determinants of off farm work and its effects on farm performance the case of norwegian grain farmers limited attention has been given in the literature to the impact of off farm work on farm performance more knowledge about the determinants of part time farming and its effects on farm performance could help policymakers to introduce better targeted rural development policies the aim in this article is to fill part of the above mentioned gaps by analyzing factors that influence the choices of off farm work by either the farmer alone or jointly by both the farmer and partner and simultaneously examining how off farm work influences farm performance these analyses were based on an unbalanced panel data set from norwegian grain farms during 1991 to 2005 among the determinants of off farm work hours we found that in addition to demographic time trend and some regional effects there was a significant negative effect of farm output on farmers off farm work hours the production function results revealed that off farm work had a positive effect on farm output at first increasing but then decreasing with increase in hours spent in off farm work furthermore our analysis revealed no systematic effect of off farm work on farm technical efficiency

quality disclosure under consumer loss aversion consumers experience a sense of loss when a product s quality does not match their expectations to alleviate consumer loss aversion cla firms can disclose information to reduce consumers uncer

on the structure of lost sales inventory models we provide a new approach to the structural analysis of the standard lost sales inventory system this approach is we think easier to work with than the original one we also derive new bounds on the optimal policy then we show that more variable demand leads to higher cost finally we extend the analysis to several important variations of the basic model

conspicuous consumption and sophisticated thinking consumers purchase conspicuous goods to satisfy not only material needs but also social needs such as prestige in an attempt to meet these social needs producers of conspicuous goods like cars perfumes and watches highlight the exclusivity of their products in this paper we propose a monopoly model of conspicuous consumption using the rational expectations framework and then examine how purchase decisions are affected by the desire for exclusivity and conformity we show that snobs can have an upward sloping demand curve but only in the presence of consumers who are weakly followers laboratory tests lend support for this model prediction and for the rational expectations framework the experimental results suggest that subjects used some degree of sophisticated thinking to arrive at their first period decisions their behavior in the subsequent trials however can be adequately captured by a purely adaptive learning mechanism we discuss the implications of consumer learning for optimal dynamic pricing policy by a monopolist

biases in valuation vs usage of innovative product features we investigate biases in product valuation and usage decisions that arise when consumers consider a new generation of a product that offers an expanded set of capabilities of uncertain value two experiments using a novel computer game show evidence of a valuation usage disparity participants display a high willingness to pay for a new version of the game that offers a new set of controls but fail to fully exercise the option to use these controls after purchase this discrepancy is attributed to a fundamental difference in how new capabilities are valued at the time of purchase versus use consumer usage decisions appear to be driven by such myopic concerns as a desire to avoid short term learning costs whereas purchase decisions often fail to take into account the factors that drive usage and are further inflated by global optimism in the future usefulness of new capabilities we show that this lack of foresight can be explained by an intertemporal judgment model in which consumers attempt to value

emotional bidders an analytical and experimental examination of consumers behavior in a priceline like reverse auction e commerce has proved to be fertile ground for new business models which may be patented for up to 20 years and have potentially far reaching impact on the e commerce landscape one such electronic market is the reverse auction model popularized by priceline com there is still uncertainty surrounding the survival of such new electronic markets currently available on the internet understanding user behavior is necessary for better assessment of these sites survival this paper adds to economic analysis a formal representation of the emotions evoked by the auction process specifically the excitement of winning if a bid is accepted and the frustration of losing if it is not we generate and empirically test a number of insights related to 1 the impact of expected excitement at winning and frustration at losing on bids across consumers and biddings scenarios and 2 the dynamic nature of the bidding behavior that is how winning and losing in previous bids influence their future bidding behavior

off farm work decisions of husbands and wives joint decision making theoretical and econometric models are developed to examine joint wage labor participation and hours decisions of a husband and wife in farm households the econometric model is multiple equation and recursive the specification of the off farm labor supply equation of the husband wife depends on whether his her wife husband does or does not work off the farm and this structure is endogenous the model is fitted to data for iowa farm households the main conclusion is that the off farm labor supply equation of a married individual differs significantly depending on whether his or her spouse also works for a wage copyright 1989 by mit press

