do soccer players play the mixed strategy nash equilibrium mixed strategy nash equilibrium msne is a commonly used solution concept in game theoretic models in various fields in economics management and other disciplines but the experimental results whether the msne predicts well actual play in games is mixed consequently the evidence for naturally occurring games in which the msne predicts the outcome well is of great importance as it can justify the vast use of msne in models the game between the kicker and the goalkeeper in soccer penalty kicks is a real world game that can be used to examine the application of the msne concept or its accuracy because payoffs are a common knowledge the players have huge incentives to play correctly the game is simple enough to analyse its nash equilibrium is in mixed strategies and players actions can be observed we collected and analysed the data on the direction of kicks and jumps in penalty kicks in various top leagues and tournaments our analysis suggests that the msne predictions are the closest to the act

the motivation and bias of bureaucrats many individuals are motivated to exert effort because they care about their jobs rather than because there are monetary consequences to their actions the intrinsic motivation of bureaucrats is the focus of this paper and three primary results are shown first bureaucrats should be biased second sometimes this bias takes the form of advocating for their clients more than would their principal while in other cases they are more hostile to their interests for a range of bureaucracies those who are biased against clients lead to more efficient outcomes third self selection need not produce the desired bias instead selection to bureaucracies is likely to be bifurcated in the sense that it becomes composed of those who are most preferred by the principal and those who are least preferred

irrational diversification in multiple decision problems the paper deals with multiple decision problems which are similar to the task of guessing the color outcomes of ve independent spinnings of a roulette wheel 60 of whose slots are red and 40 white each correct guess yields a prize of 1 the guess of 5 reds clearly rst order stochastic dominates any other strategy in contrast subjects diversify their choices when facing a multiple decision problem in which the choice is between lotteries with clear objective probabilities the diversi cation is stronger when the subjects face uncertainty without objective probabilities and weaker when the choice problem involves real life actions c 2002 elsevier science b v

the hidden information content of price movements dynamic patterns of prices in different markets may motivate strategic consumers who could be monitoring price movements over time to game vendors do past price movements carry information about the probability and magnitude of future price drops conducting empirical work in the airline industry on near 1000 us domestic routes we find that some price metrics carry information about future price swings these variables can assist in predicting the likelihood and magnitude of price drops these price metrics yield significantly different signals which also vary as the prediction horizon changes

routes of money endogeneity a heuristic comparison the paper sets up an analytical framework that is based on simplified balance sheets of the banking the non banking private and the government sectors in order to identify four primary routes through which money can be generated endogenously and to discuss their characteristics these routes approximate if not precisely correspond to the post keynesian accommodationist and structuralist views the new keynesian credit view bank lending channel and a hybrid one respectively copyright the author 2010 published by oxford university press on behalf of the cambridge political economy society all rights reserved oxford university press

how do individuals repay their debt the balance matching heuristic we study how individuals repay their debt using linked data on multiple credit cards repayments are not allocated to the higher interest rate card which would minimize the cost of borrowing moreover the degree of misallocation is invariant to the economic stakes which is inconsistent with optimization frictions instead we show that repayments are consistent with a balance matching heuristic under which the share of repayments on each card is matched to the share of balances on each card balance matching captures more than half of the predictable variation in repayments and is highly persistent within individuals over time

dynamic reform of public institutions a model of motivated agents and collective reputation abstract state capacity is optimized when public institutions are staffed by individuals with public service motivation however when motivated agents value the collective reputation of their place of employment steady state equilibria with both high and low aggregate motivation reputation in the mission oriented sector exist reforming a low motivation institution requires a non monotonic wage path since the effect of higher wages on motivation is negative for a high reputation institution but positive for a low reputation institution a transition to a high reputation steady state requires an initial wage increase to crowd motivated workers in followed by a wage decrease to crowd non motivated workers out

equilibrium characteristics of multinomial logit market share models previous research suggests that a multinomial logit model of market share can be used in optimization or equilibrium analyses of marketing decision making however there are significant problems w

multinomial logit market share models equilibrium characteristics and strategic implications we specify and analyze the conditions under which the mnl market share models are appropriate for equilibrium analysis our results show that a linear price response function as is often used in empirical research in conjunction with the typical concavity assumed in a large range of marketing response functions would yield an interior equilibrium solution we then consider the optimal reactions on pricing and marketing spending to entry and potential market expansion in the context of the mnl models we demonstrate that the entry of a new brand evokes a decrease in the equilibrium prices of the existing brands as a defensive reaction this is true in both an expanding market as well as a fixed market however while new entry into a fixed market would trigger the incumbents to lower the marketing expenditure we show that firms tend to raise marketing activities as they experience market expansion consequently there exist distinct possibilities that marketing efforts for the existing brands increase in view of entry in an expanding market further managerial and marketing implications for endogeneity of the number of firms are explored

