competitive coupon targeting with the advent of panel data on household purchase behavior and the development of statistical procedures to utilize this data firms can now target coupons to selected households with considerable accuracy and cost effectiveness in this article we develop an analytical framework to examine the effect of such targeting on firm profits prices and coupon face values we also derive comparative statics on firms optimal mix of offensive and defensive couponing the number of coupons distributed redemption rates face values and incremental sales per redemption among our findings when rival firms can target their coupon promotions at brand switchers the outcome will be a prisoner s dilemma in which the net effect of targeting is simply the cost of distribution plus the discount given to redeemers

product and price competition in a duopoly this paper examines the role of consumer preferences costs and price competition in determining the competitive product strategy of a firm in the model studied here there are two identical firms competing on product quality and price they face consumers who prefer a higher quality product to a lower quality product but differ in how much they are willing to pay for quality the consumers can also choose a substitute if they don t like the product price offerings of the two firms for the firms a higher quality product costs more to produce than a lower quality product the paper shows that the equilibrium strategy for each firm should be to differentiate its product from its competitor with the firm choosing the higher quality choosing the higher margin as well this differentiation however is not efficient that is it is possible to choose two other products and offer them at prices that cover their marginal cost and still satisfy consumers needs better in the aggregate a monopolist by contrast would differentiate his product line efficiently this suggests that cannibalization has different effects on product strategy than competition the paper also shows that if one firm enters the market first then it can defend itself from later entrants and gain a first mover advantage by preempting the most desirable product position

the greenhouse effect damages costs and abatement the buildup of so called greenhouse gases in the atmosphere co2 in particular appears to be having an adverse impact on the global climate this paper briefly reviews current expectations with regard to physical and biological effects their potential costs to society and likely costs of abatement for a worst case scenario it is impossible to assess in economic terms the full range of possible non linear synergistic effects in the most favorable although not necessarily likely case of slow paced climate change however it seems likely that the impacts are within the affordable range at least in the industrialized countries of the world in the third world the notion of affordability is of doubtful relevance making the problem of quantitative evaluation almost impossible we tentatively assess the lower limit of quantifiable climate induced damages at 30 to 35 per ton of co2 equivalent worldwide with the major damages being concentrated in regions most adversely affected by sea level rise the non quantifiable environmental damages are also significant and should by no means be disregarded the costs and benefits of 1 reducing cfc use and 2 reducing fossil fuel consumption as a means of abatement are considered in some detail this strategy has remarkably high indirect benefits in terms of reduced air pollution damage and even direct cost savings to consumers the indirect benefits of reduced air pollution and its associated health and environmental effects from fossil fuel combustion in the industrialized countries range from 20 to 60 per ton of co2 eliminated in addition there is good evidence that modest e g 25 reductions in co2 emissions may be achievable by the u s and by implication for other countries by a combination of increased energy efficiency and restructuring that would permit simultaneous direct economic benefits savings to energy consumers of the order of 50 per ton of co2 saved a higher level of overall emissions reduction possibly approaching 50 could probably be achieved at little or not net cost by taking advantage of these savings we suggest the use of taxes on fossil fuel extraction or a carbon tax as a reasonable way of inducing the structural changes that would be required to achieve significant reduction in energy use and co2 emissions to minimize the economic burden and create a political constituency in support of the approach we suggest the substitution of resource based taxes in general for other types of taxes on labor income real estate or trade that are now the main sources of government revenue while it is conceded that it would be difficult to calculate the optimal tax on extractive resources we do not think this is a necessary prerequisite to policy making in fact we note that the existing tax system has never been optimized according to theoretical principles and is far from optimal by any reasonable criteria

explaining the rain the rise and decline of nations after 25 years in the quarter century since the publication of mancur olson s rise and decline of nations a large literature has evolved testing the central hypothesis regarding olson s thesis on institutional sclerosis these tests have taken the form of both econometric regression analysis involving a sample of various nations and detailed narrative case studies of specific nations tests have appeared in both economics and political science journals as well as in collected volumes and independent books performed primarily by authors from america and europe a review of over 50 separate works reveals that on the whole the theory of institutional sclerosis is generally but certainly not universally supported no systematic bias in favor of or opposition to olson is found to have arisen on the basis of methodology publication outlet or authorship location

energy price shocks and medium term business cycles abstract energy price shocks pose sudden challenges to economies this paper examines how oil price shocks have influenced the u s economy over the last decades and especially focuses on the productivity slowdown in the years following an oil price shock we extend the existing literature by considering medium term business cycles which consist of high frequency components conventional business cycles up to 8 years and medium frequency components 8 50 years we find that the medium frequency consequences of energy price shocks are considerable and explain a significant part of the productivity slowdown

