quantitative analysis of network externalities in competing technologies the vcr case we develop a dynamic structural model of consumers choices and producers pricing in an oligopolistic market for newly introduced durable products with network externalities the model is then applied to empirically analyze the de facto standardization of the vhs format in the u s home vcr market during 1981 1988 we find i the network advantage of vhs explains at least 70 3 to 86 8 of the logarithm of relative sales of vhs to betamax in each year ii an increase in the network advantage of vhs was an engine of tipping toward the vhs format and iii in the early 1980s the network advantage of vhs was mainly due to its expected growth advantage

tipping and concentration in markets with indirect network effects this paper develops a framework for measuring tipping the increase in a firm s market share dominance caused by indirect network effects our measure compares the expected concentration in a market to the hypothetical expected concentration that would arise in the absence of indirect network effects in practice this measure requires a model that can predict the counterfactual market concentration under different parameter values capturing the strength of indirect network effects we build such a model for the case of dynamic standards competition in a market characterized by the classic hardware software paradigm to demonstrate its applicability we calibrate it using demand estimates and other data from the 32 64 bit generation of video game consoles a canonical example of standards competition with indirect network effects in our example we find that indirect network effects can lead to a strong economically significant increase in market concentration we also find important roles for beliefs on both the demand side as consumers tend to pick the product they expect to win the standards war and on the supply side as firms engage in penetration pricing to invest in growing their networks

on the use of econometric models for policy simulation in marketing abstract in this article the author discusses the properties of useful econometric models for marketing phenomena with particular attention on models for policy simulations the author addresses model diagnostics parameter stability exogeneity and the lucas critique he also presents the results of a search through the 1998 2003 issues of the journal of marketing research finally the author offers practical guidelines

structural workshop paper discrete choice models of consumer demand in marketing marketing researchers have used models of consumer demand to forecast future sales to describe and test theories of behavior and to measure the response to marketing interventions the basic framework typically starts from microfoundations of expected utility theory to obtain an econometric system that describes consumers choices over available options and to thus characterize product demand the basic framework has been augmented significantly to account for quantity choices to accommodate purchases of several products on a single purchase occasion multiple discreteness and multicategory purchases and to allow for asymmetric switching between brands across different price tiers these extensions have enabled researchers to bring the analysis to bear on several related marketing phenomena of interest this paper has three main objectives the first objective is to articulate the main goals of demand analysis forecasting measurement and testing and to highlight several considerations associated with these goals our second objective is to describe the main building blocks of individual level demand models we discuss approaches built on direct and indirect utility specifications of demand systems and we review extensions that have appeared in the marketing literature the third objective is to explore a few emerging directions in demand analysis including considering demand side dynamics combining purchase data with primary information and using semiparametric and nonparametric approaches we hope researchers new to this literature will take away a broader perspective on these models and see the potential for new directions in future research

testing the prebish singer hypothesis using second generation panel data stationarity tests with a break abstract in this paper we test the prebish singer ps hypothesis which states that real commodity prices decline in the long run using two recent powerful panel data stationarity tests accounting for cross sectional dependence and a structural break we find that the hypothesis cannot be rejected for most commodities other than oil

optimal dynamic pricing for expanding networks this paper analyzes the dynamic pricing decision of a monopolist marketing a new product or service whose consumption value increases with the expansion of the network of adopters we characterize an optimal pricing strategy which maximizes the present value of the monopolist s profits subject to the dynamics of the demand for network access these dynamics depend among other factors on the current price and consumer anticipations about future network growth we examine the effects of changes in the growth anticipations and the discount rate on the optimal equilibrium access price and network size it is shown that higher growth anticipations and a lower discount rate result in a lower equilibrium price and a larger network

