metaheuristics with local search techniques for retail shelf space optimization efficient shelf space allocation can provide retailers with a competitive edge while there has been little study on this subject there is great interest in improving product allocation in the retail industry this paper examines a practicable linear allocation model for optimizing shelf space allocation it extends the model to address other requirements such as product groupings and nonlinear profit functions besides providing a network flow solution we put forward a strategy that combines a strong local search with a metaheuristic approach to space allocation this strategy is flexible and efficient as it can address both linear and nonlinear problems of realistic size while achieving near optimal solutions through easily implemented algorithms in reasonable timescales it offers retailers opportunities for more efficient and profitable shelf management as well as higher quality planograms

the role of market forces in assuring contractual performance the conditions under which transactors can use the market repeat purchase mechanism of contract enforcement are examined increased price is shown to be a means of assuring contractual performance a necessary and sufficient condition for performance is the existence of price sufficiently above salvageable production costs so that the nonperforming firm loses a discounted steam of rents on future sales which is greater than the wealth increase from nonperformance this will generally imply a market price greater than the perfectly competitive price and rationalize investments in firm specific assets advertising investments thereby become a positive indicator of likely performance

bonding and nonbonding signals of product quality this article examines the essential role of bonding in most signaling models where quality is subject to moral hazard problems an advertising model in which advertising is a durable asset whose value is reduced by cheating illustrates how the bonding capacity of a signal determines its cost characteristics of the market that govern how well a signal is targeted to relevant consumers and how information about cheating is spread are critical to determining bonding capacity and hence to the choice among potential signals this bonding perspective explains the literature s widely divergent predictions about the conditions necessary for quality signals copyright 1990 by the university of chicago

the dissipation of profits by brand name investment and entry when price guarantees quality two previous models of the dissipation of profits generated by the use of quality guaranteeing prices assumed that pro fits were dissipated through investment in brand name capital and ent ry the model of this paper allows both possibilities it is shown th at both types of dissipation will in general occur and that brand n ame investment will dissipate a greater share of profits as the elast icity of consumer response to brand name investment grows larger copyright 1987 by university of chicago press

sh a r p shelf allocation for retailers profit shelf space is the retailer s scarcest resource space management tools are thus badly needed for that purpose commercial computer packages and optimal allocation models have been developed building on the work of corstjens and doyle we elaborate a general theoretical shelf space allocation model which focuses on the demand interdependencies prevailing across and within product groups rules of thumb are compared to the derived optimal allocation the sh a r p model is introduced as a simplified yet realistic variant and validated against data collected in a dutch supermarket chain subsequently the feasibility of its implementation has been experimented in various belgian chains case studies demonstrate the profit potential of sh a r p

the determinants of work related training in britain in 1995 and the implications of employer size this study uses a familiar set of variables to characterize the determinants of training based around individual characteristics qualifications and workplace characteristics however it goes further by using data drawn from a recent quarter of the uk labour force survey and thus contains an up to date and extensive set of core variables the dependent variable used covers three subgroups those who have never been offered training by their current employer those who have been offered but did not receive training in the last three months and those workers who received training within the last three months the hypothesis that large employers not only provide more work related training but that they are also more willing to train workers with characteristics that indicate a lower probability of obtaining a return on any investment outlay is tested this was confirmed especially for male workers along with a range of results that mostly accord with previous studies into the determinants of uk em

popularity signals in trial offer markets with social influence and position bias abstract this paper considers trial offer markets where consumer preferences are modelled by a multinomial logit with social influence and position bias the social signal for a product is given by its current market share raised to power r or equivalently the number of purchases raised to the power of r the paper shows that when r is strictly between 0 and 1 and a static position assignment e g a quality ranking is used the market converges to a unique equilibrium where the market shares depend only on product quality not their initial appeals or the early dynamics when r is greater than 1 the market becomes unpredictable in many cases the market goes to a monopoly for some product which product becomes a monopoly depends on the initial conditions of the market these theoretical results are complemented by an agent based simulation which indicates that convergence is fast when r is between 0 and 1 and that the quality ranking dominates the well known popularity ranking in terms of market efficiency these results shed a new light on the role of social influence which is often blamed for unpredictability inequalities and inefficiencies in markets in contrast this paper shows that with a proper social signal and position assignment for the products the market becomes predictable and inequalities and inefficiencies can be controlled appropriately

