price response information and asymmetry of price dispersion abstractin this study we examine how differently gasoline prices in 25 regions of seoul korea respond to asymmetric information between retailers and consumers we estimate the region specific li

price dispersion and seller heterogeneity in retail food markets price dispersion i e a homogeneous product being sold at different prices by different sellers is among the most replicated findings in empirical economics the paper assesses the extent and determinants of spatial price dispersion for 14 perfectly homogeneous food products in more than 400 retailers in a market characterized by the persistence of a large number of relatively small traditional food stores alongside large supermarkets the extent of observed price dispersion is quite high when prices in an urban area where the spatial concentration of sellers is higher are compared with those in smaller towns and rural areas differences in search costs and the potentially higher degree of competition do not yield lower prices other counteracting factors including differences in seller costs and consumer incomes make prices on average higher in the urban area for 11 of the 14 products considered for many but not all the products supermarkets proved to be less expensive than traditional retailers although average savings from food shopping at supermarkets were extremely low finally the results of the study provide evidence that retailers have different pricing strategies and these differences also emerge for supermarkets belonging to the same chain the results presented in the paper suggest that a variety of factors play a role in explaining price dispersion in addition to differences in seller costs the contemporaneous heterogeneity of retailers in terms of services provided and consumers in terms of search costs and preferences makes the emergence of monopolistic competition possible as well as allowing small traditional food retailers to remain in business

equilibrium price dispersion with consumer inventories abstract a model with two types of consumers shoppers and captives is constructed that leads to an equilibrium price dispersion shoppers may hold inventories of the good the level of consumer inventories leads to state dependent price dispersions it is shown that prices and quantities display negative serial correlation the model is tested using grocery store data which display the predicted correlations journal of economic literature classification numbers d43 l13 d83 l81

unionization and plant closure in canada this paper examines for the first time the role of unionization as a determinant of plant closings in canada using the 1999 to 2001 canadian workplace and employee survey the paper contributes to the north american evidence by showing that the share of a plant s workers covered by collective bargaining has a robust positive partial correlation with the probability of larger plants closing for smaller plants the extent of unionization tends to be much lower and its variation plays no role in plant closure the study highlights the theoretical and statistical importance of examining closure separately for large and small plants ce memoire examine pour la premiere fois le role de la syndicalisation en tant que determinant de la fermeture d usines au canada a l aide des resultats de l enquete sur le milieu de travail et les employes de 1999 et de 2001 emte le texte contribue a enrichir le dossier qui montre qu il y a correlation positive partielle robuste entre la portion des travailleurs d usines couverts par une convention collective et la probabilite de fermeture des grandes usines pour les plus petites usines le degre de syndicalisation tend aetre plus faible et sa variation ne joue pas de role dans le processus de fermeture d usines cette etude montre l importance theorique et pratique qu il y a aetudier separement les fermetures des grandes et des petites usines

gender differences in firm performance evidence from new ventures in the united states abstract prior studies examining the performance of female and male owned firms have generally reported that female owned firms underperform male owned firms however it is conceivable that the performance measures used by previous studies and or their inability to control for key demographic differences may have contributed to this finding for example few studies use size adjusted performance measures and yet we know that female owned firms tend to be smaller than their male counterparts similarly risk is typically not considered even though evidence suggests that women tend to be more risk averse than men we use a longitudinal five year database of more than 4000 new ventures that began operations in the u s in 2004 to determine whether potential differences in the performances of female and male owned firms disappear when appropriate performance measures are used and important demographic differences are controlled for in the models the performance measures we examine include 4 year closure rates return on assets roa and a risk adjusted measure sharpe ratio univariate test results confirm our expectation based on both liberal and social feminist theory that there is no difference in the performance of female and male owned new ventures provided performance is appropriately measured further these results are supported by our multivariate analyses which control for demographic differences such as industry experience and hours worked our findings should be of interest to researchers financiers advisors and policy makers perhaps more importantly our findings should also ensure that women who are contemplating starting a new venture are not discouraged from doing so by a false belief that new ventures initiated by women are less likely to succeed than those initiated by men

asymmetric changes in australia s small business loan rate this paper examines the dynamic asymmetric relationship between changes in the reserve bank of australia s rba cash rate and the interest rate for small business loans using monthly data 1990 2011 the results provide support for the rockets and feathers hypothesis with respect to both the amount and adjustment asymmetries while the rba s rate rises exert a one to one and instantaneous impact on the loan rate its rate cuts are only slowly and partially passed onto small businesses with a delay of 1 2 months the results also suggest that the recent global financial crisis increased the cost of borrowing for small businesses in australia by 2 21 these findings indicate that small businesses have limited time to respond to interest rate rises and not provided with the full benefit of interest rate decreases addressing this problem should ease the interest rate burden for small businesses and enhance their contribution to the economy

