plausible constraint on the form of the contract innovations may be adopted that have the effect of reducing expected welfare the question of how the benefits of medical innovations ought to be measured in the presence of insurance is also explored

comments on competitive responsiveness marketing science features many and diverse articles that analyze competitive responsiveness although recent marketing science editorials e g shugan 2002 suggest that competitive responsiveness is only a part of a comprehensive competitive marketing strategy it remains a vital part for that reason and many others marketing science is particularly proud of this special issue edited by david j reibstein and dick r wittink before introducing and vigorously applauding both the editors and authors of this excellent special issue we emphasize that competitive responsiveness raises numerous issues including whether one can forecast outcomes of new policies based on past observations made under old policies i e the lucas critique and decisions regarding which variables should be considered endogenous shugan 2004 i e determined within the model perhaps normative models are inherently perishable evolution in market structure requires modifications over time also although complete consistency within the world of the model is aesthetically pleasing imposing industry specific exogenous constraints that might appear unrelated to the modeling assumptions is sometimes necessary

testing for the lucas critique a quantitative investigation this thesis contains four essays which studies the macroeconomic effects of fiscal and monetary policy quantitatively the first essay investigates whether swedish postwar business cycles have been generated by domestic or foreign shocks and finds that they are about equally important in the second essay the effects of government budget deficits on interest rates in sweden are studied in a small open economy framework the empirical results which have high power due to very large swings in deficits and interest rates provide support that larger deficits produce higher interest rates and thus give support against the ricardian view the third essay seeks to identify optimal social insurance and redistribution levels in sweden and the u s with respect to temporary and permanent idiosyncratic productivity risks the results indicate that sweden should reduce the social security level while the u s should approximately maintain the current level in the last essay the small sample properties of a well known statistical test for the lucas critique the super exogeneity test is studied in a general equilibrium environment the results indicate that the super exogeneity test do not have sufficient power in small samples

the physician labor market in a managed care dominated environment i introduction health maintenance organizations hmos and other managed care arrangements are rapidly growing alternatives to fee for service ffs insurance in the united states hmo enrollment has grown from under 3 million in 1970 interstudy 1986 to over 46 million by early 1995 interstudy 1995 little is known about how these changes in health care financing will ultimately affect physicians incomes but managed care is undoubtedly altering the economic environment of medical practice the shift from ffs to salaried or capitated payment reduces physicians incentives to overtreat 1 further managed care plans control physicians access to their enrollees by monitoring practice patterns and removing overly aggressive doctors from their panels hmos also employ a different physician mix with fewer specialists than the mix that characterizes the ffs environment thus a hypothesized consequence of rising hmo market share is reduced demand for specialists wennberg et al 1993 estimate potential surpluses ranging from 10 for emergency medicine to 210 in pathology surpluses of these magnitudes would be expected to reduce earnings however until recently physicians have enjoyed stable or rising incomes simon and born 1996 this may be explained by asymmetric information between patients and physicians if patients are poorly informed about the effectiveness of treatment options doctors may be able to protect their incomes from the loss of patients to managed care by prescribing more aggressive treatment to their remaining ffs patients despite mixed evidence on the extent of supplier induced demand sid e g fuchs 1978 newhouse et al 1982 dranove and wehner 1994 rizzo and blumenthal 1996 this hypothesis remains popular among policymakers the proponents of quotas for the size and mix of the health workforce argue that the supply side of the health sector is simply impervious to signals from the demand side i t is widely believed that physicians enjoy almost total discretion in dictating the volume and composition of health care they render allow ing physicians to extract very high target incomes virtually regardless of the local physician to population ratio reinhardt 1994 interest in physician incomes arises in part from the central role that incomes play in sending appropriate signals about changing supply and demand conditions if ffs physicians can maintain their incomes as the ffs patient pool shrinks decisions about specialty location and hmos staffing patterns would have little reason to change alternatively if ffs incomes are sensitive to managed care penetration we would expect doctors to increasingly practice in areas and specialties in which employment opportunities have become relatively favorable pursue nonclinical positions or retire likewise hmos would reduce substitution towards non physician providers and away from specialist physicians the consensus among health workforce experts is that the u s has too many physicians and too many specialists relative to primary care physicians and that market adjustments will be insufficient to restructure the physician supply thus many health workforce experts and medical organizations have called for centralized workforce planning e g mitka 1997 committee on the u s physician supply 1996 pew 1995 cohen and todd 1994 schroeder 1994 wennberg et al 1993 proposals include limits on the number and specialty composition of residency positions restrictions on medical school class sizes and immigration by international medical graduates and incentive payments for early retirement retraining or diversion of physicians into non clinical positions before advocating interventions in the medical labor market it is worth exploring the potential for market forces to generate the desired physician supply changes many supporters of workforce policies presume that the failures of a ffs dominated physician services market would persist even in a radically different context

