reconciling the old and new census bureau education questions recommendations for researchers beginning with the 1990 census and the january 1992 current population survey cps the bureau of the census changed the emphasis of its educational attainment question from years of education to degree receipt using a matched sample from the 1991 and 1992 march cps this article addresses how to reconcile the old and new questions the effects of those methods on the estimated return s to education are then examined both the estimated linear return and the estimated college high school wage differential are slightly larger using information from the new question

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

advanced supply chain planning with mixtures of backorders lost sales and lost contract abstract this paper investigates a supply chain system in which a supplier prepares for the selling season by building stock levels prior to the beginning of the season and shortages realized at the beginning of the season are represented as mixtures of backorders and lost sales backlogged items are replenished as soon as possible through an emergency procurement as opposed to waiting until the next scheduled delivery as in many continuous review scenarios and the backorder rate is modeled as a piecewise linear function of the magnitude of the shortage the often intangible cost associated with lost sales and customer goodwill is also quantified in particular the buyer and supplier are engaged in a contractual agreement and the loss of customer goodwill from the supplier s perspective is represented as the expected cost associated with violating the conditions of the contract the likelihood of contract cancellation is also represented as a function of the magnitude of shortage the optimal solution is derived in closed form for the case of exponential demand distribution and an example problem is illustrated with numerical data in order to demonstrate calculation of the optimal solution and corresponding sensitivity analysis for demand distributions in which the solution cannot be expressed in closed form

optimal joint pricing and lot sizing with fixed and variable capacity this paper examines previously unexplored fixed and variable capacity problems of jointly determining an item s price and lot size for a profit maximizing firm facing constant but price dependent demands over a planning horizon we apply geometric programming to these constrained nonlinear maximization problems with nonconcave objective functions and obtain global optimal solutions using kuhn tucker condition marginal and sensitivity analyses we investigate model interactions provide managerial implications on the optimal capacity decisions and explore the postoptimal behavior of the price lot size and capacity expansion and reduction size some findings cast interesting insights different from previous just in time management studies without pricing consideration

optimal shared savings contracts in supply chains linear contracts and double moral hazard in many supply chains consumption of indirect materials sold by a supplier to a customer for use in her production process can be reduced by efforts exerted by either party since traditional supply contracts provide no incentive for the supplier to exert such effort shared savings contracts have been proposed as a way to improve incentives in the channel leading to more efficient effort choices by the two parties such shared savings contracts typically combine a fixed service fee with a variable component based on consumption volume we formalize this situation using the double moral hazard framework in which both parties decide how much effort to exert by trading off the cost of their effort against the benefits that they will obtain from reduced consumption we also extend the double moral hazard framework to analyze a broader class of cost of effort functions than considered so far including the linear cost of effort functions commonly found in practice we show that the supplier can still always induce the optimal second best equilibrium with a linear shared savings contract under this broader class of functions however the behavior of the optimal contract as a function of the problem parameters becomes more complex we illustrate how small changes in the problem parameters can turn profits from being a well behaved to a poorly behaved function of the contract and provide some theoretical characterization of this phenomenon the practical significance of this is that simple linear contracts are sufficient in many double moral hazard contexts even for the broader class of functions we consider but care must be taken in selecting the optimal contract parameters

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

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

pricing competition with inventory considerations in a hazard rate prone market of durables abstract this paper addresses bertrand type pricing competition between two firms producing partially differentiated durables over a finite planning horizon the demand for durables characterized by increasing returns of scale to a price reduction is led by the hazard rate while the effect of inventories on pricing of non durables is widely recognized the management and marketing literature typically overlooks this effect in regard to horizontally competing firms for durables in this paper we show that the pricing trajectory of durables may significantly alter when inventory dynamics are accounted for in particular the price may hike upwards before dropping gradually grow or even stay at the same level over the entire product life while it would only decline if inventories and related costs are disregarded furthermore the well known optimal pricing strategy of following the pattern of sales does not necessarily confirm even for symmetric equilibria when the competing firms have either an inventory surplus or shortage

coordination of internal supply chains in vertically integrated high tech manufacturing organizations htmos abstract this paper uses economic mechanisms to coordinate supply chains within high tech manufacturing organizations htmos it models the one shot initial production and allocation decisions involved in the production and marketing of new technologies these decisions are driven by the economic objectives of the firm and of the employees with private information the experts it analyzes and compares the efficiency of three coordination policies centralized command and control centralized revelation and decentralized revelation it shows that decentralized policies introduce an additional cost and it proposes rules of thumb for coordinating supply chains within firms that use many experts

