price promotions in choice models promotions are used in marketing to increase sales and drive profits by temporarily decreasing the price per unit of a good some price promotions apply to all quantities 20 off some have limits on the number of units that can be purchased at a reduced price and others only offer the discount if the volume purchased is sufficiently high we develop a model of price promotions in the context of a direct utility model where its effects are incorporated through the budget constraint price promotions complicate the estimation and analysis of direct utility models because they induce kinks and points of discontinuity in the budget set we propose a bayesian approach to addressing these irregularities and demonstrate the ability of the direct utility model to be used in counterfactual analyses of price promotions we investigate the stability of utility function estimates for consumers under alternative price promotions and find that the majority of the effect of a price promotion is through the budget s

design and analysis of simulated consumer choice or allocation experiments an approach based on aggregate data the authors integrate concepts in conjoint analysis and discrete choice theory in econometrics to develop a new approach to the design and analysis of controlled consumer choice or resource allocat

the term structure of euromarket interest rates an empirical investigation abstract this paper is an empirical investigation of the predictability and co movement of risk premia in the term structure of euromarket interest rates we present regression results which suggest that risk premia in three euromarket term structures and on uncovered foreign asset positions move together we test formally the hypothesis that these risk premia move in proportion to a single latent variable we are unable to reject this hypothesis the single latent variable model can be interpreted as in hansen and hodrick 1983 and hodrick and srivastava 1984 as a specialization of the icapm in which assets have constant betas on a single unobservable benchmark portfolio

the link between response time and preference variance and processing heterogeneity in stated choice experiments abstract in this article we utilize the time respondents require to answer a self administered online stated preference survey while the effects of response time have been previously explored this article proposes a different approach that explicitly recognizes the highly equivocal relationship between response time and respondents choices in particular we attempt to disentangle preference variance and processing heterogeneity and explore whether response time helps to explain these three types of heterogeneity for this we divide the data ordered by response time into approximately equal sized subsets and then derive different class membership probabilities for each subset we estimate a large number of candidate models and subsequently conduct a frequentist based model averaging approach using information criteria to derive weights of evidence for each model our findings show a clear link between response time and utility coefficients error variance and processing strategies our results thus emphasize the importance of considering response time when modeling stated choice data

ordering effects and choice set awareness in repeat response stated preference studies we present an experiment designed to investigate the presence and nature of ordering effects within repeat response stated preference sp studies our experiment takes the form of a large sample full factorial discrete choice sp exercise investigating preferences for tap water quality improvements our study simultaneously investigates a variety of different forms of position dependent and precedent dependent ordering effect in preferences for attributes and options and in response randomness we also examine whether advanced disclosure of the choice tasks impacts on the probability of exhibiting ordering effects of those different types we analyze our data both non parametrically and parametrically and find robust evidence for ordering effects we also find that the patterns of order effect in respondents preferences are significantly changed but not eradicated by the advanced disclosure of choice tasks a finding that offers insights into the choice behaviors underpinning order effects

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

elimination and selection by aspects in health choice experiments prioritising health service innovations priorities for public health innovations are typically not considered equally by all members of the public when faced with a choice between various innovation options it is therefore possible that some respondents eliminate and or select innovations based on certain characteristics this paper proposes a flexible method for exploring and accommodating situations where respondents exhibit such behaviours whilst addressing preference heterogeneity we present an empirical case study on the public s preferences for health service innovations we show that allowing for elimination by aspects and or selection by aspects behavioural rules leads to substantial improvements in model fit and importantly has implications for willingness to pay estimates and scenario analysis

promotion signal proxy for a price cut evidence suggests that some consumers react to promotion signals without considering relative price information we adopt petty and cacioppo s elaboration likelihood model elm to explain this behavior in terms of the elm s peripheral route to persuasion in which the promotion signal is taken as a cue for a price cut experimental results show that low need for cognition individuals react to the simple presence of a promotion signal whether or not the price of the promoted brand is reduced but that high need for cognition individuals react to a promotion signal only when it is accompanied by a substantive price reduction

incomplete markets borrowing constraints and the foreign exchange risk premium abstract this paper solves a model consisting of two monetary economies with incomplete markets in which agents are subject to borrowing constraints the paper investigates if such a framework is able to account for the volatility and the size of the foreign exchange risk premium the model succeeds in increasing substantially the volatility of the risk premium to about 30 of that in the data however this more volatile risk premium does not translate into sufficiently large predictable excess returns it thus appears unlikely that excess returns from currency speculation can be uniquely explained by a time varying risk premium in an incomplete markets economy with exogenous borrowing constraints

benefit estimates for landscape improvements sequential bayesian design and respondents rationality in a choice experiment a multi attribute stated preference approach is used to value low and high impact actions on four major landscape components addressed by the rural environment protection scheme in ireland several methodological issues are addressed the use of prior beliefs on the relative magnitudes of parameters standardized description of different levels of landscape improvements via image manipulation software adoption of efficiency increasing sequential experimental design and sensitivity of benefit estimates to inclusion of responses from irrational respondents results suggest that bayesian design updating delivers significant efficiency gains without loss in respondent efficiency and estimates are upward biased when irrational respondents are included

interest rates and currency prices in a two country world abstract this paper is a theoretical study of the determination of prices interest rates and currency exchange rates set in an infinitely lived two country world which is subject both to stochastic endowment shocks and to monetary instability formulas are obtained for pricing all equity claims nominally denominated bonds and currencies and these formulas are related to earlier closely related results in the theories of money finance international trade

inferred and stated attribute non attendance in food choice experiments we review the current literature on attribute non attendance in stated choice and use data from beef and chicken choice experiments using both inference and the respondents own statements inference is based on panel data analysis by mixed logit models of choice with both discrete and continuous mixtures of coefficients and is conditional on the observed pattern of choice information from respondent statements on non attendance is directly embedded in the specification of the indirect utility function results show no clear winner between the inferential approaches but the inference based on constrained latent class panel models better matches the observed data

preference structures property rights and paired comparisons the method of paired comparisons was used to determine the structure of survey participants value expressions for australian native forests the same participants were also surveyed using the contingent valuation method cvm data from the paired comparisons were used to construct preference maps which enabled identification of participants whose value expressions were structurally incompatible with economic welfare theory in particular those participants who expressed their values according to lexicographic preferences for some of these participants cvm results did not provide appropriate measures of wtp the surveys also demonstrated the importance of allowing participants own views on property rights to dictate the valuation context offered

