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

innovation and imitation in a duopoly in a duopoly where one firm has the idea for a non patentable innovation the expected profits from the innovation will not be a monotonic function of the cost of innovating furthermore a costly innovation may be undertaken where an inexpensive one would not have been all other things being equal

demand elasticities for food products in brazil a two stage budgeting system the object of this article is to estimate demand elasticities for a basket of staple food important for providing the caloric needs of brazilian households these elasticities are useful in the measurement of the impact of structural reforms on poverty a two stage demand system was constructed based on data from household expenditure surveys pof produced by ibge the brazilian bureau of statistics in 1987 88 and 1995 96 we have used panel data to estimate the model and have calculated income own price and cross price elasticities for eight groups of goods and services and in the second stage for 11 sub groups of staple food products we estimated those elasticities for the whole sample of consumers and for two income groups

hitting the jackpot product proliferation by multiproduct firms under uncertainty this paper presents a model of product proliferation by multiproduct firms under uncertainty firms introduce new differentiated products because they want to hit as many jackpots as possible products with high profits and long lives there is uncertainty about the success of new products as the probability of hitting a jackpot increases product proliferation increases more products are introduced and expected in equilibrium the expected number of products in equilibrium is always less than at the optimum but in industries with multiple firms as the probability of hitting a jackpot increases rivalry intensifies and that gap shrinks

who pays and who gains from fuel policies in brazil abstract brazil has pursued a mix of policy interventions in the fuel sector to achieve multiple objectives of economic and social development promoting biofuels and reducing dependence on oil we develop an economic framework to provide insight on the fuel policy choices in brazil and to analyze the trade offs they have engendered in the fuel and sugar sectors we also examine their distributional impacts on producers and consumers in the sugar oil and biofuel sectors and on government revenues additionally we undertake a normative analysis for the purpose of comparing the welfare and environmental impacts of existing policies with those justified by the goal of maximizing social welfare and addressing market failure the ex post analysis of the outcomes for different stakeholders in the fuel and sugar sectors provides insights on the likely political economic factors guiding policy choices we find that the status quo policies are likely to have been motivated by the objectives of increasing oil exports raising government revenue and promoting rural development through the sugarcane sector and have had a significant adverse effect on fuel and sugar consumers aggregate social welfare and greenhouse gas emissions in brazil

weak separability and the estimation of elasticities in multistage demand systems the necessary conditions for multistage budgeting to be at least approximately justified are reviewed and the plausibility of these assumptions i e weak separability and low variability of price indices with utility level are discussed using no further assumptions simple relationships between expenditure and price elasticities in different budgeting levels are derived these results are applied to a three stage model for swedish food consumption and it is shown that the assumptions are not inappropriate restricting the analysis to the last stage of a multistage budgeting process is also shown to lead to considerable errors which could well have policy consequences

conditional and unconditional food demand elasticities in a dynamic multistage demand system this paper estimates conditional and unconditional demand elasticities in a three stage analysis of consumer demand for food and non food items in greece a dynamic version of the aids model is specified and estimated and full system misspecification tests applied correction formulas for price and expenditure elasticities are used to calculate unconditional elasticities from conditional demand sub systems all food items rank as price inelastic deviations between the calculated conditional and unconditional price and expenditure elasticities are found to be significant demonstrating the importance of correcting conditional elasticities before they can be used for policy purposes or welfare analyses

managing complexity and unforeseeable uncertainty in startup companies an empirical study novel startup companies often face not only risk but also unforeseeable uncertainty the inability to recognize and articulate all relevant variables affecting performance the literature recognizes that established risk planning methods are very powerful when the nature of risks is well understood but that they are insufficient for managing unforeseeable uncertainty for this case two fundamental approaches have been identified trial and error learning or actively searching for information and repeatedly changing the goals and course of action as new information emerges and selectionism or pursuing several approaches in parallel to see ex post what works best based on a sample of 58 startups in shanghai we test predictions from prior literature on the circumstances under which selectionism or trial and error learning leads to higher performance we find that the best approach depends on a combination of uncertainty and complexity of the startup risk planning is sufficient when both are low trial and error learning promises the highest potential when unforeseeable uncertainty is high and selectionism is preferred when both unforeseeable uncertainty and complexity are high provided that the choice of the best trial can be delayed until its true market performance can be assessed