sequential product positioning under differential costs this paper examines the product positioning decisions of firms that enter a market sequentially and that have potentially different cost structures it shows that if the first mover knows the second mover to have a lower production cost it positions away from the most attractive location in the market further the larger the second mover s cost advantage the farther away the first mover positions from the most attractive location the paper also models uncertainty in the first mover s mind about the later entrant s cost structure and shows that an increase in this uncertainty in the sense of mean preserving spread also makes the first mover position farther from the most attractive location in the market overall this paper suggests that unless the first entrant in a market is certain that the later entrant will not have a superior cost structure it may be better off leaving the best position in the market vacant and having a niche or fringe product

testing the implications of the olson hypothesis considerable attention has been paid to the hypothesis advanced by olson that accumulations of interest groups build up over time and retard economic performance most previous tests of this hypothesis have been based on comparisons of growth rates in this paper it is argued that comparisons of income levels yield a superior test strong forms of the olson hypothesis in which shocks such as revolution and war yield positive benefits are rejected using this test

the recent slowdown of productivity growth the slowdown of productivity growth in the developed countries during the seventies will in this paper be viewed as a combined effect of three closely interacting forces i a long term deterioration in the efficiency and flexibility of some basic mechanisms of the economic and political systems of these countries ii the fading away of a number of uniquely favourable circumstances for productivity growth during the fifties and sixties and iii the exposure of these economies to unusually severe macroeconomic disturbances in the seventies careful inspection of time series with attempted modifications for cyclical factors suggests that there was hardly any general slowdown of productivity growth among developed countries before approximately i972 4 1 as we know the situation is radically different since then labour productivity growth per year for the entire national economy gdp per man hour seems to have fallen between the periods i960 73 and i973 9 by about i 2 percentage points in the united states 45 by about 24 percentage points in western europe2 45 and by about 5 9 percentage points in japan 6o table i see also fig i the slowdown was of about the same size in the business and manufacturing sectors see table i to calculate the extent of the slowdown of total factor productivity growth is of course a much more hazardous matter to which i will return later if just the various system changes and the fading away of the uniquely favourable factors had been the dominating forces behind the productivity growth slowdown we would expect the slowdown to have been gradual rather than abrupt as it turned out to be this abruptness as well as its timing makes the dramatic macroeconomic disturbances around i972 4 a prime suspect when looking for the villain behind the productivity growth slowdown indeed it is a basic hypothesis of the paper that these macroeconomic disturbances were not only by themselves strongly unfavourable for productivity growth but that they also revealed and accentuated the gradual deterioration of the

rent seeking distributional coalitions taxes relative prices and economic growth the results clearly indicate that much of the considerable variation in the pace and pattern of economic growth between the various american states is explainable by institutional arrangements amenable to revisions through public policy the findings suggest that long run economic growth would be best served by constraining distributional coalitions be it through constitutional restraints e g balanced budget amendments the item veto statutory changes e g subjecting coalitions like labor unions to the antitrust laws or some other means e g labor and capital fleeing distributional coalitions such as in the movement of workers and plants to nonunion areas

research note consumer addressability and customized pricing the increasing availability of customer information is giving many firms the ability to reach and customize price and other marketing efforts to the tastes of the individual consumer this ability is labeled as consumer addressability consumer addressability through sophisticated databases is particularly important for direct marketing firms catalog retailers such as l l bean and land s end credit card issuing banks and firms in the long distance telephone market we examine the strategic implications of consumer addressability on competition between database direct marketing firms we address questions such as in a competitive environment how should firms invest in addressability will future improvements in the degree of addressability increase or mitigate the intensity of competition between the firms will greater addressability always be beneficial for firms we model competition between two firms in a market where consumers differ on a horizontal attribute of product differentiation the market comprises consumers located on a linear attribute space and firms located at the ends of the line we represent the degree of addressability or the reach of a firm s database as the proportion of consumers at each point in the market who are in the firm s database consequently the firm can offer these consumers customized prices consumer addressability creates two effects that govern the competition between firms a surplus extraction effect because a firm might address a consumer who is not reached by its competitor and a competitive effect that is created by the set of consumers who can be addressed by both firms the key results of the paper pertain to when the addressability decision is endogenous when the extent of market differentiation or consumer heterogeneity in preferences for a product brand attribute as well as the incremental cost of addressability are sufficiently large firms make symmetric investments in equilibrium given high costs firms choose sufficiently low levels of addressability low addressability and high levels of market differentiation both help reduce price competition which facilitates symmetric choice of addressability by the firms in equilibrium however when market differentiation and the cost of incremental addressability become small firms face the prospect of destructive competition as a result they strategically differentiate in their choice of addressability to mitigate this competition interestingly even in the extreme case when incremental addressability is costless not every firm chooses full addressability in equilibrium this has useful implications for direct marketing given that the advances in information technology should improve the ability of firms to address their consumers it might indeed not be desirable for all direct marketing firms to indefinitely pursue greater addressability as costs of doing so decline the analysis also shows an interesting effect of market differentiation in addressable markets equilibrium profits can decrease with an increase in market differentiation when the marginal cost of addressability is sufficiently high finally we discuss the competitive outcome that would result when firms compete with addressable as well as uniform posted prices