forecasting the liquidity of very small private companies abstract short term liquidity of very small private companies vspcs is important to creditors as any cash shortages result in opportunity costs due to delayed payments we use a publicly available liquidity indicator for 19 627 slovenian vspcs as a special but generalizable case of credit record data and financial ratios to predict possible cash shortages indicator is predicted and used in lagged form s as a predictive variable with without financial ratios allowing comparisons models including financial ratios are less efficient than models based on lagged liquidity indicator alone surprisingly combined models perform only marginally better despite high overall accuracy misclassification of companies experiencing cash shortages is high

the impact of dynamic price variability on revenue maximization abstract the objective of this article is to analyze the effect of dynamic price variability on revenue maximization while dynamic pricing is a common practice in tourism this is the first comprehensive study on the relationship between price variability and revenue maximization within the framework provided by the literature on intertemporal price discrimination price fairness inventory controls and organizational culture this research proposes and applies a new hedonic revenue model on a sample of 21 687 observations the findings suggest that higher dynamic price variability leads to higher hotel revenues strategic room unavailability and review rating also exert a clear positive revenue impact overall the benefits from charging different prices for the same service intertemporal price discrimination and limiting the number of units available before the demand is known inventory control outweigh the potential negative effects of price unfairness and organizational culture the paper concludes by providing actionable levers for hospitality managers

the economic impact of wireless number portability this paper examines the price response of wireless carriers to the introduction of number portability in the u s i find that wireless prices decreased in response to number portability but not uniformly across plans average prices for the plans with the fewest minutes decreased by only 0 19 month 0 97 but average prices for medium and high volume plans decreased by 3 64 month 4 84 and 10 29 month 6 81 respectively the results suggest that higher volume users in the wireless market benefited more from the policy induced reduction in switching costs

dynamic targeted pricing with strategic consumers abstract we investigate in this paper whether dynamic targeted pricing based on consumer purchase history could benefit a practicing firm even when consumers are strategic in that they actively seek to avail themselves of a low price in the future such strategic behavior on the part of consumers has been shown in the literature to render such dynamic targeted pricing unprofitable even for a monopoly firm we show that dynamic targeted pricing can benefit competing firms when they actively pursue customer recognition based on consumer purchase history this is because in order to pursue customer recognition competing firms need to price high to screen out price sensitive consumers and hence price competition is moderated as a result all competing firms can become better off with targeted pricing than without even when consumers behave strategically interestingly because of this competition moderation effect the paradoxical outcome occurs where dynamic targeted pricing may not benefit a monopolist but it may benefit competing firms we also show that dynamic targeted pricing can expand the market such that social welfare unambiguously improves

price discrimination of buyers with identical preferences and collusion in a model of advertising a model of advertising and price distributions is investigated whereby each seller can contact different buyers whose preferences are identical with different probabilities the model features a continuum of equilibria parametrized by the ratio of the buyers contacted by one seller differing across market segments and by the other sellers in general the sellers practice price discrimination across segments more asymmetric equilibria correspond to higher volumes of transactions and higher expected transaction prices this results in a lower expected utility for the buyers and higher expected profits thus identifying areas of influence can help the sellers to support collusion

the effect of price advertising on prices evidence in the wake of 44 liquormart the 44 liquormart decision eliminating rhode island s ban on liquor price advertising made rhode island the subject of a natural experiment for measuring the effect of advertising on prices using massachusetts prices as controls we find that advertising stores substantially cut only prices of the products that they advertise prices of other products at both advertising and nonadvertising stores do not change advertising stores cut their prices on products advertised by rivals while nonadvertising stores do not we find no reductions in price dispersion across stores newspaper advertising stores appear to draw a higher share of customers after they advertise

the relationship between firm growth size and age estimates for 100 manufacturing industries this study uses a sample of all firms operating in 100 manufacturing industries to examine some aspects of firm dynamics it finds that firm growth the variability of firm growth and the probability that a firm will fail decrease with firm age it also finds that firm growth decreases at a diminishing rate with firm size even after controlling for the exit of slow growing firms from the sample gibrat s law therefore fails although the severity of the failure decreases with firm size copyright 1987 by blackwell publishing ltd

