the role of reference prices in experimental auctions abstract we examine the role of reference prices field prices in willingness to pay studies involving experimental auctions using a 2nd price vickrey auction we find that provision of reference prices increases bid values

spectrum auction designs and revenue variations this study examines a sample of 93 national 3g spectrum auctions for the period 2000 2011 to identify the sources of substantial revenue variations an implied reduced form econometric model that recognises the censored nature of the sample relates per capita winning bid per mhz per million populations values to regulator determined auction design characteristics auction competitiveness mobile wireless market conditions and spectrum package attributes identified from tender documents the analysis reveals that among other factors all auction design characteristics independently impact on realized 3g spectrum auction revenues

bidder preferences among auction institutions i introduction auctions have become a pervasive method of exchange in the online world as each day thousands of auctions take place online and this trade volume totals to billions of dollars worth of goods per year 1 this large volume of auction transactions implies the existence of a large number of sellers competing for buyers the obvious implication is that the competition among the sellers for the pool of potential buyers can be fierce and any competitive edge a seller can find could be important one such competitive edge a seller might exploit is using an auction design that attracts bidders away from their competitors when designing a real auction or modeling a theoretical one the entry decision of prospective bidders is rarely considered most auction analysis is performed assuming that a certain number of bidders will participate for certain or perhaps that the number of bidders is unknown and randomly determined it should be clear however that the most crucial part of a successful auction is encouraging as many bidders as possible to participate in general this should be expected to have a positive effect on revenue at least in noncommon value environments and in certain types of auctions it may help combat the possibility of bidder collusion because there are typically competing auctions available for similar goods or even outside options that bidders can pursue when auctions are for unique goods it is important to understand how the aspects of an auction format can effect the entry decision of a bidder consider a bidder who is faced with the choice of entering one of two auctions for similar or even identical objects how does this bidder make the decision of which auction to enter the obvious answer is that the bidder will enter into the auction that maximizes his or her expected utility so long as that expected utility is greater than some reservation value the real question then is how are these expected utilities constructed profit from participating in the auction is an obvious argument there are also a number of environmental considerations that might effect this decision that would be difficult to account for precisely such as the reputation and trustworthiness of the auctioneer quality of the advertisement for the auction and things of this nature it is also possible that the format of the auction itself can have an impact on the preferences of the bidder this latter point will be the issue of this study the particular focus will be looking at bidder preferences between the two most common standard auction formats used in the field the sealed bid first price will be abbreviated as just the sealed bid auction and the ascending or english auction the other reason we are interested in comparing these two auction formats rather than the ascending and second price or first price and descending is that it seems reasonable to expect bidders to have preferences between the two due to the strategic differences between them such differences lead to substantial differences in terms of the difficulty of deciding how to bid and also in the possibility that an outcome leads to a bidder experiencing some form of regret regret may occur in a first price auction when a bidder loses to a bid that is below his value as he may think that if only he had bid higher he could have won although such feelings of regret may be considered irrational that does not preclude their existence such a scenario should not reasonably occur in an ascending auction if one considers the situation of a bidder choosing between two auctions that differ only in regard to whether the auction is being conducted according to an ascending or sealed bid format it is not immediately obvious which would be the most preferred even assuming a standard symmetric independent private values environment were all bidders risk neutral then of course revenue equivalence would hold and the bidders would be indifferent

how to set minimum acceptable bids with an application to real estate auctions in a general auction model with affiliated signals common components to valuations and endogenous entry we compute the equilibrium bidding strategies and outcomes and derive a lower bound on the optimal reserve price this lower bound can be computed using data on past auctions combined with information about the subsequent sales prices of unsold goods we illustrate how to compute the lower bound using data from real estate auctions

payment card rewards programs and consumer payment choice abstract by using a unique data set that contains detailed information about consumer payment choice and consumers attitudes toward each payment method we estimate the effects of payment card rewards on consumer choice of payment methods our approach allows us to control for consumer heterogeneity we find the effects of rewards to be statistically significant across five retail types our policy experiments suggest that for the sub population who hold both credit and debit cards removing rewards would increase their share of paper based payment methods i e cash and checks measured in terms of in store transactions by no more than 4 percentage points

changing the way the elderly live evidence from the home health care market in the united states abstract i examine how decreases in government coverage of home health care visits to the elderly in the united states have affected their living arrangements specifically i exploit geographic variation in the medicare home health care reimbursement rate that arose as a result of legislation passed in 1997 and i identify its impact on the living arrangements of older medicare beneficiaries i find that less generous reimbursement policies lead to a greater fraction of elderly giving up independent living baseline model estimates suggest that a decline in reimbursement of one visit per user leads to a 0 98 increase in the fraction of elderly medicare beneficiaries living in shared living arrangements that is living with somebody else rather than alone or with only the spouse this estimate implies that a decline in reimbursement of 5 1 visits per medicare beneficiary increases the fraction of elderly that live in shared living arrangements by 1 12 percentage points such an increase is consistent with the time series increase in the fraction of elderly that live in shared living arrangements between 1997 and 2000

a factor analytic probit model for representing the market structure in panel data internal market structure analysis infers both brand attributes and consumer preferences for those attributes from preference or choice data the authors exploit a new method for estimating probit models from panel data to infer market structures that can be displayed in few dimensions even though the model can represent every possible vector of purchase probabilities

long term care insurance informal care and medical expenditures abstract this paper provides empirical evidence on the short run impact of government subsidies of long term care we apply a regression discontinuity design using administrative data from south korea to estimate the first year impact of subsidies for formal home and institutional care on informal care use and medical expenditures these subsidies lead to increases in formal long term care utilization even when accounting for crowd out of private spending our main finding is that the benefits of subsidized home and facility care are heterogeneous across physical function level and therefore that setting policy accordingly has the potential to dramatically reduce medical expenses we also find that formal long term care is a substitute for informal care at the intensive margin but do not find such evidence at the extensive margin the results suggest that publicly financed home care may have limited impact among the more able but that it may be both more cost effective and beneficial than institutional care for the least able