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

target pricing demand side versus supply side approaches abstract the practice of target pricing has been a key factor in the success of japanese manufacturers in the more commonly known demand side approach the target price for the supplier equals the manufacturer s market price less a percent margin for the manufacturer but no cost improvement expenses are shared in the supply side approach cost improvement expenses are shared and the target price equals the supplier s cost plus a percent margin for the supplier using a general oligopoly and cournot duopoly models we characterize the equilibrium and optimal policy for each approach under various conditions we find that sharing cost reduction expenses allows the manufacturer using the supply side approach to attain competitive advantage in the form of increased market share and higher profit particularly in industrial conditions where margins are thin and price sensitivities are high

attraction versus linear and multiplicative market share models an empirical evaluation linear and multiplicative market share models are compared with the attraction specification on the basis of both predictive and descriptive measures the data used represent 15 brands in three dif

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

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

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

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

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

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

resource allocation to defensive marketing and manufacturing strategies abstract in this paper we investigate the coordinated use of marketing and manufacturing strategies to formulate a defensive business strategy for an incumbent firm upon market entry while defensive marketing strategies have been researched extensively little has been done on defensive manufacturing strategies and even less on coordinating these two we propose a formulation for the joint formation of a defensive strategy by the marketing and production functions under budget constraint considerations the incumbent firm may allocate its resourcesto advertising and distribution expenditures as well as to manufacturing investments to reduce the unit production cost the incumbent firm has also the option of simply allocating all of its resources purely to advertising and distribution we show that while there exist cases where the optimal reaction to entry involves investments in manufacturing improvements there are also cases where defense is in marketing strategies alone we identify the market conditions that promote such reactions to entry and also provide sensitivity analysis

repeated optional gambles and risk aversion we analyze in this paper the effect of age on the optimal dynamic strategy toward repeated independent gambles when deciding to accept or to reject a lottery that is offered today the gambler knows how many lotteries can yet be played in the future we first characterize the optimal dynamic strategy when future lotteries are identically distributed we show that the existence of future lotteries always increases the willingness to gamble today when the sequence of lotteries is independent but not identically distributed we show that this does not need to be true this analysis can be applied to the problem of investing in indivisible risky investment projects or to the problem of dynamic optimal insurance demand

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

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

a note on the effect of optimal advertising on the distribution free newsboy problem abstract recently lee and hsu 2011 study the advertising effect on the distribution free newsboy problem in one of their results they show that the optimal expenditure on advertising the optimal order quantity and the optimal lower bound on the expected profit increase with the advertising effect parameters although this result holds in general it requires additional assumptions in this note we provide the necessary and sufficient conditions under which the statements of lee and hsu 2011 hold these conditions are shown to be violated if the advertising expenditure is too low or there is a very small difference between the optimal profit and the profit without advertising

on modeling the advertising operations interface under asymmetric competition abstract using a market share attraction structure of advertising competition and following a supermodular game approach this article demonstrates for an asymmetric oligopoly the directional impact of changes in model parameters on the marketing controlled variables of all rivals advertising budgets and the operations controlled variables of all rivals ordered quantities importantly the various changes are examined analytically empirically and numerically in both non dominated and dominated asymmetric oligopolies in this regard the results indicate that firms in a dominated oligopoly one firm of market share larger than or equal to 50 behave differently compared to firms in a non dominated oligopoly each firm of market share less than 50 in response to changes in model parameters furthermore changes in model parameters are investigated in terms of their relative influential impact on a variety of equilibrium measures in this regard the findings indicate that for the analyzed model the marketing parameters exert much more influence on the equilibrium measures than the operations parameters additionally a change in the mode of competition from non cooperation oligopoly to cooperation joint ownership dictates that strong asymmetric firms of favorable marketing and operations parameters continue advertising but at lower levels and weak asymmetric firms of less favorable parameters cease advertising altogether