reasons for insolvency amongst small firms a review and fresh evidence the growing and diverse literature on insolvency is comprehensively and critically reviewed the limited portfolio that small firms represent in particular as regards their managerial capabilities is suggested as an added reason for the strong inverse correlation of probability of insolvency with firm size the evidence from a hitherto largely untapped source of data the reports of the british official receiver is analysed using contingency tables the most important reason for their failure given by the owners of insolvent firms is weaknesses in operational management particularly in the adequacy of their capital marked inter temporal and interregional differences are evident within the data

selling costs and switching costs explaining retail gasoline margins recent theoretical work has shown that price discrimination can take place in imperfectly competitive as well as monopoly markets the persistence of higher retail margins on unleaded than on leaded gasoline during the 1980s suggests that discrimination may occur even in very competitive markets this article studies a number of cost based explanations for such gasoline pricing as well as the possibility of price discrimination the analysis indicates that gas stations discriminate against groups of customers who are less likely to switch to another station the conclusions highlight the influence of shopping or search costs on pricing decisions even in markets thought to be quite competitive

monopoly with incomplete information recent theoretical research on principal agent relationships has emphasized incentive problems that arise when the parties involved are constrained by either asymmetric information or their inability to monitor each other s actions here we concentrate on the former constraint and consider the case of a single principal the monopolist the main contribution is to show that under a separability assumption strong conclusions can be drawn about the nature of optimal incentive schemes although the primary focus is on optimal quantity discounts in a monopolized market the results also shed light on related topics such as optimal income taxation and commodity bundling

revisiting dynamic duopoly with consumer switching costs abstract the degree of collusiveness of a market with consumer switching costs is analyzed in an infinite horizon model of duopolistic competition in contrast with previous analyses we assume that firms compete for the demand for a homogeneous good by setting prices simultaneously in each period this problem is formulated as a simple stochastic game and a symmetric stationary markovian perfect equilibrium with distinctive economic features is studied we show that switching costs unambiguously relax price competition in equilibrium but that on the contrary they may make tacit collusion more difficult to sustain journal of economic literature classification numbers c73 d43 l13

strategic loyalty reward in dynamic price discrimination in a dynamic model with overlapping generations of consumers we study duopolistic competition when firms can price discriminate at each period between their previous customers and the consumers that they have never served long term contracts are not enforceable in markov perfect equilibrium one firm charges higher prices to its past customers than to its new customers as past customers have revealed their strong preferences for the firm the other firm however rewards its previous customers by charging lower prices to them than to its new customers this loyalty reward strategy comes from the interplay between the firms usual incentive to extract surplus from consumers with revealed strong preferences and their incentives to acquire information and to recognize their young loyal customers the result also relies on the firms inability a priori to tell different generations apart it is the outcome of the unique equilibrium of a simplified two period or t period version of the game and holds with forward looking consumers who are impatient enough

coordination economies advertising and search behavior in retail markets we introduce a model of the retail firm in which consumers and active firms benefit collectively from coordination of sales at fewer firms using this model we show that ostensibly uninformative advertising plays a key role in bringing about coordination economies by directing consumer search toward firms that offer the best deals optimal consumer search takes the form of a simple rule of thumb that uses observed advertising information to guide search both industry concentration and social surplus are higher in the presence of advertising relative to a no advertising benchmark jel d83 l15 many observed advertisements seem to be at odds with rational behavior in a variety of ads mostly on tv and radio multiproduct sellers provide little hard information choosing instead to impart only vague slogans that are suggestive of good deals examples are plentiful a hardware store

state dependence and alternative explanations for consumer inertia for many consumer packaged goods products researchers have documented inertia in brand choice a form of persistence whereby consumers have a higher probability of choosing a product that they have purchased in the past using data on margarine and refrigerated orange juice purchases we show that the finding of inertia is robust to flexible controls for preference heterogeneity and not due to autocorrelated taste shocks thus the inertia is at least partly due to structural not spurious state dependence we explore three economic explanations for the observed structural state dependence preference changes due to past purchases or consumption experiences which induce a form of loyalty search and learning our data are consistent with loyalty but not with search or learning properly distinguishing among the dierent sources of inertia is important for policy analysis because the alternative sources of inertia imply qualitative dierences in firm s pricing incentives and lead to quantitatively dierent equilibrium

