remittances and the informal economy abstract many developing countries are characterized by a large informal sector and are also often heavily dependent on remittance inflows from abroad we develop a general equilibrium framework to understand better the dynamic absorption of remittances in a two sector small open economy by incorporating many of the stylized features of the informal sector calibrating the model to yield a long run equilibrium consistent with sample averages for 56 developing countries for the period 1990 2014 we show that the effect of remittances depends critically on how they impinge on the recipient economy i e whether these inflows are i permanent or temporary ii associated with a collateral effect to securitize borrowing and iii exogenous or countercyclical we also identify the conditions under which remittances are associated with an expansion of the informal sector as well as the dutch disease effect

an analysis of the tradeoff between advertising and price discounting the authors examine an important influence on the price advertising tradeoff the ratio of price and advertising elasticities their theoretical analysis stresses the centrality of the elasticity r

do lower taxes reduce informality evidence from brazil abstract we exploit a unique large scale formalization program in brazil to estimate the effects of reducing the costs of formality on firm formalization we rely on both firm level administrative data and individual panel data to show that reducing taxes once registration costs have already been eliminated reduces firm informality this effect comes from the formalization of existing informal firms and not from the creation of new formal businesses nor greater formal firm survival the implied formalization elasticity is otherwise low and our cost benefit analysis indicates that the program led to net losses in tax revenues

estimating elasticities with pims data methodological issues and substantive implications though the pims data have been used extensively to relate profitability both to specific firm marketing actions and to market conditions no attempt has been made to estimate directly the magnitudes of marketing mix elasticities the authors propose and evaluate a simple cross sectional time series regression method that recovers unbiased estimates of the elasticities despite the presence of firm specific disguise factors in the database though measurement error creates instability for certain variables the recovered elasticities compare favorably with those found in previous research and have predictable relationships with market characteristics

the political economics of redistribution inequality and tax avoidance a central result in the political economy of taxation is that the degree of redistribution is positively linked to income inequality however empirical evidence supporting such a relationship turns out to be mixed this paper shows how the different empirical reactions can be rationalized within a simple model of tax avoidance and costly tax enforcement by focusing on structure induced equilibrium in which taxpayers vote over the size of the income tax and the level of tax enforcement we show that more inequality may well reduce the extent of redistribution depending on two opposing effects the standard political effect and a negative tax base effect working through increases in the average level of tax avoidance and the share of enforcement expenditures in total tax revenue

a friction model for describing and forecasting price changes this paper presents a new friction model for describing the price changes of a product or brand over time and for forecasting both the timing and magnitude of such changes from one period to the next after a review of the related pricing literature we present our model and a modified controlled random search procedure for estimating its parameters the model is applied to describe and forecast the weekly mortgage interest rates for a local bank in the philadelphia area finally limitations and several potential applications of this methodology are discussed

risk aversion and arbitrage this paper characterizes conditions under which asset returns and consumption are consistent with risk averse preferences it is shown that risk aversion is equivalent to zero arbitrage on a transformation of the payoff space the implicit state prices which are dual to this no arbitrage condition can be interpreted as prices of pure consumption hedges this zero arbitrage restriction implies the usual restrictions associated with nonsatiation the analysis holds in both complete and incomplete market settings through a number of recent papers in financial economics we have come to understand that the absence of arbitrage opportunities is equivalent to the existence of positive implicit state claim prices in addition given a particular allocation of consumption quantities for different states of the world absence of arbitrage is necessary and sufficient for the consumption plan to be a consumer optimum for some monotonic preference ordering the purpose of this paper is to inquire into the additional restrictions on asset returns imposed by requiring that an allocation be a consumer optimum when preferences are concave monotonic von neumann morgenstern vnm stateindependent and defined over a single good we find that a necessary and sufficient condition is that there is absence of arbitrage not only on the original payoff space but also on a simple transformation of the payoff space this transformation has an intuitively appealing form and can be interpreted as a type of risk adjustment perhaps the classic development of the duality between absence of arbitrage and positive implicit state prices is contained in ross 9 working with a finite number of assets and states ross shows that when positive state prices exist and price returns in a manner consistent with the observed market values of the assets arbitrage is precluded when markets are complete the implicit state prices are uniquely determined and it is easy to check if they are positive more generally there will be many vectors of state prices which value assets in a manner consistent with their observed market prices absence of arbitrage opportunities implies that at least one of these is positive analogues of this result have been shown to hold in more general environments by garman 3 ross 10 harrison and kreps 6 and hansen and richard 5 among others several authors have also noted that zero arbitrage restrictions are necessary and sufficient for an arbitrary positive consumption bundle to be a consumer optimum for some set of monotonic preferences kreps 7 provides perhaps the most general discussion of this point both authors from graduate school of industrial administration carnegie mellon university

identification and estimation of complex multivariate lag structures a nesting approach a process for investigating complex and multivariate lag structures is proposed the sources of the dynamic promotional effects on sales are explained and related to conventional means of mathematical expression multivariate and hybrid versions of the expressions are proposed and nests of equations are derived the nests are not universal so depend upon the subject selection of final models the process is finally followed using an example from the pharmaceutical industry where both promotions and detailing are in use

a general multiple distributed lag framework for estimating the dynamic effects of promotions game attendance resulting from ticket sales is the single largest revenue stream for major league baseball mlb teams we propose a general multiple distributed lag framework following the koyck family of models for estimating mlb attendance drivers and focus specifically on the differential direct and carryover effects of in game promotions by setting various model constraints the proposed framework incorporates different forms of serial correlation and promotion specific dynamic effects using information model selection heuristics we select an optimal model of attendance drivers for the pittsburgh pirates 2010 2012 mlb seasons we demonstrate that our newly proposed model with an unrestricted serial correlation structure performs best we find that although kids promotions have the highest direct effect on attendance giveaway and entertainment promotions have substantial carryover effects and the largest total effects we use our results to optimize the pirates promotional schedule and find that a reallocation of resources across promotional categories can increase profits between 39 and 88 data as supplemental material are available at http dx doi org 10 1287 mnsc 2013 1856 this paper was accepted by eric bradlow special issue on business analytics

