price dependent profit sharing as a channel coordination device we show how an upstream firm by using a price dependent profit sharing rule can prevent destructive competition between downstream firms that produce relatively close substitutes with this rule the upstream firm induces the retailers to behave as if demand has become less price elastic as a result competing downstream firms will maximize aggregate total channel profit when downstream firms are better informed about demand conditions than the upstream firm the same outcome cannot be achieved by vertical restraints such as resale price maintenance price dependent profit sharing may also ensure that the downstream firms undertake efficient market expanding investments the model is consistent with observations from the market for content commodities distributed by mobile networks

delay and settlement in litigation delay in litigation is a policy concern in many jurisdictions little evidence is available on the causes of such delay however we present a version of spier s 1992 bargaining model of litigation and derive directly a functional form for the conditional probability of case settlement we then estimate this and test predictions about the effects of legal costs and uncertainty over damages and liability on the conditional probability of settlement using data from negligence claims against several nhs trusts our results provide a direct test of the model and shed light on the causes of settlement delay in england

an econometric analysis of the european commission s merger decisions abstract using a sample of 96 mergers notified to the european commission and logit regression techniques we analyse the commission s decision process we find that the probability of a phase 2 investigation and of a prohibition of the merger increases with the parties market shares the probabilities increase also when the commission finds high entry barriers or that the post merger market structure is conducive to collusion we do not find significant effects of political variables such as the nationality of the merging firms

the impact of bse on the demand for beef and other meats in great britain indices of media coverage of bse are incorporated in a dynamic aids model of meat demand the publicity which bse has received is found to have had significant effects on the allocation of consumer expenditure among the meats a short run impact has been identified which accounts in large part for the discernible drop in the market share of beef in the early 1990s and more important there also appears to be a significant long run impact of bse which by the end of 1993 has reduced the beef market share by 4 5

consumer preferences before and after a food safety scare an experimental analysis of the 2010 egg recall in august 2010 more than half a billion eggs were recalled in the u s because of a salmonella outbreak this study examines the effect of the recall with a unique pair of auction experiments investigating willingness to pay wtp for conventional and organic eggs one conducted shortly before and one right after the recall with the same participants in addition to the before and after bids participants bid again after a negative information or balanced information treatment about the event accompanying surveys showed consumers had a high level of awareness of the recall but less knowledge of specific details and viewed information on egg farm conditions as very important in their wtp while there were no significant before and after differences wtp for organic eggs significantly increased in the negative information treatment and balanced information had a positive effect on consumer wtp for conventional eggs

food scandals media attention and habit persistence among desensitised meat consumers abstract consumer reactions to food scandals and their resulting economic implication are well documented however studies have typically neglected the roles that consumption habits and media usage behaviours may play in explaining household s response to food safety incidences in this study we develop a model of heterogeneous media usage intensity information impacts and decay over time to estimate household s behavioural responses to the 2011 german dioxin scandal we are specifically interested in determining the degree of heterogeneity in household s short term adjustments demand patterns versus persisting long term consumption habits of meat products chicken and pork directly affected by the incident the empirical analysis employs detailed household level retail scanner and media usage data collected by the gfk consumer scan panel for a total of 16 023 households over a period of 104 calendar weeks results of dynamic correlated random effect tobit models indicate an important role of unobserved heterogeneity in explaining household responses during the food scandal we find strong empirical evidence supporting our hypothesis that short term marginal adjustments in demand and propensity to buy affected products triggered by the negative impact of household media exposure were over compensated by habit persistence the question of how consumption patterns evolve over time in the presence of food scandals is expected to be of interest for both policy makers and the food industry the potential biases in the projection of economic impacts resulting from simplifying assumptions of household s response patterns to a proliferating numbers of food safety incidences has implications for risk management and public policy

analysis of attendees expenditure patterns to recurring annual events examining the joint effects of repeat attendance and travel distance abstract this study examines the changes in expenditure patterns of attendees to recurring annual events with specific emphasis on the effects of repeat attendance and travel distance this study utilizes a unique dataset accumulated from six consecutive years at a recurring annual event hosted in miami united states by using the almost ideal demand system aids we estimate price elasticities and cross price elasticities among tourist expenditure categories while jointly examining the effects from the trip characteristics of repeat attendance and travel distance from the econometric analysis we find expenditure own price and cross price elasticities that conform to the literature and confirm the strong inter relationship among the respective categories of the overall travel budget in addition our results confirm a significant difference in expenditure patterns between first time and repeat attendees as well as between long haul and short haul travelers

repeated interactions and improved outcomes an empirical analysis of movie production in the united states many marketing activities take place within teams these team activities often involve repeated interactions among team members over several projects we study whether and what types of repeated interactions improve current production success and under what conditions we use a unique data set of past experience successes and pairwise interactions between members of production teams of 1 123 movies and employ dynamic panel data estimation methods three unique insights emerge interactions between the producer and other team members have a greater effect on revenues than other repeated pairs for which consumers might have preferences in many instances repeated interactions with current team members are more revenue enhancing than individual successes in past movies in fact repeated interactions between team members improve current revenues even if such interactions were unsuccessful we discuss theoretical explanations for these results and the managerial implications for successful team formation

