real rigidities and the non neutrality of money rigidities in real prices are not sufficient to create rigidities in nominal prices and real effects of nominal shocks and by themselves small frictions in nominal adjustment such as costs of changing prices create only small non neutralities but this paper shows that substantial nominal rigidity can arise from a combination of real rigidities and small nominal frictions the paper shows the connection between real and nominal rigidity given the presence of nominal frictions both in general and for two specific sources of real rigidity one arising from goods market imperfections and the other from labour market imperfections

optimal monetary policy responses to relative price changes abstract an optimizing model with a flexible price sector and a sticky price sector is presented to analyze the effects of relative price changes on inflation fluctuations the relative price of the flexible price good represents a shift parameter of the new keynesian phillips curve the optimal monetary policy is to target sticky price inflation rather than a broad inflation measure although stabilizing the relative price around its efficient value is one of the appropriate goals of the central bank stabilizing sticky price inflation is sufficient for achieving this goal an optimal monetary policy for a small open economy is also discussed

the timing and magnitude of retail store markdowns evidence from weekends and holidays we examine daily prices of eight goods at seventeen retail stores collected in ann arbor michigan over a four month period from november 1 to february 28 we focus on weekly and seasonal price patterns and on the frequency of price markdowns or sales there were frequent markdowns in the intensive shopping period prior to christmas and a tendency for such sales to occur on weekends we interpret these findings as evidence that a significant number of markdowns are timed to occur when shopping intensity is exogenously high we complement the imperfect information based motives for sales in the literature by contributing an additional element based on the role of bulk shopping and increasing returns in the shopping technology

local resource reallocation considering practical feasibility a centralized data envelopment analysis approach abstractmany studies have addressed resource allocation issues by using centralized data envelopment analysis models however few of them provided a local resource reallocation plan which may be carried out more easily this article proposes two models to get such plans the first one considers an acceptable percentage of changes in resources to ensure practical feasibility the second one further considers a situation where resources can only be allowed to shift within specific units the proposed models are applied to an empirical study based on a hospital system in taiwan to demonstrate the practical feasibility of the suggested plans we compare our reallocation suggestions to a plan that can make the whole system be perfectly efficient the main conclusion is that the plans derived from our models are more practically feasible than that with perfect efficiency

sustainable design of renewable energy supply chains integrated with district heating systems a fuzzy optimization approach abstract this study aims to develop a comprehensive decision model for sustainable design of biomass based renewable energy supply chains and district heating systems dhs with thermal energy storages the model integrates the strategic decisions such as location and capacity selection for energy plants dhs thermal storages and biomass storages with tactical decisions related to biomass production supply and transportation planning inventory management and energy production the main purpose is to find the optimum configuration of the supply chain and dhs to meet the heat demand of a particular locality the model combines cost and service level objectives and accounts for biomass supply material flow capacity demand and technical constraints the problem is formulated as a fuzzy mixed integer linear programming milp model that comprises multiple biomass types and system uncertainties to explore the viability of the proposed model computational experiments are performed on a real world case sensitivity analyses are conducted to examine the impacts of cost and capacity limit of thermal energy storage as well as heat demand on the objective functions and thermal storage capacity the results reveal that the proposed model can effectively be used in practice to assist the decision makers in planning energy production systems in a sustainable and effective manner

monetary policy trend inflation and the great moderation an alternative interpretation with positive trend inflation the taylor principle does not guarantee a determinate equilibrium we provide new theoretical results on determinacy in new keynesian models with positive trend inflation and new empirical findings on the federal reserve s reaction function before and after the volcker disinflation to find that i while the fed likely satisfied the taylor principle before volcker the us economy was still subject to self fulfilling fluctuations in the 1970s ii the us economy switched to determinacy during the volcker disinflation and iii the switch reflected changes in the fed s response to macroeconomic variables and the decline in trend inflation jel e12 e23 e31 e32 e52

