forecast accuracy of individual analysts in nine industries the purpose of this paper is to investigate whether financial analysts with superior earnings forecasting ability can be distinguished on the basis of ex post forecast accuracy i explore the question by estimating and comparing average accuracy across individuals and by considering whether the observed distribution of analyst forecast accuracies differs from the distribution expected if their relative performances each year were purely random overall i do not find systematic differences in forecast accuracy across individuals financial press coverage suggests there are superior financial analysts for example institutional investor s annual all american research team includes analysts rated by money managers as superior on a variety of criteria including earnings forecasting ability to pick stocks and the quality of written reports clearly financial analyst services other than forecast accuracy are valued by their clients i focus on only one activity earnings forecasting for two reasons first forecast data are available quantitative and can be evaluated against observable earnings outcomes services such as insightful well written research reports are harder to evaluate quantitatively second academic use of analyst forecasts as earnings expectations data in capital markets empir

pricing under quality of service uncertainty market segmentation via statistical qos guarantees abstract this article examines how performance contingent pricing schemes with long term statistical performance guarantees can be applied to many it services we study two forms of performance contingent pricing with rebate proportional to failure rate and fixed rebate for below threshold performance we show that threshold performance contingency pricing can increase both profits and fairness customers who receive higher benefits pay higher effective price relative to standard pricing but an even better solution is to offer a menu of performance guarantees this can increase the firm s profit and segment the market only service providers whose performance level is sufficiently better than the industry standard can benefit from this pricing mechanism

the effect of payoff feedback and information pooling on reasoning errors evidence from experimental markets avast literature shows that individuals frequently violate normative principles in reasoning in this paper we report the results of four studies designed to determine if information dissemination in competitive auctions can reduce or even eliminate logical errors in the wason selection task our results show that payoff feedback and exposure to the information flow drive the aggregate behavior toward the normative solution we also found evidence of spillover effects from informed to uninformed traders in one sided combinatorial auctions as well as positive transfer effects from competitive to individual settings

a parsimonious model for forecasting gross box office revenues of motion pictures the primary objective of this paper is to develop a parsimonious model for forecasting the gross box office revenues of new motion pictures based on early box office data the paper also seeks to provide insights into the impact of distribution policies on the adoption of new products the model is intended to assist motion picture exhibitor chains retailers in managing their exhibition capacity and in negotiating exhibition license agreements with distributors studios by allowing them to project the box office potential of the movies they plan to or currently exhibit based on early box office results it is also of interest to practitioners in other software industries e g music books cd roms where the distribution intensity is highly variable over the product life cycle and is an important determinant of new product adoption patterns the model and its extensions are of interest to academic researchers interested in modeling distribution effects in new product adoption as well as forecasters looking for ways to leverage historical data on related products to forecast the sales of new products we draw upon a queuing theory framework to conceptualize stochastically the consumer s movie adoption process in two steps the time to decide to see the new movie and the time to act on the adoption decision the parameter for the time to decide process captures the intensity of information intensity flowing from various information sources while the parameter for the time to act process is related to the delay created by limited distribution intensity and other factors our conceptualization extends existing new product forecasting models which assume that consumers act instantaneously on the motivating information they receive about the new product the resulting model is parsimonious yet it accommodates a wide range of adoption patterns in addition the stochastic formulation allows us to quantify the uncertainty surrounding the expected adoption pattern in the empirical testing we focus on the most parsimonious version of the modeling framework boxmod i a model that assumes stationarity with respect to the two shape parameters that characterize the adoption process the model produces fairly accurate early forecasts using at most the first three weeks of data for calibration and the predictive performance of the model compares favorably with benchmark models we propose extensions of the basic model that account for more realistic non stationary distribution intensity patterns including a wide release pattern that relies on intensive distribution and promotion and a platform release pattern that involves a gradual buildup of distribution intensity finally we present an adaptive weighing scheme that combines initial parameter estimates obtained from a meta analysis procedure with estimates obtained from early data to produce forecasts of box office revenues for a new movie when little or no box office data are available an important finding from the empirical testing is that motion picture box office revenue patterns display remarkable empirical regularity we find that there are only three classes of adoption patterns and these can all be represented within the basic model by using a two parameter exponential or erlang 2 probability distribution or a three parameter generalized gamma distribution we also find that cumulative box office revenues can be predicted with reasonable accuracy often within 10 of the actual using as little as two or three data points however our attempts to predict revenue patterns without any sales data meet with limited success while the scale parameter can be estimated reasonably well from a historical database of parameter values we find that it is considerably more difficult to predict the shape parameters using historical data the parsimony we seek in developing the model comes at the cost of several limiting assumptions we assume that the time to decide subprocess and the time to act subprocess are independent which may not be the case if decisions on continued exhibition by retailers are endogenously related to box office revenues over the life cycle in the basic model formulation we also assume that the time to act process can be represented by an exponential distribution which may not always be the case while we provide some empirical evidence to support these assumptions further research could relax these and other assumptions to enrich the basic model although this would entail some loss in parsimony

information and efficiency goal arrival in soccer betting an efficient market incorporates news into prices immediately and fully tests for efficiency in financial markets have been undermined by information leakage we test for efficiency in sports betting markets real world markets where news breaks remarkably cleanly applying a novel identification to high frequency data we investigate the reaction of prices to goals scored on the cusp of half time this strategy allows us to separate the market s response to major news a goal from its reaction to the continual flow of minor game time news on our evidence prices update swiftly and fully

