decomposing promotional effects with a dynamic structural model of flexible consumption abstract in this article the authors offer a methodology to decompose the effects of price promotions into brand switching stockpiling and change in consumption by explicitly allowing for consumer heterogeneity in brand preferences and consumption needs they develop a dynamic structural model of a household that decides when what and how much to buy as well as how much to consume to maximize its expected utility over an infinite horizon by making certain simplifying assumptions the authors reduce the dimensionality of the problem they estimate the proposed model using household purchase data in the canned tuna and paper towels categories the results from the model offer insights into the decomposition of promotional effects into its components this could help managers make inferences about which brand s sales are more responsive to stockpiling or increase in consumption expansion and how temporary price cuts affect future sales contrary to previous literature the authors find that brand swi

the decomposition of promotional response an empirical generalization price promotions are used extensively in marketing for one simple reason consumers respond the sales increase for a brand on promotion could be due to consumers accelerating their purchases i e buying earlier than usual and or buying more than usual and or consumers switching their choice from other brands purchase acceleration and brand switching relate to the primary demand and secondary demand effects of a promotion gupta 1988 captures these effects in a single model and decomposes a brand s total price elasticity into these components he reports for the coffee product category that the main impact of a price promotion is on brand choice 84 and that there is a smaller impact on purchase incidence 14 and stockpiling 2 in other words the majority of the effect of a promotion is at the secondary level 84 and there is a relatively small primary demand effect 16 this paper reports the decomposition of total price elasticity for 173 brands across 13 different product categories on average we find that 25 of the elasticity is due to primary demand expansion i e purchase acceleration and 75 to secondary demand effects or brand switching thus while gupta s finding that the majority of promotional response stems from brand switching is supported the average magnitude of the effect appears to be smaller than first thought more important there is ample evidence that promotions have a significant primary demand effect the relative emphasis on purchase acceleration and brand switching varies systematically across categories and the second goal of the paper is to explain this variation as a function of exogeneous covariates in doing this we recognize that promotional response is the consumer s reaction to a price promotion and therefore develop a framework for understanding variability in promotional response that is based on the consumer s perspective of the benefits from a price promotion these benefits are posited to be a function of i category specific factors ii brand specific factors and iii consumer characteristics the framework is formalized as a generalized least squares meta analysis in which the brand s price elasticity is the dependent variable several interesting results emerge from this analysis category specific factors brand specific factors and consumer demographics explain a significant amount of the variance in promotional response for a brand at both the primary and secondary demand levels category specific factors have greater influence on variability in promotional response and its decomposition than do brand specific factors there are several instances where exogenous variables do not affect total elasticities yet significantly affect individual components of total elasticity in fact the lack of a significant relationship between the variables and total elasticity is often due to offsetting effects within two or more of the three behavioral components of elasticity this is particularly true for brand specific factors which typically have no effect on total elasticity yet have important effects on the individual behaviors there is some evidence to suggest that not all promotion related increases in primary demand are due to forward buying in some cases promotions appear to increase consumption we use these results to illustrate how category and brand specific factors work to drive primary and secondary demand elasticities in different directions in short this paper offers an empirical generalization of a key finding on promotional response how elasticities decompose across brand choice purchase incidence and stockpiling and new insights into factors that explain variance in promotional response these findings are likely to be of interest to researchers who are concerned with theory development and the generalizability of marketing phenomena and to managers who plan promotion campaigns

the impacts of international migration on remaining household members omnibus results from a migration lottery program this brief summarizes the results of a gender impact evaluation study entitled the impacts of international migration on remaining household members omnibus results from a migration lottery program conducted in 2002 in tonga the study observed the impact of migration lottery program on the remaining household members of tongan emigrants on the individual and intra household level income falls rapidly by 22 to 25 percent with a rise in remittances failing to offset a large fall in labor earnings ownership of livestock durable and access to financial services is lower for the remaining household members diets change to be less nutritious and more rice and root crops immigration has a negative impact on household size there is no significant impact of migration on labor supply for men nor women funding for the study derived from the world bank stanford university the waikato management school and mardsen fund

impact of internal in migration on income inequality in receiving areas a district level study of south africa abstractthe impact of internal migration on regional income inequality of the receiving areas has hitherto gone largely unstudied this dearth of literature is especially surprising because income inequality and in migration into urban centres of growth are two issues that many developing economies are faced with and tackling these issues effectively involves understanding the interactions between these two related phenomena this study is therefore a first attempt to analyse the impact of internal in migration on receiving areas and is placed in the context of south africa based on a conceptual analysis the study argues that in migration into the formal sector of the receiving areas will in general reduce inequality while in migration into the informal or unemployed sector increases inequality using individual panel data the study further tests empirically at the district level the impact of in migration and finds that rising urban inequality in urban areas can be attributed at least in part to rural

labour migration and social networks participation in southern mozambique this paper investigates how social networks in poor developing settings are affected by migration using a unique household survey from southern mozambique we test the role of labour mobility in shaping participation in groups and interhousehold cooperation by migrant sending households in village economies at origin we find that migration cum remittances boosts household engagement in community based social networks our findings are robust to alternative definitions of social interaction and to endogeneity concerns suggesting that stable migration ties and higher income stability through remittances may decrease participation constraints and increase household commitment in cooperative arrangements in migrant sending communities

an empirical analysis of consumer purchase decisions under bucket based price discrimination bucket based price discrimination is a unique price format that involves monthly subscription fees and instantaneous quotas the number of rental products that can be checked out we propose an empirical model in which consumers make dynamic purchase decisions under consumption uncertainty accounting for the constraints imposed by the instantaneous quota applying the model to an online dvd rental data set we find that 1 consumers incur a large disutility 8 from stockout i e unmet consumption needs 2 such a disutility drives consumers overpurchase of the service quota as a way to avoid potential stockout situations and 3 the dynamics of overpurchase are driven by the interplay between trends in consumption needs and the magnitude of consumers plan switching costs we run counterfactual exercises to better understand how the instantaneous quota and stockout risk affect consumers consumption rates purchase decisions and firm profitability we find that the instantaneous quota induces a greater stockout compared with a monthly quota we further demonstrate that the company should recognize the drivers of the dynamics in overpurchase to balance short and long term profitability for example by offering targeted discounts to customers with excess overpurchase

long run effects of promotion depth on new versus established customers three field studies we use the results of three large scale field experiments to investigate how the depth of a current price promotion affects future purchasing of first time and established customers while most previous studies have focused on packaged goods sold in grocery stores we consider durable goods sold through a direct mail catalog the findings reveal different effects for first time and established customers deeper price discounts in the current period increased future purchases by first time customers a positive long run effect but reduced future purchases by established customers a negative long run effect overall the results show evidence of several long run effects forward buying selection customer learning and increased deal sensitivity short run metrics that ignore these effects overstate the overall change in demand for established customers the implication is that if prices are set based on short run elasticity then they will be too low among first time customers the short run metrics underestimate the total increase in demand if prices are set based on short run elasticity then they will be too high

economic reform and armed conflict in mozambique abstract this paper discusses the evolution of the mozambican economy in the 1980s particular emphasis is placed on the effects of the policy reform package implemented by the government beginning in 1987 this reform centered around the restoration of economic incentives to the agricultural sector is an example of a structural adjustment package pursued under extremely adverse conditions the new strategy has yielded some favorable results but also illustrates some of the limits of price policy in sub saharan africa