quantifying the effects from horizontal mergers in european competition policy this paper starts from a recent case to study how merger analysis in europe may be potentially improved starting from the geographic market definition in the merger decision we formulate and estimate an oligopoly model with differentiated products based on the estimates we compare several alternative market power tests a hypothetical market power test an actual market power test and a comparative market power test our comparison of these alternative tests illustrates that the recently introduced empirical techniques need not be in conflict with traditional policy practices in europe but should be seen as a natural extension of commonly accepted principles furthermore we emphasize the importance of our dynamic comparative market power test in the european context according to this test the relevant point of comparison when assessing a merger is not the status quo but rather a relevant alternative merger scenario that is likely to happen in the event the merger is rejected in a european context the choice is often to accept a sequence of regionally based mergers or rather a sequence of pan european mergers finally we also emphasize the importance of constructing confidence intervals when computing the predicted merger effects especially if one is interested in testing the hypothesis that a merger has no effects

a structural time series approach to modelling multiple and resurgent meat scares in italy this paper exploits a structural time series approach to model the time pattern of multiple and resurgent food scares and their direct and cross product impacts on consumer response a structural time series almost ideal demand system sts aids is embedded in a vector error correction framework to allow for dynamic effects vec sts aids italian aggregate household data on meat demand is used to assess the time varying impact of a resurgent bse crisis 1996 and 2000 and the 1999 dioxin crisis the vec sts aids model monitors the short run impacts and performs satisfactorily in terms of residuals diagnostics overcoming the major problems encountered by the customary vector error correction approach

centralized pricing versus delegating pricing to the salesforce under information asymmetry the issue of delegating pricing responsibility to the salesforce is of interest to marketing academics and practitioners it has been shown by lal 1986 that under certain situations with information asymmetry it is more profitable for the firm to delegate pricing authority to the salesforce than to have centralized pricing in this paper we re examine situations where information asymmetry exists and analyze its effect on the decision of the firm to set a price or delegate pricing responsibility to the salesforce using contract theory we find that when the salesperson s private information can be revealed to the firm through contracting centralized pricing performs at least as well as price delegation we derive the optimal centralized pricing contract under a set of standard assumptions used in the economics and business literature

food safety the media and the information market availability of information has increased rapidly over the past decades yet information on food safety is still considered problematic economists have extensively researched the effects of imperfect information however little attention has been paid to the institutional organization of the supply of information and the incentive schemes in the information market this paper analyzes how and when information is supplied by media organizations and what the implications are we first develop a theoretical framework and afterwards provide empirical evidence from media coverage of two recent food safety crises in europe

no news is good news stochastic parameters versus media coverage indices in demand models after food scares we develop a stochastic parameter approach to model the time varying impacts of food scares on consumption as an alternative to the inclusion of news coverage indices in the demand function we empirically test the methodology on data from four food scares the 1982 heptachlor milk contamination in oahu hawaii and the bovine spongiform encephalopathy and two escherichia coli scares on u s meat demand over the period 1993 9 results show that the inclusion of time varying parameters in demand models enables the capturing of the impact of food safety information and provides better short term forecasts

advertising information and product quality the case of butter this study examines the roles of cholesterol information and advertising in explaining consumption trends for fats and oils focusing on butter results suggest increased consumer awareness of the health effects of blood cholesterol has contributed to the secular decline in butter consumption in canada although consumers responses to negative information appear to outweigh their responses to positive information the industry advertising campaign launched in 1978 by the dairy bureau of canada has had a positive effect on butter demand

can china s meat imports be sustainable a case study of mad cow disease rising demand and constrained domestic production have challenged the meat consumption in china to fill the gap between domestic demand and supply china imports an increasing volume of meat produ

bargaining with incomplete information an infinite horizon model with two sided uncertainty the resolution of any bargaining conflict depends crucially on the relative urgency of the agents to reach agreement and the information each agent has about the others preferences this paper explores within the context of an infinite horizon bargaining model with two sided uncertainty how timing and information affect the rational behaviour of agents when commitment is not possible since the bargainers are uncertain about whether trade is desirable they must communicate some of their private information before an agreement can be reached this need for learning due to incomplete information about preferences results in bargaining inefficiencies trade often occurs after costly delay thus the model provides an explanation for the inefficient bargaining behaviour that appears to occur often in practice