spatially distributed production data for supply chain models forecasting with hazardous waste abstract this paper introduces a novel approach to forecasting future commodity production in hundreds of nodes which represents a key input for many applications of supply chain models a mathematical model was proposed to handle the problem of forecasting with spatially distributed and uncertain data it is derived from the principle of regression analysis and extended by a data reconciliation technique additional areal constraints guarantee mass conservation in a tree like structure which reflects the organisational arrangement of an investigated region the proposed model was tested through a case study where future production of hazardous waste suitable for thermal treatment was forecasted in 206 base nodes 14 superior nodes and one apex based on an extensive investigation of historical data it was revealed that extrapolations carried out at different levels of the hierarchical organisational structure lead to inconsistent forecasts the differences between forecasts reached up to 50 in addition to this mass conservation was violated significant corrections were performed by computations utilizing the formulated model the corrections ranged from between 0 and 12 for 90 of nodes there were 17 nodes where massive adjustments of up to 30 were inevitable

fuzzy input output model for optimizing eco industrial supply chains under water footprint constraints global water stress is expected to increase due to population growth economic development and climate change because of this trend there is an increased interest in the water intensity of industrial activities conducted via the product supply chain or within specified geographical boundaries or regions both at the enterprise or regulatory level the total water footprint of economic activities should be evaluated in consideration of local water resource consumption virtual water trade and resource availability as individual entities seek to protect their respective interests the challenge is to optimize inter regional trade of goods with the consideration of the interests of participants in the network this work presents a fuzzy inputeoutput model for optimizing supply chains under water footprint constraints two case studies involving tile manufacturing and biofuel production are considered to demonstrate the use of the model

the inflation persistence of staggered contracts one of the criticisms routinely advanced against models with staggered contracts is their inability to generate inflation persistence this paper finds that staggered contracts a la taylor are in fact capable of reproducing the inflation persistence implied by u s data following fuhrer and moore i capture the moments that the model needs to replicate by using the correlograms from a small vector autoregression var i estimate the contract parameters using the method of maximum likelihood the correlogram of inflation for the contract model is very close to the correlogram from the var by the same metric taylor contracts fare poorly in reproducing the comovements of inflation and output

sectoral price rigidity and aggregate dynamics abstract this paper studies the business cycle implications of sectoral heterogeneity in price rigidity using a highly disaggregated multi sector model the model is estimated by the simulated method of moments using a mix of aggregate and sectoral u s data the frequencies of price changes implied by our estimates are consistent with those reported in micro based studies we show that heterogeneity in price rigidity is the primary factor explaining the heterogeneity in the responses of sectoral output and inflation to a monetary policy shock we also find that ignoring sectoral heterogeneity in price rigidity leads to the mismeasurement of the relative importance of aggregate and sector specific shocks in aggregate and sectoral fluctuations

selection and monetary non neutrality in time dependent pricing models for a given frequency of price adjustment monetary non neutrality is smaller if older prices are disproportionately more likely to change selection for the age of prices provides a complete characterization of price setting frictions in time dependent models selection for older prices is weaker and non neutralities are larger if the hazard function of price adjustment is less strongly increasing selection is weaker if there is heterogeneity in price stickiness finally selection is weaker if durations of price spells are more variable in particular the taylor 1979 model exhibits maximal selection for older prices whereas the calvo 1983 model exhibits no selection

industry performance and structural efficiency measures solutions to problems in firm models abstract it is shown that average unit structural efficiency measures do not measure the level of technical efficiency in a firm model of an industry alternative structural efficiency measures generalized to multiple input and multiple output technologies are presented as a solution to the problem of how to estimate the relative performance of an industry as a whole where reallocation of inputs across firms is not feasible compared to existing measures the proposed measures require additional information therefore the linear programming dea models needed to obtain this information are presented this non parametric approach to relative efficiency measurement is also used to obtain economic efficiency estimates for an industry as a whole without imposing a priori restrictions on the relative input and output weights

sales and monetary policy this paper analyses the efiect of monetary policy in a model where sales occur in equilibrium some consumers are loyal to a particular brand of a good others are bargain hunters as a result producers flnd it optimal to sell their goods at a normal price through some retailers and at a sale price through others the margin of adjusting the amount sold on sale is potentially very important if producers can adjust the fraction sold on sale with sticky prices and wages money is approximately neutral if we ignore the reasons behind sales but that result changes dramatically when we consider that producers optimally choose to sell some of their goods on sale owing to strategic substitutabilities in the sales decision money has strong procyclical efiects

