optimal pricing and composition of multiple bundles a two step approach abstract this paper analyzes the problem facing a firm that must determine the optimal composition and pricing of multiple bundles it supplies to a single market segment it is assumed the firm s competitors does not react in the short run to its decisions and that their bundles prices and characteristics are known it is further assumed that potential consumers of bundles are rational and maximize a random utility function the problem is modeled as a mixed integer non linear program though such programs are normally hard to solve using traditional methods the difficulties are circumvented here by taking advantage of the problem s mathematical structure to develop a novel two phase solution approach two aspects of the solution are particularly worthy of note 1 we demonstrate that the optimal price of a bundle marketed by a firm depends on the composition of all the firm s bundles and not on their prices and on the composition and price of all the competitors bundles in the market and 2 that if the consumer choice behavior is described by a logit model then the firm s bundles should be very similar to each other

the impact of progresa on food consumption abstract in this article we used data from the mexican poverty alleviation program called progresa programa de educacion salud y alimentacion to examine whether eligibility for a cash transfer provided by the program conditional on children s regular school attendance and regular visits to health centers is also associated with increased consumption of food we used a longitudinal sample of approximately 24 000 households from 506 communities a distinguishing characteristic of this sample was that some of the communities were randomly selected for participation in progresa while the rest were introduced into the program at later phases exploiting this feature in our analysis we found that eligible households in the villages covered by progresa increased caloric acquisition compared with eligible households not receiving these benefits by november 1999 median beneficiary households in treatment localities obtained 6 4 more calories than did comparable households in control localities perhaps eve

unequal pricing in the information economy implications for consumer welfare this article presents an economic analysis of information good pricing and consumer welfare and discusses the implications of price discrimination in the information economy it argues that network externalities coupled with information asymmetry enable a dominant marketer to price unequally extracting late adopters surplus to compensate for the loss from early adopters in the short term the minority early adopters benefit by paying less but in the long term the majority late adopters suffer by paying more considering that late adopters are likely to be at a disadvantage in resources this discriminatory pricing amounts to the poor subsidizing the rich based on this analysis implications for consumer welfare are discussed

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

measuring heterogeneous reservation prices for product bundles this paper develops a model for capturing continuous heterogeneity in the joint distribution of reservation prices for products and bundles our model is derived from utility theory and captures both within and among subject variability furthermore it provides dollarmetric reservation prices and individual level estimates that allow the firm to target customers and develop customized and nonlinear pricing policies our experiments show that regardless of whether the products are durables or nondurables the model captures heterogeneity and predicts well models that assume homogeneity perform poorly especially in predicting choice of the bundle furthermore the methodology is robust even when respondents evaluate few profiles self stated reservation prices do not have any informational content beyond that contained in the basic model the direct elicitation method appears to understate overstate the variation in reservation prices across consumers for low priced high priced products and bundles hence this method yields biased demand estimates and leads to suboptimal product line pricing policy the optimization results show that the product line pricing policy depends on the degree of heterogeneity in the reservation prices of the individual products and the bundle a uniformly high price strategy for all products and bundles is optimal when heterogeneity is high otherwise a hybrid strategy is optimal

the impact of obesity on wages abstract previous studies of the relationship between body weight and wages have found mixed results this paper uses a larger data set and several regres sion strategies in an attempt to generate more consistent estimates of the effect of weight on wages differences across gender race and ethnicity are explored this paperjnds that weight lowers wages for white females ols esti mates indicate that a difference in weight of two standard deviations roughly 65 pounds is associated with a difference in wages of 9 percent in absolute value this is equivalent to the wage effect of roughly one and a half years of education or three years of work experience negative cor relations between weight and wages observed for other gender ethnic groups appear to be due to unobserved heterogeneity i introduction several previous studies have found among females a negative cor relation between body weight and wages there exist three broad categories of ex planations for this finding the first explanation is that obesity lowers wages for example by lowering productivity or because of workplace discrimination the sec ond is that low wages cause obesity this would be true if poorer people consume

evaluating prior beliefs in a demand system the case of meat demand in canada an almost ideal demand system for meats is estimated using canadian data a bayesian approach is used to impose inequality restrictions on substitution elasticities via monte carlo integration and importance sampling in order to conform with prior beliefs about curvature and monotonicity restrictions and substitution relationships results are more consistent with the concavity and monotonicity restrictions from demand theory than with the added restriction that all meats are substitutes

bundle pricing of inventories with stochastic demand we consider a retailer selling a fixed inventory of two perishable products over a finite horizon assuming poisson arrivals and a bivariate reservation price distribution we determine the optimal product and bundle prices that maximize the expected revenue our results indicate that the performances of mixed bundling pure bundling and unbundled sales strategies heavily depend on the parameters of the demand process and the initial inventory levels bundling appears to be most effective with negatively correlated reservation prices and high starting inventory levels when the starting inventory levels are equal and in excess of average demand most of the benefits of bundling can be achieved through pure bundling however the mixed bundling strategy dominates the other two when the starting inventory levels are not equal we also observe that an incorrect modeling of the reservation prices may lead to significant losses the model is extended to allow for price changes during the selling horizon it is shown that offering price bundles mid season may be more effective than changing individual product prices

