an economic theory of self control the concept of self control is incorporated in a theory of individual intertemporal choice by modeling the individual as an organization the individual at a point in time is assumed to be both a farsighted planner and a myopic doer the resulting conflict is seen to be fundamentally similar to the agency conflict between the owners and managers of a firm both individuals and firms use the same techniques to mitigate the problems which the conflicts create this paper stresses the implications of this agency model and discusses as applications the effect of pensions on saving saving and the timing of income flows and individual discount rates

a multiplicative model of optimal ceo incentives in market equilibrium this paper presents a unified theory of both the level and sensitivity of pay in competitive market equilibrium by embedding a moral hazard problem into a talent assignment model by considering multiplicative specifications for the ceo s utility and production functions we generate a number of different results from traditional additive models first both the ceo s low fractional ownership the jensen murphy incentives measure and its negative relationship with firm size can be quantitatively reconciled with optimal contracting and thus need not reflect rent extraction second the dollar change in wealth for a percentage change in firm value divided by annual pay is independent of firm size and therefore a desirable empirical measure of incentives third incentive pay is effective at solving agency problems with multiplicative impacts on firm value such as strategy choice however additive issues such as perk consumption are best addressed through direct monitoring jel d2 d3 g34 j3

statistical efficiency of double bounded dichotomous choice contingent valuation the statistical efficiency of conventional dichotomous choice contingent valuation surveys can be improved by asking each respondent a second dichotomous choice question which depends on the response to the first question if the first response is yes the second bid is some amount greater than the first bid while if the first response is no the second bid is some amount smaller this double bounded approach is shown to be asymptotically more efficient than the conventional singlebounded approach using data from a survey of californians regarding their willingness to pay for wetlands in the san joaquin valley we show that in a finite sample the gain in efficiency can be very substantial

skills in the city this paper documents the allocation of skills across cities and estimates the impact of agglomeration on the hedonic prices of worker skills we find that large cities are more skilled than are small cities but only to a modest degree we also show that the increase in productivity associated with agglomeration as measured by the urban wage premium is larger for workers with stronger cognitive and people skills in contrast motor skills and physical strength are not rewarded to a greater degree in large cities urbanization thus enhances thinking and social interaction rather than physical abilities these results are robust to a variety of estimation strategies including using nlsy variables that control for worker quality and a worker msa fixed effect specification

patterns of research productivity in the business ethics literature insights from analyses of bibliometric distributions in any academic discipline published articles in respective journals represent production units of scientific knowledge and bibliometric distributions reflect the patterns in such outputs across authors or producers closely following the analysis approach used for similar studies in the economics and finance literature we present the first study to examine whether there exists an empirical regularity in the bibliometric patterns of research productivity in the business ethics literature our results present strong evidence that there indeed exists a distinct empirical regularity it is the so called generalized lotka s law of scientific productivity pattern the number of authors publishing n papers is about 1 n c of those publishing one paper we discuss the likely processes that underlie the productivity pattern postulated by the generalized lotka s law we find that the value of the exponent c is equal to about 2 6 for the comprehensive bibliometric data across the two leading business ethics journals the observed research productivity pattern in the business ethics area a relatively young discipline is interestingly very consistent with those found in much older related business disciplines like economics accounting and finance we discuss the general implications of our findings

are rich people smarter abstract we formulate a general stochastic process of wealth accumulation by capital investment and analyze the conditions required to ensure convergence to the empirically observed pareto wealth distribution while homogeneous investment talent leads to the pareto distribution under very general conditions even a mild degree of differential investment talent results in a non pareto wealth distribution this finding suggests that chance rather than differential investment talent is the dominant factor in the process of wealth accumulation by financial investment our findings conform with market efficiency and may have implications regarding the origins the economic significance and the social desirability of wealth inequality at the high wealth range

metropolitan evolution sectoral economic change and the city size distribution metropolitan evolution is conceptualised from a broad long term perspective that focuses on demographic and sectoral economic variables emphasis is placed on understanding these changes from a process oriented approach that considers its general relevance rather than its outcomes or microanalytic details a selective review of the literature provides a significant perspective and background on the stages model that is applied to the study of metropolitan change this is then related to the pareto city size distribution by considering the interurban population distribution coefficient and its expected performance over the various phases of metropolitan evolution a hypothetical interurban manufacturing employment distribution coefficient analogous to the pareto population coefficient is also considered and is related to the process of metropolitan and interurban sectoral economic change the relationship between metropolitan change and national urban size distribution is viewed as a significant compone

urban development in the united states 1690 1990 the united states transformed itself from a rural to an urban society over the last three cen turies after a century of unremarkable growth the pace of urbanization was historically un precedented between the nineteenth and the early twentieth centuries in the twentieth century the urban population continued to increase but in a much more dispersed manner as the sub urban population increased throughout these developments cities also exhibited considerable variation in their population sizes this paper finds that the pace and pattern of u s urban development are explained by changes in regional comparative advantage and in economies in transportation and local public goods which in turn were determined by the changes in the economic structures of cities this paper also finds that cities varied considerably in size because the larger cities reduced market transaction costs associated with coordinating greater geograph ic division of labor

firm size distributions an overview of steady state distributions resulting from firm dynamics models abstract empirical firm size distributions are the cumulated result of underlying firm dynamics involving entry of new firms and growth decline and exits of incumbent firms in this paper we give an overview of firm size distributions that result as steady states from models differing in the way these firm dynamics are modelled in the process we i derive common results and explain seemingly contradictory results ii propose new functional forms to describe firm size distributions iii give insight in the interrelationships between the distributions in terms of underlying firm dynamics iv give possible firm dynamical interpretations of the parameters of the distributions and v analyse to which extent the steady state approach is able to explain the shape of firm size distributions that are encountered in practice

optimal urban population size national vs local economic efficiency this paper explores whether the population size of the seoul metropolitan area sma in korea is efficient in terms of the national economy to undertake this analysis a recursively dynamic interregional computable general equilibrium icge model with a population module is developed in this model the explicit costs and benefits of population growth are estimated by using the industrial value added and consumer price inflation functions for each region the counter factual analysis shows that national population decentralisation away from the sma is desirable for korea s economic growth korea s gdp is estimated to be maximised when the sma s national population share is at 39 per cent in the short term and 35 per cent in the long term however the sma government is likely to have incentive to maintain its population at around 40 per cent of the national population where per capita income at the regional not national level is maximised

