frictionless commerce a comparison of internet and conventional retailers there have been many claims that the internet represents a new nearly frictionless market our research empirically analyzes the characteristics of the internet as a channel for two categories of homogeneous products books and cds using a data set of over 8 500 price observations collected over a period of 15 months we compare pricing behavior at 41 internet and conventional retail outlets we find that prices on the internet are 9 16 lower than prices in conventional outlets depending on whether taxes shipping and shopping costs are included in the price additionally we find that internet retailers price adjustments over time are up to 100 times smaller than conventional retailers price adjustments presumably reflecting lower menu costs in internet channels we also find that levels of price dispersion depend importantly on the measures employed when we compare the prices posted by different internet retailers we find substantial dispersion internet retailer prices differ by an average of 33 for books and 25 for cds however when we weight these prices by proxies for market share we find dispersion is lower in internet channels than in conventional channels reflecting the dominance of certain heavily branded retailers we conclude that while there is lower friction in many dimensions of internet competition branding awareness and trust remain important sources of heterogeneity among internet retailers

mergers and business model assimilation evidence from low cost airline takeovers this paper examines mergers that lead to an almost immediate replacement of the target firm s business model in favour of that of the acquiring firm we examine the post merger behaviour of the two leading european dedicated low cost airlines easyjet and ryanair each acquiring another low cost airline respectively go fly and buzz we find that both takeovers had an immediate and sustained impact on both the pricing structures and the extent of inter temporal price discrimination used on the acquired routes with early booking fares noticeably reduced and only very late booking fares increased overall the analysis points to a pro competitive effect of both takeovers as a consequence of the introduction of the acquiring firms business models and associated yield management pricing systems

the name your own price channel in the travel industry an analytical exploration name your own price nyop retailers such as priceline offer an alternative distribution channel for service providers in the travel industry such as airlines hotels and car rental companies our research employs an analytical model to identify and understand key trade offs driving the decision by a service provider to employ an nyop channel assuming that such a channel is available this decision requires the existence of forces that counteract the adverse consequences of cannibalization of sales through traditional posted price channels our analysis provides some insight into these forces contracting with the nyop retailer facilitates market segmentation and price discrimination and allows for disposal of excess capacity after meeting business travel demand however the cost of this flexibility is that the service provider can no longer credibly precommit to maintaining high prices when there is unsold capacity also when contracting with an independent retailer the service provider is unable to extract the entire revenue generated from nyop consumers a key insight from our model is that the rationale for contracting with an nyop retailer is driven by the uncertainty in business travel demand not the expectation of excess capacity indeed all else equal the larger the capacity the less likely it is that contracting with an nyop retailer is the right decision on the part of the service provider

durable goods monopolists durable goods monopolists face special problems because the sale of their products creates a secondhand market not controlled by the monopolist to the extent the monopolist is able to rent his product rather than sell it or to make binding promises about his future production such problems are ameliorated given the inability to do the above the monopolist is led to producing goods less durable than those produced by either competitive firms or monopolist returns a reverse averch johnson result that monopolist sellers may invest less in fixed costs including plant modernization and research and development than would the renters is shown it is also shown that even though sellers have less monopoly power than renters and nondurable goods monopolists it is possible that the seller will cause a greater deadweight loss than the other types of monopolies

emotional bidders an analytical and experimental examination of consumers behavior in a priceline like reverse auction e commerce has proved to be fertile ground for new business models which may be patented for up to 20 years and have potentially far reaching impact on the e commerce landscape one such electronic market is the reverse auction model popularized by priceline com there is still uncertainty surrounding the survival of such new electronic markets currently available on the internet understanding user behavior is necessary for better assessment of these sites survival this paper adds to economic analysis a formal representation of the emotions evoked by the auction process specifically the excitement of winning if a bid is accepted and the frustration of losing if it is not we generate and empirically test a number of insights related to 1 the impact of expected excitement at winning and frustration at losing on bids across consumers and biddings scenarios and 2 the dynamic nature of the bidding behavior that is how winning and losing in previous bids influence their future bidding behavior

