a dynamic model of brand choice when price and advertising signal product quality in this paper we develop a structural model of household behavior in an environment where there is uncertainty about brand attributes and both prices and advertising signal brand quality four quality signaling mechanisms are at work 1 price signals quality 2 advertising frequency signals quality 3 advertising content provides direct but noisy information about quality and 4 use experience provides direct but noisy information about quality we estimate our proposed model using scanner panel data on ketchup if price is important as a signal of brand quality then frequent price promotion may have the unintended consequence of reducing brand equity we use our estimated model to measure the importance of such effects our results imply that price is an important quality signaling mechanism and that frequent price cuts can have significant adverse effects on brand equity the role of advertising frequency in signaling quality is also significant but it is less quantitatively important than price in the printed version of marketing science vol 27 no 6 erdem et al 2008 was mistakenly identified as a research note it is a regular article and has been corrected here and in the online table of contents

equilibrium price dispersion with consumer inventories abstract a model with two types of consumers shoppers and captives is constructed that leads to an equilibrium price dispersion shoppers may hold inventories of the good the level of consumer inventories leads to state dependent price dispersions it is shown that prices and quantities display negative serial correlation the model is tested using grocery store data which display the predicted correlations journal of economic literature classification numbers d43 l13 d83 l81

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

the medicaid notch labor supply and welfare participation evidence from eligibility expansions i assess the impact of losing public health insurance on labor market decisions of women by examining a series of medicaid eligibility expansions targeted toward young children these targeted expansions severed the historical tie between afdc and medicaid eligibility the reforms allowed a mother s earnings to increase without losing public health insurance for her young children increasing the income limit for medicaid resulted in a decrease in afdc participation and an increase in labor force participation among these women the effects were large for ever married women and negligible for never married women

does public insurance crowd out private insurance the cost of expanding public sector health programs depends critically on the extent to which public eligibility will cover just the uninsured or will crowd out existing private insurance coverage we estimate the extent of crowd out arising from the expansions of medicaid to pregnant women and children over the 1987 1992 period we estimate that approximately 50 percent of the increase in medicaid coverage was associated with a reduction in private insurance coverage this occurred largely because employees took up employer based insurance less frequently there is also some evidence that employers contributed less for insurance and that workers dropped coverage of dependents

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

quantity discount dependent consumer preferences and competitive nonlinear pricing abstract producers of consumer packaged goods often offer several package sizes of the same product and charge a lower unit price for a larger size in this article the authors investigate the quantity discount effect or the phenomenon that consumers derive transaction utility from the unit price difference between a small and a large package size of the same product the authors propose a modeling framework composed of a demand side model and a supply side model the empirical results suggest that quantity discount induced gains or losses have a significant impact on consumer buying behavior the authors also find a substantial amount of structural heterogeneity that is some consumers perceive quantity discounts as gains whereas others perceive quantity discounts as losses conversely the supply side analysis suggests that manufacturers in the empirical application do not consider quantity discount effects when setting prices through a series of policy experiments the authors show that by accou

welfare regimes family supportive policies and women s employment along the life course this article examines women s employment patterns during thechild rearing period and the consequences of those patterns for earnings later in life in 12 industralized countries this study proposes an analytic framework that combines welfare regime and gender specific policies to explain country differences the findings presented here suggest that institutional arrangements mediate the costs to women s part time and intermittent employment within welfare regimes employment continuity is highest among countries in which the state provides support for working mothers furthermore this study finds that lower support for mothers employment is associated with higher wage penalties to employment discontinuity

unemployment insurance and precautionary saving abstract models of precautionary saving imply that households will hold more assets when faced with greater income uncertainty however previous empirical studies of income uncertainty have produced somewhat mixed support for the precautionary saving hypothesis in this paper we note that differences in the state contingent income stream available to workers through the unemployment insurance ui program provides an excellent source of variation for testing the presence of a precautionary savings motive simulations of a stochastic life cycle model suggest that a ui system similar to the type currently in place in the u s can lead to a significant reduction in the assets accumulated by a median worker moreover there is considerable variation in the ui benefit schedules for workers living in different states in the u s which provides an exogenous source of variation for empirically testing the precautionary saving hypothesis we carry out this test using data on expected ui benefit replacement rates and financial assets held by households in the survey of income and program participation our empirical results are consistent with the predictions of the model and suggest that reducing the ui benefit replacement rate by 50 percent would increase gross financial asset holdings by 14 percent or 241 for the average worker we also find empirical evidence that this crowd out effect of ui on household saving is stronger for those facing higher unemployment risk and weaker for older workers both of which are implications from our precautionary saving model

