economic dynamics in the malthusian era evidence from the 1609 spanish expulsion of the moriscos we investigate economic dynamics in the malthusian era using the 1609 expulsion of moriscos from spain sharp population declines in former morisco districts were accompanied by decreased output and increased per capita output while these short run results are consistent with standard malthusian predictions malthusian convergence was delayed up to 1786 in former morisco districts archival sources and historical accounts suggest extractive institutions and cultural differences may have contributed to delayed convergence in population and output per capita this historic episode provides an unusually rich setting to examine malthusian dynamics highlighting the potential for sustained differences in per capita output in the malthusian era

when does labor scarcity encourage innovation this paper studies whether labor scarcity encourages technological advances that is technology adoption or innovation for example as claimed by habakkuk in the context of nineteenth century united states i define technology as strongly labor saving if technological advances reduce the marginal product of labor and as strongly labor complementary if they increase it i show that labor scarcity encourages technological advances if technology is strongly labor saving and will discourage them if technology is strongly labor complementary i also show that technology can be strongly labor saving in plausible environments but not in many canonical macroeconomic models

retailer pricing strategy and consumer choice under price uncertainty this research examines how consumers choose retailers when they are uncertain about store prices prior to shopping simulating everyday choice participants made successive retailer choices where on each occasion they chose a retailer and only then learned product prices the results of a series of studies demonstrated that participants were more likely to choose a retailer that offered an everyday low pricing strategy edlp or that offered frequent small discounts over a retailer that offered infrequent large discounts this choice advantage for the retailer that was cheaper more often manifested even when its average price was judged to be higher the same results were obtained when choices were made a day apart when price feedback was only given for the chosen retailer and when price feedback was given for both retailers participant s expectations of future prices but not their judgments of retailer s past average prices predicted their subsequent retailer choice

looking for loss aversion in scanner panel data the confounding effect of price response heterogeneity recent work in marketing has drawn on behavioral decision theory to advance the notion that consumers evaluate attributes and therefore choice alternatives not only in absolute terms but asdeviations from a reference point the theory has important substantive and practical implications for the timing and execution of price promotions and other marketing activities choice modelers using scanner panel data have tested for the presence of these reference effects in consumer response to an attribute such as price in applications of the theory of reference dependent choice tversky and kahneman 1991 some modelers report empirical evidence of loss aversion when a consumer encounters a price above his or her established reference point a loss the response is greater than for a price below the reference point a gain researchers have gone so far as to suggest that evidence for the so called reference effect make it an empirical generalization in marketing e g kalyanaram and winer 1995 meyer and johnson 1995 it is our contention that the measurement of loss aversion in empirical applications of the reference dependent choice model is confounded by the presence of unaccounted for heterogeneity in consumer price responsiveness our reasoning is that the kinked price response curve implied by loss aversion is confounded with the slopes of the response curves across segments that are differentially responsive to price a more price responsive consumer with a steeper response function tends to have a lower price level as a reference point this consumer faces a larger proportion of prices above his reference point thus the response curve is steeperin the domain of losses similarly the less price responsive consumer sees a greater proportion of prices below his reference point so the response curve is less steep within the domain of gains as a result any cross sectional estimate of loss aversion that does not take this into account will be biased upward researchers who do not control for heterogeneity in price responsiveness may arrive at incorrect substantive conclusions about the phenomenon it is interesting to note that in this instance failure to control for heterogeneity induces a bias infavor of finding an effect rather than the more typical case of attenuation of the effect toward zero we first test our assertion regarding the referencedependent model using scanner panel data on refrigerated orange juice and subsequently extend this analysis to 11 additional product categories in all cases we find as predicted that accounting for price response heterogeneity leads to lower and frequently nonsignificant estimates of loss aversion we do however find some categories in which the effect does not disappear altogether we also estimate loss aversion using a sticker shock model of brand choice in which the reference prices arebrand specific in line with the results of the majority of prior literature we find smaller and insignificant estimates of loss aversion in this model we show that this is because in the sticker shock model there is no apparent correlation between the price responsiveness of the consumer and the representation of reference effects as losses or gains our findings strongly suggest that loss aversion may not in fact be a universal phenomenon at least in the context of frequently purchased grocery products

predicting the next step of a random walk experimental evidence of regime shifting beliefs barberis et al j financial econ 49 1998 307 construct a model in which investors use the prevalence of past trend reversals as an indicator of the likelihood of future reversals while such regime shifting beliefs are consistent with a variety of psychological theories other contrary predictions are consistent with the same theories we report two experiments with mba student participants that strongly support the existence of regime shifting beliefs we conclude that regime shifting models can provide a useful framework for understanding market anomalies including underreactions to earnings changes and overreactions to longterm earnings trends r 2002 published by elsevier science b v

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

multiattribute loss aversion and reference dependence evidence from the performing arts industry we study the prevalence of multiattribute loss aversion and reference effects in a revenue management setting based on data of individual level purchases over a series of concert performances the reference dependence that drives consumer choice is not only based on the price but also on observed sales as a fraction of the seating capacity during their past visits we find that consumers suffer from loss aversion on both prices and seats sold consumers incur significant utility loss when prices are above their references or when the actual seat sales are lower than their references we suggest pricing policies that can address consumer decisions driven by such reference dependence and loss aversion this paper was accepted by vishal gaur operations management

capital and labor saving technical change in an aging economy does population aging and the associated increase in the old age dependency ratio affect economic growth the answer is given in a novel analytical framework that allows for population aging to affect endogenous capital and labor saving technical change the short run analysis reveals that population aging induces more labor and less capital saving technical change as it increases the relative scarcity of labor with respect to capital due to external contemporaneous knowledge spill overs across innovating firms induced technical change has a first order effect on current aggregate income in the long run capitalsaving technical progress vanishes and the economy s growth rate reflects only labor saving technical change however the mere possibility of capital saving technical change is shown to imply that the economy s steady state growth rate becomes independent of its age structure neither a higher life expectancy nor a decline in fertility affects economic growth in the long run

an implicitly additive demand system the problem of endowing large applied general equilibrium models with numerical values for parameters is formidable for example a complete set of own and cross price elasticities of demands for the monash model of the australianeconomy involves in excess of 50000 items invoking the minimal assumptions that demand is generated by utility maximization reduces the load to about 26000 obviously still a number much too large for unrestrained econometric estimation to obtain demand systems estimates for a dozen or so generic commodities at a top level of aggregation categories like food clothing and footwear etc typically johansen s lead has been followed and directly additive preferences imposed upon the underlying utility function with the move beyond one step linearized solutions of applied general equilibrium models the functional form of the demand system adopted becomes an issue the most celebrated of the additive preference demand systems the linear expenditure system les has one