a probabilistic choice model for market segmentation and elasticity structure marketing scholars commonly characterize market structure by studying the patterns of substitution implied by brand switching though the approach is useful it typically ignores the destabilizing

optimal auctions revisited in symmetric privately known values oral auctions with costly entry for bidders the seller can do no better than by committing ex ante to a reservation price and entry fees or subsidies which result in no fewer and at most one more bidders than a reservation price equal to the seller s value would in the absence of entry fees or subsidies journal of economic literature classification numbers d44 c72

how much is a dollar worth tipping versus equilibrium coexistence on competing online auction sites theory models of platform competition predict that prices and buyer seller ratios should be approximately equal on coexisting auction sites using field experiments on ebay and yahoo auctions we find evidence that is inconsistent with equilibrium hypotheses and suggest that the market is tipping prices on ebay are consistently 20 70 percent higher than those on yahoo and ebay attracts two additional buyers per seller on yahoo prices and bidders counts are unaffected by the auction ending rule various differences between the sites cannot account for the magnitude of these disparities however a model of imitation dynamics can rationalize our findings

economic insights from internet auctions this paper surveys recent studies of internet auctions four main areas of research are summarized first we survey several studies that document and attempt to explain the frequently observed sniping or last second bidding behavior in these auctions second we summarize several methods proposed to quantify the distortions caused by asymmetric information in these markets most notably due to the winner s curse third we explore research about the role of reputation mechanisms installed to help combat these distortions finally we discuss what internet auctions have to teach us about auction design

frictions in internet auctions with many traders a counterexample abstract we show that when frictions are present the peters and severinov 2006 ps bidding rule is no longer efficient nor a pbe of the ps game researchers should be cautious when using the ps bidding rule in markets with frictions like ebay

search costs and equilibrium price dispersion in auctions a leading explanation for price dispersion in posted price markets is search costs we incorporate this insight into a model of competing second price auctions similar to ebay by doing so we extend the narrow literature on competing auctions to capture price dispersion and grow the already large literature on price dispersion to include auctions we provide evidence on search costs and price dispersion using data collected from ebay identifying search costs by exploiting a discontinuity in the visibility of auctions due to ebay s search tool 1 we thank aaron bodoh creed greg lewis steve tadelis and various seminar participants for helpful comments nate woody for programming assistance and the cornell university institute for social sciences for financial support the views expressed herein are solely those of the authors and do not necessarily reflect those of the u s department of justice 1

how do selling mechanisms affect profits surplus capacity and prices with unknown demand i analyze a model in which a seller wishes to sell multiple homogeneous goods to a large group of buyers with unknown demand the seller may either sell objects via a posted price mechanism a discriminatory price auction a uniform price auction their open bid analogs or a revelation mechanism in which the seller first asks all potential buyers to report their valuations and then sets a reserve price i show that the revelation mechanism leads to the greatest profits the auction mechanisms result in identical expected profits and the posted price mechanism results in the smallest profits however the more profitable mechanisms impose stronger informational requirements that may make these mechanisms infeasible in practice and the posted price mechanism also results in the greatest total surplus i also find the seller chooses a lower capacity and reserve price in an auction than in the posted price mechanism

excess asset reversions and shareholder wealth the ownership of pension assets in a defined benefit pension plan is an unresolved issue in corporate finance the issue is important because it defines the appropriate investment policy for a pension fund in this paper we summarize the ownership debate in the form of two mutually exclusive theories we then focus on a recently popular event in pension finance excess asset reversions our paper demonstrates the valuation effects associated with this event in a stochastic dominance framework under certain conditions a reversion constitutes an expropriation of wealth from the participants and beneficiaries of the plan to the firm using data provided by the pension benefit guaranty corporation and the center for research in security prices tape we examine the returns to the shareholders of 58 companies which conducted excess asset reversions between 1980 and 1984 our results show that large abnormal returns accrued to these shareholders around the time of the reversion these findings have implications both for the appropriate investment policy of pension funds and for public policy with respect to plan terminations

a house of her own old age assistance and the living arrangements of older nonmarried women abstract i investigate the factors that fostered the rise in separate living quarters for older nonmarried women since mid century by examining the impact of old age assistance on living arrangements in 1940 and 1950 i find that old age assistance substantially increased demand for separate living quarters but that demand depended upon the rules of the program in particular whether children were held legally responsible for the care of their aged parents i argue that more than half of the decline in the fraction of older nonmarried women living with kin from 1950 to 1990 can be attributed to rising social security benefits and expanded eligiblity and to the fact that social security benefits were given with no strings attached

decision making under uncertainty capturing dynamic brand choice processes in turbulent consumer goods markets we construct two models of the behavior of consumers in an environment where there is uncertainty about brand attributes in our models both usage experience and advertising exposure give consumers noisy signals about brand attributes consumers use these signals to update their expectations of brand attributes in a bayesian manner the two models are 1 a dynamic model with immediate utility maximization and 2 a dynamic forward looking model in which consumers maximize the expected present value of utility over a planning horizon given this theoretical framework we derive from the bayesian learning framework how brand choice probabilities depend on past usage experience and advertising exposures we then form likelihood functions for the models and estimate them on nielsen scanner data for detergent we find that the functional forms for experience and advertising effects that we derive from the bayesian learning framework fit the data very well relative to flexible ad hoc functional forms such as exponential smoothing and also perform better at out of sample prediction another finding is that in the context of consumer learning of product attributes although the forward looking model fits the data statistically better at conventional significance levels both models produce similar parameter estimates and policy implications our estimates indicate that consumers are risk averse with respect to variation in brand attributes which discourages them from buying unfamiliar brands using the estimated behavioral models we perform various scenario evaluations to find how changes in marketing strategy affect brand choice both in the short and long run a key finding obtained from the policy experiments is that advertising intensity has only weak short run effects but a strong cumulative effect in the long run the substantive content of the paper is potentially of interest to academics in marketing economics and decision sciences as well as product managers marketing research managers and analysts interested in studying the effectiveness of marketing mix strategies our paper will be of particular interest to those interested in the long run effects of advertising note that our estimation strategy requires us to specify explicit behavioral models of consumer choice behavior derive the implied relationships among choice probabilities past purchases and marketing mix variables and then estimate the behavioral parameters of each model such an estimation strategy is referred to as structural estimation and econometric models that are based explicitly on the consumer s maximization problem and whose parameters are parameters of the consumers utility functions or of their constraints are referred to as structural models a key benefit of the structural approach is its potential usefulness for policy evaluation the parameters of structural models are invariant to policy that is they do not change due to a change in the policy in contrast the parameters of reduced form brand choice models are in general functions of marketing strategy variables e g consumer response to price may depend on pricing policy as a result the predictions of reduced form models for the outcomes of policy experiments may be unreliable because in making the prediction one must assume that the model parameters are unaffected by the policy change since the agents in our models choose among many alternative brands their choice probabilities take the form of higher order integrals we employ monte carlo methods to approximate these integrals and estimate our models using simulated maximum likelihood estimation of the dynamic forward looking model also requires that a dynamic programming problem be solved in order to form the likelihood function for this we use a new approximation method based on simulation and interpolation techniques these estimation techniques may be of interest to researchers and policy makers in many fields where dynamic choice among discrete alternatives is important such as marketing decision sciences labor and health economics and industrial organization

