distinguished lecture on economics in government lessons from past productivity booms the u s economy has been enjoying substantially faster productivity growth for the past eight years than it did over the preceding two decades from 1995 to 2003 labor productivity rose at an average annual rate of about 3 percent up from an average annual rate of around 1 5 percent between 1973 and 1995 in both 2002 and 2003 output per hour increased more than 4 percent the significance of the improvement since 1995 can hardly be overstated even after one takes into account the possibility that the increases of the past two years in part reflect cyclical influences and thus overstate the underlying trend if productivity were to continue to rise at an average annual rate of 3 percent the standard of living in the united states would double roughly every 24 years if on the other hand productivity growth were to revert to an average annual pace of 1 5 percent a doubling in the standard of living would occur every 47 years a number of observers argue that the present era of robust trend productivity growth will soon come to an end others contend that the potential gains to productivity from the technological advances associated with the computer revolu

railways and the local economy evidence from qingzang railway abstractthis article empirically examines the causal effect of railway infrastructure on local economic development using the construction of qingzang railway as a natural experiment we apply the difference in difference method and find that the qingzang railway significantly stimulated the economy of the counties along its path railway counties the local gdp per capita increased by about 33 after the railway had begun to operate the effect manifested primarily through the positive railway effect on the manufacturing industry in addition the effect did not vary significantly with the initial economic status of the railway counties the gdp per capita of the off railway counties that are adjacent to the railway counties was not significantly affected

comparing derived importance weights across attributes certain structural equation estimators economic research program princeton research memorandum 48 summers robert 1968 a capital intensive approach to the small sample properties of various simultaneous equation estimators econometrica 33 1 41 searle samuel r and udell john g 1970 the use of regression on dummy variables in management research management science 16 397 410 weinstein david and farley john u 1974 market segmentation and parameter inequalities in a buyer behavior model journal of business 48 526 40 winer russell s 1980 estimation of a longitudinal model to decompose the effects of and advertising stimulus on family consumption management scierice 26 471 82 1981 attrition bias in the estimation of econometric models from panel data in advances in consumer research vol 8 ed kent b monroe ann arbor association for consumer research

world war ii and convergence proxies that measure the effect of world war ii on a country s capital stock are used as instruments for estimating standard cross country growth regressions the war s destruction should offer a natural experiment that allows us to consistently estimate the speed at which productivity growth converges to its long run path this paper presents evidence that convergence rates are approximately 4 to 6 per annum substantially larger than conventional wisdom

preferences for proxy attributes a proxy attribute is an indirect measure of an ultimate decision objective keeney and raiffa keeney r l h raiffa 1976 decisions with multiple objectives preferences and value tradeoffs john wiley new york argued that assessing utility functions over proxy attributes requires complex inferences that may exceed the human capacity for consistent judgment thus biasing utility assessments this hypothesis was tested in an experimental study of preferences for pollution control alternatives each decision maker made two sets of utility assessments the first regarding outcomes described by the fundamental attributes pollution control cost and pollution related illness the second regarding outcomes described by the fundamental attribute pollution control cost and the proxy attribute pollution emissions level which served as an indirect measure of illness the subjects displayed a near universal bias to overweight the proxy attribute relative to the prescriptions of expected utility theory the bias was large resulting in a substantial loss of expected utility in a simulated policy decision making scenario to account for this bias we developed three heuristic models of preferences for proxy attributes the best guess worst case and relative importance models the results strongly favored the relative importance model according to which decision makers assess scaling constants by relying on general attitudes regarding the relative importance of different decision objectives rather than on well articulated preferences for rates of substitution between pairs of attributes

betting your favorite to win costly reluctance to hedge desired outcomes we examined whether people reduce the impact of negative outcomes through emotional hedging betting against the occurrence of desired outcomes we found substantial reluctance to bet against the success of preferred u s presidential candidates and major league baseball national football league national collegiate athletic association ncaa basketball and ncaa hockey teams this reluctance was not attributable to optimism or a general aversion to hedging reluctance to hedge desired outcomes stemmed from identity signaling a desire to preserve an important aspect of the bettor s identity reluctance to hedge occurred when the diagnostic cost of the negative self signal that hedging would produce outweighed the pecuniary rewards associated with hedging participants readily accepted hedges and pure gambles with no diagnostic costs they also more readily accepted hedges with diagnostic costs when the pecuniary rewards associated with those hedges were greater reluctance to hedge identity relevant out

