shopping around how households adjusted food spending over the great recession over the great recession real wages stagnated and unemployment increased concurrently food prices rose sharply outstripping growth in food expenditure and leading to a reduction in calories purchased this has led to concern about rising food poverty we study british households to assess how they adjusted to changes in the economic environment we show they switched to cheaper calories implying food consumption was smoother than expenditure we use longitudinal data to quantify the way households lowered their per calorie spending and show they done this in part by increasing shopping eort and without lowering the nutritional quality of

carbon pass through in the electricity sector an econometric analysis abstract we conduct an econometric analysis to investigate the carbon pass through in the greek electricity sector for this reason we utilize a rich micro level panel dataset including hourly data for 24 thermal power plants spanning the period from january 2014 to december 2017 in order to study the pass through of emissions costs to wholesale electricity prices we employ an instrumental variable approach our findings survived several robustness checks accounting for logged linear and non linear econometric specifications the empirical results indicate the existence of an almost complete pass through revealing that retailers fully internalize the cost of co2 permits this study incurs important policy implications since the complete pass through signify that wholesale electricity prices will increase at least in the short run however the overall effect on retail prices will be mostly affected by the amount of co2 permits and the fuel energy mix

impact of cost shocks on consumer prices in vertically related markets the case of the french soft drink market we develop a structural econometric model of the vertical contracts between soft drink manufacturers and retailers to assess the impact of taxes or changes in production costs on consumer prices using individual data on food purchases from a representative survey of 19 000 french households in 2005 we estimate consumer demand using a random utility approach among a set of possible vertical relationships we select the model that best fits the data we evaluate the pass through rate of changes in input costs sugar or of taxes and show that the industry over shifts cost changes or excise taxes to the consumers this result challenges the belief that firms do not pass on the full extent of cost changes or excise taxes to consumers

real exchange rates and relative prices an empirical investigation abstract this paper uncovers a striking empirical regularity the consumer price of a good relative to a different good within a country tends to be much less variable than the price of that good relative to a similar good in another country this fact seems to hold for all goods except very simple homogeneous products models of real exchange rates are likely to have predictions regarding this relation so this fact may provide a useful gauge for discriminating among models

relative prices consumer preferences and the demand for food shocks to world commodity prices and the depreciation of sterling led to a large increase in the price of food in the uk it also resulted in large changes in the relative prices of different foods we document these changes and consider how they affected the composition of households shopping baskets we isolate the impact of changes in relative food prices from variation in preferences using data on purchasing decisions made by a representative panel of british households we show that changes in relative food prices led to a worsening in the nutritional quality of households shopping baskets though this was partially mitigated by offsetting changes in preferences

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

retail pricing and clearance sales sellers of new products are faced with having to guess demand conditions to set price appropriately but sellers are able to adjustprice over time and to learn from past mistakes additionally it is not necessary that all goods be sold with certainty it is sometimes better to set a high price and to risk no sale this process is modeledto explain retail pricing behavior and the time distribution of transactions prices start high and fall as a function of time on theshelf the initial price and rate of decline can be predicted and depends on thinness of the market the proportion of customers who are window shoppers and other observable characteristics copyright 1986 by american economic association

exchange rate pass through in developing and emerging markets a survey of conceptual methodological and policy issues and selected empirical findings abstractglobal integration has increased the international linkages of financial markets for emerging market countries a key channel for the international transmission of inflation and economic cycles is from exchange rate movements to domestic prices known as exchange rate pass through erpt this article reviews the conceptual methodological and policy issues connected with erpt in emerging market and developing countries and critically surveys selected empirical studies a key contribution is to categorise and compare the heterogeneous methodologies used to extract erpt measures in the empirical literature single equation models and systems methods are contrasted frequent misspecifications that produce unreliable erpt estimates are highlighted the discerning policy maker needs to ascertain by which methods erpt measures were calculated the controls and restrictions applied and the time frame and stability of the estimates

rationally inattentive seller sales and discrete pricing prices tend to remain constant for a period of time and then jump in the literature this rigidity is usually interpreted to reflect a cost of adjusting prices this article shows that price rigidity can alternatively reflect optimal price setting when there are no adjustment costs namely if the seller is rationally inattentive the model generates non trivial pricing patterns that are consistent with the data and that are hard to explain with the traditional adjustment cost model in particular prices are adjusted frequently but move back and forth between a few given values hazard functions are downward sloping and responses to persistent shocks are sluggish these results are obtained in a model that implements rational inattention without simplifying assumptions on the functional forms of the processed signals

are local minimum wages absorbed by price increases estimates from internet based restaurant menus the authors analyze 884 internet based restaurant menus from inside and outside san jose california which they collected before and after the city implemented a 25 minimum wage increase in 2013

factors influencing the adoption of state lotteries this paper explores the factors influencing the adoption of state lotteries in the united states the conceptual framework utilizes a common utility framework in which a representative legislator maximizes utility derived from the current and expected fiscal position of a state subject to a political constraint the empirical results support the theoretical hypotheses including the finding that changes in the fiscal health of the state the predicted profit potential of a lottery and the political climate of the state all affect the likelihood that a lottery is adopted by introducing a sound conceptual framework using better data than used in previous studies utilizing an appropriate estimation technique and obtaining strong results this study advances our knowledge of why states adopt lotteries

vertical contracts in the video rental industry a large body of theoretical work has explored the channels through which vertical contracts can induce efficiency improvements however it is also important to study vertical contracts empirically in order to gain insight into the relative size of different types of efficiency gains in this paper i empirically analyse a contractual innovation in the vertically separated video rental industry prior to 1998 video stores obtained inventory from movie distributors using simple linear pricing contracts in 1998 revenuesharing contracts were widely adopted i investigate the effect of the introduction of revenue sharing contracts on firms profits and consumer welfare i analyse a new panel data set of home video retailers that includes information on individual retailers contract and inventory choices as well as rentals and contract terms for 246 movie titles and 6137 retailers in the u s during each week of 1998 and 1999 and the first half of 2000 a structural econometric model of firms behaviour is developed that describes the nature of firms contract choices estimates from this model indicate that both upstream and downstream profits increase by 10 under the revenue sharing contract for popular titles for less popular titles the effects can be even larger i also estimate that consumers benefit when revenue sharing contracts are adopted

patterns of retail price variation we examine retail price variation across a range of goods and regions of the united states we find that the typical grocery product has a regular price and stays at that price at least 50 of the time and that most deviations from that regular price are downward temporary discounts or sales while infrequent account for 20 to 50 of the annual variation in retail prices for most product categories although existing models of retail sales yield predictions consistent with some aspects of the retail pricing distributions all of these models fail to explain other important aspects of retail pricing identified here

