how does advertising depend on competition evidence from u s brewing the relationship between market structure and advertising has been extensively studied but has generated sharply opposing theoretical predictions as well as inconclusive empirical findings likely because of severe endogeneity concerns we exploit the 2008 merger of miller and coors in the u s brewing industry to examine how changes in local concentration affect firms advertising behavior well established regional preferences over beer brands and the sharp increase in concentration from the merger make this an excellent setting to analyze this question we find a significant positive effect of local market concentration on advertising expenditures a 100 point increase in the herfindahl hirschmann index measure of concentration increases advertising per capita by about 5 our findings shed light on how and when firms choose to deploy advertising the online appendix is available at https doi org 10 1287 mnsc 2017 2889 this paper was accepted by eric anderson marketing

does intellectual property restrict output an analysis of pharmaceutical markets abstract standard analysis of intellectual property focuses on the balance between incentives for research and the welfare costs of restraining output through monopoly pricing we present evidence from the pharmaceutical industry that output often fails to rise after patent expirations patents restrict output by allowing monopoly pricing but may also boost output and welfare by improving incentives for marketing a form of nonprice competition we analyze how nonprice factors such as marketing mitigate and even offset the costs of monopoly associated with intellectual property empirical analysis of pharmaceutical patents suggests that in the short run patent expirations reduce output and consumer welfare by decreasing marketing in the long run patent expirations benefit consumers but by 30 percent less than would be implied by the reduction in price alone focusing only on the pricing issues of intellectual property may lead to incomplete or even inaccurate conclusions for welfare

the welfare economics of buy local this paper provides a theoretical model of how various aspects of the buy local movement influence social welfare and output across two regions market power considerations are also addressed where one region has a competitive advantage in production while consumers buy local for a variety of reasons our model categorizes some of the motivations and analyzes the impacts on output under various market structures welfare is calculated when demand is changed due to subsidies or taxes we also allow for the presence of externalities we find that in the absence of market power or externalities deadweight losses occur when the region without a competitive advantage buys more locally however in the presence of significant externalities and in the presence of market power it is possible that profits to producers from consumers buying local could increase more than consumer utility is harmed thus increasing aggregate social welfare this could arise if consumers genuinely feel there are sufficient positive externalities from local production or negative externalities from non local production to warrant the loss of efficiency we point out that understanding the motivation behind the movement is critical when analyzing welfare effects since some motivations are counter productive to each other

globesity the effects of globalization on obesity and caloric intake abstract we examine the effect of globalization in its economic and social dimensions on obesity and caloric intake namely the so called globesity hypothesis our results suggest a robust association between globalization and both obesity and caloric intake a one standard deviation increase in globalization is associated with a 23 8 percent increase in obese population and a 4 3 percent rise in calorie intake the effect remains statistically significant even after using an instrumental variable strategy to correct for some possible reverse causality and ommited variable bias a lagged structure and corrections for panel standard errors however we find that the primary driver of the globesity phenomenon is the social rather than the economic dimension of globalization and specifically the effect of changes in information flows and social proximity on obesity a one standard deviation increase in social globalization increased the percentage of obese population by 13 7 percent

consumer response to commodity specific and broad based promotion programs for fruits and vegetables generic promotion activities have traditionally been used for individual agricultural commodities yet there is renewed interest in implementing a mandatory broad based promotion program for all fruits and vegetables here we use data from an experiment that introduce subjects to various promotional efforts for fruits and vegetables to estimate the shift and rotational effects of advertising econometric results indicate that commodity specific promotional efforts may not be effective at increasing demand for fruits and vegetables after controlling for various demographic differences among treatments our results show that consumers valuation of fruits and vegetables was highest among subjects exposed to broad based advertisements copyright 2011 oxford university press

do pharmacists buy bayer informed shoppers and the brand premium we estimate the effect of information and expertise on consumers willingness to pay for national brands in physically homogeneous product categories in a detailed case study of headache remedies we find that more informed or expert consumers are less likely to pay extra to buy national brands with pharmacists choosing them over store brands only 9 percent of the time compared to 26 percent of the time for the average consumer in a similar case study of pantry staples such as salt and sugar we show that chefs devote 12 percentage points less of their purchases to national brands than demographically similar nonchefs we extend our analysis to cover 50 retail health categories and 241 food and drink categories the results suggest that misinformation and related consumer mistakes explain a sizable share of the brand premium for health products and a much smaller share for most food and drink products we tie our estimates together using a stylized model of demand and pricing

estimating dynamic demand for cigarettes using panel data the effects of bootlegging taxation and advertising reconsidered abstracct a dynamic demand for cigarette consumption is estimated using pooled data of 46 states over the period 1963 to 1980 a price elasticity of 0 2 and an insignificant income elasticity is found using pooled estimation techniques the bootlegging effect is modeled explicitly using neighboring price the effect is found to be significant two major policy issues are analyzed in light of these new estimates 1 cigarette taxation is found to be an effective tool for generating revenues even though there may be spillover effects to neighboring states where bootlegging is significant 2 the effects of the fairness doctrine act and the advertising ban on cigarette consumption are re examined we find mild support for the effectiveness of subsidized anti smoking messages in reducing cigarette consumption and no support for the thesis that the ban on advertising helps to increase per capita consumption