research note trading up a strategic analysis of reference group effects reference groups influence product and brand evaluations especially when the product is a publicly consumed luxury good marketers of such luxury goods need to carefully balance two important social forces 1 the desire of leaders to distinguish themselves from followers and 2 the countervailing desire of followers to assimilate with leaders in this paper we examine the theoretical implications of these social forces for firm prices product design and target consumer selection we show that the presence of reference group effects can motivate firms to add costly features which provide limited or no functional benefit to consumers furthermore reference group effects can induce product proliferation on one hand and motivate firms to offer limited editions on the other hand we find that offering a limited edition can increase sales and profits in some cases reference group effects can even lead to a buying frenzy

multiperson tournaments an experimental examination modern hierarchical organizations like corporations must motivate agents to work hard given their pyramid structure it is not surprising that one commonly used motivator is the promotion tournament in such tournaments agents compete to advance to positions at higher organizational levels though these tournaments are common little research has empirically looked at the interface of organizational structure and tournament design this paper aims to take a step in filling this void by comparing the performance of various tournament designs using controlled laboratory techniques

why do salespeople spend so much time lobbying for low prices in business to business settings a company s sales force often spends considerable time lobbying internally for authorization to charge lower prices these internal lobbying activities are time consuming and divert attention from other tasks such as interacting with customers we explain why internal lobbying activities serve an important role they help the firm elicit truthful reporting of demand information from the sales force as a result it may be profitable for the firm to require lobbying and make the requirement onerous even though lobbying is a nonproductive activity that creates an additional administrative burden and imposes a deadweight loss

distributional preferences in probabilistic and share contests we analyze nash equilibria of probabilistic and share contests where players have distributional preferences if players are sufficiently similar distributional preferences create multiple equilibria for the case of only mildly heterogeneous players equilibrium effort can be lower as well as higher than effort exerted by players with selfish preferences these findings can explain the following three anomalies observed in empirical tests of probabilistic and share contests the large variance of effort levels overspreading individual spending that exceeds the nash equilibrium prediction overspending and aggregate spending that exceeds the value of the prize overdissipation if players are sufficiently heterogeneous the game has a unique equilibrium that is more egalitarian than the selfish nash equilibrium it turns out that the less talented competitor may win the larger share of the prize if his inequality aversion is sufficiently strong we analyze how the equilibria evolve if the number of players becomes larger and how sequential moves influence behavior two new insights follow from the analysis of the sequential move game first sequential moves act as a coordination device in case of multiple simultaneous equilibria and second inequality aversion of the more egalitarian player can be used as a commitment device for low effort this effect can reverse the conventional wisdom that the underdog should lead

pricing and the news vendor problem a review with extensions in the newsvendor problem a decision maker facing random demand for a perishable product decides how much of it to stock for a single selling period this simple problem with its intuitively appealing solution is a crucial building block of stochastic inventory theory which comprises a vast literature focusing on operational efficiency typically in this literature market parameters such as demand and selling price are exogenous however incorporating these factors into the mode l can provide an excellent vehicle for examining how operational problems interact with marketing issues to influence decision making at the firm level in this paper we examine an extension of the newsvendor problem in which stocking quantity and selling price are set simultaneously we provide a comprehensive review that synthesizes existing results for the single period problem and develop additional results to enrich the existing knowledge base we also review and develop insight into a dynamic inventory extension of this problem and motivate the applicability of such models

designing price contracts for boundedly rational customers does the number of blocks matter when designing price contracts one of the major questions confronting managers is how many blocks there should be in the contract we investigate this question in the setting of a manufacturer retailer dyad facing a linear deterministic consumer demand theoretical marketing models predict that the manufacturer s profits rise dramatically when the number of blocks in the contract is increased from one to two because both channel efficiency and its share of channel profits increase however increasing the number of blocks to three yields no incremental profits we test these predictions experimentally and find that increasing the number of blocks from one to two raises channel efficiency but not the manufacturer s share of profits surprisingly having three blocks in the contract increases channel efficiency even further and also gives the manufacturer a slightly higher share of profits we show that these results can be explained by a quantal response equilibrium model in which the manufacturer accounts for noisy best response due to nonpecuniary payoff components in the retailer s utility we also show that the retailer is sensitive to the counterfactual profits it could have earned if it were charged a lower marginal price for earlier blocks in the multiple block contract