does inducing informal firms to formalize make sense experimental evidence from benin abstract efforts to bring informal firms into the formal sector are often based on a view that this will bring benefits to the firms themselves or at least benefit governments through increasing the tax base a randomized experiment based around the introduction of the entreprenant legal status in benin is used to test these assumptions along with supplementary efforts to enhance the presumed benefits of formalizing to firms few firms register when just given information about the new regime but our full package of supplementary efforts boosts formalization by 16 3 percentage points however this formalization does not bring firms higher sales or profits and the cost of formalizing these firms exceeds the added taxation they will pay over the next decade we show how better targeting of these policies towards firms that look more like formal firms to begin with can increase the formalization rate and improve cost effectiveness

an analysis of optimal advertising under uncertainty we examine the firm s optimal advertising behavior under conditions of uncertainty for the static one period model we show that the firm s attitude toward risk may be responsible for the potential divergence between advertising decisions under uncertainty and those under deterministic conditions for the dynamic multi period model the ultimate impact of uncertainty on advertising is further complicated when the sales response function contains an unknown parameter and the firm wishes to gain more information about it through experimentation we demonstrate that whether it is optimal for the firm to experiment at an advertising rate higher equal to or lower than the myopic one period level would depend on the specification of the response function finally we offer some empirical evidence for our assumption of a quadratic sales response function using time series data of twelve major brands of cigarettes

trade liberalization and local labor market adjustment in south africa abstract despite a large literature analyzing trade liberalization in developing countries little evidence exists around its effects in sub saharan african economies characterized by high levels of baseline unemployment and weak manufacturing sectors using a local labor market approach we investigate the causal effects of tariff reforms implemented in south africa between 1994 and 2004 on labor market outcomes at the individual level more specifically we construct a district level measure of exposure to tariff reductions equal to a weighted average of industry tariffs using baseline industry shares as weights and estimate the effect of this shock on local economies we find that workers in districts facing larger tariff reductions experience a significant decline in both formal and informal employment in the tradable sector driven primarily by a decline in manufacturing employment relative to workers in districts less exposed to these reductions there is no evidence of any significant effect on wages for those who remain employed however displaced workers do not show any evidence of transitions into other sectors or migration to less affected regions rather they are more likely to become discouraged workers or exit the labor force entirely and show an increased probability of accessing government transfers

a panel data based method for merging joint space and market response function estimation multidimensional scaling mds techniques have proven to be useful in understanding market structures at a single point in time in addition to examining snapshots of markets it has been suggested that the construction of longitudinal joint spaces in conjunction with econometric modeling techniques would provide useful insights into the dynamic structure of a market however several pragmatic factors related to data collection have limited the amount of research in this area in this paper a method is proposed that enables researchers to use commonly available consumer diary panel data to construct a time series of joint space maps and then to integrate these maps into market response models two illustrations using longitudinal maps demonstrate successful applications of this methodology

recovering measures of advertising carryover from aggregate data the role of the firm s decision behavior data interval bias the biased estimation of advertising carryover in aggregate data can be viewed as a misinterpretation of the aggregate advertising sales relationship due to missing micro advertising data this paper argues that if the researcher does not explicitly model the firm s advertising decisions he will incorrectly interpolate the missing data and thereby allow the firm s decision behavior to influence inferences about advertising carryover drawing upon a general model of advertising decision behavior the expected aggregate form of the koyck relationship is developed and compared to existing bias correction methodologies although it is difficult to find any parsimonious procedure which is robust with respect to all types of decision behavior allowing lagged advertising to enter the classical koyck equation emerges as a simple method of obtaining a reasonable estimate of advertising carryover in aggregate data

market resolution and valuation in incomplete markets the arrow debreu approach to general equilibrium in an economy has been recognized as one of the most general and conceptually elegant frameworks for the study of financial problems under uncertainty 2 9 equally well known is its elusiveness when it comes to ready application to practical problems like capital budgeting or empirical testing see 6 15 18 however some recent research see 1 3 6 12 16 18 and 19 has made a serious attempt to put the state preference theoretic model in an operational setting breeden and litzenberger 6 have developed an interesting approach to derive constructively the prices of elementary arrow debreu securities from the prices of call options on aggregate consumption banz and miller 3 use a similar technique to value capital budgeting projects based on values for state contingent claims computed from prices of call options written on the market portfolio the supershare securities proposed by hakansson 14 16 and related work by garman 13 ross 24 etc have also served to give the so called state contingent approach a practical flavor

the theory and reality of urban slums pathways out of poverty or cul de sacs this article explores two contrasting perspectives on the role of informal settlements in urban labour markets one proposes that they help to lift households out of rural poverty and onto a path to prosperity through affordable access to urban opportunities the other suggests that the debilitating conditions confine residents to enduring hardship and insecurity south africa is an important test case because of the extent of social and spatial inequalities and the policy ambivalence towards shack settlements preliminary evidence indicates that employment rates are much closer to formal urban areas than to rural areas but conditions of employment are noticeably worse other forms of data are required to assess the magnitude and timescale of economic progression for households

modeling and estimation in changing market environments in many marketing contexts managers and researchers are concerned with modeling the response of performance variables e g sales or market share to one or more decision variables e g advertising or price or other predictor variables modeling efforts in these contexts may consider either the response of an individual entity such as a single consumer or firm or the aggregate response of a collection of entities usually they involve the specification of mathematical models where the unknown parameters are assumed a priori to be constant these unknown parameters are then estimated by fitting the models to available data using some form of regression analysis the rationale for expending effort in this area is the expectation that through activities of this type the decision maker gains understanding of the market process and therefore is able to make better decisions the response of a firm s market performance to decision predictor variables may be moderated by numerous external factors by competitive factors and by the levels of the firm s decision variables for example the sensitivity of sales to price may vary depending on time of year overall economic conditions and or levels of advertising or promotion certain characteristics of marketing research is often concerned with the modeling of market response over time however the nature of the relationships being modeled may change due to shifts in consumer tastes changing marketing strategies competition and other reasons currently used constant parameter models are not capable of adequately reflecting such changing market environments therefore alternate modeling approaches should be considered recent work in statistics and econometrics suggests the appropriateness of variable parameter models for such problems this methodology permits model coefficients to change over time in this paper various potentially useful variable parameter models are discussed reported marketing applications are examined and issues pertaining to the application of this relatively new methodology to marketing problems are investigated professor winer gratefully acknowledges support from the faculty research fund of the graduate school of business columbia university professor wildt was on the faculty of the university of georgia when the paper was written