bundling as an entry barrier in this paper we look at the case for bundling in an oligopolistic environment we show that bundling is a particularly effective entry deterrent strategy a company that has market power in two goods a and b can by bundling them together make it harder for a rival with only one of these goods to enter the market bundling allows an incumbent to credibly defend both products without having to price low in each the traditional explanation for bundling that economists have given is that it serves as an effective tool of price discrimination by a monopolist although price discrimination provides a reason to bundle the gains are small compared with the gains from the entry deterrent effect i introduction in this paper we look at the case for bundling in an oligopolistic environment we show that bundling is a particularly effective entry deterrent strategy a company that has market power in two goods a and b can by bundling them together make it harder for a rival with only one of these goods to enter the market bundling allows an incumbent to defend both products without having to price low in each while it is still possible to compete by offering a rival bundle a monopolist can significantly lower the potential profits of a one product entrant without having to engage in limit pricing prior to entry we also show that bundling continues to be an effective pricing tool even if entry deterrence fails or if there is already an existing one product rival a company with a monopoly in product a and a duopoly in product b makes higher profits by selling an a b bundle than by selling a and b independently leveraging market power from a into b and accepting some one product competition against the bundle is better than using the monopoly power in good a all by itself since bundling mitigates the impact of competition on the incumbent an entrant can expect the bundling strategy to persist even without any commitment the traditional explanation for bundling that economists have given is that it serves as an effective tool of price discrimination by a monopolist see stigler 1968 adams and yellen

bundling retail products models and analysis we consider the impact of bundling products on retail merchandising we consider two broad classes of retail products basic and fashion for these product classes we develop models to calculate the optimal bundle prices order quantities and profits under bundling we use this analysis to establish conditions and insights under which bundling is profitable our analysis confirms that bundling profitability depends on individual product demands bundling costs and the nature of the relationship between the demands of the products to be bundled we also provide detailed numerical examples

the effects of farm commodity and retail food policies on obesity and economic welfare in the united states many commentators claim that farm subsidies have contributed significantly to the obesity epidemic by making fattening foods relatively cheap and abundant and symmetrically that taxing unhealthy commodities or subsidizing healthy commodities would contribute to reducing obesity rates in this article we use an equilibrium displacement model to estimate and compare the economic welfare effects from a range of hypothetical farm commodity and retail food policies as alternative mechanisms for encouraging consumption of healthy food or discouraging consumption of unhealthy food or both we find that compared with retail taxes on fat sugar or all food or subsidies on fruits and vegetables at the farm or retail levels a tax on calories would be the most efficient obesity policy a tax on calories would have the lowest deadweight loss per pound of fat reduction in average adult weight and would yield a net social gain once the impact on public health care expenditures is considered

economic and health effects of fruit and vegetable advertising evidence from lab experiments abstract this study investigates consumer response to various types of advertising for fruits and vegetables a food category which health officials uniformly agree is significantly under consumed in the united states using an adult non student subject pool of 271 participants in an economic experiment consumers response to different types of fruit and vegetable advertising is measured empirically this study finds that broad based advertising which is generic advertising for the entire fruit and vegetable category increases consumer willingness to pay by an average of 24 6 the simulation model shows that broad based advertising for fruits and vegetables either alone or as a hybrid with individual commodity specific campaigns e g apple advertising would reduce average caloric intake per person by approximately 1800 kcal per year the results of this study may contribute to new public policy initiatives that aim to reduce diet related illnesses and obesity which have become increasingly prevalent in the united states

optimum advertising policy over time for subscriber service innovations in the presence of service cost learning and customers disadoption abstract on the theoretical side this paper characterizes qualitatively optimal advertising policy for new subscriber services a monopolistic market is analyzed first for which customers disadoption discounting of future profits streams and a service cost learning curve are allowed after characterizing the optimal policy for a general diffusion model the results pertaining to a specific diffusion model for which advertising affects the coefficient of innovation that incorporates the disadoption rate are reported the results of the theoretical research show that the advertising policy of the service firm in the presence of customers disadoption could be very different from the same when disadoption is ignored on the empirical side four alternative diffusion models are estimated and their predictive powers using a one step ahead forecasting procedure compared the diffusion data analyzed are related to the canadian cable tv industry empirical research findings suggest that the specific diffusion model considered above is not only of theoretical appeal but also of major empirical relevance the analytical findings of the study are documented in six theoretical propositions for which proofs are provided in a separate appendix the results of a related numerical experiment together with the analytical findings pertaining to the competitive role of advertising are included managerial implications of the study together with directions for future research are also discussed