incentives versus reciprocity insights from a field experiment abstractthe authors conduct a field experiment in which they vary the sales force compensation scheme at an asian enterprise that sells consumer durable goods with variation generated by the experimental treatments the authors model sales force performance to identify the effectiveness of various forms of conditional and unconditional compensation they account for salesperson heterogeneity using a hierarchical bayesian framework to estimate the model they find conditional compensation in the form of quota bonus incentives to improve performance however such compensation may lead to lower future performance the authors find little difference in effectiveness between a quota bonus plan and punitive bonus plans framed as a penalty for not achieving quota they find that unconditional compensation in the form of reciprocity is effective at improving sales force performance only when it is given as a delayed reward however the effectiveness of this plan decreases with repeated exposure the authors

off farm labor supply responses to permanent and transitory farm income a sample of iowa farm couples is used to evaluate whether off farm labor supply decisions respond to permanent and transitory components of farm income off farm labor supply of both spouses declines in response to increases in permanent farm income farm wives also reduce off farm labor supply in response to positive transitory farm income shocks consequently one mechanism farm households use to smooth their goods consumption when facing fluctuating farm income is to modify their consumption of leisure ability to smooth goods consumption does not imply the absence of liquidity constraints among farm households unless leisure consumption is also smoothed

the supply of off farm labor a random coefficients approach a joint model of off farm labor decisions for farm operator and spouse is presented attention is given to operator and spouse participation decisions as well as associated problems of multiple sample selectivity biases two stage fixed and random coefficient methods corrected for possible selectivity biases are used to estimate supply function parameters results indicate that supply function parameters are random variation in important supply parameters is investigated results also illustrate the importance of spouse decisions on off farm labor supply function structure

relationship organization and price delegation an experimental study price delegation to the salesforce is a practice widely adopted by firms this paper examines the relationship between price delegation and managerial profits using a laboratory economics experiment a novel feature of our experiment is that we study how varying the relationship organization of the sales manager and salesperson to allow for 1 requests by the salesperson for the manager to choose price delegation and for 2 the manager to award a small bonus after observing the salesperson s decisions can affect behavior the results show that contrary to the theoretical prediction managers choose price delegation frequently and salespeople respond reciprocally leading to higher manager profits under price delegation moreover this behavior increases when requests and bonuses are allowed we show that a behavioral economics model that incorporates positive reciprocity can explain these results well data as supplemental material are available at http dx doi org 10 1287 mnsc 2013 1778 this paper was accepted by pradeep chintagunta marketing

technical note optimal control of an assembly system with multiple stages and multiple demand classes we consider an assembly system with multiple stages multiple items and multiple customer classes the system consists of m production facilities each producing a different item items are produced in variable batch sizes one batch at a time with exponentially distributed batch production times demand from each class takes place continuously over time according to a compound poisson process at each decision epoch we must determine whether or not to produce an item and should demand from a particular class arise whether or not to satisfy it from existing inventory if any is available we formulate the problem as a markov decision process and use it to characterize the structure of the optimal policy in contrast to systems with exogenous and deterministic production lead times we show that the optimal production policy for each item is a state dependent base stock policy with the base stock level nonincreasing in the inventory level of items that are downstream and nondecreasing in the inventory level of all other items for inventory allocation we show that the optimal policy is a multilevel state dependent rationing policy with the rationing level for each demand class nonincreasing in the inventory level of all nonend items we also show how the optimal control problem can be reformulated in terms of echelon inventory and how the essential features of the optimal policy can be reinterpreted in terms of echelon inventory

multiple job holdings among dairy farm families in new york and ontario abstract previous empirical studies of multiple job holding have tended to focus on the characteristics of those obtaining off farm employment and the factors affecting the hours supplied to those obtaining off farm activities none of these studies have explicitly addressed the reasons behind the decision to seek off farm employment neither have they been able to examine in depth the important issue of how this major component of the farm sector responds to alternative policies since most studies have used cross sectional data for a given region a comparison between countries would permit the analysis of how multiple job holding responds to differing government policies the purpose of this paper is to examine the reasons for and factors affecting multiple job holdings of dairy farm families in neighboring regions of two counties united states and canada the bordering regions of new york and ontario have similar geographic conditions but significantly different farm support and social service policies the results indicate the importance of farm income on why people work off the farm and provide evidence of multiple job holding as a flexible mechanism for coping with changes in the economic environment facing the household for operators the driving characteristics influencing off farm labor participation is the farm s financial position the supply managed milk marketing system ensures higher and more stable returns for ontario dairy farm labor in contrast it is family demographics educational level and social support policy that appears to largely influence spousal off farm employment decisions free medical care in ontario lowers the reservation wage for household members the effect of these farm and social support policies on the relative returns to labor in agriculture and non farm employment explains the lower participation rate and hours supplied in off farm work by both operators and hours supplied in off farm work by both operators and spouses in ontario dairy farm household