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

the effect of advertising on the distribution free newsboy problem abstract advertising is very important for the newsboy problem because the shelf life of the newsboy product is short and advertising may increase sales to avoid overstocking in this paper models to study the effect of advertising are developed for the distribution free newsboy problem where only the mean and variance of the demand are known as in khouja and robbins 2003 it is assumed that the mean demand is an increasing and concave function of advertising expenditure three cases are considered 1 demand has constant variance 2 demand has constant coefficient of variation and 3 demand has an increasing coefficient of variation this paper provides closed form solutions or steps to solve the problem numerical results of the model are also compared with those from other papers the effects of model parameters on optimal expenditure on advertising optimal order quantity and the lower bound on expected profit are derived or discussed

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

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

note note on optimal ordering quantity to realize a pre determined level of profit in this note we consider the one period inventory model in which it is required to determine the order quantity which maximizes the probability of realizing a predetermined level of profit r we give a condition for determining the optimal order quantity and provide explicit expressions for the optimal order quantity in three special cases

management of a periodic review inventory system using bayesian model averaging when new marketing efforts are made abstract many companies invest in various marketing efforts such as price promotion and advertising in order to attract new customers and build customer loyalty this paper examines the problem of setting efficient inventory levels when new marketing efforts are made and product demand is autocorrelated we assume that the inventory manager operates with a base stock policy based on a critical fractile if marketing has a temporary effect the underlying demand tends to revert to a long term equilibrium trend and the inventory manager needs to use a stationary demand model e g autoregressive model to determine the required inventory level in contrast if the effect is permanent demand shocks contain an element that represents a permanent departure from previous levels and a non stationary demand model e g random walk needs to be used instead we show that the required inventory behaves much differently for the case of using a stationary demand model as opposed to a non stationary model but it is difficult in practice to identify a correct demand model in the absence of a long sampling span in this paper we propose an inventory model that explicitly acknowledges uncertainty over stationary and non stationary demand models in response to new marketing efforts the proposed model averages the inventory policies of the two demand models weighted by each model s posterior probability this is an extension of bayesian model averaging simulation results demonstrate that the bayesian model averaging inventory model improves the inventory system

the value of pre decision side bets for utility maximizers if an alternative is attractive only at certain wealth levels of a decision maker typically above some critical level then there will be occasions when it is better to enter into an independent side bet prior to making a decision than to accept or reject the alternative outright

a contextual uncertainty condition for behavior under risk suppose that your choice between uncertain financial prospects is made more difficult by two independent contextual uncertainties concerning the size of your existing wealth one contextual uncertainty has a greater spread than the other if you could resolve one of these contextual uncertainties before making your choice would you rather it be the larger or the smaller in this paper we explore the intuitive notion that it ought to be more advantageous to resolve larger rather than smaller contextual uncertainties the utility function for wealth uw aw be cwa b c 0 is the only utility function that satisfies this condition and that is also increasing and risk averse at all wealth levels

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

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

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

pre season stocking and pricing decisions for fashion retailers with multiple information updating abstract motivated by the industrial practice we investigate in this paper the pre season inventory and pricing decisions for fashion retailers before the selling season a retailer can place orders for a seasonal fashion product from her supplier at two distinct stages via two different delivery modes market information from the sales of a pre seasonal product is collected and used to update the demand forecast of the seasonal product at the succeeding stages by using bayesian approach we formulate a dynamic optimization problem and obtain the optimal stocking policy after the ordered seasonal product has arrived and just before the start of the selling season the retailer can determine the optimal selling price of the product with respect to the latest demand information and the amount of product on hand we study the pricing policy under different objectives sensitivity analysis is carried out and the features of the policies are revealed managerial insights are generated

marketing production decisions in an industrial channel of distribution this paper presents a model that considers the interface between marketing and production decisions in a channel of distribution of industrial goods comprised of a manufacturer and a distributor the key issue investigated is the nature of the coordination within the channel in light of an unstable pattern of seasonal demand the investigation which focuses on dynamic issues considers production activities such as product delivery and inventory policy and their link to marketing strategies such as pricing policies the focus here is on the dynamic nature of the coordinational aspects of the various policies for example the following questions are addressed what is the distributor s pricing strategy throughout the season what is the nature of the contractual price in the channel under what conditions should the distributor carry no inventory throughout the seasonal period under what conditions should the manufacturer carry no inventory what is the impact of the seasonal parameters and differing h