five a day a price to pay an evaluation of the uk program impact accounting for market forces we provide an ex post assessment of the uk 5 a day information campaign where the positive effects of information are disentangled from potentially conflicting price dynamics using 4 years of data from the expenditure and food survey between 2002 and 2006 we estimate that the 5 a day program has lifted fruit and vegetable consumption by 0 3 portions on average we also provide quantitative evidence of a differentiated impact by income group ranging from 0 2 to 0 7 portions all impacts are larger than those observed by simply comparing pre policy and post policy intakes

optimal pricing of new subscription services analysis of a market experiment there are now available a number of new subscription services that comprise a dual pricing system of a monthly access fee rental and a per minute usage charge examples include cellular phones the internet and pay tv the usage and retention of such services depend on the absolute and relative prices of this dual system for instance a moderate access fee but a low usage charge might initially appeal to customers but later a low usage customer might find the monthly fee unjustified and thereby relinquish the service providers of such services therefore usually offer several pricing packages to cater to differing customer needs the purpose of this study is to derive a revenue maximizing strategy for subscription services that is the combination of access and usage price that maximizes revenue over a specified time period an additional objective is to determine access and usage price elasticities because they have historically played an important role in theoretical pricing models the application area is the cellular phone market but for a new rather than an existing product to help gauge the likely usage rates and customer retention a field experiment is conducted in which several alternative price combinations are used specifically a sample of potential residential customers most of whom did not have an existing cell phone were divided into four treatment groups the first group were not charged an access fee but did have to pay a small per minute usage charge the second group also paid a small usage charge but in addition had three access price increases over the duration of the trial the third group paid no access fee but had usage charge increases while the fourth group had both access fee and usage charge increases usage levels for each respondent are recorded as is their month of dropout if they discontinue the service an initial examination of the data shows that higher access fees result in higher customer attrition and higher usage cost results in lower usage furthermore usage and retention are related in that declining usage levels over time often signal impending customer attrition hence two phenomena need to be modeled usage of the service and customer retention conditional on usage some seasonal effects are also observed and are allowed for in the model modeling customer attrition simultaneously with usage is important because ignoring customer attrition will likely result in an underestimate of price sensitivity this results from a censoring effect whereby respondents who remain in the trial tend to be wealthier and hence less price sensitive given the known problems of ignoring customer attrition we develop a theoretical model of usage which explicitly incorporates attrition by extending a time series model introduced by hausman and wise 1979 we make two extensions of the hausman and wise model the first is to generalize it from two to many time periods and the second is to allow for respondent heterogeneity by incorporating latent classes we fit the model by maximum likelihood and find that a two segment model is best in addition we examine the predictive validity of our model and find it to be reasonably good in general the results show that access and usage prices have different relative effects on demand and retention there are five key results first access price has some effect on usage but a much stronger effect on retention second usage price has a strong effect on usage and a moderate effect on retention in that if usage price increases so much that usage declines then lower usage levels results in higher attrition third access price elasticity is about half that of usage price with both elasticities generally being much smaller than 1 indicating relative inelasticity for this particular service fourth customer attrition rate churn is much more sensitive to access than usage price and last if just observed usage is examined and customer attrition is ignored then price sensitivity is very likely to be substantially underestimated on the order of 45 in our case finally when developing the revenue maximizing price combination we allow for the cost of customer acquisition by using some typical advertising to sales ratios for the telecommunications industry we find that the revenue maximizing price is 27 70 per month for the access fee and 0 81 per minute for the airtime charge these values are in line with current access fees and usage costs in the given market

a more general theory of commodity bundling this paper extends the standard model of bundling as a price discrimination device to allow products to be substitutes and for products to be supplied by separate sellers whether integrated or separate firms have an incentive to introduce a bundling discount when demand for the bundle is elastic relative to demand for stand alone products product substitutability typically gives an integrated firm a greater incentive to offer a bundle discount relative to the model with additive preferences while substitutability is often the sole reason why separate sellers wish to offer inter firm discounts when separate sellers coordinate on an inter firm discount they can use the discount to overturn product substitutability and relax competition

a probabilistic approach to pricing a bundle of products or services the authors propose a probabilistic approach to optimally price a bundle of products or services that maximizes seller s profits their focus is on situations in which consumer decision making is o