using rank data to estimate health state utility models in this paper we report the estimation of conditional logistic regression models for the health utilities index mark 2 and the sf 6d using ordinal preference data the results are compared to the conventional regression models estimated from standard gamble data and to the observed mean standard gamble health state valuations for both the hui2 and the sf 6d the models estimated using ordinal data are broadly comparable to the models estimated on standard gamble data and the predictive performance of these models is close to that of the standard gamble models our research indicates that ordinal data have the potential to provide useful insights into community health state preferences however important questions remain

modeling multiattribute utility risk and belief dynamics for new consumer durable brand choice this paper proposes a brand choice model to aid in the prelaunch management of a new consumer durable entry in an existing category the model contributes to theory by integrating the critical phenomena of multiattribute preference risk and dynamics in an individual level expected utility framework the integration is based on established theoretical constructs in utility bayesian decision analysis and discrete choice theory measurement and estimation procedures are presented an application is described and the managerial relevance of this work as a planning and forecasting tool is examined

up close and personal investor sophistication and the disposition effect this paper analyzes the trading records of a major discount brokerage house to investigate the disposition effect the tendency to sell stocks that have appreciated in price winners sooner than stocks that trade below the purchase price losers in contrast to previous research that has demonstrated the disposition effect by aggregating across investors our main objective is to identify differences in the disposition bias across individuals and explain this in terms of underlying investor characteristics building on the findings in experimental economics and social psychology we hypothesize that differences in investor literacy about financial markets and trading frequency are responsible in part for the variation in individual disposition effect using demographic and socioeconomic variables as proxies for investor literacy we find empirical evidence that wealthier individuals and individuals employed in professional occupations exhibit a lower disposition effect consistent with experimental economics trading frequency also tends to reduce the disposition effect we provide guidelines for investment advisors regulators and investment communities to utilize our findings and help investors make better decisions

multiattribute risky choice behavior the editing of complex prospects this investigation draws upon concepts from prospect theory kahneman and tversky kahneman d a tversky 1979 prospect theory an analysis of decisions under risk econometrica 47 263 291 and multiattribute utility theory keeney and raiffa keeney r l h raiffa 1976 decisions with multiple objectives preferences and value tradeoffs wiley new york in an examination of the multiattribute risky choice behavior of 128 managers the questions of how managers edit multiattribute prospects and how editing relates to various independence assumptions were explored the major result is that managers appear to violate attribute independence in its general form and especially in the form of the marginality assumption the most common form of behavior observed was multiattribute risk aversion for prospects involving only gains and multiattribute risk seeking for prospects involving only losses this result reinforces the importance of a target reference point or aspiration level that has been f

constructive consumer choice processes consumer decision making has been a focal interest in consumer research and consideration of current marketplace trends e g technological change an information explosion indicates that this topic will continue to be critically important we argue that consumer choice is inherently constructive due to limited processing capacity consumers often do not have well defined existing preferences but construct them using a variety of strategies contingent on task demands after describing constructive choice consumer decision tasks and decision strategies we provide an integrative framework for understanding constructive choice review evidence for constructive consumer choice in light of that framework and identify knowledge gaps that suggest opportunities for additional research

globalizing carbon lock in this paper extends the arguments surrounding carbon lock in elaborated in unruh energy policy 28 2000 817 30 2002 317 to countries currently undergoing industrialization it argues that for numerous reasons industrializing countries are unlikely to leapfrog carbon intensive energy development on the contrary carbon lock in may be globalizing and could further constrain climate change mitigation options it is then argued that many policy recommendations ignore carbon lock in possibly limiting their potential for successful implementation the paper then discusses four policy approaches that appear to have advantages given lock in conditions it is recognized however that relative ease of implementation does not necessarily equate with superiority instead it is merely a path dependent outcome of past development decisions pursuing policies on the basis of relative implementation ease may help address the issue of climate change but could also result in sub optimal outcomes along other dimensions of sustainable development