the newsboy problem under progressive multiple discounts abstract previous research on the newsboy problem is based on the assumption that excess inventory is either discounted once and sold or disposed of real world settings especially in the apparel industry involve many cases where multiple discounts are used under multiple discounts a retailer has a series of discounts that are progressively used as the product remains on the shelf in this paper we formulate and solve a newsboy problem with multiple e discounts the new problem is solved with the objectives of 1 maximizing the expected profit and 2 maximizing the probability of achieving a target profit we show that multiple discounts when possible provide higher expected profit than using a single discount we verify the analytical results using numerical integration and illustrate the results with numerical examples

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

pioneers marketing mix reactions to entry in different competitive game structures theoretical analysis and empirical illustration pioneers marketing mix reactions to new entries are recognized as important determinants of the outcome of pioneerlate mover competition particularly in price inelastic markets such as those for pharmaceuticals cigarettes and luxury goods managers in such markets are interested in better understanding when to accommodate i e decrease marketing spending or retaliate i e increase spending in nonprice marketing variables such as advertising and salesforce in addition the reallocation of marketing resources toward advertising indicated by a pull strategy or salesforce indicated by a push strategy upon entry is strategically important to managers previous theoretical research shows that pioneers should retaliate in both static and growing markets results from empirical research are mixed in that they support both accommodation and retaliation in growing markets empirical research also shows that a pioneer accommodates retaliates with its low high elasticity marketing mix variable contrary to prior research however some pioneers have successfully accommodated late movers in growing markets and in some cases have accommodated with their stronger marketing mix variables and also retaliated with their weaker marketing mix variables for example bristol myers squibb s capoten accommodated the entry of merck s vasotec in the growing ace inhibitors market with its more powerful variable salesforce but also retaliated with its less potent variable advertising moreover not much is known about how the pioneer s marketing mix allocation should change i e toward pull vs push strategies in response to new entries we seek to better explain the pioneer s reactions and predict its shift in marketing mix allocation upon new entry we note that prior research s predictions on the pioneer s reactions are based on a limited number of key factors such as product market characteristics and the pioneer s elasticities prior to a new entry in this paper we extend previous research by adding two other critical factors namely the impact of new entry on the pioneer s elasticities and margin and different competitive game structures to better predict and explain the pioneer s reactions we develop analytical results on the pioneer s reactions in price advertising and salesforce in different competitive games both nash and different leader follower games in these results we identify the conditions under which the pioneer should accommodate or retaliate or not react to a late mover s entry and shift its marketing mix allocation toward pull versus push strategies we empirically illustrate some of the analytical results using data from a pharmaceutical category we show that a pioneer who adopts a follower leader role with respect to a marketing mix variable in a static growing market and witnesses a decrease an increase in own elasticity and margin upon a new entry generally should accommodate retaliate in that variable however we are also able to show that there are cases where these general reactions don t hold thus for example it is possible for a pioneer to find it optimal to accommodate in a growing market or to retaliate even when its elasticity decreases upon entry depending on the combination of competitive game the impact of entry on elasticities and margin and market growth in this way our results point to the fact that it is necessary to look not only at one factor at a time but instead examine the combination of all the factors we explain the empirical support for both accommodation and retaliation in growing markets by showing that the pioneer should accommodate retaliate a late mover with its competitively low high elasticity marketing mix variable competitively high low elasticity variables are not are likely to be significantly reduced by a new entry in the anticipated competitive game with regard to reallocation of the pioneer s marketing mix we show that the change in the pioneer s marketing mix allocation should follow the change in the relative marketing mix effectiveness after new entry this in turn depends on the structure of competition the impact of the late mover on its elasticities and margins and the competitor s marketing mix elasticities in addition to own elasticities the results can guide managers on how factors such as competitive structure changes in elasticities and margin and market growth impact the pioneer s marketing mix decisions and on when to accommodate retaliate or not react to a late mover s entry and shift marketing mix allocation toward pull versus push strategies

