investment and capacity choice under uncertain demand this paper extends the real options literature by discussing an investment problem where a firm has to determine optimal investment timing and optimal capacity choice at the same time under conditions of irreversible investment expenditures and uncertainty in future demand after the project is installed with a certain maximum capacity this capacity is fixed as an upper boundary to the output and cannot be adjusted later on it turns out that in the framework of this once and for all decision uncertainty in future demand leads to an increase in optimal installed capacity but on the other hand it causes investment to be delayed to an extent that even small uncertainty makes waiting and accumulation of further information the optimal decision for large ranges of demand limiting the capacity which may be installed weakens this extreme effect of uncertainty

alternative supply chain production sales policies for new product diffusion an agent based modeling and simulation approach abstract applying agent based modeling and simulation abms methodology this paper analyzes the impact of alternative production sales policies on the diffusion of a new generic product and the generated npv of profit the key features of the abms model that captures the marketplace as a complex adaptive system are i supply chain capacity is constrained ii consumers new product adoption decisions are influenced by marketing activities as well as positive and negative word of mouth wom between consumers iii interactions among consumers taking place in the context of their social network are captured at the individual level and iv the new product adoption process is adaptive conducting over 1 million simulation experiments we determined the best production sales policies under various parameter combinations based on the npv of profit generated over the diffusion process the key findings are as follows 1 on average the build up policy with delayed marketing is the preferred policy in the case of only positive wom as well as the case of positive and negative wom this policy provides the highest expected npv of profit on average and it also performs very smoothly with respect to changes in build up periods 2 it is critical to consider the significant impact of negative word of mouth in choosing production sales policies neglecting the effect of negative word of mouth can lead to poor policy recommendations incorrect conclusions concerning the impact of operational parameters on the policy choice and suboptimal choice of build up periods

a new product growth for model consumer durables this article originally appeared in management science january 1969 volume 15 number 5 pp 215 227 published by the institute of management sciences a growth model for the timing of initial purchase of new products is developed and tested empirically against data for eleven consumer durables the basic assumption of the model is that the timing of a consumer s initial purchase is related to the number of previous buyers a behavioral rationale for the model is offered in terms of innovative and imitative behavior the model yields good predictions of the sales peak and the timing of the peak when applied to historical data a long range forecast is developed for the sales of color television sets

supply and demand shocks in the covid 19 pandemic an industry and occupation perspective we provide quantitative predictions of first order supply and demand shocks for the us economy associated with the coronavirus disease 2019 covid 19 pandemic at the level of individual occupations and industries to analyze the supply shock we classify industries as essential or non essential and construct a remote labor index which measures the ability of different occupations to work from home demand shocks are based on a study of the likely effect of a severe influenza epidemic developed by the us congressional budget office compared to the pre covid period these shocks would threaten around 22 per cent of the us economy s gross domestic product gdp jeopardise 24 per cent of jobs and reduce total wage income by 17 per cent at the industry level sectors such as transport are likely to have output constrained by demand shocks while sectors relating to manufacturing mining and services are more likely to be constrained by supply shocks entertainment restaurants and tourism face large supply and demand shocks at the occupation level we show that high wage occupations are relatively immune from adverse supply and demand side shocks while low wage occupations are much more vulnerable we should emphasize that our results are only first order shocks we expect them to be substantially amplified by feedback effects in the production network

forecasting and inventory management of short life cycle products in this paper we provide an integrated framework for forecasting and inventory management of short life cycle products the literature on forecasting and inventory management does not adequately address issues relating to short life cycle products we first propose a growth model that can be used to obtain accurate monthly forecasts for the entire life cycle of the product the model avoids limiting data requirements of traditional methods instead it extracts relevant information from past product histories and utilizes the information on total life cycle sales and the peak sales timing using disguised demand data from a personal computer pc manufacturer we validate the model next we model the inventory management problem for the short life cycle environment the uncertainty in demand is modeled through the uncertainty in the realized values of the parameters of the forecasting model the high cost of terminal inventory shortages and rapidly changing procurement costs are all included in the model extensions to the basic model are also developed using optimal control theory we derive a solution that provides valuable information on procurement cutoff time and terminal service levels a detailed example explains the characteristics of the policy and its relevance in decision making many of the issues covered in the models were brought to our attention while implementing a forecasting model at a pc manufacturer the benchmark monthly forecasts and the associated inventory levels provide information that can be very helpful in planning and controlling marketing sales and production

regional interests and the reagan military buildup trubowitz p and roberts b e 1992 regional interests and the reagan military buildup reg studies 26 555 567 this paper examines the political geography of american defence policy and its implications for regional studies previous studies have examined the impact of military spending on regional economic growth and development how regional political interests shape national decisions over defence policy has received far less attention in this paper we examine the political sources of regional competition over defence policy we claim that politicians judge defence policies in terms of their consequences for their states economic growth social stability and commercial competitiveness we test our model through a cross sectional analysis of house roll call voting on national security issues during the reagan years the analysis reveals that political support for the military buildup in the 1980s varied geographically and that local economic considerations were an important factor in determining

quality and the diffusion of innovations in this paper we solve the problem of optimal control of products diffusion by quality in a context of monopolistic competition to do so we introduce a dynamic demand function leaning on two hypotheses first price acts a signal of quality second demand is more sensitive to quality than to price using the maximum principle of pontryagin we then characterize the optimal dynamic trajectory of quality and its qualitative properties

marketing mix variables and the diffusion of successive generations of a technological innovation abstract research addressing the diffusion of successive generations of technological innovations has generally ignored the impact of marketing mix variables as a result there have been several calls for the development of multiple generation models that incorporate marketing mix variables the authors develop a model of first time sales and subscriptions for successive generations of a technological innovation which explicitly captures the effects of marketing mix variables through a proportional hazards framework the empirical analysis estimates the impact of price for two generations of cellular telephones in a european country the results suggest that there are important substantive insights to be gained from the parameter estimates for this marketing mix variable when intergenerational interdependencies are considered for example although the time path of the estimated price elasticities in a multiple generation setting closely follows those reported previously for single generations the auth

social learning and dynamic pricing of durable goods we analyze the impacts of social learning sl on the dynamic pricing and consumer adoption of durable goods in a two period monopoly consumers can make either early uninformed purchases or late but potentially informed purchases as a result of social learning several results are derived first we identify the market conditions under which ex ante homogeneous consumers may choose to purchase at different times second equilibrium adoption may demonstrate inertia where all adopt late or frenzy where all adopt early in particular adoption inertia appears when sl intensity is reasonably high but may vanish when sl intensity exceeds a certain threshold third firm profits and social welfare first weakly decrease in sl intensity and may then jump up by a lump sum amount at the threshold sl intensity level mentioned above last we show that the firm potentially benefits from informative advertising or investing to cultivate more social learning

analyzing manufacturers impact on green products market diffusion the case of electric vehicles abstract electric vehicles are often seen as a promising way for rationalizing the use of fossil energy in the automotive sector so far however their market success and thus their impact on reducing fossil fuel consumption are rather limited in this article the automotive market simulator amasi is applied to analyze the leverage of manufacturers to support the market diffusion of electric vehicles this is done by parameterizing the model for the german car market and simulating different product portfolio options regarding the timing of the introduction and the elimination of vehicle models an aggregated industry as well as an individual manufacturer s perspective is taken into account the results indicate that manufacturers portfolio decisions have a strong influence on the market development of electric vehicles and can be used to gain a competitive advantage thus manufacturers should proactively strive to shape the electric vehicle market instead of adopting a waiting position for policymakers these findings imply that instruments to steer manufacturers behavior are just as important as those targeted at consumers the paper broadens the discussion on the levers for the market diffusion of electric vehicles by providing a simulator to analyze manufacturers portfolio decisions in a competitive setting and by illustrating the necessity to include portfolio decisions when designing mechanisms to foster the market diffusion of electric vehicles

