uncertainty investment and industry evolution we study the effects of aggregate and idiosyncratic uncertainty on the entry of firms total investment and prices in a competitive industry with irreversible investment we first use standard dynamic programming methods to determine firms entry decisions and we describe the resulting industry equilibrium and its characteristics emphasizing the effects of different sources of uncertainty we then show how the conditional distribution of prices can be used as an alternative means of determining and understanding the behavior of firms and the resulting industry equilibrium finally we use four digit u s manufacturing data to examine some implications of the model

how does advertising depend on competition evidence from u s brewing the relationship between market structure and advertising has been extensively studied but has generated sharply opposing theoretical predictions as well as inconclusive empirical findings likely because of severe endogeneity concerns we exploit the 2008 merger of miller and coors in the u s brewing industry to examine how changes in local concentration affect firms advertising behavior well established regional preferences over beer brands and the sharp increase in concentration from the merger make this an excellent setting to analyze this question we find a significant positive effect of local market concentration on advertising expenditures a 100 point increase in the herfindahl hirschmann index measure of concentration increases advertising per capita by about 5 our findings shed light on how and when firms choose to deploy advertising the online appendix is available at https doi org 10 1287 mnsc 2017 2889 this paper was accepted by eric anderson marketing

does intellectual property restrict output an analysis of pharmaceutical markets abstract standard analysis of intellectual property focuses on the balance between incentives for research and the welfare costs of restraining output through monopoly pricing we present evidence from the pharmaceutical industry that output often fails to rise after patent expirations patents restrict output by allowing monopoly pricing but may also boost output and welfare by improving incentives for marketing a form of nonprice competition we analyze how nonprice factors such as marketing mitigate and even offset the costs of monopoly associated with intellectual property empirical analysis of pharmaceutical patents suggests that in the short run patent expirations reduce output and consumer welfare by decreasing marketing in the long run patent expirations benefit consumers but by 30 percent less than would be implied by the reduction in price alone focusing only on the pricing issues of intellectual property may lead to incomplete or even inaccurate conclusions for welfare

consumer response to commodity specific and broad based promotion programs for fruits and vegetables generic promotion activities have traditionally been used for individual agricultural commodities yet there is renewed interest in implementing a mandatory broad based promotion program for all fruits and vegetables here we use data from an experiment that introduce subjects to various promotional efforts for fruits and vegetables to estimate the shift and rotational effects of advertising econometric results indicate that commodity specific promotional efforts may not be effective at increasing demand for fruits and vegetables after controlling for various demographic differences among treatments our results show that consumers valuation of fruits and vegetables was highest among subjects exposed to broad based advertisements copyright 2011 oxford university press

do pharmacists buy bayer informed shoppers and the brand premium we estimate the effect of information and expertise on consumers willingness to pay for national brands in physically homogeneous product categories in a detailed case study of headache remedies we find that more informed or expert consumers are less likely to pay extra to buy national brands with pharmacists choosing them over store brands only 9 percent of the time compared to 26 percent of the time for the average consumer in a similar case study of pantry staples such as salt and sugar we show that chefs devote 12 percentage points less of their purchases to national brands than demographically similar nonchefs we extend our analysis to cover 50 retail health categories and 241 food and drink categories the results suggest that misinformation and related consumer mistakes explain a sizable share of the brand premium for health products and a much smaller share for most food and drink products we tie our estimates together using a stylized model of demand and pricing

on the simple economics of advertising marketing and product design we propose a framework for analyzing transformations of demand such transformations frequently stem from changes in the dispersion of consumers valuations which lead to rotations of the demand curve in many settings profits are a u shaped function of dispersion high dispersion is complemented by niche production and low dispersion is complemented by mass market supply we investigate numerous applications including product design advertising marketing and sales advice and the construction of quality differentiated product lines we also suggest a new taxonomy of advertising distinguishing between hype which shifts demand and real information which rotates demand