an investigation of the equal commission rate policy for a multi product salesforce for a multi product sales force the policy of paying commissions as an equal percentage of realized gross margins is shown to be in general nonoptimal from the firm s profit maximization point of view for a homogeneous salesforce the nonoptimality results from the fact that earlier research while taking into account the effect of commission rates on a salesperson s allocations of total time to the multiple products has not incorporated the effect of commission rates on salesperson s total selling time resulting from his her trading off income vs total time to maximize utility the equal commission rate policy is however optimal for the cases of i salesperson with a fixed total selling time and a minimum income requirement and ii fair income salesperson whose total selling time is merely a function of income and not based on rate of change of income as in the utility maximization case if the salesforce is heterogeneous e g different salespersons have differing sales responses to selling time this makes the equal commission rate policy to be in general nonoptimal even for the restrictive cases i and ii it is suggested that the commission rates be set higher for products with greater elasticities relating quantities sold to selling times the common practice of paying commissions as a percentage of total dollar sales rather than gross margins is shown to be optimal under certain assumptions

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

salesforce compensation plans in environments with asymmetric information in this paper we present a theory of salesforce compensation plans to provide insights into why it may be advantageous for a profit maximizing firm to offer members of its salesforce the opportunity to choose from a menu of compensation plans although such contractual arrangements are not commonly used in the industry they have been introduced and implemented by firms such as ibm and st regis paper as in our previous work on salesforce compensation plans basu lal srinivasan and staelin basu a k r lal v srinivasan r staelin 1985 salesforce compensation plans an agency theoretic perspective marketing sci 4 fall 267 291 we use an agency theory framework in this paper we relax the assumptions of information symmetry and salesforce homogeneity and show the conditions under which it is optimal to offer a menu of compensation plans we also show that even when these assumptions are relaxed there are situations where offering a single plan characterized by basu lal srinivasan and staelin basu a k r lal v srinivasan r staelin 1985 salesforce compensation plans an agency theoretic perspective marketing sci 4 fall 267 291 is still optimal insights gained from the analyses are discussed in the context of an existing compensation scheme

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

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

effects of constrained supply and price contracts on agricultural cooperatives planning strategies depend in part on the supply flow structure of a supply chain in food supply chains many firms are constrained by raw material supply e g vegetables and milk this paper first examines the economic consequences of constrained supply in agricultural cooperatives secondly it deals with the effects of adding price contracts to the current cooperative contract this model combines an inventory policy approach and a monte carlo simulation to take into account price uncertainty we illustrate our results using the case of a dairy cooperative c 2008 elsevier b v all rights reserved

dynamic decision making in a two stage supply chain with repeated transactions abstract this research investigates how the experience learned in repeated transactions by consumers and manufacturers would affect supply chain partners strategic decisions such as price order quantity and service level consumer demand depends on two factors 1 retailer price and 2 service level provided by the manufacturer in the past and current transaction periods game theory is used to understand interactions between the horizontally competitive suppliers and their vertical interactions to the common retailer in the one period looking ahead decision environment dynamic system concepts are integrated into the game theoretic model for understanding the evolution of the strategic decisions over multiple time periods the research shows that the manufacturer with any type of cost advantage for providing more services to its customers will capture a larger market than its competitor comparison of our model to the myopic model indicates that the myopic suppliers who ignore the customer learning effect on future periods shrink their market sizes and earn less profit over time the manufacturers who use the learning experience to plan future investment can prevent this phenomenon from happening and enhance their competitiveness

on the prediction power of market share attraction models logical consistency of market share models has received considerable attention in the recent marketing literature the reports suggest that at least theoretically attraction type specifications a

tracking the returns to education in the 1990s bridging the gap between the new and old current population survey education items the current population survey cps is used for many studies examining trends in the returns to education the cps changed its education item in 1992 this paper develops adjustment factors for earnings at different education levels to make pre and post 1992 earnings comparable to accomplish this contradictory results from alternative data sources are analyzed and to the extent possible reconciled the adjustments reduce the estimated growth in the college high school earnings ratio between 1989 and 1993 by between 29 and 48 percent for men and between 44 and 73 percent for women