bundling strategies when products are vertically differentiated and capacities are limited we consider a seller who owns two capacity constrained resources and markets two products components corresponding to these resources as well as a bundle comprising the two components in an environment where all customers agree that one of the two components is of higher quality than the other and that the bundle is of the highest quality we derive the seller s optimal bundling strategy we demonstrate that the optimal solution depends on the absolute and relative availabilities of the two resources as well as upon the extent of subadditivity of the quality of the products the possible strategies that can arise as equilibrium behavior include a pure components strategy a partial or full spectrum mixed bundling strategy and a pure bundling strategy where the latter strategy is optimal when capacities are unconstrained these conclusions are contrary to findings in the prior literature on bundling that demonstrated the unambiguous dominance of the full spectrum mixed bundling strategy thus our work expands the frontier of bundling to an environment with vertically differentiated components and limited resources we also explore how the bundling strategies change as we introduce an element of horizontal differentiation wherein different types of customers value the available components differently

how buyers evaluate product bundles a model of anchoring and adjustment how do buyers evaluate a bundle of items the most common approach in earlier economic analyses see e g adams and yellen 1976 schmalensee 1984 was to start with the additivity assumption the overall utility of a bundle equals the sum of the bundle items individual utilities the restrictiveness of this additivity assumption was later recognized and removes dansby and conrad 1984 guiltinan 1987 hanson and martin 1990 however the question of how buyers evaluation processes may account for additivity or a lack thereof has remained largely unexplored

targeting the poor in mexico an evaluation of the selection of households into progresa abstract in this paper we conduct an evaluation of the targeting method used by health education and nutrition program progresa of mexico to identify beneficiary households we address two key questions a how well does progresa s targeting perform and b how does the program perform in terms of its impact on poverty alleviation relative to other feasible methods and transfer schemes the first question is accomplished by comparing progresa s method to an alternative selection method based on household consumption which is our preferred measure of welfare we employ the concepts of undercoverage and leakage and find that progresa selection method is more effective in identifying the extremely poor localities or households but less so when it comes to distinguishing among localities or households in the middle of the scale to address the second question we compare the potential impact of progresa on poverty alleviation against uniform transfers that involve no targeting at all targeting based on consumption and geographic targeting i e targeting at the locality level rather than at the household level we find that progresa s method of targeting households outperforms uniform coverage and targeting at the locality level in terms of reducing the poverty gap and severity of poverty indices even after taking into account the economic costs of targeting but the closeness of progresa s performance to what could be achieved by geographic targeting alone raises some serious questions about the costs and benefits associated with the practice of household targeting within poor localities

on pricing of multiple bundles of products and services this paper considers the pricing decision faced by a seller of bundles composed of a service and an associated product offered to customers on a subscription basis using a two part tariff scheme an optimal pricing policy that maximizes the profit of a firm is obtained using a dynamic programming approach and it is found that in the long run there is an optimal number of customers associated to each bundle due to managerial purposes two suboptimal fixed price policies are derived and compared to the optimal pricing policy the conditions under which it is profitable for the firm to expand its offer from one to two bundles is studied finally it is concluded that introducing a fee for subscribed customers to deter the switching from one bundle to the other increases the profitability of the firm

marketing mix variables and the diffusion of successive generations of a technological innovation abstract research addressing the diffusion of successive generations of technological innovations has generally ignored the impact of marketing mix variables as a result there have been several calls for the development of multiple generation models that incorporate marketing mix variables the authors develop a model of first time sales and subscriptions for successive generations of a technological innovation which explicitly captures the effects of marketing mix variables through a proportional hazards framework the empirical analysis estimates the impact of price for two generations of cellular telephones in a european country the results suggest that there are important substantive insights to be gained from the parameter estimates for this marketing mix variable when intergenerational interdependencies are considered for example although the time path of the estimated price elasticities in a multiple generation setting closely follows those reported previously for single generations the auth

customized bundle pricing for information goods a nonlinear mixed integer programming approach this paper proposes using nonlinear mixed integer programming to solve the customized bundle pricing problem in which consumers are allowed to choose up to n goods out of a larger pool of j goods prior work has suggested that this mechanism has attractive features for the pricing of information and other low marginal cost goods although closed form solutions exist for this problem for certain cases of consumer preferences many interesting scenarios cannot be easily handled without a numerical solution procedure in this paper we investigate the efficiency gains created by customized bundling over the alternatives of pure bundling or individual sale under different assumptions about customer preferences and firm cost structure as well as the potential loss of efficiency caused by pricing with incomplete information about consumer reservation values our analysis suggests that customized bundling enhances sellers profits and enhances welfare when consumers do not place positive values on all goods and that this consumer characteristic is much more important than the shape of the valuation distribution in determining the optimal pricing scheme we also find that customized bundling outperforms both pure bundling and individual sale in the presence of incomplete information and that customized bundling still outperforms other simpler pricing schemes even when exact consumer valuations are not known ex ante

optimal bundling and pricing under a monopoly contrasting complements and substitutes from independently valued products we develop an analytical model of contingent valuations and address two questions of import to a monopolist i should a given pair of complements or substitutes be sold separately pure components together pure bundling or both mixed bundling and at what prices ii how do optimal bundling and pricing strategies for complements and substitutes differ from those for independently valued products we find that the combination of marginal cost levels and the degree of complementarity or substitutability determines which of the three bundling strategies is optimal complements and substitutes should typically be priced higher than independently valued products