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

two nested constant elasticity of substitution models of recreational participation and site choice an alternatives model and an expenditures model two demand modelsof recreational participation and s ite choice are developed an alternatives model and an expenditures model both assume maximization of utility over the year so allow for diminishing marginal utility they do not impose the restrictive assumption that where one goes on a trip isindependent of where one plansto go on other occas ions es timation iswith a nes ted constant elasticity of substitution preference ordering it is relatively easy to estimate because of global regularity it allowss itesto be complements and it hasthe potential to be locally flexible the application is to atlantic salmon fishing

brand capital and incumbent firms positions in evolving markets in many advertising intensive industries one observes market share persistence i e firms maintaining lead market shares over long periods of time the author hypothesizes that firms that have the largest stock of well established brands a stock that he terms brand capital are most likely to introduce new products in response to new market information about consumer preferences firms with less brand capital delay their introductions until the uncertainty concerning the market size is reduced the author presents empirical support in a study of new product introductions in the u s beverage industry copyright 1995 by mit press

the demand for home produced and imported alcoholic beverages in cyprus the aids approach the purpose of this paper is to investigate the demand and its composition between home produced and imported for alcoholic beverages in cyprus the methodological approach used is the almost ideal demand system aids both in static and dynamic terms empirically the aids both in its static and dynamic version was estimated using time series 1970 1992 for three sets of data which include 1 alcoholic beverages wine beer other brandies broken down between home produced and imported model a 2 alcoholic beverages only without disaggregation between home produced and imported model b and 3 aggregate alcoholic beverages wine beer other brandies and food model c zellner s iterative estimation procedure was used for estimating the model the empirical findings 1 strongly support the dynamic version of the aids over its static alternative and 2 provide certain guidelines concerning economic policies relating to an increase in government revenues and changing the composition between

an empirical assessment of endogeneity issues in demand analysis for differentiated products this article explores the issue of price and expenditure endogeneity in empirical demand analysis the analysis focuses on the u s carbonated soft drink market we test the null hypothesis that price and expenditures are exogenous in the demand for carbonated soft drinks using an almost ideal demand system aids specification we strongly reject exogeneity for both prices and expenditures we find that accounting for price expenditures endogeneity significantly impacts demand elasticity estimates we also evaluate the implications of endogeneity issues for testing weak separability over the last few decades strong linkages between economic theory and econometric methods have stimulated much empirical analysis of consumer behavior e g deaton and muellbauer 1980b the basic approach involves estimating marshallian demand functions expressing quantities consumed as functions of prices and household expenditures the usual practice is to treat prices and expenditure as exogenous variables in this article we question the validity of these exogeneity assumptions especially when focusing on the demand for differentiated products 1 this is particularly important to the extent that food consumption typically involves differentiated products in market economies we also examine the interactions between endogeneity of prices expenditure in demand systems and the testing for weak separability of consumer preferences

units of measurement and the stone index in demand system estimation the stone index typically used in estimating linear almost ideal demand systems is not invariant to changes in units of measurement which may seriously affect the approximation properties of the model a modification to the stone index or use of a regular price index instead are both desirable practices in estimating linear ai models

heating technology and energy use a discrete continuous choice approach to norwegian household energy demand abstract the aim of this paper is to describe the structure of the household s energy demand as a discrete continuous choice and on this basis establish an econometric model suitable for the data available in the norwegian energy surveys the discrete appliance choice is specified as a multinomial logit model with a mixture of appliance attributes operating costs and individual characteristics income housing unit characteristics etc as explanatory variables in the next step the continuous choice of energy use is modelled conditional on the appliance choice the energy prices turn out to be significant both when estimating the appliance choice and the conditional energy demand the estimated price elasticity for energy exceeds minus unity the paper discusses how this relatively strong price response should be interpreted in the context of other econometric analysis with no explicit appliance dependence finally the significance of the many household characteristics at both stages of the model signals a high degree of heterogeneity within the households which justifies the use of detailed micro data in the modelling of the energy demand