the identification of monetary policy disturbances explaining the liquidity puzzle abstract this paper examines recent work on the identification of monetary policy disturbances its main finding is that the empirical anomalies found in the literature reflect a failure to properly address the federal reserve s policy of accommodating reserve demand shocks a new method of identifying monetary policy using nonborrowed reserves is proposed using this specification policy has a strong persistent liquidity effect regardless of subsample policy granger causes output even in the presence of interest rates explaining approximately 49 of the variance in output at a two year horizon and the residual explanatory power of interest rates for output is negligible

beggar thy neighbor advertising theory and application to generic commodity promotion programs profits from generic advertising by a producer group often come partly at the expense of producers of closely related commodities the resulting tendency toward excessive advertising is exacerbated by check off funding to analyze this beggar thy neighbor behavior we compare a scenario where different producer groups cooperate and choose their advertising expenditures jointly to maximize the sum of profits across the groups and a scenario where they optimize independently in an illustrative example using 1998 data for u s beef and pork the noncooperatively chosen expenditure on beef and pork advertising is more than three times the cooperative optimum copyright 2001 oxford university press

information and subsidies complements or substitutes abstract does providing information about a product influence the impact of price subsidies on purchases this question is particularly relevant for health products in developing countries where both informational campaigns and price subsidies are common policy instruments we conduct a field experiment in zambia and find that providing information about a new version of a product significantly increases the impact of price subsidies on take up taken alone the information manipulation has no significant impact on demand while the price subsidy substantially increases demand however the evaluation of either intervention in isolation fails to capture the significant complementarity between the two

interpreting the macroeconomic time series facts the effects of monetary policy existing theory and evidence on the effects of monetary policy are reviewed substantial room for disagreement among economists remains new evidence based on multivariate time series studies of several countries is presented while certain patterns in the data consistent with effective monetary policy are strikingly similar across countries others particularly the tendency of interest rate increases to predict high inflation are harder to reconcile with effective monetary policy

research note additional learning and implications on the role of informative advertising observers argue that evidence for the persuasive role of advertising comes from competitive categories where increases in advertising lead to higher average prices conversely others claim that advertising serves a purely informational role here higher levels of advertising lead to better informed consumers and this should increase competition and stimulate lower prices the objective of this study is to neither confirm nor refute either of these perspectives it is rather to show that increases in informative advertisingalone can lead to both higher or lower prices i further show that the direction of this relationship depends on the level of differentiation between competing firms similar to grossman and shapiro 1984 i examine conditions where the differences between competing products are small but i also examine conditions where the differences are significant the role of advertising is to inform consumers about individual products and higher advertising for a product means that more of the potential market knows about it higher levels of advertising increase the relative importance of fully informed consumers compared to partially informed consumers this dynamic is the basis for explaining why informative advertising can push prices either up or down in a uniformly distributed spatial market

seasonality and the effect of advertising on price does advertising make markets more or less competitive this paper lays out an econometric strategy for estimating the effect of advertising on prices that exploits seasonal demand and imperfect targeting of consumers we find mostly negligible effects of advertising on prices at monthly frequency among the 35 of 131 product categories with sufficient advertising seasonality to justify second stage estimation only nine have a significant effect and those are typically small this finding is essentially the result of the much greater seasonality in advertising than price

market concentration macroeconomic uncertainty and monetary policy abstract this paper studies the effect of market structure and macroeconomic uncertainty on the transmission of monetary policy we motivate our analysis with a simple model which predicts that 1 investment and production in more concentrated sectors are more affected by demand shocks and 2 high uncertainty makes investment and production more sensitive to demand shocks the empirical analysis estimates the effect of monetary shocks on sectoral output for different sectors in the us using a structural vector autoregressive var approach the results are generally consistent with the theoretical predictions

entrepreneurship social mobility and income redistribution in south india development economists have been preoccupied with the problem of increasing the size of the gnp pie to the relative neglect of its distribution despite the recent disenchantment with the viewpoint that all classes share in the benefits of industrial growth empirical data on the distribution of income business opportunity and economic power are in short supply many of the studies on entrepreneurship and economic development when they are not apologetics for ruthless capitalist exploitation as paul baran suggests extol the achievements of the capitalist entrepreneur without examining class origins and monopoly advantage joseph schumpeter sees entrepreneurs irrespective of class origin as heroic figures with the dream and will to found a private kingdom to conquer adversity to achieve success for its own sake and to experience the joy of creation for gustav papanek 1967 the private entrepreneur who is frugal diligent far sighted remarkably able and willing to take political risks is in large part responsible for the success of pakistan in achieving rapid industrialization

