tax policy asset prices and growth a general equilibrium analysis abstract this paper presents a computable general equilibrium tax policy model that combines a consideration of disaggregate industry effects with an integrated treatment of short and long run adjustments to policy initiatives the model s explicit consideration of forward looking investment decisions and adjustment dynamics permits assessments of short run effects of tax policy on asset values as well as long term impacts on capital accumulation simulations reveal that effects on asset values and investment depend critically on whether policies are oriented toward new or old capital investment tax credits yield significant increases in investment without conferring windfall gains to corporate shareholders corporate tax cuts with the same revenue cost on the other hand yield large windfalls to shareholders while providing only a modest investment stimulus incidence and growth effects differ considerably across sectors particularly between business and housing

taxes housing and capital accumulation in a two sector growing economy abstract it is sometimes argued that the favorable tax treatment afforded to housing may lead to an oversupply of housing at the expense of capital this issue is examined in the context of a growing two sector economy in the basic model where the rate of time preference is constant and labor is instantaneously sectorally mobile the long run response of the capital stock to a tax on housing depends upon the relative capital intensities of the two sectors while the long run relative asset price of housing remains unchanged the robustness of these propositions to changes in the model are considered taxes on capital are also analyzed

labour tax reform employment and intergenerational distribution a simulation model of an open economy with a unionized labour market is set up to analyze the effects of a labour tax reform which combines cuts in marginal tax rates with measures to broaden the tax base we find that such a reform will be contractionary and welfare reducing if unions set wage rates with the purpose of maximizing the after tax income of their members by contrast if unions also allow for the disutility of work of their members the reform will stimulate employment increase the welfare of all generations and redistribute welfare in favour of future generations

a dynamic model of brand choice when price and advertising signal product quality in this paper we develop a structural model of household behavior in an environment where there is uncertainty about brand attributes and both prices and advertising signal brand quality four quality signaling mechanisms are at work 1 price signals quality 2 advertising frequency signals quality 3 advertising content provides direct but noisy information about quality and 4 use experience provides direct but noisy information about quality we estimate our proposed model using scanner panel data on ketchup if price is important as a signal of brand quality then frequent price promotion may have the unintended consequence of reducing brand equity we use our estimated model to measure the importance of such effects our results imply that price is an important quality signaling mechanism and that frequent price cuts can have significant adverse effects on brand equity the role of advertising frequency in signaling quality is also significant but it is less quantitatively important than price in the printed version of marketing science vol 27 no 6 erdem et al 2008 was mistakenly identified as a research note it is a regular article and has been corrected here and in the online table of contents

external shocks adjustment policies and investment in a developing economy illustrations from a forward looking cge model of the philippines abstract the rapid increase in investment and external debt of middle income countries like the philippines during the 1970s was perfectly rational given existing policies however these countries could have done better with an appropriate mix of adjustment policies using a dynamic general equilibrium framework the paper examines the sensitivity of investment and growth to external shocks and adjustment policies it highlights the intertemporal trade offs of tariff reform a policy often recommended in the 1980s emphasizing the need for complementary measures to ease macro imbalances and short term dislocations of the protected sector

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

monotone stochastic choice models the case of risk and time preferences suppose that when evaluating two alternatives x and y by means of a parametric utility function low values of the parameter indicate a preference for x and high values indicate a preference for y

applied general equilibrium models of taxation and international trade an introduction and survey we wish to acknowledge the help of three referees and of john pencavel on several earlier drafts as well as the assistance of the modelers whose work is referred to in the paper they corrected our lack of understanding of their work and provided many other helpful comments excellent research and bibliographical assistance have been provided by debbie fretz radwan shaban and janet stotsky helpful comments have been made by charles ballard michael boskin lans bovenberg sylvester damus harvey galper glenn harrison gordon lenjosek jack mutti serena ng t n srinivasan charles stuart and eric toder the authors also acknowledgefinancial support from the national bureau of economic research the national science foundation international business machines and the social sciences and humanities research council ottawa canada

the complex attitudes to alcohol taxation alcoholic beverages are taxed at very different rates across the eu which implies extensive cross border shopping therefore there is an ongoing debate about harmonization of alcohol taxes among countries sweden with a tradition of high alcohol taxes due to public health arguments has the highest excise duties on spirits in the eu but because of this the occurrence and possible problems caused by cross border shopping are also extensive using a questionnaire survey i analyse the swedes attitudes to alcohol taxation and find that these two sides of the coin are important determinants many respondents want to decrease the alcohol tax while some even want to increase it those most positive to alcohol taxation are those who regard increased alcohol consumption as a worrying problem and those living in areas where many adults are treated for alcohol related diseases however the ordered probit analysis also shows that those who support the eu membership are more supportive of reduced taxation to

modeling multiattribute utility risk and belief dynamics for new consumer durable brand choice this paper proposes a brand choice model to aid in the prelaunch management of a new consumer durable entry in an existing category the model contributes to theory by integrating the critical phenomena of multiattribute preference risk and dynamics in an individual level expected utility framework the integration is based on established theoretical constructs in utility bayesian decision analysis and discrete choice theory measurement and estimation procedures are presented an application is described and the managerial relevance of this work as a planning and forecasting tool is examined