distributional coalitions state strength and economic growth toward a comprehensive theory of economic development high performing economies in the asia pacific region together with only mediocre economic development in latin america prompts the question of what explains differential economic growth rates among developing countries combining a statist perspective with olson s theory of interest group formation this research hypothesizes that nations with weak distributional coalitions will more likely experience high growth and state intervention will be effective using a longitudinal research design this secondary analysis involves a comparative and interactive examination of eight asian pacific and twelve latin american countries by considering the role of the state in interaction with distributional coalitions in society the results indicate that approximately two thirds of the variance in national economic growth is explained

neoclassical growth and the natural resource curse puzzle abstract we advance a novel mechanism that helps to explain the puzzling evidence on the natural resource curse the new channel arises in a standard dynamic heckscher ohlin model composed of small open economies that take international output prices as given within this framework a more capital intensive primary sector implies that natural resource abundant economies grow more slowly along the adjustment path this effect might be only temporary because the natural input also affects long run income and not necessarily in the same direction as transitional growth we produce quantitative results that show that the new mechanism can account for a significant fraction of the observed output growth gap between resource rich and resource poor u s states

strategic loyalty reward in dynamic price discrimination in a dynamic model with overlapping generations of consumers we study duopolistic competition when firms can price discriminate at each period between their previous customers and the consumers that they have never served long term contracts are not enforceable in markov perfect equilibrium one firm charges higher prices to its past customers than to its new customers as past customers have revealed their strong preferences for the firm the other firm however rewards its previous customers by charging lower prices to them than to its new customers this loyalty reward strategy comes from the interplay between the firms usual incentive to extract surplus from consumers with revealed strong preferences and their incentives to acquire information and to recognize their young loyal customers the result also relies on the firms inability a priori to tell different generations apart it is the outcome of the unique equilibrium of a simplified two period or t period version of the game and holds with forward looking consumers who are impatient enough

news consumption and media bias bias in the market for news is well documented recent research in economics explains the phenomenon by assuming that consumers want to read watch news that is consistent with their tastes or prior beliefs rather than the truth the present paper builds on this idea but recognizes that i besides biased consumers there are also conscientious consumers whose sole interest is in discovering the truth and ii consistent with reality media bias is constrained by the truth these two factors were expected to limit media bias in a competitive setting our results reveal the opposite we find that media bias may increase when there are more conscientious consumers however this increased media bias does not necessarily hurt conscientious consumers who may be able to recover more information from multiple media outlets the more the outlets are biased we discuss the practical implications of these findings for media positioning media pricing media planning and the targeting of advertising

competitive price discrimination strategies in a vertical channel using aggregate retail data we explore opportunities for targeted pricing for a retailer that only tracks weekly store level aggregate sales and marketing mix information we show that it is possible using these data to recover essential features of the underlying distribution of consumer willingness to pay knowledge of this distribution may enable the retailer to generate additional profits from targeting by using choice information at the checkout counter in estimating demand we incorporate a supply side model of the distribution channel that captures important features of competitive price setting behavior of firms this latter aspect helps us control for the potential endogeneity generated by unmeasured product characteristics in aggregate data the channel controls for competitive aspects both between manufacturers and between manufacturers and a retailer despite this competition we find that targeted pricing need not generate the prisoner s dilemma in our data this contrasts with the findings of theoretical models due to the flexibility of the empirical model of demand the demand system we estimate captures richer forms of product differentiation both vertical and horizontal as well as a more flexible distribution of consumer heterogeneity