the race between man and machine implications of technology for growth factor shares and employment we examine the concerns that new technologies will render labor redundant in a framework in which tasks previously performed by labor can be automated and new versions of existing tasks in which labor has a comparative advantage can be created in a static version where capital is fixed and technology is exogenous automation reduces employment and the labor share and may even reduce wages while the creation of new tasks has the opposite effects our full model endogenizes capital accumulation and the direction of research towards automation and the creation of new tasks if the long run rental rate of capital relative to the wage is sufficiently low the long run equilibrium involves automation of all tasks otherwise there exists a stable balanced growth path in which the two types of innovations go hand in hand stability is a consequence of the fact that automation reduces the cost of producing using labor and thus discourages further automation and encourages the creation of new tasks in an extension with heterogeneous skills we show that inequality increases during transitions driven both by faster automation and introduction of new tasks and characterize the conditions under which inequality is increasing or stable in the long run

consumer price and promotion expectations an experimental study the authors report results from a controlled experiment designed to investigate the impact of a brand s price promotion frequency and the depth of promotional price discounts on the price consumers

comparing dynamic consumer choice in real and computer simulated environments actual supermarket purchases made by consumers over a seven month period are compared with the choice decisions collected in one sitting in a laboratory simulation the laboratory simulation was designed to mimic the original market environment although there were systematic biases in predictions of true purchase behavior from the simulated data the compressed simulations were reasonably valid in predicting market shares and promotion sensitivity for brands across consumers

the long term effects of price promotions on category incidence brand choice and purchase quantity abstract to what extent do price promotions have a long term effect on the components of brand sales namely category incidence brand choice and purchase quantity the authors answer this question by using persistence modeling on weekly sales data of a perishable and a storable product derived from a scanner panel their analysis reveals first that permanent promotion effects are virtually absent for each sales component next the authors develop and apply an impulse response approach to estimate the promotional adjustment period and the total dynamic effects of a price promotion specifically they calculate the long term equivalent of gupta s 1988 14 84 2 breakdown of promotional effects because of positive adjustment effects for incidence but negative adjustment effects for choice the authors find a reversal of the importance of category incidence and brand choice 66 11 23 for the storable product and 58 39 3 for the perishable product the authors discuss the implications of the findings an

predicting competitive response to a major policy change combining game theoretic and empirical analyses this research uses procter gamble s value pricing initiative as a context for testing whether actual competitor and retailer response to a major policy change can be predicted using a game theoretic model we first estimate demand functions for p g and competitor brands from the period before value pricing was initiated we then formulate a dynamic manufacturer retailer stackelberg model that includes p g a national brand competitor and a retailer the model takes p g s move as given and prescribes the price and promotion response of the competitors and the retailer we substitute the estimated demand parameters into the model to obtain prescriptions for each competitor and the retailer and see whether these prescriptions are related to the actual response we find that the dynamic game theoretic model calibrated with empirical estimates of demand parameters has significant predictive power we also test the predictive power of two benchmark models the first is based on the reaction function approach of leeflang and wittink leeflang peter s h wittink dick r 1992 diagnosing competitive reactions using aggregated scanner data internat j res marketing9 39 57 and the second is a simplification of our dynamic model where the retailer is not strategic the dynamic game theoretic model performs better than either benchmark

the impact of reference price effects on the profitability of price promotions this paper investigates the impact of reference price effects on retailer price promotions and describes why these effects can make promoting profitable first we analyze the profit impact of reference price effects generated by a single period of promotion the promotion can increase profit if the gain that these effects create in the promotion period outweighs the loss they create in future periods we then describe how retailers can estimate the optimal strategy of recurring promotions that maximizes profits from reference price effects over a time horizon examples of such strategies are presented for a retailer selling a national brand of peanut butter we obtain insights into how promotion prices timing and profits are affected by changes in costs interest rates consumers reactions to reference price effects and error in estimates used in the model the retailer s optimal reaction to a trade deal is also examined this strategy involves a phase of increased promotion activity sandwiched between phases of decreased activity we explain these results using the effects described in the single period model

agricultural research spending must increase in light of future uncertainties abstract agricultural productivity depends critically on investments in research and development r d but there is a long lag in this response failing to invest today in improvements of agricultural productivity cannot be simply corrected a few decades later if the world finds itself short of food at that point in time this fundamental irreversibility is particularly problematic in light of uncertain future population income and climate change as portrayed in the ipcc s shared socio economic pathways ssps this paper finds the optimal path of agricultural r d spending over the 21st century for each ssp along with valuation of those regrets associated with investment decisions later revealed to be in error the maximum regret is minimized to find a robust optimal r d pathway that factors in key uncertainties and the lag in productivity response to r d results indicate that the whole of uncertainty s impact on r d is greater than the sum of its individual parts uncertainty in future population has the dominant impact on the optimal r d expenditure path the robust solution suggests that the optimal r d spending strategy is very close to the one that will increase agricultural productivity fast enough to feed the world under the most populous scenario it also suggests that society should accelerate r d spending up to mid century thereafter moderating this growth rate

price flexibility in channels of distribution evidence from scanner data in this study we empirically examine the extent of price rigidity using a unique store level time series data set consisting of i actual retail transaction prices ii actual wholesale transaction prices which represent both the retailers costs and the prices received by manufacturers and iii a measure of manufacturers costs for 12 goods in two widely used consumer product categories we simultaneously examine the extent of price rigidity for each of the 12 products at both final goods and intermediate goods levels we study two notions of price rigidity employed in the existing literature i the frequency of price changes and ii the response of prices to exogenous cost changes we find that retail prices exhibit remarkable flexibility in terms of both notions of price rigidity i e they change frequently and they seem to respond quickly and fully to cost changes furthermore we find that retail prices respond not just to their direct costs but also to the upstream manufacturers costs which further reinforces the extent of the retail price flexibility at the intermediate goods level of the market in contrast we find relatively more evidence of rigidity in the response of manufacturers prices to cost changes this despite the fact that wholesale prices change frequently and therefore exhibit flexibility according to the first notion of price rigidity