pricing of conspicuous goods a competitive analysis of social effects abstract social needs play an important role in the purchase of conspicuous goods in this article the authors extend traditional economic models to accommodate social needs such as desire for uniqueness and conformism and examine their implications for pricing conspicuous goods first in the context of a duopoly the authors identify the conditions under which the desire for uniqueness can increase demand among some consumers as the price of a product increases second the authors show that though the desire for uniqueness leads to higher prices and firm profits a desire for conformity leads to lower prices and profits third the authors find that consumers purchase high quality products not because of their desire for uniqueness but despite it finally marketers of conspicuous goods may find it beneficial not to emphasize the functional differences among their products when the need for uniqueness is high in a laboratory test the authors find support for the claim that demand for a product amo

intention based fairness preferences in two player contests we analyze equilibria of two player contests where players have intention based preferences we find that players invest more effort compared to the case with selfish preferences and are even willing to exert effort when the monetary value of the prize converges to zero as a consequence overdissipation occurs if the value of the prize is sufficiently small

designing pricing contracts for boundedly rational customers does the framing of the fixed fee matter the format of pricing contracts varies substantially across business contexts a major variable being whether a contract imposes a fixed fee payment this paper examines how the use of the fixed fee in pricing contracts affects market outcomes of a manufacturer retailer channel standard economic theories predict that channel efficiency increases with the introduction of the fixed fee and is invariant to its framing we conduct a laboratory experiment to test these predictions surprisingly the introduction of the fixed fee fails to increase channel efficiency moreover the framing of the fixed fee does make a difference an opaque frame as quantity discounts achieves higher channel efficiency than a salient frame as a two part tariff although these two contractual formats are theoretically equivalent to account for these anomalies we generalize the standard economic model by allowing the retailer s utilities to be reference dependent so that the up front fixed fee payment is perceived as a loss and the subsequent retail profits as a gain we embed this reference dependent utility function in a quantal response equilibrium framework where the retailer is allowed to make decision mistakes due to computational complexity the key prediction of this behavioral model is that channel efficiency decreases with loss aversion for sufficiently nash rational retailers consistent with this prediction the estimated loss aversion coefficient is 1 37 in the two part tariff condition significantly higher than 1 27 in the quantity discount condition at the same time loss aversion dominates contract complexity in explaining the data lastly we conduct a follow up experiment to confirm the central role of loss aversion as a behavioral driver in one condition the retailer becomes less loss averse when we temporally compress the fixed fee payment and the realization of retail profits which supports the loss aversion theory in the other condition the retailer s contract acceptance rate does not decline when we reward the manufacturer a higher cash payment for each experimental point earned which rules out the competing hypothesis that the retailer rejects contract offers due to fairness concerns

on the optimal policy structure in serial inventory systems with lost sales we study a periodically reviewed serial inventory system in which excess demand from external customers is lost we derive elementary properties of the vector of optimal order quantities in this system in particular we derive bounds on the sensitivity or more mathematically the derivative of the optimal order quantity at each stage to the vector of the current inventory levels our analysis uses the concept of l natural convexity which was studied in discrete convex analysis and recently used in the study of single stage inventory systems with lost sales we also remark on how our analysis extends to models with capacity constraints and or backordering

tiers in one sided matching markets theory and experimental investigation the design of a matching market may affect behavior in prematch stages in some settings forward looking agents might purchase low priced properties with the intention of trading up from a design standpoint such behavior is undesirable we investigate a tiered structure as a potential solution using a model that endogenizes prematch acquisition decisions we show that tiers promote exchange while protecting the primary market in the laboratory we find that both firm revenue and total social surplus are improved by tiered matching and the amount of improvement depends on the exchange mechanism the firm uses we focus on two popular mechanisms deposit first and request first we find that subjects are less likely to take advantage of the match under tier free deposit first mechanism possibly because of risk aversion thus a tiered approach is more critical under the request first mechanism we confirm that risk aversion partly explains deviations from theory this paper was accepted by uri gneezy