bond and stock market response to unexpected earnings announcements this study examines whether earnings changes convey information in bond markets and finds a significant positive negative reaction to unexpected earnings increases decreases the results are consistent whether earnings announcements precede or follow dividend announcements thus earnings surprises convey information to bond markets and changes in firm value are split among bondholders and stockholders this is in contrast to evidence from studies examining unexpected dividend announcements where bond price reaction is asymmetric cross sectional analysis reveals that bond excess returns are positively related to earnings surprises i introduction stock market reaction to earnings announcements has received significant attention in the finance and accounting literature ball and brown 1968 brown 1978 watts 1978 aharony and swary 1980 and fried and givoly 1982 are some ofthe studies that observe a revision of stock prices associated with the release of earnings information lev 1989 provides a survey of research in this area the explanation for the above empirical findings is that unexpected earnings provide new information about future cash flows furthermore the classical discounted cash flow model predicts a revision in firm value that is the present value of expected future cash flows whether this increased firm value accrues to stockholders and bondholders is an empirical issue past research on the information content of earnings has focused solely on stock price behavior and finds at least part of the benefits accrue to stockholders in this study we examine the bond market reaction to unexpected quarterly earnings announcements the study is unique for several reasons first dividends repurchases and earnings are eonsidered primary mechanisms used by manage ment to convey information about future cash flows to securityholders recent

split sample instrumental variables estimates of the return to schooling this article reevaluates recent instrumental variables iv estimates of the returns to schooling in light of the fact that two stage least squares is biased in the same direction as ordinary least squares ols even in very large samples we propose a split sample instrumental variables ssiv estimator that is not biased toward ols ssiv uses one half of a sample to estimate parameters of the first stage equation estimated first stage parameters are then used to construct fitted values and second stage parameter estimates in the other half sample ssiv is biased toward 0 but this bias can be corrected the splt sample estimators confirm and reinforce some previous findings on the returns to schooling but fail to confirm others

mergers and investment incentives this paper explores the effects of mergers on the investment incentives of the levered firm and on levered firm value under a fairly broad set of assumptions it is shown that most firm combinations improve investment incentives bringing about a reduction in the agency costs of underinvestment associated with risky debt the effect of the merger on debt and equity claim values is also explored if not properly anticipated the merger may create a wealth transfer from equity holders to bondholders such a wealth transfer includes but is not limited to the coinsurance effect

a survey of recent empirical work concerning auctions in this paper the authors survey some recent empirical work concerning auctions first outlining two complementary approaches to the empirical analysis of auctions and then discussing several recent developments in the econometric analysis of field data concerning auctions

vertically differentiated simultaneous vickrey auctions theory and experimental evidence we study settings where a number of sellers simultaneously offer vertically differentiated vickrey auctions for imperfect substitute goods to unit demand buyers vertical differentiation can arise from differences in item quality item value certainty seller reliability or a combination of these factors we characterize the form of the bidding equilibria and derive expressions for the corresponding allocative efficiency and expected seller revenue when bidders are restricted to submit at most one bid our theory predicts the existence of a unique bayes nash equilibrium that resembles a form of probabilistic mating of likes allowing unit demand bidders to place an arbitrary number of bids induces complex strategy profiles where bidders place positive bids in all available auctions higher bidder types tend to follow more targeted strategies focusing their serious bids on fewer and generally higher quality auctions the nature of the bidding equilibria introduces allocative inefficiencies that arise from the lack of coordination in auction selection among bidders we test our theoretical propositions in a controlled laboratory experiment while also utilizing a domain specific risk score to help assess how the bidders risk type affects their bidding behavior in support of our theory we find evidence of a probabilistic assortative matching between bidder and auction types we also find that low risk type bidders tend to crowd on the highest auction and will pay a premium for the certainty it offers whereas high risk type bidders fail to appropriately adjust for risk associated with the lowest auction leading to overbidding these lead to an interesting focal anomaly whereby bids are concentrated on the highest and lowest auctions bypassing intermediate auctions

category pricing with state dependent utility there is substantial literature documenting the presence of state dependent utility with packaged goods data typically a form of brand loyalty is detected whereby there is a higher probability of purchasing the same brand as has been purchased in the recent past the economic significance of the measured loyalty remains an open question we consider the category pricing problem and demonstrate that the presence of loyalty materially affects optimal pricing the prices of higher quality products decline relative to those of lower quality when loyalty is introduced into the model given the well known problems with the confounding of state dependence and consumer heterogeneity loyalty must be measured in a model which allows for an unknown and possibly highly nonnormal distribution of heterogeneity we implement a highly flexible model of heterogeneity using multivariate mixtures of normals in a hierarchical choice model we use an euler equations approach to the solution of the dynamic pricing problem which allows us to consider a very large number of consumer types