research on the motion picture industry state of the art and new directions off the beaten track away from theatrical release the motion picture industry has been subject of extensive academic research over the last decades however most scholars focused on the u s theatrical motion picture market the number of research activities regarding even more profitable release windows such as home video or television has been substantially lower although international distribution is essential for a motion picture project to break even there has been little significant re search on most other markets this paper aims at summarizing the current state of research on the motion picture industry particularly from marketing and management perspective revealing research gaps and proposing recommendations for future research endeavors therefore a three pillar scheme is developed to systemize previous findings research on intraorganizational decision making contractual relationships between national stakeholders and international market competition are differentiated since these insights are mainly derived from u s theatrical exhibition they can hardly be applied to other markets and exhibition windows thus potential research areas are identified to expand knowledge of posttheatrical and international markets

did the federal trade commission s advertising substantiation program promote more credible advertising this paper examines the effects of the federal trade commission s advertising substantiation program developed in the early 1970s this program coupled changes in the legal definition of deception with more vigorous ftc enforcement the authors analyze changes in advertising intensity media choice media wealth and the progress of new entrants the evidence suggests that adoption of substantiation requirements increased the credibility of advertising copyright 1990 by american economic association

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

movie advertising and the stock market valuation of studios a case of great expectations product innovation is the key revenue driver in the motion picture industry because major studios typically launch fewer than 20 movies per year the financial performance of a single release can have a major effect on the studio s profitability in this paper we study how single movie releases impact the investor valuation of the studio we analyze the change in postlaunch stock price and predict the direction and magnitude of excess returns based on the revenue expectation built up for a movie release that expectation is set in part by media support i e highly advertised movies are expected to draw larger audiences than others by using an event study methodology we isolate the impact of a movie launch on studio stock price and track the determinants of that change we examine a comprehensive data set comprising over 300 movies released by the largest studios our results indicate a clear interaction between the marketing support received by a movie and the direction and magnitude of its excess stock return post launch movies with above average prelaunch advertising have lower postlaunch stock returns than films with below average advertising our findings also suggest that movies that are hits at the box office may result in a lowering of stock price if they had high media support because of high performance expectations built up prior to launch thus prelaunch advertising plays a dual role of informing consumers about a movie s arrival as well as helping investors form expectations about the studio s profit performance

an experimental test of combinatorial information markets while a simple information market lets one trade on the probability of each value of a single variable a full combinatorial information market lets one trade on any combination of values of a set of variables including any conditional or joint probability in laboratory experiments we compare the accuracy of simple markets two kinds of combinatorial markets a call market and a market maker isolated individuals who report to a scoring rule and two ways to combine those individual reports into a group prediction we consider two environments with asymmetric information on sparsely correlated binary variables one with three subjects and three variables and the other with six subjects and eight variables thus 256 states

quality improvements and the incentive to leapfrog abstract in a model of an uncovered market of vertically differentiated products incentives of non identical duopolists to improve the technological maximum quality are analyzed it is assumed that initially firms offer products with different qualities and that the r d cost function changes exogenously this induces a reconsideration of firms quality decisions both firms have the same r d costs for improving the maximum quality quality changes within the existing quality range are assumed to incur only fixed adjustment costs it is shown that the firm which initially is in the low quality position always has a higher incentive to improve industry s quality than its rival if adjustments costs are sufficiently high persistence of dominance may occur for a low degree of initial differentiation low adjustment costs and r d cost functions with a high slope

installed base and compatibility innovation product preannouncements and predation a good is often more valuable to any user the more others use compatible goods the authors show that this effect may inhibit innovation if an installed base exists and transition to a new standard must be gradual early adopters bear a disproportionate share of transient incompatibility costs this can produce excess inertia the installed base however is stranded if the new standard is adopted this may create excess momentum these dynamic effects have strategic implications temporary price cutting can permanently prevent entry and product preannouncements can be critical in innovation these strategic actions have ambiguous welfare effects

price advertising and the deterioration of product quality arguments in favour of self enforced bans on advertising by professionals often rely on the stylized fact that advertising can communicate information about price but not about quality this being the case it is argued that allowing professionals to advertise runs the risk that firms will compete vigorously over price at the expense of the quality of their product this paper shows that even if price can communicate no information directly about quality it can do so indirectly because price will be a signal of quality because of this allowing advertising is shown to improve consumer welfare

measuring the convexity of the cost function abstract in this paper i argue that as might be expected the initial assumption made about the cost function will influence the empirical results obtained regarding the convexity i show that this expectation is supported empirically by estimating the parameters of two quadratic cost functions the first is that function which has been traditionally used in the literature the second is a simplified version of the quadratic cost function where the cost of changing the level of output is dropped since the evidence in the literature suggest that this variable has no significant effect on cost using physical product monthly data for 24 industries we find that the conclusion reached regarding the convexity of the cost function depends on the assumption we make regarding the cost function i further find that the simplified function is consistent with the observed behavior of production and sales while the traditional cost function is inconsistent with that behavior

a theory of jump bidding in ascending auctions abstract jump bidding is a commonly observed phenomenon that involves bidders in ascending auctions submitting bids higher than required by the auctioneer such behavior is typically explained as due to irrationality or to bidders signaling their value we present field data that suggests such explanations are unsatisfactory and construct an alternative model in which jump bidding occurs due to strategic concerns and impatience we go on to examine the impact of jump bidding on the outcome of ascending auctions in an attempt to resolve some policy disputes in the design of ascending auctions

economic insights from internet auctions this paper surveys recent studies of internet auctions four main areas of research are summarized first we survey several studies that document and attempt to explain the frequently observed sniping or last second bidding behavior in these auctions second we summarize several methods proposed to quantify the distortions caused by asymmetric information in these markets most notably due to the winner s curse third we explore research about the role of reputation mechanisms installed to help combat these distortions finally we discuss what internet auctions have to teach us about auction design