what do we learn about consumer demand patterns from micro data the aim of this paper is to assess the importance of using micro level data in the econometric analysis of consumer demand to do this we utilize a time series of repeated cross sections covering some 4 000 households in each of 15 years employing a number of different aggregation procedures we conclude that aggregate data alone are unlikely to produce reliable estimates of structural price and income coefficients however once certain aggregation factors as well as trend and seasonal components are included an aggregate model is not necessarily outperformed across all demand equations in terms of forecasting ability jel d12 c52 c31 the purpose of this paper is to develop a complete consumer demand system based on a time series of individual household data and to use it to measure the biases introduced into the study of consumer de mand behavior when aggregate data are used in place of the appropriate microeco nomic data we assess the suitability of ag gregate data through the impact on income and price elasticities and by evaluating the ability of both micro and aggregate based models to forecast aggregate consumer de mand the biases introduced by the use of aggregate data depend upon the way that household characteristics interact with in come and price effects and on departures of demand systems from linearity we explore the structure of microeconomic demand sys tems and the role of household characteris tics in the behavior of consumer demand both for the light this may shed on the pattern of future demands and for the im plications this behavior has for issues of aggregation consumer demand patterns typically found in micro data sets vary considerably across households with different household characteristics and with different levels of income we model this variability by making intercept and slope parameters in the budget share equations of our demand sys tem depend on household characteristics and by allowing for nonlinear total log expenditure terms in fact in theory consistent demand systems it is total ex penditure rather than disposable income that is allocated across goods we find that this general framework leads to a well specified data coherent demand system which is a quadratic extension of the popu lar almost ideal model of angus s deaton and john muellbauer 1980 the micro level estimates are shown to be sensitive to the treatment of endogeneity of total expen diture and to the specification of interaction terms with household characteristics in ad dition this specification is also shown to possess many attractive features for the evaluation of aggregate models

quality quantity and spatial variation of price this paper develops and implements a method for estimating price elasticities of demand using cross sectional household survey data geographically clustered households report unit values which when corrected for quality effects and for measurement error indicate the underlying spatial variation in prices and can be matched to variation in demand patterns a simple model of quality choice is proposed while the correction for measurement error exploits the clustered design of such surveys data from a 1979 household survey from the ivory coast are used to estimate price elasticities for beef meat fish cereals and starches copyright 1988 by american economic association

town size and the consumer behaviour of spanish households a panel data approach the aim of this paper is to analyse the effect of town size on the spanish demand for food the methodological approach followed in the study is to use panel data built from the spanish quarterly national expenditure survey to estimate a demand system the use of this type of data allows control for unobserved time invariant heterogeneity as well as to take into account the time and the cross section dimension of data four locations are distinguished 1 less than 10000 inhabitants 2 between 10000 and 100000 inhabitants 3 between 100000 and 500000 inhabitants and 4 more than 500000 inhabitants eight broad food categories are considered 1 cereals and potatoes 2 meat 3 fish 4 dairy products 5 fats and oils 6 fruits 7 vegetables and 8 other food income and price elasticities are calculated for each location in general terms two general conclusions can be drawn first results indicate that only slight changes in tastes have taken place during the analysed period second

maintaining and testing separability in demand systems we derive a general elasticity representation of the necessary and sufficient conditions for direct weak separability of the utility function parametric restrictions required to implement the separability conditions are presented for three common demand systems the almost ideal translog and rotterdam our empirical application uses the rotterdam model to test a few separable structures within a complete u s demand system emphasizing food commodities results based on size corrected likelihood ratio tests provide support for commonly used separability assumptions about food and meat demand

adoption and diffusion of an innovation of uncertain profitability the argument has frequently been made that the pattern of diffusion associated with most new innovations will typically have certain characteristics a diffusion curve for an innovation is usually defined as the proportion of its potential users who have already adopted as a function of time measured from the first adoption many empirical studies by both economists and other social scientists have shown that diffusion curves nearly always have two distinct characteristics i they are s shaped the proportion adopted is an increasing function of time which is initially convex but eventually becomes concave and ii they tend to be right hand skewed the inflection point occurs at a time corresponding to a proportion adopted which is less than one half so that the function is concave over the greatest amount of time in fact this skewing is occasionally severe enough to make the diffusion curve appear concave everywhere the focus of most empirical studies of innovation diffusion has centered on identification of either the major determinants of the speed of diffusion or the characteristics of firms which determine how long they delay adoption the seminal contributions are griliches 6 study of hybrid corn and mansfield s 121 study of 12 industrial innovations these studies and most of the similar ones following conclude that diffusion is faster for innovations with higher profitability and that large firms tend to be the earliest adopters some studies e g mansfield 121 herregat 71 have attempted to ascertain