the death of firms exploring the effects of environment and birth cohort on firm survival in sweden this paper investigates the death of firms and seizes a long term perspective it investigates the life spans of nearly 2 200 firms in seven birth cohorts of swedish joint stock companies founded during seven separate years between 1899 and 1950 research has traditionally emphasized individual and micro oriented factors in explaining post entry performance or has often focused on the influence of firm specific structural factors firm age and size a less attended field recognizes environmental forces this paper focuses on the interaction between the micro and macro levels and combines structural and environmental factors employing a cohort approach it relates firm survival to firm age and size as well as to the effect of cohort affiliation and environmental change over time period effects during macroeconomic expansion the risk of death decreases cohort effects are also evident firms founded during times of economic crisis exhibit lower survival rates consequently cohort affiliation and environmental forces i e period effects can explain differences in death rates in different firm populations

becoming a bad doctor we analyze a market with n rational rms doctors and a continuum of boundedly rational consumers patients following spiegler 2006a we assume that patients are not familiar with the market and rely on anecdotes we analyze the price setting game played by doctors with given dierent healing qualities doctors know their own quality as well as the qualities of their competitors in the unique equilibrium all doctors no matter how bad earn positive prots if doctors even costlessly choose their qualities doctors mainly oer mediocre qualities in all spne welfare may strictly decrease in the number of doctors

nonlinear pricing with random participation the canonical selection contracting programme takes the agent s participation decision as deterministic and finds the optimal contract typically satisfying this constraint for the worst type upon weakening this assumption of known reservation values by introducing independent randomness into the agents outside options we find that some of the received wisdom from mechanism design and nonlinear pricing is not robust and the richer model which allows for stochastic participation affords a more general empirical specification we develop a multidimensional methodology for addressing this class of problems providing two important applications to nonlinear pricing first with nonlinear pricing by a monopolist the familiar nodistortion at the top result persists but in tandem with the surprising conclusion that there is either no distortion at the bottom or bunching second in a simple model of product differentiated duopolists competing with nonlinear pricing we show that generally the duopoly outcome is qualitatively similar to the monopoly outcome however when marginal costs are symmetric and competition is sufficiently intense distortions disappear and the equilibrium outcome takes a remarkably simple form efficient quality allocations with cost plus fee pricing

dynamic price discrimination with asymmetric firms this paper considers variants of a dynamic duopoly model where one firm has a stronger market position than its competitor consumers past purchases may reveal their different valuations for the two firms products price discrimination based on purchase histories tends to benefit consumers if it does not cause the weaker firm to exit otherwise it can harm consumers the effect of price discrimination also depends on firms cost differences market competitiveness and consumers time horizon the stronger firm may price below cost in the presence of consumer switching costs with the purpose and effect of eliminating competition

dynamic pricing when to entice brand switching and when to reward consumer loyalty this article develops a theory of dynamic pricing in which firms may offer separate prices to different consumers based on their past purchases brand preferences over two periods are described by a copula admitting various degrees of positive dependence when commitment to future prices is infeasible each firm offers lower prices to its rival s customers when firms can commit to future prices consumer loyalty is rewarded if preference dependence is low but enticing brand switching occurs if preference dependence is high our theory provides a unified treatment of the two pricing policies and sheds light on observed practices across industries

a guide to the pitfalls of identifying price discrimination this paper demonstrates that plausible cost based explanations exist for what are commonly perceived to be cases of price discrimination we explain such commonly discussed problems as the price spreads of retail gasoline products the high price of dinners at restaurants the high price of popcorn at movie theaters and the fact that airline ticket prices vary with how long the ticket is purchased before the flight s departure our explanations benefit from not relying on consumer ignorance or implicit collusion among numerous sellers

redefining business success distinguishing between closure and failure new firms are believed to have high closure rates and these closures are believed to be failures but two u s census bureau data sources illustrate that these assumptions may not be justified the business information tracking series bits showed that about half of new employer firms survive beyond four years and the characteristics of business owners cbo showed that about a third of closed businesses were successful at closure the cbo also made it possible to compare results of models of business survival and business success but because of non response bias logit models were used similar to previous studies firms having more resources that were larger with better financing and having employees were found to have better chances of survival factors that were characteristic of closure such as having no start up capital and having a relatively young owner were also common in businesses considered successful at closure hence few defining factors can be isolated leading to true failures the significant proportion of businesses that closed while successful calls into question the use of business closure as a meaningful measure of business outcome it appears that many owners may have executed a planned exit strategy closed a business without excess debt sold a viable business or retired from the work force it is also worth noting that such inborn factors as race and gender played negligible roles in determining survivability and success at closure

