spatial competition in the network television industry we present an empirical study of spatial competition and a methodology to estimate demand for products with unobservable characteristics using panel data we estimate a discrete choice model with latent product attributes and unobserved heterogeneous consumer preferences our application of the methodology to the network television industry yields estimates that are consistent with experts views given our estimates we compute nash equilibria of a product location game and find that firms observed strategies such as the degree of product differentiation are generally optimal discrepancies between actual and optimal strategies reflect the networks adherence to rules of thumb and possible bounded rationality behavior copyright 2001 by the rand corporation

not all rivals look alike estimating an equilibrium model of the release date timing game a very serious game of strategy is at work a cross between chess and chicken which studio distribution chiefs play year round but with increasing intensity during the summer and holiday release period new york times december 6 1999 hubris hubris if you only think about your own business you think i ve got a good story department i ve got a good marketing department we re going to go out and do this and you don t think that everybody else is thinking the same way in a given weekend in a year you ll have five movies open and there s certainly not enough people to go around joe roth chairman of walt disney studios answering a question about the large number of major movies opening within days of each other los angeles times december 31 1996 i introduction the number of americans who go to the movies varies dramatically over the course of the year and sometimes more than doubles within a period of two weeks at the same time the first week accounts for almost 40 of the box office revenues of the average movie the combination of these two facts makes the timing of launching a new movie a major focus of attention for distributors of movies with virtually no subsequent price competition the movie s release date is one of the main short run vehicles by which studios compete with each other in this paper i develop and estimate a model of discrete games which allows me to analyze this release date timing game most empirical industry studies focus on price and quantity competition taking other product characteristics as given in many industries however prices play a very small role and competition is channeled through other product attributes the entertainment industry is a prime example competition among movies television programs or broadway shows is on nonmonetary product attributes such as content advertising and time therefore understanding competition in such industries requires a model that endogenizes some of these product attributes especially those that can be changed in the short run this paper provides a framework in which release decisions can be endogenized and nonprice competition can be analyzed the absence of price competition is useful because it allows the focus of the analysis to be on the timing dimension without relying on assumptions about the nature of the postrelease price competition 1 together with the frequent timing decisions associated with different movies this makes the motion picture industry quite attractive for empirical analysis of the timing game this industry however is not the only example in which timing decisions play a central role similar timing considerations are also important in the release decisions of books compact disks and other new products as well as in the scheduling decisions of major events television programs flight schedules and promotional sales 2 when taking on a new project distributors of movies typically plan for a friday release which falls within a relatively short window of time carefully chosen to match the type of the movie this makes the choice of the release date a very discrete one the exact friday within the season is generally determined by a strategic timing game played among distributors before each release season distributors scramble to release their movies on big holiday weekends when demand is high when doing so each distributor tries to release on the attractive holiday weekend and at the same time to deter competitors from doing the same the extent to which distributors are successful in doing so largely depends on the quality of the movies at their disposal and on the way they can compete with movies released by other studios thus modeling this timing game must account for the asymmetries among movies and for the variation in these asymmetries across release seasons specifically i develop and estimate a sequential move game with private information i assume that the observed release date decisions are the equilibrium outcome of such a game

learning from others outcomes i develop a simple model of social learning in which players observe others outcomes but not their actions a continuum of players arrives continuously over time and each player chooses once and for all between a safe action which succeeds with known probability and a risky action which succeeds with fixed but unknown probability depending on the state of the world the actions also differ in their costs before choosing a player observes the outcomes of k earlier players there is always an equilibrium in which success is more likely in the good state and this alignment property holds whenever the initial generation of players is not well informed about the state in the case of an outcome improving innovation where the risky action may yield a higher probability of success players take the correct action as k in the case of a cost saving innovation where the risky action involves saving a cost but accepting a lower probability of success inefficiency persists as k in any aligned equilibrium whether inefficiency takes the form of under adoption or over adoption also depends on the nature of the innovation convergence of the population to equilibrium may be non monotone

what are households willing to pay for improved water access results from a meta analysis abstract although several factors contribute to low rates of access to improved water and sanitation in the developing world it is especially important to understand and measure household demand for these services one valuable source of information regarding demand is the growing empirical literature that has applied stated preference methods to estimate households willingness to pay wtp because it is difficult to generalize and support planning based on this scattered literature we conduct a meta analysis to take stock of the worldwide sample of household wtp for improved drinking water services using 171 wtp estimates drawn from 60 studies we first describe this sample and then examine the potential factors that explain variation in wtp estimates our results suggest that households are willing to pay between approximately 3 and 30 per month for improvements in water access specifically in line with economic theory and intuition wtp is sensitive to scope the magnitude of improvement in drinking water services as well as household income and stated preference elicitation method we demonstrate how our results can be used to predict household level wtp for selected improvements in drinking water access in regions with low coverage and find that private benefits exceed the cost of provision