peer pressure and partnerships partnerships and profit sharing are often claimed to motivate workers by giving them a share of the pie but in organizations of any significant size the free rider effects would seem to choke off

optimal dynamic pricing for deteriorating items with reference price effects when inventories stimulate demand abstract in this paper we incorporate reference price effects into a deteriorating inventory problem when the demand rate depends on displayed stock level and selling price simultaneously reference price effects are formed empirically by customers to adjust current price perception on the basis of past purchases the market demand is assumed to be responsive to the difference between the current selling price and the reference price which is perceived as a loss or a gain we consider three scenarios of market demand loss neutrality loss aversion and loss seeking an optimal dynamic pricing model is established to determine a pricing strategy maximizing the discounted total profit over an infinite time horizon theoretical results are derived to demonstrate the existence of the optimal solutions and to explore the relationships between optimal pricing decisions and an initial reference price based on mild assumptions numerical example and sensitivity analysis are presented to illustrate the theoretical results and managerial insights finally concluding remarks are offered

practice prize report an assortmentwide decision support system for dynamic pricing and promotion planning in diy retailing the main objective of this report is to describe a decision support system for dynamic retail pricing and promotion planning our weekly demand model incorporates price reference price effects seasonality article availability information features and discounts building on previous research we quantify demand interdependencies and integrate the resulting profit lifting effects into the optimal pricing model the methodology was developed and implemented at baumax an austrian do it yourself retailer along with the practical requirements an objective function was employed that can be used as a vehicle for implementing a retailer s strategy eight pricing rounds with thousands of different stock keeping units have each served as a testing ground for our approach based on various benchmarking methods a positive impact on profit was reported the currently implemented marketing decision support system increased gross profit on average by 8 1 and sales by 2 1

horizontalism a critique this article offers a critique of the horizontalist view of money that banks are passive in the face of credit demand it is argued that banks liquidity preference influences their responsiveness to the demand for credit their liquidity preference is expressed in risk assessment understood in terms of john maynard keynes s theory of uncertainty it is argued that rationing in the sense of adverse changes in risk assessment occurs systematically in the downturn of the business cycle systematic rationing also occurs with respect to particular classes of borrowers the focus here is on the case of small firms c 1996 academic press limited copyright 1996 by oxford university press

a probabilistic choice model for market segmentation and elasticity structure marketing scholars commonly characterize market structure by studying the patterns of substitution implied by brand switching though the approach is useful it typically ignores the destabilizing

reference points in revenue sharing contracts how to design optimal supply chain contracts abstract coordinating supply chains is an important goal for contract designers because it enables the channel members to increase their profits recently many experimental studies have shown that behavioral aspects have to be taken into account when choosing the type of contract and specifying the contract parameters in this paper we analyze behavioral aspects of revenue sharing contracts we extend the classical normative decision model by incorporating reference dependent valuation into the decision model and show how this affects inventory decisions we conduct different lab experiments to test our model as a result human inventory decisions deviate from classical normative predictions and we find evidence for reference dependent valuation of human decision makers we also show how contract designers can use the insights we gained to design better contracts

variable pricing in oligopoly markets behavioral research has found that consumers respond to variability in prices in addition to price levels we show that this finding can explain why some firms vary their prices more frequently than others we examine pricing strategies composed of an average price and price variability and employ logit market share models to analyze equilibrium pricing strategies in an oligopoly two competing logit specifications termed price sensitivity and payoff sensitivity are considered and are shown to yield contradictory implications for pricing policy from three empirical studies on restaurant choice we find that the price sensitivity model is the better model