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

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

a regime switching model of cyclical category buying in many categories consumers display cyclical buying they repeatedly purchase in the category for several periods followed by several periods of not buying we believe that the cyclicality is a manifestation of cross category substitution by the consumer caused by variety seeking tendencies as well as by the firm s marketing activities in all relevant categories we propose a markov regime switching random coefficient logit model to represent these behaviors as stochastic switching between high and low category purchase tendencies the main feature of the proposed model is that it divides the stream of purchase decisions of a consumer into distinct regimes with different parameter values that characterize high versus low purchase tendencies in an empirical application of the model to purchases of yogurt buying households we find that as many as 38 3 households display cyclicality between high and low yogurt purchasing tendencies predictions from our proposed model track observed yogurt purchases of households over time closely and the model also fits better than two benchmark models alternating between high and low purchase tendencies may correspond with changing levels of consumer inventory in a substitute category if one ignores this phenomenon a correlation between yogurt inventory and the error term in utility arises leading to biased estimates also we show that cyclicality in buying has a key implication for a firm s price promotion strategies a price reduction that is offered to a household during its high purchasing tendency period will result in greater increases in sales than one that is offered during its low purchasing period this opens up a new dimension for enhancing the effectiveness of promotions customized timing of price reductions

a segment level model of category volume and brand choice it is an everyday marketplace occurrence that brands lose and gain share however a brand s sales gain or loss can be attributable to very different factors and thus understanding the sources of sales gain or loss would seem to be an important aspect of a brand manager s job the primary purpose of this research is to develop a model that can answer the following questions i what are the sources of gain or loss of a brand s sales due to category volume and brand switching ii what consumer and marketing characteristics affect consumers purchase frequency of the product category and that of different brands iii do all consumers behave similarly or are there distinct segments which respond to marketing actions differently iv if such segments exist what is the size and composition of each segment and what is the appropriate strategy for each group of consumers our modeling approach which decomposes a brand s sales into category volume and brand choice components has many similarities and also several differences with traditional approaches similar to the nbd and dirichlet models we assume that a consumer s category purchase rate follows a poisson distribution and the number of purchases per brand follows a multinomial distribution our model differs from traditional models by including marketing mix variables by accounting for loyal or near loyal consumers by explicitly incorporating consideration sets and by segmenting consumers on the basis of their brand perceptions and their responses to marketing mix variables we account for consumer hetereogeneity by identifying homogeneous latent segments that capture differences in consumers response to marketing variables in both brand choice and category volume behavior calibration of the category volume and brand choice models and the separation of loyalty and switching segments are done simultaneously so that there is no need to assume any specific hierarchy and in contrast to the usual assumption of independence between choice and volume which may be unreasonable at the aggregate level the requirement is that choice and volume decisions be independent only at the segment level we investigate the properties of our model in the context of a national survey of supermarket purchases of jumbo paper towels 2 500 households were surveyed who were asked to provide information on rolls of paper towels bought in the last 4 weeks rolls of each brand of paper towel bought in the last 4 weeks brand usually bought brands that a household bought or would consider buying average price paid or expected for each brand bought or considered ratings on 20 brand attributes e g strength absorbency etc and demographic information e g family size we found that not only did the modeling framework outperform a variety of competing models it also provided insights into the competitive structure in this market the loyal segments could be distinguished on the basis of price sensitivity less than 10 of the loyal households were price insensitive and in general households showed increasing price sensitivity in their category volume decisions if they had more children and were heavier users of paper towels this was consistent across all brands the model estimates that about 71 of the households are switchers and five switching segments are needed to characterize household purchase patterns two of the largest switching segments labeled as price sensitive and value segments are very price sensitive in both their brand choice and category volume components in both these segments private label brands are dominant with about 30 share segments also emerged on the basis of strength absorbency and tearing ease of paper towels interestingly we found that brand shares within these segments are quite consistent with the objective quality ratings of brands as given by consumer reports finally price elasticity analysis for one of the brands bounty reveals that a 5 drop in bounty s price increases its sales by 13 6 almost half of this increase comes from brand switching with the other half coming from increases in category volume e g stockpiling bounty gains the most from the price sensitive segments price and value segments private labels are hurt least by bounty s price cut

dispatch planning using newsvendor dual problems and occupation times application to hydropower abstract we consider price driven dispatch planning under price uncertainty a storable commodity is optimally sold and purchased over time first we consider models where the storage level is constrained in expectation the dual of the corresponding optimization problem is related to the newsvendor problem exact solutions of bang bang type are given the second methodology is for high frequency dispatch decisions in multistage stochastic programming models to overcome the curse of dimensionality prices are modeled by occupation times at price levels in a case study we consider a pumped storage hydropower plant numerical solutions are given which have similar patterns as for the first exactly solvable problems

inter temporal price discrimination and satiety driven repeat purchases abstract we discuss customers inter temporal repeat purchasing behavior when their valuations for a product are subject to transitory satiety the satiety can be increased by purchases and gradually decays in between repeat purchasing customers optimize their inter temporal purchasing schedules including the purchasing time and the purchasing quantity to maximize their time average payoffs and the monopoly seller chooses the optimal cyclic pricing policy to maximize its time average profit we derive the conditions under which firms earn the same profit under the cyclic pricing policy as under the fixed price pricing policy when the inter temporal price discrimination is more profitable we show that the optimal pricing policy depends on the relation between customer valuation and customer satiety our results imply that overlooking the effect of transitory satiety tends to cause firms to underprice we also consider extensions in which there exists a fixed purchasing cost or in which purchasing and consumption decisions are separate

subsidy or market reform rethinking china s farm consolidation strategy chinese food security policy is anchored increasingly on the conviction that domestic grain production should be greatly enhanced and the best way to do so is to expand farm production scale to that end an increasing stream of public investment has been directed to the grain sector in the form for example of farm expansion subsidies our purpose is to assess the potential impacts of china s farm scale expansion on both yields and per hectare economic returns analysis of a large sample of farm household production data finds with some exceptions that grain yields likely will decline as farm size grows compromising food self sufficiency targets more importantly in only isolated cases would per hectare economic returns decline with size thus an emphasis on reducing farmland transactions costs may stimulate cropland consolidation and achieve the desired long term structural transformation

emigration to south africa s mines this paper presents a simultaneous econometric model of both the determinants of international migration to the south african mines and of some of the economic consequences for each of the labor supplying countries not only are the short run effects of labor withdrawal on traditional crop cultivation and the domestic wage labor markets considered but also the long term effects of savings from mine earnings invested in crops and cattle in the home countries the experiences of botswana lesotho malawi mozambique and the south african homelands are compared it is shown that emigration to the south african mines has reduced crop production in the subsistence sectors of botswana lesotho malawi and the south african homelands in the short run but the results also suggest that earnings of migrants have enhanced both crop productivity and cattle accumulation in the longer run except in lesotho excerpt

unimodality of price setting newsvendor s objective function with multiplicative demand and its applications abstract we present a general solution framework for the price setting newsvendor problem with a multiplicative stochastic demand under mild assumptions such as increasing price elasticity on the mean demand function and increasing generalized failure rate on the distribution of the random factor we first prove that both the profit function with respect to price and its derived function with respect to order quantity are quasi concave three applications are then studied under our solution framework 1 we consider a wholesale price only contract by which a manufacturer sets a wholesale price and a newsvendor determines an order quantity and the retail price and show that the manufacturer s profit function is unimodal with respect to retailing price or stocking factor under certain conditions 2 we consider a newsvendor problem in which the demand depends on both the retail price and the level of sales effort and the cost exerting the sales effort is proportional to the order quantity we prove that there exists a unique pair of price and sales effort levels that maximize the total profit this result is established under a set of mild assumptions on the demand and cost functions 3 we identify a property in the single period profit function that satisfies condition 1 of huh and janakiraman 2008 which in turn guarantees the optimality of s s policy for an infinite stationary dynamic inventory price control system with lost sales and fixed order costs finally the unimodality of the newsvendor problem with a general stochastic and price sensitive demand is studied