litigation and settlement an empirical approach litigants in civil lawsuits involving monetary damages often find an out of court settlement preferable to a trial most theoretical models of settlement choice employ an expected utility maximizing framework that emphasizes the importance of risk preferences litigation costs and the distribution of trial awards an empirical model of settlement choice is used to examine whether the variables prominent in the theoretical literature are statistically useful in explaining the occurrence and monetary value of settlements estimates from a sample of civil filings provide new empirical evidence of how the legal system affects the behavior of litigants during the settlement process copyright 1989 by mit press

plea bargaining and prosecutorial discretion a model of plea bargaining with asymmetric information is presented the prosecutor s private information consists of the strength of the case while the defendant s private information consists of h is guilt or innocence in equilibrium a fraction of cases are dismis sed because they are too likely to involve an innocent defendant in the remaining cases the prosecutor s offer of a sentence in exchange for a plea of guilty reveals the strength of the case it is shown t hat unlimited prosecutorial discretion may be socially disadvantageou s since it carries with it the requirement of sequential rationality copyright 1988 by american economic association

demand for beef and chicken products separability and structural change several studies have indicated that the recent shift from beef to poultry in consumption is not entirely caused by changes in rela tive prices or income braschler chavas dahlgran hudson and vertin moschini and meilke frank thurman most studies of structural change have focused on red meat consumption only thurman has looked closely at the poultry market and no one has considered poultry products yet the mix of chicken products marketed changed dramat ically during the last twenty years and should have influenced aggregate meat demand the share of broiler slaughter marketed as whole birds declined from 74 in 1965 to 28 in 1985 while cut up parts and processed chick en products increased from 26 to 72 whole birds are inferior goods and cut up parts and processed chicken are normal goods haidacher et al the shift in chicken prod uct mix away from whole birds should have increased the preference for total chicken in this article two related questions are ad dressed first do consumers allocate expendi tures among meats by animal origin or by product type second does disaggregation of meat into products in a meat demand model give insight into the causes of structural

the timing of out of court settlements parties to a lawsuit will frequently delay litigation even in circumstances where a voluntary agreement is eventually reached this article is concerned with what causes legal disputes to be prolonged over time we discuss dynamic models of litigation to illustrate how changes in the bargaining environment might generate empirical hazard functions comparative statics results are then corroborated with empirical estimates of a hazard function adjusted to account for both the heterogeneity of lawsuits and the nonproportional time dependence suggested by theory

the dynamics of pretrial negotiation it is shown that many cases proceed to court despite ample opportunity for interaction and much of the settlement takes place on the courthouse steps the deadline effect when fixed costs of bargaining are introduced a u shaped pattern of settlement appears with a greater chance of settlement at the beginning and at the end of negotiations than in the middle these characteristics persist even as the time between offers approaches zero the theoretical predictions are consistent with the stylized facts a large proportion of the lawsuits that are settled out of court are settled very close to the trial date or in the first several days of the trial 3 although the deadline effect appears in many other settings as well it has little theoretical support 4

market segmentation self selection and product line design the purpose of this paper is to develop a theory of market segmentation based on consumer self selection the extant theory is based on the third degree price discrimination model of pigou central assumptions of which are that the firm can directly address individual segments and isolate them by using consumer self selection i am relaxing these assumptions in the context of a monopolist designing a product line i show that this relaxation has significant implications for how the products and prices are chosen and what they look like in particular segments may be aggregated even though there are no economies of scale furthermore consumer self selection enables us to model cannibalization and competition among firms

cigarette demand health scares and education in turkey the purpose of this paper is to examine the demand characteristics of cigarettes in turkey aggregate time series date for the 1960 88 period are used in estimation income and price elasticities of cigarette demand are obtained the effect of health warning is estimated to reduce cigarette consumption by about 8 since the inception of warnings in 1982 imports of cigarettes have been allowed since 1984 in addition to advertising of cigarettes in the non electronic media the effect of health warnings are found to be stronger than the opposing effect of advertising the results also suggest that public education about adverse health effects of smoking may be more effective in reducing consumption and less regressive on consumer incomes than raising the price of cigarettes

summits riots and media attention the political economy of information on trade and globalisation supply of information has increased rapidly through the growth of commercial media and technological innovations yet economists still blame anti globalists demonstrations and public opposition to trade liberalisation on poor information this paper analyses how the structure of the media industry affects the distribution of information on trade policy and globalisation we present an empirical analysis of belgian media reporting on trade policy and globalisation over the 1999 2002 period supports these hypotheses and finds strong negative bias in media coverage moreover we find that media coverage of trade policy and globalisation is highly concentrated around summit meetings of political leaders media attention in the popular press is heavily influenced by riots and demonstrations at summits the paper points at important implications for public information on trade policy and globalisation and for economists

a data envelopment analytic model for assessing the relative efficiency of the selling function abstract this paper presents a data envelopment analytic model for assessing the relative efficieny of sales units that simultaneously incorporates multiple sales outcomes controllable and uncontrollable resources and environmental factors the model enables comparisons among a reference set of sales units engaged in selling the same product service by deriving a single summary measure of relative sales efficiency in addition it provides insights into modifications that are necessary in order to enhance relative efficiency of an individual sales unit conditions when the sales unit has additional control over resources are explored and the effects on relative efficiency are examined an illustration of the model in the context of sales units from a sample of insurance companies demonstrates the critical features of the model