delays and equilibria with large and small information in social learning abstract the general model of social learning with irreversible investment and endogenous timing is analyzed for any distribution of private informations strategic complementarities and multiple equilibria appear which are generated solely by information externalities different equilibria generate strikingly different amounts of information the impacts of various assumptions bounded beliefs large number of agents discrete time and short periods are examined carefully the properties are robust to the introduction of observation noise with a continuum of agents

a factor analytic probit model for representing the market structure in panel data internal market structure analysis infers both brand attributes and consumer preferences for those attributes from preference or choice data the authors exploit a new method for estimating probit models from panel data to infer market structures that can be displayed in few dimensions even though the model can represent every possible vector of purchase probabilities

short run needs and long term goals a dynamic model of thirst management beverage consumption occurs many times a day in response to short run needs that fluctuate we develop a model in which consumers are heterogeneous in self regulating consumption by balancing short run needs e g hydration and mood with long term goals e g health the model has two novel features 1 utility depends on the match between occasion specific needs and product attributes and 2 dynamics of consumption and stockpiling are at the level of product attributes we estimate the model using unique intraday beverage consumption activity and psychological needs data we find that only a third of individuals do not self regulate of the two thirds who self regulate over 40 self regulate adaptively based on past choice whereas 25 self regulate both adaptively and anticipating future needs our attribute need match model enables us to assess unmet demand for new products with attributes that match co occurring occasion specific needs specifically we find that a product satisfying a combination of health hydrating needs expands overall beverage consumption by as much as 5 our framework of modeling heterogeneity in self regulation by balancing short run needs with long term goals is more broadly applicable in contexts where situational needs vary and long term effects are gradual and hard to discern e g nutrition smoking and preventive health care

the impact of market structure and learning on the tradeoff between r d competition and cooperation this paper compares r d competition and cooperation when firms can devote resources to a safe investment or a risky r d investment when the discovery of a new product creates positive externalities on non discovering firms equilibrium investment flow ex ante investment and welfare under r d competition are less than or equal to what they are under research cooperation with negative externalities r d cooperation results in the same or lower ex ante investment than under r d competition and social welfare may also be less our results have relevance for empirical studies of the impact of r d cooperation on r d outcomes

the direction of innovation abstract how do innovation policies affect the direction of research is market based innovation too radical or too incremental we construct a novel and tractable model of the direction of innovation firms pursue inefficient research directions because they race to discover easy yet less valuable projects and because they work on difficult inventions where they can appropriate a larger portion of the social value fixing these inefficiencies requires policy to condition on properties of inventions that could have been discovered but were not policies which do not do so like patents and prizes may fail to encourage firms to research in the efficient direction even if they obtain the optimal quantity of r d

dynamic delegation of experimentation i study a dynamic relationship where a principal delegates experimentation to an agent experimentation is modeled as a one armed bandit that yields successes following a poisson process its unknown intensity is high or low the agent has private information his type being his prior belief that the intensity is high the agent values successes more than the principal does so prefers more experimentation the optimal mechanism is a cutoff rule in the belief space the cutoff gives pessimistic types total freedom but curtails optimistic types behavior pessimistic types over experiment while the most optimistic ones under experiment this delegation rule is time consistent

a probabilistic choice model for market segmentation and elasticity structure marketing scholars commonly characterize market structure by studying the patterns of substitution implied by brand switching though the approach is useful it typically ignores the destabilizing

