gasoline demand in europe new insights abstract this study utilizes a panel data set from 14 european countries over the period 1990 2004 to estimate a dynamic model specification for gasoline demand previous studies estimating gasoline consumption per total passenger cars ignore the recent increase in the number of diesel cars in most european countries leading to biased elasticity estimates we apply several common dynamic panel estimators to our small sample results show that specifications neglecting the share of diesel cars overestimate short run income price and car ownership elasticities it appears that the results of standard pooled estimators are more reliable than common iv gmm estimators applied to our small data set

the decomposition of promotional response an empirical generalization price promotions are used extensively in marketing for one simple reason consumers respond the sales increase for a brand on promotion could be due to consumers accelerating their purchases i e buying earlier than usual and or buying more than usual and or consumers switching their choice from other brands purchase acceleration and brand switching relate to the primary demand and secondary demand effects of a promotion gupta 1988 captures these effects in a single model and decomposes a brand s total price elasticity into these components he reports for the coffee product category that the main impact of a price promotion is on brand choice 84 and that there is a smaller impact on purchase incidence 14 and stockpiling 2 in other words the majority of the effect of a promotion is at the secondary level 84 and there is a relatively small primary demand effect 16 this paper reports the decomposition of total price elasticity for 173 brands across 13 different product categories on average we find that 25 of the elasticity is due to primary demand expansion i e purchase acceleration and 75 to secondary demand effects or brand switching thus while gupta s finding that the majority of promotional response stems from brand switching is supported the average magnitude of the effect appears to be smaller than first thought more important there is ample evidence that promotions have a significant primary demand effect the relative emphasis on purchase acceleration and brand switching varies systematically across categories and the second goal of the paper is to explain this variation as a function of exogeneous covariates in doing this we recognize that promotional response is the consumer s reaction to a price promotion and therefore develop a framework for understanding variability in promotional response that is based on the consumer s perspective of the benefits from a price promotion these benefits are posited to be a function of i category specific factors ii brand specific factors and iii consumer characteristics the framework is formalized as a generalized least squares meta analysis in which the brand s price elasticity is the dependent variable several interesting results emerge from this analysis category specific factors brand specific factors and consumer demographics explain a significant amount of the variance in promotional response for a brand at both the primary and secondary demand levels category specific factors have greater influence on variability in promotional response and its decomposition than do brand specific factors there are several instances where exogenous variables do not affect total elasticities yet significantly affect individual components of total elasticity in fact the lack of a significant relationship between the variables and total elasticity is often due to offsetting effects within two or more of the three behavioral components of elasticity this is particularly true for brand specific factors which typically have no effect on total elasticity yet have important effects on the individual behaviors there is some evidence to suggest that not all promotion related increases in primary demand are due to forward buying in some cases promotions appear to increase consumption we use these results to illustrate how category and brand specific factors work to drive primary and secondary demand elasticities in different directions in short this paper offers an empirical generalization of a key finding on promotional response how elasticities decompose across brand choice purchase incidence and stockpiling and new insights into factors that explain variance in promotional response these findings are likely to be of interest to researchers who are concerned with theory development and the generalizability of marketing phenomena and to managers who plan promotion campaigns

heterogeneous information arrivals and return volatility dynamics uncovering the long run in high frequency returns recent empirical evidence suggests that the interdaily volatility clustering for most speculative returns are best characterized by a slowly mean reverting fractionally integrated process meanwhile much shorter lived volatility dynamics are typically observed with high frequency intradaily returns the present article demonstrates that by interpreting the volatility as a mixture of numerous heterogeneous short run information arrivals the observed volatility process may exhibit long run dependence as such the long memory characteristics constitute an intrinsic feature of the return generating process rather than the manifestation of occasional structural shifts these ideas are confirmed by our analysis of a one year time series of fiveminute deutschemark u s dollar exchange rates among the most puzzling issues is the behavior of volatility while the general properties of volatility remain elusive perhaps the most intriguing feature revealed by empirical work on volatility is its long persistence such behavior has sparked a search almost akin to that for the holy grail for the perfect garch model but the underlying question of why such volatility persistence endures remains unanswered we conjecture that the ability to analyze higher frequency data may be particularly useful in pursuing this issue goodhart and o hara 1997 the pronounced volatility clustering is arguably one of the most striking features of financial price series recorded at daily or weekly intervals and a large body of literature seeking to characterize this aspect of speculative returns has emerged over the past decade 1 at the same time convincing theoretical explanations for the underlying sources of long run persistence in volatility remain elusive the recent advent of comprehensive high frequency andersen is from the j l kellogg graduate school of management of northwestern university bollerslev is from the university of virginia and is a research associate at the national bureau of economic research we gratefully acknowledge the financial support provided by a research grant from the institute for quantitative research in finance the q group special thanks are due to olsen and associates for making the intradaily exchange rate quotes and reuter s news tape available we have received valuable comments from wake epps clive w j granger stephen f gray j huston mcculloch as well as seminar participants at the december 1996 triangle econometrics workshop the 1997 afa meetings in new orleans academia sinica the wharton school usc and georgetown and york universities we remain fully responsible for the content 1 see bollerslev chou and kroner 1992 for a survey of this literature using arch type

asymmetric promotion effects and brand positioning several studies have shown that promotions of national brands yield more effect than those of store brands e g allenby and rossi 1991 blattberg and wisniewski 1989 however the evolution of price quality data available from consumer reports over the last 15 years seems to reveal a reduction of the quality gap between store brands and national brands while price differences remain substantial simultaneously the share of private label brands has increased progressive grocer 1994 in this context we study whether we can maintain a view of the world where national brands may easily attract consumers from store brands through promotions whereas store brands are relatively ineffective in attracting consumers from national brands by such means we analyze consumer reactions to price discounts in a parsimonious preference model featuring loss aversion and reference dependence along dimensions of price and quality hardie johnson and fader 1993 tversky and kahneman 1991 the key result of our analysis is that given any two brands there is an asymmetric promotion effect in favor of the higher quality higher price brands if and only if the quality gap between the brands is sufficiently large in comparison with the price gap thus the direction of promotion asymmetry is not unconditional it depends uniquely on the value of the ratio of quality and price differences compared to a category specific criterion which we call if the ratio of quality and price differences is larger than this criterion the usual asymmetry prevails if such is not the case the lower quality lower price brands promote more effectively more precisely our model predicts that cross promotion effects depend on two components of brand positioning in the price quality quadrant first we define a variable termed positioning advantage that indicates whether relative to the standards achieved by another brand a given brand is underpriced positive advantage or overpriced negative advantage promotion effectiveness is increasing in this variable second cross promotion effects between two brands depend on their distance in the price quality quadrant this variable impacts promotion effectiveness negatively and symmetrically for any pair of brands positioning advantage and brand distance are orthogonal components of brand positioning irrespective of the degree of correlation between available price and quality levels in the market empirically we investigate the role of brand positioning in explaining cross promotion effects using panel data from the chilled orange juice and peanut butter categories we compute the independent positioning variables positioning advantage and brand distance from readily available data on price and quality positioning after obtaining our estimates of we next measure promotion effectiveness by estimating choice share changes in response to a price discount using a choice model that does not contain any information about quality price ratios finally we test the relation between the two positioning variables and the promotion effectiveness measures the data reveal that in the orange juice category lower quality lower price brands generally promote more effectively than higher quality higher price brands in the peanut butter data the opposite asymmetry holds in both cases inter brand promotion patterns are well explained by the positioning variables an attractive feature of our model is that in addition to the direction of promotion asymmetries it also explains the extent of those asymmetries a further interesting aspect of this approach is that we go beyond a categorization of brands into price tiers for instance lower tier brands in our data may promote more effectively than one national brand but less effectively than another consistent with our theoretical predictions the data presented here seem to confirm that such cases occur because the lower tier brand offers a favorable trade off of price and quality differences compared with one national brand and a less favorable trade off compared with the other the content of this paper is potentially relevant for brand managers or retailers concerned with predicting the impact of their promotions the paper is of particular interest to marketing scientists who study the performance of store brands versus national brands and may also appeal to those who wish to explore the marketing implications of behavioral decision theory finally our investigation does not reject blattberg and wisniewski s 1989 finding shared by allenby and rossi 1991 and hardie johnson and fader 1993 that national brands have a principle advantage in promotion effectiveness rather it formalizes when this principle advantage is overruled by positioning disadvantages of such brands