the price of launching a new product empirical evidence on factors affecting the relative magnitude of slotting allowances slotting allowances are a relatively recent trend particular to the retail food industry these allowances are lump sum up front transfer payments from manufacturer to retailer when the manufacturer launches a new product the practice has attracted some scrutiny because of uncertainty about its purposes and consequences we draw from the extant literature to identify factors that potentially influence the relative magnitude of slotting allowances based on analysis of primary survey data from retailers and manufacturers we observe that charging and paying of slotting allowances are affected by the relative strength of the players among retailers the relative magnitude of slotting fees increases with retailers informational advantage over the manufacturer about the likely success of the new product even when retailers recognize that the product is likely to be successful additionally and consistent with the first finding retailers with lower costs i e potentially more efficient and powerful retailers received higher slotting allowances furthermore retailers charge higher slotting fees even when concerns about manufacturers fulfilling postlaunch advertising commitments are minimal implying that relatively powerless manufacturers are asked to provide credible commitments regarding postlaunch activitiesand are asked to pay relatively high slotting fees among manufacturers the relative magnitude of slotting fees paid is lower for those who have a strong market share position we discuss the theoretical managerial and public policy implications of our findings

a study of wages and reliability this article studies the role of reliability on the wage rate reliability is defined in the sense of showing up for scheduled work over an extended period just as reliability is an important determinant of product prices a worker s reliability ought to be an important determinant of his or her wage moreover while workers are not conveniently packaged by brand name firms form expectations about reliability across identifiable groups of workers and thus effectively attach brand names to workers based on their observable characteristics a worker s wage depends on his own track record and the reputation for reliability of his identifiable group using robust measures of reliability i find that observed reliability and expected reliability substantially affect the wage rate and that about half of the gender wage gap can be explained by differences in expected reliability between men and women in the workforce

auction theory with private values for many centuries auctions have been a common form of selling procedure although auction methods vary across country and product the two most frequently observed are the open ascending bid or english auction and the sealed bid auction recent theoretical research has led to a theory of equilibrium bidding in these two auctions and a wide range of alternatives as well as a result it has been possible to compare the revenue extracted by the seller under different auction methods and even to characterize the revenue maximizing auction the revenue equivalence theorem see for example william vickrey 1961 roger myerson 1981 and riley and william samuelson 1981 asserts that when each bidder s reservation price for a unit of an indivisible good is an independent draw from the same distribution and bidders are risk neutral the sealed bid auction generates the same expected revenue as the open auction much recent research has involved weakening each of the main hypotheses risk neutrality identically distributed values and independence of values in turn we shall illustrate some of the principal conclusions of this work by considering the properties of open and sealed bid auctions in a model of two bidders whose reservation prices can assume only two values and by comparing these auctions to the optimal or revenuemaximizing auction i revenue equivalence

stability and chaos in demand based pricing under social interactions abstract demand based pricing is often used to moderate demand fluctuations so as to level resource utilization and increase profitability however such pricing policies may not be effective when customers purchase decisions are influenced by social interactions this paper investigates the demand dynamics under a demand based pricing policy of a frequently purchased service when social interactions are at work customers are heterogeneous and adaptively forward looking existing customers re purchase decisions are based on adaptively formed price expectations and reservation prices potential customers are attracted through social interactions with existing customers the demand process is characterized by a two dimensional dynamical system it is shown that the equilibrium demand can be unstable for a given reservation price distribution we first analyze the stability of the equilibrium demand under various scenarios of social interactions and customers adaptively forward looking behavior and then characterize their dynamics using the bifurcation plots lyapunov exponents and return maps the results indicate that the demand process can be stable periodic or chaotic the study shows that the intended effect of a demand based pricing policy may be offset by customers adaptively forward looking behavior under the influence of social interactions in fact the interplay of these factors may even lead to chaotic demand dynamics the result highlights the complex dynamics produced by a simple demand price mechanism under social interactions for a demand based pricing strategy to be effective companies must take social interactions into account