performance feedback competitive repertoire simplicity and technological evolution in a televised design contest abstract research suggests that in industries where firms compete primarily on the relative merits of their designs performance feedback from repeated episodes of competitive rivalry often leads firms to focus their resources on progressively fewer design features applying miller and chen 1996a miller and chen 1996b concept of competitive repertoire simplicity we argue that the shift from broad to narrow set of technological options marking technological evolution is the product of multi level interaction between competitive design decisions made at the individual firm level and technological knowledge that accumulates at the industry level taking advantage of an elimination tournament called robot wars where competition is transparent regulated and is marked by repeat participation we examine repertoire simplicity and its escalation over iterative episodes of dyadic rivalry using a data set of 296 robotic designs over 4 episodes of this design contest we find evidence for a escalating repertoire simplicity causing convergence in design configurations and b hypothesized but rarely tested links between competition at the individual team level and technological evolution at the population level

structural modeling and policy simulation a primary goal of research in marketing is to evaluate and recommend optimal policies for marketing actions or instruments in the terminology of franses 2005 in this respect marketing is a very policy oriented field and it is ironic that so much published research skirts the issue of policy evaluation franses s article draws much needed attention to the question of what sort of model is usable for policy simulation and evaluation our perspective on what constitutes a valid model for policy evaluation differs from franses s view but we believe our view complements his in many important respects we also strongly believe that marketing has much to contribute to the literature on structural modeling we outline some of what we believe are the advantages for marketing scholars of using structural modeling for policy evaluations and some of the challenges presented by marketing problems franses focuses on a reduced form sales response model in which the outcome variable yt is modeled conditional on marketing variables xt if customers anticipate future marketing actions and take these into account in responding to the environment at time t an additional equation is appended to the system to describe the evolution of the xt variables in franses s view this system can be used for policy simulation if both the y and x equations have timeinvariant parameters that is the lucas critique which implies that parameters of reduced form models change if the policy regime changes does not apply according to franses a model must pass standard diagnostics possess good predictive properties and exhibit parameter stability to be useful for policy simulation we applaud the attention franses is bringing to model diagnostics we believe that structural work in both marketing and economics should pay close attention to the central features of the data increased use of model diagnostics will help ensure that structural models are capable of capturing these features however we do not believe that all the criteria proposed by franses such as out of sample validity and parameter stability are either necessary or sufficient to render a model useful for policy simulation reduced form models can pass all diagnostics including out of sample validation and still provide misleading predictions about the effects of policy changes reduced form

profit increasing consumer exit this paper examines the phenomenon of profit increasing consumer exit and the related phenomenon of profit decreasing consumer entry we demonstrate that firms can be better off in shrinking markets and worse off in growing markets even in the absence of competitive entry or exit specifically firms may benefit if a segment of consumers who are relatively indifferent about consuming any product in the category leave the market profits can increase for all firms even if the exiting consumers have strong preferences for only one of the products in the market in shrinking markets it is reasonable to assume that the people who are likely to exit the market first are people who are least committed to the category in particular people who are the least satisfied with the existing offers are the most likely to change their behavior by finding an alternative or adopting a new technology similarly in growing markets consumers who enter the market late are generally the least committed to the category such exiting can relax the competitive pressure between firms and lead to increased profitability our findings provide an explanation for profit growth that has been observed in product industries exhibiting slow and predictable declines over time including vacuum tubes cigarettes and soft drinks

compositional change aggregation and dynamic factor demand estimates on a panel of manufacturing firms most empirical research on investment and dynamic factor demand has used aggregated data the large number of authors who have cited this as a source of problems strongly suggests possible benefits from analyzing individual firm data this paper presents an analysis of a panel dataset of us manufacturing firms several models based on cost minimization and a three factor cobb douglas technology are developed the differences concern whether the technology varies across two digit sic industries the presence of fixed adjustment lags and the determinants of adjustment costs identification relies on the rational expectations hypothesis and estimation on non linear 3sls the estimates indicate that versions with the adjustment lag perform better than others conditional elasticities reveal that factor demand responds rapidly to anticipated changes in output and factor prices a finding consistent with other recent work it appears that the factor demand of large firms is more price sensitive and less sensitive to output than small firms consistent with recent work on credit market imperfections comparison of the results based on the pooled and the industry varying technologies indicate that the use of aggregate data is indeed a source of problems