determinants of import demand for non renewable energy petroleum products empirical evidence from nigeria abstract this study estimated determinants of import demand for refined petroleum products in nigeria for the period 1984 2013 it employed the autoregressive distributed lag ardl bounds test cointegration method and analysed both long run and short run determinants of import demand for total and specific petroleum products in the long run aggregate and sectoral incomes are significant determinants of import of refined kerosene further real effective exchange rate reer aggregate income gdp manufacturing sector s income domestic energy production dep and population growth rate pgr are drivers of import of refined motor spirit moreover reer dep and manufacturing sector s income are propellers of import of refined distillate fuel also reer and total output of petroleum products are major drivers of total import of refined petroleum products short run results show that previous period gdp pgr and manufacturing and service sectors incomes are determinants of import demand for refined kerosene moreover reer gdp previous pgr and manufacturing sector s income exert significant effects on the import of refined motor spirit further significant effects of reer dep previous pgr domestic output of the product and manufacturing and service sectors incomes on the import demand for distillate fuel were found policy implications of the foregoing are articulated in the paper

does price elasticity vary with economic growth a cross category analysis abstract how does price sensitivity change with the macroeconomic environment the authors explore this question by measuring price elasticity using household level data across 19 grocery categories over 24 quarters for each category they estimate a separate random coefficients logit model with quarter specific price response parameters and control functions to address endogeneity this specification yields a novel set of 456 elasticities across categories and time that are generated using the same method and therefore can be directly compared on average price sensitivity is countercyclical it rises when the macroeconomy weakens however substantial variation exists and a handful of categories exhibit procyclical price sensitivity the authors show that the relationship between price sensitivity and macroeconomic growth correlates strongly with the average level of price sensitivity in a category they examine several explanations for this result and conclude that a category s share of wallet is th

endogeneity in brand choice models applications of random utility models to scanner data have been widely presented in marketing for the last 20 years one particular problem with these applications is that they have ignored possible correlations between the independent variables in the deterministic component of utility price promotion etc and the stochastic component or error term in fact marketing mix variables such as price not only affect brand purchasing probabilities but are themselves endogenously set by marketing managers this work tests whether these endogeneity problems are important enough to warrant consideration when estimating random utility models with scanner panel data our results show that not accounting for endogeneity may result in a substantial bias in the parameter estimates

energy demand in ghana a disaggregated analysis this paper presents a comprehensive analysis of energy demand in ghana by estimating demand functions for key disaggregated energy components including gasoline diesel liquefied petroleum gas lpg kerosene biomass residual fuel oil rfo and electricity our results show that energy prices income urbanization and economic structure are significant demand drivers of the different energy types in ghana with varying estimated elasticities further there is evidence of high degree of inter fuel substitution in energy demand in ghana particularly from gasoline diesel and kerosene towards lpg consumption we recommend among different policy options a customization of energy price subsidization policies especially on lpg to reduce the unintended beneficiary dilemma or spillover effect of current government policy other policies such as intensification of energy conservation programs and market entry of independent power trading companies to enhance energy service delivery through competition are also discussed

dynamic conversion behavior at e commerce sites this paper develops a model of conversion behavior i e converting store visits into purchases that predicts each customer s probability of purchasing based on an observed history of visits and purchases we offer an individual level probability model that allows for different forms of customer heterogeneity in a very flexible manner specifically we decompose an individual s conversion behavior into two components one for accumulating visit effects and another for purchasing threshold effects each component is allowed to vary across households as well as over time visit effects capture the notion that store visits can play different roles in the purchasing process for example some visits are motivated by planned purchases while others are associated with hedonic browsing akin to window shopping our model is able to accommodate these and several other types of visit purchase relationships in a logical parsimonious manner thepurchasing threshold captures the psychological resistance to online purchasing that may grow or shrink as a customer gains more experience with the purchasing process at a given website we test different versions of the model that vary in the complexity of these two key components and also compare our general framework with popular alternatives such as logistic regression we find that the proposed model offers excellent statistical properties including its performance in a holdout validation sample and also provides useful managerial diagnostics about the patterns underlying online buyer behavior

optimal inventory policies when ordering prices are random we consider a single item inventory model with deterministic demands at the beginning of each period a random ordering price is received according to a known distribution function a decision must be made as to how much if any of the item to order in each period so as to minimize total expected costs while satisfying all demands we show that in each period a sequence of critical price levels determines the optimal ordering strategy so that it is optimal to satisfy the demands of the next n periods if and only if the random price falls between the nth and the n 1st levels we derive recursive expressions that describe the critical price numbers and demonstrate the relationship of these expressions to minimal expected cost we study finite horizon as well as infinite horizon models and show that the critical number strategy is also average cost optimal

modelling industrial energy demand in saudi arabia abstract between 1986 and 2016 industrial energy consumption in saudi arabia increased by tenfold making it one of the largest end use sectors in the kingdom despite its importance there appear to be no published econometric studies on aggregate industrial energy demand in saudi arabia we model aggregate industrial energy demand in saudi arabia using harvey s 1989 structural time series model showing that it is both price and income inelastic with estimated long run elasticities of 0 34 and 0 60 respectively the estimated underlying energy demand trend suggests improvements in energy efficiency starting from 2010 applying decomposition analysis to the estimated econometric equation highlights the prominent roles of the activity effect the growth in industrial value added and the structure effect the shift towards energy intensive production in driving industrial energy demand growth moreover the decomposition shows how exogenous factors such as energy efficiency helped mitigate some of that growth delivering cumulative savings of 6 8 million tonnes of oil equivalent mtoe between 2010 and 2016 saudi arabia implemented a broad energy price reform program in 2016 which raised electricity fuel and water prices for households and industry the decomposition results reveal that holding all else constant higher industrial energy prices in 2016 reduced the sector s energy consumption by 6 9 a decrease of around 3 0 mtoe saudi policymakers could therefore build on the current policy of energy price reform and energy efficiency standards to mitigate the rate of growth of industrial energy consumption increase economic efficiency and maintain industrial sector competitiveness