on the simple economics of advertising marketing and product design we propose a framework for analyzing transformations of demand such transformations frequently stem from changes in the dispersion of consumers valuations which lead to rotations of the demand curve in many settings profits are a u shaped function of dispersion high dispersion is complemented by niche production and low dispersion is complemented by mass market supply we investigate numerous applications including product design advertising marketing and sales advice and the construction of quality differentiated product lines we also suggest a new taxonomy of advertising distinguishing between hype which shifts demand and real information which rotates demand

advertising learning and consumer choice in experience good markets an empirical examination this article empirically analyzes different effects of advertising in a nondurable experience good market a dynamic learning model of consumer behavior is presented in which i allow both informative effects of advertising and prestige or image effects of advertising this learning model is estimated using consumer level panel data tracking grocery purchases and advertising exposures over time empirical results suggest that in this market advertising s primary effect was that of informing consumers the estimates are used to quantify the value of this information to consumers and evaluate the welfare implications of an alternative advertising regulatory regime

beggar thy neighbor advertising theory and application to generic commodity promotion programs profits from generic advertising by a producer group often come partly at the expense of producers of closely related commodities the resulting tendency toward excessive advertising is exacerbated by check off funding to analyze this beggar thy neighbor behavior we compare a scenario where different producer groups cooperate and choose their advertising expenditures jointly to maximize the sum of profits across the groups and a scenario where they optimize independently in an illustrative example using 1998 data for u s beef and pork the noncooperatively chosen expenditure on beef and pork advertising is more than three times the cooperative optimum copyright 2001 oxford university press

information and subsidies complements or substitutes abstract does providing information about a product influence the impact of price subsidies on purchases this question is particularly relevant for health products in developing countries where both informational campaigns and price subsidies are common policy instruments we conduct a field experiment in zambia and find that providing information about a new version of a product significantly increases the impact of price subsidies on take up taken alone the information manipulation has no significant impact on demand while the price subsidy substantially increases demand however the evaluation of either intervention in isolation fails to capture the significant complementarity between the two

seasonality and the effect of advertising on price does advertising make markets more or less competitive this paper lays out an econometric strategy for estimating the effect of advertising on prices that exploits seasonal demand and imperfect targeting of consumers we find mostly negligible effects of advertising on prices at monthly frequency among the 35 of 131 product categories with sufficient advertising seasonality to justify second stage estimation only nine have a significant effect and those are typically small this finding is essentially the result of the much greater seasonality in advertising than price

costly buyer search in laboratory markets with seller advertising in this experiment sellers simultaneously choose prices and advertising strategies buyers either purchase at an advertised price or search sequentially for other prices in the unique symmetric equilibrium sellers charge a high unadvertised price or advertise a price chosen from a lower interval increases in search or advertising costs raise equilibrium prices and affect equilibrium advertising intensity empirical results are consistent with most comparative static predictions sellers however price much lower and advertise more intensely than predicted consequently market outcomes more closely resemble a perfect information bertrand like equilibrium than the imperfect information mixed strategy equilibrium with significant seller market power

an experimental study of price dispersion in an optimal search model with advertising abstract this paper reports a laboratory experiment to study pricing and advertising behavior with costly buyer search sellers simultaneously post prices and may incur a cost to advertise this price in the unique symmetric equilibrium sellers either charge a high unadvertised price or randomize in an interval of lower advertised prices increases in search or advertising costs raise equilibrium prices and equilibrium advertising intensity decreases with lower search costs and higher advertising costs our experimental results support these comparative static predictions and sellers also post high unadvertised prices as predicted in all treatments however sellers advertise more intensely than in equilibrium

research note additional learning and implications on the role of informative advertising observers argue that evidence for the persuasive role of advertising comes from competitive categories where increases in advertising lead to higher average prices conversely others claim that advertising serves a purely informational role here higher levels of advertising lead to better informed consumers and this should increase competition and stimulate lower prices the objective of this study is to neither confirm nor refute either of these perspectives it is rather to show that increases in informative advertisingalone can lead to both higher or lower prices i further show that the direction of this relationship depends on the level of differentiation between competing firms similar to grossman and shapiro 1984 i examine conditions where the differences between competing products are small but i also examine conditions where the differences are significant the role of advertising is to inform consumers about individual products and higher advertising for a product means that more of the potential market knows about it higher levels of advertising increase the relative importance of fully informed consumers compared to partially informed consumers this dynamic is the basis for explaining why informative advertising can push prices either up or down in a uniformly distributed spatial market

credence goods misleading labels and quality differentiation due to differences in information disclosure mechanisms consumer misinformation about the quality of many credence goods is more endemic at intermediate levels of the quality spectrum rather than at the extremes using an oligopoly model of vertical product differentiation we examine how consumers overestimation of the quality of intermediate quality products affects firms incentives to improve product quality the firms non cooperatively choose the quality of their product before choosing its price or quantity irrespective of the nature of second stage competition bertrand or cournot we find that quality overestimation by consumers increases profit of the intermediate quality firm and motivates it to raise its product s quality in response the high quality firm improves its product quality even further but ends up with lower profit overall average quality of the vertically differentiated product improves which raises consumer surplus social welfare increases when the firms compete in prices but falls when they compete in quantities