keynesian macroeconomics without the lm curve the is lm model has been a central tool of macroeconomic teaching and practice for over half a century legions of earlier writers have offered criticisms of the model that have become familiar with the passage of time the model lacks microeconomic foundations assumes price stickiness has no role for expectations and simplifies the economy s complexities to a handful of crude aggregate relationships but countless teachers students and policymakers have found the model to be a powerful framework for understanding macroeconomic fluctuations recent developments have created new difficulties for the is lm model although the new difficulties are less profound than the traditional ones they are more likely to be fatal like all models the is lm model is not universal its assumptions and simplifications make it better suited to analyzing some issues than others and to describing some economic environments than others but neither the issues nor the environment of macroeconomic fluctuations are fixed in terms of issues one major change is that the debates between keynesians and monetarists about the relative effectiveness of monetary and fiscal policy that were central to macroeconomics in the 1960s and 1970s now play only a modest role in the analysis of short run fluctuations in terms of the environment one important change is that most central banks including the u s federal reserve now pay little attention to monetary aggregates in conducting policy but the is lm model is particularly well suited to presenting the debates between keynesians and monetarists and one of its basic assumptions is that the central bank targets the money supply in short recent developments work to the disadvantage of is lm this observation suggests that it is time to revisit the question of whether is lm is the best

screening for managerial objectives the debate between agency and stewardship theorists on the nature of managerial objectives in itself implies that a principal may be uninformed about managers objectives this article introduces a model of adverse selection in managerial types where classically opportunistic agents are contrasted with stewards who exhibit intrinsic preferences for the organization s success and experience betrayal crowding out when they are incentivized as if they were agents the analysis characterizes stewardship inefficiencies not previously identified by stewardship theorists this inefficiency is minimized via a menu of contracts that emphasizes the fixed component of pay for stewards moreover steward run firms are more successful than agent run firms

identity and the economics of organizations on plebes first day at west point called r day they strip down to their underwear their hair is cut off they are put in uniform they then must address an older cadet with the proper salute and with the statement sir new cadet doe reports to the cadet in the red sash for the first time as ordered plebes must stand and salute and repeat and stand and salute and repeat until they get it exactly right all the while being reprimanded for every tiny mistake in the summary of david lipsky 2003 pp 145 154 who spent four years tracking a company of cadets at west point on r day you surrender your old self in stages but r day is just the beginning of the training and personal re engineering that is to come so that west point graduates emerge four years later as loyal officers in the u s army lipsky shows that despite some failure this tough program is remarkably successful in creating officers with the will to lead in battle economists current picture of organizations and work incentives has no place for the west point program and the motivations it seeks to inculcate in recruits in a standard economic model an individual s preferences are fixed and utility depends only on pecuniary variables the army s aim at west point is to change cadets preferences they wish to inculcate non economic motives in the cadets so that they have the same goals as the u s army alternatively stated the goal of west point is to change the identity of the cadets so they will think of themselves above all else as officers in the u s army they will feel bad about themselves they will lose utility if they fall short of the ideals of such an officer this change in identity

incorporating reference price effects into a theory of consumer choice although there has been a good deal of research on incorporating the effects of reference price formation into empirical models of consumer buying behavior little formal theoretical work had been undertaken to date this paper incorporates reference price effects into the traditional economic theory of consumer choice and examines the effects of reference price formation on the results of the traditional theory its marketing implications and the implications for empirical models which examine the effects of reference price formation on actual consumer behavior several implications of the theoretical model are empirically tested using weekly retail egg sales data from southern california this analysis indicates that reference price formation does have significant effects on consumer behavior furthermore these effects are asymmetric with consumers two and a half times more responsive to egg price increases that are in excess of the reference price than they are to comparable egg price decreases

modeling loss aversion and reference dependence effects on brand choice based upon a recently developed multiattribute generalization of prospect theory s value function tversky and kahneman 1991 we argue that consumer choice is influenced by the position of brands relative to multiattribute reference points and that consumers weigh losses from a reference point more than equivalent sized gains loss aversion we sketch implications of this model for understanding brand choice we develop a multinomial logit formulation of a reference dependent choice model calibrating it using scanner data in addition to providing better fit in both estimation and forecast periods than a standard multinomial logit model the model s coefficients demonstrate significant loss aversion as hypothesized we also discuss the implications of a reference dependent view of consumer choice for modeling brand choice demonstrate that loss aversion can account for asymmetric responses to changes in product characteristics and examine other implications for competitive strategy

dynamic stochastic inventory management with reference price effects we analyze the joint inventory and pricing decisions of a firm when demand depends on not only the current selling price but also a memory based reference price and customers are loss averse the presence of reference price effect leads to a nonconcave one period expected revenue in price and reference price we introduce a transformation technique that allows us to prove under some mild assumptions the optimality of a reference price dependent base stock list price policy which is characterized by a base stock level and a target reference price in addition we show that the target reference price is increasing in the reference price but except in the loss neutral case the base stock level is not monotone in the reference price we also show that in the steady state of the model with the reference price effect the optimal price is lower while the optimal base stock level is higher than their counterparts in the model without the reference price effect