information revelation and buyer profits in repeated procurement competition i investigate how procurement costs are affected by the information that buyers reveal about sellers behavior in a setting with two sequentially offered contracts for which a seller s privately known costs are identical expected prices are lowest when sellers learn nothing until all contracts are allocated are higher when they learn all sellers price offers as contracts are allocated and typically are even higher when they learn only the winner s identity or the winner s identity and price offer the results suggest that buyers engaged in repeated procurement may pay less by revealing minimal or extensive information rather than an intermediate amount

optimal design of research contests procurement of an innovation often requires substantial effort by potential suppliers motivating effort may be difficult if the level of effort and quality of the resulting innovation are unverifiable if innovators cannot benefit directly by marketing their innovations and if the buyer cannot extract up front payments from suppliers we study the use of contests to procure an innovation in such an environment an auction in which two suppliers are invited to innovate and then bid their prizes is optimal in a large class of contests if contestants are asymmetric it is optimal to handicap the most efficient one

behavior based discrimination is it a winning play and if so when with advances in technology the collection of information from consumers at the time of purchase is common in many categories this information allows a firm to straightforwardly classify consumers as either new or past consumers this opens the door for firms to implement marketing that a discriminates between new and past consumers and b entails making offers to them that are significantly different our objective is to examine the competitive effects of marketing that tailors offers to consumers based on their past buying behavior in a two period model with two competing firms we assume that each firm is able to commit about whether or not to implement behavior based discrimination bbd i e to add benefits to its offer for past consumers in the second period when the firms are identical in their ability to add value to the second period offer bbd generally leads to lower profits for both firms past customers are so valuable in the second period that bbd leads to cutthroat competition in the first period as a result the payoffs associated with the implementation of bbd form a prisoner s dilemma interestingly when a firm has a significant advantage over its competitor one firm has the capability to add more benefits for its past customers than the other it can increase its profit versus the base case even when there is significant competition in the second period moreover the firm at a disadvantage sometimes finds that the best response to bbd by a strong competitor is to respond with a uniform price and avoid the practice completely

price competition with reduced consumer switching costs the case of wireless number portability in the cellular phone industry wireless number portability wnp is a telecommunication regulatory policy that requires cellular phone service providers to allow customers who switch service subscriptions to retain their original phone numbers the right to retain the number lowers the switching cost for a consumer thus the purpose of the policy is to induce more competition and facilitate the growth of new or small service providers in this paper we show that wnp drives market price downward as expected but with a surprising twistrather than helping the smaller firms grow the policy may accelerate the process of market concentration we find that the main contributing factor to this peculiarity is the discriminatory pricing scheme prevalent in the industrythat is a service provider charges a lower per minute fee for the calls initiated and received within the same network than for the calls connected across two networks under this pricing scheme a consumer who subscribes to a larger network would benefit more than if subscribing to a smaller network despite the relatively higher fixed access fee that the former may charge by lowering the barrier of switching wnp creates a market condition conducive for a larger network to gain market share we support our analysis with the empirical evidence gathered from hong kong where wnp was adopted in march 1999

did installed base give an incumbent any measurable advantages in federal computer procurement this research examines the relative strength and significance of the status of incumbent contractor in federal computer procurement one finding as expected is that an agency is likely to acquire a system from an incumbent vendor another finding perhaps more interesting is that the in compatibility between a buyer s installed base and a potential system also influences the vendor choice a result that may be the first econometric measurement of the competitive effects of incompatibility an illustration of this thesis comes from ibm s experience new evidence shows however that ibm s apparent disadvantage with government agencies is largely due to incompatibilities in ibm s product line

history based price discrimination and entry in markets with switching costs a welfare analysis abstract we analyze history based price discrimination in an asymmetric industry where an incumbent protected by switching costs faces an entrant who does not have access to information about consumers purchase histories we demonstrate that consumer surplus is higher with uniform pricing than with history based price discrimination we find that the entry decision is invariant to whether the incumbent implements history based pricing or uniform pricing this implies that the potential abuse of market dominance imposed by history based price discrimination is exploitation not exclusion finally we establish that the profit gain to the incumbent from history based pricing exceeds the associated loss to consumers