inventory pooling under heavy tailed demand risk pooling has been studied extensively in the operations management literature as the basic driver behind strategies such as transshipment manufacturing flexibility component commonality and drop shipping this paper explores the benefit of risk pooling in the context of inventory management using the canonical model first studied in eppen eppen gd 1979 effects of centralization on expected costs in a multi location newsboy problem management sci 25 5 498 501 specifically we consider a single period multilocation newsvendor model where n different locations face independent and identically distributed demands and linear holding and backorder costs we show that eppen s celebrated result i e that the expected cost savings from centralized inventory management scale with the square root of the number of locations depends critically on the light tailed nature of the demand uncertainty in particular we establish that the benefit from pooling relative to the decentralized case in term

the effect of explicit reference points on consumer choice and online bidding behavior sellers often explicitly suggest to buyers that they compare one option to other reference options building on the notion that loss aversion is more pronounced when comparisons are explicit rather than implicit we propose that the mere fact that consumers are explicitly told to make particular comparisons induces more risk averse cautious choice and bidding behavior this proposition was supported in a field experiment involving real online auctions in which comparisons among listings either were done spontaneously by bidders or were encouraged using an explicit instruction to compare the focal auction with adjacent listings results showed that explicit reference points 1 diminished the influence of adjacent auction prices on the focal auction s price 2 led participants to submit fewer lower and later bids 3 increased the incidence of sniping 4 decreased bidding frenzy and 5 decreased the tendency to bid on multiple items simultaneously the impact of explicit comparisons on risk averse behavior was further tested in a very different context using a laboratory choice experiment in that study explicit instructions to compare option sets increased the tendency to choose the compromise low risk and all average alternatives we discuss the theoretical and practical implications of this research

economic growth in a cross section of cities abstract we examine the relationship between urban characteristics in 1960 and urban growth between 1960 and 1990 income and population growth move together and both types of growth are 1 positively related to initial schooling 2 negatively related to initial unemployment and 3 negatively related to the initial share of employment in manufacturing racial composition and segregation are uncorrelated with urban growth across all cities but in cities with large nonwhite communities segregation is positively correlated with population growth government expenditures except for sanitation are uncorrelated with growth government debt is positively correlated with later growth

urban concentration and agglomeration economies re examining the relationship using a sample of 49 countries and two stage least squares estimators the effects of urban concentration on economic growth are examined evidence is provided that external agglomeration economies in the largest cities have been exhausted although the process of concentration continues to have a positive impact on output this effect however is attributed to internal adjustments caused by concentration in factor intensity and marginal factor productivity in the production activities of urban areas the results suggest that a meaningful policy aiming to alleviate the social costs of concentration in over populated metropolises without reducing the overall efficiency of the economy should follow a long term strategy of developing smaller cities in the periphery and favouring the operation of smaller scale less capital intensive enterprises in the economy

an agenda for the design and study of international environmental agreements abstract the combination of a general greening of international political debate and the events of 1992 at the rio earth summit have led to great interest in the question of global environmental protection while it is recognized that international environmental agreements ieas are the means by which the earth s fragile environment is most likely to be protected this recognition has been recent hence there is very little formal research on the design and study of ieas as such in this paper i propose and describe a research agenda for the design and study of ieas very generally i propose that we frame the iea design question as a problem in mechanism design we will then be able to use inter alia the theory of common agency and the theory of hierarchies to generate interesting new theoretical and practical insights into the workings of ieas

tax incidence when individuals are time inconsistent the case of cigarette excise taxes abstract one of the most cogent criticisms of excise taxes is their regressivity with lower income groups spending a much larger share of their income on goods such as cigarettes than do higher income groups we argue that traditional quantity based measures of incidence are only appropriate under a very restrictive time consistent model of consumption of sin goods a model that is much more consistent with existing evidence on smoking decisions is a time inconsistent formulation where excise taxes on cigarettes serve a self control function that is valued by smokers who would like to quit but cannot this self control function benefits lower income groups more since they have a significantly higher price sensitivity of smoking calibrations show that as a result cigarette taxes are much less regressive than previously assumed and are even progressive for a wide variety of parameter values

a theory of limited liquidity and large investors causing spikes in stock market volatility and trading volume we survey a theory of the economic underpinnings of the fat tailed distributions of a number of financial variables such as returns and trading volumes our theory posits that they have a common origin in the strategic trading behavior of very large financial institutions in a relatively illiquid market we show how the fat tailed distribution of fund sizes can indeed generate extreme returns and volumes even in the absence of fundamental news moreover we are able to replicate the individually different empirical values of the power law exponents foreachdistribution largeinvestorsmoderatetheirtradestoreducetheirpriceimpact coupled with a concave price impact function this leads to volumes being more fat tailed than returns but less fat tailed than fund sizes the trades of large institutions offer a unified explanation for apparently disconnected empirical regularities that are otherwise a challenge for economic theory jel g12 g14 g23

is addiction rational theory and evidence this paper makes two contributions to the modeling of addiction first we provide new and convincing evidence that smokers are forward looking in their smoking decisions using state excise tax increases that have been legislatively enacted but are not yet effective and monthly data on consumption second we recognize the strong evidence that preferences with respect to smoking are time inconsistent with individuals both not recognizing the true dife culty of quitting and searching for self control devices to help them quit we develop a new model of addictive behavior that takes as its starting point the standard rational addiction model but incorporates time inconsistent preferences this model also exhibits forward looking behavior but it has strikingly different normative implications in this case optimal government policy should depend not only on the externalities that smokers impose on others but also on the internalities imposed by smokers on themselves we estimate that the optimal tax per pack of cigarettes should be at least one dollar higher under our formulation than in the rational addiction case

anomalies in intertemporal choice evidence and an interpretation research on decision making under uncertainly has been strongly influenced by the documentation of numerous expected utility eu anomalies behaviors that violate the expected utility axioms the relative lack of progress on the closely related topic of intertemporal choice is partly due to the absence of an analogous set of discounted utility du anomalies we enumerate a set of du anomalies analogous to the eu anomalies and propose a model that accounts for the anomalies as well as other intertemporal choice phenomena incompatible with du we discuss implications for savings behavior estimation of discount rates and choice framing effects

