consumption and debt response to unanticipated income shocks evidence from a natural experiment in singapore abstract this paper uses a unique panel dataset of consumer financial transactions to study how consumers respond to an exogenous unanticipated income shock consumption rose significantly after th

design and analysis of simulated consumer choice or allocation experiments an approach based on aggregate data the authors integrate concepts in conjoint analysis and discrete choice theory in econometrics to develop a new approach to the design and analysis of controlled consumer choice or resource allocat

the impact of wind power generation on the electricity price in germany abstract this paper investigates the relationship between intermittent wind power generation and electricity price behaviour in germany using a garch model i evaluate the effect of wind electricity generation on the level and the volatility of the electricity price in an integrated approach the results show that variable wind power reduces the price level but increases its volatility this paper s results also indicate that regulatory change has stabilised the wholesale price the electricity price volatility has decreased in germany after a modification of the marketing mechanism of renewable electricity this gives confidence that further adjustments to regulation and policy may foster a better integration of renewables into the power system

slovak electricity market and the price merit order effect of photovoltaics abstract this paper analyses slovak electricity market with a focus on photovoltaic energy it evaluates the impact of the solar electricity penetration into electricity mix on spot prices seeks evidence of the merit order effect in the slovak electricity market and quantifies it based on hourly data the multivariate regression analysis covers the period 2011 2016 the rather small merit order effect estimated by an ols time series model leads to the small decrease of slovak electricity wholesale prices this spot price reduction attributable to the photovoltaics does not outweigh the costs of the support scheme borne by end users what implies a consumer loss

changes to gate closure and its impact on wholesale electricity prices the case of the uk abstract the electricity supply industry in the united kingdom underwent a number of regulatory reforms since late 80 s that have transformed the trading and pricing of the energy market herein we provide empirical evidence that the modification proposal p12 mod p12 that took place in 7 2 2002 moving the gate closure gc interval from 3 5 h to 1 h before real time has caused a permanent alteration in the uk spot price volatility using a combination of recurrence plot rp and recurrence quantification analysis rqa we find that after the the change in the gc time short term price volatility significantly decreased between 2001 and 2008 while long term price volatility is not affected by cg change similar results are obtained by means of spectral analysis on the price series showing a significant reduction in its variability the results of our analysis suggest that a dynamical regime shift of the price occurred and such shift is linked to the gc change whereby shorter gc intervals facilitate short term forecasting on electricity demand and better reliability on the supply side therefore gc closer to real time is associated to reduced price fluctuations in the wholesale market

a spot forward model for electricity prices with regime shifts 2014 elsevier b v all rights reserved this is the authors manuscript preprint to the article

a heterogeneous conditional logit model of choice aggregate forecasts using mcfadden s conditional logit model of discrete choice harbor the unrealistic implicit assumption of a random utility distribution that is homogeneous across both alternatives and individuals this article relaxes that assumption a choice model is developed that describes the random utility component as a probability mixture model some numerical results illustrate that the derived model is not constrained by the independence of irrelevant alternatives property an experimental test of visual perceptions demonstrates the potential superiority of the model

temporary incentives change daily routines evidence from a field experiment on singapore s subways we show that temporary incentives can lead to lasting changes in people s daily routines through a field experiment in randomized controlled trials on singapore s subways commuters in the treatment group received a full rebate of their fares for 10 weeks if they exited fare gates before the start of morning peak travel time the objective of the fare promotion was to alleviate peak time congestion by encouraging commuters to travel prepeak this promotion resembles an actual public program implemented in singapore in 2013 using participants fare cards we obtained a rich data set for 60 weeks worth of trips a difference in differences analysis reveals that the effect of the free trip offer was modest but robust during the promotional period on average trips were 5 5 more likely to end before the morning peak time more encouragingly the modest shift toward early travel strongly persisted even seven months after the end of the free trip offer this seemingly small shift could imply large financia