a fuzzy set model of search and consideration with an application to an online market several two stage choice models consideration stage plus choice stage have been proposed in the marketing literature we extend this literature by developing a more general model that incorporates how consumer search influences the degree to which they consider various brands to test the validity and value of our model we operationalized it with data obtained from peapod an online grocer where we tracked consumers search processes we demonstrate that our model performs better than competing models on all the key criteria new choice models such as the ones proposed here are necessary for deriving managerially relevant understanding of choice behavior in online markets our empirical results suggest that consumers search both their internal memory and external information at the store to determine the degree to which they consider various brands consumers are also heterogeneous with respect to their capability to process external information for some consumers external information search dramatically increases the degree to which they consider various brands but for others it has little impact on their consideration we also find that certain features e g personal lists reduce consideration set sizes whereas other features e g sort increase consideration set sizes

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

a new product growth for model consumer durables this article originally appeared in management science january 1969 volume 15 number 5 pp 215 227 published by the institute of management sciences a growth model for the timing of initial purchase of new products is developed and tested empirically against data for eleven consumer durables the basic assumption of the model is that the timing of a consumer s initial purchase is related to the number of previous buyers a behavioral rationale for the model is offered in terms of innovative and imitative behavior the model yields good predictions of the sales peak and the timing of the peak when applied to historical data a long range forecast is developed for the sales of color television sets

transition losses of partially mobile industry specific capital in estimating the economic effects of public policy comparative static models typically assume homogenous factors that are either mobile or immobile for changes designed to improve factor allocations the former assumption would overstate welfare gains while the latter would understate them the model in this paper restricts each industry s capital reduction to its rate of depreciation the stock of depreciated capital represents an industry specific type of capital that may earn a lower equilibrium return this model suggests that previous estimates of efficiency gains from integration of u s personal and corporate income taxes are overstated by 5 billion

introduction strategy for new products with positive and negative word of mouth existing innovation diffusion models assume that individual experience with the product is always communicated positively through word of mouth for certain innovations however this assumption is tenuous since communicators of the product experience may transfer favorable unfavorable or indifferent messages through word of mouth this paper examines a diffusion model for products in which negative information plays a dominant role discusses its implications for optimal advertising timing policy and presents an application to forecast attendance for the movie gandhi in the dallas area

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

demand and distance evidence on cross border shopping while many studies have documented deviations from the law of one price in international settings evidence is scarce on the extent to which consumers take advantage of price differentials and engage in cross border shopping we use data from 287 swedish municipalities to estimate how responsive alcohol sales are to foreign prices and relate the sensitivity to the location s distance to the border typical results suggest that the elasticity with respect to the foreign price is around 0 4 in the border region moving 200 400 kilometers inland reduces it to 0 2 0 1 given that cross country price differences for alcohol and other products are often caused by taxes our evidence has implications for the debate on tax competition harmonization

thermodynamics and process analysis for future economic scenarios economists are increasingly interested in forecasting future costs and benefits of policies for dealing with materials energy fluxes polluting emissions and environmental impacts on various scales from sectoral to global computable general equilibrium cge models are currently popular because they project demand and industrial structure into the future along an equilibrium path but they are applicable only to the extent that structural changes occur in or near equilibrium independent of radical technological or social change the alternative tool for analyzing economic implications of scenario assumptions is to use leontief type input output i o models i o models are unable to endogenize structural shifts changing i o coefficients however this can be a virtue when considering radical rather than incremental shifts postulated i o tables can be used independently to check the internal consistency of scenarios or i o models can be used to generate scenarios by linking them to econometric macro drivers which can in principle be cge models explicit process analysis can be integrated in principle with i o models this hybrid scheme provides a natural means of satisfying physical constraints especially the first and second laws of thermodynamics this is important to avoid constructing scenarios based on physically impossible processes process analysis is really the only available tool for constructing physically plausible alternative future i o tables and generating materials energy and waste emissions coefficients explicit process analysis also helps avoid several problems characteristic of pure cge or i o models viz 1 aggregation errors 2 inability to handle arbitrary combinations of co product and co input relationships and 3 inability to reflect certain non linearities such as internal feedback loops

approaches to efficient capital taxation leveling the playing field vs living by the golden rule this paper analyzes intersectoral and intertemporal efficiency effects of the tax reform act of 1986 using a general equilibrium model that considers impacts of taxes on the allocation of capital across industries assets sectors and time the model pays close attentiona to capital adjustment dynamics we find that the 1986 reform worsened the intertemporal efficiency of resource allocation by increasing marginal effective tax rates on various uses and types of capital this negative efficiency effect is more that offset however by postivie effects from an improved intersectoral allocation of capital and a reduction of labor market distortions