generalizing what is known about temporal aggregation and advertising carryover this paper provides a theoretical explanation for the inconsistent findings from previous econometric analyses of aggregated data concerning the duration of advertising carryover using this theoretical explanation and the knowledge of a data interval bias the paper reviews and summarizes the empirical work in the area of sales response modeling and then after adjusting for aggregation bias presents support for an empirical generalization that the average advertising duration interval is of brief duration typically between six and nine months

symposium on health care reform the papers in this symposium focus on two major issues of health economics in the context of president clinton s health security act cost containment and labor market effects of financing insurance the act proposes to limit public and private spending a key issue is the extent to which without a limit but with a standardized basic plan supplementary insurance will exist to allow scope for individual choice the act s financing will have an ambiguous effect on labor supply but will encourage formation of small low wage firms several features including community rating and standardization of dependent coverage imply substantial redistribution

is health care really a luxury much of the work which has led to a widely held view that the income elasticity of health care spending exceeds one has been based on international cross section data or on pooled cross sections and time series in this paper we re examine this view in the context of long run equilibrium relationships between non stationary time series possibly including autonomous trends our results cast doubt upon the usefulness of pooling and upon the notion of an elasticity above one

scale economies and inefficiency of u s dairy farms this study employs data drawn from the 2000 agricultural resource management survey a u s department of agriculture sponsored farmers survey the article estimates returns to scale relationships across dairy farms of different sizes and across different regions incorporating variables hypothesized to influence farm performance results point to significant scale economies in u s dairy farms and underscore the importance of taking account of inefficiency when estimating scale economies contrary to previous research the preferred cost function specification does not show a region of decreasing returns to scale this finding helps explain why the average size of dairy farms has been increasing

a hierarchical bayes error correction model to explain dynamic effects of price changes abstract the authors put forth a sales response model to explain the differences in immediate and dynamic effects of promotional prices and regular prices on sales the model consists of a vector autoregression that is rewritten in error correction format which allows the authors to disentangle the immediate effects from the dynamic effects in a second level of the model the immediate price elasticities the cumulative promotional price elasticity and the long term regular price elasticity are correlated with various brand specific and category specific characteristics the model is applied to seven years of data on weekly sales of 100 different brands in 25 product categories the authors find many significant moderating effects on the elasticity of price promotions brands in categories that are characterized by high price differentiation and that constitute a lower share of budget are less sensitive to price discounts deep price discounts increase the immediate price sensitivity of customers the

price cap regulation and technical change abstract existing analyses of the implications of price cap regulation for the development of cost reducing technologies assume that all r d is done by the regulated industry this is unrealistic we present a simple model of non cooperative r d by a regulated firm and a single external developer under a price cap regime of the sort characterised by cabral and riordan in equilibrium the external developer exerts less r d than is socially optimal the regulated firm may exert more or less a tightening of the regulatory regime impacts the r d incentives of both players though in different ways the optimal regulatory adjustment parameter may be bigger or smaller than that suggested by existing studies despite the scope for duplication of results research by an outsider necessarily enhances welfare

short and long run adjustments in dairy production a profit function analysis a dual profit model is developed to analyse the structure of dairy technology using farm level data for vermont potential short and long run effects of milk price reductions on output supply input demand farm size and profitability are studied the observed levels of the quasi fixed inputs family labour and herd size are found to be significantly lower than their optimal or long run equilibrium values which is consistent with a continuing shift towards fewer and larger dairy farms the analysis suggests that lower milk prices threaten the short run survival of small and medium size farms and reduce the optimal farm size in the long run

the effect of supply management on herd size in alberta dairy a supply management program limits the aggregate supply of a commodity often through the use of marketable quota licenses the static aggregate welfare effects of supply controls are well known but the farm level dynamic effects on dairy investment are not a theoretical cost of adjustment model is used to show that supply management reduces the rate of quasi fixed input adjustment at the farm level in fact when a quasi fixed input is complementary to quota licenses investment or disinvestment can be impaired to such an extent that the input moves away from the long run equilibrium as a result overinvestment in this input can significantly reduce productivity growth