the asymmetric information model of state dependence marketing researchers and practitioners are interested in consumer loyalty because of its managerial consequences previous empirical studies find that consumers are loyal not only to a brand but also to a firm umbrella brand that is even when firms offer new products consumers tend to continue to purchase from the same firm this repeat purchase behavior might result from state dependence or from heterogeneity the meaning of state dependence is that the current choice behaviorally depends on the previous one the traditional model of state dependence assumes that the previous choice affects the current utility this study suggests another source of state dependence the previous choice affects the current information set specifically the model assumes that the consumer a knows the attributes of the new product offered by the firm from which he she purchased in the previous period b is uncertain about the attributes of the new products offered by the other firms c can obtain full information about the attributes of all the products through a costly search and d if the consumer decides not to search he she purchases the new product offered by the firm from which he she purchases in the previous period it is shown that state dependence can result either from the effect of previous choices on the current utility or from its effect on the current information set this theoretical result raises the following question what kind of data does a researcher need in order to distinguish between the two sources of state dependence this study shows that the two sources can be distinguished with a standard panel data set in other words although the new source of state dependence is based on the search activity of consumers there is an identifying factor that enables a researcher to detect such activity even without direct data on search the empirical distinction is possible because the behavioral implications of the two sources of state dependence are different they differ in the effect of product attributes on the repeat purchase probability the following example partially illustrates this result there are two firms a and b the consumer purchased a product from firm a in period t 1 the only product attribute is x and the utility is a linear function of x one aspect of our findings is that in the traditional model of state dependence a change in both x a and x b that leaves the difference between them x a x b unchanged neutral change hereinafter has no effect on the repeat purchase probability however such a change does affect the repeat purchase probability in the asymmetric information model of state dependence this is only one aspect of the finding the implications of the models differ in a more general fashion the intuition of this result is the following a neutral change has no effect on the repeat purchase probability in the traditional model of state dependence because it does not affect the difference between the utilities from both alternatives in the asymmetric model of state dependence the consumer s decision process consists of two stages first he decides whether to search for information about the other alternative or not then if he searches for information he chooses the alternative that maximizes his utility in the second stage a neutral change has no effect on choices since such a change does not affect the difference between the utilities from the two alternatives in the first stage the consumer knows x a but does not know x b it turns out that in this stage a neutral change does affect the search decision when for example both x s decrease and the utility is a positive function of x the probability of search increases and thus the repeat purchase probability decreases the proposed source of state dependence is examined using structural estimation and panel data on television viewing choices in the united states controlling for both observed and unobserved heterogeneity it is found that the suggested source is more important in creating repeat purchase than the traditional one for most of the population 71 this indicates that what was considered by previous studies to result from the dependence of consumer utility on their previous choices is at least partially due to the effect of the previous choices on consumers information set the distinction between the two sources of repeat purchase is important because ignoring the informational explanation may lead to incorrect theoretical and empirical conclusions for example price discounts to induce trial are more important for consumers whose utility depends on previous choices while advertising is more effective for those whose information set depends on previous choices

continuous time repeated games in this paper the authors develop a model of strategic behavior in continuous time games of complete information which includes conventional repeated games in discrete time as a special case the model developed here admits a very large class of strategies that allows one to extend the repeated game model to continuous time the set of equilibria in this game may be large in many cases equal to the feasible individually rational set of payoff s the authors also study the restriction of renegotiation proofness in this framework and apply these results to a cournot duopoly example copyright 1993 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

cast demographics unobserved segments and heterogeneous switching costs in a television viewing choice model abstract an accurate television viewing choice model is an important tool for television executives and advertisers the authors present a new viewing choice model which differs from the traditional rust alpert model in three ways 1 it introduces a new show characteristic the demographic characteristics of a show s cast 2 it allows the preferences over the traditional show categories to be a function of both observable and unobservable individual characteristics and 3 it allows the cost of switching among the viewing alternatives to vary across show types and individual characteristics cross validated predictive testing shows that this model fits the data better than the rust alpert model does furthermore the authors demonstrate that network executives can improve ratings by using this model the authors predict that by following their scheduling strategies in particular by broadcasting comedies after 10 00 p m abc cbs and nbc could have increased their average ratings by 12 9 7 5

brands as beacons a new source of loyalty to multiproduct firms abstract this study provides evidence that a multiproduct firm s portfolio of products affects consumer purchase decisions about each of the firm s products the authors present a theory that explains this empirical regularity the theory involves revising the information set of consumers to include the profile of multiproduct firms the authors show that revision of the information set in this way introduces a new source of consumer loyalty and explains interesting empirical regularities in consumer behavior for example consumers are loyal to a multiproduct firm even when it does not offer a product that matches their preferences better than a product of competing firms the authors estimate the model and test its implications using panel data on television viewing choices the estimated model also allows for state dependence parameters and unobserved heterogeneity the empirical results support the model and its implications the model offers a parsimonious framework for brand extension strategies and

contests for experimentation we study contests for innovation with learning about the innovation s feasibility and opponents outcomes we characterize contests that maximize innovation when the designer chooses a prize sharing scheme and a disclosure policy a public winner takes all contest dominates public contests where any success is immediately disclosed with any other prize sharing scheme as well as winner takes all contests with any other disclosure policy yet jointly modifying prize sharing and disclosure can increase innovation in a broad class of mechanisms it is optimal to share the prize with disclosure following a certain number of successes under simple conditions a hidden equal sharing contest is optimal

the five percent rule for improved water service can households afford more abstract results of household willingness to pay surveys in five small moroccan cities reveal that respondents would pay 7 to 10 of total household expenditures for individual water connections and subsequent commodity charges despite already having reliable and free standpost service the study also illustrates that relatively low cost rapid and reliable survey techniques to learn about water demand characteristics are possible and therefore should routinely be incorporated into the planning for all developing country water projects

learning and payoff externalities in an investment game abstract this paper examines the interplay of informational and payoff externalities in a two player irreversible investment game each player learns about the quality of his project by observing a private signal and the action of his opponent i characterize the unique symmetric equilibrium in a timing game that features a second mover advantage allowing for arbitrary correlation in project qualities despite private learning the game reduces to a stochastic war of attrition in contrast to the case of purely informational externalities all investments happen at the same real time instant irrespective of the sign of the correlation and beliefs never get trapped in a no learning region provided that the second mover advantage is sufficiently high