a price setting newsvendor problem under mean variance criteria the single product single period newsvendor problem with two decision variables namely price and stock quantity is considered the performance measure in addition to the expected revenue includes the variance of the income scaled with a risk parameter we present conditions for the concavity of this risk sensitive performance measure and the uniqueness of the optimal solution for both risk averse and risk seeking cases under the additive demand model and compare the results to others previously published these conditions are introduced in terms of the lost sales rate elasticity furthermore we provide numerical examples that aim to endorse the theoretical results herein explained

estimating a stockkeeping unit level brand choice model that combines household panel data and store data abstract the marketing literature has addressed the issues of heterogeneity and endogeneity when estimating a choice model with household level panel data when using these data at the stockkeeping unit or the universal product code level choices for each item in each of the time periods under consideration cannot be observed without such information it is difficult to control for item and time period specific unmeasured characteristics because there is no information on alternatives during those periods in which they are not purchased by any of the panelists in general when a product category has many alternatives each with fairly small shares the household sample may not contain sufficient choices for each alternative thus negatively affecting the ability to control for endogeneity with household data in contrast because aggregate store level data for those stores in which the panel makes purchases are the aggregation of purchases by all households visiting the stores the data contain the

the category demand effects of price promotions although price promotions have increased in both commercial use and quantity of academic research over the last decade most of the attention has been focused on their effects on brand choice and brand sales by contrast little is known about the conditions under which price promotions expand short run and long run category demand even though the benefits of category expansion can be substantial to manufacturers and retailers alike this paper studies the category demand effects of consumer price promotions across 560 consumer product categories over a 4 year period the data describe national sales in dutch supermarkets and cover virtually the entire marketing mix i e prices promotions advertising distribution and new product activity we focus on the estimation of main effects i e the dynamic category expansive impact of price promotions as well as the moderating effects of marketing intensity and competition both conduct and structure on short and long run promotional effectiveness the research design uses modern multivariate time series analysis to disentangle short run and long run effects first we conduct a series of unit root tests to determine whether or not category demand is stationary or evolving over time the results are incorporated in the specification of vector autoregressive models with exogenous variables varx models the impulse response functions derived from these varx models provide estimates of the short and long term effects of price promotions on category demand these estimates in turn are used as dependent variables in a series of second stage regressions that assess the explanatory power of marketing intensity and competition several model validation tests support the robustness of the empirical findings we present our results in the form of empirical generalizations on the main effects of price promotions on category demand in the short and the long run and through statistical tests on how these effects change with marketing intensity and competition the findings generate an overall picture of the power and limitations of consumer price promotions in expanding category demand as follows category demand is found to be predominantly stationary either around a fixed mean or a deterministic trend although the total net short term effects of price promotions are generally strong with an average elasticity of 2 21 and a more conservative median elasticity of 1 75 they rarely exhibit persistent effects instead the effects dissipate over a time period lasting approximately 10 weeks on average and their long term impact is essentially zero by contrast the successful introduction of new products into a category is more frequently associated with a permanent category demand increase several moderating effects on price promotion effectiveness exist more frequent promotions increase their effectiveness but only in the short run the use of nonprice advertising reduces the category demand effects of price promotions both in the short run and in the long run competitive structure matters as well the less oligopolistic the category the smaller the short run effectiveness of price promotions at the same time we find that the dominant form of competitive reaction either in price promotion or in advertising is no reaction short run category demand effectiveness of price promotions is lower in categories experiencing major new product introductions finally both the short and long run price promotion effectiveness is higher in perishable product categories the paper discusses several managerial implications of these empirical findings and suggests various avenues for future research overall we conclude that the power of price promotions lies primarily in the preservation of the status quo in the category

the evolution of income inequality in rural china abstract in this article we analyze trends in income inequality and the distribution of income in rural china from 1987 to 1999 we find an uneven but long run increase in inequality in rural china and show that nearly half of the rural population was not much better off in 1999 than at the start of the period we rule out geography as the most important factor for explaining income differences and the increases that occurred over time much more important were growing differences between households living in the same village province or region we also find that access to nonagricultural incomes from local wage employment and family businesses contributes to inequality but that employment outside the county in which a household lives and accessed through temporary migration is relatively equalizing finally we document important strengths and weaknesses of the primary data set used for our analyses relative to other data sources available for study of inequality and poverty in rural china

estimating store choices with endogenous shopping bundles and price uncertainty abstract we develop a structural model of retail store choices for which household shopping plans and price beliefs are endogenously determined in our model individual households make their store choices based on their expected basket costs which are determined by their shopping plans and price beliefs previous studies use realized purchases as a proxy for unobserved shopping lists and also assume homogenous price expectation across all households over the entire sample period our approach improves the measures of expected basket costs by estimating intended shopping lists of households using a duration model and also by constructing household time store and goods specific price expectations in our empirical application using a scanner data set we find that the store choices become significantly more elastic to prices when the correction is applied

demand uncertainty and supplier s returns policies for a multi store style good retailer abstract as demand uncertainty grows in the marketplace a critical issue today in most purchase contract negotiations between an independent retailer of a style good and its supplier is the provision of a returns policy i e a commitment by the supplier to buy back unsold inventory of the good at the end of its selling season management science research on the strategic role and optimal design of returns policies has grown in recent years but so far offers little treatment of how exactly the retailer s optimal order quantity decisions are affected by demand uncertainty and how a supplier s returns policy can influence these decisions employing the traditional newsboy problem modeling framework the authors investigate these issues considering a supplier who faces a retailer with two or more store outlets with normally distributed and possibly correlated demands to facilitate their analyses the authors employ a methodology based on special error function representations of the highly nonlinear objective functions of the retailer and supplier utilizing this approach the authors are able to provide explicit insights into how a the buyer s total order quantity decision is affected by the variability in demand b buyback prices in combination with wholesale prices can influence the buyer s order quantity response to demand uncertainty c demand uncertainty moderates the effects of the buyback and wholesale prices d supplier s optimal combination of actions are affected by demand variability e retailer s and supplier s expected profits behave in response to changes in the supplier s actions under different levels of demand variability

is 75 of the sales promotion bump due to brand switching no only 33 is abstract several researchers have decomposed sales promotion elasticities based on household scanner panel data a key result is that the majority of the sales promotion elasticity approximately 74 on average is attributed to secondary demand effects brand switching and the remainder is attributed to primary demand effects timing acceleration and quantity increases the authors demonstrate that this result does not imply that if a brand gains 100 units in sales during a promotion the other brands in the category lose 74 units the authors offer a complementary decomposition measure based on unit sales the measure shows the ratio of the current cross brand unit sales loss to the current own brand unit sales gain during promotion the authors report empirical results for this measure they also derive analytical expressions that transform the elasticity decomposition into a decomposition of unit sales effects these expressions show the nature of the difference between the two decompositions to ga

capacity pricing and production under supply and demand uncertainties with an application in agriculture abstract we consider capacitated joint lot sizing and pricing problems when supply and a price sensitive demand are uncertain in cases where there is excess capacity the decision maker has the option to rent her capacity we model the case where price and production quantity are determined before the yield is realized joint decisions as well as the case where the price is determined after the yield is known sequential decisions in the joint decisions case we introduce the concept of expected demand fill rate elasticity and characterize the conditions in which a one sided production and pricing policy is optimal we extend the results to the case when there is a fixed production cost and show that a two sided production and pricing policy is optimal we also investigate the conditions under which it is optimal for the decision maker to rent her capacity in addition we look at the case in which the decision maker is risk averse and analyze the effect of the risk attitude on the optimal price and production quantity we extend our model to the multi period case and the case where there is a lead time to acquire new capacity we show that a one sided production pricing and capacity planning policy is optimal in this situation as well we apply our model to the agricultural sector and present numerical examples using data from the california almond industry

