bidding behavior in descending and ascending auctions this research examines how individual differences and institutional practices influence consumer bidding in auctions bidders may be motivated by different goals e g thrill of winning the item with minimal attention to what they pay for it versus prudence winning the item at a price at or below its perceived value also innate or auctioneer induced differences may exist in the precision and salience of bidder cognitions about the item s value we report two studies on how these motivational and cognitive factors influence bids in descending and ascending auctions respectively each study also manipulated a situational variable wait time at each price step the two auctions realized different average prices for the same item set average bids were higher in the descending versus ascending auction in several study conditions in both auction formats bidders primed with thrill versus prudence bid higher but more precise and or salient values attenuated this goal effect among other results in the descending auction longer wait times elicited higher bids from bidders primed with thrill but not prudence in the ascending auction longer wait times produced lower bids for bidders primed with prudence but not thrill these findings on consumer bidding behavior have practical implications for auction design

the labour demand of firms an alternative conception based on the capabilities approach the aim of this paper is to offer a theoretical framework for the analysis of labour demand alternative to the neoclassical one taking as its starting point the conception of the firm that derives from the capabilities or competence based theories of the organization after briefly reviewing the essential elements of this approach to the firm we tackle a range of diverse aspects such as the link between labour demand decisions and the firm s strategic planning and its determinants the characterisation of labour demand as a demand for productive competencies the consequences that these competencies are embedded in human beings or the relative independence between labour demand decision making and the process of wage setting in general terms this conception of labour demand allows us to incorporate many of the main peculiarities of labour and the demand for it from a number of different areas of heterodox economics particularly from institutional and post keynesian economics and it fits in with the conventional literature on internal labour markets and labour market segmentation

loss aversion and price volatility as determinants of attitude towards and preference for variable price in the swedish electricity market the results of a survey of a random sample of 488 swedish residents showed that a positive attitude towards and preference for a variable price agreement with the incumbent electricity supplier was negatively affected by loss aversion and a positive attitude also negatively affected by beliefs about price volatility although correlated with attitude and preference age education and current choice of a variable price agreement had no independent effects income and current electricity costs had no effects

social capital in community level environmental governance a critique social capital is often claimed to facilitate collective action regarding the management of complex environmental goods and services however there is little systematic analysis in the literature that explains the way social capital aids in fostering collective action the paper integrates ideas from institutional ecological economics sociology and anthropology to argue that power relations involving struggle and resistance should be acknowledged as they affect collective action we address the question of why social capital should not be straightforwardly associated positively with common property resource management to unravel the complexity of the links between social capital collective action and common property resource management the concepts of common knowledge and symbolic power are introduced

the hidden persuaders institutions and individuals in economic theory in his classic book the hidden persuaders vance packard claimed that large corporations manipulated consumers using advertising techniques john kenneth galbraith and others have repeated a similar view against this gary becker and george stigler have claimed that advertising is essentially informative rather than manipulative in contrast it is argued here that both of these opposed accounts of human agency neglect the more subtle and undesigned processes by which institutions bear upon and mould individuals this paper proposes a concept of reconstitutive downward causation in which institutions act upon individual habits and dispositions the mechanisms involved do not fall foul of past critiques of holism or methodological collectivism this argument involves a rehabilitation of the concept of habit in social science with far reaching implications

agents ability to manage information in centralized markets comparing two wholesale fish markets abstract in this paper we perform an empirical investigation to detect if and how agents behavior changes with the amount of available information they have to this aim we use data from two wholesale fish markets of different thicknesses we tackle the issue by investigating features such as the dynamics of the structure of attendance in auctions the varieties of fish presentations during the seller s turn and the presence of long term relationships between buyers and sellers we perform the investigation in this way instead of focusing on the dispersion and dynamics of prices to prevent unobserved quality differences of the traded fish varieties from biasing the results of the analysis the results of our investigation are consistent with a situation in which the magnitude of phenomena like buyers loyalty to sellers and agents following rules of thumb increases with the market thickness

using extremeness aversion to fight obesity policy implications of context dependent demand this article illustrates how the compromise effect alters consumers selection of soft drinks using three within subject studies we show that extremeness aversion and price insensitivity cause consumers to increase their consumption when the smallest drink size is dropped or when a larger drink size is added to a set as a result rational firms find it best to drop the smaller sizes and add a larger size thus increasing overall consumption after estimating each individual s demand as a function of price and drink size availability policy experiments demonstrate how it is possible to reduce soft drink consumption without additional taxation

life status changes and changes in consumer preferences and satisfaction a theoretical model linking measures of objectively defined changes in consumer life status to changes in brand preferences and overall satisfaction with product and service purchases is proposed and empirically tested bivariate and multiple equation analyses of cross sectional data in one metropolitan area indicate strong support for the model the results imply that households undergoing status change are more likely to be 1 undergoing spontaneous changes in brand preferences and 2 open to intervention by change agents in the future