accounting for persistence and volatility of good level real exchange rates the role of sticky information abstract volatile and persistent real exchange rates are observed not only in aggregate series but also in micro price data at the retail level kehoe and midrigan 2007 recently showed that under a standard assumption on nominal price stickiness empirical frequencies of micro price adjustment cannot replicate the time series properties of the law of one price lop deviations we extend their sticky price model by combining good specific price adjustment with information stickiness in the sense of mankiw and reis 2002 our framework allows for multiple cities within a country using a panel of u s canadian city pairs we estimate a dynamic price adjustment process for 165 individual goods under a reasonable assumption on the money growth process we show that the model matches the persistence of the lop deviation for the median good and accounts for the majority of its volatility when information updates occur every 12 months

who participates in household scanning panels we compare two widely used household scanning panels maintained by the nielsen company and information resources inc to a random sample of the u s population results indicate that the demographic characteristics of the random sample more closely match the census bureau data than the household scanning panels we also show that after controlling for demographic differences participants in the household scanning panels are slightly more price sensitive than participants in the random sample the two household scanning panels yield similar results in relation to one another which suggests that the household scanning panels may suffer from sample selection and participation biases

religious beliefs gambling attitudes and financial market outcomes this study investigates whether geographic variation in religion induced gambling norms affects aggregate market outcomes we conjecture that gambling propensity would be stronger in regions with higher concentrations of catholics relative to protestants consistent with our conjecture we show that in regions with higher catholic protestant ratios investors exhibit a stronger propensity to hold lottery type stocks broad based employee stock option plans are more popular the initial day return following an initial public offering is higher and the magnitude of the negative lottery stock premium is larger collectively these results indicate that religion induced gambling attitudes impact investors portfolio choices corporate decisions and stock returns

are choice experiments incentive compatible a test with quality differentiated beef steaks this study compares hypothetical and nonhypothetical responses to choice experiment questions we test for hypothetical bias in a choice experiment involving beef ribeye steaks with differing quality attributes in general hypothetical responses predicted higher probabilities of purchasing beef steaks than nonhypothetical responses thus hypothetical choices overestimate total willingness to pay for beef steaks however marginal willingness to pay for a change in steak quality is in general not statistically different across hypothetical and actual payment settings

lumpy price adjustments a microeconometric analysis based on a reduced form state dependent pricing model with random thresholds we specify and estimate a nonlinear panel data model with an unobserved factor representing the common cost or demand components of the unobserved optimal price using this model we are able to assess the relative importance of common and idiosyncratic shocks in explaining the frequency and magnitude of price changes in the case of a wide variety of consumer products in belgium and france we find that the mean level and variability of the random thresholds are key for explaining differences across products in the frequency of price changes we also find that the idiosyncratic shocks represent the most important driver of the magnitude of price changes supplementary materials for this article are available online

menu costs and phillips curves this paper develops a model of a monetary economy in which individual firms are subject to idiosyncratic productivity shocks as well as general inflation sellers can change price only by incurring a real menu cost we calibrate this cost and the variance and autocorrelation of the idiosyncratic shock using a new u s data set of individual prices due to klenow and kryvtsov the prediction of the calibrated model for the effects of high inflation on the frequency of price changes accords well with international evidence from various studies the model is also used to conduct numerical experiments on the economy s response to various shocks in none of the simulations we conducted did monetary shocks induce large or persistent real responses

instant winners legal change in transition and the diffusion of state lotteries this paper investigates the determinants of legal change in a public choice framework an empirical model explaining the timing and probability of decisions to adopt state operated lotteries is developed employing a tobit estimator and explicitly considering the effects of state specific constitutional and political structures spending and tax policies and federal revenue importation evidence is presented showing that legal change is much like economic change lotteries are more likely to be adopted and to be adopted earlier where the costs are lowest relative to expected benefits state legislatures appear to be the main beneficiaries of this public choice process

the diffusion of judicially provided employment protection the employment at will doctrine labour economists in the private sector of the united states have historically expressed concerns that private sector employers too often terminate employees employment without just cause because the usa lakes statutory restrictions against such actions many state judicial branches seem to have taken a leading role in providing some degree of employment security the present note tests the intensity of the occurrence across states of judicially provided employment protection as a function of several demographic labour and political variables across states the maximum likelihood tobit results point out that education attainment of the voting population the current rate of unemployment and population density of the state are important factors that lead judicial branches of government across states to provide such protection at different points in time the note supports several findings of a previous study by kesselring and pittman 1993 which models the dependent variable as a zero one dummy

who bears the cost of a change in the exchange rate pass through accounting for the case of beer abstract nominal exchange rates are remarkably volatile they ordinarily appear disconnected from the fundamentals of the economies whose currencies they price these facts make up a classic puzzle about the international economy if prices do not respond fully to changes in the nominal exchange rate who bears the cost of such large and unpredictable changes foreign firms domestic firms or domestic consumers this study presents a new analysis of the sources of incomplete pass through and then uses this analysis to re examine its implications for social welfare i develop and estimate a structural model that analyzes the sources of local currency price stability for a particular industry the model enables counterfactual simulations that quantify the relative importance of firms local cost components and markup adjustments in the incomplete transmission of exchange rate shocks to prices and the effect of the exchange rate shock on domestic and foreign firms profits and on consumer surplus the model is applied to a panel dataset of one industry with retail and wholesale prices for upc level products i find that markup adjustments by manufacturers and the retailer explain roughly half of the incomplete transmission and local cost components account for the other half foreign manufacturers generally bear a greater cost or reap a greater benefit following an exchange rate induced marginal cost shock than do domestic consumers domestic manufacturers or the domestic retailer

resale price maintenance and interlocking relationships dampening of interbrand as well intrabrand competition is often advanced to justify per se illegality of rpm we analyze this argument in a context where rival manufacturers distribute their products through the same competing retailers we show that rpm indeed limits the exercise of competition at both levels and can generate industry wide monopoly pricing the impact on prices depends on the extent of potential competition at either level as well as on the parties influence in determining the terms of the contracts our analysis sheds a new light on ongoing legal developments and is supported by recent empirical studies