mixed bundling of two independently valued goods this paper develops analytical results and insights for the mixed bundling problem of pricing a product line consisting of two component goods with valuations distributed uniformly and independently in 0 a1 and 0 a2 respectively with a1 a2 and a bundle of the two goods this setting has previously been considered analytically intractable by deriving component good prices as exact algebraic functions of the optimal bundle price i reduce the multiproduct pricing problem to a univariate nonlinear optimization problem in the bundle price when the two component goods are sufficiently asymmetric in valuations the optimal solution is partial mixed bundling one component good is not sold separately for which i derive exact conditions and optimal prices an exact analytical solution is also given for mixed bundling of two information goods component goods with zero marginal costs for the general case i derive a closed form approximation of the optimal bundle price pb 0 5724w1 0 5695w2

heuristics for pricing and positioning a product line using conjoint and cost data designing and pricing a product line is the very essence of every business in recent years quantitative methods to assist managers in this task have been gaining in popularity conjoint analysis is already widely used to measure preferences for different product profiles and build market simulation models in the last few years several papers have been published that suggest how to optimally choose a product line based on such data we formalize this problem as a mathematical program where the objective of the firm is either profit or total welfare unlike alternative published approaches we introduce fixed and variable costs for each product profile the number of products to be introduced is endogenously determined on the basis of their desirability fixed and variable costs and in the case of profits their cannibalization effect on other products while the problem is difficult np complete we show that the maximum welfare problem is equivalent to the uncapacitated plant location problem which can be solved very efficiently using the greedy interchange heuristic based on past published experience with this problem and on simulations we perform we show that optimal or near optimal solutions are obtained in seconds for large problems we develop a new greedy heuristic for the profit problem and its application to simulated problems shows that it too runs quickly and with better performance than various alternatives and previously published heuristics we also show how the methodology can be applied taking existing products of both the firm and the competition into account

gaussian demand and commodity bundling in an important and widely cited essay adams and yellen 1976 examine the use of package selling as a price discrimination device they consider a monopolist producing two goods with constant unit costs and facing buyers with diverse tastes the marginal utility of a second unit of either good is assumed to be zero for all buyers the two goods are independent in demand for all buyers so that any buyer s reservation price for the first unit of either good is independent of the market price of the other thus the maximum amount any buyer would pay for a bundle consisting of one unit of each good is the sum of the two reservation prices and buyers are completely described by the values of those two prices 2 resale markets are assumed away in order to obtain comparative results for alternative pricing strategies the distribution of reservation prices in the adams yellen framework is assumed to be bivariate normal implications of gaussian demand are explored pure bundling is shown to operate by reducing buyer diversity thus facilitating the capture of consumers surplus it generally makes buyers worse off than unbundled sales it is more profitable if average reservation prices are high enough mixed bundling combines advantages of both pure bundling and unbundled sales and it is generally strictly more profitable than either bundling which treats goods symmetrically seems most attractive under symmetric reservation price distributions i am indebted to severin borenstein for superb research assistance to the ford motor company for research support through a grant to m i t and to the harvard economics department for housing me as a visiting scholar while most of this research was performed of course only i can be held responsible for this essay s shortcomings 1 the first clear recognition of this possibility seems to have been by stigler 1968 but also see burstein 1960 2 paroush and peles 1981 relax the assumption that consumers purchase at most one unit of each good but they consider only two types of buyers both with linear demand functions they retain the assumption that demands are independent for all buyers telser 1979 and phillips 1981 use different frameworks to analyze bundling policies spence 1980 explores the relation between bundling across commodities as here and bundling multiple units of the same

optimal bundling strategies under heavy tailed valuations we develop a framework for the optimal bundling problem of a multiproduct monopolist who provides goods to consumers with private valuations that are random draws from a distribution with heavy tails we show that in the vickrey auction setting the buyers prefer separate provision of the goods to any bundles we also provide a complete characterization of the optimal bundling strategies for a monopolist producer who provides goods for profit maximizing prices for products with low marginal costs the seller s optimal strategy is to provide goods separately when consumers valuations are heavy tailed and in a single bundle when valuations are thin tailed these conclusions are reversed for goods with high marginal costs for simplicity we use a specific class of independent and identically distributed random variables but our results can be generalized to include dependence skewness and the case of nonidentical one dimensional distributions

collusive conduct in duopolies multimarket contact and cross ownership in the mobile telephone industry the deregulation of the telecommunications industry has resulted in a variety of industry structures which have been created in hopes of increasing competition one example is the licensing of cellular telephone services in the united states where the fcc created duopolies in which two firms were granted licenses to compete in strictly defined product and geographic markets taking advantage of the unique regulatory environment we test to what degree duopolistic competition leads to competitive market outcomes we find that cross ownership and multimarket contact are important factors in explaining non competitive prices