market equilibrium and welfare effects of a fuel tax in china the impact of consumers response through driving patterns abstract we investigate the market equilibrium and welfare effects of a fuel tax in china relative to an alternative policy instrument that rations the number of new automobile sales through auctioned quotas unlike those of previous studies our modeling approach incorporates both household car purchase and utilization decisions the latter of which have been ignored in previous studies on china s fuel tax ignoring this margin of choice will underestimate the fuel tax s ability to mitigate externalities using detailed household level panel data and a fixed effects econometric specification we estimate the fuel price elasticity of vehicle miles traveled is 0 59 on average the results of the counterfactual analysis suggest that a 51 increase in tax inclusive gasoline prices will reduce car sales by 24 9 but increase social welfare to a degree that depends on vehicles lifetime we find that compared to auctioned quotas the fuel tax results in greater car sales but higher social welfare

the exponomial choice model a new alternative for assortment and price optimization we investigate the use of a canonical version of a discrete choice model due to daganzo 1979 daganzo c 1979 multinomial probit the theory and its application to demand forecasting academic press new york in optimal pricing and assortment planning in contrast to multinomial and nested logit the prevailing choice models used for optimizing prices and assortments this model assumes a negatively skewed distribution of consumer utilities an assumption we motivate by conceptual arguments as well as published work the choice probabilities in this model can be derived in closed form as an exponomial a linear function of exponential terms the pricing and assortment planning insights we obtain from the exponomial choice ec model differ from the literature in two important ways first the ec model allows variable markups in optimal prices that increase with expected utilities second when prices are exogenous the optimal assortment may exhibit leapfrogging in prices i e a product can be s

achieving representativeness of the observable component of the indirect utility function in logit choice models an empirical revelation although probabilistic discrete choice models such as multinomial logit are widely used little consideration has been given to the appropriateness of the assumption of a representative utility function the use of socioeconomic variables as proxies for unobserved attributes directly influencing choice when a single cross section of data is used has not been adequately tested in this paper experimental design enables us to obtain repeated observations on each individual and to investigate the extent to which taste variation in a population can be explained by socioeconomic differences in the population we show empirically that individual specific coefficients result in a better model for product positioning but that a group model is preferable for predicting overall market share because it produces results as good as the individual specific models at a substantially lower cost a

price competition under mixed multinomial logit demand functions in this paper we postulate a general class of price competition models with mixed multinomial logit demand functions under affine cost functions in these models the market is partitioned into a finite set of market segments we characterize the equilibrium behavior of this class of models in the case where each product in the market is sold by a separate independent firm we identify a simple and very broadly satisfied condition under which a pure nash equilibrium exists and the set of nash equilibria coincides with the solutions of the system of first order condition equations a property of essential importance to empirical studies this condition specifies that in every market segment each firm captures less than 50 of the potential customer population when pricing at a specific level that under the condition is an upper bound for a rational price choice for the firm irrespective of the competitors prices we show that under a somewhat stronger but still broadly satisfied version of the abov

balancing energy strategies in electricity portfolio management traditional management of electricity portfolios is focused on the day ahead market and futures of longer maturity within limits market participants can however also resort to the balancing energy market to close their positions in this paper we determine strategic positions in the balancing energy market and identify corresponding economic incentives in an analysis of the german balancing energy demand we find that those strategies allow an economically optimal starting point for real time balancing and create a marketplace for flexible capacity that is more open than alternative marketplaces the strategies we proffer in this paper we believe will contribute to an effective functioning of the electricity market

investigating heterogeneity in brand preferences in logit models for panel data in analyzing panel data the issue of heterogeneity across households is an important consideration if heterogeneity is present but is ignored in the analysis it will result in biased and inconsi

consumers preferences for fresh broccolis interactive effects between country of origin and organic labels while international trade in organic products has grown significantly understanding consumers preferences for imported organic foods has remained limited this research examines the impact of country of origin labeling on us consumers choices of organic foods results show that consumer valuation of domestically produced organic broccoli was significantly higher than that of imported organic broccoli adding information about usda organic certification standards rules for imported products mildly increases consumer valuation of imported organic broccoli in some cases these findings suggest that providing such information may have a positive impact on consumer willingness to purchase imported organic products