manufacturer allowances and retailer pass through rates in a competitive environment a commonly held belief has grocery and mass merchandise retailers gaining power relative to the upstream consumer package goods manufacturers one of the major justifications for this belief is that manufacturers are now giving retailers more side payments such as trade allowances slotting allowances etc however a number of researchers have shown that these concessions have not translated into increased profit for the retailer relative to the manufacturer this paper explores via an analytic model why one might see retailers getting concessions from the manufacturer without being able to translate them into high profits we do this by representing the interaction between the channel members as a one period profit maximizing game where manufacturers decide on how large a side payment i e a concession to give to each retailer and retailers decide on how much of this side payment to use to promote the manufacturer s product at the heart of our model is a demand function for each product offering i e a specific brand sold by a specific retailer this demand function is linear in own and other s prices but based on empirical evidence is assumed to be nonlinear in the effects of merchandising activities e g short term price discounts better shelf space advertising etc specifically merchandising effects are modeled with a square root function that also acknowledges most short term promotional effects result in brand or store switching versus increase category volume the model is composed of six parameters these are the inherent popularity of the brand at a particular outlet own price sensitivity cross but within the store price sensitivity customer s sensitivity to within store promotion activities customer s sensitivity to between store promotional activities and the degree to which promotional activities yield incremental product category sales we use our underlying demand formulation to find the equilibrium solution to the full information stackelberg leader game for different store and brand loyalty environments as captured by our six parameters these parameters are chosen based on empirical evidence to span possible market conditions that each channel member might have our findings and modeling efforts should be of interest to analytic channel modelers and scholars interested in the mass merchandising and grocery store industries for a theoretical point of view we build upon the case 4 model of lee and staelin 1997 to allow for promotional activities from a substantive point of view we show that manufacturers will freely give retailers side payments even though they know these retailers will pocket a substantial portion of this concession moreover we identify conditions within our model that lead to larger allowances lower pass through rates and lower retail profits outcomes that are compatible with recent industry trends in addition we highlight the difference in effect on profits prices etc of changes in consumers sensitivity to inter store differences in storewide merchandising activities one of the more counter intuitive results of these analyses is that it is in the manufacturer s best interest to help retailers increase their spatial monopoly by decreasing consumers tendency to cross store shop because of merchandising activities

the importance of engaging residential energy customers hearts and minds abstract in an attempt to reduce the contribution of residential greenhouse gas emissions the eu has implemented a variety of policy measures the focus has been to promote domestic energy efficiency and ultimately a reduction in residential energy demand in this study we estimate residential energy demand using underlying energy demand trend uedt and asymmetric price responses for 14 european oecd countries between 1978 and 2008 our results support the conclusion that policies to reduce residential energy consumption and the consequent emissions need to account for behavioural lifestyle and cultural factors in order to be effective

demand of automotive fuels in brazil underlying energy demand trend and asymmetric price response abstract this paper analyzes the role of asymmetric price response apr and underlying energy demand trend uedt in the brazilian automotive fuel demand from june 2001 to december 2016 the demand functions of automotive gasoline ethanol and compressed natural gas cng were estimated by employing the autoregressive distributed lag ardl model and harvey s structural time series model stsm the importance of considering a more flexible approach incorporating both uedt and apr was confirmed by the data we identified that consumer response to changes in price is not linear the model also inferred a high substitutability between gasoline and ethanol both in the short and the long term demand for ethanol is more price elastic than demand for gasoline empirical analysis suggests that the decision to refuel a vehicle with cng is not influenced by price variations in ethanol which indicates that competition only occurs between cng and gasoline therefore the inclusion of uedt and apr provides more precise information on the effect of price and income changes on automotive fuel demand such information is relevant for establishing public policies as refinery expansion plannning and co2 emission mitigation

the category demand effects of price promotions although price promotions have increased in both commercial use and quantity of academic research over the last decade most of the attention has been focused on their effects on brand choice and brand sales by contrast little is known about the conditions under which price promotions expand short run and long run category demand even though the benefits of category expansion can be substantial to manufacturers and retailers alike this paper studies the category demand effects of consumer price promotions across 560 consumer product categories over a 4 year period the data describe national sales in dutch supermarkets and cover virtually the entire marketing mix i e prices promotions advertising distribution and new product activity we focus on the estimation of main effects i e the dynamic category expansive impact of price promotions as well as the moderating effects of marketing intensity and competition both conduct and structure on short and long run promotional effectiveness the research design uses modern multivariate time series analysis to disentangle short run and long run effects first we conduct a series of unit root tests to determine whether or not category demand is stationary or evolving over time the results are incorporated in the specification of vector autoregressive models with exogenous variables varx models the impulse response functions derived from these varx models provide estimates of the short and long term effects of price promotions on category demand these estimates in turn are used as dependent variables in a series of second stage regressions that assess the explanatory power of marketing intensity and competition several model validation tests support the robustness of the empirical findings we present our results in the form of empirical generalizations on the main effects of price promotions on category demand in the short and the long run and through statistical tests on how these effects change with marketing intensity and competition the findings generate an overall picture of the power and limitations of consumer price promotions in expanding category demand as follows category demand is found to be predominantly stationary either around a fixed mean or a deterministic trend although the total net short term effects of price promotions are generally strong with an average elasticity of 2 21 and a more conservative median elasticity of 1 75 they rarely exhibit persistent effects instead the effects dissipate over a time period lasting approximately 10 weeks on average and their long term impact is essentially zero by contrast the successful introduction of new products into a category is more frequently associated with a permanent category demand increase several moderating effects on price promotion effectiveness exist more frequent promotions increase their effectiveness but only in the short run the use of nonprice advertising reduces the category demand effects of price promotions both in the short run and in the long run competitive structure matters as well the less oligopolistic the category the smaller the short run effectiveness of price promotions at the same time we find that the dominant form of competitive reaction either in price promotion or in advertising is no reaction short run category demand effectiveness of price promotions is lower in categories experiencing major new product introductions finally both the short and long run price promotion effectiveness is higher in perishable product categories the paper discusses several managerial implications of these empirical findings and suggests various avenues for future research overall we conclude that the power of price promotions lies primarily in the preservation of the status quo in the category

is 75 of the sales promotion bump due to brand switching no only 33 is abstract several researchers have decomposed sales promotion elasticities based on household scanner panel data a key result is that the majority of the sales promotion elasticity approximately 74 on average is attributed to secondary demand effects brand switching and the remainder is attributed to primary demand effects timing acceleration and quantity increases the authors demonstrate that this result does not imply that if a brand gains 100 units in sales during a promotion the other brands in the category lose 74 units the authors offer a complementary decomposition measure based on unit sales the measure shows the ratio of the current cross brand unit sales loss to the current own brand unit sales gain during promotion the authors report empirical results for this measure they also derive analytical expressions that transform the elasticity decomposition into a decomposition of unit sales effects these expressions show the nature of the difference between the two decompositions to ga