environment versus growth a criticism of degrowth and a plea for a growth in recent debates on environmental problems and policies the strategy of degrowth has appeared as an alternative to the paradigm of economic growth this new notion is critically evaluated by considering five common interpretations of it one conclusion is that these multiple interpretations make it an ambiguous and rather confusing concept another is that degrowth may not be an effective let alone an efficient strategy to reduce environmental pressure it is subsequently argued that a growth i e being indifferent about growth is a more logical social aim to substitute for the current goal of economic growth given that gdp per capita is a very imperfect indicator of social welfare in addition focusing ex ante on public policy is considered to be a strategy which ultimately is more likely to obtain the necessary democratic political support than an ex ante explicit degrowth strategy in line with this a policy package is proposed which consists of six elements some of which relate to concerns raised by degrowth supporters

quantity restrictions on advertising commercial media bias and welfare abstract we study the welfare effect of a quantity restriction on advertising in free to air television and other advertising financed media in the presence of commercial media bias broadcasters face a trade off between increasing the number of viewers by sending content that is highly valued by viewers and increasing the price of advertising by choosing advertiser friendly content a cap on advertising drives the per viewer price of ads up thus content improves for viewers therefore the cap can be welfare enhancing even when viewers are not ad averse competition among broadcasters makes it more likely that a cap on advertising improves welfare thus there is a complementarity between regulation and competition on this market we also show that a tax on advertising revenues has quite different effects than a cap on advertising quantity

the central banker as a risk manager estimating the federal reserve s preferences under greenspan we derive a natural generalization of the taylor rule that links changes in the interest rate to the balance of the risks implied by the dual objective of sustainable economic growth and price stability this monetary policy rule reconciles economic models of expected utility maximization with the risk management approach to central banking within this framework we formally test and reject the standard assumption of quadratic and symmetric preferences in inflation and output that underlies the derivation of the taylor rule our results suggest that fed policy decisions under greenspan were better described in terms of the fed weighing upside and downside risks to their objectives rather than simply responding to the conditional mean of inflation and of the output gap

the fleeting effect of advertising abstract this paper adds to the evidence that advertising effects depreciate rapidly inclusion of lagged advertising in empirical models may be unnecessary in addition the notion that accumulated advertising effects may be a barrier to entry is called into question

a laboratory study of advertising and price competition abstract we use a laboratory experiment to study advertising and pricing behavior in a market where consumers differ in price sensitivity equilibrium in this market entails variation in the number of firms advertising and price dispersion in advertised prices we vary the cost to advertise as well as varying the number of competing firms theory predicts that advertising costs act as a facilitating device higher costs increase firm profits at the expense of consumers we find that higher advertising costs decrease demand for advertising and raise advertised prices as predicted further this comes at the expense of consumers however advertising strategies are more aggressive than theory predicts with the result that firm profits do not increase

the rise of obesity in europe an economic perspective obesity in europe is rising this paper investigates the economic rationales for public intervention to control obesity we present new empirical evidence showing that family background is related to obesity among young european adults this evidence provides a strong basis for intervention on equity grounds particularly targeted towards children the case for intervention on efficiency grounds is less clear cut and in most cases the evidence is relatively weak we find insufficient evidence that information deficiencies are important as the majority of europeans appear to be aware of the bad consequences of obesity on health we also find that the potential health insurance externality non obese effectively subsidizing obese individuals is small in support of policy intervention we show that there are product and labour market imperfections obese employees earn less than the non obese we also find that there is a remarkably high proportion of individuals with self control problems who fail to stick to their self declared weight related plans regulations that affect fast food advertisements and the location and access to fast food vending machines and establishments may help these individuals in controlling their weight giorgio brunello pierre carl michaud and anna sanz de galdeano

inflation forecast targeting implementing and monitoring inflation targets abstract inflation targeting is shown to imply inflation forecast targeting the central bank s inflation forecast becomes an explicit intermediate target inflation forecast targeting simplifies both implementation and monitoring of monetary policy the weight on output stabilization determines how quickly the inflation forecast is adjusted towards the inflation target money growth or exchange rate targeting is generally inferior than inflation targeting and leads to higher inflation variability commitment to target rules may be better than commitment to instrument rules

incumbency advantage and political campaign spending limits abstract this paper presents a model which captures the three main arguments for and against campaign spending limits campaign spending limits are purported to restrict the incumbent s ability to exploit his fundraising advantage in contrast to conventional wisdom a ceiling increases the incumbent s probability of victory regardless of the candidates relative fundraising abilities as long as the challenger is not more effective in campaign spending if the challenger is more effective in campaign spending ceilings have a non monotonic effect when the incumbent enjoys a mild initial voter disposition advantage a moderate ceiling decreases the incumbent s probability of victory but further restricting the limit favors the incumbent irrespective of incumbency status the marginal benefit to quality decreases with a more restrictive cap in an open seat contest a more restrictive limit improves the electoral prospects of the superior quality candidate stricter ceilings may lead to the unintended consequence of increased expected spending

evaluating the cost of government credit support the oecd context governments throughout the oecd allocate a large share of societies capital and risk through their credit related activities hence accurate cost estimates for credit support programmes are a prerequisite for efficient resource allocation transparency effective management and public oversight i find that oecd governments generally take their cost of capital to be their own borrowing rate rather than using a weighted average cost of capital that includes the cost of risk borne by taxpayers and the general public in their role as equity holders that practice which is institutionalised in government accounting and budgetary rules results in cost estimates for credit support that are significantly downwardly biased relative to a fair value metric that recognises the full cost of risk the size and possible real consequences of those distortions are illustrated with analyses of the european bank for reconstruction and development the european stability mechanism and the tennessee valley authority deborah lucas