on the market impact of wind energy forecasts this paper presents an analysis of how day ahead electricity spot prices are affected by day ahead wind power forecasts demonstration of this relationship is given as a test case for the western danish price area of the nord pool s elspot market impact on the average price behaviour is investigated as well as that on the distributional properties of the price by using a non parametric regression model to assess the effects of wind power forecasts on the average behaviour the non linearities and time variations in the relationship are captured well and the effects are shown to be quite substantial furthermore by evaluating the distributional properties of the spot prices under different scenarios the impact of the wind power forecasts on the price distribution is proved to be considerable the conditional price distribution is moreover shown to be non gaussian this implies that forecasting models for electricity spot prices for which parameters are estimated by a least squares techniques will not have gaussian residuals hence the widespread assumption of gaussian residuals from electricity spot price models is shown to be inadequate for these model types the revealed effects are likely to be observable and qualitatively similar in other day ahead electricity markets significantly penetrated by wind power

can higher prices stimulate product use evidence from a field experiment in zambia the controversy over how much to charge for health products in the developing world rests in part on whether higher prices can increase use either by targeting distribution to high use households a screening effect or by stimulating use psychologically through a sunk cost effect we develop a methodology for separating these two effects we implement the methodology in a field experiment in zambia using door to door marketing of a home water purification solution we find evidence of economically important screening effects by contrast we find no consistent evidence of sunk cost effects jel c93 d12 i11 m31 o12

factors influencing willingness to pay for the energy star label abstract in the united states nearly 17 of greenhouse gas emissions come from residential energy use increases in energy efficiency for the residential sector can generate significant energy savings and emissions reductions consumer labels such as the us environmental protection agency s energy star promote conservation by providing consumers with information on energy usage for household appliances this study examines how the energy star label affects consumer preferences for refrigerators the results of an online survey of a national sample of adults suggest that consumers are on average willing to pay an extra 249 82 349 30 for a refrigerator that has been awarded the energy star label furthermore the results provide evidence that respondent willingness to pay was motivated by both private energy cost savings and public environmental benefits

taste variation in discrete choice models this paper develops an extension of the classical multinomial logit model which approximates a class of models obtained when there is uncontrolled taste variation across agents and choices in addition to the stochastic noise inherent in the logit model unlike semiparametric and parametric alternatives the extended logit model is easy to estimate even when there are many potential choices unlike parametric alternatives it does not require the specification of a distribution of varying tastes the extended logit model can give a quick indication of the impact of taste variation on estimates and it generates estimates of the covariances of the taste shifters it can be used as an exploratory device en route to the construction of a model incorporating a particular form of random taste variation and it can be used to determine whether such effort is required at all when the amount of taste variation is not excessive the approximate model can be adequate itself the model nests the conventional logit model which leads to a misspecification diagnostic a method for estimating the model using conventional logit model software is proposed asymptotic properties of estimators are derived and an application is presented

escalation errors and the sunk cost effect an explanation based on reputation and information asymmetries this paper is concerned with explaining a paradox of human behavior consider the following example a department manager makes a large investment in new production equipment and soon after learns of different equipment that could perform the same operations at lower cost incremental analysis favors switching but the manager refuses saying he does not want to waste the investment already made such real world examples have been extensively documented and studied by social scientists see thaler 1980 and staw 1981 in these examples the decision maker having commited to a course of action subsequently discovers new information that indicates that continuing the earlier commitment would likely result in worse consequences than switching in spite of this he clings to and even escalates his earlier