the demand for information and the diffusion of a new product abstract the paper examines the implications of the ability of a consumer to learn about the characteristics of a new product on the diffusion of the product over time the demand for information by the consumer is shown to generate a sigmoid diffusion curve for total sales of the product further it is shown that over time the elasticity of demand along the diffusion curve increases

the sweet taste of information a study of the demand for new brands in the uk confectionery industry this paper tests the hypothesis derived in tonks 1986 that the demand for a product becomes more elastic over time in the early periods of a product s life the demand curve is relatively inelastic as consumers purchase the good to learn about its unknown qualities over time as information accumulates consumers become more price conscious the study makes use of data on eight products in the uk confectionery industry produced by rowntree mackintosh plc introduced onto the market over the period 1976 81 the study tests the hypothesis in two ways first it applies a standard demand curve to two subperiods to test for parameter stability secondly it incorporates an information variable to take account of the full information demands in the later periods both tests provide tentative support for the hypothesis

technical note a price vector model of demand for consumer durables preliminary developments although considerable research has been conducted on optimal pricing policies for manufacturers relatively little work has been done on how price enters the consumer choice process in this paper a model is developed for durables purchasing which integrates both economic and behavioral research by specifying a vector of five price concepts which affect purchasing behavior of particular interest are variables relating to future price expectations due to data limitations a revised model is estimated and the results provide preliminary support for the general model

modeling asymmetric competition the effects of the marketing actions of one brand can be distributed among its competitors market shares in a complex manner this paper presents and illustrates methods for modeling brand competition and brand strategies in markets where competitive effects can be differentially and asymmetrically distributed we discuss the empirical specification parameter estimation and competitive strategy implications of the models proposed price and advertising competition among eleven brands of an australian household product is used to illustrate the application of these procedures

informality and development in developing countries informal firms account for up to half of economic activity they provide livelihood for billions of people yet their role in economic development remains controversial some like hernando de soto 1989 2000 see informal firms as an untapped reservoir of entrepreneurial energy held back by government regulations in this view unleashing this energy by reducing entry regulations or improving property rights would fuel growth and development others like levy 2008 take a more cynical view stressing the advantages enjoyed by informal firms and workers from avoiding taxes and regulations a report from the mckinsey global institute describes informal firms as parasites competing unfairly with law abiding formal firms farrell 2004 in this view informality should be suppressed not unleashed still others follow the development tradition of lewis 1954 harris and todaro 1970 and more recently rauch 1991 and see informality as a byproduct of poverty from this dual perspective formal and informal firms are fundamentally different productive formal entrepreneurs pay taxes and bear the cost of government regulation to reach new customers raise capital and access public goods these entrepreneurs are often educated and find it more profitable to run bigger formal firms rather than the smaller informal ones in contrast informal entrepreneurs are typically uneducated and unproductive and they run small businesses producing low quality products for low income customers using little capital and

modeling response to advertising and pricing changes for v 8 cocktail vegetable juice this paper is based on a series of studies undertaken for v 8 cocktail vegetable juice over a five year period the studies were a consequence of management questions regarding the effectiveness of a new advertising campaign the best media mix for this campaign and the apparent wear out of the advertising copy the studies included controlled experimentation estimation of advertising response functions and exploration of price sensitivity following major price increases by v 8 it was found that the short term response to advertising was s shaped and that the new creative approach rather than expenditure levels alone accounted for by far the largest component of the impact of advertising on sales it was also found that for a short period following the major price increases v 8 became extremely price sensitive however after about six months the marginal impact of price returned to historical levels the application of results at campbell soup company their relationship to the literature and their implications for both researchers and practitioners are discussed

accounting for endogeneity when assessing strategy performance does entry mode choice affect fdi survival firms choose strategies based on their attributes and industry conditions therefore strategy choice is endogenous and self selected empirical models that do not account for this and regress performance measures on strategy choice variables are potentially misspecified and their conclusions incorrect i highlight how self selection on hard to measure or unobservable characteristics can bias strategy performance estimates and recommend an econometric technique that has been developed to account for this effect although this concern applies to a wide range of strategy questions to demonstrate its effect i empirically examine if entry mode choice acquisition versus greenfield influences foreign direct investment survival in specifications that do not account for self selection i find that greenfield entries have survival advantages compared to acquisitions this confirms previous findings however the significance of this effect disappears once i account for self selection of entry mode in the empirical estimates the results confirm that estimates from models that do not account for self selection of strategy choice can lead to incorrect or misleading conclusions

who buys and who sells options the role of options in an economy with background risk abstract in this paper we derive an equilibrium in which some investors buy call put options on the market portfolio while others sell them since investors are assumed to have similar risk averse preferences the demand for these contracts is not explained by differences in the shape of utility functions rather it is the degree to which agents face other non hedgeable background risks that determines their risk taking behavior in the model we show that investors with low or no background risk have a concave sharing rule i e they sell options on the market portfolio whereas investors with high background risk have a convex sharing rule and buy these options journal of economic literature classification numbers d52 d81 g11 g13

spanning and completeness with options the role of ordinary options infacilitating the completion of securities markets is examined in the context of a model of contingent claims sufficiently general to accommodate the continuous distributions of asset pricing theory and option pricing theory in this context it is shown that call options written on a single security approximately span all contingent claims written on this security and that call options written on portfolios of call options on individual primitive securities approximately span all contingent claims that can be written on these primitive securities in the case of simple options explicit formulas are given for the approximating options and porfolios of options these results are applied to the pricing of contingent claims by arbitrage and to irrelevance propositions in corporate finance