environment versus growth a criticism of degrowth and a plea for a growth in recent debates on environmental problems and policies the strategy of degrowth has appeared as an alternative to the paradigm of economic growth this new notion is critically evaluated by considering five common interpretations of it one conclusion is that these multiple interpretations make it an ambiguous and rather confusing concept another is that degrowth may not be an effective let alone an efficient strategy to reduce environmental pressure it is subsequently argued that a growth i e being indifferent about growth is a more logical social aim to substitute for the current goal of economic growth given that gdp per capita is a very imperfect indicator of social welfare in addition focusing ex ante on public policy is considered to be a strategy which ultimately is more likely to obtain the necessary democratic political support than an ex ante explicit degrowth strategy in line with this a policy package is proposed which consists of six elements some of which relate to concerns raised by degrowth supporters

credence goods misleading labels and quality differentiation due to differences in information disclosure mechanisms consumer misinformation about the quality of many credence goods is more endemic at intermediate levels of the quality spectrum rather than at the extremes using an oligopoly model of vertical product differentiation we examine how consumers overestimation of the quality of intermediate quality products affects firms incentives to improve product quality the firms non cooperatively choose the quality of their product before choosing its price or quantity irrespective of the nature of second stage competition bertrand or cournot we find that quality overestimation by consumers increases profit of the intermediate quality firm and motivates it to raise its product s quality in response the high quality firm improves its product quality even further but ends up with lower profit overall average quality of the vertically differentiated product improves which raises consumer surplus social welfare increases when the firms compete in prices but falls when they compete in quantities

quantity restrictions on advertising commercial media bias and welfare abstract we study the welfare effect of a quantity restriction on advertising in free to air television and other advertising financed media in the presence of commercial media bias broadcasters face a trade off between increasing the number of viewers by sending content that is highly valued by viewers and increasing the price of advertising by choosing advertiser friendly content a cap on advertising drives the per viewer price of ads up thus content improves for viewers therefore the cap can be welfare enhancing even when viewers are not ad averse competition among broadcasters makes it more likely that a cap on advertising improves welfare thus there is a complementarity between regulation and competition on this market we also show that a tax on advertising revenues has quite different effects than a cap on advertising quantity

incumbency advantage and political campaign spending limits abstract this paper presents a model which captures the three main arguments for and against campaign spending limits campaign spending limits are purported to restrict the incumbent s ability to exploit his fundraising advantage in contrast to conventional wisdom a ceiling increases the incumbent s probability of victory regardless of the candidates relative fundraising abilities as long as the challenger is not more effective in campaign spending if the challenger is more effective in campaign spending ceilings have a non monotonic effect when the incumbent enjoys a mild initial voter disposition advantage a moderate ceiling decreases the incumbent s probability of victory but further restricting the limit favors the incumbent irrespective of incumbency status the marginal benefit to quality decreases with a more restrictive cap in an open seat contest a more restrictive limit improves the electoral prospects of the superior quality candidate stricter ceilings may lead to the unintended consequence of increased expected spending

rationing rules and bertrand edgeworth equilibria in large markets abstract in a market with concave downward sloping demand and symmetric firms which compete in prices with constant marginal costs and capacity limits it is shown that the supports of the symmetric mixed strategy nash equilibria converge to the unique competitive price provided that unsatisfied demand is allocated according to the surplus maximizing rationing rule

the effects of banning advertising in junk food markets we develop a structural model to analyze the eects of banning advertising on market equilibria and welfare in junk food markets we consider the impact on demand and prices and show how to quantify welfare eects when advertising might lead consumers to take decisions that are inconsistent with their underlying preferences we use transaction level data on the potato chips market and nd that banning advertising leads to a direct reduction in demand but also toughens price competition leading to lower prices and increased demand welfare increases as consumers benet from no longer making distorted

a simple theory of advertising as a good or bad our analysis treats advertisements and the goods advertised as complements in stable metautility functions and generates new results for advertising by building on and extending the general analysis of complements by assimilating the theory of advertising into the theory of complements we avoid the special approaches to advertising found in many studies that place obstacles in the way of understanding the effects of advertising we also use this approach to evaluate advertising from a welfare perspective whether there is excessive or too little advertising depends on several variables the effects on consumer utility the degree of competition in the market for advertised goods the induced changes in prices and outputs of advertised goods and whether advertising is sold to consumers