the effects of effort and intrinsic motivation on risky choice people often need to trade off between the probability and magnitude of the rewards that they could earn for investing effort the present paper proposes that the conjunction of two simple assumptions relating effort induced reward expectations to prospect theory s value function provides a parsimonious theory that predicts that the nature of the required effort will have a systematic effect on such trade offs using the case of frequency or loyalty programs a series of five studies involving both real and hypothetical choices demonstrated that a the presence as opposed to absence of effort requirements enhances the preference for sure small rewards over large uncertain rewards b the preference for reward certainty is attenuated when the effort activity is intrinsically motivating and c continuously increasing the effort level leads to an inverted u effect on the preference for sure small over largeuncertain rewards the studies also employ process measures and examine the mechanisms underlying the impact of the effort stream on the trade off between the certainty and magnitude of rewards the final section discusses the theoretical implications of this research as well as the practical implications with respect to frequency programs and other types of incentive systems

likelihood estimation of consumer preferences in choice based conjoint analysis abstract in marketing research the measurement of individual preferences and assessment of utility functions have long traditions conjoint analysis and particularly choice based conjoint analysis cbc is frequently employed for such measurement the world today appears increasingly customer or user oriented wherefore research intensity in conjoint analysis is rapidly increasing in various fields or ms being no exception although several optimization based approaches have been suggested since the introduction of the hierarchical bayes hb method for estimating cbc utility functions recent comparisons indicate that challenging hb is hard based on likelihood maximization we propose a method called lm and compare its performance with hb using twelve field data sets performance comparisons are based on holdout validation i e predictive performance average performance of lm indicates an improvement over hb and the difference is statistically significant we also use simulation based data sets to compare the performance for parameter recovery in terms of both predictive performance and rmse a smaller number of questions in cbc appears to favor lm over hb

consumer preference for a no choice option the traditional focus in the decision making literature has been on understanding how consumers choose among a given set of alternatives the notion that preference uncertainty may lead to choice deferral when no single alternative has a decisive advantage is tested in seven studies building on recent research the article shows that the decision to defer choice is influenced by the absolute difference in attractiveness among the alternatives provided and is not consistent with trade off difficulty or the theory of search these findings are then extended to show that choice deferral can also be modified for the same alternatives by manipulations that make them appear more similar in attractiveness or that decrease the need to differentiate among them the results are consistent with the notion that preference uncertainty results in a hesitation to commit to any single action since small differences in attractiveness among the alternatives are potentially reversible consistent with this premise the effect of attractiveness difference on choice deferral decreased significantly when subjects were first allowed to practice making monetary trade offs among the available alternatives

sources procedures and microeconomic effects of innovation fabio arcangeli paul david frank engelman christopher freeman massimo moggi richard nelson luigi orsenigo nathan rosenberg michele salvati g n von tunzelman two anonymous referees and the participants at the meeting of the committee on distribution growth and technical progress of the italian national research council cnr rome november 16 1985 have helped with various redraftings a particularly grateful acknowledgment is for the insightful and patient help of moses abramovitz this work has been undertaken at the science policy research unit spru university of sussex as part of the research program of the designated research centre sponsored by the economic and social research council esrc earlier support to the research that led to this paper by the italian national research council cnr is also gratefully acknowledged the statistical research has been undertaken with the assistance of stephano brioschi ilaria fornari and giovannu prennushi

earnings inequality and mobility in the united states evidence from social security data since 1937 this paper uses social security administration longitudinal earnings micro data since 1937 to analyze the evolution of inequality and mobility in the united states annual earnings inequality is u shaped decreasing sharply up to 1953 and increasing steadily afterward short term earnings mobility measures are stable over the full period except for a temporary surge during world war ii virtually all of the increase in the variance in annual log earnings since 1970 is due to increase in the variance of permanent earnings as opposed to transitory earnings mobility at the top of the earnings distribution is stable and has not mitigated the dramatic increase in annual earnings concentration since the 1970s long term mobility among all workers has increased since the 1950s but has slightly declined among men the decrease in the gender earnings gap and the resulting substantial increase in upward mobility over a lifetime for women are the driving force behind the increase in long term mobility among all workers