the effects of banning advertising in junk food markets we develop a structural model to analyze the eects of banning advertising on market equilibria and welfare in junk food markets we consider the impact on demand and prices and show how to quantify welfare eects when advertising might lead consumers to take decisions that are inconsistent with their underlying preferences we use transaction level data on the potato chips market and nd that banning advertising leads to a direct reduction in demand but also toughens price competition leading to lower prices and increased demand welfare increases as consumers benet from no longer making distorted

a simple theory of advertising as a good or bad our analysis treats advertisements and the goods advertised as complements in stable metautility functions and generates new results for advertising by building on and extending the general analysis of complements by assimilating the theory of advertising into the theory of complements we avoid the special approaches to advertising found in many studies that place obstacles in the way of understanding the effects of advertising we also use this approach to evaluate advertising from a welfare perspective whether there is excessive or too little advertising depends on several variables the effects on consumer utility the degree of competition in the market for advertised goods the induced changes in prices and outputs of advertised goods and whether advertising is sold to consumers

the length of the effect of aggregate advertising on aggregate consumption abstract we investigate the longevity of aggregate advertising effects on aggregate consumption over the period 1947 1988 using updated methods the effects appear to linger for nine years raising further questions perhaps a return to this near dormant area of research could be productive

distinguished lecture on economics in government what central bankers could learn from academics and vice versa academic writing about monetary policy has been useful to practical central bankers but more of certain aspects of the economists way of thinking could profitably be imported on the other hand academics could improve their analysis and make it more useful to policymakers if they would pay more attention to certain real world aspects of monetary policy the author draws on his experience at the federal reserve board to point out a number of specific lessons for each side

exploring international differences in inflation dynamics abstract standard closed economy dsge models have difficulty replicating the persistence of inflation we use a multicountry dataset to establish some empirical regularities on persistence and volatility of aggregate consumer prices for 135 countries since 1993 we find both persistence and volatility to be low high in developed developing countries relative to the full sample average this pattern is also observed in low high inflation countries we then employ a two country dsge framework to investigate the extent to which structural open economy features such as incomplete exchange rate pass through the existence of nontraded goods and international financial market incompleteness can help in replicating the persistence and volatility of consumer prices our simulation results indicate that the model can replicate the degree of inflation persistence seen in the data for both developed and developing countries but cannot generate the low levels of volatility observed in developed economies

advertising expenditure and consumer prices this paper studies the effect of a change in the marginal costs of advertising on advertising expenditures of firms and on consumer prices i make use of a policy change in austria that involved an increase of the taxation of advertising in parts of the country and a simultaneous decrease in other parts i show that advertising expenditures of firms move quickly in the opposite direction of the marginal costs of advertising consumer prices increase with advertising in some industries and decrease in others this effect correlates with informational differences in advertisements across industries

quantifying the risk of deflation we propose formal and quantitative measures of the risk that future inflation will be excessively high or low relative to the range preferred by a private sector agent unlike alternative measures of risk our measures are designed to make explicit the dependence of risk measures on the private sector agent s preferences with respect to inflation we illustrate our methodology by estimating the risks of deflation for the united states germany and japan for horizons of up to 2 years the question of how large these risks are has been subject to considerable public debate we find that as of september 2002 when this question first arose there was no evidence of substantial deflation risks for the united states and for germany contrary to some conjectures at the time in contrast there was evidence of substantial deflation risks in japan

fast food restaurant advertising on television and its influence on childhood obesity childhood obesity is an escalating problem around the world that is especially detrimental as its effects carry on into adulthood to estimate the effects of television fast food restaurant advertising on children and adolescents with respect to being overweight this paper employs the 1979 child young adult national longitudinal survey of youth and the 1997 national longitudinal survey of youth to estimate the effects of television fast food restaurant advertising on children and adolescents with respect to being overweight a ban on these advertisements would reduce the number of overweight children ages 3 11 in a fixed population by 18 percent and would reduce the number of overweight adolescents ages 12 18 by 14 percent the elimination of the tax deductibility of this type of advertising would produce smaller declines of between 5 and 7 percent in these outcomes but would impose lower costs on children and adults who consume fast food in moderation because positive information about restaurants that supply this type of food would not be completely banned from television

a theory of combative advertising in mature markets with competing firms a common role for advertising is to shift consumer preferences towards the advertiser in a tug of war with no effect on category demand in this paper we analyze the effect of such combative advertising on market power we show that depending on the nature of consumer response combative advertising can reduce price competition to benefit competing firms however it can also lead to a procompetitive outcome where individual firms advertise to increase their own profitability but collectively become worse off this is because combative advertising can intensify price competition such that an advertising war leads to a price war similar to price competition advertising competition can result in a prisoner s dilemma where all competing firms make less profit even when the effect of each firm s advertising is to enhance consumer preferences in its favor given such procompetitive effects we further show that cost of combative advertising could be a blessing in disguise higher unit cost of advertising resulting in lower equilibrium levels of advertising leading to higher prices and profits we conduct a laboratory experiment to investigate how combative advertising by competing brands influences consumer preferences our experimental analysis offers strong support for our conclusions