price promotions limiting competitive encroachment in this paper we explore equilibrium pricing strategies in an infinite horizon repeated game for an oligopoly we model the interactions between three firms in a market of switchers and loyals our analysis shows that if there are sufficiently large number of switchers in the market the demand parameter is within an acceptable range and the firms have a sufficiently low discount rate alternating promotions between national firms can be an outcome of a perfect nash equilibrium between competing firms this equilibrium results in an implicit collusion between national firms and therefore suggests that price promotions can be interpreted as a long run strategy pursued by national firms to defend their market shares from possible encroachments of a third firm in this way we attempt to provide an explanation for the patterns of promotion observed in some industries and in particular the beverage industry

public service motivation as an argument for government provision a public service motivation psm inclines employees to provide effort out of concern for the impact of that effort on a valued social service though deemed to be important in the literature on public administration this motivation has not been formally considered by economists when a psm exists this paper establishes conditions under which government bureaucracy can better obtain psm motivated effort from employees than a standard profit maximizing firm the model also provides an efficiency rationale for low powered incentives in both bureaucracies and other organizations producing social services 2000 elsevier science s a all rights reserved

empirical generalizations from reference price research considerable theoretical justification for consumers use of psychological reference points exists from the research literature from a managerial perspective one of the most important applications of this concept is reference price an internal standard against which observed prices are compared in this paper we propose three empirical generalizations that are well supported in the marketing literature first there is ample evidence that consumers use reference prices in making brand choices second the empirical results on reference pricing also support the generalization that consumers rely on past prices as part of the reference price formation process third consistent with other research on loss aversion consumers have been found to be more sensitive to losses i e observed prices higher than reference prices than gains we also propose topics for further research on reference prices

managerial rewards and the behavior of for profit governmental and nonprofit organizations evidence from the hospital industry abstract studies of mixed industries frequently focus on differential behavior between for profit and either nonprofit or governmental producers substantially less is known about differences among governmental religious nonprofit and secular nonprofit organizations we examine the compensation of hospital ceos to assess the extent to which these three organizational forms pursue similar objectives compensation levels the use of salaries versus bonuses as proxies for weak versus strong incentives and the criteria organizations use to determine bonuses are analyzed we conclude that the ceo incentive contracts at religious nonprofit secular nonprofit and governmental hospitals imply substantive differences in the behavior of these organizations

the bright side of loss aversion in dynamic and competitive markets a well established phenomenon of consumer buying behavior is that consumers evaluate prices relative to a reference point and exhibit loss aversion i e their propensity to buy is more negatively affected by prices above the reference point than it is positively affected by prices below the reference point the objective of this paper is to analytically examine how the competitive strategy and profitability of firms are affected by the presence of consumer loss aversion in the price dimension although we assume that consumer loss aversion increases consumer propensity to search for lower prices we find that it does not necessarily lead to lower prices or profits when firms compete over multiple periods and when the consumer reference price in subsequent periods is affected by current prices specifically consumer loss aversion could lead to higher prices and profits when consumer valuation is sufficiently high relative to search costs and the proportion of consumers with positive search costs is in an intermediate range we also show that when forward looking firms incorporate the negative effect of price promotions on future profits the equilibrium range of price promotions may actually increase

an empirical analysis of latitude of price acceptance in consumer package goods scanner panel data analyses for sweetened and unsweetened drink categories with four brands in each support the presence of a region of price insensitivity around a reference price the analyses also suggest that consumers with higher average reference price have a wider latitude of price acceptance consumers with a higher frequency of purchase i e shorter average interpurchase time interval are found to have a narrower latitude of price acceptance because they are more aware of the range of price distributions finally consumers with a higher average brand loyalty have a wider latitude of price acceptance demonstrating greater tolerance of price fluctuations

naive reinforcement learning with endogenous aspirations this article considers a simple model of reinforcement learning all behavior change derives from the reinforcing or deterring effect of instantaneous payoff experiences payoff experiences are reinforcing or deterring depending on whether the payoff exceeds an aspiration level or falls short of it over time the aspiration level is adjusted toward the actually experienced payoffs this article shows that aspiration level adjustments may improve the decision maker s long run performance by preventing him or her from feeling dissatisfied with even the best available strategies however such movements also lead to persistent deviations from expected payoff maximization by creating probability matching effects