coupon redemption and the demand for frozen concentrated orange juice a switching regression analysis a switching regression model was estimated and used to study the impact of florida department of citrus coupon promotional programs on the demand for frozen concentrated orange juice the empirical results show that discounts and information provided by coupons were effective in increasing the demand for fcoj and that the fdoc s coupon programs had positive impacts on the probability of using coupons for purchasing fcoj moreover different types of coupon promotions had different impacts and coupon users and nonusers demonstrated different degrees of response to price changes

the persistence of marketing effects on sales are marketing efforts able to affect long term trends in sales or other performance measures answering this question is essential for the creation of marketing strategies that deliver a sustainable competitive advantage this paper introduces persistence modeling to derive long term marketing effectiveness from time series observations on sales and marketing expenditures first we use unit root tests to determine whether sales are stable or evolving trending over time if they are evolving we examine how strong this evolution is univariate persistence and to what extent it can be related to marketing activity multivariate persistence an empirical example on sales and media spending for a chain of home improvement stores reveals that some but not all advertising has strong trend setting effects on sales we argue that traditional modeling approaches would not pick up these effects and therefore seriously underestimate the long term effectiveness of advertising the paper concludes with an agenda for future empirical research on long run marketing effectiveness

individual team incentives and managing competitive balance in sports leagues an empirical analysis of major league baseball abstract major league baseball and other professional sports leagues have long been concerned with competitive imbalances caused by differences in local revenues the fear is that in the absence of salary caps or other regulatory mechanisms smaller market teams will be unable to remain competitive this research uses a structural dynamic programming model to analyze ownership s payroll investment decisions this model estimates the relationship between optimal payrolls and local market populations and the influence of long term customer equity dynamics on payroll investments in addition the author analyzes the impact of a recent policy intervention that implemented revenue transfers from high local revenue markets to low local revenue markets the statistical results indicate that market population has a significant impact on the value of a team s payroll investments for example optimal payrolls double as the population increases from 2 5 million to 7 5 million furthermore rather than improving com

can informal firms hurt registered smes access to credit using firm level survey responses from 2009 to 2012 we examine whether competitors from the informal sector affect the credit constraints of registered smes in 86 countries worldwide we also investigate the role played by the quality of institutional environment in exacerbating or in alleviating such effect a weak quality of institutional environment strengthens inter linkages between the formal and the informal sectors increases the costs and decreases the benefits assumed by formal firms and reduces the costs attributed to informality moreover it also results in a large informal economy which influences perceptions about the substitutability between formal and informal goods and law evasion our findings indicate that registered smes facing competition from informal firms are more likely to be credit constrained than other formal smes that are not confronted with such competition this result is consistent with the parasite view and the entrepreneurial perspective of informality which assert that informal firms are capable of competing against registered smes and hurting the latter s profits further we find that such adverse impact manifests only in countries with weak rule of law and high degree of corruption and bureaucracy our results also show that registered micro and small firms are more likely to be affected by the presence of informal firm competitors than medium sized firms this is because the benefits of formality that include access to credit from financial institutions increase with firm size on the whole our findings suggest that governments must enhance their role in increasing access to credit to smaller firms and in providing incentives for informal firms to be integrated in the formal economy moreover in order to achieve inclusive growth our results highlight the importance of improving the business environment which affects all entrepreneurs

a unified approach to identifying estimating and testing demand structures with aggregate scanner data a one to one map between a specific demand structure and a restricted cross elasticity matrix is developed and tested using a random utility model the resulting demand structure can be used to evaluate a firm s ability to differentiate its products and can help determine if demand is characterized by factors that are easy to change similar brands are assumed to share common attributes that are stochastically evaluated by the consumer resulting in a random utility model with correlated errors the map results in more precise cross elasticity estimates and can be used to both identify and test possible structures

technical note simplified estimation procedures for mci models structural transformations of the mci model are presented which make the model easily estimated using dummy variables with widely available regression packages the mci model is empirically shown to provide better predictive power than several other models of similar form but ones which do not produce logically consistent market share estimates

modelling impact of advertising and optimizing advertising policy an application in recreation abstract this paper deals with the problem of the desirable level of advertising expenditure the optimal distribution of this expenditure in time and the allocation over the media tv radio and newspaper for a recreation park in the netherlands although the model id developed for the specific situation of this park in principle it can be applied in all situations where the interest is in short term day by day effects of promotional activities on sales examples are other situations in the recreation and leisure business cultural events theatre cinema and sales promotions e g weekend offerings for products in supermarkets first a model was specified and estimated that relates number of visitors to advertising effort it also takes into account non advertising variables that effect the number of visitors then this model was used in a heuristic advertising planning procedure which by means of incremental analysis for a given budget level searches for the optimal allocation of the advertising budget over media and time with this procedure ways to readjust the advertising policy were found by allocating the budget differently over media and time and by changing the overall budget level several recommendations were made to the management of the park a number of which have already been implemented

informality over the life cycle abstract in developing countries informality is mainly concentrated among younger and older workers and low skilled workers in this study we propose a dual labor market theory that highlights how frictions and taxation in the formal sector and educational choices interact to shape the informality rate over the life cycle we develop a life cycle model with search frictions skill heterogeneities and endogenous educational choices we carry out a numerical analysis and show that our model reproduces remarkably well the life cycle patterns of informality non employment and formal employment in argentina we analyze several public policies and show that an educational grant reduces both informality and non employment and may be fully financed by the extra tax revenues generated by the increase in formal employment and wages lowering taxes may achieve similar results but is detrimental to the government budget despite increasing the base on which they are levied