the influence of prior beliefs frequency cues and magnitude cues on consumers perceptions of comparative price data a widespread practice in grocery store advertising is to compare the advertised store s prices to a competitor s prices on multiple items an important but largely unexplored issue is how this information is processed and used in conjunction with prior beliefs to influence price perceptions in our initial studies we manipulated prior beliefs and two data based cues frequency of price advantage and magnitude of price advantage to determine their relative influence on consumer price perceptions results indicate that prior beliefs affected price perceptions but that the frequency cue exerted a dominating influence several follow up studies demonstrate the robustness of this phenomenon across a variety of presentational and instructional conditions

world product and income international comparisons of real gross product the volume reports on the third phase of the united nations international comparison project icp the main results provide comparisons of real gross domestic product gdp per capita for thirty four countries in 1975 quantity and price comparisons are given also for personal consumption capital formation and public consumption and further subdivisions of final expenditures on gdp are estimated

modeling consideration sets and brand choice using artificial neural networks brand choice can be viewed as a two step process households first construct a consideration set which does not necessarily include all available brands and then make a final choice from this set in this paper we put forward an econometric model for this two step process where we take into account that consideration sets usually are not observed our model is an artificial neural network where the consideration set corresponds with the hidden layer of the network we discuss representation parameter estimation and inference we illustrate our model for the choice between six detergent brands and show that the model improves upon one step models in terms of fit and out of sample forecasting

on the estimation of an implicitly additive demand system motivated by a lack of engel flexibility in commonly used demand systems rimmer and powell developed a new demand system this system referred to aidads is implicitly directly additive possesses marginal budget shares and thus engel elasticities that vary nonlinearly with expenditure such that predicted budget shares are restricted to the 0 1 interval due to these attractive engel properties aidads represents a significant contribution to the literature on demand analysis this paper presents an alternative estimation procedure to the one used by rimmer and powell and examines its properties via a case study the proposed approach avoids a linear approximation employed in rimmer and powell s estimation framework based on a small monte carlo study it appears that the approach produces more accurate estimates of the parameters and engel elasticities

short versus long run implications of trade liberalization for poverty in three developing countries the impacts of global trade reform on poverty are a key concern in the current trade negotiations under the doha development agenda the aggregate poverty impacts of trade reform are in turn strongly linked to the impacts of such reforms on the rural population as they constitute the overwhelming majority of the poor in almost all developing countries this paper uses a new micro simulation methodology designed to analyze this critical issue the methodology is first explained and then applied to three developing countries of particular interest chile malawi and vietnam a key feature is the distinction between the short run impacts of reform where many factors most importantly selfemployed labor of the poor tend to be immobile between sectors and the longer run impacts when factors find their highest return regardless of the sector of employment this distinction makes an enormous difference and

practice prize report an assortmentwide decision support system for dynamic pricing and promotion planning in diy retailing the main objective of this report is to describe a decision support system for dynamic retail pricing and promotion planning our weekly demand model incorporates price reference price effects seasonality article availability information features and discounts building on previous research we quantify demand interdependencies and integrate the resulting profit lifting effects into the optimal pricing model the methodology was developed and implemented at baumax an austrian do it yourself retailer along with the practical requirements an objective function was employed that can be used as a vehicle for implementing a retailer s strategy eight pricing rounds with thousands of different stock keeping units have each served as a testing ground for our approach based on various benchmarking methods a positive impact on profit was reported the currently implemented marketing decision support system increased gross profit on average by 8 1 and sales by 2 1

the rise and decline of general laws of capitalism economists have long been drawn to the ambitious quest of discovering the general laws of capitalism david ricardo for example predicted that capital accumulation would terminate in economic stagnation and inequality as a greater and greater share of national income accrued to landowners karl marx followed him by forecasting the inevitable immiseration of the proletariat thomas piketty s 2014 tome capital in the twenty first century emulates marx in his title his style of exposition and his critique of the capitalist system piketty is after general laws that will demystify our modern economy and elucidate the inherent problems of the system and point to solutions but the quest for general laws of capitalism is misguided because it ignores the key forces shaping how an economy functions the endogenous evolution of technology and of the institutions and the political equilibrium that influence not only technology but also how markets function and how the gains from various different economic arrangements are distributed despite his erudition ambition and creativity marx was led astray because of his disregard of these forces the same is true of piketty s sweeping account of inequality in capitalist economies in the next section we review marx s conceptualization of capitalism and some of his general laws we then turn to piketty s approach to capitalism and his general laws we will point to various problems in piketty s interpretation of the economic relationships underpinning inequality but the most important shortcoming is that

would freeing up world trade reduce poverty and inequality the vexed role of agricultural distortions trade policy reforms in recent decades have sharply reduced the distortions that were harming agriculture in developing countries yet global trade in farm products continues to be far more distorted than trade in nonfarm goods those distortions reduce some forms of poverty and inequality but worsen others so the net effects are unclear without empirical modeling this paper summarizes a series of new economy wide global and national empirical studies that focus on the net effects of the remaining distortions to world merchandise trade on poverty and inequality globally and in various developing countries the global linkage model results suggest that removing those remaining distortions would reduce international inequality largely by boosting net farm incomes and raising real wages for unskilled workers in developing countries and would reduce the number of poor people worldwide by 3 percent the analysis based on the global trade analysis project model for a sample of 15 countries and nine stand alone national case studies all point to larger reductions in poverty especially if only the non poor are subjected to increased income taxation to compensate for the loss of trade tax revenue

toward a new conception of the environment competitiveness relationship accepting a fixed trade off between environmental regulation and competitiveness unnecessarily raises costs and slows down environmental progress studies finding high environmental compliance costs have traditionally focused on static cost impacts ignoring any offsetting productivity benefits from innovation they typically overestimated compliance costs neglected innovation offsets and disregarded the affected industry s initial competitiveness rather than simply adding to cost properly crafted environmental standards can trigger innovation offsets allowing companies to improve their resource productivity shifting the debate from pollution control to pollution prevention was a step forward it is now necessary to make the next step and focus on resource productivity

the bright side of loss aversion in dynamic and competitive markets a well established phenomenon of consumer buying behavior is that consumers evaluate prices relative to a reference point and exhibit loss aversion i e their propensity to buy is more negatively affected by prices above the reference point than it is positively affected by prices below the reference point the objective of this paper is to analytically examine how the competitive strategy and profitability of firms are affected by the presence of consumer loss aversion in the price dimension although we assume that consumer loss aversion increases consumer propensity to search for lower prices we find that it does not necessarily lead to lower prices or profits when firms compete over multiple periods and when the consumer reference price in subsequent periods is affected by current prices specifically consumer loss aversion could lead to higher prices and profits when consumer valuation is sufficiently high relative to search costs and the proportion of consumers with positive search costs is in an intermediate range we also show that when forward looking firms incorporate the negative effect of price promotions on future profits the equilibrium range of price promotions may actually increase