do auctioneers pick optimal reserve prices we investigate how auctioneers set reserve prices in auctions a well established theoretical result assuming risk neutrality of the seller is that the optimal reserve price should not depend on the number of participating bidders in a set of controlled laboratory experiments we find that seller behavior often deviates from the theoretical benchmarks we extend the existing theory to explore three alternative explanations for our results risk aversion anticipated regret and probability weighting after fitting our data to each of these models through parameter estimation techniques on both an aggregate and individual level we find that all three models are consistent with some of the characteristics of our data but that the regret model provides a slightly more favorable fit overall this paper was accepted by teck hua ho decision analysis

mechanism design by competing sellers a dynamic model with many sellers and buyers is constructed agents failing to trade may trade in the next period an equilibrium is found where sellers hold identical auctions and buyers randomize over the sellers they visit the distribution of buyer valuations is endogenous an auction with efficient reserve is an optimal mechanism from each seller s point of view in spite of the ability of any seller to alter the distribution of buyer types participating in the seller s mechanism by altering the mechanism copyright 1993 by the econometric society

on optimal reservation prices in auctions the theory of auction design examines how various factors affect the outcome of an auction most of the existing literature focuses on how varying the amount of information available to each bidder affects the bid taker s expected revenue when all other factors remain constant this paper studies how the bid taker s expected revenue varies with changes in the auction format when such changes affect the number of bidders and in turn the bidders maximum value for the object being sold specifically we examine how varying the reservation price or screening level affects the bid taker s expected revenue though its effect on the number of bidders for two simple examples the losses associated with a reduced number of bidders outweighs any benefits that nontrivial reservation prices might have had in models with an exogonously set number of bidders

cross bidding impact throughout the product life cycle abstract two products at different points of the product life cycle have been chosen to analyse the effect of cross bidding in competing auctions the findings indicate that this strategy can have a different impact depending on the phase of the cycle

field experiments on the effects of reserve prices in auctions more magic on the internet i present experimental evidence on the effects of minimum bids in first price sealed bid auctions the auction experiments manipulated the minimum bids in a preexisting market on the internet for collectible trading cards from the game magic the gathering i examine a number of outcomes including the number of participating bidders the probability of sale the levels of individual bids and the auctioneer s revenues the benchmark theoretical model is one with symmetric risk neutral bidders with independent private values the results verify a number of the predictions concerning equilibrium bidding many bidders behave strategically anticipating the effects of the reserve price on others bids

state dependence and alternative explanations for consumer inertia for many consumer packaged goods products researchers have documented inertia in brand choice a form of persistence whereby consumers have a higher probability of choosing a product that they have purchased in the past using data on margarine and refrigerated orange juice purchases we show that the finding of inertia is robust to flexible controls for preference heterogeneity and not due to autocorrelated taste shocks thus the inertia is at least partly due to structural not spurious state dependence we explore three economic explanations for the observed structural state dependence preference changes due to past purchases or consumption experiences which induce a form of loyalty search and learning our data are consistent with loyalty but not with search or learning properly distinguishing among the dierent sources of inertia is important for policy analysis because the alternative sources of inertia imply qualitative dierences in firm s pricing incentives and lead to quantitatively dierent equilibrium

internet auctions with many traders abstract we study a multi unit auction environment similar to ebay sellers each with a single unit of a homogeneous good set reserve prices at their own second price auctions each buyer has private value for the good and wishes to acquire a single unit buyers can bid as often as they like and move between auctions we characterize a perfect bayesian equilibrium for this decentralized dynamic mechanism in which conditional on reserve prices an efficient set of trades occurs at a uniform price in a large but finite market the sellers set reserve prices equal to their true costs under a very mild distributional assumption so ex post efficiency is achieved buyers strategies in this equilibrium are simple and do not depend on their beliefs about other buyers valuations or the number of buyers and sellers

an empirical comparison of logit choice models with discrete versus continuous representations of heterogeneity abstract currently there is an important debate about the relative merits of models with discrete and continuous representations of consumer heterogeneity in a recent jmr study andrews ansari and currim 2002 hereafter aac compared metric conjoint analysis models with discrete and continuous representations of heterogeneity and found no differences between the two models with respect to parameter recovery and prediction of ratings for holdout profiles models with continuous representations of heterogeneity fit the data better than models with discrete representations of heterogeneity the goal of the current study is to compare the relative performance of logit choice models with discrete versus continuous representations of heterogeneity in terms of the accuracy of household level parameters fit and forecasting accuracy to accomplish this goal the authors conduct an extensive simulation experiment with logit models in a scanner data context using an experimental design based on aac and other

lifting the burden state care of the elderly and labor supply of adult children we use a reform in the federal funding of care for the elderly in norway to examine the effects of formal care expansion on the labor supply decisions of middle aged children we find a consistent and significant negative impact of formal care expansion on insured work absences for the adult daughters of single elderly parents this effect is particularly strong for daughters with no siblings who are also more likely to exceed earnings thresholds after the reform we find no impacts of the reform on daughters mobility or parental health and no effects on adult sons

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

pennies from ebay the determinants of price in online auctions this paper presents an exploratory analysis of the determinants of prices in online auctions for collectible united states one cent coins at the ebay web site starting with an initial data set of 20 000 auctions we perform regression analysis on a restricted sample of 461 coins for which we obtained estimates of book value we have three major findings first a seller s feedback ratings reported by other ebay users have a measurable effect on her auction prices negative feedback ratings have a much greater effect than positive feedback ratings do second minimum bids and reserve prices have positive effects on the final auction price in particular minimum bids appear only to have a significant effect when they are binding on a single bidder as predicted by theory third when a seller chooses to have her auction last for a longer period of days this significantly increases the auction price on average

home care reimbursement long term care utilization and health outcomes abstract using a substantial change in medicare reimbursement policy to study the market for home health care i find that the introduction of tightly binding average per patient reimbursement caps led to a large drop in the provision of home care particularly to the least healthy beneficiaries this decline in home health utilization was not offset by increases in institutional long term care or other medical care and there were no associated adverse health consequences however approximately one quarter of the decline in medicare spending was offset by increases in out of pocket expenditures for home health care with the offset concentrated in higher income populations