adoption and diffusion of an innovation of uncertain profitability the argument has frequently been made that the pattern of diffusion associated with most new innovations will typically have certain characteristics a diffusion curve for an innovation is usually defined as the proportion of its potential users who have already adopted as a function of time measured from the first adoption many empirical studies by both economists and other social scientists have shown that diffusion curves nearly always have two distinct characteristics i they are s shaped the proportion adopted is an increasing function of time which is initially convex but eventually becomes concave and ii they tend to be right hand skewed the inflection point occurs at a time corresponding to a proportion adopted which is less than one half so that the function is concave over the greatest amount of time in fact this skewing is occasionally severe enough to make the diffusion curve appear concave everywhere the focus of most empirical studies of innovation diffusion has centered on identification of either the major determinants of the speed of diffusion or the characteristics of firms which determine how long they delay adoption the seminal contributions are griliches 6 study of hybrid corn and mansfield s 121 study of 12 industrial innovations these studies and most of the similar ones following conclude that diffusion is faster for innovations with higher profitability and that large firms tend to be the earliest adopters some studies e g mansfield 121 herregat 71 have attempted to ascertain

capital income taxation in growing open economies abstract this paper studies how alternative capital mobility assumptions affect the incidence and efficiency of capital income taxation the study uses a two country intertemporal equilibrium model in which imperfectly elastic investment captures the notion of imperfectly mobile physical capital if home goods and foreign goods are perfect substitutes and investment is inelastic the tax effects in open and closed economies are similar only if physical capital is perfectly mobile are capital income taxes completely shifted in small open economies only then and if significant terms of trade effects are absent do open economy efficiency losses substantially exceed the closed economy losses

innovation adoption and diffusion when there are competing innovations abstract firms face a choice between two innovations without knowing which of the two is better each firm has a prior that one of the innovations is better which is updated by bayes rule as trials with the innovations are made a simple decision rule indicating which innovation should be tried given any posterior is derived and used to define an expected diffusion curve for the better innovation this curve has the commonly observed ogive shape even in the absence of any external demonstration effect when the distribution of firm priors belongs to a general class

the economic effects of production taxes in a stochastic growth model this paper analyzes the effects of stochastic taxes on production in simple stochastic growth model in so doing the paper explicitly examines the importance of uncertainty on the decisions of individual agents this importance is emphasized by comparing economic outcome to various realizations of tax rates under uncertainty and perfect foresight copyright 1990 by american economic association

multiple capital inputs q and investment spending despite their explicit treatment of dynamics and solid theoretical basis investment models based on the brainard tobin q have recorded a generally disappointing empirical performance when the q model is expanded to recognize the possibility that the value of the firm depends on two or more capital inputs with differing adjustment cost technologies the econometric equation following from optimizing behavior includes q as well as a set of additional explanatory variables the importance of these omitted variables is assessed and the capital homogeneity assumption for equipment and structures implicit in conventional q models is rejected the multi capital q model is then extended in two ways i adding inventory research and development and labor as quasi fixed factors and ii exploring the sensitivity of the instrumental variables estimates to normalization we conclude that the multi capital q model is a useful extension that overcomes an important omitted variables problem in the conventional q framework

the linkage between oil price shocks and economic growth with inflation in the presence of technological advances a cge model abstract this study examines whether oil price shocks are inflationary in the us we increase the price of oil in the year 2000 in a manner consistent with the oil price shock of 1973 74 and let the economy experience a hicksian technological change then using a dynamic computable general equilibrium cge model we conduct our analyses under two separate cases 1 regular economic growth and 2 low economic growth we also run three technological scenarios 1 no technology change 2 technological advances in the manufacturing and refining sectors and 3 technological advances in the manufacturing refining chemical and service sectors the effects of these changes are analyzed over the next 20 years until the year 2020 our results suggest that while a shock of the magnitude experienced in the 1970s will have a fairly severe effect on such things as gasoline and refinery prices the aggregate price changes will be largely dissipated over time at the aggregate level furthermore the aggregate level of prices cpi and ppi will fall over time as the level of technological advances rise under both growth scenarios there are several reasons why we would obtain such results first of all the structure of the us economy has changed remarkably since the early 1970s rather than being a manufacturing based economy the us is largely a service based economy today and hence it is more protected form raw materials shortages second the economy has had a steady history of strong growth and the faster an economy grows the quicker disruptions to that economy are dissipated finally our economy is experiencing rapid technological advances in information systems which have served to reduce costs and maintain output in a wide number of economic sectors

regulating innovation with uncertain quality information risk and access in medical devices we study the impact of regulating product entry and quality information requirements on an oligopoly equilibrium and consumer welfare product testing can reduce consumer uncertainty but also increase entry costs and delay entry using variation between eu and us medical device regulations we document patterns consistent with valuable learning from more stringent us requirements to derive welfare implications we pair the data with a model of supply demand and testing regulation us policy is indistinguishable from the policy that maximizes total surplus in our estimated model while the european union could benefit from more testing post market surveillance could further increase surplus

a multiattribute model of consumer choice during product learning the processes of consumer preference formation during product learning are analyzed a hypothesis about how individuals form attribute expectations is used to derive a dynamic multinomial logit model of individual choice which endogenously recognizes product learning the model and its underlying assumptions are then tested in the context of an interactive grocery store learning game the results support most elements of the proposed model structure an assumption of temporal stationarity in attribute salience however could not be supported approaches to implementation of the model are discussed and implications for marketing management and research in individual choice modeling are addressed