behavior based pricing production efficiency and quality differentiation in a two period vertical duopoly we examine how behavior based price discrimination bpd affects the firms endogenous quality differentiation and profits the firms relative production efficiency defined as the ratio between their unit cost difference and quality difference plays a crucial role with exogenous product qualities bpd always decreases the profits of the more efficient firm but increases those of the sufficiently less efficient firm anticipating its period 2 disadvantage in price discrimination the less efficient firm competes more vigorously and also gains more in period 1 than its competitor for the sufficiently less efficient firm its period 1 gain dominates its period 2 loss and its total profits increase with endogenous quality choices bpd does not alter the low end quality at the lower bound of the quality space but increases the high end quality enlarging quality differentiation this is because under bpd each firm s profit gain decreases or its profit loss increas

product customization and price competition on the internet the internet provides an unprecedented capability for sellers to learn about their customers and offer custom products at special prices in addition customization is more feasible today because of advances in manufacturing technologies that have improved sellers manufacturing flexibility we first develop a model of product customization and flexible pricing to incorporate the salient roles of the internet and flexible manufacturing technologies in reducing the costs of designing and producing tailored consumer goods we show how a monopoly seller may earn the highest profits by producing both standard and custom products and can raise prices for both types of products as customization and information collection technologies improve simultaneous adoption of customization in a duopoly reduces the differentiation between their standard products but does not intensify price competition compared with a two facility monopolist the duopoly may underinvest in customization consumer surplus improves after sellers adopt customization but does not monotonically increase as customization technologies advance when firms face a fixed entry cost and adopt customization sequentially the first entrant always achieves an advantage and may be able to deter subsequent entry by choosing its customization scope strategically

u s technology and the specific factors model abstract this paper reports empirical estimates of one of the most popular models of internaional trade theory the specific factors model the two outputs consumption goods and investment goods and two factors labor and capital are considered labor is assumed to be mobile between sectors while capital is assumed to be sector specific assuming that the relative supplies of the two types of capital are constant through time the model can be estimated with aggregate data even though the sector specific capital stocks are not observable empirical results show that the model does substantially better than under the heckscher ohlin production structure

the growth and welfare consequences of differential tariffs this paper analyzes the impact of differential tariffs on consumption and investment in a specific factors model of a small open economy in which capital is accumulated over time particular attention is devoted to the welfare aspects highlighting the cost of the intertemporal distortions produced by protective trade policies several specific welfare propositions are obtained first tariff protection is shown to create short run benefits but long run costs in welfare second the second best policy for the two tariffs is characterized finally several propositions summarizing the implications of our analysis for tariff reform are derived

the productivity slowdown the oil shocks and the real cycle f ive facts stand out about economic performance in the united states since world war ii the first is that for most of the postwar period the u s has had a slower rate of economic growth than the other major developed democracies except great britain and much lower rates of growth than germany japan and italy the gap between the growth of per capita income of the united states and comparable countries has however tended to diminish over time and the united states has lately grown at about the same rate as most other developed countries the second outstanding fact is that the united states has fallen far behind in many mass production industries in which it used to lead the world whereas it is ahead of other nations in many new and especially high technology industries in automobiles steel tires household appliances and earth moving and farm equipment for example u s production has fallen dramatically in relation to output in most comparable countries and the country has become a net importer of most such products by contrast in newer industries such as computers jet aircraft sophisticated weaponry and high technology in general the united states is often dominant both as producer and exporter the third outstanding fact is that most of the older heartland of american industry roughly the area north and east of an arc drawn from baltimore to st louis to milwaukee has declined dramatically in comparison with the south and the west this change in regional fortunes has been due in large part to migration motivated by differences in economic prospects from the declining to the advancing

institutional technology and economic growth an endogenous model of constitutional changes and economic growth links the temporal decline in private market returns when technology is constant with the returns to rule changes realized in a political market there is a steady state constitutional setting in which all rule changes have been incorporated that is analytically equivalent to the neoclassical steady state as in the neoclassical model private sector technological progress postpones the steady state to the extent the original constitutional setting promotes innovation the evolutionary process toward the steady state is delayed the model yields a theory of revolution based on forces leading to the adoption of inefficient changes in the constitutional setting

natural resources education and economic development economic growth since 1965 has varied inversely with the share of natural capital in national wealth across countries four main channels of transmission from abundant natural resources to stunted economic development are discussed a the dutch disease b rent seeking c overconfidence and d neglect of education public expenditure on education relative to national income expected years of schooling for girls and gross secondary school enrolment are all shown to be inversely related to the share of natural capital in national wealth across countries natural capital appears to crowd out human capital thereby slowing down the pace of economic development