the long term effects of price promotions on category incidence brand choice and purchase quantity abstract to what extent do price promotions have a long term effect on the components of brand sales namely category incidence brand choice and purchase quantity the authors answer this question by using persistence modeling on weekly sales data of a perishable and a storable product derived from a scanner panel their analysis reveals first that permanent promotion effects are virtually absent for each sales component next the authors develop and apply an impulse response approach to estimate the promotional adjustment period and the total dynamic effects of a price promotion specifically they calculate the long term equivalent of gupta s 1988 14 84 2 breakdown of promotional effects because of positive adjustment effects for incidence but negative adjustment effects for choice the authors find a reversal of the importance of category incidence and brand choice 66 11 23 for the storable product and 58 39 3 for the perishable product the authors discuss the implications of the findings an

on the determination of the us aggregate health care expenditure per capita real health care expenditure is examined against three major groups of explanatory variables economic demographic and health stock and it is found that the three groups of variables have an impact on real health care spending other subcategories such as real private and government health care pharmaceutical dental home nursing ambulatory personal medical consumption and in patient expenditures have also been examined and have been found to be affected by the explanatory variables for several subcomponents there is evidence of supplier inducement of the demographic group of variables the ageing population had an impact only on the per capita real overall and private health care outlay and pharmaceutical spending also cointegrating relationships were found and consistent estimators of the elasticities found

quality oriented technical change in japanese wheat breeding abstract the article presents a productivity analysis of japanese wheat breeding research we first estimate a hedonic function to determine the marginal implicit values of japanese wheat characteristics and find that protein contributes substantially to millers price offers to farmers induced innovation theory implies breeders thus should be responding to new protein oriented price policies by developing high protein wheat varieties we test this hypothesis by estimating a distance function relating breeding resources including what we call gene recharge rates to the yield and protein characteristics of discovered varieties new varieties indeed have been protein favoring and yield disfavoring suggesting government research programs have been market oriented

parametric decomposition of output growth using a stochastic input distance function midmore peter karagiannis g tzouvelekas v parametric decomposition of output growth using a stochastic input distance function american journal of agricultural economics 2004 86 4 pp 1044 1057

the impact of a product harm crisis on marketing effectiveness product harm crises are among a firm s worst nightmares a firm may experience i a loss in baseline sales ii a reduced own effectiveness for its marketing instruments iii an increased cross sensitivity to rival firms marketing mix activities and iv a decreased cross impact of its marketing mix instruments on the sales of competing unaffected brands we find that this quadruple jeopardy materialized in a case study of an australian product harm crisis faced by kraft peanut butter we arrive at this conclusion by using a time varying error correction model that quantifies the consequences of this crisis on base sales and on own and cross brand short and long term effectiveness the proposed modeling approach allows managers to make more informed decisions on how to regain the brands pre crisis performance levels

is livestock research unproductive separating health maintenance from improvement research studies of the rates of return to research have usually been based on the implicit assumption that if there were no research then there would be neither growth nor decline in output or productivity in the case of livestock particularly in southern africa which has a sub tropical disease ecology and a long history of disastrous losses due to disease the assumption is especially unreasonable it ignores the losses that would have occurred in the absence of livestock health research resulting in underestimation of rates of return this study draws on data from south africa to illustrate the magnitude of the error by separating the maintenance effects of animal health research from output increases due to animal improvement research this is possible because health and improvements research are conducted at separate research institutes and there are data on cattle deaths due to disease which allows the effects of health expenditures to be calculated explicitly taking the negative effect of diseases into account considerably increases the returns to the livestock research of the south african agricultural research council saarc instead of a ror of 18 for animal research in total the result is a ror of at least 35 for animal health research and 27 for improvements research suggesting a minimum underestimation of about 50 these results suggest that livestock research is productive once it is properly decomposed the implication is that all ror estimates that implicitly assume that with no research there would be no change in output or productivity must be severely biased downwards

physician reimbursement and technology adoption this study analyses the incentives of health care providers to adopt new technologies in a world with ex post moral hazard it is shown that in a second best efficient world with respect to insurance coverage a linear remuneration scheme implements the adoption of second best efficient technologies only in special cases under a third best standard coinsurance contract the adequate reimbursement rule is characterised depending on the characteristics of the technology and on patients demand elasticities with respect to monetary and non monetary costs a shift from fee for service to capitation is likely to display undesirable incentives for very severe illnesses by inducing a reduction in the technically feasible level of healing or an increase in non monetary costs of treatment