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

advertising expenditure and consumer prices this paper studies the effect of a change in the marginal costs of advertising on advertising expenditures of firms and on consumer prices i make use of a policy change in austria that involved an increase of the taxation of advertising in parts of the country and a simultaneous decrease in other parts i show that advertising expenditures of firms move quickly in the opposite direction of the marginal costs of advertising consumer prices increase with advertising in some industries and decrease in others this effect correlates with informational differences in advertisements across industries

a cue theory of consumption psychological experiments demonstrate that repeated pairings of a cue and a consumption good eventually create cue based complementarities the presence of the cue raises the marginal utility derived from consumption in this paper such dynamic preferences are embedded in a rational choice model behavior that arises from this model is characterized by endogenous cue sensitivities costly cue management commitment and cue based spikes in impatience the model is used to understand addictive habit forming behaviors and marketing the model explains why preferences change rapidly from moment to moment why temptations should sometimes be avoided and how firms package and position goods

innocuous minimum quality standards abstract the present note shows that innocuous minimum quality standards namely below the lowest quality level in a market may have effects on equilibrium outcomes such a mqs reduces the incentive to invest in r d by the quality leading firm

option exercise games an application to the equilibrium investment strategies of firms under the standard real options approach to investment under uncertainty agents formulate optimal exercise strategies in isolation and ignore competitive interactions however in many real world asset markets exercise strategies cannot be determined separately but must be formed as part of a strategic equilibrium this article provides a tractable approach for deriving equilibrium investment strategies in a continuous time cournot nash framework the impact of competition on exercise strategies is dramatic for example while standard real options models emphasize that a valuable option to wait leads firms to invest only at large positive net present values the impact of competition drastically erodes the value of the option to wait and leads to investment at very near the zero net present value threshold copyright 2002 oxford university press

investment in competitive equilibrium the optimality of myopic behavior there is an extensive literature on the optimal irreversible investment strategy of a solitary firm facing an exogenous price process this paper shows that the investment strategies that this literature derives may be optimal in competitive equilibrium even though the price process is now endogenous this provides a simple means for computing equilibrium investment strategies

on the sign of the investment uncertainty relationship understanding the effects of uncertainty over any decision variable has fascinated economists for a long time risk aversion and incomplete markets are likely to make the investment uncertainty relationship negative e g roger craine 1989 joseph zeira 1989 what happens in the absence of risk aversion and incomplete markets is however ambiguous richard hartman 1972 and andrew b abel 1983 1984 1985 found that in the presence of symmetric convex costs of adjustment mean preserving increases in price uncertainty raise investment of a competitive firm as long as the profit function is convex in prices on the other hand the recent literature on irreversible investment e g robert s pindyck 1988 giuseppe bertola 1988 has shown that increases in uncertainty lower investment all these results have been derived under either risk neutrality or complete markets intuition suggests that the explanation for such a difference lies with the asymmetric nature of adjustment costs in the irreversible investment case as compared with the symmetry of the adjustment cost mechanisms proposed by abel and hartman although this intuition is confirmed in this paper asymmetric adjustment costs are shown not to be sufficient to explain why the results differ in fact a more hidden but at least as important difference between these two literatures is that the former assumes perfect competition and constant returns to scale whereas the latter assumes either imperfect competition or decreasing returns to scale or both 2 the purpose of this paper is to highlight the role of the decreasing marginal return to capital assumption due to either imperfect competition or decreasing returns to scale or both in determining the effects of adjustment cost asymmetries on the sign of the response of investment to changes in uncertainty under risk neutrality for this the paper develops a simple model with a cost of adjustment mechanism general enough to consider both symmetric convexity and irreversibility as special cases one of the most important findings is the lack of robustness of the negative relationship between investment and uncertainty under asymmetric adjustment costs3 to changes in the degree of competition in fact when firms are nearly competitive the conclusion of hartman and of abel holds no matter how asymmetric adjustment costs are studying adjustment cost mechanisms has a central role in understanding the dynamics of investment and its business cycle implications but conclusive results about the sign of the instantaneous relationship between uncertainty and investment should not be department of economics columbia university new york ny 10027 i am grateful to giuseppe bertola prajit dutta glen hubbard anil kashyap richard lyons and the referees for their useful comments 1the financial literature on investment has considered risk aversion through a premium in the discount rate determined by the capm capital asset pricing model intertemporal capm or consumption capm however often this discount rate is left unchanged when studying the response of investment to uncertainty changes e g pindyck 1988 pp 974 5 thereby omitting the effect of changes in uncertainty on investment due to risk aversion and incomplete markets 2in the typical version of the irreversible investment problem there is no cost of upward adjustments thus imperfect competition and or decreasing returns to scale are required to bound the size of the firm 3in this paper asymmetric adjustment cost refers to the case in which it is more expensive to adjust downward than upward certainly the opposite case is a trivial extension of the case studied in this paper