efficient funds for meager asset spaces abstract for finite state space models of securities markets there exists a portfolio of traded securities on which conventional call or put options suffice to complete securities markets 28 moreover these efficient funds are generic 2 18 the objective of this paper is to present a class of larger models of securities markets for which existence and genericity of efficient funds obtains conditions abstracted from the finite state space case serve to define a meager asset space it is shown that for meager asset spaces satisfying a separability condition efficient funds exist and are generic in a category theoretic sense

informal employment in a growing and globalizing low income country abstract we document several facts about workforce transitions from the informal to the formal sector in vietnam a fast growing industrializing and low income country first younger workers particularly migrants are more likely to work in the formal sector and stay there permanently second the decline in the aggregate share of informal employment occurs through changes between and within birth cohorts third younger educated male and urban workers are more likely to switch to the formal sector than other workers initially in the informal sector poorly educated older female rural workers face little prospect of formalization fourth formalization coincides with occupational upgrading

informality and credit constraints evidence from sub saharan african mses abstractthe attributes of micro and small enterprises mses influencing access to credit in particular the level and role of firm informality are analysed in the article the puzzle is the push for mses to join the formal sector and the tug to avoid the extra burden it places on the firm it is important to know more clearly what forces are at work and the sources of the causal effects this study uses data from the world bank enterprise surveys for five low income countries lics in sub saharan africa the method is empirical and as we find informality to be endogenous to credit constraints an instrumental variable approach is estimated further to address the possibility of reverse causality an instrument for the informality variable is required not registered with inland revenue tax office is the chosen instrument variable the findings reveal that as the probability of a firm operating in the formal sector increases there is greater access to external credit the causality relationships are

trade liberalization and regional dynamics abstract we study the evolution of trade liberalization s effects on brazilian local labor markets regions facing larger tariff cuts experienced prolonged declines in formal sector employment and

transaction decoupling how price bundling affects the decision to consume abstract in today s marketplace price bundling is widespread manufacturers and retailers routinely offer multiple products for a single bundled price although the effects of price bundling on purchase behavior have been well researched the effects of price bundling on postpurchase consumption behavior have received almost no attention in this article the authors build on the sunk cost literature e g thaler 1980 1985 and predict that price bundling leads to a disassociation or decoupling of transaction costs and benefits thereby reducing attention to sunk costs and decreasing a consumer s likelihood of consuming a paid for service e g a theater performance four studies show this to be the case in two lab studies the authors show that having a bundled four day ski pass as opposed to four one day ski tickets decreases a person s likelihood of skiing on the final day of a four day ski vacation they replicate this result in a field study showing that multiperformance ticket holders are

an econometric study of recruitment marketing in the u s navy since the abolishment of the mandatory draft the u s navy along with the other services has engaged in aggressive marketing strategies in order to attract a sufficient number of qualified individuals to volunteer enlistment the purpose of this study is to investigate the effectiveness of these efforts primarily advertising and personal selling within the general framework of the recruiting environment the study uses insights into the recruiting process provided by the navy recruiting command along with principles of economics and marketing to develop an econometric model of recruiting performance the parameters of the model are then estimated on a monthly data base for the 43 navy recruiting districts from january 1976 to december 1978 the objective of the model is descriptive i e it quantifies the effects of various environmental and marketing variables on three measures of recruiting performance nationally generated leads contracts for the delayed entry program and direct shipment contr

the demand for league football a demand equation is estimated for total football league attendances for the period 1948 49 to 1979 80 plausible values are obtained for the elasticities of demand with respect to income and to a price variable which includes the cost of travel to the stadium the values imply that football spectating is an inferior good with a low price elasticity equations are also estimated for the league s separate divisions the implications of the results for the football league clubs are discussed

price induced patterns of competition this research focuses on how price changes influence the observed pattern of brand competition the paper begins with a basic utility model formulation and examines the implications of three major classes of preference distributions on the expected patterns of competition a price tier model is proposed to operationalize the theory and to allow predictive testing the price tier model is estimated on 28 brands across four product categories the results show a specific asymmetric pattern of price competition higher price higher quality brands steal share from other brands in the same price quality tier as well as from brands in the tier below however lower price lower quality brands take sales from their own tier and the tier below brands but do not steal significant share from the tiers above the results are consistent with a bimodal preference distribution with the regular price indifference point being located toward the lower quality end of the preference distribution for the categories analyzed

a meta analysis of marketing communication carryover effects abstractto optimally set marketing communication marcom budgets reliable estimates of short term elasticities and carryover effects are required empirical generalizations from meta analyses of prior field studies can help guide these decisions however the last such meta analysis of marcom carryover effects was performed on koyck model based estimates collected before 1984 and was confined to mass media advertising the authors update and extend extant empirical generalizations via two meta analyses of carryover estimates compiled from studies encompassing personal selling targeted advertising and mass media advertising using diverse model forms until 2015 the first is focused on and utilizes 918 estimates of the carryover proportion of the total effect termed long term share of the total effect and the second focuses on 863 derivable estimates of 90 implied duration intervals the authors find the mean long term shares of the total effect for personal selling 687 and targeted advertisin

modelling the informal sector formally abstract the theoretical characterization of formal informal sector dualism by labor market dualism is integrated with its empirical characterization by size dualism by supposing that the minimum formal sector wage is only enforced for firms greater than a certain size a firm s size varies directly with the talent of its enterpreneur manager and the choice between formal and informal sector entrepreneurship is determined endogenously it is then shown that the size gap between the smallest formal sector firm and largest informal sector firm varies directly with the formal informal sector wage differential which in turn is shown as expected to increase the further is the minimum wage above the market clearing wage the comparative statics of changes in the size of the firm above which the minimum wage is enforced are also examined

entry and learning this paper shows the difficulties associated with discerning the impact of learning and pressures of competitive entry on the price and cost of production in commodity markets it shows that the patterns of price and cost movements over time will be dramatically affected by the entry of new competitors if firms possess u shaped average cost curves entry alone can generate price and cost declines which look like learning induced reductions alternatively cost increases may occur even when learning is quite strong this research has dramatic managerial and empirical implications managers operating in highly competitive environments subject to rapid entry must put more emphasis on the role of their own day to day decisions in affecting cost the fact that costs have declined may have nothing to do with learning but may be driven by their reactions to competitive pressures investigators empirically estimating learning curves must also be cognizant of the role entry plays in affecting cost simple compa