optimal pricing and production in an inventory model abstract this paper deals with the problem of simultaneously determining the optimal price policy and production rate over a given planning horizon for nonlinear demand functions and convex inventory and shortage cost functions the optimal solution paths are derived by using optimal control theory the treatment of linear nonsmooth cost functions requires the use of a generalized maximum principle the solution method is a phase portrait analysis providing insight into the optimal pricing and production policies as well as the resulting inventory paths moreover it is shown that in the case of nonsmooth piecewise linear cost functions the equilibrium is approached within finite time although the model is nonlinear in the control variables finally it is illustrated that exogenous fluctuations in the demand rate seasonal demand pattern amount to cyclical optimal solutions

technology and demand forecasting for carbon capture and storage technology in south korea among the various alternatives available to reduce greenhouse gas ghg emissions carbon capture and storage ccs is considered to be a prospective technology that could both improve economic growth and meet ghg emission reduction targets despite the importance of ccs however studies of technology and demand forecasting for ccs are scarce this study bridges this gap in the body of knowledge on this topic by forecasting ccs technology and demand based on an integrated model for technology forecasting a logistic model and patent network analysis are used to compare the competitiveness of ccs technology for selected countries for demand forecasting a competition diffusion model is adopted to consider competition among renewable energies and forecast demand the results show that the number of patent applications for ccs technology will increase to 16 156 worldwide and to 4 790 in korea by 2025 we also find that the united states has the most competitive ccs technology followed by korea and france moreover about 5 million tco2e of ghg will be reduced by 2040 if ccs technology is adopted in korea after 2020

empirical generalizations and marketing science a personal view marketing has matured to the point where it seems desirable to take stock of where we are what we have learned and fruitful directions for extending the knowledge base that has developed science is a process involving the interaction between empirical generalizations and theory an empirical generalization is a pattern or regularity that repeats over different circumstances and that can be described simply by mathematical graphic or symbolic methods one of the purposes of the empirical generalizations conference held at wharton on february 16 18 1994 was to develop a list of examples of such empirical generalizations in marketing empirical generalization can precede a theory to explain it or it can be predicted by a theory science is the process of interaction between theory and data that leads to higher level theories examples are provided here of empirical generalizations in marketing and their theoretical counterparts one example is provided of a higher level theory

can entrepreneurial firms benefit from product piracy abstract we examine the potential benefits of product piracy to entrepreneurial firms specifically we use a resource based perspective to show that a decrease in the inimitability of an entrepreneurial firm s intellectual property does not necessarily diminish performance when piracy increases the value of this resource and an information economics perspective to explain why and when imitation can increase the value of an intellectual property resource this explanation reconciles empirical studies that indicate mixed results it also expands the resource based view by suggesting that reducing the value of one resource can directly increase the value of another

social network effects on the extent of innovation diffusion a computer simulation of innovation diffusion no longer focus exclusively on explaining the rate at which innovations diffuse or the sequence in which they are adopted they also focus on explaining why certain innovations diffuse extensively be coming de facto standards whereas others do so partially or not at all many of these theories specify a bandwagon process a positive feedback loop in which increases in the number of adopters create stronger bandwagon pressures and stronger bandwagon pressures in turn cause increases in the number of adopters factors affecting if and how many times this feedback loop cycles explain if and how many potential adopters jump on a bandwagon we argue that one important factor has not yet been incorporated into theories explaining bandwagons extent the structure of social net works through which potential adopters of innovations find out information about these innovations which can cause them to adopt these innovations we advance a theory of how the structure of social networks affects bandwagons extent we propose that both the number of network links as well as small seemingly insignificant idiosyncracies of their structures can have very large effects on the extent of an innovation s diffusion among members of a social network

prescribing product upgrades prices and production levels over time in a stochastic environment abstract competitive pressures cause the price of high technology products to erode over time the purpose of this paper is to describe a decision support tool to maximize profit by prescribing three related decisions product upgrading pricing and production levels a stochastic dynamic programming dp model prescribes when to upgrade a product and what new technologies to incorporate to maintain product competitiveness and profit margins it deals with the two major sources of risk demand and the lead time required to complete an upgrade the objective of the dp model is to maximize expected profit over a given planning horizon decision variables prescribe which alternative upgrades to implement and when pricing and production levels benchmarking computational tests are described along with an example demonstrating model application managers can use this dp model to coordinate decisions related to product upgrading pricing and operations management to better meet business objectives

new brand positioning and pricing in an oligopolistic market the positioning and pricing of a new brand requires knowledge about the relationship of both demand and cost with potential attribute locations and prices this paper addresses this problem and illustrates it in the context of the automobile market multi attribute expected utility theory which allows for consumer uncertainty about the brands is used to model individuals behavior attribute weights are estimated from market survey data on brands attributes and preferences using linmap as an estimation procedure expected utility is then updated using the multinomial logit model and choice data to account for the observation that stated preferences do not perfectly reflect the eventual choice it is hypothesized that when faced with an actual choice price may become more important to the consumer while other attributes may become more or less important than is reflected in stated preferences the resulting estimated choice probabilities are aggregated to form demand functions facing each brand which depend on all brands prices and attribute space locations assuming there is a price equilibrium in the existing market and that firms have the same variable cost function variable costs as a function of a brand s attribute levels are estimated given the demand and cost functions facing each firm including the potential new entrant the profit maximizing positioning and pricing of a new brand is analyzed using a game theoretic approach a solution is sought under the assumption that incumbents react to entry by changing their prices possible approaches to the translation of the perceptual attribute positioning of the new brand to physical and engineering attributes are reviewed improvements and future extensions of the study are discussed

does working from home work evidence from a chinese experiment about 10 of us employees now regularly work from home wfh but there are concerns this can lead to shirking from home we report the results of a wfh experiment at ctrip a 16 000 employee nasdaq listed chinese travel agency call center employees who volunteered to wfh were randomly assigned to work from home or in the office for 9 months home working led to a 13 performance increase of which about 9 was from working more minutes per shift fewer breaks and sick days and 4 from more calls per minute attributed to a quieter working environment home workers also reported improved work satisfaction and experienced less turnover but their promotion rate conditional on performance fell due to the success of the experiment ctrip rolled out the option to wfh to the whole firm and allowed the experimental employees to re select between the home or office interestingly over half of them switched which led to the gains from wfh almost doubling to 22 this highlights the benefits of learning and selection effects when adopting modern management practices like wfh

predicting the competitive relationships of industrial production between taiwan and china using lotka volterra model abstractthis work is the first to apply lotka volterra model combined with genetic algorithm ga to predict the production relationships of high tech industry among different areas previous studies analysed the trade interdependency among various countries but few studies have highlighted the quantitative evidence of production relationships thus this study utilizes motherboard shipment volumes to predict the competitive relationships of industrial production on both sides of the taiwan strait specifically this work uses simultaneous non linear least square regression in combination with gas for numerical parameter optimization of the proposed lotka volterra model the results of parameter estimation reveal that shipment growth in china substantially promotes that in taiwan whereas the shipment growth in taiwan curtails that in china the standard deviation of the estimated parameters from the 3000 iterated simulations is small confirming the reliability and stability of our parameter estimations