optimal risk adjustment in markets with adverse selection an application to managed care it is well known that adverse selection causes distortions in contracts in markets with asymmetric information taxing inefficient contracts and subsidizing the efficient ones can improve market outcomes bruce c greenwald and joseph e stiglitz 1986 although regulators rarely seem to implement tax and subsidy schemes with adverse selection motives in mind contracts are often complex and incomplete and it is the inefficient elements of the contract that are difficult to verify and hence tax or subsidize this is precisely the reason that in health insurance markets rather than subsidizing contracts regulators and payers contend with adverse selection by taxing and subsidizing the price paid to insuring health plans on the basis of observable characteristics of the persons joining the plan a practice known as risk adjustment risk adjusted premiums are paid to managed care plans plans that ration care by management rather than by conventional approaches like coinsurance and deductibles and offer a bundle of characteristics quality access for many services that is fundamentally outside the scope of direct regulation selection related incentives threaten the efficiency and fairness of this organization of health insurance markets by inducing plans to distort the quality of the services they offer to discourage high cost persons from joining the plan as managed care becomes the predominant source of health care for residents of the united states and many other countries payers attempt to address this incentive by setting a risk adjusted price that pays more for more expensive enrollees as it is conventionally practiced risk adjustment sets prices for people proportional to their expected cost based on observable characteristics the federal medicare program for example has used age sex welfare status and county of residence adjusters to set prices to managed care plans to convey how what we term conventional risk adjustment works suppose age is the risk adjuster for a medicare population over 65 if it is determined that the 75to 84 year old population costs 20 percent more than the overall average in medicare the assumption in conventional risk adjustment is that the premium paid to plans for someone in this group should be 20 percent above the average we fundamentally disagree that this is the right way to think about and do risk adjustment

productivity growth technical progress and efficiency change in industrialized countries this paper analyzes productivity growth in 17 oecd countries over the period 1979 1988 a nonparametric programming method activity analysis is used to compute malmquist productivity indexes these are decomposed into two component measures namely technical change and efficiency change we find that u s productivity growth is slightly higher than average all of which is due to technical change japan s productivity growth is the highest in the sample with almost half due to efficiency change jel c43 d24 in this paper we apply recently developed

the decomposition of promotional response an empirical generalization price promotions are used extensively in marketing for one simple reason consumers respond the sales increase for a brand on promotion could be due to consumers accelerating their purchases i e buying earlier than usual and or buying more than usual and or consumers switching their choice from other brands purchase acceleration and brand switching relate to the primary demand and secondary demand effects of a promotion gupta 1988 captures these effects in a single model and decomposes a brand s total price elasticity into these components he reports for the coffee product category that the main impact of a price promotion is on brand choice 84 and that there is a smaller impact on purchase incidence 14 and stockpiling 2 in other words the majority of the effect of a promotion is at the secondary level 84 and there is a relatively small primary demand effect 16 this paper reports the decomposition of total price elasticity for 173 brands across 13 different product categories on average we find that 25 of the elasticity is due to primary demand expansion i e purchase acceleration and 75 to secondary demand effects or brand switching thus while gupta s finding that the majority of promotional response stems from brand switching is supported the average magnitude of the effect appears to be smaller than first thought more important there is ample evidence that promotions have a significant primary demand effect the relative emphasis on purchase acceleration and brand switching varies systematically across categories and the second goal of the paper is to explain this variation as a function of exogeneous covariates in doing this we recognize that promotional response is the consumer s reaction to a price promotion and therefore develop a framework for understanding variability in promotional response that is based on the consumer s perspective of the benefits from a price promotion these benefits are posited to be a function of i category specific factors ii brand specific factors and iii consumer characteristics the framework is formalized as a generalized least squares meta analysis in which the brand s price elasticity is the dependent variable several interesting results emerge from this analysis category specific factors brand specific factors and consumer demographics explain a significant amount of the variance in promotional response for a brand at both the primary and secondary demand levels category specific factors have greater influence on variability in promotional response and its decomposition than do brand specific factors there are several instances where exogenous variables do not affect total elasticities yet significantly affect individual components of total elasticity in fact the lack of a significant relationship between the variables and total elasticity is often due to offsetting effects within two or more of the three behavioral components of elasticity this is particularly true for brand specific factors which typically have no effect on total elasticity yet have important effects on the individual behaviors there is some evidence to suggest that not all promotion related increases in primary demand are due to forward buying in some cases promotions appear to increase consumption we use these results to illustrate how category and brand specific factors work to drive primary and secondary demand elasticities in different directions in short this paper offers an empirical generalization of a key finding on promotional response how elasticities decompose across brand choice purchase incidence and stockpiling and new insights into factors that explain variance in promotional response these findings are likely to be of interest to researchers who are concerned with theory development and the generalizability of marketing phenomena and to managers who plan promotion campaigns