customer and retailer rebates under risk aversion abstract in a supply chain setting we analyze a manufacturer s customer and retailer rebates which are sales incentives offered to the end buyers and retailers respectively the performance of both rebates is influenced by the retailer s objective and response to the promotion due to his intermediary position in the channel earlier studies investigating rebates in distribution channels have traditionally assumed that the retailer is risk neutral with the objective of maximizing expected profits in our paper we consider a risk averse retailer we formally model risk aversion by adopting the conditional value at risk cvar decision criterion using a stochastic and effective price dependent demand we analyze the manufacturer s rebate amount decisions and the retailer s joint inventory and pricing decisions in a game theoretical framework we provide several structural properties of the objective functions and show monotonicity of the retailer s decisions in the degree of risk aversion for the case of retailer rebates we characterize the unique equilibrium and for the case of customer rebates we prove the existence of an equilibrium using numerical examples we provide further insights on the impact of risk aversion for example given an exogenous wholesale price we observe a threshold value on the retailer s risk aversion parameter below above which the manufacturer is better off with retailer rebates customer rebates implying that the manufacturer s preferred rebate type can be different depending on whether the retailer is risk neutral or sufficiently risk averse

convergence in oecd countries technical change efficiency and productivity the aim of this study is to analyse labour productivity convergence in the oecd countries over the period 1975 90 a nonparametric frontier approach is used to calculate the malmquist productivity index by breaking it down the contribution in the growth of labour productivity of technical progress of changes in efficiency and of the accumulation of inputs per worker are quantified unlike other studies the results obtained show that technical change has worked against labour productivity convergence since it has always been greater in the countries with higher labour productivity

do better schools matter parental valuation of elementary education the evaluation of numerous school reforms requires an understanding of the value of better schools given the difficulty of calculating the relationship between school quality and student outcomes i turn to another method and use house prices to infer the value parents place on school quality i look within school districts at houses located on attendance district boundaries houses then differ only by the elementary school the child attends i thereby effectively remove the variation in neighborhoods taxes and school spending i find that parents are willing to pay 2 5 percent more for a 5 percent increase in test scores this finding is robust to a number of sensitivity checks

1 000 cash back the pass through of auto manufacturer promotions automobile manufacturers frequently use promotions involving cash incentives while payments are nominally directed to either customers or dealers the ultimate beneficiary of the promotion depends on the outcome of price negotiation we use program evaluation methods to compare the incidence of these two types of promotions customers obtain 70 to 90 percent of a customer rebate but only 30 to 40 percent of a dealer discount promotion a 500 difference for a typical promotion our leading hypothesis is that pass through rates differ because of information asymmetries customer rebates are well publicized to customers while dealer discount promotions are not

automatic bill payment and salience effects evidence from electricity consumption abstract the introduction of automatic bill payment abp programs in 2005 eliminated the need for consumers to view recurring bills if those enrolled in abp programs offered by utilities and other service providers forgo inspection of their recurring bills then price salience declines prices perceived by boundedly rational agents fall and consumption increases this paper considers the impact of such programs on consumer demand and welfare and empirically tests whether enrollment in such programs increases demand results show abp enrollment increases residential electricity consumption by 4 0 and commercial electricity consumption by as much as 8 1 enrollment in programs designed to smooth seasonal variation in monthly utility bills of low income customers results in 6 7 greater electricity use

unawareness and selective disclosure the effect of school quality information on property prices the australian government launched the my school website in 2010 to provide standardised information about the quality of schools to the australian public this paper combines data from this website with home sales data for the state of victoria to estimate the effect of the publication of school quality information on property prices we use a difference in difference approach to estimate the causal effect of the release of information about high quality and low quality schools relative to medium quality schools in the neighborhood and find that the release of information about high quality schools increases property prices by 3 6 percent whereas the release of information about low quality schools has no significant effect the findings indicate that many buyers are unaware of the relevance of school quality information and that real estate agents pursue a strategy of disclosing information about high quality schools to increase the sales price results from a survey of victorian real estate agents provide evidence in favor of this strategy