firm strategies in the mid tail of platform based retailing while millions of products are sold on its retail platform amazon com itself stocks and sells only a very small fraction of them most of these products are sold by third party sellers who pay amazon a fee for each unit sold empirical evidence clearly suggests that amazon tends to sell high demand products and leave long tail products for independent sellers to offer we investigate how a platform owner such as amazon facing ex ante demand uncertainty may strategically learn from these sellers early sales which of the mid tail products are worthwhile for its direct selling and which are best left for others to sell the platform owner s cherry picking of the successful products however gives an independent seller the incentive to mask any high demand by lowering his sales with a reduced service level unobserved by the platform owner we analyze this strategic interaction between a platform owner and an independent seller using a game theoretic model with two types of sellers one with high demand and one with low demand we show that it may not always be optimal for the platform owner to identify the seller s demand interestingly the platform owner may be worse off by retaining its option to sell the independent seller s product whereas both types of sellers may benefit from the platform owner s threat of entry the platform owner s entry option may reduce consumer surplus in the early period although it increases consumer surplus in the later period we also investigate how consumer reviews influence the market outcome

early settlement in european merger control we analyse the determinants of early settlement between merging parties and the european commission over remedies that remove concerns of anticompetitive effects this extends the previously narrow range of econometric literature on early settlement consistent with the theory of early settlement our results confirm the importance of delay costs and of uncertainty measured by the complexity of the economic analysis required for each merger we also find a non monotonic effect of agency resourcing which raises questions about the commission s efficiency in times of high case load econometrically we select a sample of merger decisions in which the european commission intervened due to concerns of anticompetitive effects and our selection model provides estimates of the factors determining intervention by the commission conclusions are drawn for public policy

salesforce compensation plans in environments with asymmetric information in this paper we present a theory of salesforce compensation plans to provide insights into why it may be advantageous for a profit maximizing firm to offer members of its salesforce the opportunity to choose from a menu of compensation plans although such contractual arrangements are not commonly used in the industry they have been introduced and implemented by firms such as ibm and st regis paper as in our previous work on salesforce compensation plans basu lal srinivasan and staelin basu a k r lal v srinivasan r staelin 1985 salesforce compensation plans an agency theoretic perspective marketing sci 4 fall 267 291 we use an agency theory framework in this paper we relax the assumptions of information symmetry and salesforce homogeneity and show the conditions under which it is optimal to offer a menu of compensation plans we also show that even when these assumptions are relaxed there are situations where offering a single plan characterized by basu lal srinivasan and staelin basu a k r lal v srinivasan r staelin 1985 salesforce compensation plans an agency theoretic perspective marketing sci 4 fall 267 291 is still optimal insights gained from the analyses are discussed in the context of an existing compensation scheme

impact of bse and bird flu on consumers meat demand in japan in this article we investigate the impact of bse and bird flu on consumers meat demand in japan by using the almost ideal demand system the bse and bird flu scares brought about a fall in demand for beef and chicken respectively and an upturn in demand for pork and fishery products which are substitutes for beef and chicken in japan we also find that the bird flu outbreak had no impact on the market share for beef this suggests that bse had a larger impact on consumers meat demand than did bird flu our empirical results also show that bse has had a persistent impact whereas bird flu has not these differences might depend on the characteristics of each disease such as the incubation period cure rate and infection risk

optimization models for salesforce compensation abstract this paper reviews models which address the design of optimal salesforce compensation schemes the discussion starts with agency theoretic models that are able to derive the optimal form for a compensation scheme under assumptions regarding the degree of information asymmetry and heterogeneity within the salesforce for the four resulting extreme cases models are presented that allow for the determination of optimal parameter values for specific compensation schemes such as fixed salary plus commission bonus for quota achievement and menus of plans finally there follows an examination of approaches through which commission rates or bonuses can be optimally differentiated such that the salespersons allocate their selling time in their own and at the same time in the firm s best interest all of these models are reviewed in particular with respect to their applicability in practice

price versus quantity monitoring in an adverse selection context this article explores the relative usefulness of price information over quantity information the main finding is that price monitoring can induce a sales level that is greater than the full information sales level this imposes additional selling costs on the agent and reduces that agent s rents the analysis identifies sufficient conditions for the principal to prefer price monitoring over quantity monitoring business format franchises exhibit many of the features of the setting analyzed here and the article s findings have implications for designing information systems in that sector of the economy