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

consumer learning in a turbulent market environment modeling consumer choice dynamics after a product harm crisis abstract the authors empirically study consumer choice behavior in the wake of a product harm crisis which creates consumer uncertainty about product quality they develop a model that explicitly incorporates the impact of such uncertainty on consumer behavior assuming that consumers are uncertain about the mean product quality level and learn about product quality through the signals contained in use experience and the product harm crisis and also that consumers are uncertain about the precision of the signals in conveying product quality and update their perception of this precision over time they estimate this model using a scanner panel data set that includes consumer purchase history before during and after a product harm crisis that affected kraft foods australia s peanut butter division in june 1996 the proposed model fits the data better than the standard consumer learning model which assumes consumers are uncertain about product quality level but the precision of information in conveying p

decision making under uncertainty capturing dynamic brand choice processes in turbulent consumer goods markets we construct two models of the behavior of consumers in an environment where there is uncertainty about brand attributes in our models both usage experience and advertising exposure give consumers noisy signals about brand attributes consumers use these signals to update their expectations of brand attributes in a bayesian manner the two models are 1 a dynamic model with immediate utility maximization and 2 a dynamic forward looking model in which consumers maximize the expected present value of utility over a planning horizon given this theoretical framework we derive from the bayesian learning framework how brand choice probabilities depend on past usage experience and advertising exposures we then form likelihood functions for the models and estimate them on nielsen scanner data for detergent we find that the functional forms for experience and advertising effects that we derive from the bayesian learning framework fit the data very well relative to flexible ad hoc functional forms such as exponential smoothing and also perform better at out of sample prediction another finding is that in the context of consumer learning of product attributes although the forward looking model fits the data statistically better at conventional significance levels both models produce similar parameter estimates and policy implications our estimates indicate that consumers are risk averse with respect to variation in brand attributes which discourages them from buying unfamiliar brands using the estimated behavioral models we perform various scenario evaluations to find how changes in marketing strategy affect brand choice both in the short and long run a key finding obtained from the policy experiments is that advertising intensity has only weak short run effects but a strong cumulative effect in the long run the substantive content of the paper is potentially of interest to academics in marketing economics and decision sciences as well as product managers marketing research managers and analysts interested in studying the effectiveness of marketing mix strategies our paper will be of particular interest to those interested in the long run effects of advertising note that our estimation strategy requires us to specify explicit behavioral models of consumer choice behavior derive the implied relationships among choice probabilities past purchases and marketing mix variables and then estimate the behavioral parameters of each model such an estimation strategy is referred to as structural estimation and econometric models that are based explicitly on the consumer s maximization problem and whose parameters are parameters of the consumers utility functions or of their constraints are referred to as structural models a key benefit of the structural approach is its potential usefulness for policy evaluation the parameters of structural models are invariant to policy that is they do not change due to a change in the policy in contrast the parameters of reduced form brand choice models are in general functions of marketing strategy variables e g consumer response to price may depend on pricing policy as a result the predictions of reduced form models for the outcomes of policy experiments may be unreliable because in making the prediction one must assume that the model parameters are unaffected by the policy change since the agents in our models choose among many alternative brands their choice probabilities take the form of higher order integrals we employ monte carlo methods to approximate these integrals and estimate our models using simulated maximum likelihood estimation of the dynamic forward looking model also requires that a dynamic programming problem be solved in order to form the likelihood function for this we use a new approximation method based on simulation and interpolation techniques these estimation techniques may be of interest to researchers and policy makers in many fields where dynamic choice among discrete alternatives is important such as marketing decision sciences labor and health economics and industrial organization