issues in the use of ratings based versus choice based conjoint analysis in operations management research conjoint analysis has played an important role in helping make a number of operations management decisions including product and service design supplier selection and service operations capacity many recent advances in this area have raised questions about the most appropriate form of conjoint analysis for this research we review recent developments in the literature and provide new evidence on how the choice between ratings and choice based conjoint models might affect the estimates of customer demand used in operations management models the biggest systematic difference between ratings based rb and choice based cb parameters is consistent with the compatibility effect i e some enriched attributes like brand name tend to be more important in rb models and some comparable attributes like price are likely to be more important in cb models still there were reasonably small differences between choice and ratings based parameters parameter similarity was also seen in the lack of differences both in the choice share validations when the keep on shopping alternative was not considered and in the profiles that were predicted to maximize choice shares this suggests that the two approaches will produce similar estimates of the relative importance of various attributes in spite of demonstrated success with each method several reasons lead us to recommend the use of hierarchical bayesian choice based conjoint models first the slightly higher individual hit rate validations give us greater confidence in predictive accuracy overall as well as an increased ability to target individual customers additionally the greater ease of modeling both changes in market size and competitive reactions are attractive benefits of choice based models

growth trade and inequality we introduce firm and worker heterogeneity into a model of innovation driven endogenous growth individuals who differ in ability sort into either a research activity or a manufacturing sector research projects generate new varieties of a differentiated product projects differ in quality and the resulting technologies differ in productivity in both sectors there is a complementarity between firm quality and worker ability we study the co determination of growth and income inequality in both the closed and open economy as well as the spillover effects of policy in one country to outcomes in others

forecasting and inventory management of short life cycle products in this paper we provide an integrated framework for forecasting and inventory management of short life cycle products the literature on forecasting and inventory management does not adequately address issues relating to short life cycle products we first propose a growth model that can be used to obtain accurate monthly forecasts for the entire life cycle of the product the model avoids limiting data requirements of traditional methods instead it extracts relevant information from past product histories and utilizes the information on total life cycle sales and the peak sales timing using disguised demand data from a personal computer pc manufacturer we validate the model next we model the inventory management problem for the short life cycle environment the uncertainty in demand is modeled through the uncertainty in the realized values of the parameters of the forecasting model the high cost of terminal inventory shortages and rapidly changing procurement costs are all included in the model extensions to the basic model are also developed using optimal control theory we derive a solution that provides valuable information on procurement cutoff time and terminal service levels a detailed example explains the characteristics of the policy and its relevance in decision making many of the issues covered in the models were brought to our attention while implementing a forecasting model at a pc manufacturer the benchmark monthly forecasts and the associated inventory levels provide information that can be very helpful in planning and controlling marketing sales and production

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

risk perception in psychology and economics abstract the concept of rationality has been basic to most economic analysis its content has been successively refined over the generations as applied to the static world of certainty it has turned out to be a weak hypothesis not easily refuted and therefore not very useful as an explanation though not literally a tautology but recent decades have seen the development of stronger versions applied to a world in which time and uncertainty are real among its most important manifestations have been criteria for consistency in allocation over time the expected utility hypothesis of behavior under uncertainty and what may be termed the bayesian hypothesis for learning that is the consistent use of conditional probabilities for changing beliefs on the basis of new information these hypotheses have been used widely in offering explanations of empirically observed behavior though as not infrequently in economics the theoretical development has gone much further than the empirical implementation these hypotheses have also been used increasingly in normative analysis as a component of benefit cost studies therefore frequently referred to as benefit risk studies the value of reducing mortality rates from diseases for example has been studied by assuming that choice of occupations is made inter alia by comparing wage differences with mortality differences

when more seems like less differential price framing increases the choice share of higher priced options four experiments supported by six supplemental studies show that premium but higher priced products e g direct flights larger capacity data storage devices are more popular when the additional

consumption of economic information in agriculture we develop a model of decision makers demand for agricultural economic information services this modeltreats choice of externaldecision support services as a function of actors assessment of how alternative investments in information complement their internal competencies data from a survey in four commodity systems are used to evaluate hypotheses as to how human capital and functional role of actors in commodity systems affect demand for variously formatted information by focusing on three axes of heterogeneity diversity among decision makers information service providers and information we are abl e to identify key structuraland functionalrel ationships in agricultural economic information systems

constructive consumer choice processes consumer decision making has been a focal interest in consumer research and consideration of current marketplace trends e g technological change an information explosion indicates that this topic will continue to be critically important we argue that consumer choice is inherently constructive due to limited processing capacity consumers often do not have well defined existing preferences but construct them using a variety of strategies contingent on task demands after describing constructive choice consumer decision tasks and decision strategies we provide an integrative framework for understanding constructive choice review evidence for constructive consumer choice in light of that framework and identify knowledge gaps that suggest opportunities for additional research

market boundaries and product choice illustrating attraction and substitution effects what happens to the share of choices each item receives when the choice set boundaries are extended by adding a new item that is extremely good on one dimension but poor on the others first there is a substitution effect whereby the new item takes choice share mainly from similar items in the set second there is an attraction effect resulting in a general shift of preference toward the added item experimental studies show that choice patterns conflict with current theoretical and common sense ideas about the effect of added alternatives on choice