why do manufacturers issue coupons an empirical analysis of breakfast cereals we explore the relationship between shelf prices and manufacturers coupons for 25 readyto eat breakfast cereals we find that shelf prices are lower during periods when coupons are available this result is inconsistent with static monopoly price discrimination under a broad range of assumptions we present evidence that is inconsistent with both dynamic theories of price discrimination and explanations of couponing based on the vertical relationship between manufacturers and retailers we find support for models of price discrimination in oligopoly settings as well as suggestions that firmwide incentives may induce managers to use coupons and price cuts simultaneously finally lagged coupons have a positive effect on current sales suggesting that coupons are used to induce repurchase

costs of implementation bargaining costs versus allocative efficiency abstract a mechanism with low direct cost of use may be preferred to alternatives implementing more efficient allocations we show this experimentally by giving pairs of subjects the option to agree on a single average price for a sequence of trades in effect pooling several small bargains into a larger one we make pooling costly by tying it to some inefficient trades but subjects nevertheless reveal strong tendencies to pool particularly when more bargains remain to be struck and when bargaining is face to face the results suggest that implementation costs could play a significant role in the use of many common trading practices

foundations of dynamic monopoly and the coase conjecture subgame perfect equilibria are characterized for a market in which the seller quotes a price each period assume zero costs positive interest rate continuum of buyers and some technical conditions if buyers valuations are positive then equilibrium is unique buyers strategies are stationary and the price sequence is determinant along the equilibrium path but possibly randomized elsewhere otherwise a continuum of stationary equilibria can exist but at most one with analytic strategies coase s conjecture is verified for stationary strategies reducing the period length drives all prices to zero or the least valuation connections to bargaining models are described journal qf economic literature classification

own brand and cross brand retail pass through in this paper we describe the pass through behavior of a major u s supermarket chain for 78 products across 11 categories our data set includes retail prices and wholesale prices for stores in 15 retail price zones for a one year period for the empirical model we use a reduced form approach that focuses directly on equilibrium prices as a function of exogenous supply and demand shifting variables the reduced form approach enables us to identify the theoretical pass through rate without specific assumptions about the form of consumer demand or the conduct of a category pricing manager thus our measurements of pass through are not constrained by specific structure on the underlying economic model the empirical pricing model includes costs of all competing products in the category on the right hand side not only the cost of the focal brand and yields estimates of both own brand and cross brand pass through rates our results provide a rich picture of the retailer s pass through behavior we find that pass through varies substantially across products and across categories own brand pass through rates are on average more than 60 for 9 of 11 categories a finding that is at odds with the claims of manufacturers about retailers in general importantly we find substantial evidence of cross brand pass through effects indicating that retail prices of competing products are adjusted in response to a change in the wholesale price of any given product in the category we find that cross brand pass through rates are both positive and negative we explore determinants of own brand and cross brand pass through rates and find strong evidence in multiple categories of asymmetric retailer response to trade promotions on large versus small brands for example brands with larger market shares and brands that contribute more to retailer profits in the category receive higher pass through we also find that trade promotions on large brands are less likely than small brands to generate positive cross brand pass through i e induce the retailer to reduce the retail price of competing smaller products on the other hand small share brands are disadvantaged along three dimensions trade promotions on small brands receive low own brand pass through and generate positive cross brand pass through for larger competing brands moreover small share brands do not receive positive cross pass through from trade promotions on these larger competitors we also find that store brands are similarly disadvantaged with respect to national brands

a global supply chain model with transfer pricing and transportation cost allocation abstract we present a model for the optimization of a global supply that maximizes the after tax profits of a multinational corporation and that includes transfer prices and the allocation of transportation costs as explicit decision variables the resulting mathematical formulation is a non convex optimization problem with a linear objective function a set of linear constraints and a set of bilinear constraints we develop a heuristic solution algorithm that applies successive linear programming based on the reformulation and the relaxation of the original problem our computational experiments investigate the impact of using different starting points the algorithm produces feasible solutions with very small gaps between the solutions and their upper bound ub

price reactions to rivals local channel exits in this paper we study the effect of a firm s local channel exits on prices charged by incumbents remaining in the marketplace exits could result in higher prices due to tempered competition or lower prices due to reduced colocation or agglomeration benefits the net effect of these two countervailing forces remains unknown in addition little is known about how this effect could change depending on incumbents geographic locations we address this research gap by examining new car price reactions by incumbent multiproduct automobile dealerships who experience the exit of a chrysler dealership in their local markets we find evidence that the competition effect exceeds the colocation effect prices increase by about 1 318 following an exit relative to the price change in the absence of an exit more important we find that the price increase is lower at dealerships more proximate to the exiting dealership than dealerships farther away for the same set of cars available across these locations this