do sunk costs matter let bygones be bygones khieu samphan former head of state of the khmer rouge government asking cambodians to forget the more than one million people who died under his government s rule i introduction sunk costs are costs that have already been incurred and cannot be recovered sunk costs do not change regardless of which action is presently chosen therefore an individual should ignore sunk costs to make a rational choice introductory textbooks in economics present this as a basic principle of rational decision making frank and bernanke 2006 10 mankiw 2004 297 nonetheless people are apparently often influenced by sunk costs in their decision making once individuals have made a large sunk investment they have a tendency to invest more in an attempt to prevent their previous investment from being wasted the greater the size of their sunk investment the more they tend to invest further even when the return on additional investment does not seem worthwhile for example some people remain in failing relationships because they have already invested too much to leave others buy expensive gym memberships to commit themselves to exercising still others are swayed by arguments that a war must continue because lives will have been sacrificed in vain unless victory is achieved these types of behavior do not seem to accord with rational choice theory and are often classified as behavioral errors people who commit them are said to be engaging in the sunk cost fallacy students are repeatedly taught in economic classes that sunk costs are irrelevant to decision making so that they may ultimately learn to make better decisions invoking the theory as a normative prescription conditioning on the level of sunk costs is also taken as evidence that people do not always make rational choices thaler 1991 suggesting that the explanatory power of rational choice theory is limited in this article we argue that in a broad range of environments reacting to sunk costs is actually rational agents may rationally react to sunk costs because of informational content reputational concerns or financial and time constraints a informational content consider a project that may take an unknown expenditure to complete the failure to complete the project with a given amount of investment is informative about the expected amount needed to complete it therefore the expected additional investment required for fruition will be correlated with the sunk investment moreover in a world of random returns the realization of a return is informative about the expected value of continuing a project a large loss which leads to a rational inference of a high variance will often lead to a higher option value because option values tend to rise with variance consequently the informativeness of sunk investments is amplified by consideration of the option value b reputational concerns in team relationships each participant s willingness to invest depends on the investments of others in such circumstances a commitment to finishing projects even when they appear ex post unprofitable is valuable because such a commitment induces more efficient ex ante investment thus a reputation for throwing good money after bad the classic sunk cost fallacy can solve a coordination problem in contrast to the desire for commitment people might rationally want to conceal bad choices to appear more talented which may lead them to make further investments hoping to conceal their investments gone bad c financial and time constraints given financial constraints larger past expenditures leave less ability to make future expenditures ceteris paribus thus financial constraints may lead companies or individuals to stick with projects that no longer appear to be the best choice moreover given limited time to invest in projects as the time remaining shrinks individuals have less time over which to amortize their costs of experimenting with new projects and therefore may be rationally less likely to abandon current projects

short term electricity trading for system balancing an empirical analysis of the role of intraday trading in balancing germany s electricity system abstract previous studies have noted that unexpectedly germany s dramatic expansion of wind and solar energy coincided with a reduction of short term balancing reserves this observation has been dubbed the german balancing paradox this paper provides further and updated evidence since 2011 wind and solar energy have nearly doubled while both reserve requirements and reserve use have declined by 50 the paper quantitatively explores one reason for reduced balancing needs increased and improved short term wholesale electricity trading on the intraday market trading is now commonly done around the clock and based on quarter hour rather than full hour contracts the shift to quarter hourly products alone explains a decrease in balancing energy by 17 there is also strong evidence that market parties respond efficiently to imbalance charges suggesting that incentive based approaches to electricity balancing work

an indirect utility model of car ownership and private car use abstract in this paper a model is developed for the simultaneous determination of private car ownership and private car use measured as the annual number of kilometers this model is a micro economic utility model in which the fixed and variable car costs enter through the budget restriction this allows us to do micro simulations of increasing those costs which is a policy issue in the netherlands it turns out that in this model both fixed and variable car costs are effective measures for reducing traffic growth the former working primarily through decreasing car ownership levels the latter having a more direct effect on car use

shrouded attributes consumer myopia and information suppression in competitive markets bayesian consumers infer that hidden add on prices e g the cost of ink for a printer are likely to be high prices if consumers are bayesian firms will not shroud information in equilibrium however shrouding may occur in an economy with some myopic or unaware consumers such shrouding creates an inefficiency which firms may have an incentive to eliminate by educating their competitors customers however if add ons have close substitutes a curse of debiasing arises and firms will not be able to profitably debias consumers by unshrouding add ons in equilibrium two kinds of exploitation coexist optimizing firms exploit myopic consumers through marketing schemes that shroud high priced add ons in turn sophisticated consumers exploit these marketing schemes it is not possible to profitably drive away the business of sophisticates it is also not possible to profitably lure either myopes or sophisticates to nonexploitative firms we show that informational shrouding flourishes even in highly competitive markets even in markets with costless advertising and even when the shrouding generates allocational inefficiencies

modeling multiple sources of heterogeneity in multinomial logit models methodological and managerial issues we offer a framework to specify and estimate various sources of heterogeneity in multinomial logit brand choice models we let each brand specific intercept and each parameter of the explanatory variable vector vary randomly across households in addition we distinguish loyal households from the rest our results suggest that incorporating multiple sources of heterogeneity improves the model fit and suggests higher impact of marketing mix elements on brand choice we highlight the importance of incorporating multiple sources of heterogeneity the model we implement yields valuable managerial insights