constructing density forecasts from quantile regressions the departure from the traditional concern with the central tendency is in line with the increasing recognition that an assessment of the degree of uncertainty surrounding a point forecast is indispensable clements 2004 we propose an econometric model to estimate the conditional density without relying on assumptions about the parametric form of the conditional distribution of the target variable the methodology is applied to the u s unemployment rate and the survey of professional forecasts specification tests based on koenker and xiao 2002 and gaglianone et al 2011 indicate that our approach correctly approximates the true conditional density

prelaunch forecasting of new automobiles this paper develops and applies a prelaunch model and measurement system to the marketing planning of a new automobile the analysis addresses active search by consumers dealer visits word of mouth communication magazine reviews and production constraints issues that are important in understanding consumer response to durable goods we address these issues with a detailed consumer flow model which monitors and projects key consumer transitions in response to marketing actions a test vs control consumer clinic provides data which with judgment and previous experience are used to calibrate the model to fit the sales history of the control car we illustrate how the model evolved to meet management needs and provided suggestions on advertising dealer training and consumer incentives comparison of the model s predictions to actual sales data suggests reasonable accuracy when an implemented strategy matches the planned strategy

forecaster diversity and the benefits of combining forecasts the expected error variance of a combined forecast is necessarily lower than that of an individual forecast but in practice there may be considerable variation around these expected values this paper introduces a measure of the benefit from combining the probability of a reduction in error variance which recognizes this problem the measure is applied to data on the forecasts and forecasting methods of a panel of u s economists to determine how the benefits of combining vary with the number of forecasts combined and with the diversity in theories and techniques among the component forecasts

consumption self control by rationing purchase quantities of virtue and vice consumers attempts to control their unwanted consumption impulses influence many everyday purchases with broad implications for marketers pricing policies addressing theoreticians and practitioners alike this paper uses multiple empirical methods to show that consumers voluntarily and strategically ration their purchase quantities of goods that are likely to be consumed on impulse and that therefore may pose self control problems for example many regular smokers buy their cigarettes by the pack although they could easily afford to buy 10 pack cartons these smokers knowingly forgo sizable per unit savings from quantity discounts which they could realize if they bought cartons by rationing their purchase quantities they also self impose additional transactions costs on marginal consumption which makes excessive smoking overly difficult and costly such strategic self imposition of constraints is intuitively appealing yet theoretically problematic the marketing literature lacks operationalizations and empirical tests of such consumption self control strategies and of their managerial implications this paper provides experimental evidence of the operation of consumer self control and empirically illustrates its direct implications for the pricing of consumer goods moreover the paper develops a conceptual framework for the design of empirical tests of such self imposed constraints on consumption in consumer goods markets within matched pairs of products we distinguish relative virtue and vice goods whose preference ordering changes with whet her consumers evaluate immediate or delayed consumption consequences for example ignoring long term health effects many smokers prefer regular relative vice to light relative virtue cigarettes because they prefer the taste of the former however ignoring these short term taste differences the same smokers prefer light to regular cigarettes when they consider the long term health effects of smoking these preference orders can lead to dynamically inconsistent consumption choices by consumers whose tradeoffs between the immediate and delayed consequences of consumption depend on the time lag between purchase and consumption this creates a potential self control problem because these consumers will be tempted to over consume the vices they have in stock at home purchase quantity rationing helps them solve the self control problem by limiting their stock and hence their consumption opportunities such rationing implies that per purchase occasion vice consumers will be less likely than virtue consumers to buy larger quantities in response to unit price reductions such as quantity discounts we first test this prediction in two laboratory experiments we then examine the external validity of the results at the retail level with a field survey of quantity discounts and with a scanner data analysis of chain wide store level demand across a variety of different pairs of matched vice regular and virtue reduced fat calorie or caffeine etc product categories the analyses of these experimental field and scanner data provide strong convergent evidence of a characteristic crossover in demand schedules for relative vices and virtues for categories as diverse as among others potato chips chocolate chip cookies cream cheese beer soft drinks ice cream and frozen yogurt chewing gum coffee and beef andturkey bologna vice consumers demand increases less in response to price reductions than virtue consumers demand although their preferences are not generally weaker for vices than for virtues constraints on vice purchases are self imposed and strategic rather than driven by simple preferences we suggest that rationing their vice inventories at the point of purchase allows consumers to limit subsequent consumption as a result of purchase quantity rationing however vice buyers forgo savings from price reductions through quantity discounts effectively paying price premiums for the opportunity to engage in self control thus purchase quantity rationing vice consumers are relatively price in sensitive from a managerial and public policy perspective our findings should offer marketing practitioners in many consumer goods industries new opportunities to increase profits through segmentation and price discrimination based on consumer self control they can charge premium prices for small sizes of vices relative to the corresponding quantity discounts for virtues virtue consumers on the other hand will buy larger amounts even when quantity discounts are relatively shallow a key conceptual contribution of this paper lies in showing how marketing researchers can investigate a whole class of strategic self constraining consumer behaviors empirically moreover this research is the first to extend previous theoretical work on impulse control by empirically demonstrating its broader implications for marketing decision making

optimal aggregation of money supply forecasts accuracy profitability and market efficiency we present a general procedure for aggregating expert forecasts which exploits regularities in the structure of information within the forecaster population specific information structures lead to aggregation methods which adjust for additive bias differences in individual accuracy and correlation among forecasts as an application we construct composite predictions of the weekly change in the money supply from forecasts made by twenty major securities dealers for which high positive correlation is found to be a significant characteristic due to instability in the information structure our methods cannot improve on the accuracy of a simple average in this case however they do capture information about the correlation among money supply forecasts which is not fully impounded in short term interest rates forecasts from our models accurately predict the direction of price changes for treasury bills and treasury bill futures after a money supply announcement the adjustment of prices to information in financial markets has been studied at length mostly from the perspective of the efficient markets hypothesis market efficiency tests typically look at the behavior of prices the end product