behavior based discrimination is it a winning play and if so when with advances in technology the collection of information from consumers at the time of purchase is common in many categories this information allows a firm to straightforwardly classify consumers as either new or past consumers this opens the door for firms to implement marketing that a discriminates between new and past consumers and b entails making offers to them that are significantly different our objective is to examine the competitive effects of marketing that tailors offers to consumers based on their past buying behavior in a two period model with two competing firms we assume that each firm is able to commit about whether or not to implement behavior based discrimination bbd i e to add benefits to its offer for past consumers in the second period when the firms are identical in their ability to add value to the second period offer bbd generally leads to lower profits for both firms past customers are so valuable in the second period that bbd leads to cutthroat competition in the first period as a result the payoffs associated with the implementation of bbd form a prisoner s dilemma interestingly when a firm has a significant advantage over its competitor one firm has the capability to add more benefits for its past customers than the other it can increase its profit versus the base case even when there is significant competition in the second period moreover the firm at a disadvantage sometimes finds that the best response to bbd by a strong competitor is to respond with a uniform price and avoid the practice completely

oil and the macroeconomy since the 1970s economists have long been intrigued by empirical evidence that suggests that oil price shocks may be closely related to macroeconomic performance this interest dates back to the 1970s the 1970s were a period of growing dependence on imported oil unprecedented disruptions in the global oil market and poor macroeconomic performance in the united states thus it was natural to suspect a causal relationship from oil prices to u s macroeconomic aggregates since then a large body of work has accumulated that purports to establish this link on theoretical grounds and to provide empirical evidence in its support we do not attempt a comprehensive survey of this literature but rather provide an idiosyncratic synthesis of what we view as the key issues in this debate and the insights gained over the last 30 years the timing seems right for such an account although the experience of the 1970s continues to play an important role in discussions of the link between oil and the macroeconomy there have been a number of new oil price shocks since the 1970s notably the 1986 collapse of oil prices and the 2000 boom in oil prices as well as the oil price increases associated with the 1990 1991 gulf war and the 2003 iraq war given this richer case history we are arguably in a better position than two decades ago to distinguish the idiosyncratic features of each oil crisis from the systematic effects increases in oil prices have been held responsible for recessions periods of excessive inflation reduced productivity and lower economic growth in this paper we review the arguments supporting such views first we highlight some of the conceptual difficulties in assigning a central role to oil price shocks in explaining

pricing with cookies behavior based price discrimination and spatial competition we present a model of dynamic competition between two firms where firms gather customer information through first period purchase this creates asymmetric information in the second period whereby a

behavior based pricing in vertically differentiated industries we study behavior based pricing bbp in a vertically differentiated model vertical differentiation is innately asymmetric because all customers prefer the higher quality product when prices are equal this asymmetry causes bbp to have different properties than symmetric horizontally differentiated models we highlight two dimensions that affect the analysis the role of quality adjusted cost differences between the firms and the role of consumer discounting relative to firm discounting in the second period consistent with the prior literature we find that there are conditions based on market shares and quality adjusted costs under which either the low quality firm or the high quality firm but not both will reward its current customers with lower prices than it charges to new customers we then consider whether these conditions can arise in a two period equilibrium we find that if consumers sufficiently discount the future periods then firms at enough of a competitive disadvantage will reward their customers i e the low quality firm will reward its current customers if the quality adjusted cost differential between the two firms is small while the high quality firm will reward its current customers if this cost differential is large conversely we find that if consumers do not discount the future very much then the firm at a competitive disadvantage i e a low quality firm competing against a low cost high quality firm or a high quality firm that has very high costs can earn greater profits with bbp than without bbp although there are cases where both firms may benefit from bbp this paper was accepted by j miguel villas boas marketing

customer recognition in experience vs inspection good markets we study the effects of customer recognition and behavior based price discrimination bpd in a two period experience good duopoly with a discrete value distribution and we investigate the role of consumers ex ante valuation uncertainty in dynamic price competition through comparison with an inspection good duopoly several results are reached first the firms may reward repeat purchase when the probability of a high value is relatively low and when the high low value difference is large otherwise they may engage in poaching second bpd frequently increases each firm s total profits even in the poaching equilibrium these results contrast with the inspection good duopoly and the driver is that consumers period 2 product preference depends on their realized values in period 1 third consumers ex ante valuation uncertainty may increase or decrease firm profits without bpd and it weakly increases firm profits with bpd relative to the inspection good duopoly this paper was accepted by j miguel