price competition and compatibility in the presence of positive demand externalities in many cases the benefit to a consumer of a product increases with the number of other users of the same product these demand interdependencies are referred to in the literature as positive demand externalities or network externalities this paper examines the dynamic pricing behaviors of an incumbent and a later entrant with special attention to the impacts of demand externalities compatibility and competition on prices and profits defining market power as the ability to price above a competitor without losing market share we show how demand externalities and installed base combine to confer market power we model optimal pricing as a differential game with the optimal price trajectory established as nash open loop controls for a duopoly durable goods market with strong demand externalities the results show an increasing price trajectory can be optimal as expected a new entrant is better off if its products are compatible with those of the incumbent especially when demand externalities are strong and the installed base of the incumbent is large less intuitively the incumbent as well may be better off agreeing on common standards the comparison of monopoly and duopoly shows that under strong demand externalities and a small installed base the incumbent profits from compatible entry

a note on the econometric use of constant dollar inventory series abstract one dollar of finished goods inventories does not represent the same amount of physical goods as one dollar of sales when department of commerce constant dollar series are used this can cause seriously biased regression estimates

introduction strategy for new products with positive and negative word of mouth existing innovation diffusion models assume that individual experience with the product is always communicated positively through word of mouth for certain innovations however this assumption is tenuous since communicators of the product experience may transfer favorable unfavorable or indifferent messages through word of mouth this paper examines a diffusion model for products in which negative information plays a dominant role discusses its implications for optimal advertising timing policy and presents an application to forecast attendance for the movie gandhi in the dallas area

intertemporal price discrimination with complementary products e books and e readers this paper studies intertemporal price discrimination ipd with complementary products in the context of e readers and e books using individual level data 2008 2012 i estimate a dynamic demand

competitive price discrimination strategies in a vertical channel using aggregate retail data we explore opportunities for targeted pricing for a retailer that only tracks weekly store level aggregate sales and marketing mix information we show that it is possible using these data to recover essential features of the underlying distribution of consumer willingness to pay knowledge of this distribution may enable the retailer to generate additional profits from targeting by using choice information at the checkout counter in estimating demand we incorporate a supply side model of the distribution channel that captures important features of competitive price setting behavior of firms this latter aspect helps us control for the potential endogeneity generated by unmeasured product characteristics in aggregate data the channel controls for competitive aspects both between manufacturers and between manufacturers and a retailer despite this competition we find that targeted pricing need not generate the prisoner s dilemma in our data this contrasts with the findings of theoretical models due to the flexibility of the empirical model of demand the demand system we estimate captures richer forms of product differentiation both vertical and horizontal as well as a more flexible distribution of consumer heterogeneity

business cycles and the relationship between concentration and price cost margins using a newly constructed panel data base we examine changes in price cost margins in 284 manufacturing industries between 1958 and 1981 a key finding is a dramatic narrowing of the spread between the margins of concentrated and unconcentrated industries over this period we provide evidence that this narrowing is a result of the greater sensitivity of price cost margins in more concentrated industries to demand fluctuations this finding is robust to the inclusion of other industry variables and to measures of import competition the results indicate that cross sectional estimates of the concentration margins relationship are likely to be both biased and misleading

simple tests of distributional effects on macroeconomic equations the presence of distributional effects in macroeconomic equations is shown to coincide with nonlinearity in micro behavioral relationships parameters estimated with aggregate data as in representative agent models contain distributional biases that are not measurable using aggregate data alone tests for distributional effects and other measures of the extent of aggregation problems are derived using distributional data observed over time significant distributional effects are noted for a model of annual aggregate u s commodity expenditure data a static model that accommodates individual heterogeneity is found to be statistically equivalent to a simply dynamic model that accommodates first order autocorrelation