interjurisdictional determinants of property assessment regressivity the previous literature on vertical equity in property assessment has focused on parcel level data within a single area and has produced mixed conclusions on whether the process is progressive or regressive this paper advances the discussion to identifying what differences between jurisdictions might account for the mix of findings using data from virginia cities and counties between 2001 and 2007 evidence is presented that indicates having tax maps available online appointed assessors and senior citizens all influence the level of regressivity observed between jurisdictions overall the results support the hypothesis that interjurisdictional differences are determinants of vertical inequity

the quality double whammy this research focuses on how consumers perceive the quality level of a complex stimulus in our case a service encounter and how this perception affects consumers overall assessment of the quality level of the firm as such it should be of interest to consumer behavior theorists as well as to those involved in marketing management issues we start our presentation by developing a normative bayesian data integration and updating model somewhat similar to that put forth by rust et al 1999 the major constructs of interest in this model are the person s belief about the overall service quality level of a firm and what will happen on the next service encounter two major results following from this baseline normative model are that the updated means of these two beliefs are identical to the dynamic updating equations put forth by boulding et al 1993 and that an underlying assumption of this model is that consumers form unbiased perceptions of the complex stimulus next based on substantial empirical evidence from the behavioral literature we incorporate into this baseline model a process by which consumers form nonrandom perceptions specifically we postulate that a person s perception of a complex service encounter is a blend of the objective dimensions of the service encounter and the person s prior overall belief about the quality level of the firm the relative weights placed on these two factors are determined at least in part by the experience level of the customer and the complexity of the service encounter we then use this expanded model to compare and test different models of service quality and provide deeper insights into the process by which consumers form perceptions of both the service transaction and the overall service quality level of a firm we test this model using data from two different experiments in each experiment we manipulate the service provided and the person s initial will and should expectations using both obtrusive and unobtrusive measures of the underlying constructs of our model we employ multiple tests to determine the veracity of our expanded model relative to the baseline model these tests support the expanded model specification as found previously and as predicted by a bayesian updating process consumers prior beliefs influence their cumulative overall opinion of service quality e g anderson and sullivan 1993 bolton and drew 1991 boulding et al 1993 rust et al 1999 perhaps more importantly these prior beliefs also influence their perceptions of the data themselves which in turn affect their new updated overall opinion these two different influences of prior beliefs on cumulative evaluations of quality constitute the double whammy referred to in the title this double whammy effect has major managerial significance specifically we see from our model development that all activities of a firm will be perceived in light of a person s prior beliefs and that these priors will be double counted relative to our baseline model thus any marketing action taken by a firm will be perceived more positively or negatively depending on the person s prior belief about the quality level of the firm as such our model provides a formal explanation for the notion of brand equity as differential leverage in marketing activities as proposed by keller 1993

rational and adaptive performance expectations in a customer satisfaction framework this article develops and tests alternative models of market level expectations perceived product performance and customer satisfaction market performance expectations are argued to be largely rational in nature yet adaptive to changing market conditions customer satisfaction is conceptualized as a cumulative construct that is affected by market expectations and performance perceptions in any given period and is affected by past satisfaction from period to period an empirical study that supports adaptive market expectations and stable market satisfaction using data from the swedish customer satisfaction barometer is reported

information diversity and market behavior a reply professor minassian has raised technical points regarding my paper which for the most part seem to be well founded though not crucial to the basic results in this reply my objective will be to discuss what these mean in the context of the model and to offer slightly revised statements of theorems 1 and 3 to eliminate the problems equation 1 which duplicates equation 9 in 1 gives the following expression for the expected profits earned by trader i from trading in a pure speculative market

the price elasticity of selective demand a meta analysis of econometric models of sales the author describes a meta analysis of econometric studies that estimated the elasticity of selective sales or market share to price the literature review yielded 367 suitable price elasticities

setting customer expectation in service delivery an integrated marketing operations perspective service firms have increasingly been competing for market share on the basis of delivery time many firms now choose to set customer expectation by announcing their maximal delivery time customers will be satisfied if their perceived delivery times are shorter than their expectations this gap model of service quality is used in this paper to study how a firm might choose a delivery time commitment to influence its customer expectation and delivery quality in order to maximize its market share a market share model is developed to capture 1 the impact of delivery time commitment and delivery quality on the firm s market share and 2 the impact of the firm s market share and process variability on delivery quality when there is a congestion effect we show that the choice of the delivery time commitment requires a proper balance between the level of service capacity and customer sensitivities to delivery time expectation and delivery quality we prove the existence of nash equilibria in a duopolistic competition and show that this delivery time commitment game is analogous to a prisoners dilemma

aggregating subjective forecasts some empirical results the impact on forecast accuracy of aggregating the subjective forecasts of up to 13 individuals was examined for five forecast weighting methods equal weighting two ex post methods that took advantage of prior information about the individuals relative accuracy and two ex ante methods based on objective and subjective assessments of relative accuracy the individuals were executives managers and sales personnel employed by time inc and the variable forecasted was the number of advertising pages sold annually by time magazine over a 14 year period the results show that both the average forecast error and the variance of the error decrease as additional individuals forecasts are included in the aggregate only two to five individuals forecasts must be included to achieve much of the total improvement available from combining all 13 forecasts three of the differential weighting methods produced more accurate forecasts than equal weighting but the magnitude of the improvement was small implications for realistic forecasting situations are discussed as are conditions under which the use of aggregates seems attractive

strategic choice of quality when quality is costly the persistence of the high quality advantage in a two firm two stage model of vertical product differentiation i show that for every convex fixed cost function of quality the firm that chooses the higher quality at the first stage earns the higher profits the result holds for the pure strategy equilibrium in the simultaneous quality game and it holds as well if firms choose their qualities in sequential order