in a world without borders the impact of taxes on internet commerce the rapid rise in sales over the internet and the fact that most internet buyers pay no sales tax has ignited a considerable debate over taxes and the internet this paper uses new data on the purchase decisions of approximately 25 000 online users to examine the effect of local sales taxes on internet commerce the results suggest that controlling for observable characteristics people living in high sales taxes locations are significantly more likely to buy online the results are quite robust and cannot be explained by unobserved technological sophistication shopping costs or other alternative explanations the magnitudes in the paper suggest that applying existing sales taxes to internet commerce might reduce the number of online buyers by up to 24 percent

climate policy and induced r d how great is the effect abstract carbon taxes or tradable permit systems to address climate change may induce research and development in energy related technologies we construct a single knowledge stock model of r d growth and climate to assess the importance of this effect the contribution of induced r d is shown to be very sensitive to i the duplication externality ii the feasibility of dedicated research subsidies to internalize inter firm knowledge spillovers iii the opportunity cost of r d iv the initial level of research expenditure and v the elasticity of substitution between energy and other factors of production in contrast the direction and scale of the inter temporal research spillover are of secondary importance we find strong support for rezai s 2011 argument that when the business as usual scenario no policy is modeled appropriately all externalities treated as external sacrifices for early generations associated with optimal climate policy are minor or non existent employing our preferred selections for the parameters we find that adding an induced r d component to the model increases the welfare impact of the first best policy optimally chosen carbon tax and research subsidies by an average value of more than 400 and of the second best policy carbon tax alone by approximately 22

brand effects on choice and choice set formation under uncertainty this paper examines the effects of brand credibility a central concept in information economics based approaches to brand effects and brand equity on consumer choice and choice set formation we investigate the mechanisms through which credibility effects materialize namely through perceived quality perceived risk and information costs saved the credibility of a brand as a signal is defined as the believability of the product position information contained in a brand which depends on consumer perceptions of the willingness and ability of firms to deliver what they have promised the choice set is defined as the collection of brands that have a nonzero probability of being chosen among those actually available for choice in a given context furthermore we study the impact of brand credibility on the variance of the stochastic component of utility not only do choice model parameters capture the impact of systematic utility differences on choice probabilities but also the magnitude of this systematic impact is moderated by the relative importance of the stochastic utility component in preference we term this moderation phenomenon preference discrimination which we conceptualize as the decision makers capacity to effectively discriminate between products utilities in choice situations we estimate a discrete choice model of brand choice set formation and preference discrimination on experimental data in two categories juice and personal computers and find strong evidence for brand credibility effects and differential mechanisms through which brand credibility s impact materializes on brand choice conditional on choice set choice set formation and preference discrimination

invited paper learning models an assessment of progress challenges and new developments learning models extend the traditional discrete choice framework by postulating that consumers have incomplete information about product attributes and that they learn about these attributes over time in this survey we describe the literature on learning models that has developed over the past 20 years using the model of erdem and keane as a unifying framework erdem t keane m 1996 decision making under uncertainty capturing dynamic brand choice processes in turbulent consumer goods markets marketing sci 15 1 1 20 we describe how subsequent work has extended their modeling framework and applied learning models to a wide range of different products and markets we argue that learning models have contributed greatly to our understanding of consumer behavior in particular in enhancing our understanding of brand loyalty and long run advertising effects we also discuss the limitations of existing learning models and potential extensions one key challenge is to disentangle learning as a source of

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

a minimum discrimination information estimation of multiattribute market share models multiattribute market share models mmsm using supplier product and buyer attributes as explanatory variables generally use a logit model structure the literature indicates two basic types of approaches for estimating coefficients regression type approaches generally using log share ratios and a nonregression approach which is based on maximum likelihood principles this article discusses a nonregression estimation approach a minimum discrimination information mdi whose formulation differs from mdi procedures previously applied to the marketing literature the mdi formulation enables researchers to estimate a logit model with proportions as the dependent variable and is computationally easy because it uses the same estimators as an mle approach which assumes independence of trials equivalence between mdi and mle estimates under certain conditions are discussed the estimation methods are applied to a real world data set the results indicate the mdi mle method does best in predicting the market shares of the suppliers according to some basic error criteria both at disaggregate and aggregate levels

the corporate tax in an intertemporal equilibrium model with imperfectly mobile capital this paper examines how alternative capital mobility assumptions affect the inci dence and efficiency of corporate income taxation it uses a two sect or intertemporal equilibrium model in which imperfectly elastic inves tment captures the notion of imperfectly mobile capital if investmen t is infinitely elastic which implies perfectly mobile capital a lo wer corporate income tax yields substantial efficiency gains and bene fits all agents if investment is less elastic however the economy wide efficiency gains are smaller and labor suffers welfare losses i f the goods supplied by the two sectors are close substitutes noncor porate capital loses also and only corporate capital benefits copyright 1988 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