the geographic structure of cross national trade flows and region states poon j and pandit k 1996 the geographic structure of cross national trade flows and region states reg studies 30 273 285 recent trends in the globalization of production and the formation of regional coalitions has brought into question the suitability of the nation state as the relevant scale for regional analysis economic activities are increasingly occuring within supranational spaces or region states which act as mediators between the national and the international economy the rise of the region state has provoked fears that the postwar world order is disintegrating into closed trading blocs this paper examines the spatial structure of region states and the role they play in the international economy based upon international trade flows 1970 90 six region states are identified arranged around the core market countries of the us japan germany france uk and the former ussr trade linkages between region states are hierarchically arranged revealing a bipolar structure of pan pacific a

decomposition analysis of consumers demand changes an application to greek consumption data a decomposition analysis for consumer demand functions is developed changes in marshallian demand or expenditure shares functions over time are decomposed into a total substitution effect an income effect and a habit effect this framework is applied to post war greek consumption patterns through a habit persistence version of the quadratic almost ideal demand system quaids it is found that for all commodity categories i e food beverages and tobacco footwear and clothing settling and housing and others the income effect was the main driving force in explaining changes in both quantity demanded and expenditure shares followed by habit and total substitution effects

consumer behaviour theory and empirical evidence a survey this survey is designed to emphasize the relationship between empirical a nd theoretical considerations in the analysis of consumer behavior a lthough it focuses primarily on analysis at the individual or micro l evel it tries where possible to draw implications for the estimati on of aggregate relationships the importance of micro level analysis stems from the rapid expansion in available panel and survey data se ts this development has generated its own theoretical and empirical issues many of which are raised in this survey copyright 1988 by royal economic society

spatial price and variety competition in an urban retail market abstract we develop a nested logit model of spatial competition in retail markets consumers choose stores on the basis of price variety and transport cost three games are considered a price game a variety game and a combined price and variety game the videocassette rental market in edmonton alberta is used for illustration centrally located stores set lower prices and higher varieties than stores on the market periphery prices in the price and price variety games are nearly identical despite large differences in varieties similarly equilibrium varieties in the price variety game are similar to varieties in the variety game

a model of product proliferation with multiproduct firms this paper presents a model of product proliferation by multiproduct firms firm behavior is based on a two stage process in which there is centralized decision making in new product introductions and decentralized management of existing products in equilibrium the number of products each firm has as well as its total profits are inversely related to the cost of introducing a new product and to the number of firms in the market but as the number of rivals increases the total number of products in the market increases although total industry profits decrease copyright 1987 by blackwell publishing ltd

managing product families the case of the sony walkman abstract success in fast cycle industries e g consumer electronics can depend both on rapid model replacement and on model longevity although sony was as fast as any of its chief competitors in getting new models to market an important explanation for the wide variety of models offered by the firm is the greater longevity of its key models this finding adds an important insight to the conventional literature on time based competition which emphasizes rapid innovation exclusively sony s special understanding of the us market enabled it to respond more effectively to life style differences by locating industrial designers in its key markets sony s strong design capability and effective division of labor engineers lead generational and incremental projects industrial designers and market personnel lead topological projects allow for parallel model development investment in manufacturing flexibility amortized over multiple models within the product family make the rapid model changeover possible

empirical regularities in south african consumption patterns this article investigates a number of empirical regularities in the south african consumption patterns the data support the following empirical regularities 1 variability in consumption systematically exceeds the variability in prices 2 law of demand 3 income flexibility is about 0 5 4 engel s law and 5 the demand hypotheses demand homogeneity and slutsky symmetry are acceptable in contrast to the findings for a number of other countries another important empirical regularity that consumer s utility function is additive is rejected for the south african consumers based on the implied demand elasticity estimates from the preferred model it is found that food housing and medical care are necessities and clothing furniture transport and recreation are luxuries and demand for all the commodities are price inelastic