a reply to a comment on is having more channels really better a model of competition among commercial television broadcasters liu et al liu y d s putler c b weinberg 2004 is having more channels really better a model of competition among commercial television broadcasters marketing sci 23 1 120 133 examine the television broadcast industry using a model in which profit maximizing broadcasters seek to gain viewers by choosing the type of program to offer and by spending money to set program quality allowing broadcasters to sell access to those viewers through inserted advertisements at a fixed rate per viewer wu and chou wu c s chou 2006 commentary on is having more channels really better a model of competition among commercial television broadcasters marketing sci 25 5 541 545 argue that the duopoly result for a certain range of the cost parameter in liu et al is not a pure strategy nash equilibrium they further propose some modifications to the original model to restore liu et al s results in this reply we demonstrate how a single strategy not included in the strategy space of the liu et al duopoly model leads to the difference between our analysis and that of wu and chou while we had intended to rule out this strategy the text was not entirely clear on this issue wu and chou s comment provides an opportunity to clarify the situation we provide both empirical and theoretical support for excluding this strategy which allows us to focus on the more plausible competitive situations in television broadcasting we also reply to wu and chou s other comments on several issues such as the relative importance of program type versus quality

opaque bank assets and optimal equity capital abstract banks assets are opaque and therefore we model their true accounting asset values as partially observed variables we derive a stochastic control model to optimize banks dividend and recapitalization policies in this situation and calibrate that to a sample of u s banks by the calibrated model the noise in reported accounting asset values hides about one third of the true asset return volatility and raises the banks market equity value by 7 8 particularly those banks with a high level of loan loss provisions nonperforming assets and real estate loans and with a low volatility of reported total assets have noisy accounting asset values because of the substantial shock on the true asset values the banks assets were more opaque during the recent financial crisis

academic freedom private sector focus and the process of innovation we develop a model that clarifies the respective advantages and disadvantages of academic and private sector research rather than relying on lack of appropriability or spillovers to generate a rationale for academic research we emphasize control rights considerations and argue that the fundamental tradeoff between academia and the private sector is one of creative control versus focus by serving as a precommitment mechanism that allows scientists to freely pursue their own interests academia can be indispensable for early stage research at the same time the private sector s ability to direct scientists toward higher payoff activities makes it more attractive for later stage research

willingness to contribute labor and money to tsetse control application of contingent valuation in busia district kenya abstract a household survey was conducted in six villages of busia district kenya to assess people s willingness to contribute labor and money to control the tsetse flies that transmit trypanosomiasis a heckman s two step model was estimated to identify factors affecting the probability that a respondent was willing to contribute labor or money and the factors affecting the amounts of labor or money he or she was willing to contribute everything else equal households willing to contribute the most money were those whose heads were female and well educated while those willing to contribute the most labor were headed by men had high cash income and had participated in an educational event

good news and bad news in two armed bandits abstract this note provides a characterization of optimal policies in a class of two armed bandits that allows for correlated arms this characterization extends previously known results in the literature in particular it implies under a mild continuity assumption the optimality of cutoff belief strategies for this class of bandits cutoff beliefs are not unique though

the simple economics of research portfolios this article identifies biases in market portfolios of parallel research projects arising from the noncongruence of social goals and private aspirations occasioned by those circumstances where the market rewards only the winner and where the winner is awarded the entire social surplus it is shown that under risk neutrality this noncongruence implies that t he market encourages the development of too many discoveries too lar ge a spread in the distribution of the quality of discoveries and an excessive occurrence of multiple discoveries copyright 1987 by royal economic society

choice map inferring a product market map from panel data this paper describes choice map a model that infers a product market map from panel data choice map is a stochastic brand choice model a random utility quantal choice model and a multidimensional scaling procedure choice map combines the parsimony of stochastic choice models the rationale of random utility models and the ability of multidimensional scaling procedures to simultaneously infer both brand positions and consumer preferences from preference choice data choice map assumes that consumers have stationary purchase probabilities for the observational period which makes the model best suited to frequently bought mature product categories neither experimental nor survey data are required traditional mapping methods that scale such data may not yield the same structure for low involvement products as will a procedure like choice map that scales behavioral data choice map s descriptive and predictive validity exceeds that of an alternative stochastic brand choice model the dirichlet multinomial for a test data set

discrete choice models with multiple unobserved choice characteristics since the pioneering work by daniel mcfadden utility maximization based multinomial response models have become important tools of empirical researchers various generalizations of these models have been developed to allow for unobserved heterogeneity in taste parameters and choice characteristics here we investigate how rich a specification of the unobserved components is needed to rationalize arbitrary choice patterns in settings with many individual decision makers multiple markets and large choice sets we find that if one restricts the utility function to be monotone in the unobserved choice characteristics then up to two unobserved choice characteristics may be needed to rationalize the choices