a model of brand choice and purchase quantity price sensitivities many consumer decisions involve a discrete choice and a continuous outcome examples of such decisions are whether to own a home or rent one and how much to spend which brand of orange juice to buy and how many ounces to buy in cases like these the choice decision is typically modeled separately say using a logit model and the continuous outcomes modeled separately using regression analysis however the continuous outcomes may not be independent of the discrete choice and vice versa and modeling the two decisions independently can lead to inefficient choice parameter estimates and biased and inconsistent regression parameter estimates in this paper we present a methodology from the limited dependent variable literature to model the dependence between the choice and quantity decisions our substantive interest is in the role of price in the choice and quantity decisions when choosing among alternatives we argue that consumers consider prices of all the competitive brands in the quantity decision on the other hand only the price of the chosen alternative is expected to impact how much of the alternative is purchased the analysis of three brands using disaggregate level panel data strongly supports our hypothesis about the role of competitive prices in the choice and quantity decisions

the asymmetric role of shadow economy in the energy growth nexus in bolivia abstract this paper estimates the energy demand function to examine the asymmetric relationship between the shadow economy and energy consumption in the case of bolivia during the period of 1960 2015 the ambiguous empirical findings on shadow economy energy demand nexus has inclined us to apply the nonlinear ardl cointegration approach developed by shin et al 2014 and the hatemi j 2012 asymmetric causality test the empirical evidence confirms the presence of an asymmetric relationship between the variables of interest positive and negative shocks to official gdp true gdp and the shadow economy have positive impacts on energy consumption energy consumption is positively and negatively affected by positive and negative shocks in financial development respectively a positive negative shock to capital decreases energy consumption another important finding concerns the complex causal direction between economic growth and energy consumption this study provides new insights regarding to the use of official gdp true gdp and the shadow economy as economic tools to maintain energy demand for sustainable economic development

a path dependent approach to security valuation with application to interest rate contingent claims abstract the last two decades have witnessed a tremendous growth in the volume of assets and liabilities whose cash flows depend in a variety of ways on the path of interest rates some of these including floating rate notes and swap agreements contractually base cash flows on current and past interest rates and contain caps floors and other more complex features others including mortgages many corporate bonds and time deposits are fixed rate instruments that contain embedded options such as those to prepay call or withdrawal the irregular exercise of these options causes cash flows to vary as time proceeds and interest rates rise or fall this paper develops a state contingent claims technique for valuing such securities it is derived from the option based model of breeden and litzenberger 1978 using the transition matrix approach of banz and miller 1978 particular attention is paid to valuing so called path dependent securities whose contemporaneous cash flows depend on the historical path of interest rates as well as their current level a detailed example is provided in which an adjustable rate mortgage is valued under a variety of economic and security specific assumptions

on the short and medium term effects of formalisation panel evidence from vietnam abstractthis paper analyses the consequences of formalisation on the performance of informal firms using a panel dataset from vietnam we find that switching firms before switching have higher profit and value added compared to non switching firms suggesting heterogeneity becoming formal leads to an additional increase in switching firms profit and value added the benefits of formalisation materialise in the short term one year and persist in the longer term three or more years these benefits run through various channels such as better access to powered equipment or higher business association membership but not better access to credit

modeling competitive marketing strategies the impact of marketing mix relationships and industry structure this paper empirically analyzes the formulation of competitive marketing strategies consisting of product quality levels promotional expenditures and prices using a simultaneous equation model we examine the use of prices and promotional spending as signals or indications of product quality the impact of promotional spending on prices and the impact of industry structure on the formulation of the complete marketing mix the structural equations are developed using a theoretical model of optimal competitive marketing mix and are estimated using business level pims data which consists largely of industrial durable goods producers for a cross section of 1 100 of these businesses three results of the estimation are especially interesting price cost margins are high for high quality products suggesting that high prices indicate or signal high quality promotional intensity is unrelated to product quality suggesting that promotional effort provides no reliable signals of quality intensely promoted products earn low price cost margins however indicating that promotional spending is associated with high price sensitivity quality levels promotional intensity and price cost margins vary significantly with competitive and market conditions such as the concentration of competitors and the stability of market shares although these relationships are generally weaker than relationships between quality promotion and price cost margins quality levels are high and margins low in markets with unstable shares or unconcentrated competitors

short term market risks implied by weekly options we study short maturity weekly s p 500 index options which provide a direct way to analyze volatility and jump risks unlike longer dated options they are largely insensitive to the risk of intertemporal shifts in the economic environment adopting a novel seminonparametric approach we uncover variation in the negative jump tail risk which is not spanned by market volatility and helps predict future equity returns as such our approach allows for easy identification of periods of heightened concerns about negative tail events that are not always signaled by the level of market volatility and elude standard asset pricing models

spanning with index options current literature stresses that efficient funds do not exist when asset returns are contin uously distributed this paper shows that the existence of efficient funds can be restored if security returns are generated by a linear factor model

price elasticity dynamics over the adoption life cycle little empirical research has been conducted to test the dynamic behavior of elasticities over the product life cycle competing specifications of price elasticity dynamics are examined to test the

optimal advertising strategies this paper considers advertising policies for a very general class of response functions it is shown that if a pulsing policy is used awareness or sales eventually settle down to a steady cycle and the average response over the cycle is a decreasing function of the length of the cycle when response shows increasing returns to scale it is possible in theory to use a device called chattering to replace the true response by a straight line which lies above the true response in the region in which chattering is used a numerical example is given to show how the optimal policy can be computed when part of the response is linear and the results obtained are compared with those of the best practicable approximation to chattering it is shown that the problem of maximising awareness or sales subject to a budget constraint is structurally identical with maximising profit after advertising with or without a constraint in either case it is possible that for part of the time the optimal policy involves chattering