earnings functions specific human capital and job matching tenure bias is negative this article investigates the hypothesis that when measures of specific human capital such as job tenure are included in earnings functions there may be a sample selection bias because of job matching effects because workers with high unobserved match quality receive and accept high wage offers we develop a model for wage offers in a labor market characterized by both specific human capital and job matching the model provides a theoretical basis for empirical earnings functions containing specific capital and it demonstrates that sample selection bias reduces the estimated return to specific human capital and tenure

prices as signals of product quality this paper is concerned with the provision of quality in markets in which consumers have only imperfect information the analysis focuses on a market for a product that can be produced at different quality levels all consumers prefer higher to lower quality but they may differ in their willingness to pay for quality producers can produce any quality they like but higher qualities are more costly to produce the information in this market is imperfect in the sense that the exact quality chosen by a firm is known only to the firm itself some information about the quality of a firm s product will however reach its potential customers even if they do not make any special effort to acquire it within the framework suggested here two conclusions are drawn first prices may serve as signals which exactly differentiate the available quality levels that is there exists a fulfilledexpectations equilibrium at which each price signals a unique quality level second the pricesignals are not arbitrary each price signal exceeds the marginal cost of producing the quality it signals such a mark up depends on the nature of the product specific information received by consumers the poorer the information the higher the mark up

accounting profits versus marketing profits a relevant metric for category management retailers have long recognized that some categories are more important than others in consumers store choice decisions the overall profitability of a store requires careful category level merchandising decisions to draw the most desirable consumers into the store however the traditional accounting measure of category profits offers imperfect help making these decisions since it does not take into account the effect of merchandising one category on the profits of other categories in the store a profit measure which takes into account these important cross effects is the most relevant performance metric for category management we call this new construct marketing profits as it focuses on consumers and their store choice behavior and is particularly pertinent to the calculus of marketing decision making despite its practical importance the total impact of merchandising a specific product category on a store s profitability is difficult to measure and in practice managers can only rely on intuitive calibration of marketing profits in making many retailing decisions the difficulty arises from the fact that to directly observe the marketing profits of a category one has to know how consumer store shopping behavior would change and hence what a store s profit would be if the category were to disappear from the consumers store choice decision furthermore it is difficult to devise a demand structure that is rich enough to capture bundled purchases on the part of consumers in a reasonable manner but is simple enough to allow estimation on the basis of commonly observed variables these two technical difficulties explain the conspicuous lack of research that systematically examines how to quantify what we call marketing profits this paper builds a formal model of marketing profits we start by formalizing shopper types and then establish the implied relationship between accounting profits and marketing profits by examining shelf space allocations by a retailer on the consumer side we assume that some consumers pay attention to the assortments offered by different retailers when making their store choice decisions this assumption allows us to establish the demand side linkage between accounting profits and marketing profits consumer store choice decisions put pressure on the retailer to carry wide assortments in categories which are particularly critical to the store choice decisions of the most desirable consumers thus the allocation of shelf space gives rise to the supplyside linkage between accounting profits and marketing profits by examining the outcome of the supermarket s shelf space decision we can merge these two linkages and determine the exact relationship between the accounting and marketing profits central to our theoretical structure is our assumption on retailers shelf space allocation decisions because of the well documented pressure that retailers face in making shelf space allocation decisions we assume that they are acting in a reasonably close to optimal fashion by using either an automated planogram or simply by trial and error optimization requires that returns on shelf space allocated to any category in the store must be identical on the margin and equate to the shadow price of shelf space it is this outcome of shelf space allocation that allows us to uncover the implied relationship between accounting and marketing profits this theoretical structure allows us to construct a measure of marketing profits which can be estimated with data commonly available to retailers we demonstrate this measurement technique by using publicly available data provided by marsh supermarkets and show how marketing profits can improve merchandising decisions in our particular application we find many categories where the marketing profits of a category are very different from the traditional accounting profits further we nd that using this new marketing profits metric to make category level feature advertising space decisions significantly improves the profitability of the retailer the paper concludes by discussing how our measure of marketing profits might be improved by additional research particularly if the researcher has data across many stores