inflation dynamics in the u s global but not local mean reversion a stylized fact of u s inflation dynamics is one of extreme persistence and possible unit root behavior if so the implications for macroeconomics and monetary policy are somewhat unpalatable our econometric analysis proposes a parsimonious univariate representation of the inflation process for the last 60 years the nonlinear exponential smooth autoregressive the empirical results confirm a number of the key features such as global stationarity local unit root behavior and lower persistence in the post 1983 period than in the pre 1983 period we compare the forecasting ability of our model with that of competing univariate models and find that the nonlinear model outperforms the linear autoregressive model in the pre 1983 period and the random walk in the post 1983 period at short horizons

a cue theory of consumption psychological experiments demonstrate that repeated pairings of a cue and a consumption good eventually create cue based complementarities the presence of the cue raises the marginal utility derived from consumption in this paper such dynamic preferences are embedded in a rational choice model behavior that arises from this model is characterized by endogenous cue sensitivities costly cue management commitment and cue based spikes in impatience the model is used to understand addictive habit forming behaviors and marketing the model explains why preferences change rapidly from moment to moment why temptations should sometimes be avoided and how firms package and position goods

innocuous minimum quality standards abstract the present note shows that innocuous minimum quality standards namely below the lowest quality level in a market may have effects on equilibrium outcomes such a mqs reduces the incentive to invest in r d by the quality leading firm

advertising price and welfare evidence from the u s brewing industry the welfare effect of advertising has been a subject of controversy among economists for some time one obvious concern is simply the cost of advertising in 1990 for example americans spent 130 1 billion on advertising to put this figure into perspective this amounted to 523 per capita 2 35 percent of gross national product and roughly 80 percent of the national deficit 1 much of the early debate regarding the social desirability of advertising stems from different preconceptions regarding its purpose 13 14 8 49 for example according to the kaldor 29 hypothesis advertising is primarily persuasive or deceptive in nature it changes consumer preferences creates brand loyalty and persuades consumers to favor commodities that they did not previously desire an opinion survey by bauer and greyser 5 indicates that consumers believe that much of advertising is persuasive and greyser and reece 27 158 find that 85 percent of the over 2 700 harvard business review subscribers surveyed believe that advertising persuades people to buy things they do not need if advertising is purely deceptive then it can be classified as a bad and reduces welfare

biases in macroeconomic forecasts irrationality or asymmetric loss empirical studies using survey data on expectations have frequently observed that forecasts are biased and have concluded that agents are not rational we establish that existing rationality tests are not robust to even small deviations from symmetric loss and hence have little ability to tell whether the forecaster is irrational or the loss function is asymmetric we quantify the exact trade off between forecast inefficiency and asymmetric loss leading to identical outcomes of standard rationality tests and explore new and more general methods for testing forecast rationality jointly with flexible families of loss functions that embed quadratic loss as a special case an empirical application to survey data on forecasts of nominal output growth demonstrates the empirical significance of our results and finds that rejections of rationality may largely have been driven by the assumption of symmetric loss

generic product advertising spillovers and market concentration we examine the decision to advertise a homogenous good we show that the likelihood of inefficiently low advertising rests heavily on how one models the mechanism by which advertising affects demand regardless of this mechanism however there is always a lower bound of concentration below which no advertising occurs even when welfare enhancing in such cases mandatory programs will raise welfare if they induce entry although producer surplus may decline our model also provides an explanation for the stylized fact that advertising intensity first rises and then falls as concentration increases copyright 2008 oxford university press

the charitable activities of terrorist organizations violent groups sometimes invest significant resources in social work notably in the form of charities and ngos the present paper models a terrorist group s charities as a means to advertise its cause in order to raise popular support the analysis explains how different types of organizations arise in equilibrium depending on government policies then the interaction between a purely terrorist group and an independent local ngo is examined it is shown that a purely terrorist group always invests in more attacks than an integrated terrorist charity organization furthermore the latter may have more ngo activity than a separate local ngo

david vs goliath an analysis of asymmetric mixed strategy games and experimental evidence mixed strategies are widely used to model strategic situations in diverse fields such as economics marketing political science and biology however some of the implications of asymmetric mixed strategy solutions are counterintuitive we develop a stylized model of patent race to examine some of these implications in our model two firms compete to develop a product and obtain a patent however one firm values the patent more because of its market advantages such as brand reputation and distribution network contrary to some intuition we find that the firm that values the patent less is likely to invest more aggressively in developing the product and will also win the patent more often we argue that the reason for these counterintuitive results is inherent in the very concept of mixed strategy solution in a laboratory test we examine whether subjects behavior conforms to the equilibrium predictions we find that the aggregate behavior of our subjects is consistent with the game theoretic predictions with the help of the experience weighted attraction ewa learning model proposed by camerer and ho 1999 we show that adaptive learning can account for the investment behavior of our subjects we find that the ewa learning model tracks the investment decisions of our subjects well whether we hold out trials or an entire group of subjects

inflation targeting should it be modeled as an instrument rule or a targeting rule abstract the paper discusses how current inflation targeting should be modeled and argues that it is better represented as a commitment to a targeting rule a rule specifying operational objectives for monetary policy or a condition for the target variables than as a commitment to a simple instrument rule like a taylor rule

choice set heterogeneity and the role of advertising an analysis with micro and macro data abstract the authors show how to use microlevel survey data from a tracking study on brand awareness in conjunction with data on sales and advertising expenditures to improve the specification estimation and interpretation of aggregate discrete choice models of demand in a departure from the commonly made full information assumption they incorporate limited information in the form of choice sets to reflect that consumers may not be aware of all available brands at purchase time they find that both the estimated brand constants and the price coefficient are biased downward when consumer heterogeneity in choice sets is ignored these biased estimates can lead firms to make costly price setting mistakes in addition the tracking data enable the authors to identify separately two processes by which advertising influences market shares they find that advertising has a direct effect on brand awareness inclusion in choice set in addition to its effect on consumer preferences increase in utility this