research note prerelease demand forecasting for motion pictures using functional shape analysis of virtual stock markets prerelease demand forecasting is one of the most crucial yet difficult tasks facing marketers in the 60 billion motion picture industry we propose functional shape analysis fsa of virtual stock markets vsms to address this long standing challenge in vsms prices of a movie s stock reflect the dynamic demand expectations prior to the movie s release using fsa we identify a small number of distinguishing shapes e g the last moment velocity spurt that carry information about a movie s future demand and produce early and accurate prerelease forecasts we find that although forecasting errors from the existing methods e g those that rely on movie features can be as high as 90 87 our approach results in an error of only 4 73 because demand forecasting is especially useful for managerial decision making when provided longbefore a movie s release we further demonstrate how our method can be used for early forecasting and compare its power against alternative approaches we also discuss the theoretical implications of the discovered shapes that may help managers identify indicators of a potentially successful movie early and dynamically

coordination in the presence of asset markets markets aggregate widely dispersed information and direct resources to where they produce the greatest value friedrich a hayek 1945 adam smith 1776 these dual roles of informational and allocative efficiency help explain why asset markets are often used to guide economic activity such as production and investment many economic contexts involving production and investment are characterized by multiple equilibria john bryant 1983 jack hirshleifer 1983 russell w cooper 1999 colin camerer and marc knez 1997 jordi brandts and david j cooper 2006 when asset markets are linked to such contexts it is important to understand what role they play in aiding coordination and selecting equilibria if asset markets obtain both informational and allocative efficiency in a multiple equilibrium con text then they should coordinate the beliefs of economic agents and guide behavior to an efficient equilibrium indeed some evidence suggests that one sided auction markets may facilitate efficient coordination in an environment with multiple equi libria john b van huyck raymond c battalio and richard o beil 1993 vincent crawford and bruno broseta 1998 however the broader question of whether asset markets generally lead to efficient coordination in environments with multiple equi libria remains an open question in this paper we explore experimentally the influence of two sided futures asset markets on behavior and outcomes in an economic activity characterized by multi plicity of equilibria we use laboratory experiments where we can control impor tant features of both the market and the underlying activity and focus on situations where the outcome of the economic activity is sensitive to the behavior of small numbers of agents the economic activity in our setting consists of a coordination game with pareto ranked equilibria in which the payoff to each player is a function of her own choice or input and group output which is some order statistic such as the minimum of all players input choices see van huyck battalio and beil 1990 van huyck battalio and beil 1991 crawford 1995 players all do better if they coordinate on the highest output efficient equilibrium which is pareto optimal but they also prefer to select a lower input if they believe others will do so coordination games of this kind have been applied widely to model economic activity from the relationship between beliefs and output in macroeconomic models cooper 1999 to public good provision hirshleifer 1983 to firm production

averages of forecasts some empirical results an alternative to using a single forecasting method is to average the forecasts obtained from several methods in this paper we investigate empirically the impact of the number and choice of forecasting methods on the accuracy of simple averages it is concluded that the forecasting accuracy improves and that the variability of accuracy among different combinations decreases as the number of methods in the average increases thus combining forecasts seems to be a reasonable practical alternative when as is often the case a true model of the data generating process or a single best forecasting method cannot be or is not for whatever reasons identified

assessor behavior in the presence of regulatory constraints in recent years economists have eschewed traditional public interest models of the behavior of political officials opting instead for behavioral models that emphasize the economic motivations of the officials themselves 12 15 17 such models have rarely been applied to the behavior of property tax assessors in spite of the fact that bad assessing has been widely observed lack of uniformity in assessments coupled with a tendency for lower valued parcels to be relatively overassessed have been two of the main criticisms 3 8 11 rather than examining the incentives facing the assessors themselves researchers have explained inaccurate assessments by such factors as poor assessor training insufficient funding of assessing offices assessment lag in the face of inflation and neighborhood change in property values and an assessment appeals process that is often cumbersome and costly 7 14 there have been only a few explicit models of assessment determination geraci suggests a model where assessing error is hypothesized to depend on assessor characteristics the institutional structure of the jurisdiction and the difficulty of the local appraisal task 9 bowman and mikesell offer a similar model emphasizing residential assessment and the reassessment process 4 this paper presents an alternative view of assessment determination based on a model of assessor behavior constrained by regulatory oversight after first developing the model in general terms a more explicit linear programming model is developed to allow for simulation of actual parcel by parcel assessment determination and for examination of the sensitivity of these assessments to changes in regulatory policies the predictions of the model are compared to actual assessing behavior observed in a major metropolitan area the model performs well in comparison to other simple statistical predictions of assessed values

timing decisions of new product preannouncement and launch with competition abstract we develop a game theoretic model to study the timing of new product preannouncement and launch under competition we derive firms optimal timing choices and conducted a numerical analysis to evaluate the role of various factors our analytical and numerical results showed that anticipated competitor s timing choices are the most significant factors a firm should not preannounce early unless the preannouncement is effective in creating pent up demands however the preannouncement and launch should be rushed if the quality or profit margin of the new product is high and postponed if the market share of the existing product is high the market leader should preannounce earlier in a simultaneous game than in a sequential game but the opposite for the market follower data collected from the microprocessor industry validated our model

testing for forecast consensus a panel of forecasts may be defined to be in consensus when individual forecasters place identical weights on a common latent variable we suggest this definition and formulate a dynamic latent variable model to test for consensus this method also tests whether it is valid to use the mean forecast as the consensus forecast in applications to surveys of u s macroeconomic forecasters there is greater consensus in forecasts for output growth than for inflation or unemployment but idiosyncratic forecast autocorrelation from year to year is present for most forecasters