information sharing in a long term supply chain relationship the role of customer review strategy in this paper we study the practice of forecast sharing and supply chain coordination with a game theoretical model we find that in a one shot version of the game forecasts are not shared truthf

a note on budget allocation for market research and advertising abstract firms that introduce new products often conduct market research to reduce the substantial uncertainty in demand when a fixed budget is assigned to marketing oriented activity investments in market research must be balanced against other advertising expenses we characterize a firm s optimal marketing and production decisions for a new product the larger a firm s production cost the higher is the cost associated with unsold products market research increases the forecast accuracy and thus reduces the risk of overage as a consequence one might expect that a firm s investment in market research should be higher if it faces higher production costs interestingly we find that an increase in the production cost may sometimes lead to a decrease in the optimal investment in market research even when the marketing budget is not restrictive

product selection for newsboy type products with normal demands and unequal costs abstract in this paper we consider two newsboy type products with unequal prices and costs both demands are independent and follow normal distributions with unknown parameters and we study the product selection problem which deals with comparing two products and selecting the one that has a significantly higher profitability in which the profitability is defined to the probability of achieving a target profit under the optimal ordering policy the statistical hypothesis testing methodology is performed to tackle this selection problem critical value of the test is calculated to determine the selection decision sample size required for a designated power and confidence level is also investigated an application example on comparing english teaching magazines is presented to illustrate the practicality of our approach

inventory control with an exponential utility criterion a base stock policy is shown to be optimal when a dynamic version of the news vendor model is optimized with respect to an exponential utility criterion

asymmetric information incentives and intrafirm resource allocation this paper considers the question how should a firm allocate a resource among divisions when the productivity of the resource in each division is known only to the division manager obviously if the divisions as represented by their managers are indifferent among various allocations of the resource the headquarters can simply request the division managers to reveal their private information on productivity knowing that the managers have no incentive to lie the resource allocation problem can then be solved under complete or at least symmetric information this aspect is a flaw in much of the recent literature on this topic i e there is nothing in the models considered which makes divisions prefer one allocation over another thus although in some cases elaborate allocation schemes are proposed and analyzed they are really unnecessary in the model we develop a division can produce the same output with less managerial effort if it is allocated more resources and effort is costly to the manager we further assume that this effort is unobservable by the headquarters so that it cannot infer divisional productivity from data on divisional output and managerial effort given these assumptions we seek an optimal resource allocation process our results show that certain types of transfer pricing schemes are optimal in particular if there are no potentially binding capacity constraints on production of the resource then an optimal process is for each division to choose a transfer price from a schedule announced by the headquarters division managers receive a fixed compensation minus the cost of the resource allocated to them at the chosen transfer price resources are allocated on the basis of the chosen transfer prices if there is a potentially binding constraint on resource production a somewhat more complicated but similar scheme is required

new estimates for wage rate inequality using the employment cost index the employment cost index measures the change in wage rates for a fixed set of jobs over time the separate indices for industry and occupation groups grew at varying rates during the 1980s however their growth rates have been much more similar since then which implies that the increase in the wage rates of low wage workers relative to middlewage workers during the 1990s was due to changes in the mix of jobs had all workers remained in their jobs the relative wage of low wage to middle wage workers would have remained constant

on manufacturing marketing incentives stereotypically marketing is mainly concerned about satisfying customers and manufacturing is mainly interested in factory efficiency using the principal agent agency paradigm which assumes that the marketing and manufacturing managers of the firm will act in their self interest we seek incentive plans that will induce those managers to act so that the owner of the firm can attain as much as possible of the residual returns one optimal incentive plan can be interpreted as follows the owner subcontracts to pay the manufacturing manager a fixed rate for all capacity he delivers each marketing manager receives all of the returns from his product in turn all managers pay a fixed fee to the owner under this plan the marketing managers will often complain about the stock level decisions even though these levels are announced in advance under a revised plan the owner can eliminate such complaints by delegating the stocking decisions to the respective marketing managers without any loss this plan is interpreted as requiring the owner to make a futures market for manufacturing capacity paying the manufacturing manager the expected marginal value for each unit of capacity delivered receiving the realized marginal value from the marketing managers and losing money on average in the process