riding the waves revealing the impact of intrayear category demand cycles on advertising and pricing effectiveness abstractgoing beyond traditional seasonality this research introduces the concept of the intrayear category demand cycle this phenomenon reflects demand cycles most consumer packaged goods categories experience throughout the year with periods of higher demand following periods of lower demand the author argues that acknowledging the existence of these cycles and understanding their impact on both advertising and pricing effectiveness and practice is critical for marketers specifically the author demonstrates how both advertising and price elasticities and observed advertising and prices evolve along these cycles for a unique set of 252 brands ranging from high advertising high priced premium mass brands to low advertising low priced value niche brands in 61 consumer packaged goods categories overall both advertising efectiveness and observed advertising are found to be stronger at demand peaks surprisingly consumer reactions to price decreases are weaker at demand peaks whereas reactions

gasoline demand revisited an international meta analysis of elasticities meta analysis is used to determine if there are factors that systematically affect price and income elasticity estimates in studies of gasoline demand four econometric models are estimated using long run and short run price and income elasticity estimates from previous studies as the dependent variables explanatory variables include functional form lag structure time span national setting estimation technique and other features of the model structure elasticity estimates are found to be sensitive to the inclusion or exclusion of some measure of vehicle ownership static models appear to overestimate short run elasticities underestimate long run price elasticities but pick up the full long run income responsiveness there is variation in the elasticity of demand across countries especially in the short run and gasoline demand appears to be getting more price elastic and less income elastic over time

the dynamic effect of discounting on sales empirical analysis and normative pricing implications baseline sales measure what retail sales would be in the absence of a promotion abraham and lodish 1993 and models that measure baseline sales are widely used by managers to assess the profitability of promotions bucklin and gupta 1999 this issue estimates of baseline sales and promotional response are typically independent of past promotional activity even though there is evidence to suggest that increased discounting reduces off promotion sales and increases the percentage of purchases made on deal e g krishna 1994 as a result models that do not consider dynamic promotional effects can mislead managers to overpromote given the widespread use of static models to evaluate the efficacy of promotions it is particularly desirable to calibrate a dynamic brand sales model and use it to establish an optimal course of action accordingly we develop a descriptive dynamic brand sales model and use it to determine normative price promotion strategies our descriptive approach consists of estimating a varying parameter sales response model letting model parameters vary with past discounting activity accommodates the possibility that market response changes with firms discounting policies in the normative model we use the estimates obtained in the descriptive model to determine optimal retailer and manufacturer prices over time the results of the descriptive model indicate that promotions have positive contemporaneous effects on sales accompanied by negative future effects on baseline sales the results of the normative model suggest that the higher share brands in our data tend to overpromote while the lower share brands do not promote frequently enough we project that the use of our model could improve manufacturers profits by as much as 7 to 31 more generally the normative results indicate that i if deals become more effective in the current period i e if consumers are more price sensitive promotions should be used more frequently and ii as the negative dynamic effect of discounts on sales increases the optimal level of discounting should go down without our approach it would be difficult to make this trade off exact finally we demonstrate that these dynamic effects provide another perspective to the marketing literature regarding the existence of promotions

functional form and aggregate energy demand elasticities a nonparametric panel approach for 17 oecd countries this paper studies whether the commonly used linear parametric model for estimating aggregate energy demand is the correct functional specification for the data generating process parametric and n

consumer demand for fair trade evidence from a multistore field experiment abstract we provide new evidence on consumer demand for ethical products from experiments conducted in a u s grocery store chain we find that sales of the two most popular coffees rose by almost 10 when they carried a fair trade label as compared to a generic placebo label demand for the higher priced coffee remained steady when its price was raised by 8 but demand for the lower priced coffee was elastic a 9 price increase led to a 30 decline in sales while consumers attach value to ethical sourcing there is significant heterogeneity in willingness to pay for it

intertemporal pricing and consumer stockpiling we study a dynamic pricing problem for a class of products with stable consumption patterns e g household items staple foods consumers may stock up the product at current prices for future consumption but they incur inventory holding costs we model this situation as a dynamic game over an infinite time horizon in each period the seller sets a price and each consumer chooses how many units to buy we develop a solution methodology based on rational expectations by endowing each player with beliefs we decouple the dynamic game into individual dynamic programs for each player we solve for the rational expectations equilibrium where all players make optimal dynamic decisions given correct beliefs about others behavior in equilibrium the seller may either charge a constant fixed price or offer periodic price promotions at predictable time intervals we show that promotions are useful when frequent shoppers are willing to pay more for the product than are occasional shoppers we also develop several model extensions to study the impact of consumer stockpiling on the seller s inventory production and rationing strategies

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

the rational effect of price promotions on sales and consumption we explore the rational effect of price variation on sales and consumption in markets where consumers are uncertain about the future price of goods we first derive an optimal ordering policy which expresses the amount a consumer should purchase and consume in a given period as a function of the observed price of the good the distribution of future prices and the nature of his or her inventory this policy extends previous normative models of inventory control such as those by golabi 1985 and kalymon 1970 to the case where the amount to consume in a given period is an explicit decision variable and prices follow a first order stochastic process we then use this model to explore how changes in the long run frequency and temporal correlations of price promotions should normatively affect the contemporaneous relationship between purchase consumption and price among the predictions which follow from the model are that consumption should rationally increase with the size of existing inventories the short term sensitivity of sales to prices should be greater than that of consumption to price and this discrepancy increases with decreases in the temporal correlation of price deals and the long term relative frequency of price deals

a segment level hazard approach to studying household purchase timing decisions the increasing availability of customer level data and the willingness of marketers to customize the timing of their offers to consumers makes the accurate segment level description of household purchase timing decisions a compelling issue in this paper we employ a finite mixture accelerated failure time model to identify and characterize household segments in terms of their purchasing rates and their propensity to accelerate purchases due to marketing mix activities such an approach also promises to alleviate possible aggregation problems arising from the use of a common hazard rate for all households an application to household panel data suggested that infrequent buyers show higher propensity to accelerate than frequent buyers do and that positive duration effects are underestimated when not accounting for segment specific hazard rates copyright 2002 john wiley sons ltd

the price elasticity of selective demand a meta analysis of econometric models of sales the author describes a meta analysis of econometric studies that estimated the elasticity of selective sales or market share to price the literature review yielded 367 suitable price elasticities

a multicategory model of consumers purchase incidence quantity and brand choice decisions methodological issues and implications on promotional decisions abstract the authors propose a multicategory model of consumers purchase incidence quantity and brand choice decisions the model specification allows for cross category promotion effects in both components of the primary demand incidence and quantity decisions and uses a flexible functional form of consumer s utility to accurately measure those cross category effects to demonstrate the importance of the methodology the authors investigate two issues of relevance to retailers namely how retailers should 1 allocate promotional expenditures across brands in a category and 2 coordinate timing of promotions of brands across categories the authors estimate the proposed model using consumers purchases in pasta sauce and pasta categories the results reveal that using restrictive functional forms of utilities or ignoring cross category effects in incidence and quantity decisions leads to incorrect assessments on relative allocation of promotional expenditures across brands furthermore retailers