a fresh meat almost ideal demand system incorporating negative tv press and advertising impact abstract this paper investigates fresh meat consumption in belgium during 1995 1998 through the specification of a three equation almost ideal demand system aids incorporating a media index of tv coverage and advertising expenditures as explanatory variables estimated parameters and elasticity coefficients are plausible and consistent with demand theory own price elasticities are relatively low indicating a low fresh meat demand sensitivity to price changes over this period which was dominated by mass media reports about the potential health risks associated with meat consumption the scope of the paper extends beyond the estimation of elasticity coefficients and includes the specification of a media index and simulations that provide insights into the impact of negative press relative to advertising efforts specifically the impact of television publicity is shown to have been particularly negative on beef veal expenditures in favour of pork mixture this finding corroborates expectations since mass media issues mainly pertained to bse mad cow disease and hormone residues during the investigated period with relatively little effort being undertaken and with its current strategy fresh meat advertising is found to have only a minor impact compared with negative press

delegating pricing decisions an outstanding problem in marketing is why some firms in a competitive market delegate pricing decisions to agents and other firms do not this paper analyzes the impact of competition on the delegation decision and in turn the impact of delegation on prices and incentives the theory builds on the simplest framework of competition in two dimensions prices and sales agents effort specifically we are interested in answering the following questions 1 does competition affect the price delegation decision and if yes why 2 how do prices vary under price delegation and no price delegation scenarios 3 do the incentives to the sales representatives vary under the delegation and no delegation scenarios to address these issues we build a game theoretic model that consists of two firms selling through their sales representatives these representatives are company employees sales are a function of prices and selling efforts the risk neutral firms decide whether or not to delegate the pricing decision to risk averse sales representatives the wages to the sales representatives consist of salary plus a commission on gross margins the commission on gross margins can be adjusted either through communicated marginal cost of production which we call virtual marginal cost or directly the firm and the sales representative are assumed to have the same information about the market that is there is no information asymmetry with competition in two dimensions the strategic nature of decision variableprice depends on the relative intensity of competition with unobservable contracts and risk averse sales representatives firms delegate the pricing decision when price competition is intense part of the uncertainty in demand is absorbed by the firm by keeping virtual marginal cost greater than the marginal cost of production the competing firm infers this through the risk aversion of the sales representatives under price delegation the sales representatives wages are higher and they set a price that is higher than what the firms would have set themselves this leads to softening of price competition that is to the advantage of both firms when the effort competition is dominant however the firms prefer to make the pricing decision themselves because this reduces the intensity of effort competition among agents a single instrument commission structure in which the firms adjust the virtual marginal cost is compared to a two instrument commission structure in which the firms can adjust the commission rate as well the virtual marginal cost under no price delegation the two incentive schemes are the same however under price delegation the risk premium with the two instrument scheme is lower however the prices and efforts are higher with the single instrument scheme when price competition is intense the increase in risk premium with the single instrument scheme is more than compensated for by the increase in profits this is the benefit of softening price competition through higher prices

news and volatility of food prices financial markets exhibit an asymmetric news effect with unexpected low prices generating more price volatility than news of high prices the present study examines us food markets for such asymmetric news effects analysis of 25 years of monthly data for 45 retail food items shows that price news destabilizes about a third of the markets with unexpected price increases more destabilizing

claim efficiencies or offer remedies an analysis of litigation strategies in ec mergers efficiency defence and merger remedies are key components in most merger control regimes although in many jurisdictions both the provision of efficiency related evidence and remedy offers are at the merging firms discretion most previous works have only analysed them separately this paper is an attempt to empirically model the system of decisions that firms face in merger litigation where they are allowed to choose what combination of efficiency claims and settlement offers to make the main novelty of this work is the use of data from company reports on the merger generated synergy expectations signalled to shareholders which allows the direct empirical testing of some of the assumptions and findings from previous works evidence is presented that the current ec merger control regime is incapable of extracting information from firms on their efficiency expectations and the identity and experience of the legal advisor plays a key role in this that pre merger synergy expectations enhance the willingness to offer remedies and finally that the cost of delay plays a central role in designing firms litigation strategy especially when these costs exceed the cost of the remedy

an industry equilibrium analysis of downstream vertical integration this paper investigates the effect of product substitutability on nash equilibrium distribution structures in a duopoly where each manufacturer distributes its goods through a single exclusive retailer which may be either a franchised outlet or a factory store static linear demand and cost functions are assumed and a number of rules about players expectations of competitors behavior are examined it is found that for most specifications product substitutability does influence the equilibrium distribution structure for low degrees of substitutability each manufacturer will distribute its product through a company store for more highly competitive goods manufacturers will be more likely to use a decentralized distribution system this article was originally published in marketing science volume 2 issue 2 pages 161 191 in 1983