measuring market power in the ready to eat cereal industry the ready to eat cereal industry is characterized by high concentration high price cost margins large advertising to sales ratios and numerous introductions of new products previous researchers have concluded that the ready to eat cereal industry is a classic example of an industry with nearly collusive pricing behavior and intense nonprice competition this paper empirically examines this conclusion in particular i estimate price cost margins but more importantly i am able empirically to separate these margins into three sources i that which is due to product differentiation ii that which is due to multi product firm pricing and iii that due to potential price collusion the results suggest that given the demand for different brands of cereal the first two effects explain most of the observed price cost margins i conclude that prices in the industry are consistent with noncollusive pricing behavior despite the high price cost margins leading firms are able to maintain a portfolio of differentiated products and influence the perceived product quality it is these two factors that lead to high price cost margins

stated and revealed preferences for organic and cloned milk combining choice experiment and scanner data the u s food and drug administration s recent announcement that milk from cloned cows is as safe to drink as that from conventionally bred cows prompted interest among farmers food retailers and regulators in the market impacts of the introduction of milk from clones because milk from cloned animals is not currently labeled in the market we utilized a stated preference experiment to determine consumer preferences for the attribute but also sought to determine whether the survey based choices were consistent with people s revealed preferences given by scanner data our analysis indicates that a pooled model combining stated and revealed preference data exhibits overall better out of sample prediction performance than either data set used alone results from the pooled model indicate that consumers are willing to pay large premiums to avoid milk from cloned cows an amount that is over three times that for organic or rbst free milk the results are used to calculate the value of a mandatory labeling program

pass through in retail and wholesale this paper studies how prices comove across products firms and locations to gauge the relative importance of retailer versus manufacturer level shocks in determining prices i make use of a large panel data set on prices for a cross section of retailers in the u s i analyze prices at the barcode or universal product code upc level for individual stores i find that only 16 of the variation in prices is common across stores selling an identical product 65 of the price variation is common to stores within a particular retail chain but not across retail chains while 17 is completely idiosyncratic to the store and product product categories with frequent temporary sales exhibit a disproportionate amount of completely idiosyncratic price variation my results suggest that most of the observed price variation arises from retail level rather than manufacturer level demand and supply shocks however the behavior of prices is difficult to relate to observed variation in costs and demand at the retail level this suggests that retail prices may vary largely as a consequence of dynamic pricing strategies on the part of retailers or manufacturers rather than static demand and supply shocks this abstract was borrowed from another version of this item

cost pass through in differentiated product markets the case of u s processed cheese in this paper we estimate a mixed logit model for demand in the u s processed cheese market the estimates are used to determine pass through rates of cost changes under different behavioral regimes we find that under collusion the pass through rates for all brands fall between 21 and 31 while under nash bertrand price competition the range of pass through rates is between 73 and 103 the mixed logit model provides a more flexible framework for studying pass through rates than the logit model since the curvature of the demand functions depends upon the empirical distribution of consumer types

how closely do hypothetical surveys and laboratory experiments predict field behavior we compare the ability of three preference elicitation methods hypothetical choices nonhypothetical choices and nonhypothetical rankings and three discrete choice econometric models the multinomial logit mnl the independent availability logit ial and the random parameter logit rpl to predict actual retail shopping behavior in three different product categories ground beef wheat flour and dishwashing liquid overall we find a high level of external validity our specific results suggest that the nonhypothetical elicitation approaches especially the nonhypothetical ranking method outperformed the hypothetical choice experiment in predicting retail sales we also find that the rpl can have superior predictive performance but that the mnl predicts equally well in some circumstances experiment

price transmission and local market power empirical evidence from the austrian gasoline market we analyse the impact of local market power on price margins and different dimensions of price adjustment dynamics speed and asymmetry of price transmission using data for a large number of indiv

do hypothetical and actual marginal willingness to pay differ in choice experiments application to the valuation of the environment abstract in this paper we test the validity of choice experiments with donations for environmental projects in particular we test whether or not there are differences in preferences between a hypothetical and an actual choice experiment our experiments indicate no differences in addition internal tests of validity indicate transitive and stable preferences in both experiments although there are some indications of possible learning effects during the experiment

inventories markups and real rigidities in menu cost models a growing consensus in new keynesian macroeconomics is that nominal cost rigidities rather than countercyclical markups account for the bulk of the real effects of monetary policy shocks we revisit these conclusions using theory and data on inventories we study an economy with nominal rigidities in which goods are storable our theory predicts that if costs of production are sticky and markups do not vary much in response to say expansionary monetary policy firms react by excessively accumulating inventories in anticipation of future cost increases in contrast if the data inventories are fairly constant over the cycle and in response to changes in monetary policy we show that costs must increase and markups must decline sufficiently in times of a monetary expansion in order to reduce firm s incentive to hold inventories and thus bring the model s inventory predictions in line with the data versions of the model consistent with the dynamics of inventories in the data imply that countercyclical markups account for a sizable fraction of the response of real variables to monetary shocks

microdata evidence on the empirical importance of selection effects in menu cost models we use microdata on product prices linked to information on the producing firms that set them to study to what extent the timing of price changes reacts to changes in marginal cost this self selec

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

double marginalization and cost pass through weyl fabinger and cowan meet spengler and bresnahan reiss consider the classical double marginalization problem of single product successive monopolies we show that the ratio of the cost pass through at the final sale relative to that at the wholesale level is characterized by the curvature of inverse demand in the final market we also apply cowan s 2012 method which utilizes the idea of pass through in an analysis of third degree price discrimination to compare consumer surplus under vertical integration and separation

border prices and retail prices abstract we analyze retail prices and at the dock import prices of specific items in the bureau of labor statistics bls cpi and ipp databases using both databases simultaneously to identify items that are identical in description at the dock and when sold at retail this identification allows us to measure the distribution wedge associated with bringing traded goods from the point of entry into the united states to their retail outlet we find that overall u s distribution wedges are 50 70 around 10 to 20 percentage points higher than that reported in the literature we discuss the implications of this for measuring the size of the pure tradeables sector exchange rate pass through and real exchange rate determination we find that distribution wedges are very stable over time but there is considerable variation across items there is some variation across the country of origin for the imported item for our major trading partners but not as much as the cross item variation we also investigate the determinants of distribution wedges finding that wedges do not vary systematically with exchange rates but are related to other features of the micro data