dynamics of pricing in the video game console market skimming or penetration abstract nintendo lost its dominant position in the video game industry during the console war between its nintendo 64 and sony s playstation however nintendo could have made several different strategic decisions to change the outcome this article develops a structural model and investigates these alternative strategies through policy simulations in particular the author provides a framework to study firms optimal pricing strategies under network effects consumer heterogeneity and oligopolistic competition consumer heterogeneity provides an incentive for a durable goods manufacturer to price skim while network effects lead to an opposite motive for penetration pricing the proposed framework incorporates these two competing motives under oligopolistic competition the author estimates a demand system that allows for indirect network effects and consumer heterogeneity and then numerically solves for the markov perfect equilibrium in firms dynamic pricing game policy simulations indicate that ni

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

a dynamic analysis of the market for wide bodied commercial aircraft this paper uses an empirical dynamic oligopoly model of the commercial aircraft industry to analyse industry pricing industry performance and optimal industry policy a novel feature of the model with respect to the previous literature is that entry exit prices and quantities are endogenously determined in markov perfect equilibrium mpe we find that many unusual aspects of the aircraft data such as high concentration and persistent pricing below static marginal cost are explained by this model we also find that the unconstrained mpe is quite efficient from a social perspective providing only 10 less welfare on average than a social planner would obtain finally we provide simulation evidence that an anti trust policy in the form of a concentration restriction would be welfare reducing

the multivariate flexible accelerator model its empirical restrictions and an application to u s manufacturing this paper derives an exhaustive set of restrictions implied by the multistock flexible accelerator specification of the adjustment cost model for the firm the flexible accelerator specification of the demand for capital and labor is estimated using u s manufacturing annual data for the 1947 1976 period the consistency of the data with the model is examined by testing the validity of the derived restrictions finally the conditions which permit aggregation over firms are determined and tested empirically the flexible accelerator specification has been popular in the empirical literature on interrelated investment and employment decisions see nadiri and rosen 38 coen and hickman 10 and schramm 40 more recent examples include sargent 39 berndt fuss and wavermann 4 berndt and morrison 6 and meese 34 under suitable assumptions the specification may be rationalized by the adjustment cost model of the firm eisner and strotz 13 lucas 30 mortensen 35 extends the work of lucas and derives some empirically testable restrictions of the accelerator specification that are implied by the adjustment cost framework the broad objective of this paper is to provide a more rigorous and comprehensive test of the adjustment cost model than is presently found in the literature this objective is achieved in three stages first we offer an alternative derivation of the mortensen restrictions and more importantly we prove theorem 1 that his restrictions are exhaustive i e we establish an integrability result for the flexible accelerator adjustment cost model second the flexible accelerator specification of the demand for capital and labor is estimated using total u s manufacturing annual data for the 1947 76 period it is assumed that firms minimize expected production costs subject to a technology which implies that capital and labor stocks are costly to adjust while a third factor materials is freely adjustable the consistency of the data with the adjustmentcost framework is examined by testing for the validity of the derived restrictions further we test the validity of some separability restrictions on the adjustmentcost technology that to varying degrees are imposed a priori in all of the cited empirical studies finally we provide a complete characterization of the individual firm technologies which justify the common assumption of the existence of a representative firm this problem of aggregation over firms which has been

the impact of competitive entry in a developing market upon dynamic pricing strategies this paper analyzes dynamic pricing strategies for new durable goods in a two period context the first period is characterized as a monopoly market structure for a new product having dynamic demand the second period begins when a new firm enters the market and thereby changes the market structure to a duopolistic one we begin by analyzing the pricing strategies of three types of monopolists nonmyopic myopic and surprised a nonmyopic monopolist is a first entrant who perfectly predicts the competitive entry a myopic monopolist totally discounts the duopolistic period and a surprised monopolist is a first entrant who has the longer time horizon of the nonmyopic monopolist but who does not foresee the competitive entry our results indicate that the nature of these pricing strategies may be quite different it is optimal for the nonmyopic firm to price its product at a higher level than the myopic monopolist additional results indicate under what circumstances the surprised monopolist will p