a model for optimizing retail space allocations the allocation of scarce shelf space among competing products is a central problem in retailing space allocation affects store profitability through both the demand function where both main and cross space elasticities have to be considered and through the cost function procurement carrying and out of stock costs a model is developed which uniquely incorporates both effects a case study is used to estimate the parameters and the problem is solved within a geometrical programming framework an extensive comparison with alternative procedures suggests this general model leads to significantly different allocation rules and superior profit performance

general training by firms apprentice contracts and public policy workers will not pay for general on the job training if contracts are not enforceable firms may if there are mobility frictions private information about worker productivities however prevents workers who quit receiving their marginal products elsewhere their new employers then receive external benefits from their training in this paper training firms increase profits by offering apprenticeships which commit firms to high wages for those trainees retained on completion at these high wages only good workers are retained this signals their productivity and reduces the external benefits if they subsequently quit regulation of apprenticeship length a historically important feature enhances efficiency appropriate subsidies enhance it further

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

relational knowledge transfers an expert must train a novice the novice initially has no cash so he can only pay the expert with the accumulated surplus from his production at any time the novice can leave the relationship with his acquired knowledge and produce on his own the sole reason he does not is the prospect of learning in future periods the pro t maximizing relationship is structured as an apprenticeship in which all production generated during training is used to compensate the expert knowledge transfer takes a simple form in the rst period the expert gifts the novice a positive level of knowledge which is independent of the players discount rate after that the novice s total value of knowledge grows at the players discount rate until all knowledge has been transferred the ine ciencies that arise from this contract are caused by the expert s arti cially slowing down the rate of knowledge transfer rather than by her reducing the total amount of knowledge eventually transferred we show that these ine ciencies are larger the more patient the players are finally we study the impact of knowledge externalities across players

the economics of private sector training a survey of the literature abstract this survey organizes and summarizes existing theoretical work on private sector training the theoretical models focus on investment efficiency finance and turnover recent developments in the on the job training literature are characterized by strategic interaction between employers and employees and emphasize market imperfections

labour contracts and efficiency in on the job training two sources of inefficiency in the provision of on the job training are examined an externality between firms which arises if there is imperfect competition between firms in the labor market and allocation inefficiency due to asymmetry of information about the value of the trained worker the second source of inefficiency may compound the first various contracts between the worker and the training firm are considered analysis of a simple example suggests that a contract in which the wage is chosen by the firm performs best according to the criteria of reducing both types of inefficiency copyright 1994 by royal economic society

a consumer perspective on price matching refund policies effect on price perceptions and search behavior although price matching refund policies are common in many retail environments the impact of such policies on consumers has largely been ignored this article reports the results of three studies that examine price matching policies from a consumer perspective study 1 shows that consumers perceive price matching policies as signals of low store prices and that the presence of a refund increases the likelihood of discontinuing price search contrary to the predictions based on signaling theory in information economics studies 2 and 3 show that when search costs are low the number of stores searched increases in the presence versus absence of a price matching policy when search costs are high consumers appear to accept the price matching signal at face value and search less in the presence of a refund the article concludes by discussing the theoretical implications of the findings and suggesting directions for future research