informing transforming and persuading disentangling the multiple effects of advertising on brand choice decisions prior behavioral research has suggested that advertising can influence a consumer s quality evaluation through informative and transformative effects the informative effect acts directly to inform a consumer of product attributes and hence shapes her evaluations of brand quality the transformative effect affects the consumer s evaluation of brand quality by enhancing her assessment of her subsequent consumption experience in addition advertising may influence a consumer s utility directly even without providing any explicit information this is the persuasive effect in this paper we propose a framework that formally models the processes through which all three effects of advertisements impact consumers brand evaluations and their subsequent brand choice decisions in particular we model source credibility confirmatory bias and bounded rationality on the part of consumers by appropriately modifying the standard bayesian learning approach our model conforms closely to prior behavioral literature and the experimental findings therein in our empirical analysis we get significant estimates of both informative and transformative effects across brands we find interesting temporal patterns across the effects for instance the importance of transformative effects seem to grow over time while that of informative effects diminishes finally we conduct policy experiments to examine the impact of increased ad intensity on advertising effects as well as the role played by consumption ambiguity

the eurozone expected inflation an option s eyes view abstract we estimate inflation risk neutral densities rnds in the euro area using inflation swaps and caps floors options and introduce a parsimonious approach to jointly estimate the rnds across horizons thus we obtain daily implicit rnds for forward measures such as the 5 year on 5 year inflation rate which although not directly traded in the market is a key reference for monetary policy then we discuss several indicators derived from the information content of those historical rnds that are relevant for policy makers and compare them in light of the ecb s decisions and communication since 2009 specifically we study the evolution of tail risks associated with deflation and high inflation the balance of inflation risks risk aversion and how forward inflation rates react to the ecb s non conventional monetary policies longer term refinancing operations ltro securities market programme smp asset purchase programme app and its variants and extensions

an empirical analysis of dynamic nonprice competition in an oligopolistic industry this article develops a dynamic model of nonprice competition in an oligopolistic industry and uses it to analyze advertising competition in the u s cigarette industry the model generalizes existing studies by allowing advertising to affect both firm market shares and the total size of the market the model also allows dynamic conjectural variations to arise from the intertemporal links created by the durability of advertising we use these dynamic conjectural variations to distinguish alternative models of competitive interaction we estimate the complete model of firm production demand and advertising choice by using data for u s cigarette producers the results indicate that firm advertising primarily affects the level of market demand with a firm s effect on rival firms market shares arising through variations in the number of brands sold empirical results on firm behavior suggest that firms act as if their advertising choices will alter the future advertising choices of rival firms in both the high tar and low tar cigarette markets

food and beverage television advertising exposure and youth consumption body mass index and adiposity outcomes this study examines the relationships between exposure to food and beverage product television advertisements and consumption and obesity outcomes among youth individual level data on fast food and soft drink consumption and body mass index bmi for young adolescents from the early childhood longitudinal study kindergarten cohort 1998 1999 and adiposity measures for children from the us national health and nutrition examination survey 2003 2004 were combined with designated market area dma nielsen media advertising ratings data to account for unobserved individual level and dma level heterogeneity various fixed and random effects models were estimated the results showed that exposure to soft drink and sugar sweetened beverage ssb advertisements is economically and statistically significantly associated with higher frequency of soft drink consumption among youth even after controlling for unobserved heterogeneity with elasticity estimates ranging from 0 4 to 0 5 the association between fast food advertising exposure and fast food consumption disappeared once we controlled for unobservables exposure to cereal advertising was significantly associated with young adolescents bmi percentile ranking but exposures to fast food and soft drink advertisements were not the results on adiposity outcomes revealed that children s exposure to cereal advertising was associated with both percent body fatness and percent trunk fatness fast food advertising was significantly associated with percent trunk fatness and marginally significantly associated with percent body fatness and exposure to ssb advertising was marginally significantly associated with percent body and trunk fatness the study results suggest that continued monitoring of advertising is important and policy debates regarding the regulation of youth directed marketing are warranted

fast food costs and adolescent body mass index evidence from panel data this study draws on four waves of the 1997 national longitudinal survey of youth and external data to examine the relationship between adolescent body mass index bmi and fast food prices and fast food restaurant availability using panel data estimation methods to account for individual level unobserved heterogeneity analyses also control for contextual factors including general food prices and the availability of full service restaurants supermarkets grocery stores convenience stores and commercial physical activity related facilities the longitudinal individual level fixed effects results confirm cross sectional findings that the price of fast food but not the availability of fast food restaurants has a statistically significant effect on teen bmi with an estimated price elasticity of 0 08 the results suggest that the cross sectional model over estimates the price of fast food bmi effect by about 25 there is evidence that the weight of teens in low to middle socioeconomic status families is most sensitive to fast food prices

dynamics of retail advertising evidence from a field experiment we use a controlled field experiment to investigate the dynamic effects of retail advertising the experimental design overcomes limitations hindering previous investigations of this issue our study uncovers dynamic advertising effects that have not been considered in previous literature we find that current advertising does affect future sales but surprisingly the effect is not always positive for the firm s best customers the long run outcome may be negative this finding reflects two competing effects brand switching and intertemporal substitution we also find evidence of cross channel substitution with the firm s best customers switching demand to the ordering channel that corresponds to the advertising jel l2 l81 m3 a firm s current advertising is generally associated with an increase in its sales but this effect is generally short lived