neoclassical theory versus prospect theory evidence from the marketplace several experimental studies have provided evidence that suggest indifference curves have a kink around the current endowment level these results which clearly contradict closely held economic doctrines have led some influential commentators to call for an entirely new economic paradigm to displace conventional neoclassical theory e g prospect theory which invokes psychological effects this paper pits neoclassical theory against prospect theory by investigating data drawn from more than 375 subjects actively participating in a well functioning marketplace the pattern of results suggests that prospect theory adequately organizes behavior among inexperienced consumers but consumers with intense market experience behave largely in accordance with neoclassical predictions moreover the data are consistent with the notion that consumers learn to overcome the endowment effect in situations beyond specific problems they have previously encountered this transference of behavior across domains has important implications in both a positive and normative sense

price volatility in commodity markets with restricted participation abstract in commodity markets price volatility may rise significantly if the product granularity increases to gain insights into the underlying drivers we analyze price volatility based on the example of german electricity markets we develop a theoretical model to reproduce the price formation in the day ahead and intraday auction which are sequential short term electricity markets with 60 minute and 15 minute products as cross border trade is allowed in the day ahead but not in the intraday auction the model accounts for the impact of restricted market participation the theoretical model is then transferred into an empirical analysis to first validate the modeling approach and second to comparatively assess the impact of increasing product granularity and restricted market participation the empirical results indicate that the disproportional rise in quarter hourly price volatility is mainly triggered by limited market participation and not only by the high volatility of renewable supply and demand since restricted market participation refers to a lack of market coupling we derive a proxy for efficiency losses ranging from eur 55 million to eur 108 million that may be reduced if markets are coupled

modeling heterogeneity and state dependence in consumer choice behavior in frequently purchased consumer goods markets consumer brand choices exhibit substantial persistence across purchase occasions in this article i estimate a choice model that admits of both heterogeneity in preferences and true state dependence as sources of this persistence using nielsen scanner data on ketchup i find evidence for true state dependence in the choice process even after controlling for a rich heterogeneity structure simulation of the model indicates that the long term effect of a promotion induced purchase on future purchase probabilities is positive but small

the impact of renewable energies on eex day ahead electricity prices in this paper we analyze the impact of renewable energies wind and photovoltaic on the formation of day ahead electricity prices at eex we give an overview of the policy decisions concerning the promotion of renewable energy sources in germany and discuss their consequences on day ahead prices an analysis of electricity spot prices reveals that the introduction of renewable energies enhances extreme price changes in the frame of a dynamic fundamental model we show that there has been a continuous electricity price adaption process to market fundamentals furthermore the fundamental drivers of prices differ among hours with different load profiles our results imply that renewable energies decrease market spot prices and have implications on the traditional fuel mix for electricity production however the prices for the final consumers increased overall because they must pay in addition the feed in tariffs for the promotion of renewable energy

the psychological effect of weather on car purchases when buying durable goods consumers must forecast how much utility they will derive from future consumption including consumption in different states of the world this can be complicated for consumers because making intertemporal evaluations may expose them to a variety of psychological biases such as present bias projection bias and salience effects we investigate whether consumers are affected by such intertemporal biases when they purchase automobiles using data for more than 40 million vehicle transactions we explore the impact of weather on purchasing decisions we find that the choice to purchase a convertible or a four wheel drive is highly dependent on the weather at the time of purchase in a way that is inconsistent with classical utility theory we consider a range of rational explanations for the empirical effects we find but none can explain fully the effects we estimate we then discuss and explore projection bias and salience as two primary psychological mechanisms that are consistent with our results jel codes d03 d12

free distribution or cost sharing evidence from a randomized malaria prevention experiment author s cohen jessica dupas pascaline abstract it is often argued that cost sharing charging a subsidized positive price for a health product is necessary to avoid wasting resources on those who will not use or do not need the product we explore this argument through a field experiment in kenya in which we randomized the price at which prenatal clinics could sell long lasting anti malarial insecticide treated nets itns to pregnant women we find no evidence that costsharing reduces wastage on those that will not use the product women who received free itns are not less likely to use them than those who paid subsidized positive prices we also find no evidence that costsharing induces selection of women who need the net more those who pay higher prices appear no sicker than the average prenatal client in the area in terms of measured anemia an important indicator of malaria cost sharing does however considerably dampen demand we find that uptake drops by 75 percent when the price of itns increases from zero to 0 75 i e from 100 to 87 5 percent subsidy the price at which itns are currently sold to pregnant women in kenya we combine our estimates in a cost effectiveness analysis of itn prices on child mortality that incorporates both private and social returns to itn usage overall our results suggest that free distribution of itns could save many more lives than cost sharing programs have achieved so far and given the large positive externality associated with widespread usage of itns it would likely do so at a lesser cost per life saved