consumer normal price estimation market versus personal standards in reference price models internal reference price is typically estimated from actual market prices given the generally poor price knowledge consumers have exhibited in prior research the question is whether it is reasonable to use actual market prices to estimate consumers internal reference price standards the initial answer provided in this research surprisingly is yes although internal reference prices are measurable and do affect consumer price perception the gains in measuring and using those standards in predicting brand choice for frequently purchased products may not be worth the costs reasons why the surrogate price measure may work and implications for the measurement of internal reference price standards are considered

manufacturer allowances and retailer pass through rates in a competitive environment a commonly held belief has grocery and mass merchandise retailers gaining power relative to the upstream consumer package goods manufacturers one of the major justifications for this belief is that manufacturers are now giving retailers more side payments such as trade allowances slotting allowances etc however a number of researchers have shown that these concessions have not translated into increased profit for the retailer relative to the manufacturer this paper explores via an analytic model why one might see retailers getting concessions from the manufacturer without being able to translate them into high profits we do this by representing the interaction between the channel members as a one period profit maximizing game where manufacturers decide on how large a side payment i e a concession to give to each retailer and retailers decide on how much of this side payment to use to promote the manufacturer s product at the heart of our model is a demand function for each product offering i e a specific brand sold by a specific retailer this demand function is linear in own and other s prices but based on empirical evidence is assumed to be nonlinear in the effects of merchandising activities e g short term price discounts better shelf space advertising etc specifically merchandising effects are modeled with a square root function that also acknowledges most short term promotional effects result in brand or store switching versus increase category volume the model is composed of six parameters these are the inherent popularity of the brand at a particular outlet own price sensitivity cross but within the store price sensitivity customer s sensitivity to within store promotion activities customer s sensitivity to between store promotional activities and the degree to which promotional activities yield incremental product category sales we use our underlying demand formulation to find the equilibrium solution to the full information stackelberg leader game for different store and brand loyalty environments as captured by our six parameters these parameters are chosen based on empirical evidence to span possible market conditions that each channel member might have our findings and modeling efforts should be of interest to analytic channel modelers and scholars interested in the mass merchandising and grocery store industries for a theoretical point of view we build upon the case 4 model of lee and staelin 1997 to allow for promotional activities from a substantive point of view we show that manufacturers will freely give retailers side payments even though they know these retailers will pocket a substantial portion of this concession moreover we identify conditions within our model that lead to larger allowances lower pass through rates and lower retail profits outcomes that are compatible with recent industry trends in addition we highlight the difference in effect on profits prices etc of changes in consumers sensitivity to inter store differences in storewide merchandising activities one of the more counter intuitive results of these analyses is that it is in the manufacturer s best interest to help retailers increase their spatial monopoly by decreasing consumers tendency to cross store shop because of merchandising activities

are sale signs less effective when more products have them we analyze data from a variety of sources including historical data from a women s clothing catalog a field study in that catalog survey responses to catalog stimuli and grocery store data for frozen juice toothpaste and tuna the analysis yields three conclusions first sale signs are less effective at increasing demand when more items have them second total category sales are maximized when some but not all products have sale signs third placing a sale sign on a product reduces the perceived likelihood that the product will be available at a lower price in the future but the effect is smaller when more products have sale signs by ruling out alternative hypotheses the findings suggest that moderation of the sale sign effect is in part due to reduced credibility when they are used on more products the credibility argument is motivated in part by a recent paper that presented an equilibrium model predicting that customers who lack knowledge of market prices rely on point of purchase sale signs to help evaluate posted prices anderson and simester 1998 the model predicts that sale signs increase demand but that the increase is smaller when more products have them this moderating effect regulates how many sale signs stores use and makes customer reliance on these cues an equilibrium strategy to evaluate whether the number of sale signs moderates their effectiveness we compare demand for items with sale signs when varying the number of sale signs on other products for this comparison we use two datasets describing demand for products in a women s clothing catalog the first dataset describes customer orders for the same set of items across three sequential issues of the catalog the second dataset is a field test conducted by mailing different versions of the catalog to randomly selected customer samples reassuringly although the datasets do not share the same limitations the findings are consistent and indicate that sale signs are less effective when more products have them in addition to the credibility explanation there are at least two alternative explanations for this result first using a sale sign to make a product more attractive may lead to substitution of demand from other sale items within a store and so demand may vary even if there is no change in the credibility of the sale signs to discriminate between the substitution and credibility explanations we evaluate whether total category demand is maximized when some but not all products in the category have sale signs the credibility explanation implies that adding another sale sign will eventually decrease total category sales when many items already have sale signs in contrast if adding a sale sign to an item leads solely to substitution from other products within or outside the category we will not observe a decrease in total category demand we test the total category sales prediction using grocery store scan data describing total category demand for frozen juice toothpaste and canned tuna the findings reveal that in all three categories there is a significant reduction in aggregate demand a second alternative explanation is that sale signs focus customer attention on products with these cues distinguishing between the attention and credibility explanations is a difficult task they both imply that sale signs deliver less information when there are too many sale signs the credibility argument predicts that this occurs because the signs are noticed but not believed the attention explanation predicts that the signs are less likely to be noticed when attention is diluted by a large number of sale signs to discriminate between the credibility explanation and this attention effect we use survey measures to evaluate a third hypothesis this hypothesis predicts both that placing a sale sign on a product reduces the perceived likelihood that the product will be available at a lower price in the next period and that this effect is smaller when more items have them in an attempt to control for the attention effect we focus subjects attention on a set of focal items under these conditions it is unlikely that subjects overlook sale signs on these items more important the likelihood of overlooking sale signs on the focal items is unlikely to depend on how many other items also have sale signs the results confirm both that the presence of a sale sign reduced subjects expectations that an item would be available at a lower price in the future and that this effect is smaller when more items have sale signs

the commodity terms of trade unit roots and nonlinear alternatives a smooth transition approach market price dynamics for north american oriented strand board markets are examined specifically the role of transactions costs are examined vis a vis the law of one price weekly data for the january 3rd 1995 through april 14th 2006 period are used in the analysis nonlinearities induced by unobservable transactions costs are modeled by estimating smooth transition autoregressions stars results indicate that nonlinearity is an important feature of these markets and that the parity relationships implied by economic theory are generally supported by the star models implications for the efficiency of spatial market linkages are examined by estimating generalized impulse response functions