the charitable activities of terrorist organizations violent groups sometimes invest significant resources in social work notably in the form of charities and ngos the present paper models a terrorist group s charities as a means to advertise its cause in order to raise popular support the analysis explains how different types of organizations arise in equilibrium depending on government policies then the interaction between a purely terrorist group and an independent local ngo is examined it is shown that a purely terrorist group always invests in more attacks than an integrated terrorist charity organization furthermore the latter may have more ngo activity than a separate local ngo

generic product advertising spillovers and market concentration we examine the decision to advertise a homogenous good we show that the likelihood of inefficiently low advertising rests heavily on how one models the mechanism by which advertising affects demand regardless of this mechanism however there is always a lower bound of concentration below which no advertising occurs even when welfare enhancing in such cases mandatory programs will raise welfare if they induce entry although producer surplus may decline our model also provides an explanation for the stylized fact that advertising intensity first rises and then falls as concentration increases copyright 2008 oxford university press

an introduction to applicable game theory this paper offers an introduction to game theory for applied economists i try to give simple definitions and intuitive examples of the basic kinds of games and their solution concepts there are four kinds of games static or dynamic and complete or incomplete information complete information means there is no private information the corresponding solution concepts are nash equilibrium in static games of complete information backwards induction or subgame perfect nash equilibrium in dynamic games of complete information bayesian nash equilibrium in static games with incomplete information and perfect bayesian or sequential equilibrium in dynamic games with incomplete information the main theme of the paper is that these solution concepts are closely linked as we consider progressively richer games we progressively strengthen the solution concept to rule out implausible equilibria in the richer games that would survive if we applied solution concepts available for simpler games in each case the stronger solution concept differs from the weaker concept only for the richer games not for the simpler games

credit market imperfections and the heterogeneous response of firms to monetary shocks this paper assesses the bank lending channel interpretation of evidence on the heterogeneous response of firms to monetary shocks to do so the author develops a quantitative general equilibrium model of the bank lending channel with imperfect credit markets the calibrated model s steady state supports a common identification strategy adopted in the literature small firms are credit constrained and large firms are not for some parameter values the model reproduces the cyclical observations viewed as supporting the lending view of the monetary transmission mechanism and for others it does not the parameter values consistent with the lending view appear to be implausible

interest rates and the channels of monetary transmission some sectoral estimates abstract we estimate a small sectoral var model of the uk macroeconomy this model is then used to simulate the effects of an exogenous monetary policy shock upon asset prices bank balance sheet variables and final target variables activity and prices for the personal and corporate sectors significant sectoral differences are found among the channels of monetary transmission in addition the use of sectoral data facilitates the identification of distinct money and credit channels in the transmission of monetary policy these results contrast with the ambiguous findings on the roles of money and credit in the literature to date