consumer uncertainty and purchase decision reversals theory and evidence this research examines how prepurchase information that reduces consumer uncertainty about a product or service can affect consumer decisions to reverse an initial product purchase or service enrollment decision one belief commonly held by retailers is that provision of greater amounts of information before the purchase reduces decision reversals we provide theory and evidence showing conditions under which uncertainty reducing information provided before the purchase decision can actually increase the number of decision reversals predictions generated from an analytical model of consumer behavior incorporating behavioral theory of reference dependence are complemented by empirical evidence from both a controlled behavioral experiment and econometric analysis of archival data combined the theory and evidence suggest that managers should be aware that their information provision decisions taken to reduce decision reversals may actually increase them data as supplemental material are available at http dx doi org 10 1287 mksc 2015 0906

an empirical model of optimal dynamic product launch and exit under demand uncertainty this paper considers the decision problem of a firm that is uncertain about the demand and hence profitability of a new product we develop a model of a decision maker who sequentially learns about the true product profitability from observed product sales based on the current information the decision maker decides whether to scrap the product central to this decision problem are sequential information gathering and the option value of scrapping the product at any point in time the model predicts the optimal demand for information e g in the form of test marketing and it predicts how the launch or exit policy depends on the firm s demand uncertainty furthermore it predicts what fraction of newly developed products should be launched on average and what fraction of these products will fail i e exit the model is solved using numerical dynamic programming techniques we present an application of the model to the case of the u s ready to eat breakfast cereal industry simulations show that the value of reducing uncertainty can be large and that under higher uncertainty firms should strongly increase the fraction of all new product opportunities launched even if their point estimate of profits is negative alternative simpler decision rules are shown to lead to large profit losses compared to our method finally we find that the high observed exit rate in the u s ready to eat cereal industry is optimal and to be expected based on our model

learning from experience simply there is substantial academic interest in modeling consumer experiential learning however approximately optimal solutions to forward looking experiential learning problems are complex limiting their behavioral plausibility and empirical feasibility we propose that consumers use cognitively simple heuristic strategies we explore one viable heuristic index strategies and demonstrate that they are intuitive tractable and plausible index strategies are much simpler for consumers to use but provide close to optimal utility they also avoid exponential growth in computational complexity enabling researchers to study learning models in more complex situations well defined index strategies depend on a structural property called indexability we prove the indexability of a canonical forward looking experiential learning model in which consumers learn brand quality while facing random utility shocks following an index strategy consumers develop an index for each brand separately and choose the brand with the highest index using synthetic data we demonstrate that an index strategy achieves nearly optimal utility at substantially lower computational costs using iri data for diapers we find that an index strategy performs as well as an approximately optimal solution and better than myopic learning we extend the analysis to incorporate risk aversion other cognitively simple heuristics heterogeneous foresight and an alternative specification of brands

the impact of fuel tourism on retailers diesel price in spanish neighbouring regions since 1986 car fuel consumption in spain has been subject to the special hydrocarbons tax and the value added tax in addition since 2002 regional governments have been able to apply a regional excise duty on hydrocarbons this article analyses the impact that such a regional tax has on the retailer s diesel price at the border of the province of lugo in the region of galicia and the province of leon in the region of castile leon only the former region has the regional tax evidence shows that variations in the price of diesel at the border of lugo are of the same sign but of lower intensity than at the border of leon the price price elasticity is 0 8060 these results suggest that service stations located in regions with higher excise duties use their price policy to lessen the negative effects generated for fuel tourism

a comparative evaluation of multiattribute consumer preference models in this paper the theory and estimation procedures for several consumer preference models are discussed predictive accuracy in the form of internal consistency of these models is compared in an empirical application consumer decision situations are classified into two classes decisions under certainty and decisions under uncertainty for each of the two classes of decision situations two modeling strategies have been used statistical estimation and algebraic solution an additive conjoint an additive and a multiplicative measurable value and an additive and a multiplicative utility model are considered our main finding is that the statistical estimation procedures outperform their algebraic counterparts on the criterion of predictive accuracy the utility model provides better predictions for decisions under uncertainty than the widely used conjoint models the relationship between models for decisions under certainty and decisions under uncertainty is discussed it is shown how a conjoint or a mea

a simple model of commodity taxation and cross border shopping this paper sets up a simple model in which two countries differing in geographical extent engage in commodity tax competition originating in opportunities for cross border shopping the non cooperative tax equilibrium and various coordination initiatives are examined in the benchmark model and in two model extensions incorporating i costs of transportation for goods and ii border inspection among the more surprising results are the following with i pure profits accrue to sellers near the border but subjecting them to tax may lower the country s total tax revenue with ii the volume of cross border shopping may well increase jel classification h20 h87 h26

consumer loss aversion product experimentation and tacit collusion abstract two firms compete to attract loss averse consumers that are uncertain about how well the goods on sale fit their needs to resolve valuation uncertainty firms can allow prospective customers to test experiment their products before purchase we investigate firms dynamic incentives to allow experimentation and analyze the resulting effects on the profitability and the stability of tacit collusion depending on the regulatory regime in place i e whether experimentation is forbidden mandated or simply allowed but not imposed laissez faire the degree of loss aversion has ambiguous effects both on the profits that firms can achieve through tacit collusion and on the stability of these agreements while in static environments consumer welfare is always maximized by a policy that forbids experimentation the opposite happens in a dynamic environment