integrated fuzzy multi criteria decision making method and multi objective programming approach for supplier selection and order allocation in a green supply chain abstract an organization s environmental performance is affected by its suppliers environmental performance and selecting green suppliers is a strategic decision in order to be more competitive in today s global market the supplier selection problem involves several quantitative and qualitative criteria in the supplier selection process if suppliers have limited capacity or other constraints it is necessary to determine the best supplier and order quantity of each supplier in this paper we present an integrated approach of fuzzy multi attribute utility theory and multi objective programming for rating and selecting the best green suppliers according to economic and environmental criteria and then allocating the optimum order quantities among them at first the fuzzy analytic hierarchy process and fuzzy technique for order preference by similarity to ideal solution is applied in order to analyze the importance of multiple criteria by incorporating experts opinion and to determine the best green suppliers next multi objective linear programming is used to consider and to formulate various constraints such as quality control capacity and other objectives the objective of the mathematical model is simultaneously to maximize the total value of purchasing and to minimize the total cost of purchasing to handle the subjectivity of decision makers preferences fuzzy logic has been applied the efficiency and application of the proposed approach has been illustrated with a case study in an automobile manufacturing company the obtained results help firms establish a systematic approach for tackling green supplier selection and order allocation problems in a realistic situation finally managerial implications conclusions and directions for additional research are introduced

linear programming models for firm and industry performance programming models of technology are enjoying a revival in several strands of literature one such strand is the growing literature devoted to the assessment of firm performance based on the work of farrell 1957 and the later popularized by charnes cooper and rhodes 1978 under the name of data envelopment analysis dea for an early programming model see boles 1966 a second strand of literature seeks to model the industry production function and is associated with johansen 1972 fbrsund and hjalmarsson 1987 and aigner and chu 1968 a third strand of literature uses programming techniques such as nonparametric tests of regularity conditions in production see afriat 1972 hanoch and rothschild 1972 diewert and parkan 1983 and varian 1984 one of the purposes of this paper is to examine the relationship between the first two areas i e analysis of firm and industry programming models of technology and performance in order to compare the industry and firm models we restate them in a general programming form and ignore issues of functional form examination of these models in primal and dual form reveals that the industry approach constructs technology from firm data but allows hypothetical reallocation of aggregate resources across firms to yield an industry function the firm models also construct technology from the data on all firms in the sample industry but do not allow for reallocation of inputs across firms this suggests a natural hybrid an industry model which allows for both firm specific inputs and inputs which can be reallocated across firms the paper unfolds as follows we begin by presenting a stylized version of the aigner and chu and johansen models of industry production we

a robust fuzzy optimization model for carbon efficient closed loop supply chain network design problem a numerical illustration in electronics industry abstract environmentalism has become an important global issue in the present century during the recent years the closed loop green supply chain management has been increasingly a center of attention as a result of governmental laws and legislations regarding the environmental effects of any activity and the soaring consumers expectations in this study effort has been made to investigate a facility location allocation model for a multi product closed loop green supply chain network consisting of manufacturing remanufacturing and collection inspection centers as well as disposal center and markets to design the network we have proposed a mixed integer linear programming model capable of reducing the network total costs the model has been so developed as to consider such environmental objectives as reducing the rate of carbon dioxide emission in the environment throughout the network in question moreover the model has been developed using a robust fuzzy programming approach to investigate the effects of uncertainties of the variable costs as well as the demand rate on the network design to solve the bi objective programming model use has been made of the e constraint approach and a numerical illustration of copiers industry is used to show the applicability of the proposed optimization model results have revealed that the model is capable of controlling the network uncertainties as a result of which a robustness price will be imposed on the system

a postscript on aggregate farrell efficiencies abstract in this note we derive alternative weighting schemes that complement those of fare and zelenyuk 2003 for consistent aggregation of farrell efficiencies when the technology exhibits global constant returns to scale

five facts about prices a reevaluation of menu cost models are price decreases 3 the frequency of price increases covaries strongly with inflation whereas the frequency of price decreases and the size of price increases and price decreases do not 4 the frequency of price change is highly seasonal it is highest in the first quarter and then declines 5 we find no evidence of upwardsloping hazard functions of price changes for individual products we show that the first second and third facts are consistent with a benchmark menu cost model whereas the fourth and fifth facts are not