the periodicity of pricing abstract retail pricing data combine multiple decisions e g regular pricing and discounting that are possibly made by multiple decision makers e g retailers and manufacturers for example temporary price reductions high frequency price changes can be used to price discriminate in the short run whereas regular price adjustments low frequency price changes might reflect changes in long term costs or demand time disaggregation cannot disentangle these factors because frequency aggregation exists even when data are analyzed at the lowest possible level of temporal aggregation because little is known about the nature of pricing interactions across various planning cycles this article develops several empirical generalizations about the role of periodicity in pricing using week store stockkeeping unit level price data in 35 grocery categories the authors find that 1 cross brand correlation in prices occurs at multiple planning horizons and the planning horizon of the predominant interacti

manufacturer retailer channel interactions and implications for channel power an empirical investigation of pricing in a local market the issue of power in the marketing channels for consumer products has received considerable attention in both academic and practitioner journals as well as in the popular press our objective in this paper is to provide an empirical method to measure the power of channel members and to understand the reasons demand factors cost factors nature of channel interactions for this power we confine our analysis to pricing power in channels we use methods from the game theory literature in marketing on channel interactions to obtain the theoretical framework for our empirical model this literature provides us a definition of power one that is based on the proportion or percentage of channel profits that accrue to each of the channel members there can be a variety of possible channel interactions between manufacturers and retailers in channels the theoretical literature has examined some of these games for example choi 1991 examines how channel profits for manufacturers and retailer vary if channel interactions are either vertical nash or if they are stackelberg leaderfollower with either the manufacturer or the retailer being the price leader each of these three channel interaction games has different implications for profits made by manufacturers and retailers and consequently for the relative power of the channel members in contrast to the previous literature that has focused largely on the above three channel interaction games our model extends the game theoretic literature by allowing for a continuum of possible channel interactions between manufacturers and a retailer furthermore for a given product market we empirically estimate from the data where the channel interactions lie in this continuum more critically we obtain measures of how channel profits are divided between manufacturers and the retailer in the product market where a higher share of channel profit is associated with higher channel power we then examine how channel power is related to demand conditions facing various brands and cost parameters of various manufacturers in going from game theory based theoretical models of channel interactions to empirical estimation we use the new empirical industrial organization framework bresnahan 1988 as part of this structural modeling framework we build retail level demand functions for the various brands manufacturer and private label in a given product category given these demand functions we obtain optimal pricing rules for manufacturers and the retailer in determining their optimal prices manufacturers and the retailer account for how all the players in the channel choose their optimal prices that is we account for dependencies in decision making across channel members these dependencies are characterized by a set of conduct parameters which are estimated from market data the conduct parameters enable us to identify the nature of channel interactions between manufacturers and the retailer along the continuum mentioned previously in addition to the demand and conduct parameters manufacturers marginal costs are also estimated in the model these marginal cost estimates along with the manufacturer prices and retail prices available in our dataset enable us to compute the division of channel profits among the channel members hence we are able to obtain insights into who has pricing power in the channel in the empirical application of the model we analyze a local market for two product categories refrigerated juice and tuna in both categories there are three major brands the difference between them is that the private label has an insignificant market share in the tuna category our main empirical results show that the usual games examined in the marketing literature do not hold for the given data we also nd that the retailer s market power is very significant in both these product categories and that the estimated demand and cost parameters are consistent with the estimated pattern of conduct between the manufacturers and the retailer given the evidence from the trade press of intense manufacturer competition in these categories as well as the commodity nature of these products the result of retailer power appears intuitive

the temporal and spatial dimensions of price search insights from matching household survey and purchase data abstract price promotions are pervasive in grocery markets a household can respond to price promotions by effectively cherry picking through 1 spatial price search across stores and 2 temporal price search across time however extant research has analyzed these two dimensions of price search only separately and therefore underestimates both the consumer response to price promotions and the impact of promotions on retail profit in this article the authors introduce an integrated analysis of spatial and temporal price search they seek answers to three questions first what are the predictors of household decisions to perform either spatial or temporal price search second how effective are the temporal spatial and spatiotemporal price search strategies in obtaining lower prices and third what is the impact of alternative price search strategies on retailer profit the authors use a unique data collection approach that combines household surveys with observed purchase data to address these que

modelling residential electricity demand in the gcc countries abstract this paper aims at understanding the drivers of residential electricity demand in the gulf cooperation council countries by applying the structural time series model in addition to the economic variables of gdp and real electricity prices the model accounts for population weather and a stochastic underlying energy demand trend as a proxy for efficiency and human behaviour the resulting income and price elasticities are informative for policy makers given the paucity of previous estimates for a region with particular political structures and economies subject to large shocks in particular the estimates allow for a sound assessment of the impact of energy related policies suggesting that if policy makers in the region wish to curtail future residential electricity consumption they would need to improve the efficiency of appliances and increase energy using awareness of consumers possibly by education and marketing campaigns moreover even if prices were raised the impact on curbing residential electricity growth in the region is likely to be very small given the low estimated price elasticities unless that is prices were raised so high that expenditure on electricity becomes such a large proportion of income that the price elasticities increase in absolute terms

a competitive dynamic pricing model when demand is interdependent over time abstract in this study we contribute to the dynamic pricing literature by developing a finite horizon model for two firms offering substitutable and nonperishable products with different quality levels customers can purchase and store the products even if they do not need them at the time in order to use them in future the stockpile of the products generated by customers affects the demand in future periods therefore the demand for each product not only is a function of prices and quality levels but also of the products stockpile levels in addition the stockpile levels change the customers consumption behavior more product in a stockpile leads to more consumption therefore we address not only the price and demand relationship but also the stockpiling and consumption relationship in a competitive environment the decision variable of each firm at the beginning of each period is its unit sale price we use a deterministic dynamic program to calculate the equilibrium prices at the beginning of each period by assuming that the market stockpile is public information we show the existence of a unique nash equilibrium we next consider the case when the firms do not know the market stockpile we then develop appropriate heuristics to calculate the optimal prices in each case a numerical study is also provided to calculate the price levels in different scenarios and compare their performances

the effect of promotion on consumption buying more and consuming it faster the authors empirically demonstrate the existence of flexible consumption rates in packaged goods products how this phenomenon can be modeled and its importance in assessing the effectiveness of