management of transnational commons coordination publicness and treaty formation this paper focuses on the formation of treaties to manage transnational commons when efforts must be coordinated among a minimal sized group so as to make cooperation worthwhile by focusing on mixed strategy equilibria we are con cerned with instances where the intentions of others are uncertain the number of required participants the pattern of payoffs transaction costs and the underlying technology of public supply aggregation are key factors behind the achievement of coordina tion we apply our analysis to explain the outcome of negotiations on stratospheric ozone depletion global warming acid rain and tropical deforesta tion jel q20 d70

power laws in economics an introduction paul samuelson 1969 was once asked by a physicist for a law in economics that was both nontrivial and true this is a difficult challenge as many roughly true results are in the end rather trivial for example demand curves slope down while many nontrivial results in economics in fact require too much sophistication and rationality on the part of the agents to actually hold true in practice 1 samuelson answered the law of comparative advantage the story does not say whether the physicist was satisfied the law of comparative advantage is a qualitative law and not a quantitative one as is the rule in physics indeed many of the insights of economics seem to be qualitative with many fewer reliable

consumption self control by rationing purchase quantities of virtue and vice consumers attempts to control their unwanted consumption impulses influence many everyday purchases with broad implications for marketers pricing policies addressing theoreticians and practitioners alike this paper uses multiple empirical methods to show that consumers voluntarily and strategically ration their purchase quantities of goods that are likely to be consumed on impulse and that therefore may pose self control problems for example many regular smokers buy their cigarettes by the pack although they could easily afford to buy 10 pack cartons these smokers knowingly forgo sizable per unit savings from quantity discounts which they could realize if they bought cartons by rationing their purchase quantities they also self impose additional transactions costs on marginal consumption which makes excessive smoking overly difficult and costly such strategic self imposition of constraints is intuitively appealing yet theoretically problematic the marketing literature lacks operationalizations and empirical tests of such consumption self control strategies and of their managerial implications this paper provides experimental evidence of the operation of consumer self control and empirically illustrates its direct implications for the pricing of consumer goods moreover the paper develops a conceptual framework for the design of empirical tests of such self imposed constraints on consumption in consumer goods markets within matched pairs of products we distinguish relative virtue and vice goods whose preference ordering changes with whet her consumers evaluate immediate or delayed consumption consequences for example ignoring long term health effects many smokers prefer regular relative vice to light relative virtue cigarettes because they prefer the taste of the former however ignoring these short term taste differences the same smokers prefer light to regular cigarettes when they consider the long term health effects of smoking these preference orders can lead to dynamically inconsistent consumption choices by consumers whose tradeoffs between the immediate and delayed consequences of consumption depend on the time lag between purchase and consumption this creates a potential self control problem because these consumers will be tempted to over consume the vices they have in stock at home purchase quantity rationing helps them solve the self control problem by limiting their stock and hence their consumption opportunities such rationing implies that per purchase occasion vice consumers will be less likely than virtue consumers to buy larger quantities in response to unit price reductions such as quantity discounts we first test this prediction in two laboratory experiments we then examine the external validity of the results at the retail level with a field survey of quantity discounts and with a scanner data analysis of chain wide store level demand across a variety of different pairs of matched vice regular and virtue reduced fat calorie or caffeine etc product categories the analyses of these experimental field and scanner data provide strong convergent evidence of a characteristic crossover in demand schedules for relative vices and virtues for categories as diverse as among others potato chips chocolate chip cookies cream cheese beer soft drinks ice cream and frozen yogurt chewing gum coffee and beef andturkey bologna vice consumers demand increases less in response to price reductions than virtue consumers demand although their preferences are not generally weaker for vices than for virtues constraints on vice purchases are self imposed and strategic rather than driven by simple preferences we suggest that rationing their vice inventories at the point of purchase allows consumers to limit subsequent consumption as a result of purchase quantity rationing however vice buyers forgo savings from price reductions through quantity discounts effectively paying price premiums for the opportunity to engage in self control thus purchase quantity rationing vice consumers are relatively price in sensitive from a managerial and public policy perspective our findings should offer marketing practitioners in many consumer goods industries new opportunities to increase profits through segmentation and price discrimination based on consumer self control they can charge premium prices for small sizes of vices relative to the corresponding quantity discounts for virtues virtue consumers on the other hand will buy larger amounts even when quantity discounts are relatively shallow a key conceptual contribution of this paper lies in showing how marketing researchers can investigate a whole class of strategic self constraining consumer behaviors empirically moreover this research is the first to extend previous theoretical work on impulse control by empirically demonstrating its broader implications for marketing decision making

smoking cessation a model of planned vs actual behavior for time inconsistent consumers we offer a simple model of intertemporal choice to characterize how planned versus actual behaviors evolve for time inconsistent smokers our results suggest that smokers participation and cessation decisions are governed by the interplay between three effects the cessation effect leads smokers to advance their plans to quit smoking whereas the procrastination effect leads them to consecutively revise their planned quitting age upwards consequently the duration of smoking is effectively governed by which one of these two effects is dominant finally for certain consumer segments a threshold effect causes an all or nothing type of extreme smoking behavior based on certain critical values of present biased preferences our results provide some preliminary evidence that both marketing efforts by tobacco firms and public policy initiatives can have a significant influence on smoking behavior in particular we find that reductions in the age at which individuals start smoking may not only vastly extend their duration of smoking but also convert potential never smokers into lifetime smokers finally we estimate a hazard model using survey data from over 800 smokers to provide evidence in support of our theoretical model

gibrat s law for all cities two empirical regularities concerning the size distribution of cities have repeatedly been established zipf s law holds the upper tail is pareto and city growth is proportionate census 2000 data are used covering the entire size distribution not just the upper tail the nontruncated distribution is shown to be lognormal rather than pareto this provides a simple justification for the coexistence of proportionate growth and the resulting lognormal distribution an equilibrium theory of local externalities that can explain the empirical size distribution of cities is proposed the driving force is a random productivity process of local economies and the perfect mobility of workers

self control and incentives an analysis of multiperiod quota plans it is well known that individuals often fail to exert proper self control in organizational settings this can lead to reduced productivity and profits we use the literature on present biased preferences to model employees self control problems and examine how firms can design compensation plans to reduce the negative consequences of their employees self control problems our results suggest that firms can mitigate self control problems by delaying payment to the employees this can be achieved by using multiperiod quotas such as annual quotas to compensate employees for their cumulative performance although such plans are prevalent in the market there is little theoretical research that shows when multiperiod quota plans can be optimal the paper provides one potential explanation for the widespread use of such quota plans interestingly we find that such plans may be optimal despite the fact that they encourage more procrastination we also find that such plans lead to higher effort by the employees and can sometimes improve the welfare of not only the firm but also the employees