customer poaching and advertising this paper is a first look at the dynamic effects of customer poaching in homogeneous product markets where firms need to invest in advertising to generate awareness when a firm is able to recognize customers with different purchasing histories it may send them targeted advertisements with different prices it is shown that only the firm which advertises the highest price in the first period will engage in price discrimination a practice that clearly benefits the discriminating firm this poaching gives rise to the race for discrimination effect through which price discrimination may act actually to soften price competition rather than intensify it as a result all firms may become better off even when only one of them can engage in price discrimination this paper offers a first attempt to evaluate the effects of price discrimination on the efficiency properties of advertising in markets with low or no advertising costs allowing firms to price discriminate leads them to provide too little advertising which is not good for consumers and overall welfare only in markets with high advertising costs might firms overadvertise regarding the welfare effects price discrimination is generally bad for welfare and consumer surplus though good for firms

endogenous switching costs in a duopoly model we analyze the effect of alternative pricing policies on the competitive outcome in a two period differentiated product duopoly model if firms can precommit to a second period price for their loyal customers equilibrium profits fall but if they precommit to a discount then the equilibrium profits increase in either case switching costs are endogenized in period two firms discriminate against newcomers

competitive promotional strategies this article analyzes the equilibrium pricing strategies of brands engaged in a pricing game each brand has a monopoly market loyal consumers and competes with others in a common market called brand switchers in the case of a duopoly it is shown that the behavior of the brand switchers characterizes the equilibrium behavior of the duopolists this article focuses on two key comparative statics namely the depth of discounts away from a regular high price and the probability of giving a deal or the frequency of deals how these properties vary with the size of the loyal markets and the behavior of the brand switching population is discussed copyright 1988 by the university of chicago

the existence of equilibrium in discontinuous economic games i theory the article presents information about the existence of equilibrium in discontinuous economic games in this paper and its sequel presents study the existence of nash equilibrium in games where agents payoff functions are discontinuous the enquiry is motivated by a number of recent studies that have uncovered serious existence problems in seemingly innocuous economic games in the sequel to this paper authors have explained the utility function in the economic games referred to earlier are neither continuous nor quasi concave however they demonstrate that the payoff functions in mildly modified versions of these constructs exhibit two weaker forms of continuity which together with the requirement of quasi concavity suffice for the existence of an equilibrium from this one may conclude that at least in the modified versions of these models discontinuities in the payoff functions are not the real source of the problem rather it is the failure of the payoff functions to the quasi concave which is responsible for the non existence of equilibrium these observations bear on the existence of nash equilibrium in pure strategies

online shopping and platform design with ex ante registration requirements we study platform design in online markets in which buying involves a nonmonetary cost for consumers caused by privacy and security concerns firms decide whether to require registration at their website before consumers learn relevant product information we derive conditions under which a monopoly seller benefits from ex ante registration requirements and demonstrate that the profitability of registration requirements is increased when taking into account the prospect of future purchases or an informational value of consumer registration to the firm moreover we consider the effectiveness of discounts store credit as a means to influence the consumers registration decision finally we confirm the profitability of ex ante registration requirements in the presence of price competition the online appendix is available at https doi org 10 1287 mnsc 2016 2595 this paper was accepted by j miguel villas boas marketing

behavior based pricing in vertically differentiated industries we study behavior based pricing bbp in a vertically differentiated model vertical differentiation is innately asymmetric because all customers prefer the higher quality product when prices are equal this asymmetry causes bbp to have different properties than symmetric horizontally differentiated models we highlight two dimensions that affect the analysis the role of quality adjusted cost differences between the firms and the role of consumer discounting relative to firm discounting in the second period consistent with the prior literature we find that there are conditions based on market shares and quality adjusted costs under which either the low quality firm or the high quality firm but not both will reward its current customers with lower prices than it charges to new customers we then consider whether these conditions can arise in a two period equilibrium we find that if consumers sufficiently discount the future periods then firms at enough of a competitive disadvantage will reward their customers i e the low quality firm will reward its current customers if the quality adjusted cost differential between the two firms is small while the high quality firm will reward its current customers if this cost differential is large conversely we find that if consumers do not discount the future very much then the firm at a competitive disadvantage i e a low quality firm competing against a low cost high quality firm or a high quality firm that has very high costs can earn greater profits with bbp than without bbp although there are cases where both firms may benefit from bbp this paper was accepted by j miguel villas boas marketing

price discrimination with private and imperfect information in this paper i investigate the competitive and welfare effects of the improvements in information accuracy in markets where firms can price discriminate after observing a private and noisy signal about a consumer s brand preference i show that when firms believe that consumers have a brand preference for them then they charge more to these consumers and this price has an inverse u shaped relationship with the signal s accuracy in contrast the price charged after a disloyal signal has been observed falls as the signal s accuracy rises while industry profit and overall welfare fall monotonically when price discrimination is based on increasingly more accurate information the reverse happens to consumer surplus