time use during the great recession using data from the american time use survey between 2003 and 2010 we document that home production absorbs roughly 30 percent of foregone market work hours at business cycle frequencies leisure absorbs roughly 50 percent of foregone market work hours with sleeping and television watching accounting for most of this increase we document significant increases in time spent on shopping child care education and health job search absorbs between 2 and 6 percent of foregone market work hours we discuss the implications of our results for business cycle models with home production and non separable preferences jel codes d13 e32 j22

the transmission of monetary policy in a multisector economy this article constructs and estimates a sticky price dynamic stochastic general equilibrium model with heterogeneous production sectors firms in different sectors vary in their price rigidity production technology and the combination of material and investment inputs in particular firms buy inputs from all sectors using the actual input output matrix and capital flow table of the u s economy by relaxing the standard assumption of symmetry this model allows idiosyncratic sectoral dynamics in response to monetary policy shocks the model is estimated by the generalized method of moments using sectoral and aggregate u s time series

sticky prices new evidence from retail catalogs this paper presents new results on the size frequency and synchronization of price changes for twelve selected retail goods over the past 35 years three basic facts about the data are uncovered first nominal prices are typically fixed for more than one year although the time between changes is very irregular second prices change more often during periods of high overall inflation third when prices do change the sizes of the changes are widely dispersed both large and small changes occur for the same item and the sizes of these changes do not closely depend on overall inflation

prices are sticky after all abstract economists have interpreted the evidence that prices change every four months as implying that sticky prices cannot be important for monetary transmission theory implies that this interpretation is correct if most price changes are regular but not if a large fraction are temporary as in the data since regular prices are much stickier than temporary ones our models predict that the stickiness of the aggregate price level matches that in a standard calvo model or a standard menu cost model in which micro level prices change about once a year in this sense prices are sticky after all

the cyclicality of sales regular and effective prices business cycle and policy implications author s coibion olivier gorodnichenko yuriy hong gee hee abstract we study the cyclical properties of sales regular price changes and average prices paid by consumers effective prices using data on prices and quantities sold for numerous retailers across many us metropolitan areas inflation in the effective prices paid by consumers declines significantly with higher unemployment while little change occurs in the inflation rate of prices posted by retailers this difference reflects the reallocation of household expenditures across retailers a feature of the data which we document and quantify rather than sales we propose a simple model with household store switching and assess its implications for business cycles and policymakers jel d12 e31 e32 l25 l81

the law of one price in data envelopment analysis restricting weight flexibility across firms abstract the law of one price loop states that all firms face the same prices for their inputs and outputs under market equilibrium taken here as a normative condition for efficiency prices this law has powerful implications for productive efficiency analysis which have remained unexploited thus far this paper shows how loop based weight restrictions can be incorporated in data envelopment analysis dea utilizing the relation between industry level and firm level cost efficiency measures we propose to apply a set of input prices that is common for all firms and that maximizes the cost efficiency of the industry our framework allows for firm specific output weights and for variable returns to scale and preserves the linear programming structure of the standard dea we apply the proposed methodology to the evaluation of the research efficiency of economics departments of dutch universities this application shows that the methodology is computationally tractable for practical efficiency analysis and that it helps in deepening the dea analysis

contract length heterogeneity and the persistence of monetary shocks in a dynamic generalized taylor economy we develop the generalized taylor economy gte in which there are many sectors with overlapping contracts of different lengths in economies with the same average contract length monetary shocks will be more persistent when longer contracts are present using the bils klenow distribution of contract lengths we find that the corresponding gte tracks the u s data well when we choose a gte with the same distribution of completed contract lengths as the calvo the economies behave in a similar manner

sticky price models and durable goods the inclusion of a durable goods sector in sticky price models has strong and unexpected implications even if most prices are flexible a small durable goods sector with sticky prices may be sufficient to make aggregate output react to monetary policy as though most prices were sticky in contrast flexibly priced durables with sufficiently long service lives can undo the implications of standard sticky price models in a limiting case flexibly priced durables cause monetary policy to have no effect on aggregate output our analysis suggests that durable goods prices are the most relevant data for calibrating price rigidity jel e21 e23 e31 e52