consumption based cross brand learning are private labels really private abstract while some researchers view private labels pls as a key tool for retailer differentiation others imply that consumers do not distinguish between pls of different chains this debate raises the question do a retail chain s pl investments subsidize rival pls in addition how does this affect their choice share vis a vis national brands the authors investigate whether consumers generalize knowledge from product experience across pls of different retail chains and whether such cross brand learning depends on the pl brands link with the chain name or on their quality differences the proposed brand choice model captures cross brand learning through quality perception spillovers consumers adjust beliefs about pl quality on the basis of consumption experience and familiarity spillovers uncertainty about a pl diminishes with rival pl consumption household scanner panel data on dish soap and breakfast cereals yield clear evidence of cross retailer learning among standard pls regardless of the

the value of medicaid interpreting results from the oregon health insurance experiment we develop frameworks for welfare analysis of medicaid and apply them to the oregon health insurance experiment across different approaches we estimate low income uninsured adults willingness to

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

the advertising mix for a search good we extend the persuasion game to bring it squarely into the economics of advertising we model advertising as exciting consumer interest into learning more about the product and determine a firm s equilibrium choice of advertising content over quality information price information and horizontal match information equilibrium is unique whenever advertising is necessary the outcome is a separating equilibrium with quality unravelling lower quality firms need to provide more information for a given quality level as a function of consumer visit costs first quality information is disclosed then price information and then horizontal product information are added to the advertising mix some suggestive evidence is provided from airline ads in newspapers this paper was accepted by j miguel villas boas marketing

invited paper learning models an assessment of progress challenges and new developments learning models extend the traditional discrete choice framework by postulating that consumers have incomplete information about product attributes and that they learn about these attributes over time in this survey we describe the literature on learning models that has developed over the past 20 years using the model of erdem and keane as a unifying framework erdem t keane m 1996 decision making under uncertainty capturing dynamic brand choice processes in turbulent consumer goods markets marketing sci 15 1 1 20 we describe how subsequent work has extended their modeling framework and applied learning models to a wide range of different products and markets we argue that learning models have contributed greatly to our understanding of consumer behavior in particular in enhancing our understanding of brand loyalty and long run advertising effects we also discuss the limitations of existing learning models and potential extensions one key challenge is to disentangle learning as a source of

price induced patterns of competition this research focuses on how price changes influence the observed pattern of brand competition the paper begins with a basic utility model formulation and examines the implications of three major classes of preference distributions on the expected patterns of competition a price tier model is proposed to operationalize the theory and to allow predictive testing the price tier model is estimated on 28 brands across four product categories the results show a specific asymmetric pattern of price competition higher price higher quality brands steal share from other brands in the same price quality tier as well as from brands in the tier below however lower price lower quality brands take sales from their own tier and the tier below brands but do not steal significant share from the tiers above the results are consistent with a bimodal preference distribution with the regular price indifference point being located toward the lower quality end of the preference distribution for the categories analyzed

price as a stimulus to think the case for willful overpricing consumers aware of a new benefit will often experience uncertainty about its personal relevance or usage value this paper shows that the decision to deliberate further to resolve this uncertainty and reach a polarized judgment of personal relevance critically depends on the posted price in particular a price above the consumer s initial willingness to pay might be thought provoking and enhance the perception of relevance with a certain probability this behavioral mechanism is introduced formally and by way of an experiment with reference to the purchase of organic lettuce and fair trade coffee accounting for the effect of price as a stimulus to think a monopolistic firm should either over price transgressive pricing or under price regressive pricing in comparison to the consumer s willingness to pay under certain circumstances the firm should also empower consumers with means that reduce the effort of deliberation

the parity penalty in life course perspective motherhood and occupational status in 13 european countries research documents a wage penalty for mothers compared to childless women we demonstrate there is also an occupational status penalty to motherhood interrogating supply and demand side explanations of the motherhood penalty from the life course perspective we formulate and test original hypotheses about the short term and long run career implications of parity specific births we analyze longitudinal data from the european community and household panel for 13 european countries and eight time points between 1994 and 2001 our fixed effects models show that status losses for a first birth are not just short term but accumulate over the career the timing of a birth in a woman s life course matters only for older women who experience a significant penalty to third births although the personal strategies that women use to minimize the career costs of motherhood e g having only one child prove ineffective our cross national evidence shows that public policies are linked to the motherhood penalty in