econometric analysis of 15 minute intraday electricity prices abstract the trading activity in the german intraday electricity market has increased significantly over the last years this is partially due to an increasing share of renewable energy wind and photovoltaic which requires power generators to balance out the forecasting errors in their production we investigate the bidding behaviour in the intraday market by looking at both last prices and continuous bidding in the context of a reduced form econometric analysis a unique data set of 15 minute intraday prices and intraday updated forecasts of wind and photovoltaic has been employed price bids are explained by prior information on renewables forecasts and demand supply market specific exogenous variables we show that intraday prices adjust asymmetrically to both forecasting errors in renewables and to the volume of trades dependent on the threshold variable demand quote which reflects the expected demand covered by the planned traditional capacity in the day ahead market the location of the threshold can be used by market participants to adjust their bids accordingly given the latest updates in the wind and photovoltaic forecasting errors and the forecasts of the control area balances

the flat rate pricing paradox conflicting effects of all you can eat buffet pricing abstract are price and consumption independent in flat rate price service contexts a field experiment at an all you can eat pizza restaurant shows that a 50 discount on the price of the meal led customers to consume 27 9 less pizza 2 95 versus 4 09 pieces a second analysis indicated that individual taste ratings of this pizza tended to be inversely related to how much is consumed one possible interpretation of these two findings is that individuals in a flat rate or fixed price context may consume the amount that enables them to get their money s worth rather than consuming until their marginal utility of consumption is 0

wind power integration and power system flexibility an empirical analysis of extreme events in germany under the new negative price regime abstract in this article the flexibility of the german power market with respect to the integration of an increasing share of electricity from renewable energy sources was analysed flexibility limiting system components which cause negative prices are explained and illustrated for the german market the decision of the european energy exchange in leipzig to allow negative price bids is then explained the empirical data illustrate the flexibility of conventional generating capacities in germany from october 2008 to december 2009 of the 86 h of negative spot prices 19 h were significantly negative with prices of at least 100 mwh these extreme hours were analysed in greater detail by the examination of different system components thereby load wind power infeed and conventional generation by fuel type were observed as well as the market for negative tertiary reserve as indicators for market tightness although the market situations were found to be severe under the current conditions it could have been much worse in order to enable the market to clear at all times policy recommendations are provided and long run implications of an increasing res e share on the conventional generation capacity are discussed the article concludes with an outlook on additional power system flexibility options