agrarian structure and agricultural practice typology and application to western sudan a typology of models that explain patterns of variation in farm endowments and farm practices and yields shows that insecurity in renting land financing constraints and the absence of insurance generate patterns of factor use quite different from the famous inverse relationship caused by labor supervision problems one might expect to observe positive relationships between wealth and yields village level data from western sudan confirm that such positive relationships are not a theoretical curiosity wealthy farmers have higher levels of output per hectare because they use more labor per hectare insurance and financing constraints appear to be the crucial market failures

the dynamic effect of discounting on sales empirical analysis and normative pricing implications baseline sales measure what retail sales would be in the absence of a promotion abraham and lodish 1993 and models that measure baseline sales are widely used by managers to assess the profitability of promotions bucklin and gupta 1999 this issue estimates of baseline sales and promotional response are typically independent of past promotional activity even though there is evidence to suggest that increased discounting reduces off promotion sales and increases the percentage of purchases made on deal e g krishna 1994 as a result models that do not consider dynamic promotional effects can mislead managers to overpromote given the widespread use of static models to evaluate the efficacy of promotions it is particularly desirable to calibrate a dynamic brand sales model and use it to establish an optimal course of action accordingly we develop a descriptive dynamic brand sales model and use it to determine normative price promotion strategies our descriptive approach consists of estimating a varying parameter sales response model letting model parameters vary with past discounting activity accommodates the possibility that market response changes with firms discounting policies in the normative model we use the estimates obtained in the descriptive model to determine optimal retailer and manufacturer prices over time the results of the descriptive model indicate that promotions have positive contemporaneous effects on sales accompanied by negative future effects on baseline sales the results of the normative model suggest that the higher share brands in our data tend to overpromote while the lower share brands do not promote frequently enough we project that the use of our model could improve manufacturers profits by as much as 7 to 31 more generally the normative results indicate that i if deals become more effective in the current period i e if consumers are more price sensitive promotions should be used more frequently and ii as the negative dynamic effect of discounts on sales increases the optimal level of discounting should go down without our approach it would be difficult to make this trade off exact finally we demonstrate that these dynamic effects provide another perspective to the marketing literature regarding the existence of promotions

investigating heterogeneity in brand preferences in logit models for panel data in analyzing panel data the issue of heterogeneity across households is an important consideration if heterogeneity is present but is ignored in the analysis it will result in biased and inconsi

intertemporal pricing and consumer stockpiling we study a dynamic pricing problem for a class of products with stable consumption patterns e g household items staple foods consumers may stock up the product at current prices for future consumption but they incur inventory holding costs we model this situation as a dynamic game over an infinite time horizon in each period the seller sets a price and each consumer chooses how many units to buy we develop a solution methodology based on rational expectations by endowing each player with beliefs we decouple the dynamic game into individual dynamic programs for each player we solve for the rational expectations equilibrium where all players make optimal dynamic decisions given correct beliefs about others behavior in equilibrium the seller may either charge a constant fixed price or offer periodic price promotions at predictable time intervals we show that promotions are useful when frequent shoppers are willing to pay more for the product than are occasional shoppers we also develop several model extensions to study the impact of consumer stockpiling on the seller s inventory production and rationing strategies

the rational effect of price promotions on sales and consumption we explore the rational effect of price variation on sales and consumption in markets where consumers are uncertain about the future price of goods we first derive an optimal ordering policy which expresses the amount a consumer should purchase and consume in a given period as a function of the observed price of the good the distribution of future prices and the nature of his or her inventory this policy extends previous normative models of inventory control such as those by golabi 1985 and kalymon 1970 to the case where the amount to consume in a given period is an explicit decision variable and prices follow a first order stochastic process we then use this model to explore how changes in the long run frequency and temporal correlations of price promotions should normatively affect the contemporaneous relationship between purchase consumption and price among the predictions which follow from the model are that consumption should rationally increase with the size of existing inventories the short term sensitivity of sales to prices should be greater than that of consumption to price and this discrepancy increases with decreases in the temporal correlation of price deals and the long term relative frequency of price deals

the shadow value of migrant remittances income and inequality in a household farm economy this article offers econometric evidence that income remittances sent home by family migrants stimulate household farm incomes indirectly by relieving credit and risk constraints on household farm production a high but unequally distributed shadow value of migrant remittances appears to reinforce an equalising direct effect of remittances on the income distribution across a sample of household farms in rural mexico

measuring the impact of promotions on brand switching when consumers are forward looking abstract logit choice models have been used extensively to study promotion response this article examines whether brand switching elasticities derived from these models are overestimated as a result of rational consumer adjustment of purchase timing to coincide with promotion schedules and whether a dynamic structural model can address this bias using simulated data the authors first show that if the structural model is correct brand switching elasticities are overestimated by stand alone logit models a nested logit model improves the estimates but not completely second the authors estimate the models on real data the results indicate that the structural model fits better and produces sensible coefficient estimates the authors then observe the same pattern in switching elasticities as they do in the simulation third the authors predict sales assuming a 50 increase in promotion frequency the reduced form models predict much higher sales levels than does the dynamic structural model the autho

motivations to remit evidence from botswana in this article a theory of motivations to send remittances is described and tested with data from botswana altruism is one of the motivations tested and found to be an insufficient explanation for remittances among migrants in botswana a refinement of the model stipulates a modified altruism or enlightened self interest in this model the relationship between the migrant and family is tempered by an implicit understanding of mutual benefit the household strategy may be to encourage some members to migrate as a means of spreading risk and sharing gains the household strategy is similar to an insurance policy where migration is to places where market potential is high the risks incurred might be high the example is given of migration during a drought in botswana migrant remittances were greater in households with more cattle or households with more to lose drought alone was not statistically related to remittances increases in remittances were related to increased levels of education it is suggested that repayment was the motive for parents investment in migrants education migrants gains are identified as the potential for an inheritance the security of channeling investments through a trusted family member and security in having a home to return to it is pointed out that the altruism and family remittances from urban migration were strategies that bridged the simple dynamic of either urban development or rural development impacting on family welfare it is suggested that household models of economy adopt some measure to express the relationship of household wealth to remittances from urban migrants

a multicategory model of consumers purchase incidence quantity and brand choice decisions methodological issues and implications on promotional decisions abstract the authors propose a multicategory model of consumers purchase incidence quantity and brand choice decisions the model specification allows for cross category promotion effects in both components of the primary demand incidence and quantity decisions and uses a flexible functional form of consumer s utility to accurately measure those cross category effects to demonstrate the importance of the methodology the authors investigate two issues of relevance to retailers namely how retailers should 1 allocate promotional expenditures across brands in a category and 2 coordinate timing of promotions of brands across categories the authors estimate the proposed model using consumers purchases in pasta sauce and pasta categories the results reveal that using restrictive functional forms of utilities or ignoring cross category effects in incidence and quantity decisions leads to incorrect assessments on relative allocation of promotional expenditures across brands furthermore retailers

package size decisions we describe a model examining how a firm might choose the package size and price for a product that deteriorates over time our model considers four factors 1 the usable life of the product 2 the rates at which consumers use the product 3 the relation between package size and the variable cost of the product and 4 the minimum quantities consumers seek to consume for each dollar they spend we call these reservation quantities we allow heterogeneity in the usage rates and reservation quantities for the consumers we show that when the cost increases as a linear or convex function of the package size the firm should make packages of the smallest possible size smaller packages reduce waste and allow consumers to more closely match their purchases with desired consumption this in turn allows the firm to charge a higher unit price and also sell more unit volume the results imply that in a market with multiple package sizes produced by the same or competing firms at least one of the packages must have the smallest possible size provided the fixed cost of making the product is sufficiently low for concave cost functions the firm may find it optimal to make larger than smallest size packages