information disclosure as a matching mechanism theory and evidence from a field experiment market outcomes depend on the quality of information available to its participants we measure the effect of information disclosure on market outcomes using a large scale field experiment that randomly discloses quality information in wholesale automobile auctions we argue that buyers in this market are horizontally differentiated across cars that are vertically ranked by quality this implies that information disclosure helps match heterogeneous buyers to cars of varying quality causing both good and bad news to increase competition and revenues the data confirm these hypotheses these findings have implications for the design of other markets including e commerce procurement auctions and labor markets jel c93 d44 d82 l15

greening the vehicle fleet norway s co2 differentiated registration tax abstract in 2007 norway established its vehicle registration tax linked to vehicle co2 intensities in 2009 the tax was modified to a feebate structure but maintained its link to co2 intensities using a panel dataset to exploit the quasi experimental tax reforms we estimate that a 1000 nok 125 usd tax increment reduces new vehicle sales by 1 06 1 58 this result yields an elasticity of average co2 intensity to co2 price implied by the tax of 0 06 with a pass through of the tax to car prices of 88 the resulting elasticity of average co2 intensity to average car price is 0 53 thus the tax significantly shifts consumers toward lower emission vehicles our counterfactual simulations suggest that high emission vehicle segments lose market shares and become less co2 intensive while low emission vehicle segments gain market shares

search frictions and market power in negotiated price markets we provide a framework for empirical analysis of negotiated price markets using mortgage market data and a search and negotiation model we characterize the welfare impact of search frictions and

the role of rebates in the hybrid competition between a national brand and a private label with present biased consumers abstract over the past years rebates have been increasingly used by national brand nb manufacturers conventional wisdom suggests that rebates are beneficial to firms as long as positive slippage exists based on the present biased preference theory we investigate the performance of nb rebates as a counterstrategy to the retailer s private label pl game theoretic models are developed to characterize channel dynamics involving consumers knowledge levels of the present biased preferences our model reveals multiple insights first a positive slippage rate does not necessarily benefit the nb manufacturer if the rebates fail to expand the demand of the nb second the retailer s commitment to the original nb price plays a positive role in improving the equilibrium profits of both parties third for loss averse consumers under preference uncertainties the nb manufacturer and the retailer prefer a low redemption cost in contrary to the conventional idea that sellers take advantage of consumers with high redemption costs

collusion or competition interfirm relationships in the chinese auto industry the chinese passenger vehicle industry contains a large number of manufacturers some of them are members of big corporate groups centered around state owned enterprises these corporate relationships may facilitate collusion this paper applies the non nested hypothesis test methodology to data on passenger vehicles to identify whether price collusion exists within corporate groups or across groups our empirical results support the assumption of bertrand nash competition in the chinese passenger vehicle industry we find no evidence for within or cross group price collusion our policy experiments show that indigenous brands will gain market shares and profits if within group companies merge

tax incidence with endogenous quality and costly bargaining theory and evidence from hybrid vehicle subsidies abstract endogenous quality and bargaining are important features of many markets but are typically omitted from studies of incidence we develop a model with product upgrades and costly bargaining and find that tax rate pass through only partially characterizes the welfare impact of taxation consumers may respond to a tax or subsidy by changing product quality or by changing their bargaining effort we apply the insights of our theory to the study of subsidies for green goods specifically hybrid electric vehicles in canada we utilize highly detailed transaction data and leverage panel variation in subsidies across provinces for identification our baseline estimate finds that prices rises by 570 for every 1000 increase in the subsidy but this pass through estimate substantially underestimates consumer gains because a majority of this price increase 459 80 is due to increased product quality in the form of additional options and features

commentaries and rejoinder to measuring the impact of negative demand shocks on car dealer networks by paulo albuquerque and bart j bronnenberg this series of discussions presents commentaries and a rejoinder on strategic and managerial issues arising from albuquerque and bronnenberg albuquerque p b j bronnenberg 2012 measuring the impact of negative demand shocks on car dealer networks marketing sci 31 1 4 23