service escape profiting from customer cancellations this paper explores the benefits of letting customers escape from prepurchased service contracts by offering refunds for cancellations we show that such a policy creates opportunities for multiple selling in a capacity constrained service i e collecting cancellation fees from advance buyers who cancel and then reselling the freed slots the better the alternative that motivates a cancellation the more profitable is a refund for cancellations policy compared with a no refund policy that locks in customers in contrast to previous research on money back guarantees for durable goods we show that offering refunds for service cancellations can be profitable 1 without charging a higher price compared with a no refund policy and 2 even when advance buyers would be willing to abandon the service for no refund also service providers should decrease rather than increase the customer hassle cost of cancellations our research also suggests a new profit advantage of advance selling i e capturing some of the consumer added surplus created when customers find new alternatives and are therefore willing to pay a fee to terminate the prepurchased contract finally yield management research typically assumes exogenous no shows by advance buyers we suggest that offering refunds for cancellation reduces the need to reserve capacity for high paying customers and improves capacity utilization

price discrimination in free entry markets using a spatial model of monopolistic competition we investigate price discrimination in free entry zero profit markets we show that when brands are heterogeneous competition does not prevent discrimination the power to earn economic profits is not necessary for a firm to maintain discriminatory prices our model treats formally the fact that consumers difer not only in the utility they derive from a good but also in how strongly they prefer one brand over all others in markets where firms are very competitive sorting consumers on the strength on brand preference produces larger price differentials between groups than sorting on the basis of consumers reservation prices for the good when firms sort customers on the basis of strength of brand preference however we find that the output and welfare effects are generally less favorable than when sorting is more closely related to consumers reservation prices

measuring the frictional costs of online transactions the case of a name your own price channel we study the offers submitted by consumers to a large name your own price nyop online retailer a distinctive feature of this retailer is that it allows consumers to repeatedly submit offers on one and the same product while consumers could identify the threshold price the minimum price for which the retailer is willing to sell by incrementing their offer in small steps in each consecutive round such a strategy would require them to go through many additional online transactions we define frictional cost as the disutility that the consumer experiences when conducting an online transaction such as submitting an offer thus in our setting consumers trade off a direct financial value lower price for frictional costs based on a consumer choice model capturing this trade off we use the observed consumer behavior to reconstruct the frictional cost parameters for the consumers in our sample we show that perhaps contrary to the general wisdom frictional costs in electronic markets are substantial with median values ranging from eur 3 54 for a portable digital music player mp3 to eur 6 08 for a personal digital assistant pda we find that consumers who have gathered experience with the nyop channel in previous transactions exhibit lower frictional costs than consumers who use the channel for the first time surprisingly sociodemographic variables do not help to explain the variation in frictional costs

using yield management to shift demand when the peak time is unknown traditional peak load and stochastic peak load models assume firms have prior information about when peak demand occurs however price dispersion such as is typically used by firms practicing yield management can achieve some of the same efficient demand shifting even when the peak time is unknown equilibrium price dispersion arises because of stochastic demand and price rigidities but a previously unexplored benefit of price dispersion is its ability to reduce equilibrium capacity costs through demand shifting the model also suggests how yield management now more commonly called revenue management might actually benefit business travellers contrary to the popular prejudice

the evolution of u s airline competition studies by academic economists were a significant force in the movement towards deregulation of the domestic airline industry in the early 1970s levine 1965 jordan 1970 keeler 1972 douglas and miller 1974 during the critical 1977 78 period in which deregulation was imposed first de facto by the civil aeronautics board cab and then de jure by congress the chairman and vice chairman of the cab were economists for the 14 years since deregulation economists have continued intensive study of the industry in part because of the unusual availability of reliable firm and transaction level data and in part because of the rare opportunity to observe an industry as it evolves from strict economic regulation to fairly unimpeded competition and strategic behavior the simplest prediction of economists about airline deregulation and one of the few on which nearly all economists agreed was that deregulation would improve consumer welfare in comparison to continued price and entry regulation fourteen years later nearly all economists still agree on this though the degree of enthusiasm for the deregulation outcome varies considerably there was substantial disagreement among economists about the market structure that would result because studies of scale economies in the airline industry had concluded that none existed beyond the scale of the smaller major airlines of the 1970s caves 1962 eads et al 1969 many economists argued that deregulation would result in more than the 11 major airlines that existed at the time of deregulation others predicted that only a few or possibly only one airline would survive at a large scale two noted university of chicago economists sam peltzman and lester telser made a bet in 1979 on whether