moviemod an implementable decision support system for prerelease market evaluation of motion pictures in spite of the high financial stakes involved in marketing new motion pictures marketing science models have not been applied to the prerelease market evaluation of motion pictures the motion picture industry poses some unique challenges for example the consumer adoption process for movies is very sensitive to word of mouth interactions which are difficult to measure and predict before the movie has been released in this article we undertake the challenge to develop and implement moviemod a prerelease market evaluation model for the motion picture industry moviemod is designed to generate box office forecasts and to support marketing decisions for a new movie after the movie has been produced or when it is available in a rough cut but before it has been released unlike other forecasting models for motion pictures the calibration of moviemod does not require any actual sales data also the data collection time for a product with a limited lifetime such as a movie should not take too long for moviemod it takes only three hours in a consumer clinic to collect the data needed for the prediction of box office sales and the evaluation of alternative marketing plans the model is based on a behavioral representation of the consumer adoption process for movies as a macroflow process the heart of moviemod is an interactive markov chain model describing the macro flow process according to this model at any point in time with respect to the movie under study a consumer can be found in one of the following behavioral states undecided considerer rejecter positive spreader negative spreader and inactive the progression of consumers through the behavioral states depends on a set of movie specific factors that are related to the marketing mix as well as on a set of more general behavioral factors that characterize the movie going behavior in the population of interest this interactive markov chain model allows us to account for word of mouth interactions among potential adopters and several types of word of mouth spreaders in the population marketing variables that influence the transitions among the states are movie theme acceptability promotion strategy distribution strategy and the movie experience the model is calibrated in a consumer clinic experiment respondents fill out a questionnaire with general items related to their movie going and movie communication behavior they are exposed to different sets of information stimuli they are actually shown the movie and finally they fill outpostmovie evaluations including word of mouth intentions these measures are used to estimate the word of mouth parameters and other behavioral factors as well as the movie specific parameters of the model moviemod produces forecasts of the awareness adoption intention and cumulative penetration for a new movie within the population of interest for a given base marketing plan it also provides diagnostic information on the likely impact of alternative marketing plans on the commercial performance of a new movie we describe two applications of moviemod one is a pilot study conducted without studio cooperation in the united states and the other is a full fledged implementation conducted with cooperation of the movie s distributor and exhibitor in the netherlands the implementations suggest that moviemod produces reasonably accurate forecasts of box office performance more importantly the model offers the opportunity to simulate the effects of alternative marketing plans in the dutch application the effects of extra advertising extra magazine articles extra tv commercials and higher trailer intensity compared to the base marketing plan of the distributor were analyzed we demonstrate the value of these decision support capabilities of moviemod in assisting managers to identify a final plan that resulted in an almost 50 increase in the test movie s revenue performance compared to the marketing plan initially contemplated management implemented this recommended plan which resulted in box office sales that were within 5 of the moviemod prediction moviemod was also tested against several benchmark models and its prediction was better in all cases an evaluation of moviemod jointly by the dutch exhibitor and the distributor showed that both parties were positive about and appreciated its performance as a decision support tool in particular the distributor who has more stakes in the domestic performance of its movies showed a great interest in using moviemod for subsequent evaluations of new movies prior to their release based on such evaluations and the initial validation results moviemod can fruitfully and inexpensively be used to provide researchers and managers with a deeper understanding of the factors that drive audience response to new motion pictures and it can be instrumental in developing other decision support systems that can improve the odds of commercial success of new experiential products

cheap talk with two audiences these problems have in common a simple structure an informed sender says something to two interested but uninformed receivers who then take actions based on their beliefs these actions affect the sender as well as the receivers in this paper we study how costless nonverifiable claims cheap talk can affect these beliefs and hence the actions and how the incentives for truthful revelation to one receiver are affected by the presence of the other we then ask how welfare is affected by whether claims are made in public or in private as some of the above examples suggest public messages may be more credible than private messages addressed to either audience one possibility is that the presence of one audience can discipline the sender s relationship with the other we call this one sided

the efficiency of investment in the presence of aggregate demand spillovers in the presence of aggregate demand spillovers an imperfectly competitive form s profit is positively related to aggregate income which in turn rises with profits of all firms in the economy this pecuniary externality makes a dollar of a firm s profit raise aggregate income by more than a dollar since other firms profits also rise and in this way gives rise to a multiplier since such multipliers are ignored by firms making investment decisions privately optimal investment decisions under uncertainty will not in general be socially optimal under reasonable conditions investment is too low

implications of expected changes in the seller s price in name your own price auctions the seller s threshold price in name your own price auctions varies over time however consumers must bid without knowing when these variations occur because the threshold price is unobservable to them this paper uses an analytical model and laboratory auctions to explore how the frequency of changes in the threshold price impacts consumer bidding behavior in name your own price auctions in particular we consider how the frequency of these expected changes affects the optimal pattern of bid sequences e g strictly increasing over time or following a nonmonotonic pattern we find that when the probability of a price change is moderate consumers may have an incentive to use nonmonotonic bidding patterns rather than steadily increasing their bids over time consumers will at some point in the bid sequence decrease their bid however when the expected probability of a price change is very low or very high consumers do not have an incentive to use nonmonotonic bidding patterns interestingly impatient bidders are more likely to decrease their bids at some point in the bid sequence than patient bidders finally we find that more frequent price changes may increase customer satisfaction

sequential versus simultaneous choice with endogenous quality abstract in this paper we examine how the timing of investment affects the levels of quality chosen by firms we show that in a model with vertical quality differentiation a game with sequential quality choice induces both firms to make smaller quality investments than they would in a game with simultaneous quality choice furthermore we show that while aggregate profit is higher both consumer and social surplus are lower under sequential quality choice