reinvestment decisions by entrepreneurs rational decision making or escalation of commitment abstract among the most important decisions made by entrepreneurs are those relating to whether to expand maintain or contract their businesses we would expect these major commitments to be based upon expectations about future performance these expectations in turn would be heavily influenced by performance to date thus we might presume that businesses that have been receiving favorable feedback from the marketplace would be more likely to expand and those receiving negative feedback would be more likely to contract ongoing research in decision making suggests that psychological processes may play a role in influencing these decisions under certain conditions entrepreneurs may be influenced by a phenomenon termed escalation of commitment this may lead entrepreneurs to decide to expand the asset bases of their firms regardless of feedback from the marketplace the literature on escalation of commitment suggests that under certain conditions decision makers who make an initial decision become overly committed to the original choice and then subsequently make decisions biased by psychological commitment previous research most of which has been conducted in laboratory settings suggests that escalation bias is more likely to occur 1 if entrepreneurs have started their firms rather than purchased them 2 if entrepreneurs have partners 3 if entrepreneurs expect to use their skills in the new business and 4 if entrepreneurs are overconfident that is expected to do substantially better than others in the same kinds of business it is also expected that these escalation predictors will have a relatively greater influence when feedback is negative than when it is positive the negative feedback seems to invoke a self justification process it is also hypothesized that the influence of these predictors will be less in the third year of a business than in the second year finally it is expected that these psychological influences will help to provide systematic explanation of reinvestment decisions over and beyond what one could predict based upon financial feedback the hypotheses were tested using data from a longitudinal study involving 1112 firms it was found that entrepreneurs who had started their firms and those who had expressed substantial over confidence were significantly more likely to make the decision to expand the hypotheses that those who had partners and those who expected to apply their skills would be more likely to expand were not supported furthermore and consistent with previous research these psychological escalation predictors seemed to exert a greater influence when feedback from the marketplace was negative as expected there was a declining influence in the third year as compared with the second consistent with the prior literature and the hypotheses these psychological predictors did show a small but systematic influence upon reinvestment decisions decisions to expand or contract a business are not necessarily good or bad however it is important that entrepreneurs be aware of the factors influencing their decisions entrepreneurs should recognize that the escalation bias tendency is likely to occur seeking independent opinions from advisors who do not feel as much personal responsibility for the original decision to start may lead to more objective evaluation of alternatives advisors should also realize that the inclination to escalate exists and is natural they may thereby be able to guard against the tendency to be swept along by the entrepreneur s enthusiasm and propensity to escalate entrepreneurs and their advisors as well as researchers should recognize that important entrepreneurial decisions are often influenced by psychological as well as economic factors this awareness should enable entrepreneurs to make more rational decisions

a comparison of the predictive validity of procedures for analyzing binary data some approaches for analyzing binary data are briefly described and compared the results of two empirical investigations in the context of assessing consumer preferences and a simulation study yield some interesting findings the article concludes with some directions for future research in this area

price flexibility in channels of distribution evidence from scanner data in this study we empirically examine the extent of price rigidity using a unique store level time series data set consisting of i actual retail transaction prices ii actual wholesale transaction prices which represent both the retailers costs and the prices received by manufacturers and iii a measure of manufacturers costs for 12 goods in two widely used consumer product categories we simultaneously examine the extent of price rigidity for each of the 12 products at both final goods and intermediate goods levels we study two notions of price rigidity employed in the existing literature i the frequency of price changes and ii the response of prices to exogenous cost changes we find that retail prices exhibit remarkable flexibility in terms of both notions of price rigidity i e they change frequently and they seem to respond quickly and fully to cost changes furthermore we find that retail prices respond not just to their direct costs but also to the upstream manufacturers costs which further reinforces the extent of the retail price flexibility at the intermediate goods level of the market in contrast we find relatively more evidence of rigidity in the response of manufacturers prices to cost changes this despite the fact that wholesale prices change frequently and therefore exhibit flexibility according to the first notion of price rigidity

sunk cost fallacy in driving the world s costliest cars we develop a behavioral model of durable good usage with mental accounting for sunk costs it predicts higher than rational usage that attenuates at a rate that increases with sunk costs singapore government policy varied the sunk cost of buying a new car using singapore data we estimate the elasticity of driving with respect to sunk costs to be 0 048 which implies that government policy between 2009 and 2013 was associated with 86 kilometers per month or 5 6 more driving the results are robust to specifying sunk costs as relative to buyer income and estimation with hong kong data we believe this to be the first field evidence of the sunk cost fallacy in usage of a major durable good the online appendix is available at https doi org 10 1287 mnsc 2016 2651 this paper was accepted by john list behavioral economics

predictive testing of consumer choice models not subject to independence of irrelevant alternatives the probabilistic modeling of the relationship between objective or perceived characteristics of multiattribute alternatives and consumer choice is receiving increased attention in marketing and ot

payment depreciation the behavioral effects of temporally separating payments from consumption research suggests that individuals mentally track the costs and benefits of a consumer transaction for the purpose of reconciling those costs and benefits on completion of the transaction prelec and loewenstein 1998 thaler 1980 1985 in transactions where costs precede benefits this can lead to a systematic and economically irrational attention to sunk costs arkes and blumer 1985 thaler 1980 in this article we consider economic exchanges in which costs significantly precede benefits as with many prepayment types of consumer transactions we predict a consumer will gradually adapt to a historic cost with the passage of time thereby decreasing its sunk cost impact on the consumption of a pending benefit we label this process of gradual adaptation to costs payment depreciation in a series of experiments we find evidence of payment depreciation across a range of consumer transactions and offer insight into the behavioral implications of temporally separating costs from benefits