social security and elderly living arrangements evidence from the social security notch previous studies of the effect of social security on elderly living arrangements generally have relied on data from the distant past or differences in benefits across families or cohorts that potentially were correlated with other determinants of living arrangements using data from the 1980 99 current population surveys we attempt to isolate the causal effect of social security on living arrangements with an instrumental variable approach that relies on the large shifts in benefits for cohorts born from 1910 21 the socalled social security notch over all elderly households the estimated elasticity of living with others with respect to social security income is 0 4 with elasticities of 1 3 and 1 4 for the widowed and divorced respectively most of the effects on living arrangements appear to be concentrated among the lesser educated as well our estimated elasticities are substantially larger than those from previous studies and suggest that reductions in current benefits would alter living arrangements significantly

corporate takeover bids methods of payment and bidding firms stock returns this study explores the role of the method of payment in explaining common stock returns of bidding firms at the announcement of takeover bids the results reveal significant differences in the abnormal returns between common stock exchanges and cash offers the results are independent of the type of takeover bid i e merger or tender offer and of bid outcomes these findings supported by analysis of nonconvertible bonds are attributed mainly to signalling effects and imply that the inconclusive evidence of earlier studies on takeovers may be due to their failure to control for the method of payment recent studies on corporate takeovers provide inconclusive results on the valuation effects of acquisitions on the common stock of bidding firms 1 substantial differences are reported between the studies that analyze acquisitions initiated as tender offers and those that confine their samples to merger proposals the existence of mixed empirical findings for the bidding firms makes it difficult to interpret existing evidence and to draw conclusions about the managers acquisition motivations nevertheless the reason for the substantial difference between empirical findings on mergers and tender offers still remains an unresolved issue it is observed however that mergers are usually common stock exchange offers whereas tender offers are usually cash offers given that different methods of financing a project have different signalling implications myers and majluf 39 the differential stock returns of bidders in mergers and tender offers may be due to the method of acquisition financing

prospect theory in a dynamic game theory and evidence from online pay per bid auctions abundant evidence exists that expected utility theory does not adequately describe decision making under risk although prospect theory is a popular alternative it is rarely applied in strategic situations in which risk arises through individual interactions this study fills this research gap by incorporating prospect theory preferences into a dynamic game theoretic model using a large field data set from multiple online pay per bid auction sites the authors empirically show that their proposed model with prospect theory preferences makes a better out of sample prediction than a corresponding expected utility model prospect theory also provides a unified explanation for two behavioral anomalies average auctioneer revenues above current retail prices and the sunk cost fallacy the empirical results indicate that bidders are loss averse and overweight small probabilities such that the expected revenue of the auction exceeds the current retail price by 25 46 the authors illustrate and empirically confirm a managerial implication for how an auctioneer can increase revenue by changing the details of the auction design

optimal reservation prices in auctions the risk neutral independent private values ipv auction model produces curious results regarding the use of reservation prices no matter how many bidders the seller should announce a fixed reservation price above his true value this is notable since the seller gains by adopting an inefficient institution and puzzling because it conflicts with common practice the authors relax the ipv assumption characterize optimal reservation prices in a richer class of auctions and show that when information is correlated the seller s optimal reservation price converges to his true value often monotonically and rapidly as the number of bidders grows copyright 1996 by royal economic society

dynamic models incorporating individual heterogeneity utility evolution in conjoint analysis it has been shown in the behavioral decision making marketing research and psychometric literature that the structure underlying preferences can change during the administration of repeated measurements e g conjoint analysis and data collection because of effects from learning fatigue boredom and so on in this research note we propose a new class of hierarchical dynamic bayesian models for capturing such dynamic effects in conjoint applications which extend the standard hierarchical bayesian random effects and existing dynamic bayesian models by allowing for individual level heterogeneity around an aggregate dynamic trend using simulated conjoint data we explore the performance of these new dynamic models incorporating individual level heterogeneity across a number of possible types of dynamic effects and demonstrate the derived benefits versus static models in addition we introduce the idea of an unbiased dynamic estimate and demonstrate that using a counterbalanced design is important from an estimation perspective when parameter dynamics are present

effects of minimum bid increments in internet auctions evidence from a field experiment i study the role of minimum bid increments mbi in internet auctions using natural field experiment data from a finnish online auction site huuto net internet auctions are typically viewed as secondprice implying truthful bidding however due to the presence of the mbi equilibrium bidding behavior involves bid shading i sell otherwise identical gift cards while varying the mbi and test between truthful bidding and bid shading truthful bidding is rejected consistently with equilibrium behavior bid shading increases as the mbi increases this implies that real world bidders are capable of reacting rationally even to seemingly small variations in their strategic environment this version september 17 2015 replaces the february 15 2013 version this abstract was borrowed from another version of this item

competition among sellers who offer auctions instead of prices abstract in this paper we study a large market in which sellers compete by offering auctions to buyers instead of simple fixed price contracts two variants of the model are studied one extends a model first analyzed by wolinsky rev econ stud 55 1988 71 84 in which buyers learn their valuations only after meeting sellers the other variant extends the model of mcafee econometrica61 1993 1281 1312 in which buyers know their valuations before they choose among available auctions the equilibrium array of auctions is characterized for each case and the efficiency properties of the equilibria are analyzed journal of economic literatureclassification numbers d41 d44 d82

an empirical investigation of efficiency and price uniformity in competing auctions abstract in undetermined this paper investigates hypotheses related to efficiency and price uniformity in online competing auctions based on two theoretical predictions from peters and severinov peters m severinov s 2006 internet auctions with many traders journal of economic theory 130 220 245 the investigation is conducted using a large and ideal data set for online competing train ticket auctions and the findings support the theoretical predictions in large parts