decision making over time and under uncertainty a common approach this paper considers a number of parallels between risky and intertemporal choice we begin by demonstrating a one to one correspondence between the behavioral violations of the respective normative theories for the two domains i e expected utility and discounted utility models we argue that such violations or preference reversals are broadly consistent with three propositions about the weight that an attribute receives in both types of multiattribute choice specifically it appears that 1 if we add a constant to all values of an attribute then that attribute becomes less important 2 if we proportionately increase all values of an attribute or if we change the sign of an attribute from positive to negative then that attribute becomes more important the generality of these propositions as well as the constraints they would impose on separable representations of multiattribute preferences is discussed

analysis of preference dependencies among objectives in decision problems there are often preference dependencies for the achievement of various objectives this paper suggests a problem oriented approach to address such preference dependencies first a diagnostic analysis is conducted to identify the basis for the dependencies based on this the attributes are divided into components or transformed into an alternate set of attributes with a lesser degree of preference dependence quantification of the value structure by developing a utility function is easier in such cases making use of existing independence concepts

convergence endogenous growth and productivity disturbances abstract kelly 1992 has recently shown that evidence on convergence cannot be taken as evidence against endogenous growth in general this study uses a well known class of stochastic growth models to show other difficulties with traditional empirical studies of convergence key parameters typically cannot be estimated consistently in cross section regressions when the parameters are assumed known implications for convergence are unavailable except under restrictive and economically unmotivated assumptions those same assumptions that relate key parameters to cross country convergence render cross section regressions impossible to estimate consistently

allocation of tasks for reliability growth using multi attribute utility abstract in reliability growth models in particular and project risk management more generally improving the reliability of a system or product is limited by constraints on cost and time there are many possible tasks which can be carried out to identify and design out weaknesses in the system under development this paper considers the allocation problem which subset of tasks to undertake while the method is applicable to project risk management generally the work has been motivated by reliability growth programmes we utilise a model for reliability growth based on an efficacy matrix developed with engineering experts in the aerospace industry we develop a general multi attribute utility function based on targets for cost time on test and system reliability the optimal subset is identified by maximising the prior expected utility we derive conditions on the model parameters for risk aversion and loss aversion based on observed properties of preference we give conditions for multivariate risk aversion under the general form of the utility function the method is illustrated using an example informed by work with aerospace organisations

risk preferences for gains and losses in multiple objective decision making payne laughhunn and crum payne j w d j laughhunn r crum 1984 an experimental study of multiattribute risky choice management sci 30 1350 1361 found that managers were multiattribute risk averse for gains but multiattribute risk prone for losses a pattern that is inconsistent with both the additive and the multiplicative multiattribute utility models in this paper we develop the reference risk value rrv model which is simple in structure yet capable of representing the kinds of multiattribute reference effects observed by payne et al we also report the results of two experiments that compare the descriptive validity of the rrv model with that of the additive and multiplicative utility models experiment 1 involved choices between risky multiperiod cash flows experiment 2 choices between risky job alternatives described by change in salary and change in type of work in experiment 1 subjects were multiattribute risk averse for gains but multiattribute risk neutral for losses in e

transaction decoupling how price bundling affects the decision to consume abstract in today s marketplace price bundling is widespread manufacturers and retailers routinely offer multiple products for a single bundled price although the effects of price bundling on purchase behavior have been well researched the effects of price bundling on postpurchase consumption behavior have received almost no attention in this article the authors build on the sunk cost literature e g thaler 1980 1985 and predict that price bundling leads to a disassociation or decoupling of transaction costs and benefits thereby reducing attention to sunk costs and decreasing a consumer s likelihood of consuming a paid for service e g a theater performance four studies show this to be the case in two lab studies the authors show that having a bundled four day ski pass as opposed to four one day ski tickets decreases a person s likelihood of skiing on the final day of a four day ski vacation they replicate this result in a field study showing that multiperformance ticket holders are

measuring the benefits of a large public investment the case of the u s federal aid highway system abstract this paper presents an analysis of an important component of the benefits of federal aid highway infrastructure investments in the united states specifically it focuses on the effects of those investments since 1950 on costs and productivity of firms in the u s road freight transport industry using a theoretical and statistical model of regional truck firm costs the paper documents that the rapid growth of highway infrastructure which occured between 1950 and 1973 had a strong and positive effect on productivity growth in trucking furthermore the results indicate the benefits of these investments to be substantial large enough to justify between one third and one half of the cost of the federal aid highway system over this period on the basis of benefits to trucking alone