leaders and followers perspectives on the nordic model and the economics of innovation abstract what kinds of social and economic systems are most conducive to innovation we formulate a simple model in which countries can close the gap with the technological leader but where the cost of doing so may be so high that the country chooses to remain laggards observed disparities in productivity may be the result of a recognition that the cost of closing the gap exceeds benefit and there may therefore exist an international equilibrium in which there are leaders and followers even if it is granted that the united states is the leader and scandinavia are followers there are theoretical grounds for arguing that the nordic model may in fact be better for innovation suggesting that if the us adopted some of the nordic institutions innovations would be higher and societal welfare would be improved even more

a modified implicit directly additive demand system a recently developed demand system nicknamed aidads an implicit directly additive demand system offers an approach to capturing consumer preferences across a wide range of expenditure levels aidads generalizes the les by assuming marginal budget shares vary with utility and hence with expenditure like the les aidads includes subsistence parameters that define minimum consumption levels here we present a modified aidads maidads that replaces the constant subsistence parameters with functions that also vary with utility these transformed subsistence levels are referred to as minimum consumption quantities this model is applied to the 1996 international consumption project data as these data span a wide range of expenditure levels maidads offers a viable alternative for the estimation of a global demand system results suggest minimum consumption quantities for staple grains livestock other food products alcohol and tobacco clothing and footwear and transport and transport services vary

modeling multiple sources of heterogeneity in multinomial logit models methodological and managerial issues we offer a framework to specify and estimate various sources of heterogeneity in multinomial logit brand choice models we let each brand specific intercept and each parameter of the explanatory variable vector vary randomly across households in addition we distinguish loyal households from the rest our results suggest that incorporating multiple sources of heterogeneity improves the model fit and suggests higher impact of marketing mix elements on brand choice we highlight the importance of incorporating multiple sources of heterogeneity the model we implement yields valuable managerial insights

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

reference effects of price and promotion on brand choice behavior when consumers are exposed to pricing and promotional activity by frequently purchased packaged goods they may develop expectations that are used as points of reference in evaluating future activi

estimating consumer demands across the development spectrum maximum likelihood estimates of an implicit direct additivity model abstract this paper characterizes consumer demand patterns across the development spectrum using elasticity estimates from a demand system possessing non linear engel effects demands for six broadly defined goods are then projected under the assumption that per capita expenditure growth rates differ across the development spectrum such projections illustrate the extent to which non linear income effects generate more plausible demand responses estimated marginal budget shares for food decline in a logistical manner and range from about 0 5 for ethiopia to less than 0 05 for the usa engel elasticities for food range from 0 95 for ethiopia to less than 0 1 for the usa

a consumer perspective on price matching refund policies effect on price perceptions and search behavior although price matching refund policies are common in many retail environments the impact of such policies on consumers has largely been ignored this article reports the results of three studies that examine price matching policies from a consumer perspective study 1 shows that consumers perceive price matching policies as signals of low store prices and that the presence of a refund increases the likelihood of discontinuing price search contrary to the predictions based on signaling theory in information economics studies 2 and 3 show that when search costs are low the number of stores searched increases in the presence versus absence of a price matching policy when search costs are high consumers appear to accept the price matching signal at face value and search less in the presence of a refund the article concludes by discussing the theoretical implications of the findings and suggesting directions for future research

the impact of heterogeneity in purchase timing and price responsiveness on estimates of sticker shock effects the notion that individuals have an internal reference price against which they compare observed prices is well supported by several psychological theories empirically several papers in the marketing literature employing scanner panel data have modeled the impact of reference prices on brand choice via the sticker shock formulation in which consumers evaluate choice alternatives using differences between shelf prices and reference prices most of the studies reported thus far have not accounted for heterogeneity in price response among consumers and have typically imputed reference prices from the shelf prices of brands that a consumer is supposed to have observed on previous purchases in the category since category marketing activity can differentially affect the purchase timing of households we argue that this measure of reference price may follow certain systematic patterns across consumers and when combined with unaccounted for price response heterogeneity may result in a spurious sticker shock effect specifically we show that estimates of sticker shock are biased upward if households that are price sensitive in the brand choice decision are also more responsive to category promotion activity in their purchase timing decision we discuss some general conditions under which the bias occurs and conduct a simulation experiment to confirm our specific hypotheses our simulation results show that changes in purchase timing are a critical determinant of the bias in the sticker shock effect we also show that unaccounted for price response heterogeneity can in itself result in a biased sticker shock parameter however this requires very large differences in price sensitivities across consumers far greater than what is normally observed we develop a hierarchical bayes version of the nested logit model which models heterogeneity via individual level parameters in a continuous random effects framework we estimate the model on scanner panel data from the yogurt and ketchup categories we find in both categories that the 95 probability interval of the posterior distribution of the mean sticker shock coefficient contains the value zero therefore at least for the data used in this study there is no evidence for the sticker shock effect at the aggregate level in contrast the corresponding coefficient from a standard model which ignores this heterogeneity is highly significant and supports the existence of a possibly spurious sticker shock effect consistent with our explanation of the underlying cause of the bias households that are more price sensitive in the choice decision are also found to be more responsive to category promotion activity in their decision to purchase in the category the results highlight the measurement problems associated with imputing reference prices from past prices since the frequency duration and price level of a retailer s promotional program depend on its size and prevalence accurate estimates of the sticker shock effect are essential for formulating optimal promotion strategies an adequate accounting of consumer heterogeneity is critical to this effort

modeling loss aversion and reference dependence effects on brand choice based upon a recently developed multiattribute generalization of prospect theory s value function tversky and kahneman 1991 we argue that consumer choice is influenced by the position of brands relative to multiattribute reference points and that consumers weigh losses from a reference point more than equivalent sized gains loss aversion we sketch implications of this model for understanding brand choice we develop a multinomial logit formulation of a reference dependent choice model calibrating it using scanner data in addition to providing better fit in both estimation and forecast periods than a standard multinomial logit model the model s coefficients demonstrate significant loss aversion as hypothesized we also discuss the implications of a reference dependent view of consumer choice for modeling brand choice demonstrate that loss aversion can account for asymmetric responses to changes in product characteristics and examine other implications for competitive strategy