patterns of technological competence accumulation a proposition for empirical measurement this article develops a typology that describes and measures different types of technological competence accumulation the notion of accumulation comprises not only the state but also the change in competence and hence it complies with the criticism of the static approaches to competence management the typology of competence accumulation enables a comparison of firm profiles that lead to identification of four groups of firm behavior across the telecommunications industry the relationship between the firm and the industry level is established on the condition that each firm s competence level depends on the firms mutual relationships with other firms in the same industry known as red queen evolution the four groups of firm behaviour are therefore not considered as groups of independent firms that are similar by coincidence but as patterns of behavior within the telecommunications industry which allows for a discussion of more general implications for management of technology copyright 2005 oxford university press

evidence on the political economy of the urbanization process urbanization and economic development go hand in hand as a country moves from a rural agricultural base to an urban industrial base this paper argues that urbanization per se occurs in response to the basic sector shift out of agriculture and government policies such as price controls and trade protection of industry affect the process only indirectly through their effect on sector composition however urban concentration the extent to which a country s urban resources are concentrated in one or two large cities as opposed to more evenly spread is much more directly affected by policies and politics the paper finds specifically that investments in inter regional infrastructure facilitates urban deconcentration away from primate to hinterland cities as does increasing democratization or increasing fiscal decentralization the findings move beyond establishing basic correlations in the data to trying to quantify causal effects in a panel framework with instrumental variables estimation

central place theory and city size distribution this paper proposes a theory of city size distribution via a hierarchy approach rather than the popular random growth process it does so by formalizing central place theory using an equilibrium entry model and specifying the conditions under which city size distribution follows a power law central place theory describes the way in which a hierarchical city system with difierent layers of cities serving difierently sized market areas is formed from a uniformly populated space the force driving the city size difierences in this model is the heterogeneity in economies of scale across goods the city size distribution under a central place hierarchy exhibits a power law if the distribution of scale economies is regularly varying which is a general class that encompasses many well known commonly used distributions this model is also consistent with a power law for flrms and a number average size rule which is the log linear relationship between the number and average size of the cities in which an industry is located

on the economic geography of international migration we exploit the bilateral and skill dimensions from recent data sets of international migration to test for the existence of zipf s and gibrat s laws in the context of aggregate and high skilled international immigration and emigration using graphical parametric and non parametric analysis the top tails of the distributions of aggregate and high skilled immigrants and emigrants adhere to a pareto distribution with an exponent of unity i e zipf s law holds we find some evidence in favour of gibrat s law holding for immigration stocks i e that the growth in stocks is independent of their initial values and stronger evidence that immigration densities are diverging over time conversely emigrant stocks are converging in the sense that countries with smaller emigrant stocks are growing faster than their larger sovereign counterparts lastly high skilled immigration and emigration stocks expressed in levels or as densities all exhibit signs of convergence we conclude by discussing some competing mechanisms that could be driving the observed patterns including differing fertility rates reductions in emigration restrictions migrant sorting and selective immigration policies immigrant networks and persisting wage differentials

rates of time preference for saving lives an important characteristic of many environmental programs is that their benefits extend far into the future the primary purpose of cleanups at hazardous waste disposal sites for example is often to prevent the contamination of groundwater that could pose risks to future residents at these sites such cleanups typically involve considerable capital and other costs which are incurred at the front end of the project and yield a stream of health benefits often in the form of cancer cases avoided that may not be recognized for many years this would not pose unusual problems for program evaluation if everyone were comfortable with the assignment of dollar values to these reductions in future risk see cropper and portney 1990 however regulatory agencies are sometimes reluctant to make such monetary valuations preferring instead to evaluate programs on a cost per life saved cpls basis office of management and budget 1991 this raises an interesting question should lives saved in the future be discounted for the purpose of calculating cpls or should they be counted the same as those saved tomorrow to shed light on this over the last year we have asked members of the public hypothetical questions that enable us to infer the rate at which they implicitly discount future lives saved john k horowitz and richard t carson 1990 asked similar questions of students in the remainder of this paper we summarize the results of this research details of which can be found elsewhere cropper et al 1991 1992

beijing or shanghai the strategic location choice of large mnes host country headquarters in china we argue that a multinational enterprise s mne s location choice for its host country headquarters hchq in the geographic space of the host country is determined by the interplay between the strategic roles of hchq in the organizational space of the mne and the institutional space external and internal to the mne we focus on the location choice between beijing and shanghai we test our arguments using data for a sample of fortune global 500 corporations in china 1979 2005 this study contributes to international business ib research by reinvigorating research on hchq we also complement economic geography research on subnational agglomeration by using an ib perspective with a focus on the institutional idiosyncrasies of cities

broadband penetration and economic growth nexus evidence from cross country panel data this article investigates whether there are granger causal relationships between broadband penetration degree of urbanization foreign direct investment and economic growth using a panel data set covering the g 20 countries for the period 1998 2011 using our multivariate framework we first find that all of the variables are cointegrated our findings further reveal a network of causal connections between the variables including short run bidirectional causality between broadband penetration and economic growth among the more developed countries within the g 20 on the other hand for the developing countries within the g 20 there is evidence of unidirectional causality from economic growth to broadband penetration