the impact of bad writing in economics we find significant style differences between articles written by economists for their professional journals and articles by the same economists in the wall street journal we find no evidence that style influences the professional success of economists which suggests that the private rewards to improving the quality of writing are low indeed each community of scholars has probably adopted a professionally correct writing style from which its members diverge little however scholars do alter their rhetorical style to communicate effectively with audiences other than the professional community this suggests that intra and inter group written communication by economists is efficient

individual marketing with imperfect targetability our research investigates the competitive ramifications of individual marketing and information management in today s information intensive marketing environments the specific managerial issues we address are as follows first what kinds of incentive environments do competing firms face when they can only target individual customers imperfectly second does the improvement in an industry s targetability intensify price competition in the industry such that all competing firms become worse off third should a firm share its customer knowledge so as to improve its rival s targetability fourth how should an information vendor sell its information that can improve a firm s targetability finally do competing firms have the same incentives to invest in their own targetability to answer those questions we develop a simple model a la narasimhan 1988 in which each of the two competing firms have their own loyal customers and compete for common switchers we assume that each firm can classify its own loyal customers and switchers correctly only with a less than perfect probability this means that each firm s perceived customer segmentation differs from the actual customer segmentation based on their perceived reality these two competing firms engage in price competition as an extension we also allow the competing firms to make their investment decisions to acquire targetability we show that when individual marketing is feasible but imperfect improvements in targetability by either or both competing firms can lead to win win competition for both even if both players behave noncooperatively and the market does not expand win win competition results from the fact that as a firm becomes better at distinguishing its price insensitive loyal customers from the switchers it is motivated to charge a higher price to the former however due to imperfect targetability each firm mistakenly perceives some price sensitive switchers as price insensitive loyal customers and charges them all a higher price these misperceptions thus allow its competitors to acquire those mistargeted customers without lowering their prices and hence reduce the rival firm s incentive to cut prices this effect softens price competition in the market and qualitatively changes the incentive environment for competing firms engaged in individual marketing a prisoner s dilemma occurs only when targetability in a market reaches a sufficiently high level this win win perspective on individual marketing has many managerial implications first we show that superior knowledge of individual customers can be a competitive advantage however this does not mean that a firm should always protect its customer information from its competitors to the contrary we find that competing firms can all benefit from exchanging individual customer information with each other at the nascent stage of individual marketing when firms targetability is low indeed under certain circumstances a firm may even find it profitable to give away this information unilaterally however as individual marketing matures as firms targetability becomes sufficiently high further improvements in targetability will intensify price competition and lead to prisoner s dilemma therefore it is not only prudent politics but also a business imperative for an industry to seize the initiative on the issue of protecting customer privacy so as to ensure win win competition in the industry second we show that the firm with a larger number of loyal customers tends to invest more in targetability when the cost of acquiring targetability is high however the firm with a smaller loyal base can through information investment acquire a higher level of targetability than the firm with a larger loyal base as long as the cost of acquiring targetability is not too high as the cost further decreases competing firms will all have more incentives to increase their investments in targetability until they achieve the highest feasible level third an information vendor should make its information available nonexclusively exclusively when its information is associated with a low high level of targetability when the vendor does sell its information exclusively it should target a firm with a small loyal following if it can impart a high level of targetability to that firm finally our analysis shows that an information intensive environment does not doom small firms in fact individual marketing may provide a good opportunity for a small firm to leapfrog a large firm the key to leapfrogging is a high level of targetability or customer knowledge

energy prices and the aggregate production function abstract this paper tests the hypothesis that the effects of increases and decreases in relative energy prices on output are symmetrical alternative ratchet specifications are embedded in an aggregate production function for private sector output and estimated using us data the major finding is that the relationship between relative energy prices and output is highly asymmetrical increases in relative energy prices above previous peak levels have a substantial deleterious effect on output decreases in relative energy prices and increases below the previous peak have no effect on output

the curse and blessing of fixed specific factors in small open economies abstract this paper investigates how a country s specific factor endowment affects its long run economic performance we build an open economy version of the two sector neoclassical growth model in which we introduce fixed industry specific inputs in both activities we show that differences in input shares between sectors can contribute to explain why nations that seem to have similar factor endowments can show very different income levels in particular under productivity adjusted factor price equalization larger amounts of factors specific to the industry with a lower larger labor share lead the economy to enjoy larger smaller long run income levels the model can also account for overtaking episodes between countries along their development paths