negatively correlated bandits we analyse a two player game of strategic experimentation with two armed bandits either player has to decide in continuous time whether to use a safe arm with a known pay off or a risky arm whose expected pay off per unit of time is initially unknown this pay off can be high or low and is negatively correlated across players we characterize the set of all markov perfect equilibria in the benchmark case where the risky arms are known to be of opposite type and construct equilibria in cut off strategies for arbitrary negative correlation all strategies and pay offs are in closed form in marked contrast to the case where both risky arms are of the same type there always exists an equilibrium in cut off strategies and there always exists an equilibrium exhibiting efficient long run patterns of learning these results extend to a three player game with common knowledge that exactly one risky arm is of the high pay off type

auctionin entry into tournaments a research tournament model with heterogeneous contestants is presented for a large class of contests the optimal number of competitors is two this insight makes designing the tournament easier and highlights the importance of selecting highly qualified contestants while customary uniform price and discriminatory price auctions are intuitively appealing mechanisms for solving this adverse selection problem in practice they generally will not be efficient mechanism for selecting contestants instead we propose an alternative auction format that is equally simple to implement and efficiently selects the most qualified contestants to compete regardless of the form of contestant heterogeneity

optimal entry timing abstract a player of privately known strength chooses when to enter a market and an incumbent chooses whether to compete or concede information about the potential entrant s type is revealed publicly according to an exogenous news process and the timing of entry i analyze stationary equilibria using the public belief as a state variable no equilibria in pure strategies exist and smooth pasting conditions need not hold under both d1 and a novel refinement the informed player has nondecreasing value functions and her strategy has the following structure for high states both types enter with certainty for a possibly empty interval of intermediate states no type enters and for low states the high type enters while the low type mixes i obtain closed form solutions and analyze comparative statics for such equilibria the welfare effects of the presence of news relative to no news depend on the starting belief however for a fixed equilibrium a marginal increase in news quality always helps the informed player regardless of her type and always hurts total welfare

strategic merger waves a theory of musical chairs this paper proposes an explanation of merger waves based on the interaction between competitive pressure and irreversibility of mergers in an uncertain environment a set of acquirers compete over time for scarce targets at each point in time an acquirer can either postpone a takeover attempt or raid immediately by postponing the takeover attempt an acquirer may gain from more favorable future market conditions but runs the risk of being preempted by rivals first a complete information model is considered and it is shown that the above tradeoff leads to a continuum of subgame perfect equilibria in monotone strategies that are strictly pareto ranked all these equilibria share the feature that all acquirers rush simultaneously in merger waves the model is then extended to a dynamic global game by introducing slightly noisy private information about merger profitability this game is shown to have a unique markov perfect bayesian equilibrium in monotone strategies and the timing of the merger wave can thus be predicted last the comparative dynamics predictions of the model are related to stylized facts

investment timing and learning externalities abstract we study a duopoly model of investment in which each player learns about the quality of a common value project by observing some public background information and possibly the experience of his rival investment costs are private information and the background signal takes the form of a poisson process conditional on the quality of the project being low the resulting attrition game has a unique symmetric equilibrium which depends on initial public beliefs we determine the impact of changes in the cost and signal distributions on investment timing and how equilibrium is affected when a first mover advantage is introduced

estimating the interdependence of television program viewership between spouses a bayesian simultaneous equation model when making product choices consumers are influenced by the preferences of other consumers such as family members friends neighbors and colleagues preference interdependence among family members is likely to be significant because of cohabitation and strong emotional ties to estimate the preference interdependence we specify a simultaneous equation model and propose a bayesian estimation approach unlike existing models that use a spatial autoregressive structure to capture the interdependence of consumer preferences we are able to estimate the potential asymmetry in the preference interdependence among family members in a more flexible way in a simulation study we show that models that ignore interdependence of preferences yield biased estimates of consumers sensitivity to observed attribute preferences in an empirical application we estimate the interdependence of the viewership of television programs between husbands and wives in 481 households we find that wives viewing behavior depends more strongly on their husbands viewing behavior than husbands viewing behavior depends on their wives viewing behavior there exist significant differences in parameter estimates of dependence across categories of television programs differences in levels of spousal interdependence across households are partially explained by the age and the education level of the spouses

cellular service demand biased beliefs learning and bill shock by april 2013 the fcc s recent bill shock agreement with cellular carriers requires consumers be notied when exceeding usage allowances will the agreement help or hurt consumers to answer this question we estimate a model of consumer plan choice usage and learning using a panel of cellular bills our model predicts that the agreement will lower average consumer welfare by 2 per year because rms will respond by raising monthly fees our approach is based on novel evidence that consumers are inattentive to past usage meaning that bill shock alerts are informative and advances structural modeling of demand in situations where multipart taris induce marginal price uncertainty additionally our model estimates show that an