contingent pricing to reduce price risks the price for a product may be set too low causing the seller to leave money on the table or too high driving away potential buyers contingent pricing can be useful in mitigating these problems in contingent pricing arrangements price is contingent on whether the seller succeeds in obtaining a higher price within a specified period we show that if the probability of obtaining the high price is not too high sellers profit from using contingent pricing while economic efficiency increases the optimal contingent pricing structure depends on the buyer s risk attitude a deep discount is most profitable if buyers are risk prone a consolation reward is most profitable if buyers are risk averse to motivate buyers to participate in a contingent pricing arrangement the seller must provide sufficient incentives consequently buyers also benefit from contingent pricing in addition because the buyers with the highest willingness to pay get the product contingent pricing increases the efficiency of resource allocation

price discrimination through refund contracts in airlines this paper shows how an airline monopoly uses refundable and non refundable tickets to screen consumers who are uncertain about their travel our theoretical model predicts that the difference between these two fares diminishes as individual demand uncertainty is resolved using an original data set from u s airline markets we find strong evidence supporting our model price discrimination opportunities through refund contracts decline as the departure date nears and individuals learn about their demand

joint bidding in the name your own price channel a strategic analysis in this paper we study the name your own price nyop channel we examine theoretically and empirically whether asking consumers to place a joint bid for multiple items rather than bid one item at a time as practiced today can increase nyop retailers profits relatedly we also examine whether allowing consumers to self select whether to place a joint bid or itemwise bids increases retailers profits and consumers surplus we construct a dynamic model that incorporates both demand uncertainty and supply uncertainty to address these issues our theoretical analysis identifies the conditions under which joint bidding can increase both nyop retailers profits and consumers surplus we find that some consumers might bid more for the very same items when they place joint bids the increase in bid amount is related to the fact that joint bidding reduces the chance of mismatch between nyop retailers costs and consumer bids we conducted a laboratory study to assess the descriptive validity of some of the

correlated equilibrium as an expression of bayesian rationality if it is common knowledge that the players in a game are bayesian utility maximizers who treat uncertainty about other players actions like any other uncertainty then the outcome is necessarily a correlated equilibrium random strategies appear as an expression of each player s uncertainty about what the others will do not as the result of willful randomization use is made of the common prior assumption according to which differences in probability assessments by different individuals are due to the different information that they have where information may be interpreted broadly to include experience upbringing and genetic makeup copyright 1987 by the econometric society

monopoly with incomplete information recent theoretical research on principal agent relationships has emphasized incentive problems that arise when the parties involved are constrained by either asymmetric information or their inability to monitor each other s actions here we concentrate on the former constraint and consider the case of a single principal the monopolist the main contribution is to show that under a separability assumption strong conclusions can be drawn about the nature of optimal incentive schemes although the primary focus is on optimal quantity discounts in a monopolized market the results also shed light on related topics such as optimal income taxation and commodity bundling

an economic theory of church strictness this paper introduces spatial location models into the economics of religion we offer a new explanation for the observed tendency of state monopoly churches to locate toward the low tension end of the strictness continuum obtained through the conjunction of benevolent preferences denominations care about the aggregate utility of members and asymmetric costs of going to a more or less strict church than one prefers we derive implications regarding the relationship between religious strictness and membership religious market interactions and asymmetric costs of membership highlight new explanations for some well established stylised facts opening the way to new empirical comparisons with more traditional explanations

a theory of clearance sales clearance sales are widely used by firms as an intertemporal selling policy in particular in markets where firms face demand uncertainty and need to choose capacity in advance clearance sales consist in charging a high price initially but then lowering the price in the sales period high valuation consumers purchase the good at the high initial price so as to avoid rationing at the low price while low valuation consumers wait for the price to drop we develop a simple model of intertemporal monopoly pricing under demand uncertainty and show that clearance sales may be the optimal intertemporal selling policy