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

agricultural diversification and integrated pest management in bangladesh we study factors associated with a shift toward diversified high valued vegetable crops and the incentives associated with the use of ipm methods for vegetable producers in bangladesh the primary objective is to measure how ipm technologies affect the crop and technology choices of low income rice farmers a three season household optimisation model is used to study crop and technology choice under price and yield uncertainty the model is parameterised using data from vegetable farms and experimental ipm trials conducted in bangladesh simulation results show that access to ipm technology and ipm availability combined with access to credit increase household welfare and lead to higher rates of vegetable adoption off farm employment opportunities work against vegetable cultivation and ipm use by risk averse farmers implications for policy and extension efforts are highlighted

examining the role of energy efficiency and non economic factors in energy demand and co2 emissions in nigeria policy implications abstract this paper examines the role of energy efficiency and non economic factors such as consumers preferences lifestyles and values which have hitherto been ignored in energy demand and co2 emissions modelling for nigeria we use a structural time series model to estimate various energy demand and co2 intensity models that take account of the aforementioned factors we adopt preferred models from these estimates to analyse how energy demand and co2 emissions in nigeria might evolve by generating three different future scenarios to 2025 we find energy efficiency and non economic factors to influence energy demand and co2 emissions the long run income and price elasticities obtained differ significantly from those in existing studies that have ignored these salient factors in a business as usual scenario the results indicate that energy demand will continue to grow consequently present policies do not sufficiently mitigate aggregate co2 emissions in nigeria the lesson for policy makers is that the extant policies introduced to restrain co2 emissions from a production perspective have to be combined with new policies that influence consumers lifestyles and behaviours develop energy efficient technologies and apply low tariffs on imported energy efficient appliances to drive down co2 emissions from a consumption perspective

farmer training in off season vegetables effects on income and pesticide use in bangladesh the cultivation of crops outside the regular cropping calendar when supply is low and prices are high can give farmers better profits and consumers more choice however off season production may increase pesticide risk if crops are more affected by pests and diseases and farmers do not handle pesticides correctly this study quantified the effect of training in off season tomato production on the income and pesticide use of smallholder vegetable farmers in southwestern bangladesh the study uses farm level data from 94 trained and 151 non trained farm households and applies propensity score matching and inverse probability weighting to correct for selection bias for the average smallholder vegetable farmer training increased net household income by about 48 we found that 31 of the trained farm households who had initially adopted the technology continued its use in the second year but farm households who discontinued using the technology also experienced significant income gains from the training there was a significant increase in pesticide use 56 and although there was an improvement in pesticide handling practices trained farmers may have been more exposed to pesticide health risk the policy implication is that while off season vegetable production can create dramatic income improvements it is important to emphasize safe and sustainable pest management methods as part of policies promoting it

the relationship between market characteristics and promotional price elasticities many empirical studies in marketing and economics have estimated brand price elasticities for specific products in markets their results indicate that price elasticities seem to differ across brands product categories retail outlets and regions however there has been very little research which examines the factors associated with these observed differences this paper focuses on the promotional price elasticities of established major brands in stable categories it identifies some characteristics of markets which may be associated with differences in price elasticities for frequently purchased nondurables a cross sectional model of the effect of these market characteristics on price elasticities is developed and estimated utilizing own price elasticity estimates for brands at twelve stores the results indicate market characteristics such as brand market share couponing activity display activity and feature activity explain a substantial amount of the variation in promotional price elasticities

generalizing what is known about temporal aggregation and advertising carryover this paper provides a theoretical explanation for the inconsistent findings from previous econometric analyses of aggregated data concerning the duration of advertising carryover using this theoretical explanation and the knowledge of a data interval bias the paper reviews and summarizes the empirical work in the area of sales response modeling and then after adjusting for aggregation bias presents support for an empirical generalization that the average advertising duration interval is of brief duration typically between six and nine months

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

a decision support system for planning manufacturers sales promotion calendars a common event in the consumer packaged goods industry is the negotiation between a manufacturer and a retailer ofthe sales promotion calendar determining the promotion calendar involves a large number of decisions regarding levels of temporary price reductions feature ads and in store displays each executed at the level of individual retail accounts and brand skus over several months or a year though manufacturers spend much of their marketing budget on trade promotions they lack decision support systems to address the complexity and dynamics of promotion planning previous research has produced insights into how to evaluate the effectiveness of promotional events but has not addressed the planning problem in a dynamic environment this paper develops a disaggregate level econometric model to capture the dynamics and heterogeneity of consumer response by modeling the purchase incidence timing choice and quantity decisions of consumers we decompose total sales into incremental and nonincremental baseline plus borrowed the response model forms the basis of a market simulator that permits us to search for the manufacturer s optimal promotion calendar subject to a set of constraints some of them imposed by the retailer via the simulated annealing algorithm calendar profits are the net result of the contribution from incremental sales minus the opportunity cost from giving away discounts to nonincremental sales and the fixed costs associated with implementing promotional events e g retagging features displays incremental sales result from promotion induced switching the acceleration and quantity promotion effects on those switchers increased consumption and the carryover effect from purchase event feedback we applied our approach to the promotion planning problem of a large consumer packaged goods company in a nonperishable staple product category suggested by company executives canned tomato sauce subject to a retailer pass through constant rate of 80 provided to us by the collaborating firm the optimal promotion calendar produced by the modeling system followed a pattern of frequent and shallow temporary price reductions with no feature or display activity we also analyze how that result would change under different retailer pass through scenarios our findings indicated that the manufacturer could substantially improve the profitability of its sales promotion activity and that there would be a concurrent positive effect on retailer profit and volume levels management reported to us that the insights from the use of the system were implemented in their promotion planning process and produced positive results a validation analysis on follow up data for one market showed that promotion activity could be significantly reduced as recommended with no adverse effect on the brand s market share as predicted to generalize the model beyond the specific category where it was implemented we conducted a sensitivity analysis on the profile of the calendar i e frequency depth and duration of deals with respect to changes in market response competitive activity and retailer pass through first we found that the optimal depth frequency and timing of discounts is stable for price elasticities ranging from near zero to around four in absolute magnitude we also found no systematic impact of competitive promotions on the profile of the optimal calendar for example variation in competitive activity did not affect the optimal depth or frequency of discounts lastly we found changes in retailer pass through to have a significant effect on the optimal depth and number of weeks of trade promotion that a manufacturer should offer this emphasizes the importance to manufacturers of having accurate estimates of pass through for purposes of promotion budgeting and planning

quantifying the impact of exogenous non economic factors on uk transport oil demand abstract this paper attempts to quantify the impact of exogenous non economic factors on uk transport oil demand in addition to income price and fuel efficiency by estimating the demand relationship for oil transport for 1960 2007 using the structural time series model from this the relative impact on uk transport oil demand from income price and efficiency are quantified moreover the relative impact of the non economic factors is also quantified based on the premise that the estimated stochastic trend represents behavioural responses to changes in socio economic factors and changes in lifestyles and attitudes the estimated elasticities for income price and efficiency are 0 6 0 1 and 0 3 respectively and it is shown that for efficiency and price the overall contribution is relatively small whereas the contribution from income and non economic factors is relatively large this has important implications for policy makers keen to reduce transport oil consumption and associated emissions but not willing to reduce the trend rate of economic growth taxes and improved efficiency only have a limited impact hence a major thrust of policy should perhaps be on educating and informing consumers to persuade them to change their lifestyle and attitudes and thus reduce their consumption through the non economic instruments route