commodity tax competition between member states of a federation equilibrium and efficiency we first describe regional market equilibria whereupon consumers of each region allocate their purchases of private goods between domestic and nondomestic ones according to the structure of relative prices taxes and transportation costs next regional optimal tax levels and public good quantities are derived the tax of the other region being held constant fiscal competition arises from the ability of one region in choosing its tax to alter the tax base of the other

the inaugural isms practice prize competition isms practice prize competition chairman gary l lilien special section introduction by the isms practice prize competition chairman finalists joseph a foster peter n golder gerard j tellis predicting sales takeoff for whirlpool s new personal valet john h roberts pamela d morrison charles j nelson implementing a prelaunch diffusion model measurement and management challenges of the telstra switching study

emissions reductions or green booms general equilibrium effects of a renewable portfolio standard renewable portfolio standards rps are commonly promoted as a policy tool to reduce emissions associated with fossil generation while also stimulating development of local renewable resource endowments we develop a general equilibrium model of an rps policy that captures key features such as a fixed factor renewable endowment substitution across sectors of the economy and endogenous price responses we analytically decompose the effects of an rps into a a substitution effect b an output tax effect and c an output effect we show that an increase in the rps can either deliver large resource booms or large emissions savings but not both our framework can translate different renewable resource endowments and pre existing standards across states into economic and environmental impacts to inform current renewable energy and climate policies

goods prices and exchange rates what have we learned import prices typically change by a smaller proportion than the exchange rate between the exporting and importing country recent research indicates that common currency relative prices for similar goods exported to different markets are highly correlated with exchange rates between those markets this evidence suggests that incomplete pass through is a consequence of third degree price discrimination while distance matters for market segmentation borders have independent effects the source of the border effect has not been clearly identified furthermore there is little evidence yet to suggest substantial market power is implied by the observed price discrimination

real exchange rate fluctuations and the dynamics of retail trade industries on the u s canada border consumers living near the u s canada border can shift their expenditures between the two countries so real exchange rate fluctuations can act as demand shocks to border areas retail trade industries using annual county level data we estimate the effects of real exchange rates on the number of establishments and their average payroll in border counties for four retail industries in three of the four industries we consider the number of operating establishments responds either contemporaneously or with a lag of one year to real exchange rate movements for these industries the response of retailers average size is less pronounced the rapid response of net entry is inconsistent with any model of persistent deviations from purchasing power parity that depends on retailers costs of changing nominal prices

spatial price competition a semiparametric approach we investigate the nature of price competition among firms that produce differentiated products and compete in markets that are limited in extent we propose an instrumental variables series estimator for the matrix of cross price response coefficients demonstrate that our estimator is consistent and derive its asymptotic distribution our semiparametric approach allows us to discriminate among models of global competition in which all products compete with all others and local competition in which products compete only with their neighbors we apply our semiparametric estimator to data from u s wholesale gasoline markets and find that in this market competition is highly localized

taxing to control social costs the case of alcohol whether taxation of alcoholic beverages is an appropriate means of reducing social costs of alcohol consumption is a continuing public policy issue some argue that the public health costs and other external costs associated with the consumption of alcoholic beverages are so significant as to justify substantial excise taxes on those beverages others counter that a tax on alcohol would reduce consumption indiscriminately and therefore reduce the satisfaction experienced by millions of sensible drinkers without necessarily reducing the harm caused by a few excessive drinkers 2 this paper presents and applies a framework for evaluating these two views of the efficiency welfare effects of alcohol taxes determining the efficiency implications of alcohol taxes is complicated by the question of whether and how much abusers especially alcoholics benefit from alcohol consumption standard welfare theory assumes that all consumers of alcohol enjoy positive net benefits consumer surplus however it is possible that alcoholics over consume in the sense that consumer surplus from their

a dynamic demand model for liquor the case for pooling this paper estimates a dynamic demand model for liquor in the united states using panel data from 43 states because of taste changes over time and between states in liquor consumption purely time series or cross sectional studies do not elicit reliable price elasticity estimates this study makes the case for pooling and shows how one can control for individual state effects and endogeneity of the regressors using estimators suited for a dynamic demand model our results indicate that the long run price elasticity is in the 0 7 range the findings also support strong habit persistence a small positive income elasticity and very weak evidence of bootlegging from adjoining states the magnitude of the long run price effect suggests that sin taxes can serve not only as an important income source but also as a significant deterrent effect copyright 1995 by mit press

on economic disequilibrium and free lunch there is a sharp disagreement between mainstream economists and advocates of energy efficiency as regards the potential for free lunches or no regrets policies to cut greenhouse gas emissions from an economics perspective the critical question is whether the economic system is or is not close to a pareto optimum equilibrium state if so it follows that most technological systems now in place are optimum or nearly so from an economic perspective if not there may be many sub optimal technologies in place with corresponding opportunities for very high returns on appropriate investments this paper presents some of the evidence supporting the latter thesis