profit maximizing perceptual positions an integrated theory for the selection of product features and price an important component of marketing strategy is to position a product in perceptual space but to realize a perceptual position we must model the link from physical characteristics to perceptual dimensions and we must use this model to maximize profit this paper integrates psychological theories on how consumers process information with economic models and psychometric measurement and it develops a theory for selecting physical features and price to achieve a profit maximizing perceptual position the theory begins with a lancaster like transformation from goods space to characteristics space and investigates the implications of a mapping to a third space perceptual space we show that all products efficient in perceptual space must be efficient in characteristics space but not conversely but consumers vary in their preference and the way they perceive products thus we introduce distributional components to the theory and derive both geometric and analytic methods to incorporate this consumer heterogeneity next we investigate costs and derive a perceptual expansion path along which a profit maximizing position must exist conjoint analysis and quantal choice models provide the measurements to implement the theory the theory is illustrated with a hypothetical example from the analgesics market and some of the potential psychometric measurements are illustrated with an empirical application in the communications market

the effects of expectations on technology adoption some empirical evidence n rosenberg 1976 argues that in many markets prospective buyers for an innovation are strongly influenced by expectations concerning the timing and significance of future improvements the primary objectives of this article are to provide a model of the innovation decision process of user firms that expect improvements in current best technology and to offer an empirical study that tests the model s predictions among other results the author finds empirical support for rosenberg s argument and demonstrates theoretically that compared to models without technological expectations and learning the optimal decision process is nonmonotonic copyright 1994 by blackwell publishing ltd

demand modeling of stochastic product diffusion over the life cycle abstract planning during the product life cycle plc poses a number of challenges for managers due to the pace of change and uncertainties in the marketplace the ability to better understand predict and make decisions based on manifestations of demand forms a set of important operational problems that ultimately affect the profitability of enterprises this paper models the stochastic diffusion of a product in the market as a geometric brownian motion gbm process that has a time varying drift rate the model is calibrated such that model parameters are able to feature different product types and diffusion conditions imperfect information on the expected peak demand is treated as model uncertainty and a bayesian approach is employed to update knowledge on it the demand model demonstrates robust performance over a wide range of conditions despite model uncertainty it provides both qualitative and quantitative information for manufacturers and service providers to design strategies for stochastic plc conditions as well as dynamic production planning

what should you do when your competitors send in the clones this paper develops a model to address an important problem facing a manufacturer of a durable product that is how can it plan its new product introductions to minimize the obsolescence of the old product preserve its market for the new product and keep copycat products at bay we analyze these issues by developing a two period model in which a firm sells an old product in period 1 and a new product in period 2 we consider various new product introduction strategies such as product replacement line extension and upgrading we find that the optimal response to a threat of competitive clones is to increase the level of product innovation this increase in innovation coupled with the entry of a competitive product implies that the incumbent firm has less of an incentive to leapfrog the old product or shelve the new product

sheltering in place and domestic violence evidence from calls for service during covid 19 the covid 19 pandemic has led to an economic slowdown as more people practice social distancing and shelter at home the increase in family isolation unemployment and economic stress has the potential to increase domestic violence we document the pandemic s impact on police calls for service for domestic violence the pandemic increased domestic violence calls by 7 5 during march through may of 2020 with effects concentrated during the first five weeks after social distancing began the increase in reported domestic violence incidents began before official stay at home orders were mandated it is not driven by any particular demographic group but does appear to be driven by households without a previous history of domestic violence

optimum advertising policy over time for subscriber service innovations in the presence of service cost learning and customers disadoption abstract on the theoretical side this paper characterizes qualitatively optimal advertising policy for new subscriber services a monopolistic market is analyzed first for which customers disadoption discounting of future profits streams and a service cost learning curve are allowed after characterizing the optimal policy for a general diffusion model the results pertaining to a specific diffusion model for which advertising affects the coefficient of innovation that incorporates the disadoption rate are reported the results of the theoretical research show that the advertising policy of the service firm in the presence of customers disadoption could be very different from the same when disadoption is ignored on the empirical side four alternative diffusion models are estimated and their predictive powers using a one step ahead forecasting procedure compared the diffusion data analyzed are related to the canadian cable tv industry empirical research findings suggest that the specific diffusion model considered above is not only of theoretical appeal but also of major empirical relevance the analytical findings of the study are documented in six theoretical propositions for which proofs are provided in a separate appendix the results of a related numerical experiment together with the analytical findings pertaining to the competitive role of advertising are included managerial implications of the study together with directions for future research are also discussed

early evidence of the impacts of covid 19 on minority unemployment this paper provides early evidence of the impacts of the covid 19 pandemic on minority unemployment in the united states in the first month following march adoptions of social distancing measures by states unemployment rose to 14 5 but a much higher 24 4 when we correct for potential data misclassification noted by the bls using the official definition unemployment in april 2020 among african americans rose by less than what would have been anticipated to 16 6 based on previous recessions and the long term ordering of unemployment across racial ethnic groups was altered with latinx unemployment 18 2 rising for the first time to the highest among major groups difference in difference estimates confirm that the initial gap in unemployment between whites and blacks in april was not different than in periods prior to the pandemic however the racial gap expanded as unemployment for whites declined in the next two months but was largely stagnant for blacks the initially large gap in unemployment between whites and latinx in april was sustained in may and june as unemployment declined similarly for both groups non linear decompositions show a favorable industry distribution partly protected black employment during the early stages of the pandemic but that an unfavorable occupational distribution and lower average skills levels placed them at higher risk of job losses an unfavorable occupational distribution and lower skills contributed to a sharply widened latinx white unemployment gap that moderated over time as rehiring occurred these findings of disproportionate impacts on minority unemployment raise important concerns regarding lost earnings and wealth and longer term consequences of the pandemic on racial inequality in the united states

manufacturing intelligence for semiconductor demand forecast based on technology diffusion and product life cycle abstract semiconductor industry is capital intensive in which capacity utilization significantly affect the capital effectiveness and profitability of semiconductor manufacturing companies thus demand forecasting provides critical input to support the decisions of capacity planning and the associated capital investments for capacity expansion that require long lead time however the involved uncertainty in demand and the fluctuation of semiconductor supply chains make the present problem increasingly difficult due to diversifying product lines and shortening product life cycle in the consumer electronics era semiconductor companies must forecast future demand to provide the basis for supply chain strategic decisions including new fab construction technology migration capacity transformation and expansion tool procurement and outsourcing focused on realistic needs for manufacturing intelligence this study aims to construct a multi generation diffusion model for semiconductor product demand forecast namely the smprt model incorporating seasonal factor s market growth rate m price p repeat purchases r technology substitution t in which the nonlinear least square method is employed for parameter estimation an empirical study was conducted in a leading semiconductor foundry in hsinchu science park and the results validated the practical viability of the proposed model this study concludes with discussions of the empirical findings and future research directions

the incidence and wage consequences of home based work in the united states 1980 2000 abstract this study documents the rapid growth in home based wage and salary employment and the sharp decline in the home based wage penalty in the united states between 1980 and 2000 these twin patterns observed for both men and women in most occupation groups suggest that employer costs of providing home based work arrangements have decreased consistent with information technology it advances being an important source of these falling costs i find that occupation gender cells that had larger increases in on the job it use also experienced larger increases in the home based employment share and larger declines in the home based wage penalty

innovation diffusion in the presence of supply restrictions innovation diffusion models are developed to represent the spread of a new product from its manufacturers to its ultimate users in the marketplace however the growth of a new product can be retarded by supply restrictions such as the unavailability of the product due to limitations on the production capacity or difficulties encountered in setting up distribution systems in the presence of supply restrictions diffusion models must be developed to capture the dynamics of supply restrictions and to allow management to evaluate the impact of such supply restrictions on the growth of a new product in the market place based on the bass innovation diffusion model the objective of this paper is to suggest a parsimonious diffusion model that integrates the demand side dynamics with the supply side restrictions the sensitivity of innovation diffusion patterns in the presence of supply restrictions is examined an application examining the diffusion of new telephones in israel is documented to illustrate the usefulness of the proposed model