monitoring motivation and management the determinants of opportunistic behavior in a field experiment economic models of incentives in employment relationships are based on a specific theory of motivation employees are rational cheaters who anticipate the consequences of their actions and shirk when the marginal benefits exceed costs we investigate the rational cheater model by observing how experimentally induced variation in monitoring of telephone call center employees influences opportunism a significant fraction of employees behave as the rational cheater model predicts a substantial proportion of employees however do not respond to manipulations in the monitoring rate this heterogeneity is related to variation in employee assessments of their general treatment by the employer jel d2 j2 l2 l8 m12

the incentive effects of missions evidence from experiments with ngo employees and students abstract this paper studies the incentive effects of an organization s mission on the effort provision of agents across treatments i exogenously vary how much the agents and their projects missions match in the first study ngo employees are assigned the role of agents in an online one shot principal agent experiment in the second study i replicate the experimental design with a student subject pool in both experiments the agents effort choices are for any given piece rate increasing in their mission match in a third study a laboratory experiment with a finitely repeated principal agent game with random matching i do not find a motivational effect of missions unlike in my first two studies

money credit constraints and economic activity when government expenditures exceed current tax revenues the resulting deficit must be financed either by issuing bonds which imply obligations to levy future taxes or by creating high powered money the choice between money and bonds is often thought to be of great moment for both real and nominal variables that is monetary policy matters there is by now a wide empirical consensus that monetary policy has effects on real variables like output and employment but there is far less agreement about why this is so the purpose of this paper is to take issue with some currently fashionable views of why money has real effects and to suggest a new theory or rather resurrect an old one the loanable funds theory and give it new improved microfoundations this abstract was borrowed from another version of this item

a comparative analysis of reference price models the effect of reference price on brand choice decisions has been well documented in the literature researchers however have differed in their conceptualizations and therefore in their modeling of reference price in this article we evaluate five alternative models of reference price of which two are stimulus based i e based on information available at the point of purchase and three that are memory based i e based on price history and or other contextual factors we calibrate the models using scanner panel data for peanut butter liquid detergent ground coffee and tissue to account for heterogeneity in model parameters we employ a latent class approach and select the best segmentation scheme for each model the best model of reference price is then selected on the basis of fit and prediction as well as on the basis of parsimony in cases where the fits of the models are not very different in all four categories we find that the best reference price model is a memory based model namely one that is based on the brand s own price history in the liquid detergent category however we find that one of the stimulus based models namely the current price of a previously chosen brand also performs fairly well we discuss the implications of these findings

teaching modern macroeconomics at the principles level ideas taught at the macroeconomics principles level should satisfy two goals first they should be simple enough to be both understandable and memorable for the beginning student second they should be consistent both with the modem economy and with the macroeconomic models of this economy that are used in practice for policy evaluation there is no necessary conflict between these two goals the greater the consistency between the ideas taught in the classroom and the models used in practice the easier the ideas are to understand and the worthier they are of being remembered it would be an exaggeration to say that a consensus now exists in advanced research about how macroeconomics should evolve in the future debates continue for example about the usefulness of models with representative agents or what it means to have a fully articulated model of money nevertheless at the practical level a common view of macroeconomics is now pervasive in policyresearch projects at universities and central banks around the world this view evolved gradually since the rational expectations revolution of the 1970 s and has solidified during the 1990 s it differs from past views and it explains the growth and fluctuations of the modern economy it can thus be said to represent a modem view of macroeconomics 1 the purpose of this paper is to show how this modem macroeconomics can be taught at the principles level i focus on macroeconomic concepts including economic growth and fluctuations and their graphical representation rather than on techniques of delivery whether active learning experiments or the use of new media 2 the teaching ideas are similar to those used by david romer 2000 and taylor 1998 but the purpose of this paper is to show how closely they represent modern macroeconomics

if you tourist behave irrationally i ll find you abstract when departures from rational behavior can potentially be expected modeling should allow for their identification and their quantification in this regard prices in tourism might have effects that may not be as apparent as economic theory predicts this article incorporates the sticker shock formulation into the mixed logit model without imposing consistency with consumer theory to accommodate any possible positive or negative price effects by allowing the parameters of price and sticker shock term to take any value negative or positive we detect abnormal behaviors in the tourist demand not only is the negative relationship between price and demand inverted for some people but also some tourists might be willing to accept higher than expected prices the non well behaved groups shares are estimated