is having more channels really better a model of competition among commercial television broadcasters competitive behavior in commercial television broadcasting is modeled to examine program choice and the effects of more channels being available on firm strategy specifically broadcasters compete by selecting both the type and quality level of a program to offer but do not compete on price we obtain five major results first a comparison of monopoly and duopoly markets indicates that broadcasters in an industry with a larger number of competitors may provide programs of lower quality compared to broadcasters in an industry with a smaller number second in terms of viewer welfare having more channels available is not necessarily better third broadcasters tend to choose an intermediate level of differentiation in terms of the types of programs they provide resulting in a counterprogramming strategy in other words avoidance of price competition is not required for competitors to differentiate themselves from each other fourth if one broadcaster starts the evening with a higher quality higher rated program than its competitor its second program should also be of higher quality finally a broadcaster s first program should be of equal or higher quality than its second program put another way it always behooves a broadcaster to lead with its best

does basic services privatisation benefit the urban poor some evidence from water supply privatisation in thailand access to safe water and sanitation has been a development priority for decades this is also included in the millennium development goal targets meanwhile privatisation of water supply continues to be a subject of intense debate particularly as to its effects on the urban poor the arguments for and against often reflect the intellectual divide between socialist ideals and neo liberal pragmatism key issues are access quality and price this paper reports findings from an investigation of thailand s first water supply privatisation scheme implemented in 1998 household level data for the poor defined by community and income status show a significant improvement in access to piped water despite an increase in the connection cost and monthly charges the associated benefits from access include improved water quality and service a promising plus is the prospect of improvement in tenure status for the households living in informal settlements

the market for news we investigate the market for news under two assumptions that readers hold beliefs which they like to see confirmed and that newspapers can slant stories toward these beliefs we show that on the topics where readers share common beliefs one should not expect accuracy even from competitive media competition results in lower prices but common slanting toward reader biases on topics where reader beliefs diverge such as politically divisive issues however newspapers segment the market and slant toward extreme positions yet in the aggregate a reader with access to all news sources could get an unbiased perspective generally speaking reader heterogeneity is more important for accuracy in media than competition per se

rivals search for buried treasure competition and duplication in r d we model an r d race in which each fi rm decides in each period between two research projects only one of which has positive success probability and it is not known which there is symmetric information and hence scope for strategic search if the prize is shared when discovery is simultaneous there is too much duplication of projects if neither is rewarded in this event then equilibrium is efficient unless projects have asymmetric costs in which case there is a bias toward the high cost project or asymmetric success probabilities in which case too little duplication is possible if one firm is informed it may choose the wrong project to put the other off the scent

rational frenzies and crashes most markets clear through a sequence of sales rather than through a walrasian auctioneer because buyers can decide whether to buy now or later rather than only now or never their current willingness to pay is much more sensitive to price than the demand curve is a consequence is that markets will be extremely sensitive to new information leading to both frenzies in which demand feeds on itself and crashes in which price drops discontinuously the paper also shows how a result from static auction theory the revenue equivalence theorem can be applied to solve for a dynamic price path

business as usual market crashes and wisdom after the fact the authors present a three stage model of market dynamics in the first stage routine behavior tends to keep information of common interest trapped in private hands in the second stage private information reaches a threshold that triggers some agents to alter their behavior these actions release information to the market the final stage involves the market s response to this news as other participants react to the initial departure from routine behavior the authors present an application to industry investment they also outline applications to the international debt crisis to bank runs and to political upheavals copyright 1994 by american economic association

different missions and commitment power in r d organizations theory and evidence on industry university alliances this paper proposes a theory for why firms conduct some research activities in house but outsource other projects to independent partners and for why firms retain different degrees of control over collaborative research projects the focus is on the determinants of a company s choice to outsource research projects to academic organizations because of the different institutional missions of academic organizations outsourcing a project to a university allows a firm to commit not to terminate or alter a scientifically valuable project before it is complete this commitment is potentially valuable for the firm in an environment where scientific value and economic value may not coincide and scientific workers are responsive to the incentives defined by their community of peers an economic model that formalizes these arguments is developed empirical hypotheses are then formulated about the kind of research activities firms will outsource to universities and activities on which they will exert stronger control evidence from a sample of industry university research agreements as well as from other large sample and case studies shows patterns consistent with the predictions of the model

learning and information aggregation in an exit game we analyze information aggregation in a stopping game with uncertain common payos players learn from their own private experiences as well as by observing the actions of other players we give a full characterization of the symmetric mixed strategy equilibrium and show that information aggregates in randomly occurring exit waves observational learning induces the players to stay in the game longer the equilibria display aggregate randomness even for large numbers of players