a competitive dynamic pricing model when demand is interdependent over time abstract in this study we contribute to the dynamic pricing literature by developing a finite horizon model for two firms offering substitutable and nonperishable products with different quality levels customers can purchase and store the products even if they do not need them at the time in order to use them in future the stockpile of the products generated by customers affects the demand in future periods therefore the demand for each product not only is a function of prices and quality levels but also of the products stockpile levels in addition the stockpile levels change the customers consumption behavior more product in a stockpile leads to more consumption therefore we address not only the price and demand relationship but also the stockpiling and consumption relationship in a competitive environment the decision variable of each firm at the beginning of each period is its unit sale price we use a deterministic dynamic program to calculate the equilibrium prices at the beginning of each period by assuming that the market stockpile is public information we show the existence of a unique nash equilibrium we next consider the case when the firms do not know the market stockpile we then develop appropriate heuristics to calculate the optimal prices in each case a numerical study is also provided to calculate the price levels in different scenarios and compare their performances

the effect of promotion on consumption buying more and consuming it faster the authors empirically demonstrate the existence of flexible consumption rates in packaged goods products how this phenomenon can be modeled and its importance in assessing the effectiveness of

migration and rural welfare the impact of potential policy reforms in europe summary this paper uses an agricultural household model in an imperfect market environment and data from burkina faso to explore the impact of potential immigration policy reforms in europe on the welfare of rural households simulation results demonstrate that in contrast to continental migration increased intercontinental migration has strong positive household welfare effects similarly an increase in the stay abroad of intercontinental migrants impacts positively on welfare of the migrant sending household results of these simulations lend support to the introduction of a tmp which would in addition to facilitating migration control in host economies improve the welfare of sending households by allowing for increased engagement in intercontinental migration the temporary nature of such a program would ensure that dutch disease effects would be mitigated through eventual migrant return

transaction decoupling how price bundling affects the decision to consume abstract in today s marketplace price bundling is widespread manufacturers and retailers routinely offer multiple products for a single bundled price although the effects of price bundling on purchase behavior have been well researched the effects of price bundling on postpurchase consumption behavior have received almost no attention in this article the authors build on the sunk cost literature e g thaler 1980 1985 and predict that price bundling leads to a disassociation or decoupling of transaction costs and benefits thereby reducing attention to sunk costs and decreasing a consumer s likelihood of consuming a paid for service e g a theater performance four studies show this to be the case in two lab studies the authors show that having a bundled four day ski pass as opposed to four one day ski tickets decreases a person s likelihood of skiing on the final day of a four day ski vacation they replicate this result in a field study showing that multiperformance ticket holders are

price induced patterns of competition this research focuses on how price changes influence the observed pattern of brand competition the paper begins with a basic utility model formulation and examines the implications of three major classes of preference distributions on the expected patterns of competition a price tier model is proposed to operationalize the theory and to allow predictive testing the price tier model is estimated on 28 brands across four product categories the results show a specific asymmetric pattern of price competition higher price higher quality brands steal share from other brands in the same price quality tier as well as from brands in the tier below however lower price lower quality brands take sales from their own tier and the tier below brands but do not steal significant share from the tiers above the results are consistent with a bimodal preference distribution with the regular price indifference point being located toward the lower quality end of the preference distribution for the categories analyzed

cross market discounts firms in several markets attract consumers by offering discounts in other unrelated markets this promotion strategy which we call cross market discounts has been successfully adopted in the last few years by many grocery retailers in partnership with gasoline retailers across north america europe and australia in this paper we use an analytical model to investigate the major forces driving the profitability of this novel promotion strategy we consider a generalized scenario in which purchases in a source market lead to price discounts redeemable in a target market our analysis shows that this strategy can be a revenue driver by simultaneously increasing prices as well as sales in the source market even though we assume the demand curve to be downward sloping in price moreover it distributes additional consumption motivated by the discount in two markets and under diminishing marginal returns from consumption this can simultaneously increase firm profits and consumer welfare more effectively than traditional nonlinear pricing strategies our study provides many other interesting insights as well and our key results are in accordance with anecdotal evidence obtained from managers and industry publications

frugality is hard to afford intertemporal savings strategies such as bulk buying or accelerating purchase timing to take advantage of a good deal provide long term savings in exchange for an increase in immediate spending

mines and migrants in south africa between 1971 and 1978 wages of more than one half million nonwhite laborers in the south african mines tripled in real terms in the same period the nonwhites employed in the mines switched from being 62 percent foreign to 62 percent domestic these changes followed a period from 1911 to 1971 during which real wages of black gold miners did not rise and terminated almost a century of reliance on foreign labor reserves for the majority of such labor 2 these dramatic events are examined here in the context of an econometric model of the demand for labor by the south african mining sector from 1946 to 1980 this affords an unusual opportunity to study the demand side of a market for internal and international migrants in a society where racial discrimination is formalized in the apartheid system where powerful mining houses wield potential monopsony power and where political factors in the region are major determinants of economic behavior to comprehend the derived demand for workers in this sector it is essential to outline at least certain aspects of the industry s organization and that of the market for labor this is undertaken in section i section ii develops a stylized model which is then estimated from data described in section iii for the gold diamond coal and other minerals sectors separately in section iv i organization of the mine labor market

coordinating price reductions and coupon events abstract in this article the authors use an economic model to show that it may be optimal to lower the retail price during a coupon event when marginal consumers have moderate hassle costs of coupon redemption results from the model offer predictions on the relationships among coupon redemptions shelf price and coupon face value the authors test these predictions on a large data set of hundreds of coupon events across six packaged goods categories the data show that when a small coupon face value is offered the shelf price is likely to be reduced they also find that coupon efficiency increases when there is a lower retail price the results are of interest to managers planning a promotion calendar and deciding whether to coordinate price promotions with coupon events and they contribute to economic theory when a firm moves from uniform pricing e g no coupons to second degree price discrimination e g coupons all consumers may face a lower price this finding has public policy implication

a flexible yet globally regular multigood demand system a vexing challenge when using the utility maximization framework to estimate consumers decisions on which set of goods to purchase and how much quantity to buy is obtaining a functional form of the utility that satisfies three criteria tractability flexibility and global regularity flexibility refers to the ability of a utility function to impose minimal prior restrictions on demand elasticities global regularity refers to the ability of a utility function to satisfy regularity properties required by economic theory in the entire feasible space of variables the tractable utility functions used so far are either inflexible which could yield inaccurate estimates of underlying elasticities or do not satisfy global regularity which can result in invalid expressions of likelihood and invalid policy simulations i tackle this problem by deriving necessary and sufficient conditions for global regularity of basic translog utility using simulated and scanner data i show that the proposed demand system

the effect of partitions on controlling consumption abstract the authors demonstrate that partitioning an aggregate quantity of a resource e g food money into smaller units reduces the consumed quantity or the rate of consumption of that resource partitions draw attention to the consumption decision by introducing a small transaction cost that is they provide more decision making opportunities so that prudent consumers can control consumption thus people are better able to constrain consumption when resources associated with a desirable activity which they are trying to control are partitioned rather than when they are aggregated this effect of partitioning is demonstrated for the consumption of chocolates study 1 and gambles study 2 in study 3 process measures reveal that partitioning increases recall accuracy and decision times importantly the effect of partitioning diminishes when consumers are not trying to regulate consumption studies 1 and 3 finally study 4 explores how habituation may decrease the amount of attention that pa