an economist s perspective on probability matching the experimental phenomenon known as probability matching is often offered as evidence in support of adaptive learning models and against the idea that people maximise their expected utility recent interest in dynamic based equilibrium theories means the term re appears in economics however there seems to be conflicting views on what is actually meant by the term and about the validity of the data the purpose of this paper is therefore threefold first to introduce today s readers to what is meant by probability matching and in particular to clarify which aspects of this phenomenon challenge the utility maximisation hypothesis second to familiarise the reader with the different theoretical approaches to behaviour in such circumstances and to focus on the differences in predictions between these theories in light of recent advances third to provide a comprehensive survey of repeated binary choice experiments

modeling the psychology of consumer and firm behavior with behavioral economics abstract marketing is an applied science that tries to explain and influence how firms and consumers behave in markets marketing models are usually applications of standard economic theories which rely on strong assumptions of rationality of consumers and firms behavioral economics explores the implications of the limits of rationality with the goal of making economic theories more plausible by explaining and predicting behavior more accurately while maintaining formal power this article reviews six behavioral economics models that are useful to marketing three models generalize standard preference structures to allow for sensitivity to reference points and loss aversion social preferences toward outcomes of others and preference for instant gratification the other three models generalize the concept of game theoretic equilibrium allowing decision makers to make mistakes encounter limits on the depth of strategic thinking and equilibrate by learning from feedback the authors also discuss a sp

theoretical reflections on endogenous money the problem with convenience lending this paper questions the practice of representing the endogenous money supply by means of a horizontal money supply curve implicitly contrasted with the conventional vertical stock supply curve what is drawn as a horizontal curve is strictly a locus between a continually shifting stock curve and a shifting demand curve consequently demand for money considerations have been suppressed in the horizontal presentation one response is that the resulting deposits are automatically held through some process such as convenience lending however the argument behind convenience lending points to the conclusion that it is changes in relative interest rates that reconcile the demand for additional loans with the demand for additional deposits c 1996 academic press limited copyright 1996 by oxford university press

intrinsic motivation and optimal incentive contracts i study the role of intrinsic motivation on optimal incentive contracts agents engage in efforts to generate projects with both financial return and intrinsic value to the agent in a neutral environment where intrinsic motivation has no direct effect on the disutility of effort static contracts are unaffected by intrinsic motivation in contrast the firm s profits from an implicit contract are increasing in the degree to which the agent is intrinsically motivated showing that implicit contracts and intrinsic motivation are complements the results are further extended to consider the role of multiple implicit contracts and product market strategy

competition and incentives with motivated agents a unifying theme in the literature on organizations such as public bureaucracies and private nonprofits is the importance of mission as opposed to profit as an organizational goal such mission oriented organizations are frequently staffed by motivated agents who subscribe to the mission this paper studies incentives in such contexts and emphasizes the role of matching the mission preferences of principals and agents in increasing organizational efficiency matching economizes on the need for high powered incentives it can also however entrench bureaucratic conservatism and resistance to innovations the framework developed in this paper is applied to school competition incentives in the public sector and in private nonprofits and the interdependence of incentives and productivity between the private for profit sector and the mission oriented sector through occupational choice jel d23 d73 h41 l31 the late twentieth century witnessed a historic high in the march of market capitalism with unbridled optimism in the role of the profit motive in promoting welfare in the production of private goods moreover this generated a broad consensus on the optimal organization of private good production through privately owned competitive firms when it comes to the provision of collective goods no such consensus has emerged debates about the relative merits of public and private provision still dominate this paper suggests a contracting approach to the provision of collective goods it focuses on two key issues how to structure incentives and the role of competition between providers at its heart is the idea that organizations that provide collective goods cohere around a mission 2 thus production of collective goods can be viewed as mission oriented

identity supervision and work groups i want to tell my foreman to f off but i can t so says mike a steel handler we meet in stud terkel s book working 1974 xxxv many workers stories we read in working and in ethnographies suggest workers greatly resent supervision as a result they exert lower effort and may sabotage production mike puts dents in the steel ethnographies also reveal workers who are not strictly monitored develop work group output norms this paper uses the con cept of identity to study trade offs in supervi sory policy 1 we follow the social psychology literature and examine intrinsic incentives that depend on how workers see themselves in rela tion to the firm when a supervisor monitors workers workers adopt an identity in opposition to the firm the firm gains information and can fine tune its incentive pay but resentful workers require high compensation to work in the firm s interest with no monitoring workers are less hostile to the firm but they may forge a work group identity with norms that restrict output we show that a firm may find it profitable to have lax supervision when workers take on a work group identity the cost per unit of effort can be lower than when workers view them selves in opposition to the firm we shall present the model and then discuss some classic studies of workplaces that portray these trade offs our identity framework synthesizes an emerg ing body of economic theory and empirics on incentives and monitoring e g bruno frey 1993 gary charness 2000 daniel s nagin et al 2002 michael t rauh and giulio seccia 1 this paper provides a simple formal model of tradeoffs described loosely in akerlof and kranton 2005 we also discuss further implications of supervision versus work group cohesion