the value of purchase history data in target marketing an important aspect of marketing practice is the targeting of consumer segments for differential promotional activity the premise of this activity is that there exist distinct segments of homogeneous consumers who can be identified by readily available demographic information the increased availability of individual consumer panel data open the possibility of direct targeting of individual households the goal of this paper is to assess the information content of various information sets available for direct marketing purposes information on the consumer is obtained from the current and past purchase history as well as demographic characteristics we consider the situation in which the marketer may have access to a reasonably long purchase history which includes both the products purchased and information on the causal environment short of this complete purchase history we also consider more limited information sets which consist of only the current purchase occasion or only information on past product choice without causal variables proper evaluation of this information requires a flexible model of heterogeneity which can accommodate observable and unobservable heterogeneity as well as produce household level inferences for targeting purposes we develop new econometric methods to implement a random coefficient choice model in which the heterogeneity distribution is related to observable demographics we couple this approach to modeling heterogeneity with a target couponing problem in which coupons are customized to specific households on the basis of various information sets the couponing problem allows us to place a monetary value on the information sets our results indicate there exists a tremendous potential for improving the profitability of direct marketing efforts by more fully utilizing household purchase histories even rather short purchase histories can produce a net gain in revenue from target couponing which is 2 5 times the gain from blanket couponing the most popular current electronic couponing trigger strategy uses only one observation to customize the delivery of coupons surprisingly even the information contained in observing one purchase occasion boasts net couponing revenue by 50 more than that which would be gained by the blanket strategy this result coupled with increased competitive pressures will force targeted marketing strategies to become much more prevalent in the future than they are today

estimating the willingness to pay for water services in developing countries a case study of the use of contingent valuation surveys in southern haiti progress in improving the quality and quantity of water used by people in rural areas of the developing world has been unsatisfactory in two respects 1 supplies that have been built are frequently neither used correctly nor properly maintained and 2 extension of improved service to unserved populations has been slow though this poor record is not the result of a single factor a major impediment to improved performance is inadequate information on the response of consumers to new service options the behavioral assumptions that typically underlie most rural water supply planning efforts are simple it is commonly assumed that so long as financial requirements do not exceed 5 of income rural consumers will choose to abandon their existing water supply in favor of the improved system several reviews by the world bank bilateral donors and water supply agencies in developing countries have shown however that this simple model of behavioral response to improved water supplies has usually proved incorrect 1 in rural areas many of those served by new systems have chosen to continue with their traditional water use practices

water for all how to combine public management with commercial practice for the benefit of the poor water is critical to improving the health and welfare of the expanding urban populations of the south unfortunately few cities in poor countries have managed to develop institutions able to supply the poor with water let alone take away the waste one city that has managed to do so is bogota colombia the results of this public company are impressive and have been achieved by adopting some elements of neo liberal economic thought and by maintaining independence from political pressure recently however the water company s operations and particularly its efficiency and pricing policy have come under attack from a new left of centre mayor the paper explores the legitimacy of some of the attacks and examines whether they constitute fair political debate or a means of undermining what by the standards of the south is an effective company

information revelation and strategic delay in a model of investment we model investment as an n player game with a pure informational externality each player s payoff depends only on his own action and the state of nature however because a player s action reveals his private information players wait to see what other players will do equilibrium is inefficient because delay is costly and information is imperfectly revealed we characterize the unique symmetric perfect bayesian equilibrium and study the robustness of delay which turns out to be sensitive to the reaction speed and the number of players we establish the following results i when the period length is very short the game ends very quickly and there is a form of herding or informational cascade which results in a collapse of investment ii as the period length increases the possibility of herding disappears iii as the number of players increases the rate of investment and the information flow are eventually independent of the number of players adding more players simply increases the number who delay iv in the limit the time profile of investment is extreme a period of low investment followed either by an investment surge or a collapse

preemption games under levy uncertainty abstract we study a stochastic version of fudenberg tirole s preemption game two firms contemplate entering a new market with stochastic demand firms differ in sunk costs of entry if the demand process has no upward jumps the low cost firm enters first and the high cost firm follows if leader s optimization problem has an interior solution the leader enters at the optimal threshold of a monopolist otherwise the leader enters earlier than the monopolist if the demand admits positive jumps then the optimal entry threshold of the leader can be lower than the monopolist s threshold even if the solution is interior simultaneous entry can happen either as an equilibrium or a coordination failure the high cost firm can become the leader we characterize subgame perfect equilibrium strategies in terms of stopping times and value functions analytical expressions for the value functions and thresholds that define stopping times are derived

decomposing uncertainty and its effects on imitation in firm exit decisions this study examines the effects of different uncertainty types on interorganizational imitation in firm exit decisions we draw on herding models to conceptualize exit decisions as being based on a firm s private information which the firm updates with information inferred from observing the actions of others we posit that different types of uncertainty differentially affect this observational learning process in particular we propose that certain uncertainty types attenuate rather than foster observational learning and subsequent imitation we test this theory using a 29 year panel data set on the exit of private venture capital firms our results indicate that observational learning does influence imitation in firm exit decisions and they also suggest that a common belief that uncertainty enhances imitation does not apply to all types of uncertainty specifically we find that uncertainty fosters imitation only when it is idiosyncratic to the firm uncertainties that are common to all firms in contrast actually reduce reliance on observational learning by decomposing uncertainty into different types and explicating their effects on imitation we demonstrate that this relationship is more nuanced than previously assumed and in addition highlight the role of deliberate information processing in imitation