state dependent or time dependent pricing does it matter for recent u s inflation in the 1988 2004 micro data collected by the u s bureau of labor statistics for the cpi price changes are frequent every 4 7 months depending on the treatment of sale prices and large in absolute value on the order of 10 the size and timing of price changes varies considerably for a given item but the size and probability of a price change are unrelated to the time since the last price change movements in aggregate inflation reflect movements in the size of price changes rather than the fraction of items changing price due to offsetting movements in the fraction of price increases and decreases neither leading time dependent models taylor or calvo nor 1 st generation state dependent models match all of these facts some 2 nd generation state dependent models however appear broadly consistent with the empirical patterns

sectoral phillips curves and the aggregate phillips curve sector level phillips curves are estimated in french data there is considerable heterogeneity across sectors with vastly different estimates of the backward looking component of inflation and the duration of nominal rigidities a multi sector model of inflation dynamics is calibrated on the basis of these sectoral estimates aggregate inflation simulated on the basis of heterogeneous sectors displays comparable dynamics to actual data a comparison is drawn between the policy trade offs implied by a phillips curve based on macroeconomic estimates vs one based on a model with heterogeneous sectors the difference is sizeable

the optimal inflation rate in new keynesian models should central banks raise their inflation targets in light of the zero lower bound we study the effects of positive steady state inflation in new keynesian models subject to the zero bound on interest rates we derive the utility based welfare loss function taking into account the effects of positive steady state inflation and solve for the optimal level of inflation in the model for plausible calibrations with costly but infrequent episodes at the zero lower bound the optimal inflation rate is low typically less than two percent even after considering a variety of extensions including optimal stabilization policy price indexation endogenous and statedependent price stickiness capital formation model uncertainty and downward nominal wage rigidities on the normative side price level targeting delivers large welfare gains and a very low optimal inflation rate consistent with price stability these results suggest that raising the inflation target is too blunt an instrument to efficiently reduce the severe costs of zero bound episodes

the cross sectional distribution of price stickiness implied by aggregate data we provide evidence on three mechanisms that can reconcile frequent individual price changes with sluggish aggregate price dynamics to that end we estimate a semistructural model that can extract

reference prices costs and nominal rigidities we assess the importance of nominal rigidities using a new weekly scanner dataset we find that nominal rigidities take the form of inertia in reference prices and costst defined as the most common prices and costs within a given quarter reference prices are particularly inertial and have an average duration of roughly one year even though weekly prices change roughly once every two weeks we document the relation between prices and costs and find sharp evidence of state dependence in prices we use a simple model to argue that reference prices and costs are useful statistics for macroeconomic

monetary non neutrality in a multisector menu cost model empirical evidence suggests that as much as one third of the u s business cycle is due to nominal shocks we calibrate a multisector menu cost model using new evidence on the cross sectional distribution of the frequency and size of price changes in the u s economy we augment the model to incorporate intermediate inputs we show that the introduction of heterogeneity in the frequency of price change triples the degree of monetary non neutrality generated by the model we furthermore show that the introduction of intermediate inputs raises the degree of monetary non neutrality by another factor of three without adversely affecting the model s ability to match the large average size of price changes a single sector model with a frequency of price change equal to the median rather than the mean generates monetary non neutrality similar to that in our multisector model our multisector model with intermediate inputs generates variation in real output in response to calibrated aggregate nominal shocks that can account for roughly 23 of the u s business cycle

the rigidity of prices this paper uses evidence on individual transaction prices to analyze price behavior the evidence shows that for many transactions pricesremain rigid for periods exceeding one year the rigidity of price ispositively correlated with industry concentration for several productsthe correlation of price changes across buyers is low the paper alsoinvestigates the relationship between price rigidity price change andthe length of time a buyer and seller have been doing business together the author interprets the evidence as emphasizing the importance of nonprice rationing and the inadequacy of models in whichprice movements alone clear markets copyright 1986 by american economic association