the existence of low end firms may help high end firms two models of competition between high end and low end products benefiting the high end firms are presented one is a quantity competition model and the other is a price competition model with product differentiation the key factor is the existence of two heterogeneous consumer groups those who demand only high end name brand products and those who care little whether products are high or low end we show that under certain conditions the profits of firms in the high end market are larger when there are firms producing low end products than when there are not the existence of price sensitive consumers who care little about product quality intensifies competition among the high end firms the existence of low end firms functions as a credible threat which induces the high end firms not to overproduce because price sensitive consumers buy products from the low end firms the result provides a new theoretical mechanism concerning the profitability and pricing of national brand firms after the entry of private labels it has an implication for pricing and marketing strategies established firms should not decrease their prices after the entry of nonestablished firms

a two factor model to combine us inflation forecasts the combination of individual forecasts is often a useful tool to improve forecast accuracy the most commonly used technique for forecast combination is the mean and it has frequently proved hard to surpass this study considers factor analysis to combine us inflation forecasts showing that just one factor is not enough to beat the mean and that the second one is necessary the first factor is usually a weighted mean of the variables and it can be interpreted as a consensus forecast while the second factor generally provides the differences among the variables and since the observations are forecasts it may be related with the dispersion in forecasting expectations and in a sense with its uncertainty within this approach the study also revisits friedman s hypothesis relating the level of inflation with expectations uncertainty at the beginning of the twenty first century

explaining and forecasting online auction prices and their dynamics using functional data analysis online auctions have become increasingly popular in recent years and as a consequence there is a growing body of empirical research on this topic most of that research treats data from online auctions as cross sectional and consequently ignores the changing dynamics that occur during an auction in this article we take a different look at online auctions and propose to study an auction s price evolution and associated price dynamics specifically we develop a dynamic forecasting system to predict the price of an ongoing auction by dynamic we mean that the model can predict the price of an auction in progress and can update its prediction based on newly arriving information forecasting price in online auctions is challenging because traditional forecasting methods cannot adequately account for two features of online auction data 1 the unequal spacing of bids and 2 the changing dynamics of price and bidding throughout the auction our dynamic forecasting model accounts for these special featur

internet based virtual stock markets for business forecasting the application of internet based virtual stock markets vsms is an additional approach that can be used to predict short and medium term market developments the basic concept involves bringing a group of participants together via the internet and allowing them to trade shares of virtual stocks these stocks represent a bet on the outcome of future market situations and their value depends on the realization of these market situations in this process a vsm elicits and aggregates the assessments of its participants concerning future market developments the aim of this article is to evaluate the potential use and the different design possibilities as well as the forecast accuracy and performance of vsms compared to expert predictions for their application to business forecasting after introducing the basic idea of using vsms for business forecasting we discuss the different design possibilities for such vsms in three real world applications we analyze the feasibility and forecast accuracy of vsms compare the performance of vsms to expert predictions and propose a new validity test for vsm forecasts finally we draw conclusions and provide suggestions for future research

jump bidding strategies in internet auctions abidding strategy commonly observed in internet auctions is that of jump bidding or entering a bid larger than what is necessary to be a currently winning bidder in this paper we argue that the cost associated with entering online bids and the uncertainty about future entry both of which distinguish internet from live auctions can explain this behavior we present a simple theoretical model that includes the preceding characteristics and derive the conditions under which jump bidding arises in a format commonly used for online trading the ascending price auction we also present evidence recorded from hundreds of internet auctions that is consistent with some of the basic predictions from our model we find that jump bidding is more likely earlier in an auction when jumping has a larger strategic value and that the incentives to jump bid increase as competition increases our results also indicate that jump bidding is effective jump bidders place fewer bids overall and increased early jump bidding deters entry later in the auction we also discuss possible means of reducing bidding costs and evidence that internet auctioneers are pursuing this goal

wishes expectations and actions a survey on price formation in election stock markets abstract with error prone and biased individual traders can markets aggregate trader information and produce efficient outcomes we review election stock market evidence that suggests this does happen individual traders appear biased and error prone consistently yet these markets prove quite efficient in predicting election outcomes we also review work which documents comparable but substantially different phenomena in related laboratory markets in addition we report the results from a new laboratory session which shows how we can create particular biases that mirror those in election stock markets finally we discuss how combined laboratory and field experiments can help us understand trader market interactions

measuring consumers willingness to pay at the point of purchase abstract economists psychologists and marketing researchers rely on measures of consumers willingness to pay wtp in estimating demand for private and public goods and in designing optimal price schedules existing market research techniques for measuring wtp differ in whether they provide an incentive to consumers to reveal their true wtp and in whether they simulate actual point of purchase contexts the authors present an empirical comparison of several procedures for eliciting wtp that are applicable directly at the point of purchase in particular the authors test the applicability of becker degroot and marschak s 1964 well known incentive compatible procedure for assessing the utility of lotteries to measuring consumers wtp in three studies the authors explore the reliability validity and feasibility of the procedure and show that it yields lower wtp estimates than do non incentive compatible methods such as open ended and double bounded contingent valuation they show experimentally t

rather bait than switch abstract this paper reviews some of the theory e g postner 1973 on the incentives of firms to advertise deceptively it argues that the widely held belief that these incentives are small and are outweighed by important disincentives is based on unjustified assumptions about consumer rationality the paper presents a model of advertising and consumer reactions in which consumers manifest a form of bounded rationality given this it is demonstrated that under cogent assumptions about parameter values some firms will have an incentive to advertise deceptively causing a net welfare loss to society in the absence of corrective policy