learning from experience simply there is substantial academic interest in modeling consumer experiential learning however approximately optimal solutions to forward looking experiential learning problems are complex limiting their behavioral plausibility and empirical feasibility we propose that consumers use cognitively simple heuristic strategies we explore one viable heuristic index strategies and demonstrate that they are intuitive tractable and plausible index strategies are much simpler for consumers to use but provide close to optimal utility they also avoid exponential growth in computational complexity enabling researchers to study learning models in more complex situations well defined index strategies depend on a structural property called indexability we prove the indexability of a canonical forward looking experiential learning model in which consumers learn brand quality while facing random utility shocks following an index strategy consumers develop an index for each brand separately and choose the brand with the highest index using synthetic data we demonstrate that an index strategy achieves nearly optimal utility at substantially lower computational costs using iri data for diapers we find that an index strategy performs as well as an approximately optimal solution and better than myopic learning we extend the analysis to incorporate risk aversion other cognitively simple heuristics heterogeneous foresight and an alternative specification of brands

the incidence of mandated maternity benefits i consider the labor market effects of mandates which raise the costs of employing a demographically identifiable group the efficiency of these policies will be largely dependent on the extent to which their costs are shifted to group specific wages i study several state and federal mandates which stipulated that childbirth be covered comprehensively in health insurance plans raising the relative cost of insuring women of childbearing age i find substantial shifting of the costs of these mandates to the wages of the targeted group correspondingly i find little effect on total labor input for that group jel 118 j32 h51 in an era of tight fiscal budget constraints mandating employer provision of workplace benefits to employees is an attractive means for a government to finance its policy agenda consequently in recent years there has been a growth of interest in mandated benefits as a tool of social policy for example the centerpiece of president bill clinton s health care proposal is mandated employer provision of health insurance and more than 20 states have man

crowd out effects of place based subsidized rental housing new evidence from the lihtc program abstract since its inception in 1987 the low income housing tax credit lihtc program has ballooned into the largest ever source of subsidized construction of low income housing in the united states accounting for one third of all recent multi family rental construction this paper examines the crowd out effects of this increasingly important source of low moderate income housing to do so we analyze the impact of lihtc construction at three different levels of geography msa county and 10 mile radius circles this allows us to employ increasingly extensive geographic fixed effects that help to difference away unobserved factors political variables are also used as instruments to further facilitate identification in all of our models iv estimates yield substantially greater crowd out than ols confirming the endogenous attraction of lihtc development to areas ripe for new construction our most robust iv estimates indicate that nearly 100 of lihtc development is offset by a reduction in the number of newly built unsubsidized rental units although the confidence band around this point estimate allows for less dramatic assessments additional estimates suggest that lihtc development has a much more moderate impact on construction of owner occupied housing but these estimates are imprecise overall while lihtc development may well affect the location of low moderate income rental housing opportunities our estimates suggest that the impact of the program on the number of newly developed rental housing units appears to be small

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

dual role of price and myopia in a marketing channel abstract in this paper we study a dynamic two player channel where the manufacturer controls the wholesale price and the investment in quality and the retailer chooses the retail price we consider that the retail price affects both the demand and the perceived quality of the brand and that its variations contribute to the building of an internal reference price one of the model s distinctive features is that it accounts for the two meanings of price i e its classical objective measure of the cost of acquiring a particular quantity of the product and its subjective roles as an assessment of the quality of the product and an evaluation of gains or losses deal vs sacrifice resulting from buying a cheap or an expensive product this dual computation is done with respect to the internal reference price our objective is to investigate the impact of retailer s myopia on the pricing strategies and payoffs of channel members in this context a myopic retailer is an agent that disregards the effects of its pricing strategy on the evolution of the perceived brand quality and the reference price