monetary policy when potential output is uncertain understanding the growth gamble of the 1990s abstract t he fed kept interest rates low and essentially unchanged during the late 1990s despite a booming economy and record low unemployment these interest rates were accommodative by historical standards nonetheless inflation remained low how did the fed succeed in sustaining rapid economic growth without fueling inflation and inflationary expectations in retrospect it is evident that the productive capacity of the economy increased yet as events unfolded there was uncertainty about the expansion of the capacity of the economy and therefore about the sustainability of the fed s policy this paper provides an explanation for the success of the fed in accommodating growth with stable inflation in the late 1990s it shows that if the central bank is committed to reverse policy errors it makes because of unwarranted optimism inflation can remain in check even if the central bank keeps interest rates low because of this optimism in particular a price level target which is a simple way to model a commitment to offset errors can serve to anchor inflation even if the public does not share the central bank s optimism about shifts in potential output the paper shows that price level targeting is superior to inflation targeting in a wide range of situations the paper also provides econometric evidence that in contrast to earlier periods the fed has recently put substantial weight on the price level in setting interest rates moreover it shows that cpi announcement surprises lead to reversion in the price level finally it provides textual evidence that alan greenspan puts relatively more weight on the price level than inflation

restricted reallocation of resources abstract this paper investigates restricted reallocation among individual units when the efficiency index is calculated for an aggregated unit in the dea framework moreover we address the question of the optimal reallocation flow the optimal flow of inputs among the individual units subject to given transfer costs restrictions on reallocation can be given by the maximum cost the managers are willing to pay in the framework of full reallocation there is a trade off between the maximum allowed reallocation cost and the highest efficiency the aggregated unit can achieve the final goal is to present a way to generate efficiency gain functions that show this trade off

a hybrid multi stage stochastic programming robust optimization model for maximizing the supply chain of a forest based biomass power plant considering uncertainties electricity generated from forest based biomass is an attractive source of renewable energy however the cost of generating heat and or electricity from it is relatively high due to the low energy density of wood high moisture content and variations in its quality and availability models have been developed to optimize the supply chain and reduce the cost per kilowatt hour generated this paper focuses on incorporating uncertainty in the supply chain of such a model the model considers the tactical supply chain planning of a power plant over a one year time horizon with monthly time steps uncertain parameters which impact the net profit of the power plant include biomass quality namely moisture content and higher heating value and monthly available biomass from different suppliers robust optimization is used to model uncertainty in the quality of biomass then a hybrid multi stage stochastic programming robust optimization model is presented in order to simultaneously include uncertainty in biomass quality and biomass availability it is demonstrated that the hybrid model takes advantage of both modelling approaches to balance the profit estimates and the tractability to various circumstances the model provides solution considering all instances of the uncertain parameters within the defined sets and scenario tree the results revealed a major trade off between profit and range of biomass quality profit decreased by up to 23 when there was 13 variation in moisture content and 5 change in higher heating value the model achieved a biomass purchase cost that was lower than the current commercial costs at the power plant implementing the model could prevent production curtailment and undesirable fluctuation in storage levels which occurred in the past due to variations in biomass availability and quality

solving the puzzles of structural efficiency abstract since the concept of structural efficiency first appeared in farrell farrell m j 1957 the measurement of productive efficiency journal of the royal statistical society series a part iii 120 253 281 attempts have been made to derive measures for the performance of a group of production units often referred to an industry with many firms many empirical studies used the technical efficiency of an average unit to measure the structural efficiency of a group but researchers have been puzzled by the discrepancies between the average of individual efficiency scores and the performance of the group as a whole in this paper we point out that the shadow price model provides a useful framework for understanding the economic meaning of the structural efficiency as well as its components by recognizing these components the puzzles related to the inconsistencies between the individual and group performance can be solved readily

identifying the influences of nominal and real rigidities in aggregate price setting behavior we formulate a generalized price setting framework that incorporates staggered contracts of multiple durations and that enables us to directly identify the influences of nominal vs real rigidities we estimate this framework using macroeconomic data for germany 1975 1998 and for the u s 1983 2003 in each case we find that the data are well characterized by nominal contracts with an average duration of about two to three quarters we also find that new contracts exhibit very low sensitivity to marginal cost corresponding to a relatively high degree of real rigidity finally our results indicate that backward looking price setting behavior such as indexation to lagged inflation is not needed in explaining the aggregate data at least in an environment with a stable monetary policy regime and a transparent and credible inflation objective