informing transforming and persuading disentangling the multiple effects of advertising on brand choice decisions prior behavioral research has suggested that advertising can influence a consumer s quality evaluation through informative and transformative effects the informative effect acts directly to inform a consumer of product attributes and hence shapes her evaluations of brand quality the transformative effect affects the consumer s evaluation of brand quality by enhancing her assessment of her subsequent consumption experience in addition advertising may influence a consumer s utility directly even without providing any explicit information this is the persuasive effect in this paper we propose a framework that formally models the processes through which all three effects of advertisements impact consumers brand evaluations and their subsequent brand choice decisions in particular we model source credibility confirmatory bias and bounded rationality on the part of consumers by appropriately modifying the standard bayesian learning approach our model conforms closely to prior behavioral literature and the experimental findings therein in our empirical analysis we get significant estimates of both informative and transformative effects across brands we find interesting temporal patterns across the effects for instance the importance of transformative effects seem to grow over time while that of informative effects diminishes finally we conduct policy experiments to examine the impact of increased ad intensity on advertising effects as well as the role played by consumption ambiguity

choice set heterogeneity and the role of advertising an analysis with micro and macro data abstract the authors show how to use microlevel survey data from a tracking study on brand awareness in conjunction with data on sales and advertising expenditures to improve the specification estimation and interpretation of aggregate discrete choice models of demand in a departure from the commonly made full information assumption they incorporate limited information in the form of choice sets to reflect that consumers may not be aware of all available brands at purchase time they find that both the estimated brand constants and the price coefficient are biased downward when consumer heterogeneity in choice sets is ignored these biased estimates can lead firms to make costly price setting mistakes in addition the tracking data enable the authors to identify separately two processes by which advertising influences market shares they find that advertising has a direct effect on brand awareness inclusion in choice set in addition to its effect on consumer preferences increase in utility this

what do we know about investment under uncertainty recent theoretical developments relating to investment under uncertainty have highlighted the importance of irreversibility for the timing of investment expenditures and their expected returns this has subsequently stimulated a growing empirical literature which examines uncertainty and threshold effects on investment behaviour this paper presents a review of this literature a variety of methods have been used to investigate the empirical implication of irreversibility in investment the majority focusing on the relationship between investment flows and proxy measures of uncertainty a general conclusion is that increased uncertainty at both aggregate and disaggregate levels leads to lower investment rates this suggests that there is an irreversibility effect under which greater uncertainty raises the value of the call option to delay a commitment to investment this effect appears to dominate any positive impact on investment arising from the fact that greater uncertability under certain circumstances increases the marginal profitability of capital the methods used raise a number of issues which call into question the reliability of the findings and these are addressed in the paper however if such irreversibility effects are present then their omission from traditional investment models casts doubt on the efficacy of such specifications jel classification d81 d92 e22

dynamics of retail advertising evidence from a field experiment we use a controlled field experiment to investigate the dynamic effects of retail advertising the experimental design overcomes limitations hindering previous investigations of this issue our study uncovers dynamic advertising effects that have not been considered in previous literature we find that current advertising does affect future sales but surprisingly the effect is not always positive for the firm s best customers the long run outcome may be negative this finding reflects two competing effects brand switching and intertemporal substitution we also find evidence of cross channel substitution with the firm s best customers switching demand to the ordering channel that corresponds to the advertising jel l2 l81 m3 a firm s current advertising is generally associated with an increase in its sales but this effect is generally short lived

a tear in the iron curtain the impact of western television on consumption behavior this paper examines the impact of exposure to foreign media on the economic behavior of agents in a totalitarian regime we study private consumption choices focusing on former east germany where differential access to western television was determined by geographic features using data collected after the transition to a market economy we find no evidence of a significant impact of previous exposure to western television on aggregate consumption levels however exposure to western broadcasts affects the composition of consumption biasing choices in favor of categories of goods with high intensity of pre reunification advertisement the effects vanish by 1998

pure strategy nash equilibria in an advertising game with interference abstract two manufacturers produce substitutable goods for a homogeneous market the advertising efforts of the two manufacturers determine the demand for the goods and interfere negatively with each other the demand of each good is a piecewise linear function of the product goodwill and the latter is a linear function of advertising efforts in a game with two competing profit maximizing manufacturers who have access to a set of several advertising media the pure strategy nash equilibria are characterized and their existence is shown