structural analysis of manufacturer pricing in the presence of a strategic retailer consumer goods manufacturers usually sell their brands to consumers through common independent retailers theoretical research on such channel structures has analyzed the optimal behavior of channel members under alternative assumptions of manufacturer retailer interaction vertical strategic interaction research in empirical industrial organization has focused on analyzing the competitive interactions between manufacturers horizontal strategic interaction decision support systems have made various assumptions about retailer pricing rules e g constant markup category profit maximization the appropriateness of such assumptions about strategic behavior for any specific market however is an empirical question this paper therefore empirically infers 1 the vertical strategic interaction vsi between manufacturers and retailer 2 the horizontal strategic interaction hsi between manufacturers simultaneously with the vsi and 3 the pricing rule used by a retailer the approach is particularly appealing because it can be used with widely available scanner data where there is no information on wholesale prices researchers usually have no access to wholesale prices even manufacturers who have access to their own wholesale prices usually have limited information on competitors wholesale prices in the absence of wholesale prices we derive formulae for wholesale prices using game theoretic solution techniques under the specific assumptions of vertical and horizontal strategic interaction and retailer pricing rules we then embed the formulae for wholesale prices into the estimation equations while our empirical illustration is using scanner data without wholesale prices the model itself can be applied when wholesale prices are available early research on the inference of hsi among manufacturers in setting wholesale prices using scanner data e g kadiyali et al 1996 1999 made the simplifying assumption that retailers charge a constant margin this assumption enabled them to infer wholesale prices and analyze competitive interactions between manufacturers in this paper we show that this model is econometrically identical to a model that measures retail price coordination across brands hence the inferred cooperation among manufacturers could be exaggerated by the coordinated pricing category management done by the retailer we find empirical support for this argument this highlights the need to properly model and infer vsi simultaneously to accurately estimate the hsi when using data at the retail level functional forms of demand have been evaluated in terms of the fit of the model to sales data but recent theoretical research on channels lee and staelin 1997 tyagi 1999 has shown that the functional form has serious implications for strategic behavior such as retail passthrough while the logit and linear model implies equilibrium passthrough of less than 100 lee and staelin call this vertical strategic substitute vss the multiplicative model implies optimal passthrough of greater than 100 vertical strategic complement vsc because passthrough rates on promotions have been found to be below or above 100 chevalier and curhan 1976 armstrong 1991 we empirically test the appropriateness of the logit vss and the multiplicative vsc functional form for the data we perform our analysis in the yogurt and peanut butter categories for the two biggest stores in a local market we found that the vss implications of the logit fit the data better than the multiplicative model we also find that for both categories the best fitting model is one in which 1 the retailer maximizes category profits 2 the vsi is manufacturer stackelberg and 3 manufacturer pricing hsi is tacitly collusive the fact that the retailer maximizes category profits is consistent with theoretical expectations the inference that the vsi is manufacturer stackelberg reflects the institutional reality of the timing of the game retailers set their retail prices after manufacturers set their wholesale prices note that in the stores and product categories that we analyze the two manufacturers own the dominant brands with combined market shares of about 82 in the yogurt market and 65 in the peanut butter market the result is also consistent with a balance of power argument in the literature the finding that manufacturer pricing is tacitly collusive is consistent with the argument that firms involved in long term competition in concentrated markets can achieve tacit collusion managers use decision support systems for promotion planning that routinely make assumptions about vsi hsi and the functional form the results from our analysis are of substantive import in judging the appropriateness of assumptions made in such decision support systems

pass through vertical contracts and bargains abstract this paper analyzes the determinants of pass through that are specific to vertical relationships between wholesalers and retailers the type of vertical agreement firms contract upon as well as their relative bargaining power are identified as major determinants of pass through rates

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

the evolution of price dispersion in the european car market car prices in europe are characterized by large and persistent differences across countries the purpose of this paper is to document and explain this price dispersion using a panel data set extending from 1980 to 1993 we first demonstrate two main facts concerning car prices in europe i the existence of significant differences in quality adjusted prices across countries with italy and the u k systematically representing the most expensive markets 2 substantial year to year volatility that is to a large extent accounted for by exchange rate fluctuations and the incomplete response of local currency prices to these fluctuations these facts are analysed within the framework of a multiproduct oligopoly model with product differentiation the model identifies three potential sources for the international price differences price elasticities generating differences in markups costs and import quota constraints local currency price stability can be attributed either to the presence of a local component in marginal costs or to markup adjustment that is correlated with exchange rate volatility the latter requires that the perceived elasticity of demand is increasing in price we find that the primary reason for the higher prices in italy is the existence of a strong bias for domestic brancs that generates high markups for the domestic firm fiat in the u k higher prices are mainly attributed to better equipped cars and or differences in the dealer discount practices the import quota constraints are found to have a significant impact on japanese car prices in italy france and the u k with respect to local currency price stability a large percentage of the documented price inertia can be attributed to local costs and a smaller fraction to markup adjustment that is indicative of price discrimination based on these results we conjecture that the emu will substantially reduce the year to year volatility observed in the car price data but without further measures to increase european integration it will not completely eliminate existing cross country price differences

actively learning by pricing a model of an experimenting seller this article presents a model of a rational seller who is actively learning the slope of his demand curve via his pricing strategy consequently this seller optimally experiments with his price resulting price patterns show a tendency for discreteness as observed in the data which has proved to be a major challenge to most price setting models the experimentation motive can also replicate the observation that prices are more volatile than costs as well as the presence of many idiosyncratic price changes in the data it can do so without a need to assume the existence of large idiosyncratic shocks

pass through in a concentrated industry empirical evidence and regulatory implications we estimate pass through with thirty years of data from a concentrated industry the empirical model accounts for oligopoly interactions yet facilitates estimation with aggregate price data robust statistical evidence supports that industry wide cost changes are more than completely transmitted downstream and that this industry pass through is largely unaected by competitive conditions the industry in question portland cement is a major focus of environmental and antitrust regulators we use our pass through estimates to i evaluate the welfare consequences of marketbased co2 regulation ii predict the magnitude and location of price eects due to a merger under review by antitrust authorities and iii corroborate the simulation based analysis of the epa regarding its impending regulation of local pollutants

technical note sequential multiproduct price competition in supply chain networks we analyze a general model in which at each echelon of the supply process an arbitrary number of firms compete offering one or multiple products to some or all of the firms at the next echelon with firms at the most downstream echelon selling to the end consumer at each echelon the offered products are differentiated and the firms belonging to this echelon engage in price competition the model assumes a general set of piecewise linear consumer demand functions for all products potentially brought to the consumer market where each product s demand volume may depend on the retail prices charged for all products consumers preferences over the various product retailer combinations are general and asymmetric similarly the cost rates incurred by the firms at the most upstream echelon are general as well we fully characterize the equilibrium behavior under linear price only contracts and we show how all equilibrium performance measures can be computed via a simple recursive scheme moreover we establish how changes in the model parameters in particular exogenous cost rates or intercept values in the demand functions impact the system wide equilibrium these comparative statics results allow for the quantification of cost pass through effects and the measurement and characterization of the firms brand value lastly we illustrate what qualitative impacts various changes in the structure of the supply chain network may bring forth