behavior based pricing an analysis of the impact of peer induced fairness firms tracking consumer purchase information often use behavior based pricing bbp i e price discriminate between consumers based on preferences revealed from purchase histories however behavioral research has shown that such pricing practices can lead to perceptions of unfairness when consumers are charged a higher price than other consumers for the same product this paper studies the impact of consumers fairness concerns on firms behavior based pricing strategy profits consumer surplus and social welfare prior research shows that bbp often yields lower profits than profits without customer recognition or behavior based price discrimination by contrast we find that firms profits from conducting bbp increase with consumers fairness concerns when fairness concerns are sufficiently strong practicing bbp is more profitable than without customer recognition however consumers fairness concerns decrease consumer surplus in addition when consumers fairness concerns are sufficiently stron

a dynamic specific factors model of international trade in a dynamic economy land and capital serve not only as factors of production but as assets which individuals use to transfer income from working periods to retirement changes in the terms of trade and in the endowments of fixed factors do not necessarily have the same effects on factor prices and on the composition of output as they do in a static framework changes in these variables affect both total savings and the amount of savings that is diverted toward investment in capital results derived from the traditional specific factors model are more likely to emerge when the sector using land as a factor of production has a higher labor share than the sector using capital in this case the land using sector dominates factor markets more than asset markets once the roles for land and capital as assets are recognized the possibility of natural resource booms that reduce steady state welfare arises at the same time an increase in population can raise steady state welfare

the perils of behavior based personalization behavior based personalization has gained popularity in recent years whereby businesses offer personalized products based on consumers purchase histories this paper highlights two perils of behavior based personalization in competitive markets first although purchase histories reveal consumer preferences competitive exploitation of such information damages differentiation similar to the classic finding that behavior based price discrimination intensifies price competition with endogenous product design there is yet a second peril it emerges when forward looking firms try to avoid the first peril by suppressing the information value of purchase histories ideally if a market leader serves all consumers on day 1 purchase histories contain no information about consumer preferences however knowing that their rivals are willing to accommodate a market leader firms are more likely to offer a mainstream design at day 1 which jeopardizes differentiation based on this understanding i investigate how the perils of behavior based personalization change under alternative market conditions such as firms better knowledge about their own customers consumer loyalty and inertia consumer self selection and the need for classic designs

malthus to solow a unified growth theory is developed that accounts for the roughly constant living standards displayed by world economies prior to 1800 as well as the growing living standards exhibited by modern industrial economies our theory also explains the industrial revolution which is the transition from an era when per capita incomes are stagnant to one with sustained growth the authors use a standard growth model with several technologies the first denoted the malthus technology requires land labor and reproducible capital as inputs the second denoted the solow technology does not require land the authors show that in the early stages of development only the malthus technology is used and due to population growth living standards are stagnant despite technological progress eventually technological progress causes the solow technology to become profitable and both technologies are employed at this point living standards improve since population growth has less influence on per capita income growth in the limit the economy behaves like a standard solow growth model excerpt

california shows the future of electricity production in the single market in california pressure from industrial and commercial ratepayers has initiated liberalization in electricity production this us experience is important because the plausibility arguments against liberalization may reappear in the european debate on the single market

take the money and run political turnover rent seeking and economic growth abstract we find a negative and significant relationship between gubernatorial turnover and u s state economic growth although our finding of an inverse relationship between growth and political instability may seem to contradict olson s 1982a famous hypothesis regarding the growth retarding nature of political stability such constitutional political changes were not primarily what olson had in mind we argue that enhanced political turnover is associated with more rent seeking since payoffs to focusing on special interest redistributive policies vs general growth enhancing ones are greater for less durable regimes therefore we interpret our evidence as supportive of olson s broader argument concerning the negative affect of rent seeking behavior on growth

the value of purchase history data in target marketing an important aspect of marketing practice is the targeting of consumer segments for differential promotional activity the premise of this activity is that there exist distinct segments of homogeneous consumers who can be identified by readily available demographic information the increased availability of individual consumer panel data open the possibility of direct targeting of individual households the goal of this paper is to assess the information content of various information sets available for direct marketing purposes information on the consumer is obtained from the current and past purchase history as well as demographic characteristics we consider the situation in which the marketer may have access to a reasonably long purchase history which includes both the products purchased and information on the causal environment short of this complete purchase history we also consider more limited information sets which consist of only the current purchase occasion or only information on past product choice without causal variables proper evaluation of this information requires a flexible model of heterogeneity which can accommodate observable and unobservable heterogeneity as well as produce household level inferences for targeting purposes we develop new econometric methods to implement a random coefficient choice model in which the heterogeneity distribution is related to observable demographics we couple this approach to modeling heterogeneity with a target couponing problem in which coupons are customized to specific households on the basis of various information sets the couponing problem allows us to place a monetary value on the information sets our results indicate there exists a tremendous potential for improving the profitability of direct marketing efforts by more fully utilizing household purchase histories even rather short purchase histories can produce a net gain in revenue from target couponing which is 2 5 times the gain from blanket couponing the most popular current electronic couponing trigger strategy uses only one observation to customize the delivery of coupons surprisingly even the information contained in observing one purchase occasion boasts net couponing revenue by 50 more than that which would be gained by the blanket strategy this result coupled with increased competitive pressures will force targeted marketing strategies to become much more prevalent in the future than they are today