inflation bankruptcy default premia and the stock market in this paper we explore some of the possibilities and argue that in the absence of index linked loans higher inflation implies higher liquidation rates and default premia this would also be one possible reason why higher inflation would depress share values our evidence also suggests that the modigliani and cohn 1979 valuation errors hypothesis is extremely important in order to see why higher inflation might lead to more bankruptcies consider the following example suppose that the real interest rate p is i and that a firm has borrowed iooo if there is no inflation the firm s interest payments are io now suppose that inflation p rises to io and that the nominal interest rate r is given by the formula i r i p i fi then r rises to i i i and total interest payments to i i i hence at a time when revenue has risen by only io interest payments rise elevenfold and this creates cashflow problems for the firm index linked debt would avoid this problem because the principal could be indexed and would rise to i ioo leaving the firm to only pay li i in interest

equilibrium price dispersion in retail markets for prescription drugs this study seeks to establish the empirical importance of price dispersion due to costly consumer search by examining retail prices for prescription drugs posted prices in two geographically distinct markets are shown to vary considerably across pharmacies within the same market even after one controls for variation due to pharmacy differences pharmacy heterogeneity accounts for at most one third of the observed price dispersion the empirical analysis hinges on the observation that consumers incentives to price shop depend on characteristics of the drug therapy cross sectional patterns in price distributions across drugs are consistent with the predictions of a search model prices for repeatedly purchased prescriptions for which the expected benefits of search are highest exhibit significant reductions in both dispersion and price cost margins

consumer privacy and marketing avoidance a static model we introduce the concept of marketing avoidance consumer efforts to conceal themselves and to deflect marketing the setting is one in which sellers market some item through solicitations to potential consumers who differ in their benefit from the item and suffer harm from receiving solicitations concealment by one consumer induces sellers to shift solicitations to other consumers whereas deflection does not solicitations cause two externalities direct harm on consumers and the indirect cost of consumer concealment and deflection we find that in markets where the marginal cost of solicitation is sufficiently low efforts by low benefit consumers to conceal themselves will increase the cost effectiveness of solicitations and lead sellers to market more however concealment by high benefit consumers leads sellers to market less furthermore concealment by low benefit consumers increases direct privacy harm and consumer welfare is higher with deflection than concealment finally it is optimal to impose a charge on solicitations

advertising brand loyalty and pricing i consider an oligopoly model where prior to price competition firms invest in persuasive advertising and induce brand loyalty in consumers who would otherwise buy the cheapest alternative on the market this setting in which persuasive advertising is introduced to homogenous product markets provides an alternative explanation for price dispersion phenomena despite ex ante symmetry the equilibrium profile of advertising outlays is asymmetric it follows that endogenously determined brand loyal consumer bases are not symmetric across firms this raises a robustness question regarding varian s model of sales where symmetry is exogenously assumed

small business failure and external risk factors unlike much of the previous literature which has generally focused on internal risk factors this study seeks to explore the impact of macro economic factors on small business mortality the results suggest that economic factors appear to be associated with between 30 and 50 of small business failures depending on the definition of failure used as expected failure rates were positively associated with interest rates where failure was defined as bankruptcy and the rate of unemployment where failure was defined as discontinuance of ownership however somewhat unexpectedly failure rates were found to be positively associated with lagged employment rates where failure was defined as to prevent further losses and with current and lagged retail sales where failure was defined as either failed to make a go of it discontinuance of ownership or discontinuance of business this indicates that a strengthening economy may provide the trigger for an increase in voluntary business exits as individual proprietors seek to maximize the returns available to them on both their financial and human capital

behavior based pricing with experience goods we consider a two period model in which duopolists sell experience goods and practice behavior based price discrimination bbpd we give general conditions for when firms should offer a lower price to existing customers pay to stay or to new customers pay to switch we also demonstrate that unlike previous results bbpd may intensify competition in the first period but weaken it in the second

the perils of behavior based personalization behavior based personalization has gained popularity in recent years whereby businesses offer personalized products based on consumers purchase histories this paper highlights two perils of behavior based personalization in competitive markets first although purchase histories reveal consumer preferences competitive exploitation of such information damages differentiation similar to the classic finding that behavior based price discrimination intensifies price competition with endogenous product design there is yet a second peril it emerges when forward looking firms try to avoid the first peril by suppressing the information value of purchase histories ideally if a market leader serves all consumers on day 1 purchase histories contain no information about consumer preferences however knowing that their rivals are willing to accommodate a market leader firms are more likely to offer a mainstream design at day 1 which jeopardizes differentiation based on this understanding i investigate how the perils of behavior based personalization change under alternative market conditions such as firms better knowledge about their own customers consumer loyalty and inertia consumer self selection and the need for classic designs