how do advertised brands benefit from private labels an application of rational expectations models private labels have traditionally been viewed as a threat to advertised brands contrary to traditional wisdom this study uses a two asset rational expectations model to show that advertised brands could benefit from private labels while the manufacturer s advertising creates product differentiation the retailer s synchronous pricing strategy further enhances the product differentiation and raises profits as well as the efficiency of price discounts for the advertised brand in addition the existence of private labels improves the advertising efficiency especially for newly introduced brands the economic role of private labels is not limited to taking a free ride on the manufacturer s advertising efforts and this role cannot be replaced by another advertised brand

price and advertising signals of product quality we present a signaling model based on ideas of phillip nelson in which both the introductory price and the level of directly uninformative advertising or other dissipative marketing expenditures are choice variables and may be used as signals for the initially unobservable quality of a newly introduced experience good repeat purchases play a crucial role in our model a second focus of the paper is on illustrating an approach to refining the set of equilibria in signalling games with multiple potential signals

the work employment distinction among new mothers cps data for 1979 to 1988 are used to examine the determinants of employment actual work and maternity leave for women in the year following childbirth women with better market skills higher expected wages older more education are more likely than other new mothers to have a job and to work among employed women paid leave is also positively related to market skills work responds to childbirth more than employment does with the greatest differences in the first three months following childbirth therefore most women working when their child was one year old had returned to work within three months of childbirth

from motherhood penalties to husband premia the new challenge for gender equality and family policy lessons from norway given the key role that processes occurring in the family play in creating gender inequality the family is a central focus of policies aimed at creating greater gender equality we examine how family status affects the gender wage gap using longitudinal matched employer employee data from norway 1979 96 a period with extensive expansion of family policies the motherhood penalty dropped dramatically from 1979 to 1996 among men the premia for marriage and fatherhood remained constant in 1979 the gender wage gap was primarily due to the motherhood penalty but by 1996 husband premia were more important than motherhood penalties

wearout effects of different advertising themes a dynamic bayesian model of the advertising sales relationship models of advertising response implicitly assume that the entire advertising budget is spent on disseminating one message in practice managers use different themes of advertising for example price advertisements versus product advertisements and within each theme they employ different versions of an advertisement in this study we evaluate the dynamic effects of different themes of advertising that have been employed in a campaign we develop a model that jointly considers the effects of wearout as well as that of forgetting in the context of an advertising campaign that employs five different advertising themes we quantify the differential wearout effects across the different themes of advertising and examine the interaction effects between the different themes using a bayesian dynamic linear model dlm such a response model can help managers decide on the optimal allocation of resources across the portfolio of ads as well as better manage their scheduling we develop a model to show how our response model parameters can be used to improve the effectiveness of advertising budget allocation across different themes we find that a reallocation of resources across different themes according to our model results in a significant improvement in demand

the price consideration model of brand choice the workhorse brand choice models in marketing are the multinomial logit mnl and nested multinomial logit nmnl these models place strong restrictions on how brand share and purchase incidence price elasticities are related in this paper we propose a new model of brand choice the price consideration pc model that allows more flexibility in this relationship in the pc model consumers do not observe prices in each period every week a consumer decides whether to consider a category only then does he she look at prices and decide whether and what to buy using scanner data we show the pc model fits much better than mnl or nmnl simulations reveal the reason the pc model provides a vastly superior fit to inter purchase spells

price uncertainty and consumer search a structural model of consideration set formation we offer an econometric framework that models consumer s consideration set formation as an outcome of her costly information search behavior because frequently purchased products are characterized by frequent price promotions of varying depths of discounts a consumer faces significant uncertainty about the prices of the brands the consumers engage in a fixed sample search strategy that results in their discovering the posted prices of a subset of the available brands this subset is referred to as the consumer s consideration set the proposed model is estimated using the scanner data set for liquid detergents our key empirical results are i consumers zincur significant search costs to discover the posted prices of the brands ii whereas in store displays and feature ads do not influence consumers quality perceptions of the brands they significantly reduce search costs for observing the prices of the brands iii per capita income of consumer s household significantly increases her search costs and iv the consumers price sensitivity is seriously underestimated if we were to assume that consumers get to know all the posted prices at zero cost the proposed model is also estimated for the ketchup category to enable us to do cross category comparisons of consumers price search behavior