research note multinational diffusion models an alternative framework the literature on cross national diffusion models is gaining increased importance today due to the needs of present day managers new product sales growth in a given nation or society is affected by many factors rogers 1995 and of these sociocontagion or word of mouth has been found to be the most important factor that characterizes the diffusion process bass 1969 moore 1995 hence it is interesting and perhaps challenging to analyze what would happen if a new product diffuses in parallel in two neighboring but culturally different countries not only will we expect the diffusion process in the two countries to be different but we will also expect some interaction among them especially if the two societies mingle with each other there are two streams of research in cross national diffusion the first type focuses on exploring the differences between diffusion processes in two countries and finding out whether those differences can be attributed to social and cultural differences between the countries involved examples of this type of research are found in takada and jain 1991 gatignon et al 1989 helsen et al 1993 and kumar et al 1998 these studies did find some relationship between the cultural differences of the countries studied and the differences in the diffusion process the second stream of research focuses on modeling explicitly the interaction between the diffusion processes in two countries the interaction is typically captured through lead lag effect eliashberg and helsen 1996 kalish et al 1995 where the sales process in the lead country i e the country where the product was first introduced is modeled to affect the sales process in the lag country i e the country where the product was introduced a few years later another method to study the interaction among the diffusion processes in two countries was suggested by putsis et al 1997 who used a mixing model to empirically explore the existence of such interactions these studies basically observed that when a new product is introduced early in one country and with a time lag in subsequent countries the consumers in the lag countries learn about the product from the lead country adopters resulting in a faster diffusion rate in the lag countries ganesh and kumar 1996 formulized this effect as the learning effect and subsequently ganesh et al 1997 found this learning effect to be influenced by country specific factors cultural similarity economic similarity and time lag elapsed between the lead and the lag countries and product specific factors continuous vs discontinuous innovation and the presence or absence of a standardized technology a careful analysis of the extant literature on the second stream of research would reveal that neither the learning effect model nor the mixing model can be modified to accommodate the other model our contribution to the literature exactly addresses this point in this paper an alternative framework is proposed that has two unique features first the framework is flexible enough to not only account for the lead country affecting the lag countries and vice versa but also to accommodate the simultaneous interaction among countries in explaining the diffusion processes in the countries concerned using multiple product categories and a variety of new product introduction situations we empirically demonstrate the flexibility and efficiency of our proposed framework we found strong evidence of all types of interactions namely lead lag lag lead and simultaneous which evidence suggests that one cannot afford to omit any of the interactions the second unique feature of our paper is the estimation procedure that we used because statistical estimation of a dynamic process that includes lead lag lag lead and simultaneous types of causality within a single framework is not straightforward we suggest an iterative estimation procedure for the estimation this new procedure not only proved to be flexible in accommodating different types of interaction but also converged rather quickly in all of the cases that we empirically tested noting that the statistical properties of these estimators are not generally available we carried out a simulation exercise that clearly revealed the efficiency of the proposed estimation procedure after analyzing the interaction we went further and showed that the magnitude of the cross national influences is affected by certain country specific and product specific factors the flexibility of the proposed method over the existing methods is demonstrated through obtaining superior forecasts with the proposed method several interesting insights for managers concerned with formulating international marketing strategies are offered

microeconomics norms and rationality a divergence of views among microeconomists in general and game theorists in particular regarding the explanatory objectives of microeconomic theory has become apparent in recent years this divergence concerns most fundamentally the question whether institutions legal or customary rules or social norms are to be classified among the endogenous as opposed to the exogenous variables in the framework of microeconomic analysis the majority of economists are probably agnostic or ambivalent on this question not having confronted or not having had to confront the issue in their own work many have sidestepped it by treating institutions as immutable or by restricting their analyses to a given rule regime but rules do vary and change and among those who are concerned with studying variation in institutions two diverging views are increasingly identifiable sometimes coexisting even within the writings of the same author the first sees game theory and microeconomic theory in general as an analytical device useful for considering the comparative incentive features of and corresponding outcomes associated with different institutional regimes regimes that might be changed in one s capacity as a policymaker or that have varied in fact as the result of differential historical development in different regions the second position accepts this statement of the objectives of microeconomic theory vis avis institutions for the short run but takes it as the ultimate task of

search costs and adaptive consumers short time delays do not affect choice quality using online price comparison and shopping platforms makes experiencing slow connections lags and waiting times for information an unfortunate reality however little attention has been paid to analyzing the effects of such delayed display of information on product choice behavior this article explores the effect of time delays in a multi attribute choice laboratory experiment by not providing information immediately when requested but after short time delays increasing these waiting times reduced the amount of information looked up but did not affect choice quality higher time delays made decision makers use more deliberate search processes whereas low time delays induced inefficient over searching