commitment lending under asymmetric information theory and tests on u k startup data u k business startup data is used to examine the role of contract parameters in solving the bank s problem of lending under asymmetric information margins are found to be a direct function of the probability of failure and an inverse function of security for given loan size consistently with collateral being invoked to solve the moral hazard problem business survival is also found to be enhanced by owner equity inputs for given debt again consistent with a requirement for owner financial inputs to enhance unobservable effort security rises along with loan size and survival chances a finding consistent with a a firm loan size effect larger borrowers have lower marginal admin cost to the bank and with b positive borrower self selection better borrowers offer collateral because they are less likely to experience forfeiture observable business characteristics are found to play an important intermediary role in the solution to the moral hazard problem more mature proprietors have more experience business commitment assets for borrowing and the willingness to use them for loan collateral their contract parameters reflect these facts

efficient mechanisms for mergers and acquisitions we characterize incentive ecient merger outcomes when payments can be made both in cash and stock each firm has private information about both its stand alone value and a component of the possibly negative potential synergies we study two cases when transfers can and cannot be made contingent on the value of any new firm when they can we show that redistributing shares of any non merging firm generates information rents and provide necessary and sucient conditions for the implementability of ecient merger rules when they cannot private information undermines eciency more when it concerns stand alone values

are business startups debt rationed using a large random sample of u k start ups and a rich data set the paper demonstrates that human capital is the true determinant of survival and that the correlation between financial capital and survival is spurious provision of finance is demand driven with banks supplying funds elastically and business requests governing take up firms self select for funds on the basis of the human capital endowments of the proprietors with better businesses more likely to borrow a reason why others have seemingly identified start up debt gaps may be the failure to test a sufficiently rich empirical model copyright 1996 by royal economic society

endogenous availability cartels and merger in an equilibrium price dispersion abstract in a generalization of the butters advertising model the equilibrium involves one firm that advertises at least twice as much as the others who all advertise equally a cartel formation game is considered and any equilibrium cartel involves at least two but generally not all firms in one equilibrium only the largest firms join the cartel a merger game is considered and in equilibrium the large firm buys the other firms in sequence with discounting equalizing the expected utility of the targets and prices rising over time journal of economic literature classification numbers d43 d83 l11 l13 l41

information gatekeepers on the internet and the competitiveness of homogeneous product markets we examine the equilibrium interaction between a market for price information controlled by a gatekeeper and the homogenous product market it serves the gatekeeper charges fees to firms that advertise prices on its internet site and to consumers who access the list of advertised prices gatekeeper profits are maximized in an equilibrium where a the product market exhibits price dispersion b access fees are sufficiently low that all consumers subscribe c advertising fees exceed socially optimal levels thus inducing partial firm participation and d advertised prices are below unadvertised prices introducing the market for information has ambiguous social welfare effects

pricing with customer recognition abstract this article studies the dynamic effects of behaviour based price discrimination and customer recognition in a duopolistic market where the distribution of consumers preferences is discrete consumers are myopic and firms are forward looking in the static and first period equilibrium firms choose prices with mixed strategies when price discrimination is allowed forward looking firms have an incentive to avoid customer recognition thus the probability that both will have positive first period sales decreases as they become more patient furthermore an asymmetric equilibrium sometimes exists yielding a 100 0 division of the first period sales as a whole price discrimination is bad for profits but good for consumer surplus and welfare

the impact of brand selection on price competition a double edged sword brand selection the number of alternative brands of a particular product is a double edged sword in that on the one hand it increases rivalry and so stimulates price competition but on the other hand it causes consumers to be poorly informed and thus vulnerable to exploitation and so dampens price competition this phenomenon is demonstrated analytically and empirically with analytical work based on hotelling s unit market line using price dispersion as a measure of the state of price competition it is shown that a widening in price dispersion that is a lessening of price competition arises from an increase in brand selection any increase in the number of alternative brands on offer brand selection causes an increase in dif ness distortion in information function which in turn causes an increase in price dispersion a lessening of price competition the phenomenon is demonstrated empirically through a small survey of household beverages