incorporating discontinuous preferences into the analysis of discrete choice experiments data from a discrete choice experiment on improvements of rural landscape attributes are used to investigate the implications of discontinuous preferences on willingness to pay estimates using a multinomial error component logit model we explore differences in scale and unexplained variance between respondents with discontinuous and continuous preferences and condition taste intensities on whether or not each attribute was considered by the respondent during the evaluation of alternatives results suggest that significant improvements in model performance can be achieved when discontinuous preferences are accommodated in the econometric specification and that the magnitude and robustness of the willingness to pay estimates are sensitive to discontinuous preferences

the impact of terms of trade and real exchange rate volatility on investment and growth in sub saharan africa abstract specialization in primary product exports reduces growth but why adverse trends in and the high variance of primary product prices are possible explanations the impact on investment and growth of the level and volatility of the terms of trade and the real effective exchange rate is estimated for a panel of 14 sub saharan african countries over 1980 1995 growth is negatively affected by terms of trade instability and investment by real exchange rate instability both growth and investment increase when the terms of trade improve and real exchange rate overvaluation is eliminated

the implications of mean variance optimization for four questions in international macroeconomics abstract the hypothesis of mean variance optimization has powerful implications transcending particular methods used for variance covariance estimation 1 for conventional estimates of risk aversion substitutability between domestic and foreign securities is close to perfect in the sense that risk premiums are small in magnitude a few basic points and thus cannot explain much bias in forward rates 2 nevertheless as long as risk aversion is not zero foreign exchange intervention still affects the level of the exchange rate proportionately at least to asset supply changes 3 current account deficits also have effects 4 finally dollar depreciation should not be accompanied by appreciation of the mark against the franc

reservation price as a range an incentive compatible measurement approach abstract drawing from the literature on buyers uncertainty in preference and product knowledge the authors suggest and empirically test the proposition that a consumer s reservation price for a product is more meaningfully and accurately represented as a range than as a single point given this conceptualization they propose an approach for incentive compatible elicitation of a consumer s reservation price range icerange that builds on becker degroot and marschak s 1964 point of purchase method two empirical applications of the approach provide an assessment of its practicality and its predictive performance relative to current methodologies for reservation price elicitation the results demonstrate that the proposed method significantly outperforms the benchmark approaches in terms of predictive validity and yields valuable incremental information about uncertainty in product valuation

on the foreign exchange risk premium in a general equilibrium model abstract the foreign exchange risk premium in a cash in advance model is investigated some weaknesses of the definition of the risk premium generally used are discussed it is shown that the primary ultimate source of foreign exchange risk is the covariance of monetary shocks with real output shocks several studies have assumed this covariance is zero and hence assumed away the major source of risk in the model finally the risk premium generated from standard versions of this model is argued to be very small because it is the same order of magnitudeas covariances of money and output growth rates

using survey data to test standard propositions regarding exchange rate expectations survey data provide a measure of exchange rate expectations superior to the forward rate in that no risk premium interferes we estimate extrapolative adaptive and regressive models of expectations static or random walk expectations and bandwagon expectations are rejected current appreciation generates the expectation of future depreciation because variables other than the contemporaneous spot rate receive weight in comparing expectations to the process governing the spot rate we find statistically significant bias no variable is as ubiquitous in international financial theory and yet as elusive empirically as investors expectations regarding exchange rates in the past expectations have been modeled in an ad hoc way often by using the forward exchange rate there is however a serious problem with using the forward discount as the measure of the expected change in the exchange rate in that the two may not be equal the gap that may separate the forward discount and expected depreciation is generally interpreted as a risk premium most of the large empirical literature testing the unbiasedness of the forward exchange rate for example has found it necessary either arbitrarily to assume away the existence of the risk premium if the aim

profits risk and uncertainty in foreign exchange markets this paper examines the properties of nominal profits from speculation in dollar dominated forward contracts using a representative agent cash in advance model modified to allow for heteroscedasticity in the exogenous processes the model is simulated by estimating exogenous processes from the data and the remaining free parameters with a simulated method of moments technique simulated expected profits are variable heteroskedastic and serially correlated but the magnitude of these second moments fall short of those of the predictable component of observed profits on the u s dollar as in the actual data simulated forward rates display biasedness in predicting simulated future spot rates

estimating search benefits from path tracking data measurement and determinants we study consumer search behavior in a brick and mortar store environment using a unique data set obtained from radio frequency identification tags which are attached to supermarket shopping carts this technology allows us to record consumers purchases as well as the time they spent in front of the shelf when contemplating which product to buy giving us a direct measure of search effort we estimate a linear regression of price paid on search duration in which search duration is instrumented with a search cost shifter we show that this regression allows us to recover the marginal return from search in terms of price at the optimal stopping point for the average consumer our identification strategy and coefficient interpretation are valid for a broad class of search models and we are hence able to remain agnostic about the details of the search process such as search order and search protocol we estimate an average return from search of 2 10 per minute and explore heterogeneity across consumer

international evidence on the historical properties of business cycles we contrast properties of real quantities with those of price levels and stocks of money for ten countries over the last century although the magnitude of output fluctuations has varied across countries and periods relations among real quantities have been remarkably uniform properties of price levels however exhibit striking differences between periods inflation rates are more persistent after world war ii than before and price level fluctuations are typically procyclical before world war ii and countercyclical afterward fluctuations in money are less highly correlated with output in the postwar period but are no more persistent than in earlier periods jel e32 e31

risk uncertainty and exchange rates this paper is motivated by two facts failure of log linear empirical exchange rate models of the 1970 s and the observed variability of risk premiums in the forward market rational maximizing models predict that changes in conditional variances of monetary policies government spendings and income growths affect risk premiums and induce conditional volatility of exchange rates i examine theoretically how changes in these exogenous conditional variances affect the level of the current exchange rate and attempt to quantify the extent that this channel explains exchange rate volatility using autoregressive conditional heteroscedastic models

rising food prices food price volatility and social unrest can food prices cause social unrest throughout history riots have frequently broken out ostensibly as a consequence of high food prices using monthly data at the international level this article studies the impact of food prices food price levels as well as food price volatility on social unrest because food prices and social unrest are jointly determined data on natural disasters are used to identify the causal relationship flowing from food price levels to social unrest results indicate that for the period 1990 2011 food price increases have led to increases in social unrest whereas food price volatility has not been associated with increases in social unrest these results are robust to alternative definitions of social unrest to using real or nominal prices to using commodity specific price indices instead of aggregated price indices to alternative definitions of the instrumental variable to alternative definitions of volatility and to controlling for non food related social unrest