the heart kuznets curve understanding the relations between economic development and cardiac conditions abstract as countries turn wealthier some health indicators such as child mortality seem to have well defined trends however others including cardiovascular conditions do not follow clear linear patterns of change with economic development abnormal blood pressure is a serious health risk factor with consequences for population growth and longevity as well as public and private expenditure in health care and labor productivity this also increases the risk of the population in certain pandemics such as covid 19 to determine the correlation of income and blood pressure we analyzed time series for the mean systolic blood pressure sbp of men s population mmhg and nominal gross domestic product per capita gdppc for 136 countries from 1980 to 2008 using regression and statistical analysis by pearson s correlation r our study finds a trend similar to an inverted u shaped curve or a heart kuznets curve there is a positive correlation increase gdppc increase sbp in low income countries and a negative correlation in high income countries increase gdppc decrease sbp as country income rises people tend to change their diets and habits and have better access to health services and education which affects blood pressure however the latter two may not offset the rise in blood pressure until countries reach a certain income investing early in health education and preventive health care could avoid the sharp increase in blood pressure as countries develop and therefore avoiding the heart kuznets curve and its economic and human impacts

price competition with reduced consumer switching costs the case of wireless number portability in the cellular phone industry wireless number portability wnp is a telecommunication regulatory policy that requires cellular phone service providers to allow customers who switch service subscriptions to retain their original phone numbers the right to retain the number lowers the switching cost for a consumer thus the purpose of the policy is to induce more competition and facilitate the growth of new or small service providers in this paper we show that wnp drives market price downward as expected but with a surprising twistrather than helping the smaller firms grow the policy may accelerate the process of market concentration we find that the main contributing factor to this peculiarity is the discriminatory pricing scheme prevalent in the industrythat is a service provider charges a lower per minute fee for the calls initiated and received within the same network than for the calls connected across two networks under this pricing scheme a consumer who subscribes to a larger network would benefit more than if subscribing to a smaller network despite the relatively higher fixed access fee that the former may charge by lowering the barrier of switching wnp creates a market condition conducive for a larger network to gain market share we support our analysis with the empirical evidence gathered from hong kong where wnp was adopted in march 1999

oportunidades program effect on consumption low participation and methodological issues abstract in this paper we estimate the effect of the mexican conditional cash transfer program oportunidades on consumption and we explore some issues related to participation in the program and to the estimation of treatment effects we discuss the comparability of treatment and control areas provide evidence that the expected transfer may not be sufficiently high to induce many eligible households to participate and find positive effects on consumption

to bundle or not to bundle commodity bundling is studied in an environment where the dispersion of valuations unambiguously decreases when two or more goods are sold as a bundle only bundling is more likely to dominate separately selling the goods if marginal costs are low relative to the average valuation or if the distribution of valuations is very peaked around the mean

optimal product bundling with dependent valuations the price of independence abstract in this paper we investigate the tactical problem of pricing a bundle of products when the underlying valuations of the bundle components are dependent we use copula theory to model the joint density of reservation prices and provide analytical derivations for the prices under different bundling strategies and sharp bounds for the profit function we discover that when only the bundle is offered and the marginal costs are relatively small the seller is better off by bundling products that have a negative association between their valuations while the converse is true when the marginal costs are relatively high we also show that the net benefit of offering a full product line containing both the bundle and the components decreases for mild to strong associations between the component valuations compared to offering just the bundle finally we analyze how the typical literature assumption of independence of reservation prices impacts the seller s profitability when in fact the valuations are dependent and find that this gap in profitability which we call the price of independence can be arbitrarily large

dynamic and targeted bundle pricing of two independently valued products abstract bundling is when two or more products are offered as a single unit and at a price lower than the sum of the individual prices of the products we study a multi segment market in which a retailer aims to clear the inventory of an item by bundling it with a second product which is independently valued we investigate the question of how dynamic and segment specific bundle pricing impacts retailer s revenue we develop a revenue model that integrates the dynamic and segment specific aspects of the pricing decisions and present a computational study to analyze their revenue impact relative to a price promotion for the individual item only the computational results indicate that the bundle offers are most effective when the initial inventory of the item under consideration is high the results also demonstrate that dynamic pricing is beneficial when the initial inventory of the item is low an additional revenue improvement is observed when the price of the bundle is dynamically optimized in the computational study segment specific pricing is observed to have no direct impact on revenue when prices are static segment specific and dynamic pricing however can bring about substantial revenue improvements that are an increasing function of the initial inventory level of the item we consider the correlation in consumers valuations of the bundled products and show that dynamically priced and segment specific bundle offers yield a robust revenue performance mitigating the potentially revenue diminishing impact of positive correlation in consumers valuations of the products