the salesperson as outside agent or employee a transaction cost analysis this descriptive study explores the reasons for integration of the personal selling function i e the use of employee direct salespeople rather than manufacturers representatives reps a hypothesized model is developed based on both transaction cost analysis and the sales force management literature data from 13 electronic component manufacturers covering 159 u s sales districts are used to estimate a logistic model of the probability of going direct in a given district results are shown to be stable across specification and estimation methods and to fit the data well the transaction cost model is generally supported the principal finding is that the greater the difficulty of evaluating a salesperson s performance the more likely the firm to substitute surveillance for commission as a control mechanism i e to use a direct sales force among other findings direct sales forces are also associated with complex hard to learn product lines and with districts that demand considerable nonselling activities several factors prove unrelated including company size the amount of travel a district requires and the importance of key accounts this article was originally published in marketing science volume 4 issue 3 pages 234 254 in 1985

quota based compensation plans for multiterritory heterogeneous salesforces we compare quota based salesforce compensation plans with the blss plan i e the optimal curvilinear agency theory based compensation plans proposed in basu lal srinivasan and staelin basu a k r lal v srinivasan r staelin 1985 salesforce compensation plans an agency theoretic perspective marketing sci 4 fall 267 291 a quota plan pays a fixed salary which is supplemented by commission income that is a prespecified fraction of the dollar sales that exceed the quota for a salesforce comprised of multiple salespersons territories we consider a basic quota plan where the commission rate and salary remain the same across salespersons however quotas vary across salespersons territories compared to the blss plan that is individually tailored to each salesperson territory the basic quota plan s total nonoptimality in profit has two components i a shapeinduced nonoptimality arising from the fact that the quota based plan does not have the same optimal shape as the curvilinear blss pl

structuring a multiproduct sales quota bonus plan for a heterogeneous sales force a practical model based approach this paper presents an agency theoretic model based approach that assists sales managers in determining the profit maximizing structure of a common multiproduct sales quota bonus plan for a geographically specialized heterogeneous sales force operating in a repetitive buying environment this approach involves estimating each salesperson s utility function for income and effort and using these models to predict individual sales achievements and the associated aggregate profit for the firm under a specified plan the utility function estimation is based on the salesperson s own preference rank ordering of alternative sales quota bonus plans once these functions have been estimated they are incorporated in a mathematical programming model that the sales manager can use to determine the best plan the authors demonstrate the approach in the context of a case involving the design of a two product sales quota bonus plan for a set of salespeople at a pharmaceutical products firm

food safety issues and the bse scare some lessons from the french case abstract the bovine spongiform encephalopathy bse scare began after the uk minister of health admitted a possible link between the bse prion and the creutzfeldt jakob disease contaminating humans the paper outlines a survey conducted in the area of rennes to analyse consumer behaviour after the bse crisis a contingent scenario was proposed to determine the willingness to pay wtp for beef which should not transmit cjd using a mix of the referendum method and the bidding process the variables considered as main determinants of the wtp have been selected the study concludes with the interests and limits of the method used and the implications of the bse scare on food policy in fact the mad cow disease raises the problem of loss of public confidence and the means to restore it consumers are waiting for a greater transparency or traceability and according to the survey would accept to pay for it

food scare crises and developing countries the impact of avian influenza on vertical price transmission in the egyptian poultry sector abstract a bivariate smooth transition vector error correction model is applied to monthly poultry price data to analyze the effects that avian influenza has had on price transmission along the egyptian poultry marketing chain in order to reflect consumer awareness of the crisis an avian influenza food scare information index is developed and used within the model as a transition variable our results suggest that price adjustments to deviations from the market equilibrium parity depend on the magnitude of the avian influenza crisis further these adjustments are found to have very different implications for market equilibrium during the crisis retailers use their market power to increase marketing margins in contrast wholesaler margins are found to decline results also suggest that food safety information indices contribute to understanding the economic effects of food scare crises in developing countries

on manufacturing marketing incentives stereotypically marketing is mainly concerned about satisfying customers and manufacturing is mainly interested in factory efficiency using the principal agent agency paradigm which assumes that the marketing and manufacturing managers of the firm will act in their self interest we seek incentive plans that will induce those managers to act so that the owner of the firm can attain as much as possible of the residual returns one optimal incentive plan can be interpreted as follows the owner subcontracts to pay the manufacturing manager a fixed rate for all capacity he delivers each marketing manager receives all of the returns from his product in turn all managers pay a fixed fee to the owner under this plan the marketing managers will often complain about the stock level decisions even though these levels are announced in advance under a revised plan the owner can eliminate such complaints by delegating the stocking decisions to the respective marketing managers without any loss this plan is interpreted as requiring the owner to make a futures market for manufacturing capacity paying the manufacturing manager the expected marginal value for each unit of capacity delivered receiving the realized marginal value from the marketing managers and losing money on average in the process