games with incomplete information a simplified exposition with inventory management applications abstract in most existing literature in supply chain management it is assumed that the players possess complete information about the game i e the players payoff objective functions are assumed to be common knowledge for static and dynamic games with complete information the nash equilibrium and subgame perfect equilibrium are the standard solution concepts respectively for static and dynamic games with incomplete information the bayesian nash equilibrium and perfect bayesian equilibrium respectively are used as solution concepts after presenting a brief review of the static and dynamic games under complete information the application of these two games in inventory management is illustrated by using a single period stochastic inventory problem with two competing newsvendors next we illustrate the bayesian nash and perfect bayesian equilibrium solution concepts for the static and dynamic games under incomplete information with two competing newsvendors the expository nature of our paper may help researchers in inventory supply chain management gain easy access to the complicated notions related to the games played under incomplete information

investment and demand uncertainty this paper investigates the effects of uncertainty on the investment decisions of a sample of italian manufacturing firms using information on the subjective probability distribution of future demand for firms products according to the entrepreneurs the results support the view that uncertainty weakens the response of investment to demand thus slowing down capital accumulation consistent with the predictions of the theory there is considerable heterogeneity in the effect of uncertainty on investment it is stronger for firms that cannot easily reverse investment decisions and for those with substantial market power we show that the negative effect of uncertainty on investment cannot be explained by uncertainty proxying for liquidity constraints

appropriating signs and meaning the elusive economics of trademark this paper deals with economic analysis of trademark its presence in markets is originally connected with the problem of information asymmetries and the need to provide information for assisting exchanges so as to avert the market failure brought about by adverse selection however this information conveying function is also accompanied by a differentiation effect arising from the power of persuasion that signs can exert on individuals the exploitation of differentiation has given rise to the practice of branding which ties markets and consumption to the realms of meaning and experience branding is so all pervasive in today s economy as to have somehow transfigured it so that the role of persuasion is now pre eminent nonetheless the mainstream economic theory tends to resist acknowledging this change which would to a large extent call into question well established hypotheses and theoretical tools the general response has therefore been to assume that the informational role of trademark predominates and to use this hypothesis to construct models welfare evaluations and policy prescriptions that bear little or no relation to the actual markets the opposing approach in the shadow of the nelson s and arrow s seminal papers on economics of information is recognising the idiosyncratic character of information and therefore drawing conclusions and devising solutions that while still based upon the welfare criterion also incorporate a wider awareness and a deeper representation of the scenario under study the present work attempts to move in this direction showing how different disciplines can provide some key epistemological tools for enabling economists to effectively evaluate the welfare outcomes of the introduction and progressive alteration of a particular intellectual property right within the realm of signs and meanings

gary becker as teacher this paper looks at the work of gary s becker american economist professor of sociology friend and colleague of kevin m murphy murphy discusses the traditional approach of becker s teaching and ideas as they were expressed through his wealth of content and style in course design his discussions on the role of preferences technology and constraints as they influence household production and his emphasis on the importance of markets and desire for more murphy recognizes becker s teaching style as groundbreaking unapologetic and pure economics

an inverse economic lot sizing approach to eliciting supplier cost parameters recent literature on supply chain coordination offers a wide range of game theoretic and optimization approaches that ensure efficient planning in the supply chain but assume that the involved parties have complete information about each other however in reality complete information is rarely available and those models alone do not present any incentive for the parties to reveal their private information e g the cost parameters that they use when solving their planning problems this paper proposes an inverse lot sizing model for eliciting the cost parameters of a supplier from historic demand vs optimal delivery lot size pairs gathered during repeated earlier encounters it is assumed that the supplier solves a single item multi period uncapacitated lot sizing problem with backlogs to optimality to calculate its lot sizes and the buyer is aware of this fact the inverse lot sizing problem is reformulated to an inverse shortest path problem which is in turn solved as a linear program this model is used to compute the ratios of the supplier s cost parameters i e the setup the holding and the backlog cost parameters consistent with all the historic samples the elicited cost parameters can be used as input for various game theoretic or bilevel optimization models for supply chain coordination computational experiments on randomly generated problem instances indicate that the approach is very efficient in predicting future supplier actions from the historic records 2013 elsevier b v all rights reserved