first to market is technological innovation in new product development profitable in health care industries abstract do innovative products incorporated advanced technologies help firms improve operating performance in this study we traced the operating performance of 168 publicly traded manufacturing firms in the usa that announced technologically innovative products in two major industries from the health care domain namely pharmaceuticals and medical instruments we employed the event study methodology and collected objective financial data from compustat we found that technologically innovative products have a statistically significant positive effect on operating performance the median abnormal increase in return on assets ranged from 2 20 to 7 07 over a four year period the median abnormal increase in return on sales ranged from 4 16 to 4 70 and the median abnormal increase in sales over assets ranged from 5 85 to 7 38

accounting information disclosure and the cost of capital in this paper we examine whether and how accounting information about a firm manifests in its cost of capital despite the forces of diversification we build a model that is consistent with the capital asset pricing model and explicitly allows for multiple securities whose cash flows are correlated we demonstrate that the quality of accounting information can influence the cost of capital both directly and indirectly the direct effect occurs because higher quality disclosures affect the firm s assessed covariances with other firms cash flows which is nondiversifiable the indirect effect occurs because higher quality disclosures affect a firm s real decisions which likely changes the firm s ratio of the expected future cash flows to the covariance of these cash flows with the sum of all the cash flows in the market we show that this effect can go in either direction but also derive conditions under which an increase in information quality leads to an unambiguous decline in the cost of capital

unstable weights in the combination of forecasts the weights used in the combination of forecasts are shown to be very unstable they are generally so unstable that the combined forecasts often do not perform better than some of the individual forecasts or a simple average of the forecasts in practice the instability is found from a series of monte carlo experiments as well as from the nominal gnp forecasts from four well known macro forecasters the monte carlo experiments also show that when the underlying models are known a composite forecast from a composite model is generally more accurate than the combination of the individual forecasts a simple average is shown to be the best technique to use in practice because the weights in the combination are so unstable

growing growing gone cascades diffusion and turning points in the product life cycle research on the product life cycle plc has focused primarily on the role of diffusion this study takes a broader theoretical perspective on the plc by incorporating informational cascades and developing and testing many new hypotheses based on this theory on average across 30 product categories the authors find that i new consumer durables have a typical pattern of rapid growth of 45 per year over 8 years ii this period of growth is followed by a slowdown when sales decline by 15 and stay below those of the previous peak for 5 years iii slowdown occurs at 34 population penetration and about 50 of ultimate market penetration iv products with large sales increases at takeoff tend to have larger sales declines at slowdown v leisure enhancing products tend to have higher growth rates and shorter growth stages than nonleisure enhancing products time saving products tend to have lower growth rates and longer growth stages than nontime saving products vi lower probability of slowdown is associated with steeper price reductions lower penetration and higher economic growth vii a hazard model can provide reasonable predictions of the slowdown as early as the takeoff the authors discuss the implications of these findings

competition in the medical profession an application of the economic theory of regulation although economists generally believe that the medical profession earns above normal returns by restricting entry this proposition has never been directly tested there have been indirect attempts to determine the existence and extent of above normal returns in medicine by comparing the rate of return to investment in medicine with various other occupations the first work along these lines was performed by friedman and kuznets 9 using income data generated for various professions in the 1930s they found physicians enjoyed a substantial premium over dentists in terms of the rate of return to their educational expenses friedman and kuznet s results however are not without critics 13 14 in addition to the findings of friedman and kuznets kessel 11 12 has criticized the medical profession for cartel behavior again others disagree with this contention the debate continues but no test of the actual effect of licensing limitations on the salaries of physicians and hence rate of return to investment in medical education has been performed that task is the purpose of this study peltzman 15 has provided a general theory of regulation which may be employed to test the effect of restrictive practices of the medical profession on the level of physicians earnings and thus provide evidence as to the intent and result of physicians restrictive practices section ii of this paper is a review and critique of the literature concerned with restrictive practices and above normal returns to the medical profession the third section extends peltzman s theory to the case of a self regulating profession the structure of regulation in medicine section iv empirically tests the model and discusses its implication the fifth and final section contains a summary and conclusions

setting quality expectations when entering a market what should the promise be this paper examines optimal advertised quality actual quality and price for a firm entering a market it develops a two period model where advertised quality influences expectations and hence trial and the gap between actual quality and expectations determines satisfaction which in turn impacts second period sales in such situations a company makes a choice between advertising high quality and getting trial but little repeat and advertising low quality and getting low trial but high repeat results are derived by numerical methods as well as analytically for a special case of the model the model suggests it is optimal to overstate quality when i customers rely relatively less on advertising to form quality expectations and ii customers intrinsic satisfaction with a product is high these results are consistent with deceptive advertising cases at the ftc which showed more deception for unknown firms and for firms whose customers were more satisfied they are also consistent with the decisions made by future managers mbas except that the respondents would advertise higher versus lower quality when advertising was effective

a manipulator can aid prediction market accuracy prediction markets are low volume speculative markets whose prices offer informative forecasts on particular policy topics observers worry that traders may attempt to mislead decision makers by manipulating prices we adapt a kyle style market microstructure model to this case adding a manipulator with an additional quadratic preference regarding the price in this model when other traders are uncertain about the manipulator s target price the mean target price has no effect on prices and raising the variance of the target price can increase average price accuracy by boosting the returns to informed trading and thereby incentives for traders to become informed

the winner s curse reserve prices and endogenous entry empirical insights from ebay auctions internet auctions have recently gained widespread popularity and are one of the most successful forms of electronic commerce we examine a unique data set of ebay coin auctions to explore the determinants of bidder and seller behavior we begin by documenting a number of empirical regularities in our data set of ebay auctions next we specify and estimate a structural econometric model of bidding on ebay using our parameter estimates from this model we measure the extent of the winner s curse and simulate seller revenue under different reserve prices