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

contingent valuation controversies and evidence contingent valuation cv has become one of the most widely used non market valuation techniques cv s prominence is due to its flexibility and ability to estimate total value including passive use value its use and the inclusion of passive use value in benefit cost analyses and environ mental litigation are the subject of a contentious debate this paper discusses key areas of the debate over cv and the validity of passive use value we conclude that many of the alleged problems with cv can be resolved by careful study design and implementation we further conclude that claims that empirical cv findings are theoretically inconsistent are not generally supported by the literature the debate over cv however has clarified several key issues related to nonmarket valuation and can provide useful guidance both to cv practitioners and the users of cv results

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

can we sterilize theory and evidence under managed floating as under the bretton woods system central banks have intervened heavily in the foreign exchange market as before they have often attempted to divorce their intervention activities from their money supplies through offsetting operations in domestic financial markets an official purchase of foreign exchange can be sterilized through a corresponding openmarket sale of domestic securities the transaction which is equivalent to an official forward sale of domestic currency leaves relative money supplies unchanged but alters the relative supplies of foreign and domestic currency bonds available to the public regardless of the exchange rate regime sterilized intervention may be viewed as an attempt to attain independent exchange rate and money stock targets in the short run for this to be possible bonds denominated in different currencies must be imperfect substitutes in private portfolios if feasible sterilization may or may not be useful in attaining the long run objectives of the central bank

do prices and attributes explain international differences in food purchases food purchases differ substantially across countries we use detailed household level data from the united states france and the united kingdom to i document these differences ii estimate a demand system for food and nutrients and iii simulate counterfactual choices if households faced prices and nutritional characteristics from other countries we find that differences in prices and characteristics are important and can explain some difference e g united states france difference in caloric intake but generally cannot explain many of the compositional patterns by themselves instead it seems an interaction between the economic environment and differences in preferences is needed to explain cross country differences jel d12 i12 l11 l66 q11 food purchases differ across countries within countries over time and across demographic groups these differences seem to be correlated with rates of excess weight gain and diet related illness economists tend to attribute the difference in food purchases across markets to differences in prices an alternative explanation is that they are due to inherent differences in preferences and eating habits in this article we study the differences in food purchases and nutritional outcomes across countries focusing on the united states united kingdom and france we start by systematically documenting the differences in food purchases for consumption at home between the united states united kingdom and france we show that us households purchase different foods from french and uk households for example us households purchase more calories per person a greater percentage of those calories comes in the form of carbohydrates and a lower share in the form of proteins a higher share of expenditure is on drinks and prepared foods and

the dynamics of markups and inventories in retailing firms this paper is concerned with the interaction between price and inventory decisions in retailing firms and its implications for the dynamics of markups and the existence of sales pro motions we consider a model where a monopolistically competitive retailer decides price and inventories and assumes lump sum costs when placing orders or changing nominal prices tn this model the existence of stockout probabilities and fixed ordering costs generate a cyclical price behaviour characterized by long periods without nominal price changes and short periods with very low prices i e sales promotions we estimate this model using a unique longitudinal dataset with information about retail and wholesale prices inventories orders and sales for several brands in a supermarket chain based on the estimated model we perform several counterfactual experi ments that show the important role that inventories and fixed ordering costs play in the dynamics of retail prices and the frequency of sales promotions in this dataset

network effects in the german magazine industry this paper examines the two sided network effects in the german magazine industry we specify and estimate the network effect functions for readers and advertisers nonparametrically and find that they are neither linear nor monotonic

buyer power and mutual dependency in a model of negotiations we study bilateral bargaining between several buyers and sellers in a framework that allows both sides in case of a bilateral disagreement flexibility to adjust trade with each of their other trading partners and receive the gross benefit generated by each adjustment a larger buyer pays a higher per unit price when buyers bargaining power in bilateral negotiations is sufficiently low and a lower price otherwise an analogous result holds for sellers these predictions and the implications of different technologies are explained by the fact that size is a source of mutual dependency and not an unequivocal source of power

observed and unobserved preference heterogeneity in brand choice models this paper extends the scanner based choice literature by explicitly incorporating individual level brand preference data we illustrate our model using a unique data set that combines survey and scanner data collected from the same individuals the addition of individual specific brand preference information significantly improves fit and prediction furthermore this observed heterogeneity better explains choice than does unobserved heterogeneity in the standard scanner model s parameters more importantly we find that the standard model underestimates the importance of consumers brand preferences and overestimates both brand loyalties and price sensitivities brand loyalty is overestimated because models without preference information confound state dependence heterogeneity and preference effects price sensitivities are inflated because the average preference based consumer is implicitly assumed to be more willing to switch from his preferred brand than is the real preference based consumer further standard models overestimate the heterogeneity in price and loyalty sensitivities and misidentify both price and loyalty sensitive consumers the managerial implications of our findings and the applicability of our methodology when survey data are collected infrequently and for only a subsample of consumers are pursued we demonstrate that even under these circumstances better populationwide pricing and promotion decisions are identified and more accurate targeting results

the timing of sales this paper presents a model of intertemporal price discrimination a fixed number of sellers produce a homogeneous good consumers with different preferences enter the market in each period and leave when they make a purchase the sellers typically vary their prices over time charging a high price in most periods but occasionally cutting the price to sell to a large group of customers with a low reservation price in some equilibria all stores lower their price at the same time and to the same level

an empirical analysis of internal and external reference prices using scanner data single source yogurt data are used to examine whether both internal and external reference prices affect purchase decisions internal reference prices are memory resident prices based on actual fair or other price concepts external reference prices are observed stimuli such as regular prices that stores may display along with a sale price for comparability discrete choice models with variables representing the two types of reference prices are estimated and both types of variables are found to have significant effects on purchase probabilities this suggests that consumers may use multiple reference points in evaluating price in purchase decisions in addition a model using an indicator of a sale price discount explains purchase probabilities as well as one that models the actual discount which suggests that consumers may be reacting to the indication of savings rather than to the amount of the discount

vertical relationships between manufacturers and retailers inference with limited data in this paper different models of vertical relationships between manufacturers and retailers in the supermarket industry are compared demand estimates are used to compute price cost margins for retailers and manufacturers under different supply models when wholesale prices are not observed the purpose is to identify the set of margins compatible with the margins obtained from estimates of cost and to select the model most consistent with the data among non nested competing models the models considered are 1 a simple linear pricing model 2 a vertically integrated model and 3 a variety of alternative strategic supply scenarios that allow for collusion non linear pricing and strategic behaviour with respect to private label products using data on yogurt sold in several stores in a large urban area of the u s the results imply that wholesale prices are close to marginal cost and that retailers have pricing power in the vertical chain this is consistent with non linear pricing by the manufacturers or high bargaining power of the retailers

a discrete time hazard model of lottery adoption this paper uses conventional logit probablitities to estimate a discrete time hazard model of lottery adoption the data set consists of a time series of cross sections on states in the us our findings suggests that politicians are more likely to support the decision a lottery is more likely to be adopted of ther is a favourable climate for gambling in the state and if a bordering state has adopted a lottery