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

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

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

on the robustness and strategic implications of a parsimonious advertising inventory competitive model with extensions to pricing competition abstract using a market share attraction structure of advertising competition this research introduces first a parsimonious inventory advertising model for which competition is limited to two symmetric firms thus obtaining its related comparative statics following a supermodular game approach the derived comparative statics remain robust upon considering non dominant firms each with a market share of less than 50 competing in an asymmetric oligopoly of n rivals where each firm controls the inventory advertising decision variables furthermore changes in model parameters are investigated in terms of their relative impact on equilibrium measures in this regard the findings indicate that for the analyzed model the marketing parameters possess much more influence on the equilibrium measures than the operations parameters the generalization appears applicable to both non dominated oligopolies as well as dominated oligopolies where one firm has a market share equal to or greater than 50 where each firm controls the inventory advertising decision variables in addition to price however changes in shift parameters elicit a response from the dominant firm which will differ from its non dominant rivals for products and services additionally while the literature shows that the non dominant firm will pursue a defensive strategy of decreasing both the equilibrium price and the amount of equilibrium advertising in response to competitive entry our findings show that results for a fixed market potential may not continue to be robust once inclusion of the operations variables of order quantity are considered finally the study explores the implications of the free entry equilibrium for which the number of firms in the industry is determined endogenously

linking advertising and quantity decisions in the single period inventory model abstract the single period problem spp also known as the newsboy or news vendor problem is to find the order quantity which maximizes the expected profit in a single period probabilistic demand framework interest in the spp remains unabated and many extensions to it have been proposed in the last decade an important aspect of the spp is the effect of advertising on sales in this paper we extend the spp to a case in which advertising leads to increases in sales we assume that the mean demand is increasing and concave in advertising expenditure and address three cases of demand variance as a function of advertising expenditure 1 demand has constant variance 2 demand has constant coefficient of variation and 3 demand has an increasing coefficient of variation we deal with two objectives a maximizing the expected profit and b maximizing the probability of achieving a target profit we provide closed or near closed form solutions to the problem under uniform exponential and normal demand distributions we illustrate the results using numerical examples and provide some insights into the effect of advertising

percentage rent contracts between co stores abstract high rental rates and space scarcity in popular retail areas are encouraging retailers to share available space creating co stores co stores with complementary products enjoy a boost in foot traffic thus higher sales when the space is owned by one a common practice for retailers is to engage in a revenue sharing agreement we study the optimal design of a percentage rent contract between two co stores each having his her own random sales dependent on effort levels of both retailers since the effort level exerted by a retailer is often unverifiable it results in a double moral hazard problem we show that a linear percentage rent which is composed of a sales share and a based rent achieves the second best effort levels the landlord may also find it optimal to set a fixed rent by setting the sales share to zero with cobb douglas sales and power disutility of effort functions we obtain closed form expressions for the optimal contract we show that the landlord charges a high sales share for a tenant with low demand externality and a high sales scale the landlord is better off renting out space to a small but high revenue generating retailer rather than one generating larger traffic but with lower sales scale when the landlord s externality potential is low but he is successful in generating sales optimal sales share is low but the base rent is high the percentage rent can increase the landlord profit by up to 13 compared to the conventional fixed rent

reordering strategies for a newsboy type product abstract this paper considers the very common situation in which a single period newsboy type product may be ordered or produced twice during a season period we show that the explicit consideration of this reorder opportunity makes the newsboy problem very much richer the specific version considered in this paper allows a reorder during mid season after the early season demand has been observed and this reorder arrives after a given lead time the demand distributions during the various portions of the season may have very general distribution forms also the late season and early season demands may be dependent solution procedures are developed to find the best way to exploit this reorder opportunity and our numerical solutions indicate that this reorder opportunity can improve profits considerably as long as the product s profit margin is not very high other real world variations of this two order newsboy problem are briefly discussed