a multiplicative fixed effects model of consumer choice the issue of consumer heterogeneity in discrete choice analysis has been attracting much attention recently research has suggested that heterogeneity can result in biased parameter estimates which in turn can lead to incorrect conclusions among the many methods proposed in the literature to handle heterogeneity fixed effects models seem to be the most attractive from a substantive point of view however in order to provide consistent estimates these models typically require long purchase histories this difficult constraint has prevented their widespread use in this paper we propose a new model which offers the benefits of fixed effects models without requiring long purchase histories our approach differs from the classic formulation in two ways first we calibrate the common and fixed effects sequentially rather than simultaneously this two stage estimation permits us to obtain unbiased estimates of the common parameters even when the sample has households with very few observations second we incorporate the fixed effects in a multiplicative rather than in an additive form our assumptions regarding the error term result in a probit model with heteroskedastic and temporally correlated random utilities we develop a method of moments based estimator to calibrate parameters of models with this type of error structure this procedure exploits the property that the method of moments yields estimates which are asymptotically as efficient as the maximum likelihood estimates given an appropriate starting point and a matrix of instruments this is a very general procedure in that its mechanics are not tied to the proposed model it can be readily applied to other problems where probit models are used to analyze data with serial correlation this is a methodological contribution of the paper the model and estimation procedure are illustrated on the a c nielsen scanner data base for the liquid detergent category our results indicate that the proposed model can provide a better fit than random effects and loyalty based models and better predictive performance than random effects models from a substantive perspective our analysis provides the following findings a the distribution of price sensitivities has a low variance thus most households have very similar price sensitivity in this category b the promotion response distribution has a high variance suggesting that there are some households that are highly responsive to promotions while there are quite a few households that are less influenced by promotions c preferences and price sensitivity have a negative covariance which is an indication that a reduction in preference for a brand is associated with an increase in price sensitivity and vice versa d preferences and promotion response have a positive covariance thus as the preference for a brand increases response to promotions by the brand also increases and e price sensitivity and promotion response have a negative covariance implying that as households become more price sensitive purchases may be driven more by price than by promotions in other words rather than responding to promotions such as displays and features as signals of a reduced price price sensitive households actively evaluate prices in arriving at a choice the proposed approach can be used by theoretical as well as applied researchers of brand choice behavior specifically estimates of fixed effects provided by the model can be used to cluster households into groups with similar parameters profiling the resulting groups in terms of demographics would provide interesting insights from a theoretical perspective regarding the household characteristics that are associated with different types of response behavior it would also help managers to better target their brands using the proposed approach for cross category analyses of fixed effects would be an interesting area of future research for instance given a sample of households and their purchase histories in multiple categories the proposed model can be used to explore the relationship between household behavior and category characteristics in particular issues such as the following can be investigated by comparing household level estimates across categories a are households that are highly price sensitive in one category also price sensitive in other categories b what household characteristics are associated with high low price sensitivity or high low promotion response across categories and c in what types of categories are households likely to exhibit high low price sensitivity or high low promotion response

the merit order effect of wind and photovoltaic electricity generation in germany 2008 2016 estimation and distributional implications abstract generation from renewable energy sources in germany has experienced a considerable uptake in recent years mainly responsible for this development is the german renewable energy sources act erneuerbare energien gesetz eeg this paper considers redistributive implications of the eeg for different electricity consumers using time series regression analysis we show that electricity generation by wind and pv has reduced spot market prices considerably by 6 mwh in 2010 rising to 10 mwh in 2012 we use these results to build a near term forecasting tool for merit order effects projected to reach 14 16 mwh in 2016 on the other hand the costs of the eeg are passed forward to consumers in the form of a surcharge our findings highlight significant redistributive transfers under the current design of the eeg in particular some energy intensive industries are benefiting from lower wholesale electricity prices whilst being largely exempted from contributing to the costs of the scheme we also highlight implications of our results for other areas for reform of the eeg such as adequate remuneration mechanisms that ensure efficient operation and investment decisions are made under the scheme more generally these findings suggest that policy makers need to integrate distributional assessments into policy design and implementation