workers machines and economic growth this paper models technology adoption as replacing workers by machines which perform the same job in the production process the paper shows that such modelling of technology adoption affects significantly the analysis of economic growth this model can explain large and persistent international differences in output levels and growth rates caused by small differences in underlying parameters

experienced vs described uncertainty do we need two prospect theory specifications this paper reports on the results of an experimental elicitation at the individual level of all prospect theory components i e utility loss aversion and weighting functions in two decision contexts situations where alternatives are described as probability distributions and situations where the decision maker must experience unknown probability distributions through sampling before choice for description based decisions our results are fully consistent with prospect theory s empirical findings under risk furthermore no significant differences are detected across contexts as regards utility and loss aversion whereas decision weights exhibit similar qualitative properties across contexts typically found under prospect theory our data suggest that for gains at least the subjective treatment of uncertainty in experience based and description based decisions is significantly different more specifically we observe a less pronounced overweighting of small probabilities and a more pronounced underweighting of moderate and high probabilities for experience based decisions on the contrary for losses no significant differences were observed in the evaluation of prospects across contexts this paper was accepted by george wu decision analysis

specifying price judgments with range frequency theory in models of brand choice abstract to construct a price judgment consumers compare a focal price with one or more reference prices however reference price operationalizations in the brand choice literature use single point summary measures that cannot account for several distributional effects to account for effects beyond the first moment of the reference price distribution the authors specify price judgments in models of brand choice in accordance with range frequency theory the findings indicate that range frequency price judgments provide a more complete specification of reference price effects and become more important with an increase in the second and third moments of a reference price distribution the data also indicate that range effects are stronger for coupon users and frequency effects are stronger for consumers exposed to a trend of prices the results have several implications for choice modeling pricing theory and pricing strategy

empirical generalizations from reference price research considerable theoretical justification for consumers use of psychological reference points exists from the research literature from a managerial perspective one of the most important applications of this concept is reference price an internal standard against which observed prices are compared in this paper we propose three empirical generalizations that are well supported in the marketing literature first there is ample evidence that consumers use reference prices in making brand choices second the empirical results on reference pricing also support the generalization that consumers rely on past prices as part of the reference price formation process third consistent with other research on loss aversion consumers have been found to be more sensitive to losses i e observed prices higher than reference prices than gains we also propose topics for further research on reference prices

an empirical comparison of the validity of a neural net based multinomial logit choice model to alternative model specifications applications of choice models to brand purchase data as a rule specify a linear deterministic utility function we estimate deterministic utility by means of a neural net able to approximate any continuous multivariate function and its derivatives to a desired level of precision we compare this model to related alternatives both with linear and nonlinear utility functions alternatives with nonlinear utility functions are based on generalized additive modeling and taylor series expansion respectively we analyze purchase data of the six largest brands in terms of market share for two product groups neural choice models outperform the alternative models studied w r t posterior probabilities they also attain the best crossvalidated log likelihood values these results demonstrate that the increase in complexity caused by the neural choice model is justified by higher validity in the empirical study the neural choice models imply elasticities different from those obtained by linear utility multinomial logit models for several predictors neural choice models discover inversely s shaped saturation and interaction effects on utility

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

when the levee breaks black migration and economic development in the american south abstract in the american south postbellum economic development may have been restricted in part by white landowners access to low wage black labor this paper examines the impact of the great mississippi flood of 1927 on black out migration and subsequent agricultural development flooded counties experienced an immediate and persistent out migration of black population over time landowners in flooded counties modernized agricultural production and increased its capital intensity relative to landowners in nearby similar non flooded counties landowners resisted black out migration however benefiting from the status quo system of labor intensive agricultural production jel j15 j43 n32 n52 n92 q54 r23

the long run impact of biofuels on food prices more than 40 of us corn is now used to produce biofuels which are used as substitutes for gasoline in transportation biofuels have been blamed universally for past increases in world food prices and many studies have shown that these energy mandates in the us and eu may have a large 30 60 impact on food prices in this paper we use a partial equilibrium framework to show that demand side effects in the form of population growth and income driven preferences for meat and dairy products rather than cereals may play as much of a role in raising food prices as biofuel policy by specifying a ricardian model with differential land quality we find that a significant amount of new land will be converted to farming which is likely to cause a modest increase in food prices however biofuels may increase aggregate world carbon emissions due to leakage from lower oil prices and conversion of pasture and forest land for farming

agricultural intensification in ghana evaluating the optimist s case for a green revolution abstract while there are valid reasons for a renewed interest in adapting the lessons of the asian green revolution to the african setting research must go further in identifying the main and potentially unique drivers of agricultural intensification within and across african countries in this study we look at the case of ghana to identify whether fast population growth and the remarkable agricultural performance the country has enjoyed in recent years have resulted in favorable conditions for the adoption of asian style green revolution technologies through descriptive analysis combined with empirical assessment of the economic efficiency of agriculture in different production systems and agroecologies we are able assess the relevance of green revolution technologies for agricultural production in ghana in particular we analyze whether fertilizer use in ghana is associated with high population density and intensive cereal production and whether land intensive innovations are associated with more efficient production practices overall we do not find evidence of asian style green revolution agricultural intensification in ghana in fact we find no correlation between population density and input intensity we also find that labor costs still play a major role in ghanaian agricultural development in limiting the adoption of labor intensive technologies even in relatively high population density areas

world food demand long term projections of global food demand are heavily dependent on which functional form of the food demand equation is used given that real incomes can change substantially over the long term key elements are the dependence of the income elasticity on income which ensures that the food budget share always lies within the 0 1 range and the role of income inequality this article analyzes these issues proposes a new functional form that deals with them and presents estimates of income and price elasticities for food in 138 countries copyright 2012 oxford university press

an investigation of reference price segments abstract empirical research on reference price has typically assumed that consumers use either an internal reference price irp or an external reference price erp but not both in brand choice decisions in this article the authors assume that consumers use both irp and erp but may consider one of them more salient than the other the authors develop a model that segments consumers on the basis of the differences in the importance they assign to each type of reference price as well as in their brand preferences and responses to marketing mix variables the authors calibrate the model on data for four categories liquid detergents ketchup tissue and yogurt in all four categories the proposed model performs significantly better than the one that assumes that consumers use either irp or erp exclusively the authors discuss the managerial implications of this finding