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

consumer shopping behavior how much do consumers save this paper documents the potential and actual savings that consumers realize from four particular types of purchasing behavior purchasing on sale buying in bulk at a lower per unit price buying generic brands and choosing outlets how much can and do households save through each of these behaviors how do these patterns vary with consumer demographics we use data collected by a marketing firm on all food purchases brought into the home for a large nationally representative sample of u k households in 2006 we are interested in how consumer choice affects the measurement of price changes in particular a standard price index based on a fixed basket of goods will overstate the rise in the true cost of living because it does not properly consider sales and bulk purchasing according to our measures the extent of this bias might be of the same or even greater magnitude than the better known substitution and outlet biases

milk by any other name consumer benefits from labeled milk this article uses revealed preferences of consumers to study the consumer benefits from rbst free and organic labeled milk the article specifies and estimates a quadratic aids demand system model for different milk types using u s supermarket scanner data the introduction of rbst free and organic milk is used to estimate consumer benefits that are decomposed into two components competitive and variety effects results show significant consumer benefits from organic milk and to a lesser extent from rbst free milk based on the findings we explore implications for present u s labeling standards th eu s food sector is going through rapid transformations in terms of new product introduction and innovations organic and genetically modified gm food products are leading the way in changing the landscape of available choices to consumers this rapid expansion of product space has taken place concomitantly with an increase in public policy concerns on issues of standardization labeling health risks and associated consumer welfare in this paper we explore these broader issues in the context of a specific product introduction the introduction of recombinant bovine somatotropin rbst free and organic milk in the u s market from a policy perspective understanding the market for organics and the various components of that demand i e what portion is for gm free and what is for other attributes of organics can help determine the value of creating a national standard and the potential welfare losses to consumers of weakening such a standard are consumers willing to pay extra for organic and rbst free milk if so how

uniform pricing in us retail chains we show that most u s food drugstore and mass merchandise chains charge nearly uniform prices across stores despite wide variation in consumer demographics and competition demand estimates reveal substantial within chain variation in price elasticities and suggest that the median chain sacrifices 16 million of annual profit relative to a benchmark of optimal prices in contrast differences in average prices between chains are broadly consistent with the optimal benchmark we discuss a range of explanations for nearly uniform pricing highlighting managerial inertia and brand image concerns as mechanisms frequently mentioned by industry participants relative to our optimal benchmark uniform pricing may significantly increase the prices paid by poorer households relative to the rich dampen the response of prices to local economic shocks alter the analysis of mergers in antitrust and shift the incidence of intranational trade costs

on the effects of sterilized intervention an analysis of weekly data abstract as the recent empirical studies surveyed here illustrate it is very difficult to demonstrate that the exchange rate risk premium depends through a portfolio balance channel on the currency composition of outside assets the existence of a portfolio balance effect is a necessary condition for sterilized intervention to be a genuinely independent tool of monetary policy this paper studies u s canadian data and attempts to improve on earlier studies by using higher frequency weekly data and by implementing an appropriate instrumental variables technique 2s2sls however we still fail to detect evidence of a portfolio balance effect

accounting for incomplete pass through recent theoretical work has suggested a number of potentially important factors in causing incomplete pass through of exchange rates to prices including markup adjustment local costs and barriers to price adjustment we empirically analyze the determinants of incomplete passthrough in the coee industry the observed pass through in this industry replicates key features of pass through documented in aggregate data prices respond sluggishly and incompletely to changes in costs we use microdata on sales and prices to uncover the role of markup adjustment local costs and barriers to price adjustment in determining incomplete pass through using a structural oligopoly model that nests all three potential factors the implied pricing model explains the main dynamic features of short and long run pass through local costs reduce long run pass through by a factor of 59 relative to a ces benchmark markup adjustment reduces pass through by an additional factor of 33 where the extent of markup adjustment depends on the estimated super elasticity of demand the estimated menu costs are small 0 23 of revenue and have a negligible eect on long run pass through but are quantitatively successful in explaining the delayed response of prices to costs we nd that delayed passthrough in the coee industry occurs almost entirely at the wholesale rather than the retail level

the role of prices in measuring the poor s living standards in this paper we revisit two pieces of conventional wisdom in the current debate about poverty paying close attention to the price data underlying these findings that the poor pay more than households of higher income for the goods and services they purchase and that poverty rates at least as measured by the u s census have remained essentially flat since the late 1960s raising questions about the success of the policies implemented to reduce poverty by examining scanner data on thousands of household purchases we find that the poor pay less not more for the goods they purchase and by extending the advances on price measurement in the recent decade back to the 1970s we find that current poverty rates are less than half of the official numbers