optimal pricing strategy for new products robinson and lakhani 1975 initiated a long research stream in marketing when they used the bass model 1969 to develop optimal pricing path for a new product a careful analysis of the extant literature reveals that the research predominantly suggests that the optimal price path should be largely based on the sales growth pattern however in the real world we rarely find new products that have such pricing pattern we observe either a monotonically declining pricing pattern or an increase decrease pricing pattern that does not seem close to the sales path in this paper we use a variation of the generalized bass model called gbm developed by bass et al 1994 that yields optimal pricing policies that are consistent with empirical data

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

dynamic nonlinear pricing in networks with interdependent demand we consider the pricing decision for a new product whose consumption value increases as the network of adopters expands this demand interdependence is a characteristic feature of telecommunications networks the paper analyzes the case of a single supplier offering the product to a heterogeneous population consumers decide on network access and consumption quantity the pricing decision consists of choosing a pricing schedule over the dimensions of quantity and time that maximizes the present value of a weighted sum of total surplus and producer profits subject to the dynamics of market growth we find that the decision can be decoupled into two nested optimization problems a given some market size what should the optimal nonlinear price schedule be and b how should the price schedule be changed optimally over time this separation enables us to solve the pricing problem explicit consideration of the dynamics the discounting of future surpluses and the extent of market growth anticipation affect not only the price and network size trajectories but also their steady state equilibrium values

dynamic demand for new and used durable goods without physical depreciation the case of japanese video games we develop a new dynamic demand model for new and used durable goods and quantify the impact of used goods markets on producers profits and consumer welfare

dynamic factor demands and the effects of energy price shocks a dynamic model is used to understand how sharp changes in energy prices affect investment behavior employment and energy use the authors discuss the theory behind their model selection model specifications estimation methods and data list parameter estimates and elasticities for the selected model and describe the simulations they conclude that 1 the data strongly reject the hypothesis of constant returns to scale within their specification of aggregate production 2 the data indicate adjustment costs on labor are small and 3 their results help reconcile some of the conflicting estimates of energy demand elasticities appearing in recent literature 23 references 3 figures 3 tables

primary commodity prices manufactured goods prices and the terms of trade of developing countries what the long run shows the authors revisit in this article the empirical foundation of the alleged secular decline in the prices of primary commodities relative to those of manufactures they use a newly constructed index of commodity prices and two modified indexes of manufactured good prices and find that from 1900 to 1986 the relative prices of all primary commodities fell on trend by 0 5 percent a year and those of nonfuel primary commodities by 0 6 percent a year they thus confirm the sign but not the magnitude of the trend implicit in the work of prebisch but even the more limited secular decline shown by their relative price indexes may be magnified by an incomplete account of quality improvements in manufactures they then show that the evolution of terms of trade of nonfuel primary commodities is not the same as that of the net barter terms of trade of non oil exporting developing countries finally they find that despite the decline that has probably occurred during the current century in the terms of trade of nonfuel primary commodities the purchasing power of total exports of these products has increased considerably similarly the fall that may have occurred after world war ii in the net barter terms of trade of developing countries seems to have been more than compensated for by the steady improvement in their income terms of trade

competition strategy and price dynamics a theoretical and empirical investigation the authors explore how competition affects dynamic pricing of new products dynamics of diffusion saturation and cost reduction due to experience are all considered with emphasis on the last t

when grilli and yang meet prebisch and singer piecewise linear trends in primary commodity prices abstract in this study we test the prebisch singer hypothesis on the secular decline of relative primary commodity prices with the extended grilli and yang 1988 data set ending at 2010 rather than asking whether it holds for the whole sample period we examine if the hypothesis holds sometimes during the sample period by estimating the piecewise linear trends of primary commodity prices we employ the new l1 trend filtering proposed by kim et al 2009 to estimate the piecewise linear trends we find that the prebisch singer hypothesis holds sometimes but not always for many of the primary commodities in the grilli yang data the strength of the prebisch singer hypothesis has become substantially weaker recently as the relative prices of many primary commodities have increased sharply since around 2000