efficient intra household allocations a general characterization and empirical tests the neoclassical theory of demand applies to individuals yet in empirical work it is usually taken as valid for households with many members this paper explores what the theory of individuals implies for households that have more than one member we make minimal assumptions about how the individual members of the household resolve conflicts all we assume is that however decisions are made outcomes are efficient we refer to this as the collective setting we show that in the collective setting household demands must satisfy a symmetry and rank condition on the slutsky matrix we also present some further results on the effects on demands of variables that do not modify preferences but that do affect how decisions are made we apply our theory to a series of surveys of household expenditures from canada the tests of the usual symmetry conditions are rejected for two person households but not for one person households we also show that income pooling is rejected for two person households we then test for our collective setting conditions on the couples data none of the collective setting restrictions are rejected we conclude that the collective setting is a plausible and tractable next step to take in the analysis of household behavior

beyond the endogeneity bias the effect of unmeasured brand characteristics on household level brand choice models we investigate the role of potential weekly brand specific characteristics that influence consumer choices but are unobserved or unmeasurable by the researcher we use an empirical approach based on the estimation methods used for standard random coefficients logit models to account for the presence of such unobserved attributes using household scanner panel data we find evidence that ignoring such time varying latent to the researcher characteristics can lead to two types of problems first consistent with previous literature we find that these unobserved characteristics may lead to biased estimates of the mean price response parameters this argument is based on a form of price endogeneity if marketing managers set prices based on consumer willingness to pay then the observed prices will likely be correlated with the latent to the researcher brand characteristics we resolve this problem by using an instrumental variables procedure our findings suggest that simply ignoring these attributes may also lead to larger estimates of the variance in the heterogeneity distribution of preferences and price sensitivities across households this could overstate the benefits from marketing activities such as household level targeting we resolve the problem by using weekly brand intercepts embedded in a random coefficients brand choice model to control for weekly brand specific characteristics while accounting for household heterogeneity overall our results extend the finding on the endogeneity bias from the mean of the heterogeneity distribution i e the price effect to include the variance of that distribution

a dynamic analysis of market structure based on panel data internal market structure analysis infers brand positions in an attribute space from preference and choice data given a market in which consumers have heterogeneous tastes for attributes previous market structure models have adopted a static framework e g elrod 1988 chintagunta 1994 elrod and keane 1995 furthermore they assumed that consumer perceptions of brand attributes do not vary across consumers yet these approaches may render inaccurate representations of market structure if there is state dependence in consumer choice behavior this paper attempts to incorporate consumer choice dynamics into market structure models by specifying the source of choice dynamics explicitly in particular the process by which past purchases affect current choices is modeled in a framework which captures both consumer habit persistence and variety seeking behavior more specifically consumer preferences for brand attributes are modeled to depend on the attributes of brands bought on the previous purchase occasion furthermore the modeling approach adopted incorporates heterogeneity in both consumer preferences and perceptions of brand attributes the audience of this paper includes practitioners and academics interested in understanding consumer choice processes and inferring market structure from consumer choice data the proposed models are estimated on nielsen scanner panel data for margarine peanut butter yogurt and liquid detergent using simulated maximum likelihood techniques the empirical results suggest that accounting for choice dynamics improves both in sample and out of sample fit the results indicate that the average consumer is habit persistent in all the product categories studied this result is consistent with the findings of kannan and sanchez 1994 who conducted an aggregate analysis of consumer variety seeking behavior across product categories however the results obtained in this paper suggest that consumers are heterogeneous with respect to the processes by which past purchases affect current purchases these results provide strong evidence for habit persistence and variety seeking in brand attributes to be the behavioral source of consumer choice dynamics in food categories thus consumer tastes utility weights seem to be affected by the attributes of the brands consumed in the past given the empirical result that a large proportion of consumers are habit persistent this suggests that tastes are reinforced by the brand attributes consumed in the past the empirical results also show that not accounting for state dependence in market structure models for panel data may produce misleading results that is depending on consumer behavior patterns models that do not account for state dependence may distort the true nature of competition among brands more specifically the results confirm the expectation that if there is habit persistence that is if consumer tastes are reinforced by attributes of brands consumed in the past models that do not capture this choice dynamics will overestimate the distance between similar brands furthermore the policy experiments conducted suggest that 1 static models overestimate the short run impact of a price cut on the sales of the brand on promotion 2 price cuts hurt the sales of the more similar brands more and 3 free samples affect relatively less similar brands the most finally this paper studies variety seeking and habit persistence across brands over purchase occasions however variety seeking behavior may also involve the purchase of a portfolio of brands or items at a purchase occasion consumers may buy multiple items knowing that prior to the next trip they may want to consume different items simanson 1990 walsh 1995 this type of behavior can be modeled within the context of dynamic expected utility maximization with forward looking consumers the development and estimation of market structure models that include forward looking consumers who maximize expected utility over a planning horizon incorporating their future tastes and needs and shopping for an inventory of brands remain an important future research issue

bidding behavior in competing auctions evidence from ebay much of the existing auction literature treats auctions as running independently of one another with each bidder choosing to participate in only one auction however in many online auctions a number of substitutable goods are auctioned concurrently and bidders can bid on several auctions at the same time recent theoretical research shows how bidders can gain from the existence of competing auctions the current paper providing the first empirical evidence in support of competing auctions theory using online auctions data from ebay our results indicate that a significant proportion of bidders do bid across competing auctions and that bidders tend to submit bids on auctions with the lowest standing bid as the theory predicts the paper also shows that winning bidders who cross bid pay lower prices on average than winning bidders who do not

changes in beef packers market power after the livestock mandatory price reporting act an agent based auction controversy remains about the effectiveness of the 1999 livestock mandatory price reporting act mpra we determine the likely changes in beef packers market power after the mpra by using an agent based first price common value auction past research has employed cournot models but we use an auction model which more closely resembles the actual cattle procurement process we find that feeders benefit from the mpra regardless of whether price uncertainty decreases for packers and or feeders if the packers price uncertainty is reduced the feeder benefits from an increase in competition between the packers if the feeder s price uncertainty is reduced the feeder benefits from imposing more accurate reserve prices copyright 2013 oxford university press