trade liberalization in general equilibrium intertemporal and inter industry effects this paper uses a dynamic computable general equilibrium model to simulate the effects of unilateral reductions by the u s in tariffs and voluntary export restraints ver s we consider 50 percent cuts in tariffs and in ad valorem ver equivalents separately and in combination the model features intertemporal optimization by households and firms explicit adjustment dynamics an integrated treatment of the current and capital accounts of the balance of payments and industry disaggregation central findings include 1 ver s are considerably more significant than tariffs in terms of the magnitude of the macroeconomic effects induced by their reduction 2 while ver reductions enhance domestic welfare unilateral tariff cuts reduce domestic welfare as a consequence of u s monopsony power and associated adverse terms of trade effects 3 international capital movements critically regulate the responses of the u s and foreign economies to these trade initiatives and produce significant differences between short and long run effects and 4 effects differ substantially across industries together these findings indicate that simulation analyses that disregard international capital movements adjustment dynamics and industry differences may generate seriously misleading results

prices taxes and automotive fuel cross border shopping abstract the aim of the present paper is to determine whether differences in automotive fuel prices among neighboring autonomous communities i e spanish political administrative regions affect the decisions taken by individuals regarding the region in which to purchase fuel in particular the intention is to discover if price increases in certain autonomous communities as a result of the application of the regional tranche of the hydrocarbon retail sales tax hrst has affected fuel purchases in neighboring communities in order to achieve the above mentioned objectives the monthly purchases of automotive diesel in aragon between january 2001 and march 2007 is estimated from the fuel price in aragon the relation between prices in each of the bordering communities and aragon weighted by density of traffic the number of vehicles registered in that community and three dummy variables representative of the implementation of the regional tranche of the hrst in madrid catalonia and valencia the paper finds empirical evidence to demonstrate a positive effect of the relative prices in the neighboring communities and vehicle registrations and also a negative effect of prices in aragon upon the acquisition of diesel in this region in the case of catalonia some evidence suggests that the price effect may have been strengthened following the introduction of the regional tranche of the hrst in august 2004

the welfare cost of factor taxation in a perfect foresight model this paper examines the marginal efficiency cost of various factor taxes in a dynamic general equilibrium model the au thor solves for the excess burden of anticipated and unanticipated t emporary and permanent tax policies using a range of estimates for taste and technology parameters he finds excess burdens larger than those indicated by previous studies that use static models these exc ess burdens are sensitive to parameter values and timing however th e rankings of alternative tax policies turn out to be insensitive to structural parameter values copyright 1987 by university of chicago press

optimal pricing and advertising policies for new product oligopoly models in this paper our previous work on monopoly and oligopoly new product models is extended by the addition of pricing as well as advertising control variables these models contain bass s demand growth model and the vidale wolfe and ozga advertising models as well as the production learning curve model and an exponential demand function the problem of characterizing an optimal pricing and advertising policy over time is an important question in the field of marketing as well as in the areas of business policy and competitive economics these questions are particularly important during the introductory period of a new product when the effects of the learning curve phenomenon and market saturation are most pronounced we consider first the monopoly case with linear advertising cost exponential demand and three different pricing rules the optimal variable pricing the instantaneous marginal pricing and the optimal constant pricing rules several theoretical results are established for these rules including the facts that the instantaneous marginal pricing rule is a myopic version of the optimal pricing rule and the optimal constant pricing rule is a weighted average over time of the instantaneous marginal pricing rule another surprising result is that after the market is at least half saturated a pulse of advertising must be preceded by a significant drop in price numerical solutions of a number of examples are discussed oligopolistic models are analyzed as nonzero sum differential games in the rest of the paper the state and adjoint equations are easy to write down but impossible to solve in closed form hence we describe how to reformulate these models as discrete differential games and give a numerical algorithm for finding open loop nash solutions the latter was used to solve three triopoly models in each case it was found that optimal prices and advertising rates start high and steadily decline

consumer choice process for experience goods an econometric model and analysis in this research the authors develop and execute an econometric framework to model and analyze the consumer choice process for experience products formally the authors develop a multistage model

product balancing under conditions of quality inflation cost pressures and growth strategies abstract this paper analyzes an organization that has a well defined strategy providing a sustainable competitive advantage this advantage is expressed by at least one dimension of quality on which the product or service exhibits outstanding performance using decreasing and increasing exponential demand functions for price and quality respectively the optimal quality level is characterized when dollar sales volume under a cost based price floor and profit are maximized however as quality inflates the same quality performance is worth less tomorrow than today this paper shows that continuous and simultaneous improvement of operational efficiency and quality is a must and is independent from price setting policies the condition of optimal trade offs among quality dimensions is found for the case when the company competes on multiple quality dimensions finally the conditions are analyzed when the resources of quality are utilized in other market segments as well it is found that the corporate level quality or the utilization level of resources is lower higher than the highest least individual business unit product quality