advertising budget allocation under uncertainty this article presents a model for the allocation of an advertising budget to geographic market segments or territories when the sales response to advertising in each segment is characterized by a probability distribution it is shown that allocation decisions that are based on the expected sales response may be associated with a relatively large degree of risk and therefore non optimal to a risk averse manager the model derives an efficient frontier in terms of the expected profit and its variance resulting from alternative budget allocations the manager then chooses the optimal allocation based on his her preference function

efficient funds in a financial market with options a new irrelevance proposition under the same assumptions that ross used to assert the existence of an efficient fund on which a spanning set of options can be written we prove that almost any portfolio is an efficient fund from a constructive point of view a randomly chosen vector of portfolio weights yields an efficient fund when the ross assumptions are relaxed a limited notion of efficiency maximal efficiency is the best attainable the maximally efficient funds are also everywhere dense in the portfolio space some implications are discussed and illustrative examples given the theory of consumer and firm behavior in economies with a complete set of contingent claims is rather well understood these complete market structures1 bring about competitive equilibria where consumers maximize utility firms maximize profits and prices adjust to match demand and supply as shown in debreu 7 all competitive equilibria are pareto optimal and any pareto optimum can be sustained as a competitive equilibrium it is commonly recognized however that complete markets have not come into

equilibrium open interest abstract this paper analyses what determines an individual investor s risk sharing demand for options and aggregating across investors what the equilibrium demand for options we find that agents trade options to achieve their desired skewness specifically we find that portfolio holdings boil down to a three fund separation theorem that includes a so called skewness portfolio that agents like to attain our analysis indicates also however that the common risk sharing setup used for option demand and pricing is incompatible with a stylized fact about open interest across strikes

pre and within season attendance forecasting in major league baseball a random forest approach this study explores the forecasting of major league baseball game ticket sales and identifies important attendance predictors by means of random forests that are grown from classification and regre

a control function approach to endogeneity in consumer choice models abstract endogeneity arises for numerous reasons in models of consumer choice it leads to inconsistency with standard estimation methods that maintain independence between the model s error and the included variables the authors describe a control function approach for handling endogeneity in choice models observed variables and economic theory are used to derive controls for the dependence between the endogenous variable and the demand error the theory points to the relationships that contain information on the unobserved demand factor such as the pricing equation and the advertising equation the authors approach is an alternative to berry levinsohn and pakes s 1995 product market controls for unobserved quality the authors apply both methods to examine households choices among television options including basic and premium cable packages in which unobserved attributes such as quality of programming are expected to be correlated with price without correcting for endogeneity aggregate d

chapter 9 econometric and time series market response models publisher summary marketing has seen a rapid expansion in the widespread use of quantitative methods correlation and regression analysis were among the first techniques used as marketing research emerged as a discipline after world war ii in the early 1970s regression analysis became econometrics simultaneous equation systems could be estimated almost as easily as single regression equations while econometrics as a whole continues to flourish as new and more sophisticated estimation techniques and associated computer software have become available simultaneous equation systems have not become widely prevalent the dynamic structure of marketing variables themselves is addressed in the chapter followed by discussions of leads and lags among marketing variables and the assessment of the direction of causality dynamic properties of sales response functions have been discussed in more detail marketing generalizations that have been uncovered as well as empirical evidence on the shape of the sales response function is reported

shedding light on the shadow economy a nighttime light approach abstractmeasuring the shadow economy is inherently difficult but critical for understanding economic development using census data on formal and informal sectors in cambodia we document that 96 6 per cent of non farm establishments do not formally register with the government and their sales accounted for 76 6 per cent of total sales in 2011 estimating their past sales from changes in nighttime light for 1993 2010 we find that both formal and informal firms increased their estimated sales the share of informal sales increased from 68 8 per cent in 1993 to 76 6 per cent in 2011 suggesting that the informal sector increased quantitatively in both absolute and relative terms over time

developed country mnes investing in developing economies progress and prospect this study reviews research from 1970 through 2016 on developed country multinational enterprises dmnes entering and competing in developing economies to identify the current state of knowledge of this research and push it further we review the literature using bibliometric and qualitative content analyses covering leading journals and books we articulate frontier issues that are understudied yet critical to both theorization and practice of dmnes in developing economies we discuss the findings and conclusions from prior research along five key areas 1 entering developing economies 2 organizing local activities 3 managing alliances and joint ventures 4 competing in dynamic environments and 5 dealing with institutions governments and society we offer prospective insights into future agenda that have important implications for mne strategies and decisions and propose frontier directions that encompass strategic localization reverse transfer and adaptation co evolution with local business ecosystems reorganizing and restructuring and strategic responses to institutional and market complexity

spanning and completeness in markets with contingent claims abstract we characterize financial markets that are complete or that contain portfolios which span all measurable functions of a particular asset payoffs either finite and infinite dimensional these results are then employed to describe the extent to which options trading is sufficient to complete markets to investigate the existence of efficient funds and to establish the extent of market completeness required to ensure the unanimity and irrelevance results of modern corporation finance

a complete analysis of full pareto efficiency in financial markets for arbitrary preferences this paper provides a complete analysis of the necessary and sufficient conditions for financial markets to achieve fully pareto efficient allocation of aggregate wealth through trade in economies with arbitrary preferences we show that full pareto efficiency obtains only if the market structure of contingent claims spans the information partition of a minimal aggregate wealth statistic and a halmos savage sufficient statistic for the beliefs of the traders all the known allocation efficiency results in the literature due to arrow hakansson john ross and others are unified by this result a security is a certificate that entitles the holder to a stream of cash flows

why do developing countries tax so little the power to tax is taken for granted in a great deal of mainstream public finance in considering limits to taxation traditional research in the field focuses on limits imposed by incentive constraints which are tied to asymmetric information or to politics and political institutions the limits to taxation are rarely tied to the administrative capacity of the state but incentive constraints alone cannot explain the vast differences in the levels of taxation that we see across the world and across time low income countries typically collect taxes of between 10 to 20 percent of gdp while the average for high income countries is more like 40 percent in essence our view on these patterns is similar to that taken by joseph schumpeter 1918 almost a century ago when he noted the fiscal history of a people is above all an essential part of its general history an enormous influence on the fate of nations emanates from the economic bleeding which the needs of the state necessitates and from the use to which the results are put in order to understand taxation economic development and the relationships between them we need to think about the forces that drive the development process poor countries