the risk premium in the foreign exchange market this paper presents a dynamic optimizing model of the risk premium in the forward foreign exchange market agents face random endowments and money growth rates complete insurance markets do not exist and foreign exchange is held to hedge against risk in some examples with log linear preferences the size of the risk premium in the forward market is related to the variability of output and money growth an interesting conclusion of the model is that for plausible examples the convexity component of the nominal risk premium due to siegel s paradox may be quite large relative to the total risk premium copyright 1989 by ohio state university press

the implications of first order risk aversion for asset market risk premiums abstract in an effort to explain simultaneously the excess return predictability observed in equity bond and foreign exchange markets we incorporate preferences exhibiting first order risk aversion into a general equilibrium two country monetary model when we calibrate the model to us and japanese data we find that first order risk aversion substantially increases excess return predictability however this increased predictability is insufficient to match the data we conclude that the observed patterns of excess return predictability are unlikely to be explained purely by time varying risk premiums generated by highly risk averse agents in a complete markets economy

estimating the short run poverty impacts of the 2010 11 surge in food prices global food prices have increased substantially since mid 2010 as have prices in many developing countries in this study we assess the poverty impact of the price changes between june and december 2010 in twenty eight low and middle income countries this is done by gathering detailed information on individual households food production and consumption levels for thirty eight agricultural and food commodities to assess the impacts on household welfare this study estimates that this sudden food price surge increased the number of poor people globally but with considerably different impacts in different countries the heterogeneity of these impacts is partly related to the wide variation in the transmission of global prices to local prices and partly to differences in households patterns of production and consumption on balance the adverse welfare impact on net buyers outweighs the benefits to net sellers resulting in an increase in the number of poor and in the depth of poverty we estimate that the average poverty change was 1 1 percentage points in low income countries and 0 7 percentage points in middle income countries with a net increase of 44 million people falling below the 1 25 per day extreme poverty line

public expenditure under uncertainty the net benefit criteria public expenditure under uncertainty is modeled as the problem of determining the quantities of l public goods and m private goods to be provided to n consumers when the private goods are claims to a single commodity dollars which are contingent upon the occurrence of one of m possible states of nature a real valued net benefit function is identified and criteria based upon this function are provided that are both necessary and sufficient for pareto improving or pareto efficient solutions to this problem copyright 1992 by american economic association

time varying risk interest rates and exchange rates in general equilibrium under mild assumptions the data indicate that time varying risk is the primary force driving nominal interest rate differentials on currency denominated bonds this finding is an immediate implication of the fact that exchange rates are roughly random walks a general equilibrium monetary model with an endogenous source of risk variation a variable degree of asset market segmentation can produce key features of actual interest rates and exchange rates in this model the endogenous segmentation arises from a fixed cost for agents to exchange money for assets as inflation varies so does the benefit of asset market participation and that changes the fraction of agents participating these effects lead the risk premium to vary systematically with the level of inflation this model produces variation in the risk premium even though the fundamental shocks have constant conditional variances

a retailer promotion policy model considering promotion signal sensitivity recent research suggests that the signal e g sign or marker with a point of purchase promotion will stimulate a significant sales increase regardless of whether or not that signal is accompanied by a price cut this paper develops a model of retailer profitability that incorporates this promotion signal sensitivity in a field test the profitability of the promotion policy prescribed by this model is compared to the profitability of two other promotion policy setting paradigms a model based policy that does not consider promotion signal sensitivity and one prescribed by industry experts the test results support the proposed model its policy generates 11 more category profit per unit than the model based policy and 12 more than the industry experts implications for retailers and future research are discussed

signaling strategies in competitive interaction building reputations and hiding the truth abstract the authors develop a conceptual framework of how managers interpret competitors signals over time in various market contexts from the framework the authors generate hypotheses about the relative effectiveness of signaling strategies used by firms in different market contexts the authors conducted two empirical studies involving a repeated entry pricing game to test the hypotheses the results of study 1 show that the entrant s perceptions of the aggressiveness of the incumbent depend on the focus and strength of the incumbent s signals the results of study 2 show that the strength of the entrant s responses to the incumbent s signals depends on the incumbent s use of bluffs and the cost of information about the factors driving the incumbent s signals the implications of these findings for how firms should signal to achieve such strategic objectives as revealing or concealing information developing a desired reputation and influencing competitors responses over time are discussed the au

the asymmetric effects of monetary policy a nonlinear vector autoregression approach this paper tests for nonlinearity in a standard vector autoregression including output prices and money supply using an estimation strategy that is consistent with a wide range of structural macroeconomic models shocks to the money supply are found to have stronger output effects and weaker price effects when output growth is initially low positive and negative monetary shocks are found to have nearly symmetric effects in addition there is some evidence that shocks of different magnitudes have asymmetric effects these results are consistent with the view that the aggregate supply curve is convex

semiparametric analysis to estimate the deal effect curve abstract the marketing literature suggests several phenomena that may contribute to the nature of the relationship between sales and price discounts these phenomena can produce complex nonlinearities and interactions in the deal effect curve that are best captured with a flexible approach because a fully nonparametric regression model suffers from the curse of dimensionality the authors propose a semiparametric regression model store level sales over time are modeled as a nonparametric function of own and cross item price discounts and a parametric function of other predictors the authors compare the predictive validity of the semiparametric model with that of two parametric benchmark models and obtain superior performance the results for three product categories indicate threshold and saturation effects for both ownand cross item temporary price cuts the authors also find that the nature of the own item curve depends on other items price discounts comparisons with restricted model specification

do hypothetical and actual marginal willingness to pay differ in choice experiments application to the valuation of the environment abstract in this paper we test the validity of choice experiments with donations for environmental projects in particular we test whether or not there are differences in preferences between a hypothetical and an actual choice experiment our experiments indicate no differences in addition internal tests of validity indicate transitive and stable preferences in both experiments although there are some indications of possible learning effects during the experiment

foreign exchange risk premia volatility once again abstract in a recent paper in this journal we analyze the puzzle of excess volatility of risk premia in the foreign exchange market one of our conclusions was that allowing for the observed time variation of conditional variances the static mean variance model can predict movements in risk premia of the same order of magnitude as in the empirical data unfortunately the derivation in our paper contains an error which falsifies our claim this note presents a brief correction of our previous computations and an assessment of the corrected results