inventories and the automobile market this article studies the within model year pricing production and inventory management of new automobiles using new monthly data on u s transaction prices we document that for the typical vehicle prices fall over the model year at a 9 0 annual rate concurrently both sales and inventories are hump shaped to explain these time series we formulate an industry model for new automobiles in which inventory and pricing decisions are made simultaneously the model predicts that automakers build to stock inventory management policy substantially influences the time series of prices and sales accounting for four tenths of the price decline observed over the model year

the comparative advantages of firms markets and contracts a unified theory the most efficient labour market mechanism depends on the advantages of specialization workers costs of switching between entrepreneurs and the frequency with which needs change multilateral mechanisms are more efficient when specialization is more advantageous when it is cheap for workers to switch between entrepreneurs and when individual entrepreneurs cannot occupy a worker on a full time basis given a bilateral mechanism employment a firm is more efficient than contracts when in process adjustments arise more frequently there exist three regions in which firms markets and sequences of bilateral contracts are weakly more efficient than all other mechanisms in a big class

practice prize winner a nested logit model of product and transaction type choice for planning automakers pricing and promotions we develop a consumer response model to evaluate and plan pricing and promotions in durable good markets we discuss its implementation in the u s automotive industry which spends about 45 billion each year in price promotions the approach is based on a random effects multinomial nested logit model of product e g a vehicle model such as hyundai tucson and transaction type choice transaction types include combinations of acquisition types e g purchase versus lease and pricing instruments cash rebates reduced apr financing lease payment discounts we estimate the model using hierarchical bayes methods to capture response heterogeneity at the local market level we find key characteristics unique to durable good markets first consumers are heterogeneous in both their brand and transaction type preferences second consumers differ in their overall price sensitivity as well as in their relative sensitivity to alternative pricing instruments e g cash discounts reduced monthly payments third the most effective pricing programs tend to be those in which automakers offer consumers a menu of options to choose from e g a choice among a cash discount reduced interest rate financing or a lease payment discount we illustrate the model through an empirical application to a sample of data drawn from j d power transaction records in the entry suv segment and discuss examples of actual implementations

durable goods monopoly with entry of new consumers this paper analyzes a model of a dynamic monopolist who produces at constant unit cost each period a new cohort of consumers enters the market each entering cohort is identical consumers within a cohort have different tastes for the good my main results are if players are sufficiently patient any positive average profit less than the maximum feasible level can be attained in a subgame perfect equilibrium in the subset of subgame perfect equilibria in which players use stationary strategies the seller cannot make sales at prices significantly greater than the lowest willingness to pay when period length goes to zero and the seller attains the maximum profit when commitment is feasible by charging the same static monopoly price in every period this paper analyzes a model of a dynamic monopolist who operates in a market in which there is a regular flow of new consumers the seller produces a durable good at constant unit cost each period a new cohort of consumers enters the market consumers wish to buy exactly one unit of the item but are willing to wait resales are not allowed each entering cohort is identical

estimating the effect of salience in wholesale and retail car markets we investigate whether the first digit of an odometer reading is more salient to consumers than subsequent digits we find that retail transaction prices and volumes of used vehicles drop discontinuously at 10 000 mile odometer thresholds echoing effects found in the wholesale market by lacetera pope and sydnor 2012 our results reveal that retail consumers devote limited attention to evaluating vehicle mileage and that this drives effects in the wholesale market we estimate the inattention parameter implied by the price discontinuities in addition our results suggest that estimating consumer level structural parameters using data from an intermediate market can give misleading results

are consumers myopic evidence from new and used car purchases abstract we investigate whether car buyers are myopic about future fuel costs we estimate the effect of gasoline prices on short run equilibrium prices of cars of different fuel economies we then compare the implied changes in willingness to pay to the associated changes in expected future gasoline costs for cars of different fuel economies in order to calculate implicit discount rates using different assumptions about annual mileage survival rates and demand elasticities we calculate a range of implicit discount rates similar to the range of interest rates paid by car buyers who borrow we interpret this as showing little evidence of consumer myopia jel d12 h25 l11 l62 l71 l81

intertemporal substitution and new car purchases this article presents a dynamic demand model for motor vehicles this approach accounts for the change in the mix of consumers over the model year and measures consumers substitution patterns across products and time i find intertemporal substitution is significant consumers are more likely to change the timing of their purchase in reaction to a price increase rather than buy another vehicle in the same period further i find automakers use of large cash back rebates at the end of the model year although boosting overall sales induces large numbers of consumers to delay their purchases and so pay lower prices