a hierarchical bayes error correction model to explain dynamic effects of price changes abstract the authors put forth a sales response model to explain the differences in immediate and dynamic effects of promotional prices and regular prices on sales the model consists of a vector autoregression that is rewritten in error correction format which allows the authors to disentangle the immediate effects from the dynamic effects in a second level of the model the immediate price elasticities the cumulative promotional price elasticity and the long term regular price elasticity are correlated with various brand specific and category specific characteristics the model is applied to seven years of data on weekly sales of 100 different brands in 25 product categories the authors find many significant moderating effects on the elasticity of price promotions brands in categories that are characterized by high price differentiation and that constitute a lower share of budget are less sensitive to price discounts deep price discounts increase the immediate price sensitivity of customers the

rational shopping behavior and the option value of variable pricing when a product s price fluctuates at a store how should rational cost minimizing shoppers shop for it specifically how frequently should they visit the store and how much of the product should they buy when they get there would this rational shopping behavior differ across every day low price edlp and promotional pricing hilo stores if shoppers are rational which retail price format is more profitable edlp or hilo to answer these questions we develop a normative model that shows how rational customers should shop when the price of the product is random we derive a closed form expression for the optimal purchasing policy and show that the optimal quantity to purchase under a given price scenario is linearly decreasing in the difference between the price under that scenario and the average price this purchase flexibility due to price variability has a direct impact on shopping frequency indeed the benefit of this purchase flexibility can be captured via an option value that implicitly reduces the fixed cost associated with each shopping trip consequently rational shoppers should shop more often and buy fewer units per trip when they face higher price variability our results suggest that if two stores charge the same average price for a product rational shoppers incur a lower level of expenditure at the store with a higher price variability since stores with different price variabilities coexist in practice we expect stores with higher price variability to charge a higher average price thus given two stores a higher relative mean price for a given item should be indicative of higher price variability and vice versa these model implications are tested using multicategory scanner panel data from 513 households and pricing data for three stores two edlp stores and one hilo store and 33 product categories over a two year period we find strong empirical support for the model implications

an empirical analysis of the relationship between brand loyalty and consumer price elasticity this empirical paper explores the relationship between consumer brand preference or loyalty and price elasticity in purchase behavior this behavior is conceptualized as resulting from two distinct but related decisions namely a brand choice decision and a purchase quantity decision we argue that loyal consumers will be less price sensitive in the choice decision than nonloyal consumers however this direction is expected to be reversed in the quantity decision with loyal consumers expected to be more price sensitive than nonloyal consumers we model the choice and quantity decisions jointly using the limited dependent variable framework described in krishnamurthi and raj the data used are diary panel data on a frequently purchased product class from burke and caffeinated ground coffee scanner data from iri we show that loyals are less price sensitive than nonloyals in the choice decision but more price sensitive in the quantity decision managerial implications of the differing elasticities are disc

empirical evidence on the role of non linear wholesale pricing and vertical restraints on cost pass through abstract how a cost shock is passed through to final consumer prices may relate to nominal price stickiness and rigidities the existence of nonadjustable cost components strategic markup adjustments or other contract terms along the supply distribution chain this paper presents a simple framework to assess the potential role of nonlinear pricing contracts and vertical restraints such as resale price maintenance or wholesale price discrimination in the supply chain in explaining the degree of pass through from upstream cost shocks in the ground coffee category to downstream retail prices we find that resale price maintenance increases pass through rate

revealed and stated preferences for co2 emissions reduction the missing link abstract in this paper we combine data collected from two strands of literature dealing with revealed preferences expressed by conventional vehicle drivers for fuel price variation and stated preferences expressed by consumers for alternative fuel vehicles we employ a meta analysis approach drawing data on 30 primary studies reflecting two important policy interventions which are fuel price taxation and subsidies for alternative fuel vehicles this is a new contribution in environmental and energy economics in that we rescale all primary information into a unique index which captures consumers economic attitude towards carbon dioxide co2 emission reduction in monetary terms focusing on the transport sector we compute the implicit price for the avoidance of a kilogram of co2 emissions named pco2 explaining the existing heterogeneity from several points of view the results of the meta analysis show that contextual and individual characteristics influence the implicit price for co2 emissions avoidance this implicit price is on average positive in the case of revealed preferences studies whereas it is negative in the stated preferences studies although there are some important geographical differences our results show that fuel taxes could be an important additional instrument for environmental policy

diagnostic checking of unobserved components time series models diagnostic checking of the specification of time series models is normally carried out using the innovations that is the one step ahead prediction errors in an unobserved components model other sets of residuals are available these auxiliary residuals are estimators of the disturbances associated with the unobserved components they can often yield information that is less apparent from the innovations but they suffer from the disadvantage that they are serially correlated even in a correctly specified model with known parameters this article shows how the properties of the auxiliary residuals may be obtained how they are related to each other and to the innovations and how they can be used to construct test statistics applications are presented showing how residuals can be used to detect and distinguish between outliers and structural change

competitive reactions to advertising and promotion attacks how do competitors react to each other s price promotion and advertising attacks what are the reasons for the observed reaction behavior we answer these questions by performing a large scale empirical study on the short run and long run reactions to promotion and advertising shocks in over 400 consumer product categories over a four year time span our results clearly show that the most predominant form of competitive response is passive in nature when a reaction does occur it is usually retaliatory in the same instrument i e promotion attacks are countered with promotions and advertising attacks are countered with advertising there are very few long run consequences of any type of reaction behavior by linking reaction behavior to both cross and own effectiveness we further demonstrate that passive behavior is often a sound strategy while firms that do opt to retaliate often use ineffective instruments resulting in spoiled arms accommodating behavior is observed in only a minority of cases and often results in a missed sales opportunity when promotional support is reduced the ultimate impact of most promotion and advertising campaigns depends primarily on the nature of consumer response not the vigilance of competitors

underlying trends and seasonality in uk energy demand a sectoral analysis this paper demonstrates the importance for energy demand modelling of allowing for trends and seasonal effects that are stochastic in form inherent underlying trends may be non linear and reflect not only technical progress which usually produces greater energy efficiency but also other factors such as changes in consumer tastes and the economic structure that may be working in the opposite direction using quarterly unadjusted data for various sectors in the uk it is shown that unless energy demand models are formulated so as to allow for stochastic trends and seasonals estimates of price and income elasticities could be seriously biased

examining demand elasticities in hanemann s framework a theoretical and empirical analysis this paper examines demand elasticities using an integrated framework proposed by hanemann hanemann m w 1984 discrete continuous models of consumer demand econometrica52 3 541 561 which models the incidence brand choice and quantity decisions of a consumer as an outcome of her utility maximization subject to budget constraints although the hanemann framework has been the mainstay of earlier efforts to examine these decisions jointly empirical researchers who have used the it to study purchase behavior have often found that the quantity elasticities are around 1 regardless of the brand or category we attempt to uncover the underlying reasons for this finding and propose approaches to get as close to the true quantity elasticities as possible we do this by i analytically demonstrating how assumptions on the distribution of the brand specific econometrician s errors imply certain restrictions that in turn force quantity elasticities to 1 ii discussing how these restrictions can be alleviated by considering a suitable specification of unobserved parameter heterogeneity and iii using scanner data to empirically illustrate the impact of the restrictions on quantity elasticities and the relative efficacy of multiple specifications of unobserved heterogeneity in easing those restrictions we find that the specification of unobserved heterogeneity crucially influences estimates of quantity elasticities and that the mixture normal specification outperforms the alternatives