the impact of reference price effects on the profitability of price promotions this paper investigates the impact of reference price effects on retailer price promotions and describes why these effects can make promoting profitable first we analyze the profit impact of reference price effects generated by a single period of promotion the promotion can increase profit if the gain that these effects create in the promotion period outweighs the loss they create in future periods we then describe how retailers can estimate the optimal strategy of recurring promotions that maximizes profits from reference price effects over a time horizon examples of such strategies are presented for a retailer selling a national brand of peanut butter we obtain insights into how promotion prices timing and profits are affected by changes in costs interest rates consumers reactions to reference price effects and error in estimates used in the model the retailer s optimal reaction to a trade deal is also examined this strategy involves a phase of increased promotion activity sandwiched between phases of decreased activity we explain these results using the effects described in the single period model

reference effects of price and promotion on brand choice behavior when consumers are exposed to pricing and promotional activity by frequently purchased packaged goods they may develop expectations that are used as points of reference in evaluating future activi

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

incorporating consumer price expectations in diffusion models in this paper the sensitivity of the optimal price path of a new durable product to the price expectations of consumers is examined consumers enter the market every period in a diffusion type framework during the initial periods more consumers enter the market due to word of mouth influence but in the latter periods saturation effects set in the entering set of cohorts form expectations about future prices and in a stable equilibrium these expectations are fulfilled it is shown that the price path is cyclical with the following properties at the beginning of the cycle the price is at its highest level it falls monotonically over time reaching a low price at the end of the cycle equal to the reservation price of the consumers willing to pay less the cycle lengths are not equal the sensitivity of the optimal price path to model parameters is explored through a numerical procedure

quality perceptions and asymmetric switching between brands rotating indifference curves are used to induce an income effect that favors superior brands at the expense of inferior brands in a discrete choice model when calibrated on scanner panel data the model yields an objective measure of brand quality which is related to the rate of rotation the model also leads to asymmetric responses to price promotions where switching up to high quality brands is more likely than switching down the model is capable of nesting the standard logit model and is similar to a nested logit model when there exists clusters of brands of like quality the model is used to explore a product line pricing decision where profits are maximized subject to the constraint that consumer utility is maintained

anti social behavior in profit and nonprofit organizations abstract two types of intrinsically motivated workers are considered good workers care about the mission of an organization whereas bad workers derive pleasure from destructive behavior compared to the case with only good motivated workers the mission oriented sector has to resort to higher monitoring to deter bad workers from entering the sector in equilibrium bad workers work in the for profit sector where they behave like normal people while good workers self select into the mission oriented sector in the profit oriented sector both monitoring and bonus payments for good behavior increase to control the damage caused by bad workers the results of the paper are illustrated by examples from child care and the threat posed by pedophiles in this sector

investigating purchase incidence brand choice and purchase quantity decisions of households we develop a comprehensive utility maximizing framework to study the impact of marketing variables on the category purchase brand choice and purchase quantity decisions of households for frequently purchased packaged goods the model allows for dependence among the three decisions while ensuring that these decisions provide in combination the greatest possible utility to the household by accounting for variations in reservation prices and intrinsic brand preferences across households the modeling framework explicitly captures the effects of unobserved heterogeneity on all three purchase decisions the principal empirical finding from analyzing the a c nielsen data for the yogurt product category is that the substantive implications for the effects of marketing variables are sensitive to whether these effects are determined conditional or unconditional on a product category purchase our results show that reservation prices and intrinsic brand preferences vary across households and not accounting for these variations in the estimation could lead to biased estimates for the coefficients of the marketing variables a comparison of our results to those obtained from a nested logit model of purchase incidence and brand choice reveals that our proposed model performs better using both a formal statistical test as well as the criterion of predictive validity in a holdout sample of panelists further the purchase quantity model compares favorably with two alternative models of quantity choice in the validation sample