the effects of consumers price expectations on sellers dynamic pricing strategies abstract the authors propose a dynamic market equilibrium model to investigate how consumers form price expectations and how these expectations influence their sequential search behavior and prices in the market they derive a perfect bayesian nash equilibrium and show that whereas higher current period prices induce search consumers who observe higher historical prices form higher price expectations become more pessimistic and search less furthermore the authors show that when prices increase as a result of an increase in marginal costs consumers respond by searching more which then leads to higher prices and instant price adjustment in contrast because consumer search activities decline when prices fall sellers may respond by lowering their prices just enough to dampen consumers search tendencies when costs decrease the authors test their theoretical model and its implications and find support for it in a series of simulated market experiments

a laboratory study of duopoly price competition with patient buyers i introduction two extreme forms of pricing behavior sometimes called the bertrand paradox and the diamond paradox emerge from a single distinguishing assumption bertrand 1883 assumes that a buyer knows ex ante the prices of all sellers and notes that with homogeneous goods a single competitive price emerges even among a small number of sellers because at any slightly higher price at least one seller can increase his profit by engaging in undercutting in diamond s 1971 model on the other hand a buyer first chooses a seller and then receives the price quote ex post even with infinitesimal search cost in equilibrium a buyer searches only one seller and all sellers charge the monopoly price the only difference between the two formulations is whether sellers price ex ante or ex post 1 intuitively however there is no strong rationale for preferring either assumption for when price information is acquired this is especially so since the law of one price is known to fail and persistent price dispersion is widely observed even in essentially homogenous goods markets e g baye morgan and scholten 2004 brynjolfsson and smith 2000 sorensen 2000 most of the theoretical literature that models price dispersion has employed costly buyer search e g salop and stiglitz 1977 1982 stahl 1989 1996 stigler 1961 or costly seller advertising butters 1977 robert and stahl 1993 to generate dispersed prices 2 gale 1988 on the other hand models price dispersion in a rather stark form using only two sellers and one buyer this can provide a modeling foundation for some types of multilateral bargaining such as in concentrated intermediate goods markets sellers are uncertain whether the buyer is receiving price offers from both ex ante pricing or one ex post pricing of them at any given time if the buyer s sample contains both offers with a positive but not certain probability gamma a unique dispersed price equilibrium exists that shifts systematically with gamma extending this static model to multiround pricing with time discounting gale examines the impact of greater buyer patience modeled as a higher discount factor on the equilibrium price level and price dispersion this is intended to approximate market conditions with many buyers where trade continues over time as can occur also in durable goods settings as buyers become more patient sellers must compete not only with the other seller but also with their own future price offers consequently the equilibrium price distribution becomes concentrated at lower prices this article presents the first laboratory experiment that studies the interaction of buyer patience and search with multiround pricing by competing sellers specifically we focus on prices posted by competing sellers in a noisy search environment where buyers can wait for more price offers this enables us to explore how the timing of buyer s purchase decisions influences sellers pricing strategy which is not captured by the stationary equilibrium of the theoretical model the experiment includes both a static treatment where agents have only one opportunity to trade each period and a dynamic treatment where trading opportunities may continue for future rounds of price offers with a positive and known probability 3 one interpretation of these single round trading and multiple round trading treatments is that the former refers to a disposable goods and the latter to a durable goods environment the model s predictions that prices decrease if the buyer is more patient or is more likely to receive both price offers are intuitive but the available evidence from previous durable goods and bargaining experiments provides only weak support for theory furthermore implications of multiple price offers from competing sellers have never been studied previously in experiments with durable goods and multiple round trading which have focused on single seller environments

integration of serially sampled price information modeling and some findings focusing on the perceived value of an observed basket of items as the dependent variable the article suggests several rival models of integrating serially sampled price information within this context perceptual implications of different discount structures are noted also a computer controlled laboratory experiment is reported that attempts to provide guidance for subsequent studies that may compare the suggested models the results suggest that 1 store profile effects persist after exposure to price information 2 primacy effects are statistically significant but not strong and 3 a large number of noticeable discounts lead to a higher perceived value than a small number of extreme discounts

the agricultural roots of chinese innovation performance abstract a debate is brewing in the literature on whether legacies of rice and wheat cultivation in china matters for cultural attributes in particular individualism vs collectivism in turn this important cultural dimension has recently been shown to affect the pattern of innovation across countries however the previous literature has not firmly connected agricultural legacies and innovation rates and has consistently used low resolution data we study the role of agricultural legacy for innovation performance using unique patent data from close to two thousand chinese counties we provide robust evidence that counties with a legacy of rice cultivation generate fewer patent applications than other counties and a legacy of wheat production tends to be associated with more patent applications the results for rice are robust to e g controlling for temperature precipitation irrigation disease burden religiosity and corruption as well as accounting for migration patterns our results firmly establish the importance of agricultural legacy for shaping the culture of innovation

reassessing brand loyalty price sensitivity and merchandising effects on consumer brand choice this article reports the results of an empirical study of household brand choices over four scanner panel data sets the study uses a random effects autocorrelated logistic regression model the analysis presents evidence that the brand choice process is not zero order in addition the influence of in store displays and feature advertisements on switching is shown to be about two to three times more effective than estimates obtained from previous studies finally the analysis indicates systematic differences between frequent and infrequent buyers of products in terms of their sensitivity to price displays and feature advertising

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

hysteresis price acceptance and reference prices the existence of price thresholds in grocery retailing is well documented most authors explain the existence of price thresholds using assimilation contrast theory adaptation level theory or prospect theory however each of these theories is untenable if consumers are believed to behave rationally we offer a theoretical explanation grounded in real options theory rot and economic hysteresis we test the rot hypothesis against three plausible alternatives using a maximum likelihood friction model that we augment for unobserved heterogeneity our findings support the rot hypothesis and suggest that the existence of price thresholds in aggregate data are driven by a common recognition of real option values which do not disappear with the inclusion of consumer heterogeneity

a model of balanced choice behavior in some product categories consumers appear to alternate among items in a consistent and purposeful though not entirely deterministic fashion such alternation occurs even in the absence of any apparent external influences on choice to explain such balanced choice behavior we present a model based upon the premise that past consumption influences the utility of items on subsequent choice occasions individuals may seek variety on certain product attributes and exhibit loyalty toward others the model specification yields a logit choice model which may be calibrated using consumption diary panel data at the individual or cross sectional level

brand loyalty and market equilibrium two concepts of brand loyalty are defined inertial brand loyalty resulting from time lags in awareness and cost based brand loyalty resulting from intertemporal utility effects their market level implications are formally derived in a continuous time model it is found that inertial brand loyalty leads to equilibria with price dispersion while cost based brand loyalty also may allow single price equilibria in all cases as brand loyalty vanishes so does the difference between the average trading price and the price which obtains with no brand loyalty consistent with empirical results the theory predicts that the relationship between market share and performance is positive in cross sectional studies but flat in time series studies the theory is also consistent with the view that market share is an asset in itself after developing the theory several strategic implications are drawn in the end some questions for further theoretical and empirical research are raised