social contagion and income heterogeneity in new product diffusion a meta analytic test standard diffusion models capture social contagion only coarsely and do not allow one to operationalize different contagion mechanisms moreover there is increasing skepticism about the importance of contagion and as has long been known s shaped diffusion curves can also result from heterogeneity in the propensity to adopt we present hypotheses about conditions under which specific contagion mechanisms and income heterogeneity are more pronounced and test these hypotheses using a meta analysis of the q p ratio in applications of the bass diffusion model the ratio is positively associated with the gini index of income inequality in a country supporting the heterogeneity in thresholds interpretation the ratio also varies as predicted by the gamma shifted gompertz diffusion model but the evidence vanishes after controlling for national culture as to contagion the q p ratio varies with the four hofstede dimensions of national culture for three of them in a direction consistent with the social contagion interpretation furthermore products with competing standards have a higher q p ratio which is again consistent with the social contagion interpretation finally we find effects of national culture only for products without competing standards suggesting that technological effects and culturally moderated social contagion effects might not operate independently from each other

global takeoff of new products culture wealth or vanishing differences the authors study the takeoff of 16 new products across 31 countries 430 categories to analyze how and why takeoff varies across products and countries they test the effect of 12 hypothesized drivers of takeoff using a parametric hazard model the authors find that the average time to takeoff varies substantially between developed and developing countries between work and fun products across cultural clusters and over calendar time products take off fastest in japan and norway followed by other nordic countries the united states and some countries of midwestern europe takeoff is driven by culture and wealth plus product class product vintage and prior takeoff most importantly time to takeoff is shortening over time and takeoff is converging across countries the authors discuss the implications of these findings

optimal pricing strategies for new products in dynamic oligopolies this paper deals with the determination of optimal pricing policies for firms in oligopolistic markets the problem is studied as a differential game and optimal pricing policies are established as nash open loop controls cost learning effects are assumed such that unit costs are decreasing with cumulative output discounting of future profits is also taken into consideration initially the problem is addressed in a general framework and we proceed to study some specific cases that are related to models presented in recent literature three basic classes of sales dynamics are analyzed competition with price effects only competition with price as well as adoption effects and competition with adoption effects only in some cases it turns out that results which hold for the monopoly case carry over to the multi firm case in the sense that the qualitative structure of optimal pricing strategies is the same in the monopoly and the oligopoly cases however due to competitive interdependencies differences certainly exist in the levels as well as the rates of change of optimal prices

waste paper procurement optimization an agent based simulation approach abstract this paper proposes an agent based simulation model to study and analyse the performance of various procurement and production policies in the recycled paper industry the proposed model includes the recycled pulp production process as well as the waste paper inventory and procurement processes a detailed simulation model developed in partnership with a large recycled pulp producer in north america was developed in order to emulate the procurement manager s behaviour therefore based on the observed behaviour of the procurement manager a procurement behaviour model which takes both market price and inventory requirement into account is introduced this paper also introduces a waste paper market model that simulates a market price and enables the control of price forecast accuracy two series of experiments were carried out in order to study the performance of procurement and production policies in several productions contexts results show that production volume flexibility has a negative impact on costs inventory and quality however it is possible to partially reduce these issues with the introduction of contracts with volume flexibility although only a limited effect has been observed in our experiments a more significant strategy to improve costs consists in reducing production rate to the minimum level required to meet demand

how many us jobs might be offshorable using detailed information on the nature of work done in over 800 us bureau of labor statistics occupational codes this paper ranks those occupations according to how easy hard it is to offshore the work either physically or electronically using this ranking it is estimated that somewhere between 22 and 29 of all us jobs are or will be potentially offshorable within a decade or two no estimate is made of how many jobs will actually be offshored since the rankings are subjective two alternatives are presented one is entirely objective the other is an independent subjective ranking in general they corroborate the rankings albeit not perfectly it is found that there is little or no correlation between an occupation s offshorability and the skill level of its workers as measured either by educational attainment or wages however it appears that controlling for education the most highly offshorable occupations were already paying significantly lower wages in 2004

modeling intercategory and generational dynamics for a growing information technology industry previous studies dealing with product growth have dealt only with substitution effects among successive generations of one product category and not with complementarity and competition provided by related product categories based on a broadened concept of the competitive information technology it market we develop a dynamic market growth model that is able to incorporate both interproduct category and technological substitution effects simultaneously the market potential for each category or generation is treated as a variable rather than a constant parameter which is typical of recently growing it sectors such as wireless telecommunications the model is calibrated its plausibility discussed and its face and predictive validity assessed using data on wireless telecommunications services from two asian markets results show that the market potential and sales growth of one category or generation is significantly affected by others and by the overall structure of a geographic market the model is shown to make relatively good predictions even when the data from recently introduced categories generations are limited

real options and product life cycles in this paper i develop an option valuation framework that explicitly incorporates a product life cycle i then use the framework to value the real option to change a project s capacity standard techniques for valuing real options typically ignore product life cycle models and specify instead a constant expected growth rate for demand or price i show that this specification can lead to significant error in the valuation of capacity options in particular the standard technique tends to undervalue the option to contract capacity and overvalue the option to expand capacity this result has important implications for capital investment decisions especially in high technology industries that feature regular introductions of newly improved products

optimizing product launches in the presence of strategic consumers a technology firm launches newer generations of a given product over time at any moment the firm decides whether to release a new version of the product that captures the current technology level at the expense of a fixed launch cost consumers are forward looking and purchase newer models only when it maximizes their own future discounted surpluses we start by assuming that consumers have a common valuation for the product and consider two product launch settings in the first setting the firm does not announce future release technologies and the equilibrium of the game is to release new versions cyclically with a constant level of technology improvement that is optimal for the firm in the second setting the firm is able to precommit to a schedule of technology releases and the optimal policy generally consists of alternating minor and major technology launch cycles we verify that the difference in profits between the commitment and no commitment scenarios can be significant varying from 4 to 12

competitive pricing by a price leader we examine the problem of pricing in a market where one brand acts as a price leader we develop a procedure to estimate a leader s price rule which is optimal given a sales target objective and allows for the inclusion of demand forecasts we illustrate our estimation procedure by calibrating this optimal price rule for both the leader and the follower using data on past sales and prices from the mid size sedan segment of the u s automobile market our results suggest that a leader follower system stackelberg seems more consistent with the pricing behavior in this market than a mutually independent pricing rule nash we also find that our optimal price rule explains this market data better than other pricing schemes that do not account for optimizing behavior on the part of the leader and the follower

inequality in the impact of the coronavirus shock evidence from real time surveys abstract we present real time survey evidence from the uk us and germany showing that the immediate labor market impacts of covid 19 differ considerably across countries employees in germany which has a well established short time work scheme are substantially less likely to be affected by the crisis within countries the impacts are highly unequal and exacerbate existing inequalities workers in alternative work arrangements and who can only do a small share of tasks from home are more likely to have lost their jobs and suffered falls in earnings women and less educated workers are more affected by the crisis