estimation of an implied price elasticity of demand through current pricing practices researchers have long pursued better methods to estimate price elasticity of market level demand due to a plethora of empirical problems the estimates produced in many empirical studies leave researchers with wide confidence intervals that do little to clarify demand conditions as a result these estimates are of limited practical use to the firm facing a firm level demand here a non statistical methodology based on seller optimization behaviour is applied that creates an implied elasticity of firm level demand that is robust intuitively plausible and free of oppressive data requirements these elasticities are tested in an applied setting against pricing managers surveyed estimates for customer price sensitivity for freight rail transportation services and it is found that the estimate is consistent with their pricing behaviour this methodology is recommended for creating a simple plausible starting point estimate for firm level price elasticities or using this calculation as an input to stat

latent separability grouping goods without weak separability this paper develops a new concept of separability with overlapping groups latent separability this is shown to provide a useful empirical and theoretical framework for investigating the grouping of goods and prices it is a generalization of weak separability in which goods are allowed to enter more than one group and where the composition of groups is identified by the choice of group specific exclusive goods latent separability is shown to be equivalent to weak separability in latent rather than purchased goods and provides a relationship between separability and household production theory for the popular class of linear almost ideal and translog demand models and their generalizations we provide a method for choosing the number of homothetic separable groups a detailed method for exploring the composition of the separable groups is also presented these methods are applied to a long time series of british individual household data on the consumption of twenty two nondurable and service goods

broader product line a necessity to achieve success strategic product line breadth decisions evoke differential responses from the manufacturing and the marketing areas manufacturing prefers keeping process disruptions to a minimum and as a result discourages product proliferation however marketing in its attempt to match products to heterogeneous consumer needs and gain market share emphasizes a broader product line we systematically investigate the market benefits and cost disadvantages of broader product lines on a large sample of over 1 400 business units our results indicate significant market share benefits and increases in firms profitability with broader product lines moreover widely held beliefs of increases in production costs are not empirically supported american manufacturing firms may indeed be flexible enough to accommodate product variety without significant detrimental effects on costs

causality in demand a co integrated demand system for trout in germany this article focuses on causality in demand a methodology where causality is imposed and tested within an empirical co integrated demand model not prespecified is suggested the methodology allows different causality of different products within the same demand system the methodology is applied to fish demand on the german market for farmed trout and substitutes it is found that supply sources i e aquaculture and fishery are not the only determinant of causality storing tightness of management and aggregation level of integrated markets might also be important the methodological implication is that more explicit focus on causality in demand analyses provides improved information the results suggest that frozen trout forms part of a large european whitefish market where prices of fresh trout are formed on a relatively separate market redfish is a substitute on both markets the policy implication is that increased production of trout causes a downward pressure on fresh trout prices but froz

long run income and price elasticities of demand for colombian nontraditional exports a multivariate cointegration framework a long run income and price elasticities of demand is estimated for colombian nontraditional exports through a multivariate cointegration analysis based on the combination of cointegration and exogeneity concepts and the inclusion of the complete dynamic system the paper shows the existence of a long run relationship among nontraditional exports relative price and foreign demand and higher long run elasticities than those provided by the long run cointegration vector coefficients that are usually reported in the trade literature

the choice between unilateral and multilateral trade liberalization strategies this paper develops a framework for analyzing the economic costs and benefits of unilateral and multilateral trade liberalization strategies the interest in this topic is sparked by the apparent dilemma faced by some developing countries in the ongoing uruguay round of multilateral trade negotiations mtns an active participation in the mtns implies that what developing countries have to bargain away is worth something there if so it might pay to delay the introduction of unilateral measures in the hope of securing increased access to foreign markets deciding on the merits of unilateral and multilateral trade liberalization strategies should involve economic and political factors this report addresses the economics of this decision and applies the framework to the case of argentina

household food demand in turkey a two step demand system approach abstract demands for sixteen food products are investigated using data from the turkish household expenditure survey the linear approximate almost ideal demand system laids is estimated with shonkwiler and yen s two step procedure all own price elasticities are negative and expenditure elasticities positive bread other cereals bovine mutton giblets and cheese have high expenditure elasticities mutton bovine and several other protein rich products are price elastic results suggest a mix of gross substitutes and complements while net substitution is the dominant pattern demographic characteristics also play important roles in shaping food demand the elasticity estimates can inform policy deliberations