an examination of uncovered interest rate parity in segmented international commodity markets we examine the effect of segmented commodity markets on the relation between forward and future spot exchange rates in a dynamic economy we calculate the slope coefficient in our theoretical economy from regressing exchange rate changes on forward premia with reasonable parameter values the slope coefficient is less than unity however even for extreme parameters the slope is not less than zero as found in the data a negative slope coefficient in a nominal version of the model requires the covariance between monetary shocks and relative output shocks to be significantly negative in contrast to the covariance in the data one of the most studied relations in international finance is that between forward exchange rates and future spot rates empirical tests typically find that when one regresses changes in spot rates on forward premia the slope coefficient is less than one and often negative this result is called the forward bias anomaly and implies that the returns from investing in forward exchange contracts are predictable our objective is to examine the effect of segmentation of international commodity markets on the relation between the forward premium and the change in the spot rate segmentation of commodity markets is modeled by introducing a cost for transferring goods across countries giving rise to deviations from purchasing power parity ppp in this article we first derive the theoretical implications of the effect of segmentation on the forward bias in a dynamic general equilibrium model and then analyze a calibrated version of the model our analysis serves as a useful benchmark to study how much of the predictable deviations from uncovered interest parity uip can be explained by endogenous deviations from ppp

what do we learn from the weather the new climate economy literature a rapidly growing body of research applies panel methods to examine how temperature precipitation and windstorms influence economic outcomes these studies focus on changes in weather realizations over time within a given spatial area and demonstrate impacts on agricultural output industrial output labor productivity energy demand health conflict and economic growth among other outcomes by harnessing exogenous variation over time within a given spatial unit these studies help credibly identify i the breadth of channels linking weather and the economy ii heterogeneous treatment effects across different types of locations and iii nonlinear effects of weather variables this paper reviews the new literature with two purposes first we summarize recent work providing a guide to its methodologies datasets and findings second we consider applications of the new literature including insights for the damage function within models that seek to assess the potential economic effects of future climate change jel c51 d72 o13 q51 q54

changing beliefs and systematic rational forecast errors with evidence from foreign exchange this paper addresses a new interpretation to the appearance in the early 1980s of systematic errors in forecasting the dollar exchange rate following a change in the process of a fundamental variable market participants revise their beliefs about the process using bayes rule since the market does not immediately recognize the change forecast errors are on average wrong during a period when the market is rationally learning for conservative parameter values the learning behavior of the dollar exchange rate in the early 1980s appears consistent with about half of the dollar s underprediction implied by the forward market copyright 1989 by american economic association

the enso effect and asymmetries in wheat price dynamics summary climate has historically played a critical role in the development of nations primarily due to its intrinsic linkage with agricultural production and prices this study examines one such relationship between the better known and most talked about climate anomaly el nino southern oscillation enso and the international prices of wheat one of the most produced and consumed grain cereals in the world the enso price relationship moreover is assumed to be characterized by nonlinear dynamics because of the known asymmetric nature of enso cycles as well as that of wheat prices this study applies a vector smooth transition autoregressive vstar modeling framework to monthly spot prices of wheat from the united states the european union australia canada and argentina as well as the sea surface temperature anomalies from the nino3 4 region which serves as a proxy for the enso variable results show that overall wheat prices tend to increase after la nina events and decrease after el nino events the regime dependent dynamics are apparent with more amplified price responses after la nina shocks and with more persistent price responses during the la nina conditions this is consistent with the economics of storage wherein shocks related to expected supply and demand are known to have a more pronounced effect in a low inventory regime findings of this study have strong implications for development economics as they point to an additional channel of adversity due to the enso related climate shocks moreover the enso induced price fluctuations are likely to affect the dynamics of international food and cash programs during extreme episodes of this climate anomaly

accounting for forward rates in markets for foreign currency absteract forward and spot exchange rates between major currencies imply large standard deviations of both predictable returns from currency speculation and of the equilibrium price measure the intertemporal marginal rate of substitution representative agent theory with time additive preferences cannot account for either of these properties we show that the theory does considerably better along these dimensions when the representative agent s preferences exhibit habit persistence but that the theory fails to reproduce some of the other properties of the data in particular the strong autocorrelation of forward premiums since the advent of flexible exchange rates in the early 1970s a large body of statistical work has established that forward rates for major currencies are not optimal predictors of future spot rates relevant evidence is reported in studies by baillie lippens and mcmahon 1983 bekaert 1991 bilson 1981 boothe and longworth 1984 cumby 1988 cumby and obstfeld 1984 fama 1984 gregory and mccurdy 1984 hansen and hodrick 1983 hodrick and srivastava 1984 and korajczyk and viallet 1990 a more complete list of references is provided by hodrick 1987 these papers indicate that returns from speculation in forward and spot currency markets are predictable and that the predictable components vary considerably over time a number of alternative explanations have been offered for the predictable variation in foreign currency market excess returns kaminsky 1988 korajczyk 1985 and krasker 1980 suggest that infrequent extreme events may make returns appear predictable in small samples the so called peso problem lewis 1989 argues that rational learning following infrequent changes in the process governing equilibrium prices can explain part of the ex post predictability of currency returns froot and frankel 1989 and froot and thaler 1990 examine the hypothesis that market forecasts of future spot

the effect of discount frequency and depth on consumer price judgments the intensity of price discounting by retailers and manufacturers raises important questions about consumer price judgments in the extreme discounting can take the form of frequent but shallow discounts or deep but infrequent discounts the research reported here explores the effects of these strategies on consumer estimation of price levels for competing stores and brands in an initial experiment in which subjects made brand choices over time a depth effect was observed that contrasted with the frequency effect found in previous research subsequent experiments identified the conditions under which depth vs frequency characteristics of price data dominate consumers price estimation judgments frequency information is more influential when sets of interstore or interbrand comparative prices exhibit complex and overlapping distributions hence creating processing difficulty in contrast a depth bias occurs when prices have a simpler dichotomous distribution these results place pragmatically meaningful limitations on the influence of frequency information and illustrate the importance of context in determining consumer price judgments in a promotional environment

characterizing nonlinearities in business cycles using smooth transition autoregressive models during the past few years investigators have found evidence indicating that various time series representing business cycles such as production and unemployment may be nonlinear in this paper it is assumed that if the time series is nonlinear then it can be adequately described by a smooth transition autoregressive star model the paper describes the application of these models to quarterly logarithmic production indices for 13 countries and europe tests reject linearity for most of these series and estimated star models indicate that the nonlinearity is needed mainly to describe the responses of production to large negative shocks such as oil price shocks