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

rational addiction to caffeine an analysis of coffee consumption it is common knowledge that coffee tea and other beverages that contain caffeine are habit forming a recent medical study confirms that caffeine is strongly addictive with subjects exhibiting syndromes of intoxication withdrawal and dependence strain et al 1994 p 1043 that study concludes that the effect is physiological not just psychological it is of interest to ask whether the addictive nature of the most widely used psychoactive substance in the world is apparent from data on consumption there are several economic models of addiction among them the rational addiction model of becker and murphy 1988 stands out because of its simplicity and consistency with economic theory in this model the utility a consumer derives from consumption depends not only on the quantity c that is consumed but also on the degree of addiction at addiction is a form of human capital taking the form of a possibly harmful rather than beneficial stock variable it is increased as a by product of consumption and it gradually depreciates as time passes thus current consumption affects future choices consuming the good now increases its desirability in the future the becker murphy model is rational and forward looking in that the consumer is aware of these future effects and weighs them in making the current consumption choice this is in strong contrast to models that are based on assumptions of myopia and nonrational behavior an implication of the model is that this forward looking behavior can be detected in the data theory predicts that consumption data

analysing mexican population concentration a model with empirical evidence in this study we analyse the economic determinants of population concentration in mexico estimating a time series cross sectional model for 1895 1990 in which the pareto coefficient is a measure of population concentration the fundamental lesson of this paper is that there is a clear and unequivocal u shaped pattern between population concentration and economic development this finding was not confirmed in cross national studies our results are consistent with central place theory and suggest that as development proceeds agglomeration benefits of large cities are exhausted and the optimum level of production is exceeded hence government policies aimed at encouraging decentralisation may not interfere with economic growth and efficiency our findings point to the significant non linear relationship between population concentration and a number of variables in the model including total population urbanisation ratio total land area population density and central government expenditure the signifi

spatial growth and industry age between 1970 and 2000 employment growth across u s counties exhibited very different patterns in manufacturing and services whereas manufacturing employment growth was negatively related to initial manufacturing employment across the entire distribution of counties service employment growth was positively related to initial service employment for intermediate sized counties this paper presents a theory to rationalize these facts local sectoral growth is driven by technological diffusion across space and depends on the age of the sector the theory correctly predicts the relation between county employment growth and initial county employment in manufacturing at the turn of the 20th century

an analysis of the implications of china s urbanization policy for economic growth and energy consumption abstract china intends to rely on urbanization policies to increase its economic growth even against the backdrop of new constraints on energy consumption this paper investigates the impact of urbanization on economic growth and energy consumption using data from china s 266 prefecture level cities over the 2000 2010 period and examines the heterogeneity of this impact across income and urbanization groups the main results of our empirical estimation indicate that 1 the effect of urbanization on economic growth is positive and significant for the entire sample although it is positive and significant only for high and middle income groups and not the low income group 2 the impact of urbanization on energy consumption is positive and significant for all groups when the sample is divided into three urbanization groups based on the northam curve indicating that urbanization will lead to large increases in energy consumption in summary our empirical results show that urbanization targets will be difficult to achieve in terms of increasing gdp per capita under energy consumption constraints

a theory of rational addiction we develop a theory of rational addiction in which rationality means a consistent plan to maximize utility over time strong addiction to a good requires a big effect of past consumption of the good on current consumption such powerful complementarities cause some steady states to be unstable they are an important part of our analysis because even small deviations from the consumption at an unstable steady state can lead to large cumulative rises over time in addictive consumption or to rapid falls in consumption to abstention our theory also implies that cold turkey is used to end strong addictions that addicts often go on binges that addicts respond more to permanent than to temporary changes in prices of addictive goods and that anxiety and tensions can precipitate an addiction

the multicontract organization this paper starts by discussing some nonstandard issues in organization theory bou nded rationality incomplete contracting and collusive behavior on which the rest of the paper focuses it then contrasts the comprehens ive contracting and game theoretic approaches to collusion and it li sts tentative conclusions and some unresolved issues

gale nikaido debreu and milgrom shannon communal interactions with endogenous community structures abstract this paper examines nash jurisdictional stability in a model with a continuum of agents whose characteristics are distributed over a unidimensional interval communal benefits and costs of each individual depend on her identity and the composition of the community which she belongs to since the framework is too general to yield an existence of nash equilibrium we introduce the essentiality of membership in one of the communities for all individuals we highlight the border indifference property bip when all individuals located on a border between two adjacent jurisdictions are indifferent about joining either of them and show that bip is a necessary condition for yielding a nash equilibrium we invoke the celebrated gale nikaido debreu lemma to guarantee the existence of a partition that satisfies bip we then proceed to demonstrate that bip is not sufficient to yield a nash equilibrium the equilibrium existence under bip is rescued when we use the milgrom shannon monotone comparative statics conditions

procrastination and obedience in this lecture i shall focus on situations involving repeated decisions with time inconsistent behavior although each choice may be close to maximizing and therefore result in only small losses the cumulative effect of a series of repeated errors may be quite large thus in my examples decision makers are quite close to the intelligent well informed individuals usually assumed in economic analysis but cumulatively they make seriously wrong decisions that do not occur in standard textbook economics this lecture discusses and illustrates several pathological modes of individual and group behavior procrastination in decision making undue obedience to authority membership of seemingly normal individuals in deviant cult groups and escalation of commitment to courses of action that are clearly unwise in each case individuals choose a series of current actions without fully appreciating how those actions will affect future perceptions and behavior the standard assumption of rational forwardlooking utility maximizing is violated the nonindependence of errors in decision making in the series of decisions can be explained with the concept from cognitive psychology of undue salience or vividness for example present benefits and costs may have undue salience relative to future costs

a new approach to business fluctuations heterogeneous interacting agents scaling laws and financial fragility abstract in this paper we discuss a scaling approach to business fluctuations our starting point consists in recognizing that concepts and methods derived from physics have allowed economists to re discover a set of stylized facts which have to be satisfactorily accounted for in their models standard macroeconomics based on a reductionist approach centered on the representative agent is definitely badly equipped for this task on the contrary we show that a simple financial fragility agent based model based on complex interactions of heterogeneous agents is able to replicate a large number of scaling type stylized facts with a remarkable high degree of statistical precision

pareto and piketty the macroeconomics of top income and wealth inequality abstract since the early 2000s research by thomas piketty emmanuel saez and their coauthors has revolutionized our understanding of income and wealth inequality in this paper i highlight some of the key empirical facts from this research and comment on how they relate to macroeconomics and to economic theory more generally one of the key links between data and theory is the pareto distribution the paper describes simple mechanisms that give rise to pareto distributions for income and wealth and considers the economic forces that influence top inequality over time and across countries for example it is in this context that the role of the famous r g expression is best understood

asset pricing in large information networks we study asset pricing in economies with large information networks we focus on networks that are sparse and have power law degree distributions in line with empirical studies of large scale social networks our theoretical framework yields a rich set of novel asset pricing implications we derive closed form expressions for price volatility profitability and trading volume as functions of the network topology we also study agent welfare and show that the network that optimizes total welfare is typically a uniform one with an intermediate degree of connectedness