product warranties and double moral hazard this article explores a model of warranties in which moral hazard problems play a key role the goal is to understand the important characteristics of warranties including their provision of incomplete insurance and the relationship between product quality and coverage we analyze a model in which buyers and sellers take actions that affect a product s performance since these actions are not cooperatively determined an incentives problem arises we characterize the optimal warranty contract and undertake comparative statics to determine the predicted correlation of warranty coverage and product quality

investment flexibility and the acceptance of risk abstract the hypothesis examined in this paper is that the greater the investor s flexibility the easier it is for him to change his portfolio depending on his results the more willing he will be to accept risks when the investor has no control on the size of the risky investment but can choose between one risky and one riskless asset this conjecture is shown to be correct however if there is more than one risky asset each period counterexamples demonstrate that flexibility rarely ensures greater risk taking for the standard portfolio problem in which investors are free to determine the size of their investment in a risky asset flexibility always raises the demand for the risky asset if constant relative risk aversion is less than unity but counterexamples can always be found when the constant relative risk aversion is larger than unity journal of economic literatureclassification numbers g11 d81 d84

intertemporal efficiency analysis of sales teams of a bank stochastic semi nonparametric approach abstract the primary role of a bank branch is evolving from a service provider towards a sales channel previous branch level studies of sales efficiency consider a static setting of a single time period ignoring the stochastic nature of sales outcomes in this paper we examine efficiency and performance of sales teams in a bank branch network over time taking into account the changing demand and operational conditions as well as random disturbances the intertemporal sales frontier is estimated from the panel of monthly data over the years 2007 2010 using the stochastic semi nonparametric envelopment of data stoned method the efficiency scores of sales teams and the trajectories of performance over time allow managers and the sales force to learn from past events and to develop the managerial and work practices across the network while this study focuses on the case of a specific bank some of the innovative features of our approach are applicable to sales efficiency assessment in other banks and financial institutions as well as other network based sales organizations

manufacturer buyer coordination for newsvendor type products with two ordering opportunities and partial backorders abstract in a recent paper weng z k 2004 coordinating order quantities between the manufacturer and the buyer a generalized newsvendor model european journal of operational research 156 148 161 a newsvendor type coordination model was developed for a single manufacturer single buyer channel with two ordering opportunities this paper further extends the model to the case where the excess demand after the first order is partially backlogged and both parties share the manufacturing setup cost of the second order if happened we show that the decentralized system would perform best if the manufacturer covers utterly the second production setup cost which is opposite to that obtained in weng 2004 another extension in the present paper is that in the centralized system the second order decision is made by the buyer based on the channel s benefit rather than based on the buyer s benefit as in weng 2004 it is proved that the expected profit of the system in our paper is always larger than that in weng 2004 in order to maximize the expected profit of the channel two coordinated policies are proposed to achieve perfect coordination a two part tariff policy for the special case that the buyer pays all the manufacturing setup cost and a revised revenue sharing contract for the case that two parties share the manufacturing setup cost

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

on the predictive power of market share attraction models the authors test naert and weverbergh s empirical finding that attraction type specifications are characterized by a predictive power greater than that of their nonrobust counterparts the empirica

testing alternative econometric models on the existence of advertising threshold effect threshold effect of advertising has received wide attention in the marketing literature but little formal representation of this phenomenon has been developed on the basis of monthly time series

comment on dynamics of price elasticity and brand life cycles an empirical study a 1979 study by simon made several important contributions to the analysis of price elasticity over the brand life cycle however the author suggests that the elasticity estimator used in that stu

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

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

dynamic business share allocation in a supply chain with competing suppliers this paper studies a repeated game between a manufacturer and two competing suppliers with imperfect monitoring we present a principal agent model for managing long term supplier relationships using a unique form of measurement and incentive scheme we measure a supplier s overall performance with a rating equivalent to its continuation utility the expected total discounted utility of its future payoffs and incentivize supplier effort with larger allocations of future business we obtain the vector of the two suppliers ratings as the state of a markov decision process and we solve an infinite horizon contracting problem in which the manufacturer allocates business volume between the two suppliers and updates their ratings dynamically based on their current ratings and the current performance outcome our contributions are both theoretical and managerial we propose a repeated principal agent model with a novel incentive scheme to tackle a common but challenging incentive problem in a multiperiod s