peer induced fairness in games people exhibit peer induced fairness concerns when they look to their peers as a reference to evaluate their endowments we analyze two independent ulti matum games played sequentially by a leader and two followers with peer induced fairness the second follower is averse to receiving less than the first follower using laboratory experimental data we estimate that peer induced fairness between followers is two times stronger than distributional fairness between leader and follower allowing for heterogeneity we find that 50 per cent of subjects are fairness minded we discuss how peer induced fairness might limit price discrimination account for low variability in ceo compensa tion and explain pattern bargaining

designing multiperson tournaments with asymmetric contestants an experimental study is the right amount of effort exerted in multiperson tournaments where contestants have two different levels of initial endowments termed favorites and underdogs we develop theoretical predictions for the level of effort and the effect of varying the prize structure we test these predictions for three person tournaments using an economic experiment in a social environment where contest outcomes are publicly announced we find that both favorites and underdogs overexert effort relative to the theoretical point predictions moreover in the treatment with two favorites and one underdog favorites increase their effort when the number of prizes is increased from one to two contrary to the theory prediction we show that a generalized model that allows for psychological losses from losing for favorites and psychological gains from winning for underdogs because of social comparisons tracks the experimental results better than the standard theoretical model this paper was accepted by peter wakker decision analysis

combined pricing and inventory control under uncertainty this paper addresses the simultaneous determination of pricing and inventory replenishment strategies in the face of demand uncertainty more specifically we analyze the following single item periodic review model demands in consecutive periods are independent but their distributions depend on the item s price in accordance with general stochastic demand functions the price charged in any given period can be specified dynamically as a function of the state of the system a replenishment order may be placed at the beginning of some or all of the periods stockouts are fully backlogged we address both finite and infinite horizon models with the objective of maximizing total expected discounted profit or its time average value assuming that prices can either be adjusted arbitrarily upward or downward or that they can only be decreased we characterize the structure of an optimal combined pricing and inventory strategy for all of the above types of models we also develop an efficient value iteration method to compute these optimal strategies finally we report on an extensive numerical study that characterizes various qualitative properties of the optimal strategies and corresponding optimal profit values

multiple job holding in the united kingdom evidence from the british household panel survey this article examines the determinants of multiple job holding in the uk we address these issues using data from the first 11 waves of the british household panel survey bhps which covered the period from 1991 to 2001 evidence from the bhps does not support the hypotheses of main job hours constrained and main job insecurity we argue that the incentive for moonlighting in the uk is due to financial pressures and the desire for heterogeneous jobs the empirical work is carried out separately for men and women

modeling the psychology of consumer and firm behavior with behavioral economics abstract marketing is an applied science that tries to explain and influence how firms and consumers behave in markets marketing models are usually applications of standard economic theories which rely on strong assumptions of rationality of consumers and firms behavioral economics explores the implications of the limits of rationality with the goal of making economic theories more plausible by explaining and predicting behavior more accurately while maintaining formal power this article reviews six behavioral economics models that are useful to marketing three models generalize standard preference structures to allow for sensitivity to reference points and loss aversion social preferences toward outcomes of others and preference for instant gratification the other three models generalize the concept of game theoretic equilibrium allowing decision makers to make mistakes encounter limits on the depth of strategic thinking and equilibrate by learning from feedback the authors also discuss a sp

bounded rationality in pricing under state dependent demand do firms look ahead and if so how far the authors propose an empirical procedure to investigate the pricing behavior of manufacturers and retailers in the presence of state dependent demand rather than assuming that firms are perfectl

s s optimality in joint inventory pricing control an alternate approach we study a stationary single stage inventory system under periodic review with fixed ordering costs and multiple sales levers such as pricing advertising etc we show the optimality of s s type policies in these settings under both the backordering and lost sales assumptions our analysis is constructive and is based on a condition that we identify as being key to proving the s s structure this condition is entirely based on the single period profit function and the demand model our optimality results complement the existing results in this area

consumer value maximizing sweepstakes and contests abstract sweepstakes and contests are some of the most frequently used promotional tools consumers participating in sweepstakes or contests have an opportunity to win prizes through a random draw the authors examine how commonly used sweepstakes formats that vary in the number of winners and the allocation of the total reward money among the winners affect consumer valuations of the promotion given a fixed amount of reward money the authors examine alternative reward formats based on the promotional objectives consumer risk aversion and degree of subadditivity they test the analytical results using an experimental approach