modeling heterogeneity and state dependence in consumer choice behavior in frequently purchased consumer goods markets consumer brand choices exhibit substantial persistence across purchase occasions in this article i estimate a choice model that admits of both heterogeneity in preferences and true state dependence as sources of this persistence using nielsen scanner data on ketchup i find evidence for true state dependence in the choice process even after controlling for a rich heterogeneity structure simulation of the model indicates that the long term effect of a promotion induced purchase on future purchase probabilities is positive but small

search costs and equilibrium price dispersion in auction markets abstract a leading explanation for price dispersion in posted price markets is search costs we incorporate this insight into a model of competing second price auctions similar to ebay by doing so we extend the narrow literature on competing auctions to capture price dispersion and grow the already large literature on price dispersion to include auctions we provide evidence on search costs and price dispersion using data collected from ebay identifying search costs by exploiting a discontinuity in the visibility of auctions due to ebay s search tool

observed and unobserved preference heterogeneity in brand choice models this paper extends the scanner based choice literature by explicitly incorporating individual level brand preference data we illustrate our model using a unique data set that combines survey and scanner data collected from the same individuals the addition of individual specific brand preference information significantly improves fit and prediction furthermore this observed heterogeneity better explains choice than does unobserved heterogeneity in the standard scanner model s parameters more importantly we find that the standard model underestimates the importance of consumers brand preferences and overestimates both brand loyalties and price sensitivities brand loyalty is overestimated because models without preference information confound state dependence heterogeneity and preference effects price sensitivities are inflated because the average preference based consumer is implicitly assumed to be more willing to switch from his preferred brand than is the real preference based consumer further standard models overestimate the heterogeneity in price and loyalty sensitivities and misidentify both price and loyalty sensitive consumers the managerial implications of our findings and the applicability of our methodology when survey data are collected infrequently and for only a subsample of consumers are pursued we demonstrate that even under these circumstances better populationwide pricing and promotion decisions are identified and more accurate targeting results

strategic pricing and detailing behavior in international markets we study three determinants of the levels of price and detailing effort across geographic markets the within market response to each variable the nature of interfirm strategic interactions both within that market and across markets we empirically examine the interactions of prozac zoloft and paxil across the united states the united kingdom germany france and italy our results indicate that all three factors driving marketing mix interactions are at play in this product category the u s market is less price sensitive than the european markets detailing elasticities are comparable across the united states germany and italy while the united kingdom and france show greater elasticity for the u s market we find that almost all deviations from nash pricing and detailing levels are due to within market interactions in the u k market deviations from nash prices come about due mostly to across market interactions both with the united states as well as the rest of europe whereas deviations from nash detailing levels are mainly due to across market interactions with the united states for italy we observe that both within and across market interactions affect price and detailing levels overall the pattern of interactions makes observed prices more similar across countries than prices implied by the estimated elasticities this underscores the importance of considering within and across market interactions in developing multimarket strategy

on absolute auctions and secret reserve prices from a theory viewpoint the use of auctions with zero public reserve prices also called absolute auctions or of auctions with secret reserve prices is somewhat puzzling despite being common by allowing that buyers differ in their processing of past data regarding how the participation rate varies with the auction format and how reserve prices are distributed when secret we show in a competitive environment that these auction formats may endogenously emerge we also analyze how buyers with various sophistications and sellers with various costs sort into the different formats thereby offering a range of testable predictions alternative approaches are reviewed

auctions with heterogeneous entry costs it is well known that if bidders have independent private values and homogeneous entry costs a rst or second price auction with a reserve price equal to the seller s value maximizes social surplus and seller revenue and leaves bidders with no surplus further in mixed strategy entry equilibria social surplus and seller revenue decrease with the number of bidders we show that when entry costs are heterogeneous and private information the revenue maximizing reserve price is above the seller s value a positive inspection fee and a reserve price equal to the seller s value generates even more revenue and in either case bidders capture informational rents further seller revenue and social surplus may either increase or decrease with the number of bidders nevertheless seller revenue is asymptotically the same whether entry costs are homogeneous or heterogeneous our results are framed in terms of screening values rather than reserve prices and apply to any standard auction

empirical evidence on the impact of reserve prices in english auctions we study the impact of reserve prices on the revenue of english auctions using a unique hand collected database of virtual football players from the online football management game hattrick as theoretically predicted setting a reserve price entails a trade off between the cost of setting it too high and having the good go unsold and the benefit associated with a higher revenue should the reserve price successfully extract surplus from the highest bidder overall we find the net benefit of setting a higher reserve price to be negative regardless of the value of the reserve price this is a novel result insofar as previous literature has generally found an insignificant or positive effect of the reserve price on unconditional auction revenue

endogenous price expectations as reference points in auctions the paper models auctions with bidders who have reference dependent payos the reference point is endogenised as the expected price of the good in the auction the model predicts that in equilibrium bidders both overbid and underbid in comparison to the standard bidding function without reference dependent utility the model predicts that more bidders overbid than underbid and that bidders bid more aggressively as the number of bidders or the reserve price increases finally it is shown perhaps surprisingly that revenue equivalence continues to hold between rst and second price

the value of purchase history data in target marketing an important aspect of marketing practice is the targeting of consumer segments for differential promotional activity the premise of this activity is that there exist distinct segments of homogeneous consumers who can be identified by readily available demographic information the increased availability of individual consumer panel data open the possibility of direct targeting of individual households the goal of this paper is to assess the information content of various information sets available for direct marketing purposes information on the consumer is obtained from the current and past purchase history as well as demographic characteristics we consider the situation in which the marketer may have access to a reasonably long purchase history which includes both the products purchased and information on the causal environment short of this complete purchase history we also consider more limited information sets which consist of only the current purchase occasion or only information on past product choice without causal variables proper evaluation of this information requires a flexible model of heterogeneity which can accommodate observable and unobservable heterogeneity as well as produce household level inferences for targeting purposes we develop new econometric methods to implement a random coefficient choice model in which the heterogeneity distribution is related to observable demographics we couple this approach to modeling heterogeneity with a target couponing problem in which coupons are customized to specific households on the basis of various information sets the couponing problem allows us to place a monetary value on the information sets our results indicate there exists a tremendous potential for improving the profitability of direct marketing efforts by more fully utilizing household purchase histories even rather short purchase histories can produce a net gain in revenue from target couponing which is 2 5 times the gain from blanket couponing the most popular current electronic couponing trigger strategy uses only one observation to customize the delivery of coupons surprisingly even the information contained in observing one purchase occasion boasts net couponing revenue by 50 more than that which would be gained by the blanket strategy this result coupled with increased competitive pressures will force targeted marketing strategies to become much more prevalent in the future than they are today