unconditional elasticities in two stage demand systems an approximate solution two stage budgeting postulates that the consumer s utility maximization decision can be decomposed into two steps in the first stage total expenditure is allocated over broad groups of goods in the second stage group expenditures are allocated over elementary commodities in this article we assume that the current weighted true cost of living price indices defined for each broad group of elementary commodities vary only very slightly with sub utility levels hence it is possible to approximate the first stage of a two stage budgeting structure by a maximization problem involving a single price index and a single quantity index for each of the broad groups relationships between conditional and unconditional expenditure and price elasticities are derived within this context

is utility additive further evidence this paper investigates the question of additive structure of the utility function using the data for nine broad commodity groups from 45 countries further evidence is presented in support of the preference independent utility structure

an evolutionary pattern of innovation diffusion the case of flexible automation abstract the aim of this paper is to provide evidence supporting an evolutionary model of the process of innovation diffusion relying on an extensive field study the paper analyses the pattern of adoption of the entire set of innovations deriving from the flexible automation paradigm on the part of a large sample of italian metalworking firms owing to the relevance of the technology examined and to the size of the sample the case illustrates quite representatively the dynamics of the early stage of development of radical and complex innovations the main results of the paper confirm the importance of firm size and market structure to explain the characteristics of the innovation diffusion process at the same time they emphasize that the localized search procedures on the part of potential users involve a step by step approach to adoption namely the technological and organizational profile of firms turns out to play a decisive role in favouring diffusion moreover empirical support is provided for the existence of persistent market disequilibria along the diffusion paths witnessed by the extent of the retrofitting phenomenon

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

doing the right thing or doing the thing right allocating resources between marketing research and manufacturing matching production with sales potential is essential for survival in volatile markets manufacturing and marketing managers compete for staff space cash and other assets as they struggle both to determine what and how many products ought to be produced and to actually produce them we develop an analytical framework to answer one simple question how much marketing research should a firm do when it takes resources away from manufacturing the goods that generate revenue to understand the costs and benefits of marketing research we account for the lost opportunities to produce these goods some analytical findings are striking firms without initial knowledge of their potential customers should allocate one third of the firm s resources to marketing research the model suggests a host of issues to be more deeply studied by management scientists

investigating dynamic multifirm market interactions in price and advertising diagnosing the nature and magnitu de of competitive interactions among firms is important for developing effective marketing strategies in this paper we formulate a game theoretic model of firm interaction to analyze the dynamic price and advertising competition among firms in a given p roduct market firm or brand level demand functions account for the contemporaneous and carry over effects of these marketing activities and also allow for the effects of competitor actions firms take into consideration the actions of their rivals as well as their own demand and cost functions both production and advertising when determining the profit maximizing price and advertising levels our formulation enables us to quantify not only the direction and magnitude of competitive reactions but also to identify the underlying form of market conduct that generates the particular pattern of interaction we specify and estimate a fully structural econometric model for three firms constituting a distinct sub market within a personal care product category we estimate the demand and competitive interaction parameters as well as the production and advertising cost functions for each firm we then derive implications for competitive interactions and market structure interestingly we find that while firms seem to compete on advertising they price cooperatively thereby enhancing their price cost margins

managing a product family under stochastic technological changes abstract this paper characterize a decision framework by which a firm can manage generational product replacements under stochastic technological changes first we characterize an optimal threshold based product replacement policy that maximizes the firm s expected total profit for a finite planning horizon with this policy the firm should optimally replace its current product when the performance gap of the product is above a threshold upon each product replacement we also show that the firm should adopt the latest technology for the new product second using stochastic ordering concepts we quantify the negative impact from the accelerated technological changes on the expected total profit finally we provide an analytical example based on a consumer choice model and characterize a technology follower s joint product replacement and pricing decisions upon the arrival of each innovation from a technology leader

logit demand estimation under competitive pricing behavior an equilibrium framework discrete choice models of demand have typically been estimated assuming that prices are exogenous since unobservable to the researcher product attributes such as coupon availability may impact consumer utility as well as price setting by firms we treat prices as endogenous specifically prices are assumed to be the equilibrium outcomes of nash competition among manufacturers and retailers to empirically validate the assumptions we estimate logit demand systems jointly with equilibrium pricing equations for two product categories using retail scanner data and cost data on factor prices in each category we find statistical evidence of price endogeneity we also find that the estimates of the price response parameter and the brand specific constants are generally biased downward when the endogeneity of prices is ignored our framework provides explicit estimates of the value created by a brand i e the difference between consumers willingness to pay for a brand and its cost of production we develop theoretical propositions about the relationship between value creation and competitive advantage for logit demand systems and use our empirical results to illustrate how firms use alternative value creation strategies to accomplish competitive advantage