the role of explanations and need for uniqueness in consumer decision making unconventional choices based on reasons this research investigates the interaction between a very common task explaining decisions and an individual difference need for uniqueness nfu on buyer decision making we propose that explaining or providing reasons for decisions shifts the focus from the choice of options to the choice of reasons furthermore buyers who explain their decisions and have high nfu tend to select unconventional reasons and are consequently more likely to make unconventional choices these predictions were supported in a series of studies involving choices between conventional and less conventional options such as whether to switch to a brand on sale whether to select a compromise option and whether to accept a gamble with a possible loss the findings also indicate that the effects of providing reasons are not due to attempts to act rationally or to concerns about being evaluated three boundary conditions on the generalization that high nfu consumers who provide reasons tend to make unconventional choices we

costly optimization an experiment abstract an experimental technique is developed and used to examine how human subjects make choices when optimization is costly the total cost of making a choice is defined to include two parts 1 the direct cost of making the decision and 2 the indirect cost of making a choice that is not best among the available alternatives the total cost of choice for subjects in the experimental economy ranged from 15 to 42 percent of the economy s resources the hypothesis that agents are rational on average was strongly rejected while the hypothesis that agents are rational in the long run fared better

between data and decisions the organization of agricultural economic information systems abstract in the current political economic environment there is pressure to reduce and reorient public agency involvement in agricultural economic research and information services efforts to evaluate the effectiveness of public investments and enhance sectoral coherence through exploitation of institutional complementarity are constrained by weak understanding of how economic information is produced processed and circulated in this paper we locate the centers of analytic competence and analyze supply of agricultural economic advisory services through development of an information accounting framework we focus on the relative contributions of public agencies commercial firms collective organizations and informal networks in order to identify organizational structures and institutional arrangements of coordination in the agricultural economy the observed division of labor in information systems reflects the heterogeneous distribution and strategic choices of actors with respect to internal analytic competencies decision makers in agricultural businesses are heavily dependent on the services of a diverse range of intermediaries who perform information translation and customization functions these intermediaries rely heavily on largely but not exclusively publicly supplied data and information inputs this strongly linear aspect of agricultural economic information systems is identified as a component subsystem within the larger and more highly interconnected system of innovation the dominant role of public agencies in economic information systems suggests that they currently perform highly valuable coordinating functions in agriculture while commercial and collective organizations make important contributions and could be mobilized to assume broader responsibility there are likely to be limitations to substitutability based on the classic but still fully relevant problem of private underinvestment in information

the world distribution of income falling poverty and convergence period we estimate the world distribution of income by integrating individual income distributions for 138 countries between 1970 and 2000 country distributions are constructed by combining national accounts gdp per capita to anchor the mean with survey data to pin down the dispersion poverty rates and head counts are reported for four specific poverty lines rates in 2000 were between one third and one half of what they were in 1970 for all four lines there were between 250 and 500 million fewer poor in 2000 than in 1970 we estimate eight indexes of income inequality implied by our world distribution of income all of them show reductions in global inequality during the 1980s and 1990s

optimisation and evolution winter s critique of friedman revisited milton friedman s 1953 article remains an often quoted defense of the maximization hypothesis but sidney winter s 1964 critique of friedman is less well known this paper examines critically both the natural selection argument invoked by friedman and others and the main elements of winter s critique in the light of recent development in evolutionary theory winter attempted to identify the circumstances in which the selection of maximizers could occur and these are elaborated critically finally winter s critique is extended by considering the very meaning of rational or maximizing behavior it is argued that the answer to this is neither obvious nor straightforward in an evolutionary context copyright 1994 by oxford university press

when do changes in consumer preferences make forecasts from choice based conjoint models unreliable forecasting the sales or market share of new products is a major challenge as there is little or no sales history with which to estimate levels and trends choice based conjoint cbc is one of the most common approaches used to forecast new products sales however the accuracy of forecasts based on cbc models may be reduced when consumers preferences for the attributes of products are labile despite this there is a lack of research on the extent to which lability can impair accuracy when the coefficients estimated in cbc models are assumed to be constant over time this paper aims to address this research gap by investigating the prevalence of lability for consumer durable products and its potential impact on the accuracy of forecasts there are reasons to expect that lability may be particularly evident where a product is subject to rapid technological change and has a short product life cycle we carried out a longitudinal survey of the preferences of 161 potential consumers relating to four different types of products we established that for both functional and innovative products i the cbc models vary significantly over time indicating changes in consumer preferences and ii such changes may cause large differences in forecasts of the probabilities that consumers will purchase particular brands of products hence employing models where coefficients do not change over time can potentially lead to inaccurate market share forecasts for high tech short life cycle products that are launched even a short time after the choice based modelling has been conducted

product category familiarity and preference construction marketers often base decisions about marketing strategies on the results of research designed to elicit information about consumers preferences a large body of research indicates however that preferences often are labile that is preferences can be reversed depending on factors such as how the preference is elicited in three studies we examine the effect of familiarity in two preference elicitation tasks choice and matching judgments we provide evidence of an interaction between familiarity and response mode choice or matching in each study in study 3 we test the explanation that preference reversals may occur when the interaction of response mode with product category familiarity leads to systematic changes in attribute weighting