a decision support system for planning manufacturers sales promotion calendars a common event in the consumer packaged goods industry is the negotiation between a manufacturer and a retailer ofthe sales promotion calendar determining the promotion calendar involves a large number of decisions regarding levels of temporary price reductions feature ads and in store displays each executed at the level of individual retail accounts and brand skus over several months or a year though manufacturers spend much of their marketing budget on trade promotions they lack decision support systems to address the complexity and dynamics of promotion planning previous research has produced insights into how to evaluate the effectiveness of promotional events but has not addressed the planning problem in a dynamic environment this paper develops a disaggregate level econometric model to capture the dynamics and heterogeneity of consumer response by modeling the purchase incidence timing choice and quantity decisions of consumers we decompose total sales into incremental and nonincremental baseline plus borrowed the response model forms the basis of a market simulator that permits us to search for the manufacturer s optimal promotion calendar subject to a set of constraints some of them imposed by the retailer via the simulated annealing algorithm calendar profits are the net result of the contribution from incremental sales minus the opportunity cost from giving away discounts to nonincremental sales and the fixed costs associated with implementing promotional events e g retagging features displays incremental sales result from promotion induced switching the acceleration and quantity promotion effects on those switchers increased consumption and the carryover effect from purchase event feedback we applied our approach to the promotion planning problem of a large consumer packaged goods company in a nonperishable staple product category suggested by company executives canned tomato sauce subject to a retailer pass through constant rate of 80 provided to us by the collaborating firm the optimal promotion calendar produced by the modeling system followed a pattern of frequent and shallow temporary price reductions with no feature or display activity we also analyze how that result would change under different retailer pass through scenarios our findings indicated that the manufacturer could substantially improve the profitability of its sales promotion activity and that there would be a concurrent positive effect on retailer profit and volume levels management reported to us that the insights from the use of the system were implemented in their promotion planning process and produced positive results a validation analysis on follow up data for one market showed that promotion activity could be significantly reduced as recommended with no adverse effect on the brand s market share as predicted to generalize the model beyond the specific category where it was implemented we conducted a sensitivity analysis on the profile of the calendar i e frequency depth and duration of deals with respect to changes in market response competitive activity and retailer pass through first we found that the optimal depth frequency and timing of discounts is stable for price elasticities ranging from near zero to around four in absolute magnitude we also found no systematic impact of competitive promotions on the profile of the optimal calendar for example variation in competitive activity did not affect the optimal depth or frequency of discounts lastly we found changes in retailer pass through to have a significant effect on the optimal depth and number of weeks of trade promotion that a manufacturer should offer this emphasizes the importance to manufacturers of having accurate estimates of pass through for purposes of promotion budgeting and planning

mean downside risk and mean variance newsvendor models implications for sustainable fashion retailing abstract newsvendor models have been well established for studying supply chain management problems with fashionable products in this paper we explore the mean downside risk mdr and mean variance mv newsvendor models under both the exogenous and endogenous retail price decision cases we first construct analytical models with the mdr and mv objectives we then show that the analytical solution schemes for both the mdr and mv problems are the same with the measures for sustainability such as the expected quantity of goods leftover the expected sales to expected goods leftover ratio the rate of return on investment and the probability of achieving a pre determined profit target we proceed to compare the levels of sustainability by the fashion retailers which employ the mean risk and the risk neutral models insights are generated

household composition labor markets and labor demand testing for separation in agricultural household models this paper tests the separation of farm labor supply and labor demand decisions using the observation that household composition is an important determinant of farm labor use with nonseparation after assessing the conditions under which the test has power against several alternatives an empirical model is developed to test the proposition that farm employment is independent of family composition the model is estimated on a data set from rural java the null hypothesis that farm labor allocation decisions are independent of household structure is not rejected the results are robust to different specifications of the labor demand function copyright 1992 by the econometric society

on price risk and the inverse farm size productivity relationship abstract the oft observed inverse relationship between farm size and productivity has elicited several explanations having important policy and theoretical implications using advances in the analysis of price risk effects on producer behavior and a simple two period model of an agricultural household that both produces and consumes under price uncertainty at the time labor allocation decisions are made this paper demonstrates analytically that a non degenerate land distribution and price risk can together produce an inverse relationship even absent any of the more common explanations empirical evidence from madagascar confirms the plausibility of this intuitive explanation for the phenomenon

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

an elasticity approach to the newsvendor with price sensitive demand we introduce a measure of elasticity of stochastic demand called the elasticity of the lost sales rate which offers a unifying perspective on the well known newsvendor with pricing problem this new concept provides a framework to characterize structural results for coordinated and uncoordinated pricing and inventory strategies concavity and submodularity of the profit function as well as sensitivity properties of the optimal inventory and price policies are characterized by monotonicity conditions or bounds on the elasticity of the lost sales rate these elasticity conditions are satisfied by most relevant demand models in the marketing and operations literature our results unify and complement previous work on price setting newsvendor models and provide a new tool for researchers modeling stochastic price sensitive demand in other contexts

the new economics of labor migration this paper reviews selected theoretical and empirical developments in the field of labor migration economics the migration behavior of individuals differs in accordance with their perceived relative deprivation those who are relatively more deprived tend to have stronger incentive to migrate than those who are relatively less deprived moreover a reference group characterized by more income inequality is likely to generate more relative deprivation highly skilled workers are also more likely to migrate migration decisions are often made jointly by the migrant and nonmigrant with a contractual arrangement regarding the sharing of costs and returns the exchange of commitments to share income provides coinsurance of particular interest are the determinants of the speed of adoption of migration as an innovation and the characteristics associated with the delay in the adoption of innovation new econometric techniques including techniques for the analysis of qualitative dependent variables techniques that correct for sample selection bias and those for the analysis of longitudinal data have substantially benefited empirical research in this area new methods that can correct for the biased estimate of the wages particular individuals would receive at 2 or more locations at the same point in time allow researchers to test locational decsion making models estimates of these structural models of labor migration support the hypothesis that individuals respond to income incentives in making the decsion to migrate further research is needed on the pazzling observation that migrant workers earn less than native born workers with similar characteristics during the 1st few years after migration but more thereafter other topics that need further research include the macroeconomic effects of migration the microeconomic and macroeconomic relationships between aging and labor migration and the migration behavior of dual earner families

predicting competitive response to a major policy change combining game theoretic and empirical analyses this research uses procter gamble s value pricing initiative as a context for testing whether actual competitor and retailer response to a major policy change can be predicted using a game theoretic model we first estimate demand functions for p g and competitor brands from the period before value pricing was initiated we then formulate a dynamic manufacturer retailer stackelberg model that includes p g a national brand competitor and a retailer the model takes p g s move as given and prescribes the price and promotion response of the competitors and the retailer we substitute the estimated demand parameters into the model to obtain prescriptions for each competitor and the retailer and see whether these prescriptions are related to the actual response we find that the dynamic game theoretic model calibrated with empirical estimates of demand parameters has significant predictive power we also test the predictive power of two benchmark models the first is based on the reaction function approach of leeflang and wittink leeflang peter s h wittink dick r 1992 diagnosing competitive reactions using aggregated scanner data internat j res marketing9 39 57 and the second is a simplification of our dynamic model where the retailer is not strategic the dynamic game theoretic model performs better than either benchmark

examining demand elasticities in hanemann s framework a theoretical and empirical analysis this paper examines demand elasticities using an integrated framework proposed by hanemann hanemann m w 1984 discrete continuous models of consumer demand econometrica52 3 541 561 which models the incidence brand choice and quantity decisions of a consumer as an outcome of her utility maximization subject to budget constraints although the hanemann framework has been the mainstay of earlier efforts to examine these decisions jointly empirical researchers who have used the it to study purchase behavior have often found that the quantity elasticities are around 1 regardless of the brand or category we attempt to uncover the underlying reasons for this finding and propose approaches to get as close to the true quantity elasticities as possible we do this by i analytically demonstrating how assumptions on the distribution of the brand specific econometrician s errors imply certain restrictions that in turn force quantity elasticities to 1 ii discussing how these restrictions can be alleviated by considering a suitable specification of unobserved parameter heterogeneity and iii using scanner data to empirically illustrate the impact of the restrictions on quantity elasticities and the relative efficacy of multiple specifications of unobserved heterogeneity in easing those restrictions we find that the specification of unobserved heterogeneity crucially influences estimates of quantity elasticities and that the mixture normal specification outperforms the alternatives