estimating the population utility function a parametric bayesian approach abstract in this paper we consider the health utility index mark ii for quantifying and describing a population s health related quality of life over health states composed of multiple attributes this measure can be used for various purposes such as evaluating the severity of the effect of a disease or comparing different treatment methods we present a bayesian framework for population utility estimation and health policy evaluation by introducing a probabilistic interpretation of the multi attribute utility theory maut used in health economics in doing so our approach combines ideas from the maut and bayesian statistics and provides an alternative method of modeling preferences and utility estimation

a time series approach to g convergence this paper applies time series analysis to study how the gap between a number of countries and the usa evolves through time as other authors it is found that time series analysis provides a better insight into the concept of convergence than the cross sectional one the econometric results show that the stochastic behaviour of the output disparity varies considerably neither the steady state equilibrium nor the speed of convergence are unique and constant across countries and time in general there is catching up for european countries convergence for east and south asian countries and neither of them for latin american countries

common mistakes in making value trade offs value trade offs define how much must be gained in the achievement of one objective to compensate for a lesser achievement on a different objective value trade offs that adequately express a decision maker s values are essential both for good decision making in multiple objective contexts and for insightful analyses of multiple objective decisions this paper identifies and illustrates 12 important mistakes frequently made that limit one s ability to determine useful value trade offs it then suggests how to avoid making these mistakes the intent is to provide practical advice for making good value trade offs and hence better decisions

a comparative evaluation of multiattribute consumer preference models in this paper the theory and estimation procedures for several consumer preference models are discussed predictive accuracy in the form of internal consistency of these models is compared in an empirical application consumer decision situations are classified into two classes decisions under certainty and decisions under uncertainty for each of the two classes of decision situations two modeling strategies have been used statistical estimation and algebraic solution an additive conjoint an additive and a multiplicative measurable value and an additive and a multiplicative utility model are considered our main finding is that the statistical estimation procedures outperform their algebraic counterparts on the criterion of predictive accuracy the utility model provides better predictions for decisions under uncertainty than the widely used conjoint models the relationship between models for decisions under certainty and decisions under uncertainty is discussed it is shown how a conjoint or a mea

strength of preference and risky choice this paper provides conditions under which a utility function under risk can be legitimately interpreted to measure strength of preference between consequences these conditions require that if a decision maker regards the preference difference between acts a and b to be the same as the preference difference between acts a and b for every state of the world then the preference difference between a and b should be regarded as equivalent to the preference difference between a and b a key assumption is that a decision maker s preference differences between acts given one state of the world should be independent of common consequences given other states of the world usefulness of this result is discussed

note further tests of aspiration level effects in risky choice behavior this note extends the work reported in payne laughhunn and crum payne j w d j laughhunn r crum 1980 translation of gambles and aspiration level effects in risky choice behavior management sci 26 1039 1060 on the need to incorporate a target return reference point or aspiration level concept in the analysis of risky choice behavior two experiments are reported the first experiment provides a more complete test of the model of reference point effects developed by payne laughhunn and crum a translation of outcomes procedure which adds a constant to all outcomes was used to vary the relationship of pairs of gambles to an assumed target or reference point the results fully support the model the second experiment provides evidence of the conceptual validity of the model by using explicit instructions to vary the target levels of managers while holding gamble values constant

specification seeking how product specifications influence consumer preference we offer a framework about when and how specifications e g megapixels of a camera and number of air bags in a massage chair influence consumer preferences and report five studies that test the framework studies 1 3 show that even when consumers can directly experience the relevant products and the specifications carry little or no new information their preference is still influenced by specifications including specifications that are self generated and by definition spurious and specifications that the respondents themselves deem uninformative studies 4 and 5 show that relative to choice hedonic preference liking is more stable and less influenced by specifications

multi attribute utility function or statistical inference models a comparison of health state valuation models using the hui2 health state classification system a key issue in health state valuation modelling is the choice of functional form the two most frequently used preference based instruments adopt different approaches one based on multi attribute utility theory maut the other on statistical analysis there has been no comparison of these alternative approaches in the context of health economics we report a comparison of these approaches for the health utilities index mark 2 the statistical inference model predicts more accurately than the one based on maut we discuss possible explanations for the differences in performance the importance of the findings and implications for future research