designing sales contests does the prize structure matter abstract sales contests are short term incentives that managers use to raise sales effort the extant marketing theory predicts that the optimal prize structure should have two characteristics 1 the number of prizewinners should be greater than one and 2 prize values should be unique and rank ordered however this theory has not been empirically examined this article presents two empirical studies that examine whether the prize structure of a sales contest affects sales performance in each study the authors investigate the incremental effects of introducing multiple prizewinners and unique rank ordered prizes into a sales contest the first study consists of two laboratory experiments in which participants make decisions that closely reflect the decision trade offs in the theoretical model of sales contests the second study consists of two field economic experiments in which trained salespeople sell fundraising sponsorships to companies the results across the experiments are remarkably consist

technical note optimal dynamic joint inventory pricing control for multiplicative demand with fixed order costs and lost sales this note studies the optimal dynamic decision making problem for a retailer in a price sensitive multiplicative demand framework our model incorporates lost sales holding cost fixed and variable procurement costs as well as salvage value we characterize the structure of the retailer s discounted expected profit maximizing dynamic inventory policy for both finite and infinite selling horizon problems

the off farm work behavior of farm operators there is widespread concern about the opportunities for people to begin farming most observers argue that the financial barrier to entry into agriculture has risen relative to farm incomes several authors have pointed to off farm earnings as one important way to overcome this barrier coffman carlin and ghelfi steeves steeves in particular cited evidence that fewer than 20 of canadian farm entrants between 1966 and 1971 recorded no significant off farm work in 1971 nearly 43 of these entrants worked 229 to 365 days off the farm in that year similar evidence for farm entrants in iowa is found in kaldor and jetton hence off farm work by new farmers is often viewed as an important way to manage the high capital investment required to establish a viable farm this viewpoint is not the only one possible neoclassical theory predicts that farmers increase off farm work when marginal returns to off farm work become larger than marginal returns to farming lee bollman sumner because entering farmers often have current off farm work skills they may choose some off farm work regardless of the financial obligations of farming because offfarm work skills depreciate and returns to farming appreciate over time established farmers are less likely to engage in off farm work clearly a simple correlation between farm entry and off farm work will not allow us to distinguish between these views this paper develops two formal models of offfarm labor supply to examine these two interpretations first it analyzes the off farm work decisions in a conventional utility maximizing framework consistent with the view that off farm work is chosen when marginal returns to farming fall below potential off farm returns the paper then analyzes the off farm work decisions when an income target reflecting the need to meet the financial obligations of farming is the objective the paper demonstrates that these models produce divergent predictions about off farm work decisions only under the assumption that the higher financial obligations exceed the higher returns to work on larger farms the models are then tested under this assumption using the 1978 agricultural enumerative survey for the canadian province of saskatchewan

the off farm labor supply of farmers theoretical and empirical models are developed to examine the off farm wages labor force participation and hours of work of farmers econometric estimates use data from a 1971 survey of illinois farmers the off farm wage depends on farmer human capital and the local labor market the major result confirms the sensitivity of off farm work to economic incentives a 10 increase in the off farm wage entails an 11 increase in hours of off farm work holding farm characteristics constant results also indicate effects of seasonality risk and life cycle factors on off farm work

reference dependence in multilocation newsvendor models a structural analysis we propose a behavioral theory to predict actual ordering behavior in multilocation inventory systems the theory rests on a well known stylized fact of human behavior people s preferences are reference dependent we incorporate reference dependence into the newsvendor framework by assuming that there are psychological costs of leftovers and stockouts we also hypothesize that the psychological aversion to leftovers is greater than the disutility for stockouts we then experimentally test the proposed theory in both the centralized and decentralized inventory structures using subjects motivated by substantial financial incentives consistent with the proposed theory actual orders exhibit the so called pull to center bias and the degree of bias is greater in the high profit margin than in the low profit margin condition these systematic biases are shown to eliminate the risk pooling benefit when the demands across store locations are strongly correlated because the proposed model nests the standard inventory and ex post inventory error minimization theories as special cases one can systematically evaluate the predictive power of each alternative using the generalized likelihood principle we structurally estimate all three theories using the experimental data and the estimation results strongly suggest that the proposed behavioral theory captures actual orders and profits better we also conduct two experiments to validate the behavioral model by manipulating the relative salience of the psychological costs of leftovers versus that of stockouts to alleviate the pull to center bias