a microfoundation for normalized ces production functions with factor augmenting technical change based on a tractable endogeneous technology choice framework we provide a microfoundation for aggregate normalized constant elasticity of substitution ces production functions with non neutral factor augmenting technical change in this framework firms are allowed to choose unit productivities of capital and labor optimally from a technology menu constructed under the assumption that unit factor productivities ufps are independently weibull distributed the weibull distribution itself is also microfounded here based on extreme value theory it is found to be an accurate and robust approximation of the true ufp distribution if technologies consist of a large number of complementary components

institutional investors and stock market volatility statement of responsibility on t p reads xavier gabaix parameswaran gopikrishnan vasiliki plerou h eugene stanley

self control for the righteous toward a theory of precommitment to indulgence prior research has examined consumers use of self control to avoid hedonic myopic temptations such as overspending and smoking in this research we investigate the opposite form of self control whereby consumers force themselves to indulge and avoid default forms of spending on utilitarian necessities and or savings in particular consumers who have difficulty choosing items that are perceived as indulgences or luxuries e g a cruise over necessities e g saving for college education and cash in everyday decisions may use precommitments to indulgence especially when the psychological cost of such commitments is less concrete these propositions were tested in a series of studies involving real and hypothetical choices as well as process measures the results indicate that a substantial segment of consumers choose hedonic luxury rewards over cash of equal or greater value consumers typically explain such choices based on the need to precommit to indulgence to make sure that the award does no

zipf s law for cities an explanation zipf s law is a very tight constraint on the class of admissible models of local growth it says that for most countries the size distribution of cities strikingly fits a power law the number of cities with populations greater than s is proportional to 1 s suppose that at least in the upper tail all cities follow some proportional growth process this appears to be verified empirically this automatically leads their distribution to converge to zipf s law

spatial concentration location and competitiveness the case of switzerland maggi r and haeni p k 1986 spatial concentration location and competitiveness the case of switzerland ireg studies 20 141 149 this paper considers the relation between location and competitiveness of thirty nine swiss export industries using a factor endowment approach we found that spatial concentration in intermediate areas is important for performance and conclude that spatial proximity offers a significant comparative advantage for swiss industries further findings in the case of switzerland are that scale economies are unimportant and that high technical skill constitutes a comparative advantage while manual skill does not the chosen approach proves to be useful but additional information might be found by analysing companies rather than industries

editorial are consumers rational experimental evidence despite some misconceptions consumer rationality is a property of the researcher rather than the consumer consumers become more rational as we are better able to predict their behavior or other important outcomes influenced by their behavior perfect rationality results when we achieve accurate predictions consequently at least for many marketing science articles consumers are becoming more rational as we find better ways to predict however some experimental consumer behavior articles find the opposite the difference between experimental and statistical controls explains the divergence in conclusions experimental controls test rationality based on whether previously absent variables exhibit significant explanatory power holding known explanatory variables constant statistical controls test rationality based on the incremental explanatory power of previously absent variables after accounting for known explanatory variables moreover experimental tests tend to isolate consumer behavior predictions while statistical tests check for sufficient accuracy to choose among different firm strategies both perspectives are correct but ask very different questions

marketing of vice goods a strategic analysis of the package size decision consumers are often unable to resist the temptation of overconsuming certain products such as cookies crackers soft drinks alcohol etc to control their consumption some consumers buy small packages or abstain from purchasing the product altogether other consumers however still purchase large packages and overconsume from a strategic perspective firms have the option of introducing small packages or only offering large packages we use the literature on hyperbolic discounting to model consumers self control problems and examine conditions under which firms will offer small packages to help consumers combat their self control problem and how this offering in turn affects prices profits consumer and social welfare our results show that introducing small packages can increase firms profits only when a small fraction of consumers have overconsumption problems or when small packages can bring in new customers additionally we find that competition can sometimes reduce the incentives for firms to introduce small packages this is particularly true when a large fraction of consumers is attracted to small packages we also find that firms profits can sometimes decrease if they produce healthier alternatives of their goods our analysis of consumer welfare reveals that small packages enhance consumer and social welfare even though they sometimes increase the consumption of vice goods

urbanization and economic development a bias toward large cities abstract we find that a nation s urban population percentage increases with gdp per capita industrialization export orientation and possibly foreign assistance it decreases with the importance of agriculture industrialization and agricultural importance have the same implications for the concentration of urban population in cities with 100 000 population as for the urban percentage greater export orientation reduces such concentration finally gdp per capita population and export orientation reduce primacy political factors such as whether a country s largest city is also its capital affect primacy our results do not seem to imply that developing country urbanization today differs fundamentally from urbanization in the past

the effect of information and communication technologies on urban structure this paper examines the effects of information and communication technologies ict on urban structure improvements in ict may lead to changes in urban structure for example because they reduce the costs of communicating ideas from a distance hence they may weaken local agglomeration forces and thus provide incentives for economic activity to relocate to smaller urban centres we use international data on city size distributions in different countries and on country level characteristics to test the effect of ict we find robust evidence that increases in the number of telephone lines per capita encourage the spatial dispersion of population in that they lead to a more concentrated distribution of city sizes so far the evidence on internet usage is more speculative although it goes in the same direction we argue that the internet is likely to have similar or even larger effects on urban structures once its use has spread more thoroughly through different economies

developing countries and environmental protection the effects of budget balance and pollution ceiling constraints abstract i analyze the problem faced by an asymmetrically informed supra national governmental authority snga with limited financial resources who wishes to design an international environmental agreement iea the snga cannot contract directly with polluting firms in the various ldcs and he must deal with such firms through their governments i study this tripartite hierarchical interaction and focus on the properties of the optimal ex post contracts ieas which can be implemented by the snga in turn in the case where governments and firms in each nation do not collude and then in the case where governments and firms do collude i find that the monetary transfers necessary to induce optimal behavior by governments and firms are not very sensitive to the presence of collusion however because the optimal contracts satisfy budget balance and because there is a ceiling on the amount of pollution reduction that an iea can require the level and pattern of pollution abatement are typically not ideal my analysis suggests that ieas are not inherently doomed due to a basic monitoring and enforcement problem arising from national sovereignty however the success of ieas is fundamentally contingent on the funds available for environmental protection and the pollution reduction ceiling negotiated by the snga and the ldc government