intertemporal substitution and storable products storable products allow consumers to time their purchases to exploit price fluctuations it has been documented that during promotions consumers buy more the additional purchases are potentially intended not only for current use but to be stockpiled for future consumption this paper discusses the predictions of a consumer inventory model and reviews the available evidence we then discuss the implications for demand estimation and present estimates of jel lo l4 dl d4 the economic magnitude of the dynamic effect of storability jel lo l4 dl d4 jel lo l4 dl d4

empirical generalizations and marketing science a personal view marketing has matured to the point where it seems desirable to take stock of where we are what we have learned and fruitful directions for extending the knowledge base that has developed science is a process involving the interaction between empirical generalizations and theory an empirical generalization is a pattern or regularity that repeats over different circumstances and that can be described simply by mathematical graphic or symbolic methods one of the purposes of the empirical generalizations conference held at wharton on february 16 18 1994 was to develop a list of examples of such empirical generalizations in marketing empirical generalization can precede a theory to explain it or it can be predicted by a theory science is the process of interaction between theory and data that leads to higher level theories examples are provided here of empirical generalizations in marketing and their theoretical counterparts one example is provided of a higher level theory

pesticides productivity and farmer health a philippine case study health is recognized as one of the most important components of the human capital of rural people in developing countries there is a growing body of literature showing the productivity effects of health associated with nutrition e g bliss and stern 1978 strauss 1986 deolalikar 1988 pitt rosenzweig and hassan 1990 in this literature the productivity effects of health are inferred either by correlating health indicators with wages or by including health indicators in an agricultural production function the human capital literature also has demonstrated that farmer education plays an important role in the allocative and technical efficiency of farmers welch 1970 schultz 1975

a simultaneous approach to the whether what and how much to buy questions consumer s purchase decisions of whether to buy what to buy and how much to buy are examined simultaneously based on a consumer utility maximization problem an unobservable threshold price about which a consumer pivots from nonpurchase to purchase can be deduced with any model specification the interrelationships between purchase decisions can be explicitly derived the model is applied to coffee purchasing data in addition by suppressing the nonpurchase options the model is compared with an alternative approach appearing in the marketing literature

the impact of a product harm crisis on marketing effectiveness product harm crises are among a firm s worst nightmares a firm may experience i a loss in baseline sales ii a reduced own effectiveness for its marketing instruments iii an increased cross sensitivity to rival firms marketing mix activities and iv a decreased cross impact of its marketing mix instruments on the sales of competing unaffected brands we find that this quadruple jeopardy materialized in a case study of an australian product harm crisis faced by kraft peanut butter we arrive at this conclusion by using a time varying error correction model that quantifies the consequences of this crisis on base sales and on own and cross brand short and long term effectiveness the proposed modeling approach allows managers to make more informed decisions on how to regain the brands pre crisis performance levels

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

identifying generalizable effects of strategic actions on firm performance the case of demand side returns to r d spending this paper provides an approach for assessing generalizable effects of strategic actions on firm performance we identify five key issues that need to be addressed before one can have confidence in the obtained strategic generalization in addition we suggest a methodology for attacking each of these five issues we then illustrate this framework using the example of demand side returns to r d spending we document two empirical generalizations in this research first and foremost we show that demand returns to r d spending depend on whether the firm has ability and motivation to take advantage of the r d investment thus only firms with high ability and motivation leverage the r d investment into monopoly rents in the form of subsequent price increases second we show that the concept of a firm needing both ability and motivation to sustain returns from a strategic action generalizes across strategic actions we make two other conclusions about empirical approaches to strategy research first to pro

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

similarities in choice behavior across product categories differences between consumers in sensitivity to marketing mix variables have been extensively documented in the scanner panel data all studies of consumer heterogeneity focus on a specific category of products and ignore the fact that the purchase behavior of panel households is often observed simultaneously in multiple categories if sensitivity to marketing mix variables is a common consumer trait then one should expect to see similarities in sensitivity across multiple categories the goal in this paper is to measure the covariance of both observed linked to measured characteristics of households and unobserved heterogeneity in marketing mix sensitivity across multiple categories measurement of correlation in sensitivities across categories will serve to guide the interpretation of the literature on household heterogeneity if there is a large correlation one can be more confident that sensitivity to marketing variables is a fundamental household pr operty and not simply a category specific anomaly detection of correlation in sensitivities across categories requires an appropriate methodology that can handle the high dimensional covariance structures and properly account for uncertainty in estimatio n for example a simple approach might be to fit a brand choice model to each of the available categories in turn ignoring the data in the other categories for each category household parameter estimates could be obtained for the parameters corresponding to price display and feature sensitivity these parameter estimates could be viewed as data and the correlations across categories could be computed such a procedure could induce a downward bias in the estimation of correlation dueto the independent sampling errors which are present in each parameter estimate we develop a hierarchical model structure that introduces an explicit correlation structure across categories and utilizes the data in multiple categories at the same time to reduce the size of the covariance matrix we use a variance components approach we introduce household specific demographic variables to decompose the correlation across categories into that which can be ascribed to observable and unobservable sources shopping behavior variables such as shopping frequency and market basket size as well as intensity of shopping in a category are also included in the model using data on five categories we find substantial and statistically important correlations ranging from 32 for price sensitivities to 58 for feature sensitivity these correlations are much larger than the correlations obtained with the state of the art techniques available prior to our work we attribute our ability to detect substantial correlations to our method which involves the joint use of multiple category data in a parsimonious and efficient manner unlike previous studies with panel data household demographic variables are found to be strongly related to price sensitivity higher income households are less price sensitive and large families are more price sensitive shopping behavior variables are also important in explaining price sensitivity households that visit the store often are more price sensitive households with larger market baskets are less price sensitive confirming the view of bell and lattin 1998 heavy user households tend to be both less price sensitive and less display sensitive the evidence presented here of substantial correlations validates in part the notion that sensitivity to marketing mix variables is a consumer trait and is not unique to specific product categories it also opens the possibility of using information across categories in making inferences about consumer brand preference and marketing mix sensitivity providing a richer source of information for target marketing

the cross price effect on willingness to pay estimates in open ended contingent valuation abstract previous literature has shown that potential buyers use a reference price or product to form their opinion about the value of a new product therefore the pricing decision is an interactive process we investigate the two generalizations of the cross price effect the neighborhood price effect and the asymmetric price effect on consumer willingness to pay wtp for multiple similar products in an open ended contingent valuation context results show that the cross price effect on wtp is prominent with the neighborhood price effect holding in contingent valuation no conclusions are reached about the asymmetric price effect