how people respond to contingent valuation questions a verbal protocol analysis of willingness to pay for an environmental regulation abstract this paper investigates what a respondent is thinking when answering a willingness to pay question in a contingent valuation using a think aloud technique from psychology called verbal protocol analysis the willingness to pay responses we observed seem to be constructed from a variety of considerations including an obligation to pay a fair share of the cost of the solution and signaling concern for a larger set of environmental issues the finding that respondents seem to construct their values at the time they are asked rather than reporting a more well defined value is seen as consistent with over two decades of research on the psychology of decision making potential uses of verbal protocols in contingent valuation studies are also discussed

the market for preferences learning processes are widely held to be the mechanism by which boundedly rational agents adapt to environmental changes we argue that this same outcome might also be achieved by a different mechanism namely specialisation and the division of knowledge which we here extend to the consumer side of the economy we distinguish between high level preferences and low level preferences as nested systems of rules used to solve particular choice problems we argue that agents while sovereign in high level preferences may often find it expedient to acquire in a pseudo market the low level preferences in order to make good choices when purchasing complex commodities about which they have little or no experience a market for preferences arises when environmental complexity overwhelms learning possibilities and leads agents to make use of other people s specialised knowledge and decision rules

household life cycle stages transitions and product expenditures data from the u s bureau of labor statistics consumer expenditure survey provide empirical verification of changes in household spending across a wide variety of products as households pass from one stage of the household life cycle to another three spending patterns emerged 1 a generalized inverted u pattern with spending rising sharply as households shift from young single to young married then remaining relatively high and falling sharply at the older married and or older single stages 2 generally increasing expenditures across stages until the last one or two stages and 3 generally decreasing expenditures across the life cycle expenditures are especially influenced by the presence of young children in the household

a rational reconstruction of the compromise effect using market data to infer utilities this article explores the possibility that consumers use market data to make inferences about product utilities the argument is made by means of an example based on the compromise effect found in extant experimental data this phenomenon is generally looked at as a manifestation of deviations from rationality in choice however assuming full rationality i describe a decision rule that is based on consumers inferences about their personal valuation of alternatives from the portfolio of market offerings and some information about their own relative tastes through a number of examples i will argue that consumers often use this or similar decision rules to make inferences about utility i then show that the decision rule may generate compromise effects in experiments and that it may be sustainable the compromise effect could therefore be seen as preliminary evidence that consumers make such inferences

adaptive behavior and economic theory the relationship between psychological and economic views of behavior once a subject of heavy dispute is now understood in a very similar way by practitioners of both these disciplines and of our sister social sciences in general terms we view or model an individual as a collection of decision rules rules that dictate the action to be taken in given situations and a set of preferences used to evaluate the outcomes arising from particular situation action combinations these decision rules are continuously under review and revision new decision rules are tried and tested against experience and rules that produce desirable outcomes supplant those that do not i use the term adaptive to refer to this trial anderror process through which our modes of behavior are determined if one is interested in modeling particular decisions in any very explicit way it is obviously necessary to think about rather narrow aspects of an individual s entire set of decision rules his or her personality experimental psychology has traditionally focused on the adaptive process by which decision rules are replaced by others in this tradition the influence of the subject s or as an economist says the agent s preferences this essay uses a series of examples to illustrate the use of rationality and adaptation in economic theory it is argued that these hypotheses are complementary and that stability theories based on adaptive behavior may help to narrow the class of empirically interesting equilibria in certain economic models an experiment is proposed to test this idea

choice based on reasons the case of attraction and compromise effects building on previous research this article proposes that choice behavior under preference uncertainty may be easier to explain by assuming that consumers select the alternative supported by the best reasons this approach provides an explanation for the so called attraction effect and leads to the prediction of a compromise effect consistent with the hypotheses the results indicate that 1 brands tend to gain share when they become compromise alternatives in a choice set 2 attraction and compromise effects tend to be stronger among subjects who expect to justify their decisions to others and 3 selections of dominating and compromise brands are associated with more elaborate and difficult decisions

effects of payment mechanism on spending behavior the role of rehearsal and immediacy of payments past expenses have been shown to influence future spending behavior by depleting available budgets however a prerequisite for this relationship is the accurate recall of past payments and the experiencing of the full aversive impact associated with them this article shows that the use of different payment mechanisms influences both these factors and hence moderates the effects of past payments on future spending specifically past payments strongly reduce purchase intention when the payment mechanism requires the consumer to write down the amount paid rehearsal and when the consumer s wealth is depleted immediately rather than with a delay immediacy two experiments show support for the proposed theoretical framework