a reexamination of frequency depth effects in consumer price judgments previous research has shown that when there are multiple possible prices for two brands the brand that is discounted frequently but at shallow levels is perceived to have a lower average price than the brand that is discounted infrequently but at deeper levels the frequency effect however when there are only two possible prices for each brand the brand discounted infrequently but at deeper levels is perceived to have a lower average price the depth effect over a series of experiments we demonstrate that these frequency and depth effects do not generalize to other temporal price distributions

secular stagnation the effect of aging on economic growth in the age of automation several recent theories emphasize the negative effects of an aging population on economic growth either because of the lower labor force participation and productivity of older workers or because aging will create an excess of savings over desired investment leading to secular stagnation we show that there is no such negative relationship in the data if anything countries experiencing more rapid aging have grown more in recent decades we suggest that this counterintuitive finding might reflect the more rapid adoption of automation technologies in countries undergoing more pronounced demographic changes and provide evidence and theoretical underpinnings for this argument

agricultural productivity and structural transformation evidence from brazil we study the eects of the adoption of new agricultural technologies on structural transfor mation to guide empirical work we present a simple model where the eect of agricultural productivity on industrial development depends on the factor bias of technical change we test the predictions of the model by studying the introduction of genetically engineered soybean seeds in brazil which had heterogeneous eects on agricultural productivity across areas with dierent soil and weather characteristics we nd that technical change in soy production was strongly labor saving and lead to industrial growth as predicted by the model

mental accounting and changes in price the frame dependence of reference dependence mental accounting principles for multiple events were replicated and then extended to pricing situations that were designed to moderate these principles if reference dependence is proportional i e if consumers evaluate events in terms of proportional deviations from reference states rather than raw deviations prices were stated with or without popular percentage based pricing frames such as 33 off mental accounting principles generally prevailed in the absence of percentage based frames however percentage based frames altered two principles and increased tendencies toward the others the findings demonstrate that mental accounting principles price perception and reference dependence are sensitive to the ways in which deviations from reference states are framed

progressive supply side economics an explanation and update of the rehn meidner model the swedish rehn meidner model is a unique economic and wage policy program for the simultaneous achievement of full employment price stability growth and equality this article presents specif

consumer evaluations of multiple versus single price change this article examines how consumer evaluations of multiple price changes differ from the evaluation of a single price change of an equal amount consistent with r thaler s theory about segregation versus integration of gains and losses we find that multiple price decreases are evaluated more favorably than a single price decrease and multiple price increases are evaluated more unfavorably than a single price increase however these effects are moderated by consumer price uncertainty and relative magnitude of the prices being evaluated because price uncertain consumers consider higher ranges of prices acceptable they are less unfavorable to multiple price increases and more favorable to multiple price decreases than certain consumers moreover when the magnitude of one price is very small relative to other prices consumers preference for multiple price decreases relative to a single price decrease is reduced however this effect is not found when there are price increases

changes in the structure of global food demand may 1998 purdue agec staff paper 98 5 a newly developed demand system is used to estimate the response of food and food product demand to per capita expenditure changes the resulting engel elasticities are then used to project food and food product demand in 2020 assuming per capita expenditure and population changes results suggest that while food expenditure is projected to grow it accounts for a smaller proportion of total expenditure further analysis indicates change in the composition of food demand away from a grain and towards livestock is projected to occur in lower income countries in 2020

incorporating reference price effects into a theory of consumer choice although there has been a good deal of research on incorporating the effects of reference price formation into empirical models of consumer buying behavior little formal theoretical work had been undertaken to date this paper incorporates reference price effects into the traditional economic theory of consumer choice and examines the effects of reference price formation on the results of the traditional theory its marketing implications and the implications for empirical models which examine the effects of reference price formation on actual consumer behavior several implications of the theoretical model are empirically tested using weekly retail egg sales data from southern california this analysis indicates that reference price formation does have significant effects on consumer behavior furthermore these effects are asymmetric with consumers two and a half times more responsive to egg price increases that are in excess of the reference price than they are to comparable egg price decreases

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

immigration restrictions as active labor market policy evidence from the mexican bracero exclusion an important class of active labor market policy has received little rigorous impact evaluation immigration barriers intended to improve the terms of employment for domestic workers by deliberately shrinking the workforce recent advances in the theory of endogenous technical change suggest that such policies could have limited or even perverse labor market effects but empirical tests are scarce we study a natural experiment that excluded almost half a million mexican bracero seasonal agricultural workers from the united states with the stated goal of raising wages and employment for domestic farm workers we build a simple model to clarify how the labor market effects of bracero exclusion depend on assumptions about production technology and test it by collecting novel archival data on the bracero program that allow us to measure state level exposure to exclusion for the first time we cannot reject the hypothesis that bracero exclusion had no effect on u s agricultural wages or employment and find that important mechanisms for this result include both adoption of less labor intensive technologies and shifts in crop mix

consumer uncertainty and purchase decision reversals theory and evidence this research examines how prepurchase information that reduces consumer uncertainty about a product or service can affect consumer decisions to reverse an initial product purchase or service enrollment decision one belief commonly held by retailers is that provision of greater amounts of information before the purchase reduces decision reversals we provide theory and evidence showing conditions under which uncertainty reducing information provided before the purchase decision can actually increase the number of decision reversals predictions generated from an analytical model of consumer behavior incorporating behavioral theory of reference dependence are complemented by empirical evidence from both a controlled behavioral experiment and econometric analysis of archival data combined the theory and evidence suggest that managers should be aware that their information provision decisions taken to reduce decision reversals may actually increase them data as supplemental material are available at http dx doi org 10 1287 mksc 2015 0906

an empirical analysis of latitude of price acceptance in consumer package goods scanner panel data analyses for sweetened and unsweetened drink categories with four brands in each support the presence of a region of price insensitivity around a reference price the analyses also suggest that consumers with higher average reference price have a wider latitude of price acceptance consumers with a higher frequency of purchase i e shorter average interpurchase time interval are found to have a narrower latitude of price acceptance because they are more aware of the range of price distributions finally consumers with a higher average brand loyalty have a wider latitude of price acceptance demonstrating greater tolerance of price fluctuations