saving money vs investing money do energy ratings influence consumer demand for energy efficient goods abstract the article analyses economic barriers leading to the energy efficiency gap in the market for energy using products by observing several million transactions in the uk over two years the empirical exercise estimates aids models for refrigerators washing machines tvs and light bulbs results indicate that market barriers are crucial in the demand for energy efficient options and consumer response to changes in appliance prices total expenditures and energy prices depends on the possibility of behavioural adjustments in consumption in contrast with the induced innovation hypothesis current electricity prices can fail to induce innovation because of their short term impact on disposable income while consumers invest in energy efficiency when expecting electricity prices to rise in the future

salesforce incentives market information and production inventory planning salespeople are the eyes and ears of the firms they serve they possess market knowledge that is critical for a wide range of decisions a key question is how a firm can provide incentives to its salesforce so that it is in their interest to truthfully disclose their information about the market and to work hard many people have considered this question and provided solutions perhaps the most well known solution is due to gonik 1978 who proposed and implemented a clever scheme designed to elicit market information and encourage hard work the purpose of this paper is to study gonik s scheme and compare it with a menu of linear contracts a solution often used in the agency literature in a model where the market information possessed by the salesforce is important for the firm s production and inventory planning decisions

media coverage of biotech foods and influence on consumer choice in the last two decades few issues in the global agrifood sector have attracted as much media attention as biotechnology thousands of brief and in depth articles have been written focusing on diverse issues from the spectacle of ecological disasters to the promise of feeding a burgeoning world population among those accounts of alleged health risks could influence consumer perceptions and behavior directly indeed reporters across the globe have continued to draw parallels between biotechnology and other known food hazards such as mad cow disease and chemical contaminants such as dioxin they have also continued to raise the possibility of unknown long term health effects essentially framing biotechnology as a food safety risk marks and kalaitzandonakes marks et al there is evidence that this broad and often negative media coverage of biotechnology has raised public awareness influenced public perceptions and altered the public agenda on biotech foods in europe and elsewhere bauer durant bauer and gaskell this is not surprising as over 90 of consumers receive information about agrifood biotechnology primarily through the popular press and television hoban and kendall despite the apparent influence of media coverage on public perceptions however the question of whether such coverage has also affected consumer purchasing behavior has not been answered the answer to this question is broadly relevant with less than 2 of the u s population now engaged in agricultural production the average food consumer has diminishing personal experience and knowledge of agriculture

art of the deal the merger settlement process at the federal trade commission 1 introductiontwo firms competing with each other in at least one line of business face a complicated regulatory regime if they attempt to merge under the hart scott rodino hsr act of 1975 almost all large transactions in the united states are subject to review by either the department of justice or the federal trade commission ftc in the event an enforcement agency objects to the transaction several outcomes are possible i the parties could give up and abandon their transaction ii take the case to a federal court and litigate the dispute to a conclusion or iii the firms could settle their differences with the enforcement agency all settlements however are not the same in particular agencies have shown some willingness to accept compromise settlements defined here as consents that do not fully resolve the relevant competitive concerns the purpose of this study is to model the interaction between an antitrust agency and firms seeking to consummate mergers in doing so we will attempt to answer an important question in antitrust regulation what attributes drive the final outcome of a merger challenge this paper will model interactions between the ftc and private parties interested in consummating horizontal mergers that may adversely affect competition in at least one relevant market this decision to fight fold or settle is somewhat more complicated than an action for damages because the prospective nature of the alleged competitive injury gives the defendant an opportunity to abandon the transaction before the injury occurs moreover the conglomerate nature of most mergers creates a possibility for a strong settlement to resolve competitive concerns while allowing the firm to quickly consummate the innocuous portions of the transaction compromise settlements also are possible under which the consent offers partial relief the maximum likelihood estimation procedure used in the paper is derived directly from a game theoretic analysis that models the outcome of the interaction between merging firms and the ftc this allows for formal estimation of utility functions for both merging parties and the ftc estimating the structural equations of the model offers more detailed insight into the regulatory system we have two basic hypotheses with respect to this process first the underlying opportunity costs the legal merits of particular cases and possibly the political ramifications of enforcement decisions drive ftc decisions second firms decisions depend not only on the competitive merits of the ftc s case but perhaps more importantly on both the financial issues relevant to the specific transaction and how the nature of the case fits into the merger review process section 2 presents the background for the analysis by discussing the institutional structure of the ftc explaining the merger review process describing the hostage effects that may affect a firm s response to an ftc enforcement decision and introducing the idea of a compromise settlement section 3 models the game theoretic interaction between firms and the ftc and then explores an econometrically tractable method of estimating the underlying utility functions for the players in the game section 4 describes the data and specifications to be used results of the maximum likelihood estimation are presented in section 5 concluding comments are in section 6 we hope to shed light on an important aspect of the u s merger review process we also suggest that our results may have broader consequences since the mid 1980s a large number of countries have established formal antitrust procedures the results here may be of assistance to those policy regimes as well 2 issues in merger enforcementbackground on the ftcthe ftc is a government agency charged along with the department of justice doj with enforcing u s antitrust laws the bulk of the casework involves the evaluation of proposed horizontal mergers