the zipf s law and the effects of free trade the case of guatemala abstract the aim of this study is to investigate the impacts of trade policy changes on the order of the size of cities and economic growth of guatemala between 1921 and 2002 the pareto coefficient was estimated and an index was used to measure the degree of urban concentration finally a model of the impact of trade liberalization on economic growth was estimated the main results obtained showed a slight growth in inequality and divergence although the urban concentration index showed a gradual decline since 1964 the golden age of the cacm by the year 2002 it was found that the urban concentration has an inverse relationship with the commercial opening and positive economic growth during the period from 1921 to 1964 it was concluded that major cities reduced their growth and that small and medium sized cities grew at a faster rate than big cities driven by the growth of international trade

the dynamics of inequality the past forty years have seen a rapid rise in top income inequality in the united states while there is a large number of existing theories of the pareto tail of the long run income distributions almost none of these address the fast rise in top inequality observed in the data we show that standard theories which build on a random growth mechanism generate transition dynamics that are too slow relative to those observed in the data we then suggest two parsimonious deviations from the canonical model that can explain such changes scale dependence that may arise from changes in skill prices and type dependence that is the presence of some high growth types these deviations are consistent with theories in which the increase in top income inequality is driven by the rise of superstar entrepreneurs or managers

a schumpeterian model of top income inequality top income inequality rose sharply in the united states over the last 40 years but increased only slightly in france and japan why we explore a model in which heterogeneous entrepreneurs broadly

economic growth urbanization and energy consumption a provincial level analysis of china abstract as the largest developing country with fast paced economic growth china s development has been characterized by a high degree of energy consumption high level of heavy industry international trade and urbanization progress in this study we extend the current literature by incorporating urbanization energy consumption and international trade into a production function using a panel data set model over the period from 2001 to 2012 the results show that urbanization and capital are the major contributors to china s economic growth meanwhile there exists a u shaped relationship between urbanization and economic growth that heavy industry exerts a significant negative effect on economic growth using system generalized methods of moments gmm sys estimation methods and the relationship between international trade and economic growth is mixed and no consistent results support the conclusion that the international trade promotes economic growth adjusting the industry and trade structure in economic growth is the priority for the policy makers

contingent valuation and social choice the contingent valuation method for estimating the existence value of natural resources is examined for psychophysical robustness statistical reliability and economic sensibility extensions of standard models for willingness to pay and suitable econometric techniques for analyzing these models are developed the analysis is applied to a series of experiments on the value of preserving wilderness areas in the western united states the results call into question the reliability of the cv method for estimating existence values

market forces and ceo pay shocks to ceo demand induced by ipo waves i develop a simple competitive equilibrium model and derive the prediction that ceo pay size elasticity increases when more firms compete for an inelastic supply of managers using industry level ipo waves as a proxy for increased competition for ceos i find that pay size elasticity increases by 6 with a one standard deviation increase in ipo activity this effect is stronger in specialized industries in addition increased ipo activity leads to a greater likelihood of executive transitions between firms these findings indicate that market forces play a key role in the determination of ceo pay received august 6 2015 editorial decision september 24 2016 by editor francesca cornelli

the duration of the smoking habit i introduction most smokers smoke out of habit once the habit is ended many of smoking s most harmful effects decline rather quickly preventing and ending cigarette addiction is therefore the straightest path toward preventing the health damage done by cigarette smoking consequently the related questions of why people start smoking and why they quit are central to formulating and evaluating effective antismoking policies duration or hazard models are designed to measure the probability of transition between states and are thus ideal for investigating the structural determinants of the transition between addiction and non addiction nevertheless most previous work in the economics literature uses the aggregate smoking participation rate defined as the percentage of people who currently smoke or an individual s probability of participation rather than a hazard rate to measure the attractiveness of habitual smoking this paper models the hazard rates of both starting and quitting the cigarette smoking habit the starting hazard rate is the probability that an individual will start smoking in a given time period conditional on being a nonsmoker until then the quitting hazard rate is the probability of quitting smoking in a given time period conditional on being a smoker since the starting date both of these rates should rise and fall in response to changes in the attractiveness of smoking the two rates will respond differently to different stimuli since the starting hazard reflects the point of view of nonsmokers and the quitting hazard reflects the point of view of smokers hazard or duration models possess several advantages over smoking participation models most obviously smoking participation rates cannot directly distinguish between increased starting rates and decreased quitting rates but the hazard models can also in a participation rate model it is difficult to control for the effect of the duration of the habit whereas duration models are designed specifically to allow for and measure the dependence of the hazard rate on duration another advantage is that the participation rate at any one time will oversample the number of long term smokers relative to those who had a short term habit whereas a duration model is designed to avoid this source of bias one drawback however is that because of their inherent panel nature the data requirements of duration models are somewhat more difficult to satisfy as shall be seen the only previous work in the economics literature that estimates the hazard rate of starting smoking is douglas and hariharan 1994 my paper improves upon douglas and hariharan in at least three important ways first it estimates the hazard rate of quitting smoking as well as that of starting second it takes into account variation in state level regulation third its time varying covariate model allows hazard rates to respond dynamically to changes in cigarette price regulation and information variables the use of time varying covariates is important because it brings the empirical model into much closer accord with theory the decision whether or not to start or quit smoking is an ongoing decision made one day at a time on the basis of current information the hazard of starting is greatest when the cost of the habit appears lowest and its benefit appears highest this comparison of cost and benefit changes through time as price information income and life cycle variables change while douglas and hariharan 1994 used price information from the potential smoker s most vulnerable age on the theory that its marginal effect is greatest at that time the model used in this paper allows each individual s hazard rate to respond to changes in price and public information as they occur the leading theoretical model of the decision to smoke is the rational addiction model of becker and murphy 1988 which assumes that consumers of addictive goods begin smoking only after fully weighing the costs and benefits of the habit

a note on the size distribution of cities over time abstract the pareto law of income distribution is applied to the analysis of city size structures particular concern is focused on the pareto coefficient as a measure of interurban concentration and on how this varies through time within a nation on the basis of evidence from 12 nations it is argued that over time a nation tends to display a u shaped pattern in the degree of interurban concentration and that the higher a nation s overall level of development the more advanced it will be in the sequence of concentration consideration is given to the possibility of supporting these conclusions through cross sectional analysis among nations the various bases for the proposed temporal pattern of concentration within a nation are then explored