public capital and private productivity this paper uses three different approaches to investigate whether the declining provision of public capital is a major cause of declining labor productivity the juxtaposition of approaches removes

on the strategic choice of spatial price policy the strategic incentives with respect to the choice of price policy in spatial competition are analyzed in a duopoly model price discrimination emerges as the unique equilibriu m outcome in games with either simultaneous choice of policy and pric e or sequential choice where firms may commit first to uniform mill p ricing before the actual market stage nevertheless profits may be h igher with uniform pricing the authors models are applied to analyz e some common business practices that arise in geographical pricing like the basing point system and in the pricing of varieties or opti ons from a base product in a product differentiation context copyright 1988 by american economic association

dynamic targeted pricing with strategic consumers abstract we investigate in this paper whether dynamic targeted pricing based on consumer purchase history could benefit a practicing firm even when consumers are strategic in that they actively seek to avail themselves of a low price in the future such strategic behavior on the part of consumers has been shown in the literature to render such dynamic targeted pricing unprofitable even for a monopoly firm we show that dynamic targeted pricing can benefit competing firms when they actively pursue customer recognition based on consumer purchase history this is because in order to pursue customer recognition competing firms need to price high to screen out price sensitive consumers and hence price competition is moderated as a result all competing firms can become better off with targeted pricing than without even when consumers behave strategically interestingly because of this competition moderation effect the paradoxical outcome occurs where dynamic targeted pricing may not benefit a monopolist but it may benefit competing firms we also show that dynamic targeted pricing can expand the market such that social welfare unambiguously improves

the strategic value of high cost customers many firms today manage their existing customers differentially based on profit potential providing fewer incentives to less profitable customers and firing unprofitable customers although researchers and industry experts advocate this practice results have been mixed we examine this practice explicitly accounting for competition and find that some conventional prescriptions may not always hold we analyze a setting where customers differ in their cost to serve we find that when a firm can discriminate among its customers but the rival cannot customer base composition influences the rival s poaching behavior consequently even though a low cost customer is more profitable when viewed in isolation a high cost customer may be strategically more valuable by discouraging poaching therefore contrary to conventional advice it can be profitable for a firm to retain unprofitable customers moreover some customers may become more valuable to retain and receive better incentives when they are less profitable we further show that in competitive settings traditional customer lifetime value metrics may lead to poor retention decisions because they do not account for the competitive externality that actions toward some customers impose on the cash flows from other customers our results suggest that firms may need to evolve from a segmentation mindset which views each customer in isolation to a customer portfolio mindset which recognizes that the value of different customers is interlinked this paper was accepted by j miguel villas boas marketing

beyond keynesianism and monetarism though there is consensus among economists about microeconomic theory neither the keynesian nor the monetarist theory of macroeconomics has attracted a consensus presumably because neither is compelling enough to persuade the skeptical a new approach to the subject that combines insights from each of the familiar schools with considerations that both schools have overlooked is accordingly offered here this argument accepts the evidence that involuntary unemployment and depressions sometimes occur and thus rejects the finding of the new classical or equilibrium macroeconomics that markets always clear and that all individuals and firms are in equilibrium it also rejects the keynesian assumption of wages or prices arbitrarily fixed at disequilibrium levels and insists that any adequate theory must show what interests are served by the existence of involuntary unemployment the theory offered here shows that an institutional or organizational arrangement common in all societies which have experienced widespread unemployment and deep recessions entails that many firms and individuals will be in disequilibrium this disequilibrium becomes more severe when there is unexpected deflation or disinflation the disequilibrium is of precisely the type commonplace in recessions and entails involuntary unemployment the theory also shows how groups of individuals and firms can gain from practices that entail involuntary unemployment and underutilization of resources for others