put call parity and market frictions abstract we extend the fundamental theorem of finance and the pricing rule representation theorem to the case in which market frictions are taken into account but the put call parity is still assumed to hold in turn we obtain a representation of the pricing rule as a discounted expectation with respect to a nonadditive risk neutral probability

informality in the process of development and growth informality is a term used to describe the collection of firms workers and activities that operate outside the legal and regulatory systems it is widespread in the majority of developing countries in a typical developing economy the informal sector produces about 35 per cent of gdp and employs 70 per cent of the labour force this paper studies informality in the context of economic development by presenting a model and projections that link informality regulations migration and economic growth this analytical framework highlights the trade offs between formality and informality the relationship between the different types of informality and the connection between them and the forces of labour capital and productivity growth the paper models the behaviour of the informal sector based on the following fundamental asymmetry formal firms confront higher labour costs while informal firms face higher capital costs and lower productivity using mandated minimum wages as the policy induced distortion the model first studies the static allocation of formal and informal capital and labour in a modern economy second it opens the possibility of labour migration from a rudimentary economy with ample supply of labour e g rural areas or less advanced neighbouring countries third the model analyses the dynamic behaviour of the formal and informal sectors considering how they affect and are affected by economic growth and labour migration then the paper presents projections for the size of labour informality in the modern and rudimentary economies in the next two decades for a large group of countries representing all regions of the world the projections are based on the calibration and simulation of the model and serve to discuss its usefulness and limitations

short long and spatial dynamics of informal employment di caro p and nicotra g short long and spatial dynamics of informal employment regional studies this paper analyses regional shadow labour markets cross regional migration flows are introduced in a stochastic two sector model used to study the effects of regional interactions on informality empirical results show that informal activities across italian regions are driven by the inefficient provision of public goods and high taxes regional connections are found to be significant place specific reactions of informal employment to national shocks in the official economy are investigated finding that the informal sector can act as a complement to or a substitute for formal activities the summary of the results and policy conclusions are then discussed

household inequality entrepreneurial dynamism and corporate financing economic theories provide conflicting hypotheses on how wealth inequality affects entrepreneurial dynamism to empirically investigate its impact we construct local measures of household wealth inequality based on financial rents home equity and 1880 farmland we identify its effects on entrepreneurship by instrumenting it with land distribution under the 1862 homestead act or us states removal of death taxes wealth inequality decreases firm entry and exit and the proportion of high tech businesses across metropolitan statistical areas there is also less redistribution into public goods supportive of entrepreneurship such as schooling and the judiciary income per capita consequently grows more slowly

the missing missing middle the notion that the distribution of firm size in poor countries is characterized by a bimodal distribution with a missing middle is a widely accepted fact in development economics for example see krueger 2013 the idea of the missing middle is that there are a large number of small firms some large firms but very few medium sized firms the purported fact about the missing middle is cited as evidence for two broad stories of why many countries are poor perhaps surprisingly these models look for the cause of the missing middle in two fundamentally different places one approach suggests that small firms are disfavored in low income countries for example by a lack of access to financial capital and thus face difficulties in growing to become middle sized firms the other approach posits a dual economy of large high productivity firms and small low productivity firms and then suggests that larger firms are disfavored in low income countries for example by having to bear large fixed costs of regulation which make it difficult for middle sized firms to become established we begin by reviewing these theories of development based on the purported fact of a missing middle we then explore the evidence on distribution of firm sizes in more detail and challenge the presumption that a missing middle occurs at all we present three main facts first there is in fact no evidence of a missing middle in detailed and comprehensive data on the size of manufacturing firms in india indonesia or mexico regardless of how we slice the data to be sure there

modelling the effects of promotion expenditures on sales of pharmaceuticals the successful innovation of pharmaceuticals requires a substantial amount of marketing support despite concerns about the effects of these marketing efforts this study considers prior findings that indicate that higher marketing expenditures for a brand reduce its price elasticity of demand which may lead to higher prices in the context of the dutch pharmaceutical market the authors find that parameters are heterogeneous across brands and that marketing effects differ across product life cycle stages they propose a separate analysis of established and new brands for established brands marketing efforts neither have a positive effect on sales nor do they affect the price elasticity for new brands several proposed models might capture their diffusion pattern the diffusion of innovation models provide the best results marketing accelerates the rate of diffusion and leads to a higher baseline level of sales

the relationship between distribution and market share this paper develops an aggregate level model of distribution and market share for frequently purchased branded consumer goods that is founded in the concepts of push and pull the model makes a key distinction between uncompromised and compromised demand as sources of market share uncompromised demand is demand that is satisfied when the preferred brand is found compromised demand results from brands that lack broad distribution and whose potential customers are willing to compromise and purchase another brand when the preferred brand is not present trade behavior is also addressed by analyzing the effects of consumer demand feedback on the trade s decision to stock and merchandise the brand compromised demand and feedback effects may be critical and often overlooked determinants of market share under a variety of model assumptions analytical results are consistent with longitudinal and cross sectional evidence that market share is a convex function of distribution increasing at an increasing rate up to 100 percent distribution in addition to these insights we believe that the model has promise for future normative work on balancing push and pull marketing effects

margins of labor market adjustment to trade abstract we use both longitudinal administrative data and cross sectional household survey data to study the margins of labor market adjustment following brazil s early 1990s trade liberalization we document how workers and regional labor markets adjust to trade induced changes in local labor demand examining various adjustment margins including earnings and wage changes interregional migration shifts between tradable and nontradable employment and shifts between formal employment informal employment and non employment our results provide insight into the regional labor market effects of trade and have important implications for policies that address informal employment and that assist trade displaced workers