peer effects in the diffusion of solar photovoltaic panels social interaction peer effects are recognized as a potentially important factor in the diffusion of new products in the case of environmentally friendly goods or technologies both marketers and policy makers are interested in the presence of causal peer effects as social spillovers can be used to expedite adoption we provide a methodology for the simple straightforward identification of peer effects with sufficiently rich data avoiding the biases that occur with traditional fixed effects estimation when using the past installed base of consumers in the reference group we study the diffusion of solar photovoltaic panels in california and find that at the average number of owner occupied homes in a zip code an additional installation increases the probability of an adoption in the zip code by 0 78 percentage points our results provide valuable guidance to marketers designing strategies to increase referrals and reduce customer acquisition costs they also provide insights into the diffusion process of environmentally friendly technologies

evaluating alternative capacity strategies in semiconductor manufacturing under uncertain demand and price scenarios abstract because product demand is very volatile and machine and process technologies are advanced at a rapid pace capacity planning and investment in the semiconductor industry is a challenging task many studies have addressed mid and short term machine portfolio planning tasks of capacity planning however capacity planning should be considered in a framework of strategy planning in order to address the whole problem this paper describes a method of analysis for adapting capacity strategy to changing business environment the paper has three major parts in the first part empirical data analysis of a case study company yields predictive formulas for production and capacity costs the uncertainty of demand is also calibrated using the geometric brownian motion process in the second part experiments are designed to simulate demand and profit scenarios for comparing two capacity strategies in the third part the resultant data of simulation are analysed to gain insights to the relative performance of the two strategies in various scenarios the analysis method provides a framework for formulating capacity strategy and for integrating capacity planning with business planning

managing demand and sales dynamics in new product diffusion under supply constraint the bass diffusion model is a well known parametric approach to estimating new product demand trajectory over time this paper generalizes the bass model by allowing for a supply constraint in the presence of a supply constraint potential customers who are not able to obtain the new product join the waiting queue generating backorders and potentially reversing their adoption decision resulting in lost sales consequently they do not generate the positive word of mouth that is typically assumed in the bass model leading to significant changes in the new product diffusion dynamics we study how a firm should manage its supply processes in a new product diffusion environment with backorders and lost sales we consider a make to stock production environment and use optimal control theory to establish that it is never optimal to delay demand fulfillment this result is interesting because immediate fulfillment may accelerate the diffusion process and thereby result in a greater loss of customers in the future using this result we derive closed form expressions for the resulting demand and sales dynamics over the product life cycle we then use these expressions to investigate how the firm should determine the size of its capacity and the time to market its new product we show that delaying a product launch to build up an initial inventory may be optimal and can be used as a substitute for capacity also the optimal time to market and capacity increase with the coefficients of innovation and imitation in the adoption population we compare our optimal capacity and time to market policies with those resulting from exogeneous demand forecasts in order to quantify the value of endogenizing demand

hotelling bertrand duopoly competition under firm specific network effects abstract social pressure plays a crucial role in consumer choices the impact of network social effects has also been largely recognised in the context of market competition in this paper we consider a duopoly where competing firms are differentiated solely by the level of social or network externality they induce on consumers perceived utility we fully characterise nash equilibria in locations prices and market shares under a scenario of weak social externality firms opt for maximum differentiation and the firm with the highest social recognition enjoys a relative advantage in terms of profit this outcome is not the only possible we formally prove that large values of social recognition may lead to adverse coordination among consumers and move the strongest firm out of the market with positive probability this scenario is related to a pareto inefficient trap of no differentiation

market segmentation self selection and product line design the purpose of this paper is to develop a theory of market segmentation based on consumer self selection the extant theory is based on the third degree price discrimination model of pigou central assumptions of which are that the firm can directly address individual segments and isolate them by using consumer self selection i am relaxing these assumptions in the context of a monopolist designing a product line i show that this relaxation has significant implications for how the products and prices are chosen and what they look like in particular segments may be aggregated even though there are no economies of scale furthermore consumer self selection enables us to model cannibalization and competition among firms

innovation diffusion uncertainty advertising and pricing policies we develop and analyze a normative and structurally stochastic model of innovation diffusion by depicting the market at an aggregate level model dynamics are defined through the flow pattern of individuals that move from the innovation unaware stage to the innovation aware and ultimately to the adopter stages the stochastic evolution of this stage wise transition unfolds according to tractable stochastic processes and is influenced by such factors as price word of mouth and advertisement efforts in this environment techniques of contingent claims analysis and stochastic control theory are employed to obtain optimal pricing or advertising policies that maximize the value of the innovation to account for their optimal adjustment over time these policies are modeled as positive real valued adapted processes given this setting policy adjustments over time i e advertising or pricing are viewed as a value additive sequence of nested real options we present closed form analytic results regarding the optimal policies simulations provide a numeric insight to the models behavior

economic interests party and ideology in early cold war era u s foreign policy although it is widely acknowledged that economic interests influence the politics of trade policy most research on international relations treats security issues differently do conflicting economic interests shape political debate over foreign policy even when security issues are highly salient to answer this question i test a range of hypotheses about conflicting interests in the economic stakes of u s foreign policy during the early cold war era i present evidence that economic interests in their home states were closely related to senators voting patterns on foreign policy issues these patterns hold across economic and security issues i also find that political parties play an important mediating role making senators more or less receptive to various economic interests

optimal production sales policies and entry time for successive generations of new products abstract this paper explores the optimal initial inventory at launch sales plan and introduction time for a new generation of a product we propose a multi generation demand model that accounts for supply constraints a mathematical model of the supply restricted multi generation diffusion problem is then developed and the optimal sales policy is derived closed form analytical expressions as well as numerical experiments are used to investigate the effect of consumers backlogging cost of production capacity unit profit margin for the products market expansion by the new generation and cannibalization of older generations through consideration of supply restrictions and lost sales we are able to generalize previous findings on market entry policy by showing that there is a continuous range of optimal introduction times we show that the inter dependence between production capacity and initial inventory varies based on the introduction time of the new generation we also provide an application of the proposed model in the case of sony s playstation 3 game console the results suggest that the company introduced the product too late and overproduced inventory which as supported by empirical evidence had a negative impact on the product s performance limitations and considerations for the application of the model are also discussed

commentary defensive marketing strategies for every new product and service entrant there are usually many incumbents who must defend their positions in the market hence defensive strategy is as least as critical as new product strategy our 1983 article argued that defensive strategy critically depends on the distribution of buyer preferences and the position of the new entrant relative to the position of the incumbent in a multidimensional attribute space since the appearance of our 1983 article in marketing science research in defensive strategy has progressed in both prescriptive and descriptive directions subsequent research on defensive strategy has also addressed empirical methodological theoretical and substantive issues today defensive strategy is more important than ever with shorter new product life cycles persistent service innovation remarkable technological change global competition and the invention of new channels of distributions

high definition television assessing demand forecasts for a next generation consumer durable high definition television promises to be the next generation of television this technology has broad implications for consumer markets as well as the underlying manufacturing technology development and r d activities of firms under increasing pressure from various groups the u s government must make major policy and funding decisions based on its assessment of the likely demand for hdtv three published reports which forecast sales of hdtv after its scheduled introduction in the mid 1990s are available unfortunately these forecasts offer widely differing perspectives on hdtv s potential this paper presents an approach that links product segmentation based on historical demand parameters and marketing and manufacturing related variables and demand forecasting for new products the published hdtv forecasts are then assessed using this segmentation scheme differing from the congressional budget office s earlier evaluation this analysis indicates that one report is consistent with historical d