coordinating inventory control and pricing strategies with random demand and fixed ordering cost the finite horizon case we analyze a finite horizon single product periodic review model in which pricing and production inventory decisions are made simultaneously demands in different periods are random variables that are independent of each other and their distributions depend on the product price pricing and ordering decisions are made at the beginning of each period and all shortages are backlogged ordering cost includes both a fixed cost and a variable cost proportional to the amount ordered the objective is to find an inventory policy and a pricing strategy maximizing expected profit over the finite horizon we show that when the demand model is additive the profit to go functions arek concave and hence an s s p policy is optimal in such a policy the period inventory is managed based on the classical s s policy and price is determined based on the inventory position at the beginning of each period for more general demand functions i e multiplicative plus additive functions we demonstrate that the profit to go function is not necessarilyk concave and an s s p policy is not necessarily optimal we introduce a new concept the symmetrick concave functions and apply it to provide a characterization of the optimal policy

technical note a note on the structure of joint inventory pricing control with leadtimes we consider a joint inventory pricing control problem for a periodic review single stage inventory system with a positive order leadtime and a linear order cost demands in consecutive periods are independent but their distributions depend on the price in accordance with a stochastic demand function of additive form pricing and ordering decisions are made simultaneously at the beginning of each period the objective is to maximize the total expected discounted profit over a finite horizon we partially characterize the structure of the optimal joint ordering and pricing policies we also show that our structural analysis can be extended to a multistage or serial inventory system with constant or stochastic leadtimes and an assemble to order system with price sensitive demand

favoring the winner or loser in repeated contests should a firm favor a weaker or stronger employee in a contest despite a widespread emphasis on rewarding the best employees managers continue to tolerate and even favor poor performers contest theory reveals that evenly matched contests are the most intense which implies that a contest designer can maximize each player s effort by artificially boosting the underdog s chances we apply this type of handicapping to a two period repeated contest between employees in which the only information available about their abilities is their performance in the first period in this setting employees are strategic and forward looking such that they fully anticipate the potential impact of the first period contest result on the second period contest and thus adjust their behaviors accordingly the manager also incorporates these strategic behaviors of employees when determining an optimal handicapping policy if employees abilities are sufficiently different favoring the first period loser in the second period increases the total effort over both periods however if abilities are sufficiently similar we find the opposite result occurs total effort increases the most in response to a handicapping strategy of favoring the first period winner

coordinating inventory control and pricing strategies under batch ordering in this paper we investigate joint pricing and inventory control problems in a finite horizon single product periodic review setting with certain uncertain supply capacities the demands in different periods are random variables whose distributions depend on the posted price exhibiting the additive form the order quantity in each period is required to be of integral multiples of a given specific batch size denoted by q inventory replenishment incurs a linear ordering cost referred to as the cost rate function the sum of holding and backorder costs can either be convex or quasi convex the objective is to determine a joint ordering and pricing decision that can maximize the total expected profit over the planning horizon we first consider the case in which the cost rate function is convex and show that the modifiedr q list price policy is optimal for the system with certain and limited capacities a special case of which is the r q list price policy when capacities become unlimited as supply capacities become random the optimal policy follows a new structure wherein the optimal order up to level and posted price must be coordinated to make the optimal safety stock level follow the r q policy we further consider the case of a quasi convex cost rate function which may arise when a service level constraint is used as a surrogate for the shortage cost we demonstrate that the r q list price policy is optimal for the system without supply capacity constraints in addition extensions to several other models are discussed the enabling technique is based on the notion of q jump convexity and its variants

dynamic pricing in the presence of inventory considerations research overview current practices and future directions the benefits of dynamic pricing methods have long been known in industries such as airlines hotels and electric utilities where the capacity is fixed in the short term and perishable in recent years there has been an increasing adoption of dynamic pricing policies in retail and other industries where the sellers have the ability to store inventory three factors contributed to this phenomenon 1 the increased availability of demand data 2 the ease of changing prices due to new technologies and 3 the availability of decision support tools for analyzing demand data and for dynamic pricing this paper constitutes a review of the literature and current practices in dynamic pricing given its applicability in most markets and its increasing adoption in practice our focus is on dynamic intertemporal pricing in the presence of inventory considerations