information and consumer perception of the organic attribute in fresh fruits and vegetables using a double hurdle model on panel data from 3 200 danish households monthly observations for 2002 2007 we study the effects of health related media information on the demand for organic fruit and vegetables we find that negative information about pesticides contained in conventional fruit and vegetables mainly influences the probability of a consumer entering the organic market not the quantities consumed by households that are already active on the organic market positive information that links health and the consumption of organic food influences both steps of the decision process our dataset includes information about consumers media habits which allows us to disentangle the direct effects of media information from the indirect effects of this information as it is disseminated through the population our results suggest that directly obtained information is the main type of information influencing consumers while information loadings by dissemination through the population have almost no effect on consumption

a multistage model of bargaining this paper presents a simple multistage model of bargaining wherein a seller makes an offer that can be either accepted or refused if rejected the process continues how the seller s ability to make commitments affects bargaining outcomes is analysed by comparing the commitment equilibria to those arising when commitment is impossible the effects of increasing uncertainty about preferences and varying the length of the bargaining horizon are analysed the ways in which the bargaining environment can be changed to improve outcomes are discussed

sequential bargaining with incomplete information this paper describes a simple two person two period bargaining game and solves it using the concept of perfect bayesian equilibrium in which the actions of each player convey information which is used by his opponent the paper examines the effects of changes in bargaining costs the size of the contract zone and the length of the bargaining process on such aspects of the solution as the probability of impasse and the likelihood of concessions the combination of information transfer and the lack of pre commitment embodied in perfectness yields many surprising results common perceptions about the effects of parameter changes on bargaining processes are suspect and should be checked in the particular game being discussed

antitrust settlements and trial outcomes risk aversion plays an important role in explaining why antitrust cases settle instead of going to trial using a jointly estimated model of settlement and trial outcome the authors find that a one percent increase in the probability that the plaintiff wins at trial raises the probability of a settlement by 0 13 percent they also find that reputation effects are not a significant factor for defendants so the risk aversion of the defendants does not play a dominant role in determining whether the parties settle plaintiffs are more likely to win in certain jurisdictions which encourages venue shopping by plaintiffs copyright 1996 by mit press

political economy of the media and consumer perceptions of biotechnology although households are flooded with information through dozens of tv channels plenty of newspapers journals and radio the public is said to be poorly informed on many important issues for example european consumers oppose genetically modified gm foods despite scientists and official institutions claiming those products are safe these reactions are blamed on consumers being poorly informed there is an extensive literature on imperfect information see akerlof stiglitz an important implicit assumption in this literature is that such information problems may be solved by providing more information the problem is that information provision is assumed to be neutral however in reality most information is not provided by institutions whose objective is to foster the public good but by organizations who have an internal incentive to select certain information and certain forms of information over other information it is either provided by private sources with their own profitmaximizing objectives or by public sources that may have the formal goal of providing objective information but administrators and governments may have incentives to bias the information this issue is particularly relevant for consumers risk perceptions about gm foods over 90 of consumers receive information about food and biotechnology primarily through the popular press and television hoban and kendall extensive media coverage of possible risks can lead to decreased demand for example johnson shows how media coverage of product contamination by

the impact of food scares on price adjustment in the uk beef market abstract this paper considers the impact of food scares predominately concerns relating to bse on uk beef prices at retail wholesale and producer levels over the 1990s acknowledging the co movement that exists between prices in the meat marketing chain we use a co integrating framework the results of which show the importance of publicity regarding the safety of food in the transmission of beef prices in the uk the food publicity index that we use has a marked negative impact on the prices at all levels a result that is consistent with the effect of an inward shift in the demand function moreover the extent of price decline varies between the marketing stages entailing that the price spreads rise in response to an increase in the negative publicity about food safety while not a formal test of market power these observations are consistent with recent theoretical results demonstrating that market power exacerbates price changes in the upstream sectors for a given change in the retail demand function the implication of these varying price changes is that the food safety concerns also cause the marketing margins between the stages to widen the uk s competition commission has recently investigated the abuse of market power in the food sector inspired largely by this specific issue

compensation plans for single and multi product salesforces an application of the holmstrom milgrom model the agency theory approach to understanding salesforce compensation plans is modified to incorporate the intratemporal nature of the salesperson s effort rate decision i e the decision about the effort rate at any given point in time potentially depends upon the sales performance up to that point in time in the accounting period under the assumptions considered in this paper holmstrom and milgrom 1987 have shown that the optimal compensation plan is linear in total sales over the accounting period the comparative statics results obtained here corroborate most of the corresponding results in the salesforce compensation literature moreover we derive many additional results not available in the literature it is demonstrated that the commission income as a fraction of total compensation goes up with an increase in the effectiveness of the sales effort or an increase in base sales on the other hand the salary component of the total compensation goes up with increases in uncertainty absolute risk