price uncertainty and consumer search a structural model of consideration set formation we offer an econometric framework that models consumer s consideration set formation as an outcome of her costly information search behavior because frequently purchased products are characterized by frequent price promotions of varying depths of discounts a consumer faces significant uncertainty about the prices of the brands the consumers engage in a fixed sample search strategy that results in their discovering the posted prices of a subset of the available brands this subset is referred to as the consumer s consideration set the proposed model is estimated using the scanner data set for liquid detergents our key empirical results are i consumers zincur significant search costs to discover the posted prices of the brands ii whereas in store displays and feature ads do not influence consumers quality perceptions of the brands they significantly reduce search costs for observing the prices of the brands iii per capita income of consumer s household significantly increases her search costs and iv the consumers price sensitivity is seriously underestimated if we were to assume that consumers get to know all the posted prices at zero cost the proposed model is also estimated for the ketchup category to enable us to do cross category comparisons of consumers price search behavior

jeux sans frontieres tax competition and tax coordination when countries differ in size closer international integration is putting increasing pressure on existing national tax structures this paper uses a simple two country model to address a range of consequent policy concerns focusing particularly on the role of country size differences in size exacerbate the inefficiency from noncooperative behavior harming both countries the smaller country loses from harmonization to any tax rate between those set in the noncooperative equilibrium but both countries gain from the imposition of a minimum tax anywhere in that range the fully optimal response to freer cross border trade however may be to do nothing jel h20 h77

that s what i thought i wanted miswanting and regret for a standard good in a mass customized world how can a standardized product survive in a mass customized world this requires understanding that consumers often experience problems predicting their future hedonic reactions to new experiences such as custom products leading to feelings of regret this form of regret occurs not because the custom product differs from specifications but because consumers miswanted the design they ordered our analytic model shows that regret aversion induces consumers to design custom products to reflect the attributes of the available standard products consequently regret averse consumers may choose the standard product rather than place a custom order the number of available standard products however moderates both these effects two experiments empirically substantiate the key predictions of the analytical model a the custom product s resemblance to the standard product grows with regret aversion associated with miswanting b there exists a segment of regretfully loyal consumers for the standard product in a mass customized world and it expands with regret aversion c both the above effects are weakened by the presence of a second standard product and d the custom product can increase its market share when the number of standard products increases

the economics of cross border travel abstract we model the decision to travel across an international border as a trade off between benefits derived from buying a range of products at lower prices and the costs of travel we estimate the model using microdata on canada united states travel price differences motivate cross border travel a 10 home appreciation raises the propensity to cross by 8 to 26 the larger elasticity arises when the home currency is strong a result predicted by the model distance to the border strongly inhibits crossings with an implied cost of 87 cents per mile geographic differences can partially explain why american travel is less exchange rate responsive

on the effects of investment tax credits on economic efficiency and growth abstract this paper explores the overall efficiency effects of itcs in the context of a disaggregated dynamic general equilibrium simulation model of the u s economy this model postulates forward looking investment decisions and allows for optimal government borrowing and financial crowding out simulation results confirm the conventional wisdom that itcs are distortionary but challenge the equally conventional wisdom that itcs necessarily spur investment and gdp in addition results point to an important policy trade off introducing itcs without neutralizing their budgetary effects would lead to low efficiency losses but would reduce investment and gdp due to financial crowding out in turn imposition of itcs while blocking their budgetary effects would lead to relatively large efficiency losses while minimizing the negative impact on investment and gdp

new brand positioning and pricing in an oligopolistic market the positioning and pricing of a new brand requires knowledge about the relationship of both demand and cost with potential attribute locations and prices this paper addresses this problem and illustrates it in the context of the automobile market multi attribute expected utility theory which allows for consumer uncertainty about the brands is used to model individuals behavior attribute weights are estimated from market survey data on brands attributes and preferences using linmap as an estimation procedure expected utility is then updated using the multinomial logit model and choice data to account for the observation that stated preferences do not perfectly reflect the eventual choice it is hypothesized that when faced with an actual choice price may become more important to the consumer while other attributes may become more or less important than is reflected in stated preferences the resulting estimated choice probabilities are aggregated to form demand functions facing each brand which depend on all brands prices and attribute space locations assuming there is a price equilibrium in the existing market and that firms have the same variable cost function variable costs as a function of a brand s attribute levels are estimated given the demand and cost functions facing each firm including the potential new entrant the profit maximizing positioning and pricing of a new brand is analyzed using a game theoretic approach a solution is sought under the assumption that incumbents react to entry by changing their prices possible approaches to the translation of the perceptual attribute positioning of the new brand to physical and engineering attributes are reviewed improvements and future extensions of the study are discussed

tax reform and u s economic growth in this paper we evaluate the impact of the tax reform act of 1986 on u s economic growth we first calculate effective tax rates on income from capital employed in corporate noncorporate and household sectors we then project the future growth of the u s economy with and without the 1986 tax reform we find that much of the potential gain in welfare was dissipated through failure to index the income tax base for inflation the most promising avenue for future reform is to include income from household assets in the tax base while reducing tax rates on business income