attribute causality in environmental choice modelling when selecting attributes in environmentalchoice modelling studies preference should begiven to those attributes that aredemand relevant policy relevant andmeasurable the use of these criteria willoften result in a short list of environmentalattributes of which some are causally related the inclusion of attributes that have a cause effect relationship may stimulate somerespondents to seek to understand the causalrelations among attributes in order to assigngreater meaning to the alternatives andpotentially simplify the decision makingprocess this may have implications for theweights they assign to each of the attributeswhen identifying the preferred alternatives and subsequently for the implicit prices and orwelfare estimates a test of the impact ofincluding an attribute that causesimpacts on ecosystem health as well as anattribute relating to ecosystem health effectson parameter estimates implicitprices and welfare estimates is conducted twoquestionnaires are developed one with the causal attribute included and one without acomparison of results indicates that when the causal attribute is included in the vector ofchoice attributes the implicit value of asingle endangered species falls by 34 per centwhilst no significant difference is detected inthe parameter estimates importantly however estimates of compensating surplus for a givenpolicy package do not differsignificantly across the two treatments thisimplies that to the extent that the inclusionof a causal attribute reduces the implicitprices for one or more of the effect attributes the associated loss in utility isapproximately offset by the utility nowassociated with the new attribute

position bias in best worst scaling surveys a case study on trust in institutions this paper investigates the effect of physical position on best and worst choices in the bestworst scaling technique although the best worst scaling technique has been used widely in many fields the phenomenon of consumers adoption of processing strategies while making choices has been largely overlooked we examine this issue in the context of consumers perception of trust in institutions to provide information about a new food technology namely nanotechnology and its use in food processing our results show that around half of the consumers used position as a schematic cue when making choices we find the position bias is particularly strong when consumers chose their most trustworthy institution compared to their least trustworthy institution in light of our findings we recommend researchers in the field to be aware of the possibility of position bias when designing best worst scaling surveys we also encourage researchers who have already collected best worst data to investigate whether their data shows such heuristics

a roller coaster ride an empirical investigation of the main drivers of the international wheat price over the last decade commodity prices have registered substantial booms and busts marked by extreme volatility wheat in particular one of the main nonoil commodities has registered a roller coaster in price levels which seems to be inconsistent with supply and demand fundamentals to acutely investigate the drivers of wheat prices and quantify their impact a vector error correction model vecm has been used the exogenous variables have been distinguished into four groups market specific factors broad macroeconomic determinants speculative components and weather variables the quadriangulation of the determinants will enable us to better understand the movements in wheat price and identify the specific role of each component the results show that a mix of factors are contributing to wheat price movements including speculation global demand and real effective exchange rate

the macroeconomic consequences of disasters abstract natural disasters have a statistically observable adverse impact on the macro economy in the short run and costlier events lead to more pronounced slowdowns in production yet interestingly developing countries and smaller economies face much larger output declines following a disaster of similar relative magnitude than do developed countries or bigger economies a close study of the determinants of these adverse macroeconomic output costs reveals several interesting patterns countries with a higher literacy rate better institutions higher per capita income higher degree of openness to trade and higher levels of government spending are better able to withstand the initial disaster shock and prevent further spillovers into the macro economy these all suggest an increased ability to mobilize resources for reconstruction financial conditions also seem to be of importance countries with more foreign exchange reserves and higher levels of domestic credit but with less open capital accounts appear more robust and better able to endure natural disasters with less adverse spillover into domestic production

exchange rate volatility and deviations from unbiasedness in a cash in advance model abstract this paper examines time series properties of exchange rate changes the forward premium and the forward bias in the context of a variant of svensson s cash in advance model the model is solved and simulated using realistic forcing processes whose law of motion is estimated from u s japan data and then approximated by a markov chain although method of moments estimation shows that the over identifying restrictions implied by the model are not rejected it fails dramatically in producing a sufficiently variable risk premium on forward market speculation this result is robust to various pertubations to the model s parameters forcing processes and preference structure the model also fails to match exchange rate and forward premium volatility simultaneously

north american oriented strand board markets arbitrage activity and market price dynamics a smooth transition approach price dynamics for north american oriented strand board osb markets are examined the role of transactions costs are explored vis a vis the law of one price weekly data february 3rd 1995 through october 9th 2009 are used in the analysis nonlinearities induced by unobservable transactions costs are modeled by estimating time varying smooth transition autoregressions tv stars results indicate that nonlinearity and structural change are important features of these markets price parity relationships implied by economic theory are generally supported by the estimated models implications for the efficiency of spatial market linkages and the dynamics associated with price adjustments are also examined

exploring scale effects of best worst rank ordered choice data to estimate benefits of tourism in alpine grazing commons in many environmental valuation applications standard sample sizes for choice modelling surveys are impractical to achieve one can improve data quality using more in depth surveys administered to fewer respondents we report on a study using high quality rank ordered data elicited with the best worst approach the resulting exploded logit choice model estimated on 64 responses per person was used to study the willingness to pay for external benefits by visitors for policies which maintain the cultural heritage of alpine grazing commons we find evidence supporting this approach and reasonable estimates of mean wtp which appear theoretically valid and policy informative

the time variation of risk and return in foreign exchange markets a general equilibrium perspective this article successively introduces variable velocity durability and habit persistence in a standard two country general equilibrium model and explores their effects on the variability of exchange rate changes forward premiums and the foreign exchange risk premium a new feature of the model is that agents make decisions at a weekly frequency and face conditionally heteroskedastic shocks nevertheless even the most complex model fails to deliver sufficiently variable risk premiums without causing forward premiums and exchange rates to be excessively variable unlike previous models the model can roughly match the persistence of forward premiums article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

an integrated choice model incorporating alternative mechanisms for consumers reactions to in store display and feature advertising the marketing literature has suggested two prominent decision mechanisms through which in store display and feature advertising can affect brand choice which i call the price cut proxy effect and the consideration set formation effect the primary objective of this study is to propose an integrated brand choice model that incorporates these two possible behavioral mechanisms which have been shown to work by previous research the model allows consumers to use various combinations of the decision mechanisms with different probabilities and thus enables one to jointly assess the extent to which each effect might occur in actual purchase data and to investigate how consumers might differ in their tendencies to engage in these decision processes by incorporating these likely behavioral mechanisms the proposed model alleviates the problems caused by multicollinearity and produces sensible parameter estimates for the joint effects of promotion vehicles in store display feature ad and price discount which contributes to better managerial decision making