commercial use of upc scanner data industry and academic perspectives the authors report the findings from an exploratory investigation of the use of upc scanner data in the consumer packaged goods industry in the u s the study examines the practitioner community s view of the use of scanner data and compares these views with academic research forty one executives from ten data suppliers packaged goods manufacturers and consulting firms participated in wide ranging in person interviews conducted by the authors the interviews sought to uncover key questions practitioners would like to answer with scanner data how scanner data is applied to these questions and the industry s perspective regarding the success that the use of scanner data has had in each area the authors then compare and contrast practitioners views regarding the resolution of each issue with academic research this produces a 2 2 classification of each question as resolved or unresolved from the perspectives of industry and academia along the diagonal of the 2 2 issues viewed as unresolved by both groups are important topics for future research issues deemed resolved by both groups are correspondingly of lower priority in the off diagonal cells industry and academics disagree these topics should be given priority for discussion information exchange and possible further research practitioners reported that scanner data analysis has had the most success and been most widely adopted for decision making in consumer promotions i e coupons trade promotions and pricing for example logit and regression models applied to scanner data have revealed very low average consumer response to coupons which has directly led to reduced couponing activity managers also reported high levels of comfort with and impact from analyses of trade promotions and price elasticities while industry views most of the issues in these areas to be resolved academic research raises concerns about a number of practices in common commercial use these include price threshold analysis and trade promotion evaluation using baseline and incremental sales in product strategy advertising and distribution management practitioners reported that the use of scanner data has had more limited development success and impact in the case of new product decisions scanner data use has been slow to develop due to the inherent limitations of historicaldata for these decisions and a heavy reliance on traditional primary research methods in advertising scanner data is widely analyzed with models but confusion among practitioners is very high due to controversies about methods e g what level of data aggregation is best and conflicting results in distribution and retail management scanner data use has tremendous potential but a mixed track record to date thus practitioners view the use of scanner data as unresolved for most issues in product strategy advertising and distribution this view is largely though not entirely consistent with academic research which has only begun to address many of the key questions raised by practitioners in light of the large number of unresolved issues and mixed record of scanner data use to date the authors offer aseries of specific recommendations for immediate and long term research priorities that are likely to have the greatest impact on commercial utilization of upc scanner data topics of immediate priority include price thresholds and gaps baseline and incremental sales base price elasticity competitive reactions measurement of advertising effects management of brand equity rationalization of product assortments and category management long term priorities include a greater emphasis on profitability versus sales or market share developing prescriptive models versus descriptive models and the need for industry standards

sticky prices and costly credit we develop a theory of money and credit as competing payment instruments then put it to work in applications agents use cash and credit because the former latter is subject to the inflation tax transaction costs frictions that make the choice of payment method interesting also imply equilibrium price dispersion we derive closed form solutions for money demand and show how to simultaneously account for the price change facts cash credit shares in micro data and money interest correlations in macro data the effects of inflation on welfare price dispersion and markups are discussed as are nonstationary equilibria with dynamics in the price distribution

non separable time preferences novelty consumption and body weight theory and evidence from the east german transition to capitalism abstract this paper develops a dynamic model to illustrate how diet and body weight change when novel food products become available to consumers we propose a microfounded test to empirically discriminate between habit and taste formation in intertemporal preferences moreover we show that novelty consumption and endogenous preferences can explain the persistent correlation between economic development and obesity by empirically studying the german reunification we find that east germans consumed more novel western food and gained more weight than west germans when a larger variety of food products became readily accessible after the fall of the wall the observed consumption patterns suggest that food consumption features habit formation

market power and heterogeneous pass through in german electricity retail abstract we analyze the pass through of cost changes to retail tariffs in the german electricity market over the 2007 2014 period we find an average pass through rate of around 60 this significantly varies with demand factors while the pass through rate to baseline tariffs where firms have greater market power because customers are less willing to switch is only 50 it increases to 70 in the competitive segment of the market although the pass through rate of independent firms is significantly higher than that of other firms in the competitive market segment the extent of supply side heterogeneity is limited thus the firms ability to exercise market power and reduce pass through appears to be constrained by competition and largely determined by demand side factors finally we find that the pass through rate in the competitive market segment has been approaching unity over the past years indicating a rise in competitive pressure

foreign exchange market efficiency tests implications of recent empirical findings abstract the recent empirical literature on the efficiency of the foreign exchange market has been characterized by strikingly contradictory conclusions drawn from similar empirical evidence these contradictions result because 1 different maintained hypotheses are held and 2 different criteria e g micro versus macroeconomic are used to judge the evidence in this survey we organize the empirical literature under several headings the presence of risk premiums empirical regularities in regression tests profitable trading rules and advanced econometric techniques in integrating this material we consider the implications of the current evidence for investors forecasters policy makers and theorists

tax incidence with strategic firms in the soft drink market abstract because soft drink sd consumption is considered to be a contributor to the epidemic of obesity there is a growing interest in evaluating the impact on sd consumption of alternative tax policies in this paper we propose a methodology to evaluate the impact of taxation of a food market taking into account the strategic price response of both manufacturers and retailers we apply this methodology to the french sd market and simulate the impacts of ad valorem and excise taxes we find that firms behave differently when facing an ad valorem tax or an excise tax an excise tax is overshifted to consumer prices while an ad valorem tax is undershifted to consumer prices we find that an excise tax based on the sugar content of sd is the most effective at reducing sd consumption our results also indicate that ignoring strategic pricing by firms leads to misestimations of the impact of taxation by between 15 and 40 depending on the products and the tax implemented in the short term that is ignoring positive long term health effects a 9 cents l excise tax has a small negative welfare effect about 1 person year

an empirical investigation of the welfare effects of banning wholesale price discrimination rand 054 rand2007 cls 1994 07 13 v1 2u standard latex document class rand rand 054 dispatch 12 7 2008 ce n a journal msp no no of pages 26 pe sharon rand journal of economics vol 40 no 1 spring 2009 pp 20 45 an empirical investigation of the welfare effects of banning wholesale price discrimination sofia berto villas boas economic theory does not provide sharp predictions on the welfare effects of banning wholesale price discrimination if downstream cost differences exist then discrimination shifts production inefficiently toward high cost retailers so a ban increases welfare if differences in price elasticity of demand across retailers exist discrimination may increase welfare if quantity sold increases so a ban reduces welfare using retail prices and quantities of coffee brands sold by german retailers i estimate a model of demand and supply and separate cost and demand differences simulating a ban on wholesale price discrimination has positive welfare effects in this market and less if downstream cost differences shrink or with less competition introduction wholesale price discrimination means that an upstream firm sets different prices for the same product for various downstream retailers wholesale price discrimination is commonly practiced in many markets examples include markets such as petroleum distribution steel heavy trucking tobacco and pharmaceuticals in several countries milk and other dairy products are sold using government administered or sanctioned discriminatory pricing schemes wholesale price discrimination practices are also used for services such as loans insurance and advertising 1 competition authorities have been concerned with wholesale price discrimination the european union treaty s article 82 c prohibits practices where a dominant firm would place trading partners at a competitive disadvantage the u s robinson patman act forbids discriminat ing in price between different purchasers where the effect may be to lessen competition unless the university of california berkeley sberto are berkeley edu i thank the editor igal hendel and two anonymous referees for many helpful comments and max auffhammer cyndi berck peter berck gal hochman silke januszewski forbes george judge kai uwe k uhn diana lazo mark muendler aviv nevo ariel pakes jeff perloff andrew sweeting miguel villas boas and participants at uc san diego university of michigan the inra idei conference in toulouse and the university of british columbia summer conference in industrial organization for their suggestions i thank daniel klapper for letting me have access to the data support from the giannini foundation and from an aes grant are gratefully appreciated see for gasoline markets texaco v hasbrouck 496 us 543 no 87 2048 1990 and the new york state motor fuel marketing practices act for steel chan hall and rust 2003 for heavy trucking volvo trucks north america inc v reeder simco gmc inc docket no 04 905 for tobacco brooke group ltd v brown and williamson tobacco corp 509 us 209 no 92 466 1993 for wholesale pharmaceuticals see http www datcp state wi us trade business unfair comp drug price jsp for dairy markets see for example gardner 1984 and for services see givens 1983 c 2009 rand copyright