on the unimodality of the price setting newsvendor problem with additive demand under risk considerations abstract we present a mean variance analysis of the single product single period price setting newsvendor problem with additive price dependent demand the main goal of this paper is to use a mean variance framework to solve any risk sensitive instance and find conditions under which the unimodality of the problem is guaranteed we introduce such conditions via the lost sales rate elasticity the elasticity of the optimal price and the elasticity of the expected safety stock surplus to provide managerial insight in terms of the newsvendor s level of service we also simplify the optimization problem in case that those conditions do not hold the main contribution of this paper is that by evaluating the unimodality of the problem for any possible risk attitude it extends previously published results found for the concavity of the solution in risk neutral and moderately risk sensitive cases

the long term effects of price promotions on category incidence brand choice and purchase quantity abstract to what extent do price promotions have a long term effect on the components of brand sales namely category incidence brand choice and purchase quantity the authors answer this question by using persistence modeling on weekly sales data of a perishable and a storable product derived from a scanner panel their analysis reveals first that permanent promotion effects are virtually absent for each sales component next the authors develop and apply an impulse response approach to estimate the promotional adjustment period and the total dynamic effects of a price promotion specifically they calculate the long term equivalent of gupta s 1988 14 84 2 breakdown of promotional effects because of positive adjustment effects for incidence but negative adjustment effects for choice the authors find a reversal of the importance of category incidence and brand choice 66 11 23 for the storable product and 58 39 3 for the perishable product the authors discuss the implications of the findings an

migration amongst the batswana the present study undertakes analysis of the effects of employment probabilities and wage alternatives on migration decisions in the context of botswana adopting micro level data both to estimate a multinomial migration function and to develop prediction equations for wages and likelihood of employment data are from the 1978 1979 national migration survey the factors that influence rural batswana adults to remain at home migrate to town on a short or long term basis move to another rural area or emigrate to south africa are examined consideration is given to the effects of employment alternatives on the rate of internal migration and the selectivity of movements with respect to personal household and locational factors excerpt

decomposing the sales promotion bump with store data sales promotions generate substantial short term sales increases to determine whether the sales promotion bump is truly beneficial from a managerial perspective we propose a system of store level regression models that decomposes the sales promotion bump into three parts cross brand effects secondary demand cross period effects primary demand borrowed from other time periods and category expansion effects remaining primary demand across four store level scanner datasets we find that each of these three parts contribute about one third on average one extension we propose is the separation of the category expansion effect into cross store and market expansion effects another one is to split the cross item effect total across all other items into cannibalization and between brand effects we also allow for a flexible decomposition by allowing all effects to depend on the feature display support condition and on the magnitude of the price discount the latter dependence is achieved by local polynomial regression we find that feature supported price discounts are strongly associated with cross period effects while display only supported price discounts have especially strong category expansion effects while the role of the category expansion effect tends to increase with higher price discounts the roles of cross brand and cross period effects both tend to decrease

practice prize winner a nested logit model of product and transaction type choice for planning automakers pricing and promotions we develop a consumer response model to evaluate and plan pricing and promotions in durable good markets we discuss its implementation in the u s automotive industry which spends about 45 billion each year in price promotions the approach is based on a random effects multinomial nested logit model of product e g a vehicle model such as hyundai tucson and transaction type choice transaction types include combinations of acquisition types e g purchase versus lease and pricing instruments cash rebates reduced apr financing lease payment discounts we estimate the model using hierarchical bayes methods to capture response heterogeneity at the local market level we find key characteristics unique to durable good markets first consumers are heterogeneous in both their brand and transaction type preferences second consumers differ in their overall price sensitivity as well as in their relative sensitivity to alternative pricing instruments e g cash discounts reduced monthly payments third the most effective pricing programs tend to be those in which automakers offer consumers a menu of options to choose from e g a choice among a cash discount reduced interest rate financing or a lease payment discount we illustrate the model through an empirical application to a sample of data drawn from j d power transaction records in the entry suv segment and discuss examples of actual implementations

a simultaneous approach to the whether what and how much to buy questions consumer s purchase decisions of whether to buy what to buy and how much to buy are examined simultaneously based on a consumer utility maximization problem an unobservable threshold price about which a consumer pivots from nonpurchase to purchase can be deduced with any model specification the interrelationships between purchase decisions can be explicitly derived the model is applied to coffee purchasing data in addition by suppressing the nonpurchase options the model is compared with an alternative approach appearing in the marketing literature

shadow wages and peasant family labour supply an econometric application to the peruvian sierra a striking feature of developing economies is the large proportion of the work force that is self employed lack of widespread labor market participation in the agricultural sector can pose a major obstacle to the empirical implementation of economic models of the peasant household whether because wage data are simply not available or because the assumptions required to make use of wage data stretch the bounds of credulity this paper develops a methodology for estimating a structural labor supply model for primarily self employed peasant households which holds under a general agricultural technology and set of labor market conditions the unique feature of the approach is that the opportunity cost of time or shadow wage of household workers is explicitly estimated from an agricultural production function and is subsequently used to identify a set of structural labor supply parameters recent household survey data from rural peru is employed to estimate and perform various diagnostic tests on the model the empirical findings lend support to the hypothesis that peasant households allocate their members time as if to maximize a family utility function and moreover demonstrate the tractability of the shadow wage methodology and its usefulness in estimating more elaborate time allocation models

migration remittances and agricultural productivity in china in our paper we have used the new economics of labor migration framework to trace the complex linkages that exist among migration remittances and agricultural productivity in china constraints in the operation of on farm labor and capital or insurance markets or institutions provide households with a motivation to migrate and distort on farm operations when labor leaves in our household sample the net impact of migration and remittances on maize production is negative excerpt

commercial use of upc scanner data industry and academic perspectives the authors report the findings from an exploratory investigation of the use of upc scanner data in the consumer packaged goods industry in the u s the study examines the practitioner community s view of the use of scanner data and compares these views with academic research forty one executives from ten data suppliers packaged goods manufacturers and consulting firms participated in wide ranging in person interviews conducted by the authors the interviews sought to uncover key questions practitioners would like to answer with scanner data how scanner data is applied to these questions and the industry s perspective regarding the success that the use of scanner data has had in each area the authors then compare and contrast practitioners views regarding the resolution of each issue with academic research this produces a 2 2 classification of each question as resolved or unresolved from the perspectives of industry and academia along the diagonal of the 2 2 issues viewed as unresolved by both groups are important topics for future research issues deemed resolved by both groups are correspondingly of lower priority in the off diagonal cells industry and academics disagree these topics should be given priority for discussion information exchange and possible further research practitioners reported that scanner data analysis has had the most success and been most widely adopted for decision making in consumer promotions i e coupons trade promotions and pricing for example logit and regression models applied to scanner data have revealed very low average consumer response to coupons which has directly led to reduced couponing activity managers also reported high levels of comfort with and impact from analyses of trade promotions and price elasticities while industry views most of the issues in these areas to be resolved academic research raises concerns about a number of practices in common commercial use these include price threshold analysis and trade promotion evaluation using baseline and incremental sales in product strategy advertising and distribution management practitioners reported that the use of scanner data has had more limited development success and impact in the case of new product decisions scanner data use has been slow to develop due to the inherent limitations of historicaldata for these decisions and a heavy reliance on traditional primary research methods in advertising scanner data is widely analyzed with models but confusion among practitioners is very high due to controversies about methods e g what level of data aggregation is best and conflicting results in distribution and retail management scanner data use has tremendous potential but a mixed track record to date thus practitioners view the use of scanner data as unresolved for most issues in product strategy advertising and distribution this view is largely though not entirely consistent with academic research which has only begun to address many of the key questions raised by practitioners in light of the large number of unresolved issues and mixed record of scanner data use to date the authors offer aseries of specific recommendations for immediate and long term research priorities that are likely to have the greatest impact on commercial utilization of upc scanner data topics of immediate priority include price thresholds and gaps baseline and incremental sales base price elasticity competitive reactions measurement of advertising effects management of brand equity rationalization of product assortments and category management long term priorities include a greater emphasis on profitability versus sales or market share developing prescriptive models versus descriptive models and the need for industry standards