dyadic compromise effect existing research on the compromise effect has focused exclusively on the individual this paper investigates compromise effects in a setting that involves multiple individuals making a choice we study whether the dyadic compromise effect dce exists the association between dyadic and individual compromise effects and strategies to mitigate the dce we build a statistical model of dyadic choice that formally incorporates dce we conduct two studies to test our proposed models empirically in study 1 we begin with an investigation of the dce with student subjects in study 2 we test for the presence of dce among married couples when making retirement investment choices in both studies model free and model based evidence provides strong support for the presence of dce a model that incorporates dce provides a better fit than models that do not evidence in support of dce is shown to be robust to alternative compromise effect model specifications and utility aggregation methods we find that the indi

accounting for heterogeneity and nonstationarity in a cross sectional model of consumer purchase behavior when calibrating a brand choice model cross sectionally a measure of brand loyalty is often introduced into the utility function to account for differences in utility across households and over time one of the most widely used measures of brand loyalty proposed by guadagni and little 1983 is an exponential smoothing model of past choice behavior by the household in this study we argue that the exponential smoothing model of brand loyalty cannot properly distinguish between sources of variation in utility due to heterogeneity across households and sources of variation due to nonstationarity within household over time we introduce a new measure of brand loyalty derived from a nonstationary dirichlet multinomial choice model in which heterogeneity and nonstationarity are handled distinctly

consumer choice strategies for comparing noncomparable alternatives research on consumer choice has focused on easily comparable alternatives a subset of the choices consumers regularly face this paper outlines the problem and two general strategies for comparing noncomparable alternatives a subset of choices that has been overlooked in the literature experiments are reported that support use of the strategies

lifestyle conformity and lifecycle saving a veblenian perspective since the 1950s the lifecycle hypothesis has been the dominant explanation for the inverse u in household wealth accumulation this paper advances an alternative explanation rooted in the ideas of veblen that emphasises the role of lifestyle conformity because people tend to adopt lifestyles common to their social group and modify them in standard ways as they age lifecycle norms impart a certain order to the accumulation of assets and liabilities which enables people to do lifecycle saving via habitual thinking after laying out the argument conceptually the paper provides empirical evidence on the role of conformity in lifecycle saving and discusses its contribution to the current low saving rate in the usa copyright the author 2008 published by oxford university press on behalf of the cambridge political economy society all rights reserved oxford university press

the ubiquity of habits and rules under what circumstances is it necessary or convenient for an agent to rely on habits or rules this paper focuses on the types of decision situations giving rise to their use even optimization requires the deployment of rules and for this reason mainstream economics cannot legitimately ignore these questions the argument is that habits and rules are ubiquitous in human activity in a new taxonomy seven types of decision situations are considered classified according to the type of information problem involved neither neoclassical nor behavioral economics can provide a complete account of the bases of habits or rules in these cases copyright 1997 by oxford university press

brand retrieval consideration set composition consumer choice and the pioneering advantage recent research on the pioneering advantage has shown that consumers often prefer pioneering brands to follower brands recent research on consumer choice suggests that information about brands is filtered through a series of sequential cognitive processes this study attempts to integrate these two separate lines of research by investigating the effects of pioneering on each stage of the multistage decision process a within subjects longitudinal experiment was conducted to simulate brand order of entry into a new market we also developed a sequential logit model to isolate the direct impact of pioneering on each stage of the decision process while controlling for indirect effects of pioneering on previous stages the results revealed that the pioneering brand vs followers is more likely to be retrieved considered and selected moreover the results revealed that consumers are more likely to bypass consideration set formation when the choice decision is simple vs complex theoretical and practical implications of the results are discussed

two studies of women s retirement incomes in australia assessing some outcomes of pluralism in economic research to illustrate the potential use of plural research methods two studies of australian women s retirement incomes are examined the first study employed quantitative microsimulation techniques its outcomes emphasised low lifetime earnings as a cause of women s lower retirement incomes the second study used an inductive approach known as grounded theory and its conclusions emphasised household decision making processes as a cause of both women s low lifetime earnings and lower retirement incomes using runde s criteria for assessing causal explanations a comparison is made of the outcomes of the two studies the conclusion is that rather than being seen as competing accounts the outcomes of the two varying research methods can be viewed as complementary by demonstrating the different insights afforded by contrasting research methods this paper provides some support for pluralism of research methods within the discipline of economics

an institutional and evolutionary perspective on health economics neoclassical theoretical approaches dominate modern health economics however the peculiarities of healthcare provision are so unusual that neoclassical theory is especially unsuited to the area even mainstream health economists often abandon paretian welfare considerations to focus on needs instead problems relating to uncertainty and externalities are also widely acknowledged this article shows that there are additional important pecularities of healthcare that are relatively neglected in the literature some of these concern healthcare needs while health itself is a universal need needs for healthcare provision are largely involuntary varied and idiosyncratic these issues have important consequences for the planning of healthcare systems and the extent of transaction costs in any market based system these factors combined with the inherent dynamism of modern healthcare needs and capabilities make institutional and evolutionary approaches especially suitable for healthcare economics