interrelated labor decisions of farm couples a censored response analysis of off farm work farm couples labor market responses are partly the discrete choice of entering the off farm labor market and partly the continuous choice of off farm working hours given entry such a setting is interesting when examining the increasing occurrence of multiple job holdings among farmers in western economies most existing analyses of off farm labor supply only model the decisions of the farmer not the joint decisions of the farm couple this article presents a framework for handling such interrelated discrete continuous choices involving also farm production and household consumption the derived two equation sub model for husband wife s censored labor responses is estimated from a 10 year norwegian panel data for 342 farms the results agree to some extent with earlier studies but are more informative because of the longer panels which allows a more extensive examination of latent heterogeneity and behavioral persistence because it provides cross effects in the spouses labor supplies the results show some interesting differences between how the independent variables influence the labor supply of operator and spouse this is most evident for the cross effects of education children and wage rate overall the results strongly support applying a panel censoring model that accounts for latent heterogeneity in this context

social loss aversion and optimal contest design when managers are designing a contest to motivate effort by salespeople service employees franchisees or product development teams a key question is what should the optimal proportion of winne

designing optimal sales contests a theoretical perspective sales contests are commonly used by firms as a short term motivational device to increase salespeople s efforts conceptually sales contests and piece rate schemes such as salary commission or quotas differ in that in sales contests payment to salespeople is based on relative rather than absolute sales levels using the agency theoretic framework where the firm is risk neutral and the salespeople are risk averse we examine how a firm should design an optimal contest to maximize its profit through stimulating salespeople s efforts specifically we investigate how many salespeople should be given awards and how the reward should be allocated between the winners three commonly used sales contest formats are studied in the first format termed as rank order tournament there are many winners and the amount of reward is based on relative rank achieved with larger amounts awarded to higher ranks we also examine two special cases of rank ordered tournament a multiple winners format where the reward is shared equally and a winner take all format where a single winner gets the entire reward we model salespeople s behavior by considering utility of the reward from achieving one of the winning ranks in the contest and assessing incremental chances of winning by exerting more effort the analysis was done for two situations based on whether the total reward is large enough for salespeople to participate in the effort maximizing sales contest or not the analysis shows that factors impacting contest design include the salespeople s degree of risk aversion number of salespeople competing in the contest and degree of sales uncertainty which reflects strength of the sales effort relationship the results show that salespeople exert lower effort when there are larger numbers of participants or when sales uncertainty is high we find that the rank order tournament is superior to the multiple winners contest format in a multiple winners format the salesperson whose performance is just sufficient to win is better off than any of the other winners as he exerts the least effort to win but obtains as high a reward as any other winners specific recommendations on contest designs are obtained assuming that sales follow either a logistic or uniform distribution assuming that sales outcome is logistically distributed and the contest budget is high enough to ensure participation our analysis shows that the total number of winners in a sales contest should not exceed half the number of the contestants this result is due to the symmetric nature of the logistic distribution our analysis also indicates that the total number of winners should be increased and the spread decreased when salespeople are more risk averse when salespeople are more risk averse their marginal values for higher rewards become smaller the spread should increase with ranks when rate of risk tolerance is high and decrease with ranks when the rate of risk tolerance is lower in the extreme case of risk neutral salespeople the optimal design is a winner take all format we also conclude that since the probability of winning the contest decreases with number of contestants the optimal number of winners should increase and interrank spread decrease when there are a larger number of participants if the firm does not allocate a large enough budget for salespeople to participate in the effort maximizing sales contest then the firm may increase the number of winners to more than half the sales force increasing the number of winners and decreasing the spread are required to encourage the salespeople to participate particularly when there are many participants who are risk averse a counterintuitive result is that the number of winners should be reduced and the spread increased when sales uncertainty is high increasing sales uncertainty leads to lower equilibrium effort levels while keeping the expected utility of the contest rewards the same therefore increased uncertainty results in higher participation incentive the firm should thus relatively reduce the number of winners in high uncertainty situations under the assumption of uniformly distributed sales the recommendation is that a winner take all contest induces maximum efforts regardless of the level of risk aversion number of players or the degree of uncertainty when the winner take all format does not meet the participation constraint our analysis recommends offering a big reward to the top salesperson and a small reward to many other sales people the small reward should be just sufficient to ensure that all salespeople participate consistent with logistic distribution the spread should decrease when salespeople are more risk averse or there are more players but should increase when sales uncertainty is larger these results highlight that some of the conclusions drawn may be sensitive to distributional assumptions