optimal sticky prices under rational inattention this paper presents a model in which price setting firms decide what to pay attention to subject to a constraint on information flow when idiosyncratic conditions are more variable or more important than aggregate conditions firms pay more attention to idiosyncratic conditions than to aggregate conditions when we calibrate the model to match the large average absolute size of price changes observed in micro data prices react fast and by large amounts to idiosyncratic shocks but only slowly and by small amounts to nominal shocks nominal shocks have strong and persistent real effects we use the model to investigate how the optimal allocation of attention and the dynamics of prices depend on the firms environment jel e 3 e5 d8

supermarket competition the case of every day low pricing every day low pricing edlp strategy has proved to be a successful innovation resulting in higher profits to supermarkets adopting it in competition with promotional pricing promo conventional wisdom attributes this success either to lower costs or to edlp better serving time constrained consumers while discouraging cherry pickers who seek promotions however it is unclear that such cost savings are being fully realized since edlp stores also engage in price promotions also continued existence of promo stores means that costs are not the only factor and they compete effectively without relying just on the cherry pickers furthermore experimental evidence suggests that a supermarket cannot obtain higher profits by merely setting constant low prices leading to the question exactly what makes edlp successful this question is of particular relevance to both academics and practitioners who have been intrigued by the success of this retailing strategy more generally the retailing issues addressed in this paper the economic analysis of competition and the empirical findings should be of interest to the broader community of researchers and managers we investigate the factors contributing to edlp s success by analyzing the competition between supermarkets through a game theoretic analysis of a market consisting of both time constrained consumers and cherry pickers key features of our model are consumers shop and purchase a basket of goods based on price announcements by stores and rational expectations of unannounced prices stores carry more than one good and compete through prices service convenience and appropriate communication strategies and no exogenous cost asymmetries we derive the conditions under which retailers choosing different strategies edlp and promo is a perfect nash equilibrium our analysis shows that the edlp store s offering of constant every day low prices is an equilibrium outcome endogenously determined successful implementation of the edlp strategy involves communication of relative basket prices implying that merely setting constant low prices is not viable we further demonstrate that while time constrained consumers find every day low prices at edlp attractive and cherry pickers the promotions at promo clientele effects are in fact more complicated specifically in equilibrium the promo store offers a higher service level as desired by time constrained consumers and the edlp store a lower service level in keeping with the needs of cherry pickers this choice of service by the two stores results in a cleaner segmentation of the market the higher relative basket price and service at the promo store results in a larger base of time constrained consumers to shop at the promo store and a larger base of cherry pickers to shop at the edlp store even though some cherry pickers continue to visit the promo store to avail of the price specials in this way our results contradict the conventional wisdom on edlp strategy as being mainly geared towards time constrained consumers finally industry profits are higher in an edlp promo equilibrium than when stores adopt identical strategies our analysis and results also offer a more complete characterization of the edlp and promo strategies indeed we show that edlp and promo strategies are positioning strategies rather than merely pricing strategies with different elements price promotions service and communications while the edlp store uses basket prices to attract both segments the promo store uses service and price specials to compete in the time constrained and cherry picking segment respectively given these different approaches of the two stores the communication strategies of the edlp and the promo stores emphasize these differences as well in this way we show as suggested by corstjens and corstjens 1994 that positioning in a retail context involves developing multidimensional strategies appealing to all segments while each element of the strategy may focus on a different consumer segment this is in contrast to the traditional view of segmentation in which different products in a product line for example are designed to appeal to different segments we complete the analysis by examining the data from the trade press and a survey conducted in a major metropolitan area these data while limited in scope support our theoretical results

consumption versus expenditure previous authors have documented a dramatic decline in food expenditures at the time of retirement we show that this is matched by an equally dramatic rise in time spent shopping for and preparing meals using a novel data set that collects detailed food diaries for a large cross section of u s households we show that neither the quality nor the quantity of food intake deteriorates with retirement status we also show that unemployed households experience a decline in food expenditure and food consumption commensurate with the impact of job displacement on permanent income these results highlight how direct measures of consumption distinguish between anticipated and unanticipated shocks to income whereas measures of expenditures obscure the distinction