maintaining a reputation when strategies are imperfectly observed this paper studies reputation effects in games with a single long run player whose choice of stage game strategy is imperfectly observed by his opponents we obtain lower and upper bounds on the long run player s payoff in any nash equilibrium of the game if the long run player s stage game strategy is statistically identified by the observed outcomes then for generic payoffs the upper and lower bounds both converge as the discount factor tends to 1 to the long run player s stackelberg payoff which is the most he could obtain by publicly committing himself to any strategy

strategic learning in teams this paper analyzes a two player game of strategic experimentation with three armed exponential bandits in continuous time players face replica bandits with one arm that is safe in that it generates a known payoff whereas the likelihood of the risky arms yielding a positive payoff is initially unknown it is common knowledge that the types of the two risky arms are perfectly negatively correlated i show that the efficient policy is incentive compatible if and only if the stakes are high enough moreover learning will be complete in any markov perfect equilibrium with continuous value functions if and only if the stakes exceed a certain threshold

information rigidities and asymmetric business cycles abstract we study the link between asymmetries of markups and firm exit rates and asymmetries in information acquisition along the u s business cycle we argue that a model of optimal firm exit under rational inattention produces lagged counter cyclical and positively skewed markups together with counter cyclical exit rates consistent with the empirical evidence our model also predicts counter cyclical information rigidities consistent with survey evidence

delay and information aggregation in stopping games with private information abstract we consider equilibrium timing decisions in a model with a large number of players and informational externalities the players have private information about a common payoff parameter that determines the optimal time to invest they learn from each other in real time by observing past investment decisions we develop new methods of analysis for such large games and we give a full characterization of symmetric equilibria we show that the equilibrium statistical inferences are based on an exponential learning model although the beliefs converge to truth learning takes place too late ex ante welfare is strictly between that without observational learning and that with full information

a dynamic game of r and d patent protection and competitive behavior a theory of dynamic optimal resource allocation to r and d in an n firm industry is developed using differential games this technique represents a synthesis of the analytic methods previously applied to the problem static game theory and optimal control the use of particular functional forms allows the computation and detailed discussion of the nash equilibrium in investment rules this paper addresses the problem of resource allocation to research and development among the important issues that a firm engaging in r and d must evaluate are uncertainty regarding the feasibility and profitability of a particular innovation the possibility of a protracted development period the possibility that a rival firm may innovate first capturing either a patent or a significant share of the new market the possibility that a rival firm may imitate the innovation and appropriate some of the profits in the new market in what follows we will develop a theory of optimal resource allocation to research and development which incorporates the aspects of r and d enumerated above we will use a dynamic game theoretic analysis determining the nash equilibrium strategies for n identical firms the availability of perfect patent protection is shown to accelerate development of the innovation and the effect of increasing rivalry is addressed the impact of increasing rivalry on nash equilibrium investment in r and d depends upon the degree of appropriability of rewards if patent protection is perfect then increasing the number of nash rivals results in increased r and d effort however when imitation is rewarded the opposite may be true finally some notions of competitive and perfectly competitive equilibrium are examined in the context of the model developed below

learning from trades i study stationary cut off strategy equilibria of a dynamic market model where buyers sample sellers sequentially from an unknown distribution buyers learn about the distribution from the sampled sellers and a trade signal the trade signal reveals whether a randomly chosen seller traded yesterday observing a trade as opposed to no trade is good news about the distribution buyers who observe a trade use a higher cut off than buyers who observe no trade despite buyers learning from sampled sellers that puts a countervailing pressure on the cut offs the trade signal may reduce market efficiency while an appropriate exogenous signal increases efficiency

is the market biased against risky r d this article analyzes the riskiness of the r d strategies chosen by firms engaged in a winner takes all patent race in contradiction to dasgupta and stiglitz 1980 we show that when the distribution of invention times is symmetric the market equilibrium cannot be safer and may be riskier than is socially optimal we identify the economic reason for the emergence but only if there are few competitors

business models for media firms does competition matter for how they raise revenue the purpose of this article is to analyze how competitive forces may influence the way media firms like tv channels raise revenue a media firm can either be financed by advertising revenue by direct payment from the viewers or the readers if we consider newspapers or by both we show that the scope for raising revenues from consumer payment is constrained by other media firms offering close substitutes this implies that the less differentiated the media firms content the larger is the fraction of their revenue coming from advertising a media firm s scope for raising revenues from ads on the other hand is constrained by how many competitors it faces we should thus expect that direct payment from the media consumers becomes more important the larger the number of competing media products