asymmetric reference price effects and dynamic pricing policies we consider a group of frequently purchased consumer brands which are partial substitutes and examine two situations the first where the group of brands is managed by a retailer and second where the brands compete in an oligopoly we assume that demand is a function of actual prices and reference prices and develop optimal dynamic pricing policies for each situation in addition to researchers studying pricing strategy our results may interest retailers choosing between hi lo pricing and an everyday low price and manufacturers assessing whether to follow procter gamble s lead and replace a policy of funding consumer price reductions through trade deals with a constant wholesale price a reference price is an anchoring level formed by customers based on the pricing environment the literature suggests that demand for a brand depends not only on the brand price but also whether the brand price is greater than the reference price a perceived loss or is less than it a perceived gain the responses to gains and losses are asymmetric broadly speaking we find that when enough consumers weigh gains more than losses the optimal pricing policy is cyclical likewise when they weigh losses more than gains a constant price is optimal thus we provide a rationale for dynamic pricing which is quite distinct from the three explanations previously offered 1 decreasing unit variable costs due to learning effects 2 the transfer of inventory to consumers who face lower inventory holding costs than do retailers and 3 competitive effects our explanations apply even when the other explanations do not i e in mature product categories where learning effects are minimal when retailer inventories are minimized through the use of just in time policies and when competitive effects do not exist as in a monopoly greenleaf 1995 has shown numerically that in the presence of reference price effects the optimal pricing policy for a monopolist can be cyclical we first analytically extend greenleaf s result to a monopolist with a constant cost of goods facing a homogeneous market where all customers either weigh gains more than losses or vice versa using this building block we examine a monopolist retailer managing multiple brands we assume that demand is a linear function of prices of multiple brands and together with an expression which reflects the reference price effect further we assume that the retailer maximizes average profit per period next we analyze a duopoly and extend the results to an oligopoly we assume that the manufacturers are able to set the retail prices as in an integrated channel here we retain the same demand function as for the retailer and derive markov perfect nash equilibria we use two alternative processes of reference price formation the exponential smoothed es past price process which is frequently used in the literature and for the multi brand situations the recently proposed reference brand rb process hardie johnson and fader 1993 in the latter the reference price is the current price of the last brand bought the reference brand we adapt the individual level rb formulation in hardie et al to an aggregate demand specification for the es process we obtain most results analytically for the rb process we use simulation finally we extend our results to a population with two customer segments segment 1 which weighs gains more than losses and segment 2 which does the opposite i e is loss averse when the market consists exclusively of segment 1 customers and es is the reference price process we find that prices are cyclical in all cases analyzed i e for a monopoly a monopolist retailer managing multiple brands a duopoly and an oligopoly if the rb formulation is the underlying process a monopolist retailer managing two brands uses cyclical prices but in a duopoly the equilibrium solution is for the brands to maintain constant prices when all customers belong to segment 2 i e they are loss averse constant prices are optimal in all cases for both reference price formulations when the population consists of both segment 1 and segment 2 and the es process applies we develop a sufficient condition for cyclical pricing policies to be optimal the condition is expressed in terms of the proportion of the two segment sizes the absolute difference between the gain and loss parameters of each segment and their respective exponential smoothing constants interestingly for reasonable values of the latter two factors cyclical policies are optimal even when the proportion of segment 1 is quite small similar magnitudes are obtained numerically for the rb case

the neglect of correlation in allocation decisions we study the effect of variation in correlation on investment decision in an experimental two asset application comparison of allocations across problems suggests that subjects neglect probabilistic information on the joint distribution of returns and base their allocations on the observed return levels for the two assets when asked to predict future returns subjects try to replicate the historical distribution thereby falling into the probability matching bias predictions drastically vary when correlations become negative while allocations are not significantly affected by changes in sign of correlation the observed allocation patterns contradict the predictions of standard models of choice the inconsistency is attributed to common behavioral bias in financial decision field implications of the results are discussed

dynamic pricing with loss averse consumers and peak end anchoring we study the dynamic pricing implications of a new behaviorally motivated reference price mechanism based on the peak end memory mode this model suggests that consumers anchor on a reference price that is a weighted average of the lowest and most recent prices loss averse consumers are more sensitive to perceived losses than gains relative to this reference price we find that a range of constant pricing policies is optimal for the corresponding dynamic pricing problem this range is wider the more consumers anchor on lowest prices and it persists when buyers are loss neutral in contrast with previous literature in a transient regime the optimal pricing policy is monotone and converges to a steady state price which is lower the more extreme and salient the low price anchor is our results suggest that behavioral regularities such as peak end anchoring and loss aversion limit the benefits of varying prices and caution that the adverse effects of deep discounts on the firm s optimal prices and profits might be more enduring than previous models predict