can social programs break the vicious cycle between poverty and obesity evidence from urban mexico abstract this article analyzes how social interventions offer a solution to counteract the spread of overweight among the poor focusing on the mexican conditional cash transfers program we assess the average effect of a long run enrollment on adult body mass index and waist to height ratio an original triple difference approach which distinguishes over time participants from nonparticipants and stayers from leavers is implemented we find that the expansion of this program to urban areas has a protective effect on adult bodyweight for staying participants but not an absolute effect moreover the global impact of the program to reduce obesity is halved due to a low rate of participation in mexican cities furthermore we find health risky externalities related to the cash component of the program indeed the amount of cash payments is positively correlated with abdominal fat concentration especially among enrolled women and for short run enrollments to sum up our results bring new insights to the complementary role of both program components cash and conditionalities

profitability of product bundling using copulas to model the stochastic dependence of values this article establishes new general conditions for the profitability of product bundling a multiproduct monopolist generally achieves higher profit from mixed bundling than from separate selling if consumer values for two of its products are negatively dependent are independent or have sufficiently limited positive dependence the profitability of monopoly bundling also extends to situations where a multiproduct firm competes with a single product rival

optimal bundle formation and pricing of two products with limited stock abstract in this study we consider the stochastic modeling of a retail firm that sells two types of perishable products in a single period not only as independent items but also as a bundle our emphasis is on understanding the bundling practices on the inventory and pricing decisions of the firm one of the issues we address is to decide on the number of bundles to be formed from the initial product inventory levels and the price of the bundle to maximize the expected profit product demands follow a poisson process with a price dependent rate customer reservation prices are assumed to have a joint distribution we study the impact of reservation price distributions initial inventory levels product prices demand arrival rates and cost of bundling we observe that the expected profit decreases as the correlation between the reservation prices of two products increases with negative correlation bundling cost has a significant impact on the number of bundles formed when the product prices are low the retailer sells individual products as well as the bundle mixed bundling when they are high the retailer sells only bundles pure bundling the expected profit and the number of bundles offered decrease as the variance of the reservation price distribution increases for high starting inventory levels the retailer reduces bundle price and offers more bundles the number of bundle sales decreases and the number of individual product sales increases when the arrival rate increases since the need for bundling decreases impacts of substitutability and complementarity of products are also investigated the retailer forms more bundles or charges higher prices for the bundle or both as the products become more complementary and less substitutable

bundling with customer self selection a simple approach to bundling low marginal cost goods with declining costs of distributing digital products comes renewed interest in strategies for pricing goods with low marginal costs in this paper we evaluate customized bundling a pricing strategy that gives consumers the right to choose up to a quantity m of goods drawn from a larger pool of n different goods for a fixed price we show that the complex mixed bundle problem can be reduced to the customized bundle problem under some commonly used assumptions we also show that for a monopoly seller of low marginal cost goods this strategy outperforms individual selling m 1 and pure bundling m n when goods have a positive marginal cost or when customers have heterogeneous preferences over goods comparative statics results also show that the optimal bundle size for customized bundling decreases in both heterogeneity of consumer preferences over different goods and marginal costs of production we further explore how the customized bundle solution is affected by factors such as the nature of distribution functions in which valuations are drawn the correlations of values across goods and the complementarity or substitutability among products altogether our results suggest that customized bundling has a number of advantages both in theory and practice over other bundling strategies in many relevant settings

multiproduct monopoly commodity bundling and correlation of values through what selling strategy can a multiproduct monopolist maximize his profits when his knowledge about individual consumers preferences is limited one possibility extensively studied in the context of a single good monopoly is to use quantity dependent pricing as a means of discriminating among customers with differing tastes see for example oi 1971 and maskin and riley 1984 an alternative technique for price discrimination first suggested by stigler 1968 and analyzed further by adams and yellen 1976 is for the monopolist to package two or more products in bundles rather than selling them separately through a series of examples adams and yellen illustrate that bundling can serve as a useful price discrimination device even when all consumers willingnesses to pay for each of the goods individually are unaffected by whether they are also consuming the other product a typical example is illustrated in figure i adapted from figure iv in adams and yellen where there are two goods three consumers ab c who consume at most one unit of each good with reservation values for each good that are independent of whether the other good is consumed and zero costs of production there a bundle offered at a price of 100 fully extracts all potential surplus which would be impossible pricing the goods independently unfortunately though these authors do not provide any general characterization of the circumstances in which bundling is actually a multiproduct monopolist s optimal strategy their examples however such as figure i create the impression that the profitable use of bundling