a tear in the iron curtain the impact of western television on consumption behavior this paper examines the impact of exposure to foreign media on the economic behavior of agents in a totalitarian regime we study private consumption choices focusing on former east germany where differential access to western television was determined by geographic features using data collected after the transition to a market economy we find no evidence of a significant impact of previous exposure to western television on aggregate consumption levels however exposure to western broadcasts affects the composition of consumption biasing choices in favor of categories of goods with high intensity of pre reunification advertisement the effects vanish by 1998

investment decisions in manufacturing assessing the effects of real oil prices and their uncertainty summary we investigate the effects of real oil prices and their uncertainty on investment decisions making use of plant level data we estimate dynamic discrete choice models that allow modeling investment inaction under different assumptions related to initial conditions and unobserved heterogeneity we find that increases in real oil price changes and in real oil price uncertainty significantly reduce the likelihood of investment action in line with the predictions of irreversible investment theory we also document that investment decisions exhibit strong pure state dependence and are also significantly affected by initial conditions copyright 2012 john wiley sons ltd

pure strategy nash equilibria in an advertising game with interference abstract two manufacturers produce substitutable goods for a homogeneous market the advertising efforts of the two manufacturers determine the demand for the goods and interfere negatively with each other the demand of each good is a piecewise linear function of the product goodwill and the latter is a linear function of advertising efforts in a game with two competing profit maximizing manufacturers who have access to a set of several advertising media the pure strategy nash equilibria are characterized and their existence is shown

an economy of scales a selective review of obesity s economic causes consequences and solutions this paper reviews the economic research on obesity covering topics such as the measurement of and trends in obesity the economic causes of obesity e g the monetary price and time cost of food food assistance programs income education macroeconomic conditions and peer effects and the economic consequences of obesity e g lower wages a lower probability of employment and higher medical care costs it also examines the extent to which obesity imposes negative externalities and economic interventions that could potentially internalize such externalities such as food taxes subsidies for school based physical activity programs and financial rewards for weight loss it discusses other economic rationales for government intervention with respect to obesity such as imperfect information time inconsistent preferences and irrational behavior it concludes by proposing a research agenda for the field overall the evidence suggests that there is no single dominant economic cause of obesity a wide variety of factors may contribute a modest amount to the risk there is consistent evidence regarding the economic consequences of obesity which are lower wages and higher medical care costs that impose negative externalities through health insurance studies of economic approaches to preventing obesity such as menu labeling taxes on energy dense foods and financial rewards for weight loss find only modest effects on weight and thus a range of policies may be necessary to have a substantial effect on the prevalence of obesity

appropriating signs and meaning the elusive economics of trademark this paper deals with economic analysis of trademark its presence in markets is originally connected with the problem of information asymmetries and the need to provide information for assisting exchanges so as to avert the market failure brought about by adverse selection however this information conveying function is also accompanied by a differentiation effect arising from the power of persuasion that signs can exert on individuals the exploitation of differentiation has given rise to the practice of branding which ties markets and consumption to the realms of meaning and experience branding is so all pervasive in today s economy as to have somehow transfigured it so that the role of persuasion is now pre eminent nonetheless the mainstream economic theory tends to resist acknowledging this change which would to a large extent call into question well established hypotheses and theoretical tools the general response has therefore been to assume that the informational role of trademark predominates and to use this hypothesis to construct models welfare evaluations and policy prescriptions that bear little or no relation to the actual markets the opposing approach in the shadow of the nelson s and arrow s seminal papers on economics of information is recognising the idiosyncratic character of information and therefore drawing conclusions and devising solutions that while still based upon the welfare criterion also incorporate a wider awareness and a deeper representation of the scenario under study the present work attempts to move in this direction showing how different disciplines can provide some key epistemological tools for enabling economists to effectively evaluate the welfare outcomes of the introduction and progressive alteration of a particular intellectual property right within the realm of signs and meanings

the causes of childhood obesity a survey childhood obesity rates are rapidly rising in many countries since it is highly likely that obesity will persist into adulthood current rates undermine the health and future of people in developed as well as developing countries this public health epidemic carries significant economic social as well as individual level consequences and has become a research topic of significant interest for various disciplines including economics we survey the literature in economics and related disciplines associated with the causes of childhood obesity and synthesize the results to provide a better understanding of the explanations for the rising childhood obesity rates this is an important step in crafting effective policies to combat global childhood obesity trends

spatial competition with three firms an experimental study the paper reports the results of an experimental study of the three firm location problem we compare the subjects behavior in the experiments with the symmetric mixed strategy nash equilibrium calculated by shaked 1982 overall the findings are consistent with the equilibrium prediction however the subjects locations were significantly more dispersed than predicted by the theory three alternative explanations of this phenomenon inexperience approximate equilibrium behavior and risk aversion are suggested and evaluated for their predictive power special attention is paid to risk aversion