diffusion of innovations under supply constraints in this paper we present a canonical setting that illustrates the need for explicitly modeling interactions between manufacturing and marketing sales decisions in a firm we consider a firm that sells an innovative product with a given market potential the firm may not be able to meet demand due to capacity constraints for such firms we present a new model of demand modified from the original model of bass to capture the effect of unmet past demand on future demand we use this model to find production and sales plans that maximize profit during the lifetime of the product in a firm with a fixed production capacity we conduct an extensive numerical study to establish that the trivial myopic sales plan that sells the maximal amount possible at each time instant is not necessarily optimal we show that a heuristic build up policy in which the firm does not sell at all for a period of time and builds up enough inventory to never lose sales once it begins selling is a robust approximation to the optimal policy specializing to a lost sales setting we prove that the optimal sales plan is indeed of the build up type we explicitly characterize the optimal build up period and analytically derive the optimal initial inventory and roll out delay finally we show that the insights obtained in the fixed capacity case continue to hold when the firm is able to dynamically change capacity

capacity expansion under stochastic demands we consider the problem of optimally meeting a stochastically growing demand for capacity over an infinite horizon under the assumption that demand for product follows either a nonlinear brownian motion or a non markovian birth and death process we show that this stochastic problem can be transformed into an equivalent deterministic problem consistent with earlier work by a manne the equivalent problem is formed by replacing the stochastic demand by its deterministic trend and discounting all costs by a new interest rate that is smaller than the original in approximate proportion to the uncertainty in the demand

on the optimal frequency of multiple generation product introductions this paper considers a firm that introduces multiple generations of a product to the market at regular intervals we assume that the firm has only a single production generation in the market at any time to maximize the total profit within a given planning horizon the firm needs to decide the optimal frequency to introduce new product generations taking into account the trade off between sales revenues and product development costs we model the sales quantity of each generation as a function of the technical decay and installed base effects we analytically examine the optimal frequency for introducing new product generations as a function of these parameters c 2015 elsevier b v all rights reserved

dynamic product portfolio management with life cycle considerations we consider a portfolio of products in which each product probabilistically transitions through various life cycle stages the evolution through these life cycle stages is impacted by both marketing support and product launch decisions which are bound by a financial constraint in the form of restricted working capital in the model the joint working capital level serves to finance the portfolio expenditures and is decided a priori by the company we use an infinite horizon markov decision process mdp to find the optimal decisions to coordinate the operations and finance depending on the composition of the portfolio we find that the policy optimizing the product launch marketing support and inventory decisions under a working capital constraint is independent of the correlation between demand levels of the products in the portfolio we numerically demonstrate that the joint management of the products has a significant positive effect on the total profit reducing the amount of working capital used per product we also show that the optimal policy smooths aggregated demand levels as well as cash flows

a reply to new product diffusion decisions under supply constraints in our prior work on product diffusions in presence of a capacity constraint we postulated that a firm operating in such an environment should always attempt to fulfill as much of the present demand as is possible with the capacity constraint in other words the firm would never have demand backlogged while accumulating inventory in this note we derive a sufficient condition for the optimality of such fulfillment policy this paper was accepted by candace a yano operations management

a diffusion theory model of adoption and substitution for successive generations of high technology products this study deals with the dynamic sales behavior of successive generations of high technology products new technologies diffuse through a population of potential buyers over time therefore diffusion theory models are related to this demand growth furthermore successive generations of a technology compete with earlier ones and that behavior is the subject of models of technological substitution building upon the bass bass f m 1969 a new product growth model for consumer durables management sci 15january 215 227 diffusion model we develop a model which encompasses both diffusion and substitution we demonstrate the forecasting properties of the model by estimating parameters over part of the data and projecting shipments for later periods

recent developments in dynamic advertising research a variety of continuous time differential functions have been developed to investigate dynamic advertising problems in business and economics fields since major dynamic models appearing before 1995 have been reviewed by a few survey papers we provide a comprehensive review of the dynamic advertising models published after 1995 which are classified into six categories i nerlove arrow model and its extensions ii vidale wolfe model and its extensions iii lanchester model and its extensions iv the diffusion models v dynamic advertising competition models with other attributes and vi empirical studies for dynamic advertising problems for each category we first briefly summarize major relevant before 1995 models and then discuss major after 1995 models in details we find that the dynamic models reviewed in this paper have been extensively used to analyze various advertising problems in the monopoly duopoly oligopoly and supply chain systems our review reveals that the diffusion models have not been used to analyze advertising problems in supply chain operations which may be a research direction in the future moreover we learn from our review that very few publications regarding dynamic advertising problems have considered the supply chain competition we also find that very few researchers have used the diffusion model to investigate the dynamic advertising problems with product quality as a decision variable and the pricing decision has not been incorporated into any extant lanchester model the paper ends with a summary of our review and suggestions on possible research directions in the future

skimming or penetration strategic dynamic pricing for new products current complex dynamic markets are characterized by numerous brands each with multiple products and price points and differentiated on a variety of product attributes plus a large number of new product introductions this study seeks to analyze dynamic pricing paths in a highly complex branded market consisting of 663 products under 79 brand names of digital cameras the authors develop a method to classify dynamic pricing strategies and analyze the choice and correlates of observed pricing paths in the introduction and early growth phase of this market the authors find that despite numerous recommendations in the literature for skimming or penetration pricing market pricing dominates in practice in particular the authors find five patterns skimming 20 frequency penetration 20 frequency and three variants of market pricing patterns 60 frequency where new products are launched at market prices skimming pricing launches the new product 16 above the market price and subsequently increases the price relative to the market price penetration pricing launches the new product 18 below the market price and subsequently lowers the price relative to the market price firms exhibit a mix of these pricing paths across their portfolios the specific pricing paths correlate with market firm and brand characteristics such as competitive intensity market pioneering brand reputation and experience effects the authors discuss managerial implications

50th anniversary article option pricing valuation models and applications this paper surveys the literature on option pricing from its origins to the present an extensive review of valuation methods for european and american style claims is provided applications to complex securities and numerical methods are surveyed emphasis is placed on recent trends and developments in methodology and modeling

diffusion of renewable energy technologies in south korea on incorporating their competitive interrelationships renewable energy technologies rets have attracted significant public attention for several reasons the most important being that they are clean alternative energy sources that help reduce greenhouse gas emissions to increase the probability that rets will be successful it is essential to reduce the uncertainty about its adoption with accurate long term demand forecasting this study develops a diffusion model that incorporates the effect of competitive interrelationships among renewable sources to forecast the growth pattern of five rets solar photovoltaic wind power and fuel cell in the electric power sector and solar thermal and geothermal energy in the heating sector the 2 step forecasting procedure is based on the bayus 1993 manage sci 39 11 1319 1333 price function and a diffusion model suggested by hahn et al 1994 marketing sci 13 3 224 247 in an empirical analysis the model is applied to the south korean renewable energy market

diffusion of new products empirical generalizations and managerial uses the diffusion model developed by bass bass f m 1969 a new product growth model for consumer durables management sci 15january 215 227 constitutes an empirical generalization it represents a pattern or regularity that has been shown to repeat over many new products and services in many countries and over a variety circumstances numerous and various applications of the model have lead to further generalizations modifications and extensions of the model have lead to further generalizations in addition to the empirical generalizations that stem from the model we discuss here some of the managerial applications of the model

a percolation based model explaining delayed takeoff in new product diffusion a model of new product diffusion is proposed in which a site percolation dynamics represents socially driven diffusion of knowledge about the product s characteristics in a population of consumers a consumer buys the new product if her valuation of it formed after her witnessing the product in use among her friends or neighbors is not below the price of the product announced in a given period our model attributes the empirical finding of a delayed takeoff of a new product to a drift of the percolation dynamics from a nonpercolating regime to a percolating regime this drift is caused by learning effects lowering the price of the product or by network effects increasing its individual valuations by consumers both with an increasing number of buyers