rivalry in price and variety among supermarket retailers recent theoretical models of retail competition suggest that product heterogeneity is critical to retail price and variety strategies this article provides empirical evidence on supermarket retailers price and variety strategies using a nested constant elasticity of substitution nces modeling framework the model is estimated using chain level scanner data for four major grocery chains in a large urban west coast market the results show that retailers compete for market share using both price and variety while they all tend to follow moderately cooperative pricing strategies the extent to which they follow cooperative strategies in variety is less homogeneous

product development decisions a review of the literature this paper is a review of research in product development which we define as the transformation of a market opportunity into a product available for sale our review is broad encompassing work in the academic fields of marketing operations management and engineering design the value of this breadth is in conveying the shape of the entire research landscape we focus on product development projects within a single firm we also devote our attention to the development of physical goods although much of the work we describe applies to products of all kinds we look inside the black box of product development at the fundamentaldecisions that are made by intention or default in doing so we adopt the perspective of product development as a deliberate business process involving hundreds of decisions many of which can be usefully supported by knowledge and tools we contrast this approach to prior reviews of the literature which tend to examine the importance of environmental and contextual variables such as market growth rate the competitive environment or the level of top management support

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

food expenditures and household demographic composition in the us a demand systems approach food expenditures and subsistence quantities of poverty status and non poverty status us households are analysed within a linear expenditure system that postulates subsistence quantities to be linear combinations of demographic variables using the us bureau of labor statistics 1992 consumer expenditure survey and detailed monthly consumer price indices this article obtains expenditure elasticities own price elasticities and subsistence quantities for each income group across nine broadly aggregated food commodity groups elasticity estimates and subsistence quantity estimates differ across income groups supporting the premise that policies targeted at specific income groups should be based on the target group s elasticity estimates rather than average population elasticities parameter estimates are then used to simulate how subsistence quantities and own price elasticities can be expected to vary according to the demographic composition of the household within a specific income group

the matrix approach to evaluating demand equations as there is a plethora of demand models which one should be used to estimate income and price elasticities the paper sheds light on this important practical problem by developing a matrix approach to simulating mas demand equations to analyse their performance under idealized circumstances artificial data on the dependent variable are generated by one model and these are then used for the estimation of another model as an illustrative application using four popular models a 4 4 matrix is generated which gives all pair wise comparisons the performance of the models is then evaluated on the basis of the quality of the income and own price elasticity estimates

practical implications of game theoretic models of r and d the purpose of this paper is to survey recent game theoretic models of research and development and to ask whether they yield practical implications or testable hypotheses the papers i will be discussing have been written or published within the past five years they have a good deal in common relying upon similar assumptions and building upon each other because of this the literature surveyed here may seem narrow and some relevant work has probably been inadvertently omitted i apologize for these omissions for want of space i will not discuss the normative conclusions of this literature

multiple product firms a nested logit approach this paper proves the existence of a symmetric equilibrium with multiproduct firms using a nested logit model of demand the demand model is parameterized by two variables that characterize different dimensions of preference for variety these reflect intragroup heterogeneity and intergroup heterogeneity a group or nest being the set of products produced by a firm there are then two dimensions to market performance the total number of firms and the range of products produced per firm it is shown that the market equilibrium involves an excessive number of firms but each firm provides too few products copyright 1992 by blackwell publishing ltd

quadratic engel curves and consumer demand this paper presents a model of consumer demand that is consistent with the observed expenditure patterns of individual consumers in a long time series of expenditure surveys and is also able to provide a detailed welfare analysis of shifts in relative prices a nonparametric analysis of consumer expenditure patterns suggests that engel curves require quadratic terms in the logarithm of expenditure while popular models of demand such as the translog or the almost ideal demand systems do allow flexible price responses within a theoretically coherent structure they have expenditure share engel curves that are linear in the logarithm of total expenditure we derive the complete class of integrable quadratic logarithmic expenditure share systems a specification from this class is estimated on a large pooled data set of u k households models that fail to account for engel curvature are found ro generate important distortions in the patterns of welfare losses associated with a tax increase