the dynamics of price dispersion or edgeworth variations abstract hypotheses on the dynamics of dispersed prices are extracted from computer simulations and theory and are tested using laboratory data as predicted in some variations of the edgeworth hypothesis the data exhibit a significant cycle relative to the unique stationary distribution the empirical distribution of posted prices has excess mass in an interval that declines until it approaches the lower boundary of the stationary distribution then jumps upward and the downward cycle resumes the amplitude of the cycle seems fairly constant over the longer experimental sessions a hybrid of gradient dynamics and logit dynamics seems to best reproduce the observed dynamics

an experimental study of price dispersion abstract we report an experiment examining a simple clearinghouse model that generates price dispersion according to this model price dispersion arises because of consumer heterogeneity some consumers are informed and simply buy from the firm offering the lowest price while the remaining consumers are captive and shop based on considerations other than price in our experiment we observe substantial and persistent price dispersion we find that as predicted an increase in the fraction of informed consumers leads to more competitive pricing for all consumers we also find as predicted that when more firms enter the market prices to informed consumers become more competitive while prices to captive customers become less competitive thus our experiment provides strong support for the model s comparative static predictions about how changes in market structure affect pricing

how are preferences revealed revealed preferences are tastes that rationalize an economic agent s observed actions normative preferences represent the agent s actual interests it sometimes makes sense to assume that revealed preferences are identical to normative preferences but there are many cases where this assumption is violated we identify five factors that increase the likelihood of a disparity between revealed preferences and normative preferences passive choice complexity limited personal experience third party marketing and intertemporal choice we then discuss six approaches that jointly contribute to the identification of normative preferences structural estimation active decisions asymptotic choice aggregated revealed preferences reported preferences and informed preferences each of these approaches uses consumer behavior to infer some property of normative preferences without equating revealed and normative preferences we illustrate these issues with evidence from savings and investment outcomes

the effects of soft drink taxes on child and adolescent consumption and weight outcomes abstract childhood and adolescent obesity is associated with serious adverse lifetime health consequences and its prevalence has increased rapidly soft drink consumption has also expanded rapidly so much so that soft drinks are currently the largest single contributors to energy intake in this paper we investigate the potential for soft drink taxes to combat rising levels of child and adolescent obesity through a reduction in consumption our results based on state soft drink sales and excise tax information between 1989 and 2006 and the national health examination and nutrition survey suggest that soft drink taxation as currently practiced in the united states leads to a moderate reduction in soft drink consumption by children and adolescents however we show that this reduction in soda consumption is completely offset by increases in consumption of other high calorie drinks

forecasting the real prices of crude oil using forecast combinations over time varying parameter models abstract in this paper we forecast real prices of crude oil using real time forecast combinations over time varying parameter tvp models with single predictor we reveal the significant predictability at all horizons up to 24 months the mean squared predictive error reduction over the benchmark of no change forecast is as high as 17 and the directional accuracy as high as 0 645 a combination with tvp models is found to generate more accurate forecasts than the same combination with constant coefficient models because the forecast errors of individual tvp models are correlated at a lower degree we also evaluate the forecasting performance in the framework of density forecasting our results indicate that the benchmark model can be significantly outperformed by forecast combination at the horizons longer than 3 months

a risk return model with risk and return measured as deviations from a target return two attribute risk and return models are very popular in the economics and finance literature for analyzing decisions under uncertainty their popularity stems primarily from the intuitive appeal of the dichotomy into risk and return and from the ease with which the concepts can be diagrammed in two dimensions the most commonly used risk return model is the mean variance model in which risk is measured as the variance and return by the mean of the probability distribution over outcomes the mean variance model has a number of shortcomings which are widely known but of particular concern here are the facts that 1 mean variance dominance is neither necessary nor sufficient for second degree stochastic dominance 2 unless the form of the probability distribution is restricted mean variance is consistent with von neumann morgenstern utility theory only if the utility function is quadratic and 3 as peter fishburn has noted

environmental policy when pollutive consumption is sensitive to advertising norms versus status a theoretical model is developed to analyse optimal environmental policy when consumer preferences are endogenous it captures that pollutive consumption is sensitive to consumption by others and commercial advertising this is conceptualized through a consumption norm an increase in this norm means that consumers will become dissatisfied with a given consumption level and try to raise it which will cause an increase in pollution the model is particularly relevant for the study of conspicuous consumption which generally is subject to concentrated advertising efforts while it generates considerable pollution the model can accommodate the cases of an externality created by advertising being positive or negative we also show that using different functional specifications for the norm function one can address either conformity or status seeking we derive optimal rules for a pollution tax a subsidy or tax on advertising and information provision by the government the results not only contribute to more realism in environmental policy theory but also extend public policy with new instruments

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

gary becker as teacher this paper looks at the work of gary s becker american economist professor of sociology friend and colleague of kevin m murphy murphy discusses the traditional approach of becker s teaching and ideas as they were expressed through his wealth of content and style in course design his discussions on the role of preferences technology and constraints as they influence household production and his emphasis on the importance of markets and desire for more murphy recognizes becker s teaching style as groundbreaking unapologetic and pure economics

advertising in consumer goods industries durability economies of scale and heterogeneity hree prominent explanations can be offered for the large and persistent recorded profit rates of firms in heavily advertised consumer goods industries these explanations are based on durability scale economies and heterogeneity for advertising respectively the first explanation posits a prolonged durability for advertising as a consequence recorded profit rates are overstated because accounting convention expenses advertising rather than properly treating it as an investment in durable assets 2 when the durability of advertising is sufficiently prolonged normal returns on the unreported advertising assets fully account for apparent windfall profits a second explanation rests on the presumed collusion