new product diffusion acceleration measurement and analysis it is a popular contention that products launched today diffuse faster than products launched in the past however the evidence of diffusion acceleration is rather scant and the methodology used in previous studies has several weaknesses also little is known about why such acceleration would have occurred this study investigates changes in diffusion speed in the united states over a period of 74 years 1923 1996 using data on 31 electrical household durables this study defines diffusion speed as the time it takes to go from one penetration level to a higher level and it measures speed using the slope coefficient of the logistic diffusion model this metric relates unambiguously both to speed as just defined and to the empirical growth rate a measure of instantaneous penetration growth the data are analyzed using a single stage hierarchical modeling approach for all products simultaneously in which parameters capturing the adoption ceilings are estimated jointly with diffusion speed parameters the variance in diffusion speed across and within products is represented separately but analyzed simultaneously the focus of this study is on description and explanation rather than forecasting or normative prescription there are three main findings 1 on average there has been an increase in diffusion speed that is statistically significant and rather sizable for the set of 31 consumer durables the average value of the slope parameter in the logistic model s hazard function was roughly 0 48 increasing with 0 09 about every 10 years it took an innovation reaching 5 household penetration in 1946 an estimated 13 8 years to go from 10 to 90 of its estimated maximum adoption ceiling for an innovation reaching 5 penetration in 1980 that time would have been halved to 6 9 years this corresponds to a compound growth rate in diffusion speed of roughly 2 between 1946 and 1980 2 economic conditions and demographic change are related to diffusion speed whether the innovation is an expensive item also has a sizable effect finally products that required large investments in complementary infrastructure radio black and white television color television cellular telephone and products for which multiple competing standards were available early on pcs and vcrs diffused faster than other products once 5 household penetration had been achieved 3 almost all the variance in diffusion speed among the products in this study can be explained by 1 the systematic increase in purchasing power and variations in the business cycle unemployment 2 demographic changes and 3 the changing nature of the products studied e g products with competing standards appear only late in the data set after controlling for these factors no systematic trend in diffusion speed remains unaccounted for these findings are of interest to researchers attempting to identify patterns of difference and similarity among the diffusion paths of many innovations either by jointly modeling the diffusion of multiple products as in this study or by retrospective meta analysis the finding that purchasing power demographics and the nature of the products capture nearly all the variance is of particular interest specifically one does not need to invoke unobserved changes in tastes and values as some researchers have done to account for long term changes in the speed at which households adopt new products the findings also suggest that new product diffusion modelers should attempt to control not only for marketing mix variables but also for broader environmental factors the hierarchical model structure and the findings on the systematic variance in diffusion speed across products are also of interest to forecasting applications when very little or no data are available

defensive marketing strategies this paper analyzes how a firm should adjust its marketing expenditures and its price to defend its position in an existing market from attack by a competitive new product our focus is to provide usable managerial recommendations on the strategy of response in particular we show that if products can be represented by their position in a multiattribute space consumers are heterogeneous and maximize utility and awareness advertising and distribution can be summarized by response functions then for the profit maximizing firm it is optimal to decrease awareness advertising it is optimal to decrease the distribution budget unless the new product can be kept out of the market a price increase may be optimal and even under the optimal strategy profits decrease as a result of the competitive new product furthermore if the consumer tastes are uniformly distributed across the spectrum a price decrease increases defensive profits it is optimal at the margin to improve product quality in the direction of the defending product s strength and it is optimal at the margin to reposition by advertising in the same direction in addition we provide practical procedures to estimate 1 the distribution of consumer tastes and 2 the position of the new product in perceptual space from sales data and knowledge of the percent of consumers who are aware of the new product and find it available competitive diagnostics such as the angle of attack are introduced to help the defending manager this article was originally published in marketing science volume 2 issue 4 pages 319 360 in 1983

measuring contagion in the diffusion of consumer packaged goods abstract this study measures the degree of contagion or interpersonal influence in the diffusion of new consumer packaged goods cpgs the authors demonstrate that when an individual level trial hazard model is properly specified to account for potential sources of biases substantial contagion effects may be detected in the diffusion of many cpgs using longitudinal panel data on individual level trial and repeat purchases of 67 newly introduced cpgs they show that standard diffusion models fail to detect contagion however after extending the model to allow for spatial and temporal heterogeneity in contagion and controlling for various cross sectional and temporal confounds they find statistically significant contagion effects in 33 to 40 of the 67 sample products the empirical evidence of contagion in the diffusion of many cpgs has important implications because most new product trial models for cpgs have assumed a priori that there is no contagion in the diffusion of these products moreover the

how many jobs can be done at home evaluating the economic impact of social distancing measures taken to arrest the spread of covid 19 raises a fundamental question about the modern economy how many jobs can be performed at home we classify the feasibility of working at home for all occupations and merge this classification with occupational employment counts we find that 37 of jobs in the united states can be performed entirely at home with significant variation across cities and industries these jobs typically pay more than jobs that cannot be done at home and account for 46 of all us wages applying our occupational classification to 85 other countries reveals that lower income economies have a lower share of jobs that can be done at home

dynamic optimal control models in advertising recent developments this paper presents a review of recent developments that have taken place in the area of dynamic optimal control models in advertising subsequent to the comprehensive survey of the literature by sethi in 1977 the basic problem underlying these models is that of determining optimal advertising expenditures and possibly other variables of interest over time for a firm or a group of competing firms under consideration this optimization is done subject to some dynamics that define how these variables translate into sales and in turn into profits the purpose of this update is twofold on the one hand new contributions in the areas already treated in the earlier survey are reviewed on the other hand new trends in the advertising literature since 1977 such as quality as an additional marketing instrument cumulative sales models pulsing advertising and advertising as a part of corporate models of the firm are discussed the models covered in this update are organized under six headings models with ca

a diffusion model incorporating product benefits price income and information we start by assuming that a major benefit of many new durable products such as dishwashers and microwave ovens is time savings others such as vcrs also enhance the value of our leisure time using a household production framework we demonstrate that a utility maximizing individual will have a reservation price for the product which is a function of the product benefits and his wage rate by assuming that the wage rate has an extreme value distribution across the population we are able to derive for the aggregate process an income price dependent logistic adoption equation we then allow for the possibility that certain eligible consumers may delay their purchase of the product because they are unaware that it exists are suspicious of its quality or expect its price to fall unawareness uncertainty and hope for further price declines are assumed to decrease with the increase in the number of previous adopters the resulting diffusion model has the property that the product life cycle phenomenon can be explained jointly or separately by the income price process and the awareness uncertainty expectations process using data on household income on durable penetration within different income classes and on first purchase sales the aggregate diffusion model and its premises are tested and supported it is found that both the income price and awareness uncertainty expectations processes are at work however the dependence of the awareness uncertainty expectations delay process on the number of previous adopters e g word of mouth type effect exists only in certain product categories and is usually relatively weak it is demonstrated that if the word of mouth type effects are weak a price skimming strategy is optimal for a monopolist and also is likely to be implemented by oligopolists the sales forecasting implications of the model also are pursued

heuristics for pricing and positioning a product line using conjoint and cost data designing and pricing a product line is the very essence of every business in recent years quantitative methods to assist managers in this task have been gaining in popularity conjoint analysis is already widely used to measure preferences for different product profiles and build market simulation models in the last few years several papers have been published that suggest how to optimally choose a product line based on such data we formalize this problem as a mathematical program where the objective of the firm is either profit or total welfare unlike alternative published approaches we introduce fixed and variable costs for each product profile the number of products to be introduced is endogenously determined on the basis of their desirability fixed and variable costs and in the case of profits their cannibalization effect on other products while the problem is difficult np complete we show that the maximum welfare problem is equivalent to the uncapacitated plant location problem which can be solved very efficiently using the greedy interchange heuristic based on past published experience with this problem and on simulations we perform we show that optimal or near optimal solutions are obtained in seconds for large problems we develop a new greedy heuristic for the profit problem and its application to simulated problems shows that it too runs quickly and with better performance than various alternatives and previously published heuristics we also show how the methodology can be applied taking existing products of both the firm and the competition into account