willingness to pay estimation with choice based conjoint analysis addressing extreme response behavior with individually adapted designs the increasing consideration of behavioral aspects in operations management models has prompted greater use of choice based conjoint cbc studies in operations research such studies can elicit consumers willingness to pay wtp a core input for many optimization models however optimization models can yield valid results only if consumers wtp is estimated accurately a simulation study and two field studies show that extreme response behavior in cbc studies such that consumers always or never choose the no purchase option harms the validity of wtp estimates reporting the share of consumers who always and never select the no purchase option allows for detecting extreme response behavior this study suggests an individually adapted design that avoids extreme response behavior and thus significantly improves wtp estimation accuracy

the limits of neoclassical theory in management education the productivity slowdown and the competitive difficulties experienced by many american firms in domestic and international markets have triggered considerable research into the reasons for the observed changes although rarely featured in systematic analysis of productivity trends various writers have suggested that management miseducation may be part of the problem in an award winning article robert hayes and william abernathy assert

distributive politics and economic growth a crude distinction between economics and politics would be that economics is concerned with expanding the pie while politics is about distributing it in this paper we analyze the relationship between the two we focus on how an economy s initial configuration of resources shapes the political struggle for income and wealth distribution and how that in turn affects long run growth our main conclusion is that inequality is conducive to the adoption of growth retarding policies we derive this result from a simple political economy model of growth and present cross country evidence consistent with it the key feature of our model is that individuals differ in their relative factor endowments we distinguish between two types of factors an accumulated factor called capital and a nonaccumulated factor called labor growth is driven by the expansion of the capital stock which is in turn determined by individual saving decisions long run growth is endogenous as the aggregate production function is taken to be linearly homogeneous in capital and productive government services taken together the provision of government services is financed by a tax on capital because government services are productive a small tax on

institutions in economics the old and the new institutionalism 1 definitions and issues 2 formalism and anti formalism 3 individualism and holism 4 rationality and rule following 5 evolution and design 6 efficiency and reform 7 conflicts and complementarities

the effect of stress on consumer saving and spending abstractin examining how stress influences consumer saving and spending the authors propose that consumers who experience a stressful situation allocate their resources strategically to gain control of their environment a series of studies shows that this strategic allocation of resources occurs in two ways consumers experiencing stress may show increased saving behavior which assures them that monetary resources will be available when needed alternatively consumers experiencing stress may show increased spending behavior directed specifically toward products that the consumer perceives to be necessities and that allow for control in an otherwise uncontrollable environment this conceptualization and the related findings can inform assessments of when stress will lead to beneficial or impulsive consumer behaviors

a note on participatory decision making and rationality this paper addresses a particular issue of institutional choice it is concerned with one aspect of the argument for participatory decision making structures how to make sense of the claim that participation can raise productivity because it produces a change in motivation the argument of the paper turns first on distinguishing between the rational choice account of behaviour and a norm guided one and second on the thought that participatory structures give scope for norm guided behaviour to flourish in ways not found in hierarchies

north s institutionalism and the prospect of combining theoretical approaches the distinction between new and old institutional economics may be unhelpful in depicting those theorists who defy clear categorisation one such writer is douglass north who is associated with the new institutionalism but who deviates from the neoclassical principles which supposedly form the foundations of this school the paper analyses his work to show how he combines both mainstream and alternative ideas in attempting to reconcile individual agency with social structure north suggests that institutions provide the constraints under which decisions are made but that individuals and organisations can alter those constraints while his work is an attempt to advance interdisciplinary research it fails to provide a fully integrated theoretical approach

real world performance of choice based conjoint models conjoint analysis is one of the most important tools to support product development pricing and positioning decisions in management practice for this purpose various models have been developed it is widely accepted that models that take consumer heterogeneity into account outperform aggregate models in terms of hold out tasks the aim of our study is to investigate empirically whether predictions of choice based conjoint models which incorporate heterogeneity can successfully be generalized to a whole market to date no studies exist that examine the real world performance of choice based conjoint models by use of aggregate scanner panel data our analysis is based on four commercial choice based conjoint pricing studies including a total of 43 stock keeping units sku and the corresponding weekly scanning data for approximately two years an aggregate model serves as a benchmark for the performance of two models that take heterogeneity into account hierarchical bayes and latent class our empirical analysis demonstrates that in contrast to the performance using hold out tasks the real world performance of hierarchical bayes and latent class is similar to the performance of the aggregate model our results indicate that heterogeneity cannot be generalized to a whole market and suggest that aggregate models are sufficient to predict market shares author s abstract