determining the impact of food price and income changes on body weight we develop a theoretical model to identify conditions under which price and income changes are most likely to change weight although it is intuitive that raising the price of high calorie food will decrease consumption of such goods it is not clear that such an outcome will actually reduce weight our empirical analysis demonstrates a case where a tax on food away from home a food intake category blamed for much of the rise in obesity could lead to an increase in body weight a finding which emphasizes the need to employ economic modeling when developing public policy to reduce obesity

robust portfolio optimization with copulas abstract conditional value at risk cvar is widely used in portfolio optimization as a measure of risk cvar is clearly dependent on the underlying probability distribution of the portfolio we show how copulas can be introduced to any problem that involves distributions and how they can provide solutions for the modeling of the portfolio we use this to provide the copula formulation of the cvar of a portfolio given the critical dependence of cvar on the underlying distribution we use a robust framework to extend our approach to worst case cvar wcvar wcvar is achieved through the use of rival copulas these rival copulas have the advantage of exploiting a variety of dependence structures symmetric and not we compare our model against two other models gaussian cvar and worst case markowitz our empirical analysis shows that wcvar can asses the risk more adequately than the two competitive models during periods of crisis

how buyers perceive savings in a bundle price an examination of a bundle s transaction value although bundling the selling of two or more products and or services at a single price has a history of economic research marketing oriented investigations have appeared only recently this pap

leaving the safety net an analysis of dropouts in an urban conditional cash transfer program summary in poverty reduction programs a significant number of beneficiaries change program status an analysis of oportunidades data from urban mexico shows that beneficiaries that drop out for behavioral and administrative reasons are those who are marginally eligible improving targeting through minimizing errors of inclusion results also indicate that the very poorest recipients particularly in large urban areas and less marginal communities are more likely to drop out increasing the errors of omission households deemed ineligible through a recertification process were those that had obtained basic durables or changed their demographic composition implying that oportunidades retargeting is based on limited information

a dual approach to evaluating research benefits in the presence of trade distortions we present a new approach for evaluating the welfare consequences of technical change a major feature is its ability to incorporate multiple distortions and multiple sources of technical change in interrelated markets a modified balance of trade function provides money measures of welfare change in terms of producer profits consumer expenditures and tax revenues alternative specifications of technical change are presented to capture the effects of differences in the form of technical change in an illustrative numerical example the approach is applied to a case involving two distortions and technical changes in two related markets the example shows that the approach is reasonably easy to use and that accounting correctly for price distortions can have important implications for research benefit measures

dynamic pricing for subscription services this paper investigates the use of pricing schemes in subscription services that consist of various combinations of activation subscription and cancellation fees when customers exclusively consider what is directly perceivable the activation fee starts low and increases as the network grows penetration strategy whereas the cancellation fee starts high and decreases as the network grows skimming strategy the activation and cancellation fees take various other forms otherwise the subscription fee remains low at the early stages and increases only when a reasonable number of subscribers is secured finally the authors discuss the theoretical and managerial implications of their findings

pricing patterns of cellular phones and phonecalls a segment level analysis one expectation of the u s federal communications commission fcc in the early stages of the cellular communications industry was that the presence of two licensees in each market would ensure competition and thereby result in declining prices over time for both cellular phones handsets and phonecalls however industry observers have noted recently that although the price of handsets has declined over time the price of the phonecalls has not we investigate this interesting pricing issue by modeling the market interaction between the providers of cellular services and also their interaction with customers using a game theoretic framework a critical assumption in the development of our model is that there exist segments of customers with different valuations usage levels and price sensitivities for cellular service empirically we provide support for the existence of two customer segments viz business professional and personal from both secondary data on industry usage and revenue and primary data collected from a conjoint analysis study of cellular service customers from the latter source we also establish that the business professional customers are more sensitive to prices of phonecalls than the personal segment from our analytical model we characterize the conditions under which penetration and skimming pricing strategies for the handsets are profit maximizing from the sellers standpoint and derive the corresponding price of phonecalls one of our main analytical results is that a competitive structure can result in lower prices over time for the handset but higher prices for the phonecalls depending on production costs of the handset we are thus able to provide a theoretical explanation for the observed price patterns for the handset and phonecalls

a general choice model for bundles with multiple category products application to market segmentation and optimal pricing for bundles abstract the attribute based approach to study customer choices cannot deal with bundles of heterogeneous components which are usually drawn from different product categories the authors develop the comparability based balance model which is a unified framework for modeling bundle choices the model can be employed for any bundle regardless of the heterogeneity of bundle components under a pure bundling strategy the conjoint model and balance model are special cases of the general model the authors use mixture distributions in a hierarchical bayesian framework to incorporate consumer heterogeneity in a more flexible manner than the extant approaches such as latent class and random coefficient models the empirical tests of the model show that most attribute effects are significant and consistent with the model s predictions the model is superior to those that do not consider the issues of comparability of attributes latent class structure and heterogeneity among respondents the authors show how