a novel bass type model for product life cycle quantification using aggregate market data abstract product life cycle plc is a widely accepted concept that has been given significant attention in operations management and marketing literature however its quantification remains a major challenge this study aims to develop a unique and original analytical model for quantifying plcs using aggregate market data the bass diffusion model is used to forecast consumers first purchases of the product next the novelty loyalty based consumer utility nlbcu theory which has a confirmed neuropsychological basis is used to model repeat or replacement purchases the unique contribution of this work is that it synthesizes the prevailing innovation diffusion theory and the nlbcu theory to provide a distinct dynamic and endogenous perspective on consumer purchasing behavior across the entire plc the model s advantages include its simple mathematical formulation its minimal use of data and its harmony with the predominating ideas of the innovation diffusion literature through simulation studies and empirical investigations the descriptive power and data fitting performance of the model are demonstrated

updating a credit scoring model based on new attributes without realization of actual data abstract funding small and medium sized enterprises smes to support technological innovation is critical for national competitiveness technology credit scoring models are required for the selection of appropriate funding beneficiaries typically a technology credit scoring model consists of several attributes and new models must be derived every time these attributes are updated however it is not feasible to develop new models until sufficient historical evaluation data based on these new attributes will have accumulated in order to resolve this limitation we suggest the framework to update the technology credit scoring model this framework consists of ways to construct new technology credit scoring model by comparing alternative scenarios for various relationships between existing and new attributes based on explanatory factor analysis analysis of variance and logistic regression our approach can contribute to find the optimal scenario for updating a scoring model

new product diffusion with influentials and imitators we model the diffusion of innovations in markets with two segments influentials who are more in touch with new developments and who affect another segment of imitators whose own adoptions do not affect the influentials this two segment structure with asymmetric influence is consistent with several theories in sociology and diffusion research as well as many viral or network marketing strategies we have four main results 1 diffusion in a mixture of influentials and imitators can exhibit a dip or chasm between the early and later parts of the diffusion curve 2 the proportion of adoptions stemming from influentials need not decrease monotonically but may first decrease and then increase 3 erroneously specifying a mixed influence model to a mixture process where influentials act independently from each other can generate systematic changes in the parameter values reported in earlier research 4 empirical analysis of 33 different data series indicates that the two segment model fits better than the standard mixed influence the gamma shifted gompertz and the weibull gamma models especially in cases where a two segment structure is likely to exist also the two segment model fits about as well as the karmeshu goswami mixed influence model in which the coefficients of innovation and imitation vary across potential adopters in a continuous fashion

new product pricing in quality sensitive markets this paper considers the problem of pricing a new product in a market having competing products of different qualities and market penetration levels as measured by the cumulative number of units sold each customer type selects his optimal product based on maximizing consumer surplus pricing policies for a new product are determined for the seller based on cumulative profit maximization without discounting an example is solved in detail for two demand function forms

growing growing gone cascades diffusion and turning points in the product life cycle research on the product life cycle plc has focused primarily on the role of diffusion this study takes a broader theoretical perspective on the plc by incorporating informational cascades and developing and testing many new hypotheses based on this theory on average across 30 product categories the authors find that i new consumer durables have a typical pattern of rapid growth of 45 per year over 8 years ii this period of growth is followed by a slowdown when sales decline by 15 and stay below those of the previous peak for 5 years iii slowdown occurs at 34 population penetration and about 50 of ultimate market penetration iv products with large sales increases at takeoff tend to have larger sales declines at slowdown v leisure enhancing products tend to have higher growth rates and shorter growth stages than nonleisure enhancing products time saving products tend to have lower growth rates and longer growth stages than nontime saving products vi lower probability of slowdown is associated with steeper price reductions lower penetration and higher economic growth vii a hazard model can provide reasonable predictions of the slowdown as early as the takeoff the authors discuss the implications of these findings

simultaneous and dynamic price production inventory and capacity decisions abstract this paper concerns a profit maximizing firm that derives the optimal price for its output level of output level of inventory and composition of productive capacity over time first it is assumed that capacity may be acquired to either increase or replace the firm s existing productive capacity second it is assumed that the acquisition of new capacity causes a reduction in the firm s production cost lastly it is assumed that demand which is expressed as a function of time and price must be met either from current production or from inventory clearly the level of production cannot exceed the productive capacity at any time the optimal control model formulated requires the solution of a two point boundary value problem so that a discrete approximation numerical procedure is presented numerical results indicate that due to anticipated technological improvement the acquisition of new capacity is postponed and occurs in greater magnitude later in the planning horizon in addition as a result of upgrading productive capacity through the acquisition of new technology numerical results show that a firm lowers its per unit production cost and thereby reduces the optimal price charged for output which increases demand furthermore since the level of capacity is increased due to the purchase of new technology less reliance on inventory is necessary to meet peak demand lastly it is shown that a larger firm optimally acquires a greater level of new capacity over the planning horizon to reduce its operating costs and thereby further its competitive advantage

the illusion of choice defense and welfare in advanced industrial democracies 1948 1978 research on the tendency of governments to trade off welfare spending for defense has generated diverse and often contradictory findings this study attempts to clarify the issue of trade offs by examining expenditure patterns since 1948 for the four major na to allies united states united kingdom federal republic of germany and france when viewed from the perspective of long term trends in shares of outlays trade offs are evident when short term changes in expenditure which are more germane to the potential for one spending category to benefit at the expense of the other are studied no pattern of trade off can be detected a three equation model is estimated to control for the variety of possible determining factors of public resource allocation in none of the four nations does a pattern of trade off emerge except in periods of wartime or postwar reconstruction these findings are consistent with the ability of governments to finance new spending through either increased taxes or larger budget deficits the growing disinclination to use these methods however suggests that the potential for trade offs has perhaps reappeared in the 1980s

irreversible investment with uncertainty and scale economies abstract optimal irreversible investment policy is analyzed when profits undergo multiplicative geometric brownian shocks the marginal product of capital increases initially and then decreases in the latter range it is optimal to add capacity gradually as the shock rises to a threshold where the expected return on the marginal unit is a multiple of its cost reflecting the option value of waiting the optimal policy in the increasing marginal product range obeys the same multiple now applied to the total return on an optimal discrete capacity addition implications for economic growth and suboptimal equilibria under external economies are examined

new product diffusion decisions under supply constraints two recent papers on managing new product diffusion decisions under production constraints reach somewhat contradictory conclusions ho et al ho t h s savin c terwiesch 2002 managing demand and sales dynamics in new product diffusion under supply constraint management sci 48 2 187 206 show that it is never optimal to refuse to satisfy any customers when the firm has inventory of the product on the other hand in a very similar model kumar and swaminathan kumar s j m swaminathan 2003 diffusion of innovations under supply constraints oper res 51 6 866 879 show that production constraints may in fact lead a firm to reject customers orders even when the firm has the inventory to satisfy them to slow down new product diffusion we provide a counterexample to the results of ho et al 2002 and show that in their and kumar and swaminathan s 2003 models it may be optimal to deny customers a product in inventory we provide a generalization of both models that includes the ability to dynamically price the product and also allows capacity and production costs to vary over time we show that the unintuitive but optimal behavior of denying customers products that are in inventory disappears when the firm can dynamically set prices this paper was accepted by candace a yano operations and supply chain management