impacts of migration on household production choices evidence from china abstractthe great migration from chinese farms to cities during the past several decades ranks among the most economically consequential of modern population movements we use a national sample of rice producing chinese households to examine the effects of that migration on agricultural production our assessment involves evaluating four alternative theories of labour market equilibrium in the framework of an expanded agricultural household model migration s farm production impacts appear to be slight not on account of farm labour market perfections or remittance financed technological improvements but by substituting a reduction in leisure and other low return activities for lost labour

investigating purchase incidence brand choice and purchase quantity decisions of households we develop a comprehensive utility maximizing framework to study the impact of marketing variables on the category purchase brand choice and purchase quantity decisions of households for frequently purchased packaged goods the model allows for dependence among the three decisions while ensuring that these decisions provide in combination the greatest possible utility to the household by accounting for variations in reservation prices and intrinsic brand preferences across households the modeling framework explicitly captures the effects of unobserved heterogeneity on all three purchase decisions the principal empirical finding from analyzing the a c nielsen data for the yogurt product category is that the substantive implications for the effects of marketing variables are sensitive to whether these effects are determined conditional or unconditional on a product category purchase our results show that reservation prices and intrinsic brand preferences vary across households and not accounting for these variations in the estimation could lead to biased estimates for the coefficients of the marketing variables a comparison of our results to those obtained from a nested logit model of purchase incidence and brand choice reveals that our proposed model performs better using both a formal statistical test as well as the criterion of predictive validity in a holdout sample of panelists further the purchase quantity model compares favorably with two alternative models of quantity choice in the validation sample

migration unemployment and development a dynamic two sector analysis abstract a time minimizing problem of attaining a full employment state is solved in a dual economy model with harris todaro migration mechanism and with a positive level of urban unemployment in the starting period it appears that the optimum solution lies in the specialization of investment in the urban sector at least in the initial stage of development if the per capita capital stock in the urban sector is very small in the starting period

variance vs downside risk is there really that much difference abstract the popularity of downside risk among investors is growing and mean return downside risk portfolio selection models seem to oppress the familiar mean variance approach the reason for the success of the former models is that they separate return fluctuations into downside risk and upside potential this is especially relevant for asymmetrical return distributions for which mean variance models punish the upside potential in the same fashion as the downside risk the paper focuses on the differences and similarities between using variance or a downside risk measure both from a theoretical and an empirical point of view we first discuss the theoretical properties of different downside risk measures and the corresponding mean downside risk models against common beliefs we show that from the large family of downside risk measures only a few possess better theoretical properties within a return risk framework than the variance on the empirical side we analyze the differences between some us asset allocation portfolios based on variances and downside risk measures among other things we find that the downside risk approach tends to produce on average slightly higher bond allocations than the mean variance approach furthermore we take a closer look at estimation risk viz the effect of sampling error in expected returns and risk measures on portfolio composition on the basis of simulation analyses we find that there are marked differences in the degree of estimation accuracy which calls for further research

price competition under stockpiling and flexible consumption abstract conventional wisdom suggests that the main effect of price promotion is on brand switching i e secondary demand however some recent studies demonstrate that the primary demand expansion effect can be considerably larger than previously believed a significant driver of this primary demand effect is consumer stockpiling in response to price promotions indeed experimental studies have shown that additional inventory on hand can lead to an endogenous increase in consumption the authors develop a model of price competition between firms in response to the stockpiling and subsequent consumption dynamics of consumers in this setting the flexible consumption effect causes more intense price competition deeper promotions and an increase in the frequency of promotions the authors use two years of scanner panel data from eight product categories and 4313 stockkeeping units to test three implications of the theoretical model they find strong support for each

a dynamic model of rational addiction evaluating cigarette taxes addiction creates an intertemporal link between a consumer s past and present decisions altering their responsiveness to price changes relative to nonaddictive products we construct a dynamic model of rational addiction and endogenous consumption to investigate how consumers respond to policy interventions that aim to reduce purchases of cigarettes we find that on average the category elasticity is about 35 higher when the model correctly accounts for addiction however some policies spur substitution from more expensive single packs to less expensive cartons of cigarettes resulting in higher overall consumption for some consumers

multi product newsvendor problem with value at risk considerations abstract we consider the single period stochastic inventory newsvendor problem with downside risk constraints the aim in the classical newsvendor problem is maximizing the expected profit this formulation does not take into account the risk of earning less than a desired target profit or losing more than an acceptable level due to the randomness of demand we utilize value at risk var as the risk measure in a newsvendor framework and investigate the multi product newsvendor problem under a var constraint to this end we first derive the exact distribution function for the two product newsvendor problem and develop an approximation method for the profit distribution of the n product case n 2 a mathematical programming approach is used to determine the solution of the newsvendor problem with a var constraint this approach allows us to handle a wide range of cases including the correlated demand case that yields new results and insights the accuracy of the approximation method and the effects of the system parameters on the solution are investigated numerically

an empirical investigation of the dynamic effect of marlboro s permanent pricing shift the strategy philip morris adopted in 1993 featured a one time permanent publicly announced price cut an event referred to as marlboro friday little is known about the impact of permanent and publicly announced price cuts on consumer brand switching behaviors for an addictive product in the context of marlboro friday we investigate 1 how consumers brand choices are affected by a permanent price cut 2 whether differential and dynamic effects of permanent price cuts occur for different types of consumers and 3 the implications of publicly announced permanent price cuts on consumer brand switching behavior in the long run we develop a dynamic structural brand choice model that allows for consumer forward looking behavior learning and addiction and investigate how consumers adjusted their brand choice behaviors before and after this permanent price cut using unique consumer panel data pertaining to cigarette purchases before and after the event we provide behavioral explanations of whether and how the drastic and permanent price cut represented an effective step to encourage brand switching for an addictive product and a necessary step for philip morris to combat the growing market share of generic brands

creating win win trade promotions theory and empirical analysis of scan back trade deals manufacturer trade promotion spending is second only to cost of goods sold as a profit and loss item yet manufacturers often lose money on these deals as a result of forward buying by retailers the search for more effective forms of trade promotion and the availability of scanners at cash registers has led to the emergence of a new type of trade deal the scan back that gives retailers a discount on unitssoldduring the promotion rather than on unitsbought we develop a theory to compare retailer pricing decisions and profitability under scan back and traditional off invoice trade deals we show that when the terms of the trade deal are identical retailers prefer off invoice trade deals and manufacturers prefer scan backs manufacturers can however redesign the scan back to leave the retailer weakly better off and leave themselves strictly better off using proprietary data from the beverage category we conduct an empirical analysis and find that during the promotion period scan back trade deals relative to off invoice deals 1 do not cause excess ordering and 2 generate higher retail sales through lower retail prices implications for researchers and managers are discussed

promotion effect on endogenous consumption over the years researchers have found that promotion makes consumers switch brands and purchase earlier or more however it is unclear how promotion affects consumption especially for product categories that are perceived to be versatile and substitutable in this paper we propose a dynamic structural model with endogenous consumption under promotion uncertainty to analyze the promotion effect on consumption this model recognizes consumers as rational decision makers who form promotion expectations and plan their purchase and consumption decisions in light of promotion schedule applying the proposed model to packaged tuna and yogurt we find that endogenous consumption responds to promotion as a result of forward looking and stockpiling behavior this is the first empirical paper that recognizes consumption as an endogenous decision variable and proposes a structural model to offer behavioral explanations on whether how and why promotion encourages consumption for product categories with flexible consumption