from gibrat s law to zipf s law through cointegration abstract this article investigates the role of cointegration in the context of urban growth processes it proposes the use of cointegration tests to distinguish between two versions of gibrat s law a standard formalization with growth shocks that are iid across time and cities and an alternative one with shocks that are only iid over time it then shows that city size distributions converge to zipf s law under the standard version of gibrat s law in contrast they are perfectly preserved under the alternative formalization an empirical application to french data provides support for non cointegrated city growth and thus for the standard formalization

why do people drink tests of the rational addiction model the rational addiction ra model applied to alcoho consumption is tested using 1983 us health interview survey data the ra model yields refutable hypotheses concerning effects of current past and future prices past and future consumption time preference and marginal utility of wealth on addictive good consumption the estimations provide relatively strong support for the ra model past and present consumption had strong positive relationship with current consumption coefficients on past present and future money prices and fines for first oflence drunk driving as a form of price for alcohol consumption were significant and of the predical sign

urbanization in a developing country city size and population composition abstract in developing countries typically there is a very high correlation between city size and educational attainment of the local population which is less pronounced or even absent in developed countries such as canada the u s a or the u k two explanations are examined first the types of goods produced in larger cities require relatively high skill labor inputs second public and perhaps private services demanded by higher skill people are only offered in larger cities the paper econometrically tests these hypotheses for brazil estimating the elasticities of substitution or typically complementarity between high and low skill labor and the bright lights effect for high versus low skill labor

urban concentration agglomeration economies and the level of economic development there is a view among planners in the developing nations that the process of economic development invariably results in the concentration of population in one or two primal cities there is also however considerable disagreement over whether this apparent relationship is either necessary or desirable proponents on the one hand argue that concentrated urbanization strongly supports industrial development through the realization of scale and agglomeration economies 2 dissenters from this view feel that urban concentration creates serious social costs and results more from historical or political forces than economic ones in this case policies aimed at decentralizing growth can achieve social objectives without sacrificing economic efficiency despite these deliberations it is surprising that there has been little or no empirical study of urban concentration on either a longitudinal or cross national basis the major related work which exists is williamson s research on economic development and income inequality 3 williamson demonstrates that as economic growth begins inequality initially increases but then diminishes in the more advanced stages of development this coincides with hirschman s4 view that industrialization eventually spreads into more backward areas reduc

a dynamic model of rational addiction evaluating cigarette taxes addiction creates an intertemporal link between a consumer s past and present decisions altering their responsiveness to price changes relative to nonaddictive products we construct a dynamic model of rational addiction and endogenous consumption to investigate how consumers respond to policy interventions that aim to reduce purchases of cigarettes we find that on average the category elasticity is about 35 higher when the model correctly accounts for addiction however some policies spur substitution from more expensive single packs to less expensive cartons of cigarettes resulting in higher overall consumption for some consumers

factors determining energy consumption evidence from indonesia malaysia and thailand abstract the aim of this study is to verify empirically the impact of various factors on energy consumption in three asean countries namely indonesia malaysia and thailand over the period 1980 to 2012 after using sundry appropriate diagnostic tests for checking time series data the method of least square as an analytical technique is used for parameters estimation the findings validate that fdi inflows economic growth trade openness and human development index have positive and statistically significant impacts on energy consumption the other variable urbanization has positive and statistically significant impacts on energy consumption for thailand and indonesia only while the empirical results reveals that population growth rate has a positive and statistically significant relationship with energy consumption only in the case of malaysia so in the light of determinations of the study the policy implication is that energy policy needs to be orientated in favor of expanding the supply of energy to reach an enhanced degree of sustainable economic growth and development

the effect of international environmental institutions how we might learn more analysts of international politics can measure and explain the effect of international environmental institutions on the behavior of states and other actors and on the natural environment in three steps first we measure the outcome to be explained in terms of goal attainment defined as the difference over time or across cases between actor behavior or the state of the natural environment on dimensions identified by institutional goals and certain end points determined by institutional goals second we assess the effect of an institution in terms of the extent to which the existence or operation of the institution contributes ceteris paribus to variation in goal attainment we transform these two variables into a score of institutional effectiveness to indicate the degree to which institutions contribute to the resolution of the environmental problems that motivate their establishment third we analyze the relationship between institutional effectiveness and specific dimensions of institutional design such as decision making rules membership and access conditions and the compliance system

an explanatory model of city size distribution evidence from cross country data this paper utilises data from files of the world bank to investigate the relevancy of a wide set of variables in explaining systematic variations of city size distribution across countries the pareto exponent is employed as a measure of population concentration among cities of different sizes the empirical results allow us to confirm a number of hypotheses high degrees of economic development as measured by per capita gnp foster urban dispersal conversely high degrees of government involvement in the economy and prevalence of significant scale and agglomeration economies promote urban concentration like most other cross sectional studies this study does not provide support to a dominating view in the economic development literature that at low levels of development the relation between economic development and population concentration is negative while at high levels the relation reverses and becomes positive

polarization reversal in the state of sao paulo brazil polarization reversal pr is the term given to the turning point in the spatial pattern of growth and development in a nation when continuing relative concentration ceases and urban deconcentration or spatial decentralization commences the focus of this paper is on those ldcs with fast growth rates of population which are reaching a transitional stage in their pattern of economic development as well as a change in direction of their spatial development the paper briefly discusses why a pr turning point may be anticipated as the economy of a nation grows and the urban system develops it then examines possible indices of pr and of alternative definitions arriving at a new and narrower definition of pr this definition and the earlier measures are then considered in the context of sao paulo which underwent increasing polarization of urban population from 1950 1970 but experienced a pr turning in the 1970s this may be the first documented example of pr in an ldc

promotion effect on endogenous consumption over the years researchers have found that promotion makes consumers switch brands and purchase earlier or more however it is unclear how promotion affects consumption especially for product categories that are perceived to be versatile and substitutable in this paper we propose a dynamic structural model with endogenous consumption under promotion uncertainty to analyze the promotion effect on consumption this model recognizes consumers as rational decision makers who form promotion expectations and plan their purchase and consumption decisions in light of promotion schedule applying the proposed model to packaged tuna and yogurt we find that endogenous consumption responds to promotion as a result of forward looking and stockpiling behavior this is the first empirical paper that recognizes consumption as an endogenous decision variable and proposes a structural model to offer behavioral explanations on whether how and why promotion encourages consumption for product categories with flexible consumption