product balancing under conditions of quality inflation cost pressures and growth strategies abstract this paper analyzes an organization that has a well defined strategy providing a sustainable competitive advantage this advantage is expressed by at least one dimension of quality on which the product or service exhibits outstanding performance using decreasing and increasing exponential demand functions for price and quality respectively the optimal quality level is characterized when dollar sales volume under a cost based price floor and profit are maximized however as quality inflates the same quality performance is worth less tomorrow than today this paper shows that continuous and simultaneous improvement of operational efficiency and quality is a must and is independent from price setting policies the condition of optimal trade offs among quality dimensions is found for the case when the company competes on multiple quality dimensions finally the conditions are analyzed when the resources of quality are utilized in other market segments as well it is found that the corporate level quality or the utilization level of resources is lower higher than the highest least individual business unit product quality

the inefficiency of regulating a competitive industry productivity gains in trucking following reform this study confirms the higher productivity levels predicted by advocates of regulatory reform in trucking and shows that these gains have been substantial cost simulations suggest that following a year of higher expenditures efforts to remain competitive have yielded considerable cost savings that increase over time from 1 percent in 1981 to 23 percent in 1984 the indirect effects of reform through the independent variables initially decrease costs but later lead to higher costs the cumulative effect has been a less than 1 percent increase in costs in 1980 becoming by 1984 a significant 16 percent productivity gain copyright 1990 by mit press

real business cycles in this paper we demonstrate how certain very ordinary economic principles lead maximizing individuals to choose consumption production plans that display many of the characteristics commonly associated with business cycles our explanation is entirely consistent with i rational expectations ii complete current information iii stable preferences iv no technological change v no long lived commodities vi no frictions or adjustment costs vii no government viii no money and ix no serial dependence in the stochastic elements of the environment we also provide a completely worked out example of the type of artificial economy we have in mind the time series properties of the example exhibit some major features of observed business cycles although this type of model may not be capable of explaining all of the regularities in actual business cycles we believe that it provides a useful well defined benchmark for assessing the relative importance of factors e g monetary disturbances

new brand positioning and pricing in an oligopolistic market the positioning and pricing of a new brand requires knowledge about the relationship of both demand and cost with potential attribute locations and prices this paper addresses this problem and illustrates it in the context of the automobile market multi attribute expected utility theory which allows for consumer uncertainty about the brands is used to model individuals behavior attribute weights are estimated from market survey data on brands attributes and preferences using linmap as an estimation procedure expected utility is then updated using the multinomial logit model and choice data to account for the observation that stated preferences do not perfectly reflect the eventual choice it is hypothesized that when faced with an actual choice price may become more important to the consumer while other attributes may become more or less important than is reflected in stated preferences the resulting estimated choice probabilities are aggregated to form demand functions facing each brand which depend on all brands prices and attribute space locations assuming there is a price equilibrium in the existing market and that firms have the same variable cost function variable costs as a function of a brand s attribute levels are estimated given the demand and cost functions facing each firm including the potential new entrant the profit maximizing positioning and pricing of a new brand is analyzed using a game theoretic approach a solution is sought under the assumption that incumbents react to entry by changing their prices possible approaches to the translation of the perceptual attribute positioning of the new brand to physical and engineering attributes are reviewed improvements and future extensions of the study are discussed

the cost of simplifying preference models formulas are derived which estimate the accuracy of conjoint analysis in predicting preferences in a validation sample this accuracy turns out to depend on among other things which model of preference is used e g whether interactions are added whether partworth or linear functions are used i first show a paradoxical result that simpler models often yield higher predictive accuracy even when a more complex model is the true one the reason for this is that the additional parameters of the complex model are estimated with larger variance which tends to overwhelm the benefits of using the true model i then shift my criterion from predicting an individual s preferences to predicting market share which is of most interest to managers under this criterion my conclusions reverse and i show that a true model even when complex is much more likely to yield higher predictive accuracy than a simpler incorrect model this reverses some previous conclusions in marketing and confirms that finding the