is it risk explaining deviations from uncovered interest parity abstract this paper analyzes ex ante returns to forward speculation and asks if these returns can be explained by models of a foreign exchange risk premium after presenting evidence that both nominal and real expected speculative profits are nonzero the paper examines if real returns to forward speculation are consistent with consumption based models of risk premia estimates of the conditional covariance between real speculative returns and real consumption growth are presented and like ex ante returns to forward speculation they exhibit statistically significant fluctuations over time and often change sign

the impact of product line extensions and consumer goals on the formation of price image abstract how do vertical product line extensions influence a retailer s price image conventional wisdom suggests that adding an upscale or downscale item to a product line has a directionally consistent impact on price image such that upscale extensions increase price image and downscale extensions decrease price image in contrast this research argues that vertical extensions can have the opposite effect such that upscale extensions can decrease rather than increase price image and vice versa for downscale extensions the authors further propose that the impact of vertical extensions on price image is a function of consumer goals and in particular whether consumers have the intent of browsing or buying the authors test these predictions in a series of five empirical studies that offer converging evidence in support of the proposed theory

an empirical analysis of internal and external reference prices using scanner data single source yogurt data are used to examine whether both internal and external reference prices affect purchase decisions internal reference prices are memory resident prices based on actual fair or other price concepts external reference prices are observed stimuli such as regular prices that stores may display along with a sale price for comparability discrete choice models with variables representing the two types of reference prices are estimated and both types of variables are found to have significant effects on purchase probabilities this suggests that consumers may use multiple reference points in evaluating price in purchase decisions in addition a model using an indicator of a sale price discount explains purchase probabilities as well as one that models the actual discount which suggests that consumers may be reacting to the indication of savings rather than to the amount of the discount

stability of willingness to pay for coastal management a choice experiment across three time periods a key assumption of stated preference methods is that individuals have well formed preferences that are robust over time both the discovered and constructed preference perspectives imply this is not necessarily the case there can be a large situational component to expressed preferences that add to the uncertainty of sampling error most non market valuation studies only collect data from one point in time so the degree of temporal variability cannot be tested test retest studies that provide data from two points in time generally find significant differences in preference structure and willingness to pay wtp in this study we test stability of wtp for beach erosion management using a fully ranked discrete choice experiment survey with not one but two retests over a six month period we find that stability does not improve with the additional repetition as the preference discovery hypothesis implies it might wtp confidence intervals overlap but the models are significantly different at each point in time even after allowing for variation in choice error either the survey did not facilitate sufficient preference discovery or preferences were reconstructed however respondents with high scores of self reported certainty in their choices in the first survey had significantly more stable wtp estimates

should the holding period matter for the intertemporal consumption based capm abstract empirical studies of the restrictions implied by the intertemporal capital asset pricing model across different asset markets have found conflicting evidence this paper asks whether an auxiliary assumption implicit in these tests could be responsible for the pattern of rejections this auxiliary assumption requires that covariances of returns with consumption move in constant proportion over time the paper tests this condition empirically using data on foreign exchange bonds and equity returns interestingly the evidence suggests that the tendency to reject the intertemporal consumption based asset pricing relationship depends upon the inadequacy of the auxiliary assumption not necessarily the relationship itself

products with branded components an approach for premium pricing and partner selection an increasing number of products are being sold with components that themselves are brand names examples are personal computers with intel microprocessors and diet soft drinks that use the nutrasweet formulation branded components may alter consumers valuation of the bundle necessitating changes in the ways firms identify and price such bundled products surprisingly the existing marketing literature is silent on this issue the purpose of our paper is to propose an analytical approach that helps marketers of products with branded components make optimal pricing and partner selection decisions our managerial objectives are twofold a to the seller of the bundled product we suggest the optimal bundled product offering optimal selling prices of alternative products revenues and profits and b to the branded component manufacturers we indicate the most favorable alliance partners and payoff gains losses of aligning with other branded components instead of unbranded alternatives our analytical approach is also likely to be helpful to academics researching bundling and ingredient branding issues the specific problem modeled assumes the bundled product has two components that are consumed jointly furthermore each component can be either a brand name or unbranded in this model the consumer has no control over the choice of the components in the bundle the seller decides what form of bundle components i e branded or unbranded to offer we assume that the product that is marketed eventually enjoys a monopoly drawing from research in signaling and brand alliance we posit each branded component may either enrich or suppress the value of the partnering component in the bundle as perceived by the consumers our approach has three methodological stages first we build an individual level model to assess the valuation of alternative products and their principal components at the level of a randomly drawn consumer to do so we rely primarily on the theory of reservation prices and weber s theory on price value changes second we aggregate such valuation across consumers to assess the market s overall valuation for this purpose we invoke parametric distributions based on integral transform theory third we develop payoff functions based on market valuation of alternative products and supply side costs the managerial objectives are met based on results from this stage our approach was successfully applied to the context of a university bookstore that intends to sell windows based laptop computers the two principal components of the laptop computer bundle are the microprocessor chip and the personal computer platform on which the chip is implanted the seller may choose either compaq with intel inside or a simpler bundle featuring one of these with an unbranded complementary component or an entirely unbranded bundle we used data collected from 192 potential consumers via a survey included in the survey were measures of consumers perceptions of functional aspects of the components and their reservation prices for alternative bundled products the approach identified the most profitable bundle for the seller and its optimal price it also provided estimates of the revenue impact of the gain or loss for each branded component by partnering the other branded component instead of the unbranded alternative as such the model facilitates the determination of the optimal price price premium and profits for products with branded components as well as the identification of the ideal partner for each branded component manufacturer it is apt to caution that products with branded components need not always lead to price premiums or lead to win win outcomes reasons such as incongruity between the branded components or domination of one of the components over the other may drive potential consumers away thus hurting profits implications of the results to negotiate component prices are discussed in the paper the study limitations and directions for future research are also presented