irreversible investment with price ceilings a model of irreversible investment in a competitive industry under demand uncertainty is developed in the absence of restrictions investment by itself will keep the price from rising above a natural ceiling that exceeds the long run average cost by an option value factor when a lower ceiling is imposed investment is triggered only by the observation of an even higher shadow price as the imposed ceiling is reduced to the long run average cost this shadow price goes to infinity and investment ceases completely because investment is depressed a tighter price ceiling generally leads to a higher long run average price

how are preferences revealed revealed preferences are tastes that rationalize an economic agent s observed actions normative preferences represent the agent s actual interests it sometimes makes sense to assume that revealed preferences are identical to normative preferences but there are many cases where this assumption is violated we identify five factors that increase the likelihood of a disparity between revealed preferences and normative preferences passive choice complexity limited personal experience third party marketing and intertemporal choice we then discuss six approaches that jointly contribute to the identification of normative preferences structural estimation active decisions asymptotic choice aggregated revealed preferences reported preferences and informed preferences each of these approaches uses consumer behavior to infer some property of normative preferences without equating revealed and normative preferences we illustrate these issues with evidence from savings and investment outcomes

a realistic model for official interest rate movements and their consequences this article extends the vector autoregression var methodology to examine the consequences of monetary policy decisions by considering two types of nonlinearities in the determination of official interest rates 1 the asymmetry related to the different nature of the discrete and infrequent positive and negative interest rate movements determined by central bankers and 2 the convexity in the transmission of policy shocks induced by the nonnegativity constraint in interest rates for the uk we find some evidence of both types of asymmetries in the us responses to unexpected interest rate shocks are far more symmetric results highlight the importance of considering all types of asymmetries when studying monetary transmission

environmental policy when pollutive consumption is sensitive to advertising norms versus status a theoretical model is developed to analyse optimal environmental policy when consumer preferences are endogenous it captures that pollutive consumption is sensitive to consumption by others and commercial advertising this is conceptualized through a consumption norm an increase in this norm means that consumers will become dissatisfied with a given consumption level and try to raise it which will cause an increase in pollution the model is particularly relevant for the study of conspicuous consumption which generally is subject to concentrated advertising efforts while it generates considerable pollution the model can accommodate the cases of an externality created by advertising being positive or negative we also show that using different functional specifications for the norm function one can address either conformity or status seeking we derive optimal rules for a pollution tax a subsidy or tax on advertising and information provision by the government the results not only contribute to more realism in environmental policy theory but also extend public policy with new instruments

aggregate uncertainty investment and asymmetric adjustment in the uk manufacturing sector theory suggests that the level of uncertainty facing firms should affect both the rate of adjustment to and the steady state level of investment although there is ambiguity about the sign of the effect a non linear model of investment behaviour incorporating time varying adjustment speeds with threshold effects is estimated for the uk manufacturing sector the most general non linear specification is found to be most congruent with the data uncertainty has a large and significant effect on both levels and rates of adjustment

advertising price and welfare evidence from the u s brewing industry the welfare effect of advertising has been a subject of controversy among economists for some time one obvious concern is simply the cost of advertising in 1990 for example americans spent 130 1 billion on advertising to put this figure into perspective this amounted to 523 per capita 2 35 percent of gross national product and roughly 80 percent of the national deficit 1 much of the early debate regarding the social desirability of advertising stems from different preconceptions regarding its purpose 13 14 8 49 for example according to the kaldor 29 hypothesis advertising is primarily persuasive or deceptive in nature it changes consumer preferences creates brand loyalty and persuades consumers to favor commodities that they did not previously desire an opinion survey by bauer and greyser 5 indicates that consumers believe that much of advertising is persuasive and greyser and reece 27 158 find that 85 percent of the over 2 700 harvard business review subscribers surveyed believe that advertising persuades people to buy things they do not need if advertising is purely deceptive then it can be classified as a bad and reduces welfare