search and choice in online consumer auctions price dispersion in simultaneous online auctions is a puzzle in light of the relatively low search costs required to find the lower price much of this price dispersion appears to be due to a lack of switching by bidders between auctions which in turn could be due to inertia related to search costs we identify some of the influencing factors through a controlled field experiment involving pairs of simultaneous auctions keeping the sellers and the goods sold identical between two auctions we vary auction design features between and within pairs including shipping cost open reserve secret reserve price and duration and we provide bidders with incentives to search we use a choice model that examines individual choice between pairs of simultaneous auctions we find that within pair price dispersion is substantial and that prices and auction choice by bidders are indeed related to search costs we find strong inertia in auction choice and find that this effect significantly interacts with time left in the auction although individuals do not always choose a lower priced auction they are more likely to do so when search costs are low or search incentives are high

reserve price effects in auctions estimates from multiple regression discontinuity designs i introduction online auctions are an important trading mechanism in modern economies ebay alone has 81 million active users worldwide and auctions a billion objects annually ebay 2009 as data from auction settings has become accessible especially from online auction environments there has been a surge in empirical analysis testing whether the behavior of buyers and sellers is consistent with auction theory bajari and hortacsu 2004 we contribute to this empirical literature by presenting evidence from 260 000 online auctions of second hand cars that took place between january 2003 and november 2008 we identify the impact of a common feature of online and offline auctions public reserve prices on a rich set of auction outcomes 1 to establish causality we present evidence from multiple regression discontinuity rd research designs an empirical method that has not been used in the earlier literature to test the predictions of auction theory guided by theory we first identify the impact of reserve prices on various standard margins of bidder s behavior such as their entry into auctions bidding behavior within the auction and ultimately the winning bid we then combine these estimates to shed light on whether the reserve prices set by the auctioneer indeed maximize her ex ante expected revenue at a final stage we exploit our rich data to provide new insights that have not previously been documented in the empirical auctions literature such as the impact of reserve prices on i bidder s search behavior and ii the composition and characteristics of bidders this new evidence helps shed light on how to best characterize this environment in terms of whether bidders endogenously enter auctions and whether they hold symmetric valuations or not our analysis has broad relevance in three regards first car sales through auctions form an important share of the market the value of cars sold via auction in the united states was 89 billion in 2007 and used car dealers filled over 30 of their inventory via auctions roberts 2013 second the auction mechanism used in our setting an open ascending second price auction that allows proxy bidding is widely suggested to be the most prevalent online auction format bajari and hortacsu 2004 third the specific auction design feature we study reserve prices is commonly observed in online and offline formats the first set of outcomes we study are motivated by the theoretical auction literature these relate to the impact of reserve prices on winning bids the number of entrants that is the number of bidders that place at least one bid and the probability the object is sold 2 theory suggests reserve price impacts on these margins depend on three factors i whether bidders have private or common valuations of the auctioned object ii whether bidder entry is exogenous or endogenous and iii whether the reserve price signals the auctioneer s private information on the true value of the auctioned object in exogenous entry models predictions about the impact of reserve prices on these outcomes are robust with regard to whether bidders have private affiliated or common values for the object milgrom and weber 1982 myerson 1981 riley and samuelson 1981 and to whether the reserve price conveys a signal of the object s value to buyers cai riley and ye 2007 as is intuitive in this class of exogenous entry models a higher reserve price discourages entry of marginal bidders decreases the likelihood the object is sold and increases winning payments conditional on sale theoretical predictions on reserve price impacts are less clear cut in endogenous entry models levin and smith 1994 tan and yilankaya 2006 analogous to exogenous entry models a higher reserve price discourages entry of both potential and actual bidders and decreases the probability of sale however a higher reserve price might decrease winning payments through its adverse impact on entry

reserve prices in auctions as reference points we consider second price and first price auctions in the symmetric independentprivate values framework we modify the standard model by theassumption that the bidders have reference based utility where the reserveprice minimum bid plays the role of the reference point in contrast to theusual result the seller s optimal reserve price is increasing in the number ofbidders even if an individual bidder perceives only a very small utility losswhen he has to pay more than the reserve price the impact on the optimalreserve price can be strong when there are many bidders

an empirical test of the redistribution effect in pure exchange mergers merger transactions involve differing degrees of change in capital structure and asset distribution as a result different forms of merger could have different effects on security values of the firms involved previous empirical studies primarily used samples that included all types of mergers the present study examines the effect of one type of merger pure stock exchange on the values of the debt and equity of the firms involved

conducting event studies with thinly traded stocks abstract procedures for measuring abnormal performance around events when securities do not trade daily are examined a rank test patterned after the statistic proposed by corrado corrado c j 1989 a nonparametne test for abnormal security price performance in event studies journal of financial economics 23 385 395 is derived the empirical frequency distributions of the rank test statistic and a conventional test statistic are assessed under different rules for handling missing stock returns the results suggest that the traditional procedures are reasonably well specified for thickly and moderately traded stocks but misspecified for thinly traded stocks the rank test however performs well for all trading frequencies and trade to trade returns are the best way to handle missing returns

the winner s curse reserve prices and endogenous entry empirical insights from ebay auctions internet auctions have recently gained widespread popularity and are one of the most successful forms of electronic commerce we examine a unique data set of ebay coin auctions to explore the determinants of bidder and seller behavior we begin by documenting a number of empirical regularities in our data set of ebay auctions next we specify and estimate a structural econometric model of bidding on ebay using our parameter estimates from this model we measure the extent of the winner s curse and simulate seller revenue under different reserve prices