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

the influence of prior beliefs frequency cues and magnitude cues on consumers perceptions of comparative price data a widespread practice in grocery store advertising is to compare the advertised store s prices to a competitor s prices on multiple items an important but largely unexplored issue is how this information is processed and used in conjunction with prior beliefs to influence price perceptions in our initial studies we manipulated prior beliefs and two data based cues frequency of price advantage and magnitude of price advantage to determine their relative influence on consumer price perceptions results indicate that prior beliefs affected price perceptions but that the frequency cue exerted a dominating influence several follow up studies demonstrate the robustness of this phenomenon across a variety of presentational and instructional conditions

el nino la nina and world coffee price dynamics coffee is produced in equatorial and subequatorial regions of the world which are also most affected by el ni no southern oscillation enso enso events have a tendency to amplify weather conditions such as droughts or excess precipitation in the affected regions resulting in production shortage or excess supply subsequently impacting agricultural commodity prices in this research we assess effects of enso events on world coffee price dynamics using the monthly data between march 1989 and december 2010 we employ smooth transition autoregression framework to examine nonlinear dynamics of enso and coffee prices and illustrate the results of this research using generalized impulse response functions we find that enso events indeed have short term impacts on coffee prices the research findings are of interest to coffee producers and intermediaries in the coffee markets as well as researchers in the fields of environmental and development economics jel classifications c32 q11 q54

us food aid and civil conflict we study the effect of us food aid on conflict in recipient countries our analysis exploits time variation in food aid shipments due to changes in us wheat production and cross sectional variation in a country s tendency to receive any us food aid according to our estimates an increase in us food aid increases the incidence and duration of civil conflicts but has no robust effect on interstate conflicts or the onset of civil conflicts we also provide suggestive evidence that the effects are most pronounced in countries with a recent history of civil conflict jel d74 f35 o17 o19 q11 q18 we are unable to determine whether our aid helps or hinders one or more parties to the conflict it is clear that the losses particularly looted assets constitutes a serious barrier to the efficient and effective provision of assistance and can contribute to the war economy this raises a serious challenge for the humanitarian community can humanitarians be accused of fueling or prolonging the conflict in these two countries medecins sans frontieres amsterdam 1

neural antecedents of a random utility model abstract for over a decade economists have sought to identify neural antecedents for economic theories more recently neuroeconomic work has sought to predict consumer choice using brain activations witnessed in non choice visual appraisals this paper combines these two emerging strains of inquiry using functional magnetic resonance imaging fmri data observed when consumers view a quality differentiated food product labeled with different attributes we seek to determine the predictive validity of the random utility model rum often used in economic studies of consumer choice our fmri data consist of changes in blood flow to the ventromedial prefrontal cortex a brain region previously associated with value formation observed when people saw low price and high labels and labels indicating high or low quality we couple the fmri data with data on 28 non hypothetical choices made by each participant which pitted higher priced higher quality good vs a lower priced lower quality good we find little evidence of a systematic difference in activation in brain areas thought to be associated with value formation when viewing high vs low levels of attributes prices and quality however differences in neural blood flow across participants related to quality but not price is significantly related to subsequent consumer choice both in and out of sample providing some qualified neuroeconomic support for the attribute based rum

new techniques to extract market expectations from financial instruments this paper is a selective survey of new or recent methods to extract information about market expectations from asset prices for monetary policy purposes traditionally interest rates and forward exchange rates have been used to extract expected means of future interest rates exchange rates and inflation more recently these methods have been refined to rely on implied forward interest rates so as to extract expected future time paths very recently methods have been designed to extract not only the means but the whole risk neutral probability distribution from a set of option prices

when do price promotions affect pretrial brand evaluations the authors investigate the conditions in which price promotions affect pretrial brand evaluations a price promotion is theorized to be informative about brand quality when it stands out because i

the forward premium puzzle in a model of imperfect information abstract this paper studies the forward premium puzzle in a model with imperfect information the model predicts fixed effects and conditional heteroskedasticity in the forward premium regression and provides a rationale for the evidence in mayfield and murphy mayfield e s murphy r g 1992 interest rate parity and the exchange risk premium economics letters 40 319 324

stocks to use ratios and prices as indicators of vulnerability to spikes in global cereal markets we identify critical stocks to use ratios surs for major grains and for an index of total calories from these grains the latter appears to be a promising indicator of vulnerability to large price spikes when the current price shows no cause for concern more generally our results suggest that stocks data though no doubt unreliable can be valuable complements to price data as indicators of vulnerability to shortages and price spikes

the impact of choice inconsistencies in stated choice studies a new test procedure revealing mutuallyinconsistent choices has been developed andapplied to stated choice data our analysisshows that inconsistent choices commonly occurin several stated choice tasks an applicationof the test to the norwegian value of timestudy data shows that failing to excludeinconsistent choices resulted in asubstantially higher value of time theinconsistent choices were made by less educatedparticipants as the tasks were undertaken inthe easy context of choosing travelalternatives with three attributes practitioners of more complex and cognitivedemanding designs should be particularilyconcerned with these results

booms and slumps in world commodity prices abstract this paper examines the duration and magnitude of cycles in world commodity prices cycles are a dominant feature of commodity prices and dealing with the economic consequences of booms and slumps in prices continues to be one of the most challenging issues facing policymakers in commodity exporting developing countries we find that there is an asymmetry in commodity price cycles as price slumps last longer than price booms how far prices fall in a slump is found to be slightly larger than how far they tend to rebound in a subsequent boom in addition for most commodities the probability of an end to a slump boom in prices is independent of the time already spent in the slump boom

understanding reference price shoppers a within and cross category analysis abstract the authors attempt to draw profiles of reference price shoppers specifically the authors study how selected factors that affect brand choice are correlated with consumer sensitivity to gains and losses with respect to internal reference prices they also study the interaction between sociodemographics and gain and loss sensitivity furthermore the authors analyze cross category correlations in gain and loss sensitivity to shed light on their individual and category specific characters in three categories the results show significant heterogeneity in loss sensitivity among consumers and indicate that loss sensitivity is greater and more heterogeneous than gain sensitivity across categories the results show that loss sensitive shoppers are less influenced by past brand use and that both loss and gain sensitive shoppers more sensitive to price display and feature than the average consumer loss sensitive households tend to be larger and their heads are less likely to be fully employed

conditional variance and the risk premium in the foreign exchange market abstract we investigate the existence of a risk premium in the foreign exchange market based on the conditional variance of market forecast errors the forecast errors are assumed to follow the arch process introduced by engle 1982 estimation and diagnostic testing of the model are discussed and results are presented for the currencies of the united kingdom france germany japan and switzerland