the effect of discount frequency and depth on consumer price judgments the intensity of price discounting by retailers and manufacturers raises important questions about consumer price judgments in the extreme discounting can take the form of frequent but shallow discounts or deep but infrequent discounts the research reported here explores the effects of these strategies on consumer estimation of price levels for competing stores and brands in an initial experiment in which subjects made brand choices over time a depth effect was observed that contrasted with the frequency effect found in previous research subsequent experiments identified the conditions under which depth vs frequency characteristics of price data dominate consumers price estimation judgments frequency information is more influential when sets of interstore or interbrand comparative prices exhibit complex and overlapping distributions hence creating processing difficulty in contrast a depth bias occurs when prices have a simpler dichotomous distribution these results place pragmatically meaningful limitations on the influence of frequency information and illustrate the importance of context in determining consumer price judgments in a promotional environment

the budget contraction effect how contracting budgets lead to less varied choice how do consumers adjust their spending when their budget changes a common view is that the allocation of one s current budget should not depend on previous budget allocations contrary to this the authors find that when the budget contracts to a particular level consumers select less variety as measured by the number of different items with some of the budget allocated to them than when their budget expands to that same level this budget contraction effect stems from a reduction in variety under the contracting budget not from variety expansion under the expanding budget evidence from five experiments indicates that the effect is driven by a desire to avoid feelings of loss associated with spreading allocation cuts relative to reference quantities from previous allocations across many items

an alternative explanation for lower repeat rates after promotion purchases several authors have observed that average repeat rates are lower after a promotion purchase one interpretation of this result is that a media coupon or cents off promotion undermines the consumer

explicit solutions of optimization models and differential games with nonsmooth asymmetric reference price effects models in marketing with asymmetric reference effects lead to nonsmooth optimization problems and differential games which cannot be solved using standard methods in this study we introduce a new method for calculating explicitly optimal strategies open loop equilibria and closed loop equilibria of such nonsmooth problems application of this method to the case of asymmetric reference price effects with loss aversive consumers leads to the following conclusions 1 when the planning horizon is infinite after an introductory stage the optimal price stabilizes at a steady state price which is slightly below the optimal price in the absence of reference price effects 2 the optimal strategy is the same as in the symmetric case but with the loss parameter determined by the initial reference price 3 competition does not change the qualitative behavior of the optimal strategy 4 adopting an appropriate constant price strategy results in a minute decline in profits

a high tech product market share model with customer expectations in a product category based on dynamic technology new products enter the market in rapid succession and the competitive situation changes almost daily because technological features of available products tend to improve while prices tend to decline customers develop expectations that may influence their purchase decisions we model the impact of customer expectations regarding price and technology on product market share in the personal computer industry finding significant nonlinear effects of both these effects are observed when actual product price and or technology differ from expectations by a threshold amount our results suggest implementable implications for high tech product managers in particular price and technology should meet but not exceed customer expectations this does not mean that managers should strive for mediocrity rather continuous improvement should be implemented so that product development efforts lead customer expectations

the impact of product line extensions and consumer goals on the formation of price image abstract how do vertical product line extensions influence a retailer s price image conventional wisdom suggests that adding an upscale or downscale item to a product line has a directionally consistent impact on price image such that upscale extensions increase price image and downscale extensions decrease price image in contrast this research argues that vertical extensions can have the opposite effect such that upscale extensions can decrease rather than increase price image and vice versa for downscale extensions the authors further propose that the impact of vertical extensions on price image is a function of consumer goals and in particular whether consumers have the intent of browsing or buying the authors test these predictions in a series of five empirical studies that offer converging evidence in support of the proposed theory

chapter 6 market share models publisher summary this chapter describes that three basic principles motivate the specification of the market share models market share models should be competitive descriptive as well as predictive and profit oriented being fundamentally competitive implies that one cannot know the effect or effectiveness of a marketing action without accounting for the actions of competitors market share models are models for understanding how the marketing efforts of every brand impact the results in a competitive marketplace only by describing the influence of each marketing instrument can one gain a basis for marketing planning prediction alone is not enough time series models that forecast the future from the past sales provide no insight into how sales are generated the emphasis on being descriptive also embraces the need to understand the areas in which consumer choice probabilities are synonymous with market shares as well part of the goal of description transcends what can be done by market share models alone managers need to understand that their efforts have potentially competitive effects and potentially market expansive effects in sales response models these effects are comingled but by combining descriptive market share models for the competitive effects with descriptive category volume models for the market expansive effects managers obtain a much richer understanding of the market the profit oriented goal of market share analysis urges us to ask how the firm s allocations of resources to aspects of the marketing mix produce bottom line results

nutrition transition and the structure of global food demand estimating future demand for food is a critical aspect of global food security analyses the process linking dietary changes to wealth is known as the nutrition transition and presents well identified features that help to predict consumption changes in poor countries this study proposes to represent the nutrition transition with a nonhomothetic flexible in income demand system known as the modified implicitly directly additive demand system maidads the resulting model is transparent and estimated statistically based on cross sectional information from faostat it captures the main features of the nutrition transition rise in demand for calories associated with income growth diversification of diets away from starchy staples and a large increase in caloric demand for animal based products fats and sweeteners the estimated model is used to project food demand between 2010 and 2050 based on a set of plausible futures trend projections and shared socioeconomic pathways scenarios the main results of these projections are as follows 1 global food demand will increase by 46 less than half the growth in the previous four decades 2 this growth will be attributable mainly to lower middle income and low income countries 3 the structure of global food demand will change over the period with a 95 increase in demand for animal based calories and a much smaller 18 increase in demand for starchy staples and 4 the analysis of a range of population and income projections reveals important uncertainties depending on the scenario the projected increases in demand for animal based and vegetal based calories range from 78 to 109 and from 20 to 42 respectively

understanding reference price shoppers a within and cross category analysis abstract the authors attempt to draw profiles of reference price shoppers specifically the authors study how selected factors that affect brand choice are correlated with consumer sensitivity to gains and losses with respect to internal reference prices they also study the interaction between sociodemographics and gain and loss sensitivity furthermore the authors analyze cross category correlations in gain and loss sensitivity to shed light on their individual and category specific characters in three categories the results show significant heterogeneity in loss sensitivity among consumers and indicate that loss sensitivity is greater and more heterogeneous than gain sensitivity across categories the results show that loss sensitive shoppers are less influenced by past brand use and that both loss and gain sensitive shoppers more sensitive to price display and feature than the average consumer loss sensitive households tend to be larger and their heads are less likely to be fully employed