do markets differ much this essay reports the results of a crosssection study of differences in accounting profitability that sheds light on some basic controversies in industrial economics most previous cross section studies in this field have been concerned with testing hypotheses about structural coefficients in models meant to apply to essentially all markets as we have learned more about the difficulties of constructing such general models and of performing tests on their structural parameters properly structural cross section analysis has fallen out of fashion in contrast to most of the cross section literature the analysis reported here is fundamentally descriptive it does not attempt directly to estimate or to test hypotheses about structural parameters i hope to show by example that one can perform illuminating analysis of cross section data without a host of controversial maintained hypotheses cross section data can yield interesting stylized facts to guide both general theorizing and empirical analysis of specific industries even if they cannot easily support full blown structural estimation one can view the sort of search for stylized facts conducted here as either a replacement for or an input to interindustry structural estimation depending on one s feeling about the long run potential of that research approach this study also departs from much of the cross section literature by being fundamentally concerned with the importance of various effects not just with coefficient signs and t statistics in particular this essay provides estimates of the relative importance of firm market and market share differences in the determination of business unit divisional profitability in u s manufacturing using 1975 data from the line of business program of the u s federal trade commission ftc i find support neither for the existence of firm effects nor for the importance of market share effects moreover while industry effects apparently exist and are important they appear to be negatively correlated with seller concentration in these data section i relates firm market and share effects to current issues and controversies in industrial economics and thus supplies the motivation for our empirical analysis the remainder of the essay treats the data and

optimal pricing and advertising policies for new product oligopoly models in this paper our previous work on monopoly and oligopoly new product models is extended by the addition of pricing as well as advertising control variables these models contain bass s demand growth model and the vidale wolfe and ozga advertising models as well as the production learning curve model and an exponential demand function the problem of characterizing an optimal pricing and advertising policy over time is an important question in the field of marketing as well as in the areas of business policy and competitive economics these questions are particularly important during the introductory period of a new product when the effects of the learning curve phenomenon and market saturation are most pronounced we consider first the monopoly case with linear advertising cost exponential demand and three different pricing rules the optimal variable pricing the instantaneous marginal pricing and the optimal constant pricing rules several theoretical results are established for these rules including the facts that the instantaneous marginal pricing rule is a myopic version of the optimal pricing rule and the optimal constant pricing rule is a weighted average over time of the instantaneous marginal pricing rule another surprising result is that after the market is at least half saturated a pulse of advertising must be preceded by a significant drop in price numerical solutions of a number of examples are discussed oligopolistic models are analyzed as nonzero sum differential games in the rest of the paper the state and adjoint equations are easy to write down but impossible to solve in closed form hence we describe how to reformulate these models as discrete differential games and give a numerical algorithm for finding open loop nash solutions the latter was used to solve three triopoly models in each case it was found that optimal prices and advertising rates start high and steadily decline

the prebish singer hypothesis in the post colonial era evidence from panel cointegration abstract we test the hypothesis that commodity prices tend to decline relatively to manufactured goods prices using a panel cointegration bootstrap test the hypothesis does not hold for 1950 1980 and it does for 1950 2011 for agricultural products but not for metals

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

the overvaluation of purchasing power parity abstract recent panel studies of purchasing power parity have reported strong evidence of mean reversion in real exchange rates however these studies fail to control for cross sectional dependence in the data this failure has dramatic consequences raising the significance level of tests with a nominal size of 5 percent to as much as 50 percent it is shown in this paper that controlling for cross sectional dependence no evidence against the random walk null can be found in panels of up to 64 real exchange rates this finding cannot be attributed to low power as there is ample power in panels of this size to reject the unit root null