a structural approach to identifying the sources of local currency price stability the inertia of the local currency prices of traded goods in the face of exchange rate changes is a well documented phenomenon in international economics this paper develops a structural model to identify the sources of this local currency price stability and applies it to micro data from the beer market the empirical procedure exploits manufacturers and retailers first order conditions in conjunction with detailed information on the frequency of price adjustments following exchange rate changes to quantify the relative importance of local non traded cost components markup adjustment by manufacturers and retailers and nominal price rigidities in the incomplete transmission of such changes to prices we find that on average approximately 60 of the incomplete exchange rate pass through is due to local non traded costs 8 to markup adjustment 30 to the existence of own brand price adjustment costs and 1 to the indirect strategic effect of such costs though these results vary considerably across individual brands according to their market shares

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

patterns of pass through of commodity price shocks to retail prices commodity prices have been rising at unprecedented rates over the last two years the primary objective of this paper is to assess if and how firms pass through upstream cost increases to final good prices first we investigate what happens to the shelf prices the regular prices of goods that contain significant amounts of a commodity whose price has changed the objective is to document patterns of price rigidity depending on the share of the commodity in the final good that is sold to consumers for example given an abnormal commodity price change in wheat what happens to the shelf regular price of bread wheat cereals and other goods that contain wheat commodity pass through patterns for ready to eat cereal smallest share of commodity in final product and fresh chicken largest share of commodity in final good are investigated second we also assess what happens to the net prices consumers pay that is the regular price net of discounts offered one possible way to pass through a cost increase is to reduce the frequency of promotional discounts or offer smaller discounts to consumers upstream commodity input prices used in our investigation are wheat and corn futures prices to account for upstream inputs and flour and chicken feed producer price sub indices for downstream cost shocks we combine several datasets for this empirical analysis commodity prices commodity price indices and scanner data on prices for a variety of goods over a four year time period and across several stores in california belonging to a large retail chain we construct quantity weighted price indices within two product categories sold in the supermarket where prices are weighted by pre determined quantity weights to obtain shelf price indices and net price indices for each of the commodities regressions will be run using store level product upc weekly data the reduced form regressions consist of projecting the shelf price index as well as the net price index on commodity prices other explanatory variables and on region and time dummies the point estimates measure the effect of residual changes in commodity prices net of seasonal and regional effects on the prices consumers face when making purchase decisions we also construct a variable that measures the frequency of price discounts and relate that variable to the same explanatory variables we estimate pass through behavior using the above three different measures of retail price activity controlling for cost proxies store level fixed effects and regional time trends using panel data estimation techniques results suggest that an important part of retail price variation comes from promotional activities and the usual shelf price index would underestimate the true pass through coefficient to deal with omitted variables and price stickiness we included a lagged dependent variable using the arellano bond dynamic panel estimator for chicken the results show that using standard information on regular shelf price leads to an underestimation of the true pass through coefficient for cereal using standard shelf prices leads to an overestimation of the pass through coefficient reflecting the importance of storability faced by consumers and retailers and industry characteristics in the sale dynamics not only do our cost pass through estimates account for sales we also provide dynamic multipliers for grain commodity price increases to supermarket shelf prices the estimated dynamic elasticities are not as small as one might expect from a naive model the elasticity of cereal price with respect to flour is over 1 and the elasticity of chicken price with respect to chicken feed was 30 percent these estimates would imply a very large price increase in cereal and chicken over the last several years there are fewer sales when commodity prices go up from this we would conclude that net prices should be used for pass through analysis

creating win win trade promotions theory and empirical analysis of scan back trade deals manufacturer trade promotion spending is second only to cost of goods sold as a profit and loss item yet manufacturers often lose money on these deals as a result of forward buying by retailers the search for more effective forms of trade promotion and the availability of scanners at cash registers has led to the emergence of a new type of trade deal the scan back that gives retailers a discount on unitssoldduring the promotion rather than on unitsbought we develop a theory to compare retailer pricing decisions and profitability under scan back and traditional off invoice trade deals we show that when the terms of the trade deal are identical retailers prefer off invoice trade deals and manufacturers prefer scan backs manufacturers can however redesign the scan back to leave the retailer weakly better off and leave themselves strictly better off using proprietary data from the beverage category we conduct an empirical analysis and find that during the promotion period scan back trade deals relative to off invoice deals 1 do not cause excess ordering and 2 generate higher retail sales through lower retail prices implications for researchers and managers are discussed

state lotteries as duopoly transfer mechanisms government sponsored lotteries can be traced back at least as far as caesar augustus who instituted legalized gambling for the purpose of rebuilding rome mote 1984 we are also told that queen elizabeth introduced a lottery in 1549 and that lotteries were used to provide financial support for the virginia company s founding of jamestown johnson 1960 no less authority on the topic than captain john smith reported that lotteries were the reall and substantial food by which virginia has been nourished johnson 1960 161 later lotteries were used by the continental congress and several colonies to fund the revolutionary war and such venerable institutions as harvard yale princeton and dartmouth benefited from their use kaplan 1984 in more recent times lotteries provided an important source of revenues for the depressed post civil war southern states but criticism regarding their moral implications and corruption in their operation is given as the explanation for congressional action that foreclosed state lotteries in 1895 by prohibiting the use of the mail for distributing lottery tickets and information tillett 1983 in that same year congress passed a national income tax which was struck down by the court some might argue that the demise of state lotteries was related to the federal government s attempt to extend its ability to collect

the importance of product reformulation versus consumer choice in improving diet quality improving diet quality has been a target of public health policy governments have encouraged consumers to make healthier food choices and firms to reformulate food products evaluation of such policies has focused on the impact on consumer behaviour firm behaviour has been less well studied we show that the recent decline in dietary salt intake in the uk was entirely attributable to product reformulation consumer switching between products worked in the opposite direction and led to a slight increase in grocery salt intensity these findings point to the important role that firms can play in achieving public policy goals