mail versus mall a strategic analysis of competition between direct marketers and conventional retailers consumers now purchase several offerings from direct sellers including catalog and internet marketers these direct channels exist in parallel with the conventional retail stores the availability of multiple channels has significant implications for the performance of consumer markets the literature in marketing and economics has however been dominated by a focus on the conventional retail sector this paper is an effort toward modeling competition in the multiple channel environment from a strategic viewpoint at the outset a parsimonious model that accommodates the following consumer and market characteristics is introduced first the relative attractiveness of retail shopping varies across consumers second the fit with the direct channel varies across product categories third the strength of existing retail presence in local markets moderates competition fourth in contrast with the fixed location of the retail store that anchors its localized market power the location of the direct marketer is irrelevant to the competitive outcome the model is first applied in a setting where consumers have complete knowledge of product availability and prices in all channels in the resulting equilibrium the direct marketer acts as a competitive wedge between retail stores the direct presence is so strong that each retailer competes against the remotely located direct marketer rather than against neighboring retailers this outcome has implications for the marketing mix of retailers which has traditionally been tuned to attract consumers choosing between retail stores in the context of market entry conditions under which a direct channel can access a local market in retail entry equilibrium are derived our analysis suggests that the traditional focus on retail entry equilibria may not yield informative or relevant findings when direct channels are a strong presence next the role of information in multiple channel markets is modeled this issue is particularly relevant in the context of direct marketing where the seller can typically control the level of information in the marketplace sometimes on a customer by customer basis e g by deciding on the mailing list for a catalog campaign when a certain fraction of consumers does not receive information from the direct marketer the retailers compete with each other for that fraction of the market the retailer s marketing mix has to be tuned in this case to jointly address direct and neighboring retail competition the level of information disseminated by the direct marketer is shown to have strategic implications and the use of market coverage as a lever to control competition is described even with zero information costs providing information to all consumers may not be optimal under some circumstances in particular when the product is not well adapted to the direct channel the level of market information about the direct option should ideally be lowered the only way to compete with retailers on a larger scale with a poorly adapted product is by lowering direct prices which lowers profits lowering market information levels and allowing retailers to compete more with each other facilitates a higher equilibrium retail price in turn this allows a higher direct price to be charged and improves overall direct profit on the other hand when the product is well adapted increasing direct market presence and engaging in greater competition with the retail sector yields higher returns the finding that high market coverage may depress profits raises some issues for further exploration first implementing the optimal coverage is straightforward when the seller controls the information mechanism as in the case of catalog marketing the internet in contrast is an efficient mechanism to transmit information but does not provide the sellers with such control over the level of market information a key reason is that the initiative to gather information on the internet lies largely with consumers the design and implementation of mechanisms to control aggregate information levels in electronic markets can therefore be an important theme for research and managerial interest second direct marketers have traditionally relied on the statistical analysis of customer records to decide on contact policies the analysis in this paper reveals that these policies can have significant strategic implications as well research that integrates the statistical and strategic aspects could make a valuable contribution the paper concludes with a discussion of issues for future research in multiple channel markets including avenues to model competition in settings with multiple direct marketers

club goods and group identity evidence from islamic resurgence during the indonesian financial crisis this paper tests a model in which group identity in the form of religious intensity functions as ex post insurance i exploit relative price shocks induced by the indonesian financial crisis to demonstrate a causal relationship between economic distress and religious intensity koran study and islamic school attendance that is weaker for other forms of group identity consistent with ex post insurance credit availability reduces the effect of economic distress on religious intensity religious intensity alleviates credit constraints and religious institutions smooth consumption shocks across households and within households particularly for those who were less religious before the crisis

competition and price dispersion in the airline markets we use two ticket level data sets on one way domestic flights for the us airlines to examine the potentially nonlinear relationship between price dispersion and three forms of competition inter firm inter flight and frequency competitions the linear relationship is rejected at any conventional significance levels in particular there is an s shaped relationship between market concentration and price dispersion this can be a reason for the mixed results in the literature roughly speaking the inter flight and frequency competitions have opposite effects on price dispersion finally in general the size of aircraft has a positive effect on price however for very large aircraft the relationship becomes negative

when and how is the internet likely to decrease price competition conventional wisdom seems to claim that by lowering the cost of distribution and by making search easier for consumer the introduction of the internet is likely to intensify price competition this paper intends to challenge this view by asking when and how is the internet likely to decrease the level of price competition between firms to answer this question we develop an analytic model with the following characteristics on the demand side consumers need to gather information on two types of product attributes digital attributes which can be communicated on the web at very low cost and nondigital attributes for which physical inspection of the product is necessary consumers choose between two brands but are familiar with the nondigital attributes of only the brand purchased on the last purchase occasion on the supply side firms use traditional stores and the internet to inform consumers about their products attributes and to sell their products in this setup we show that the impact of the internet on competition will be radically different depending on the relative importance of parameters describing the relevant shopping and distribution context specifically we find that the introduction of the internet might lead to monopoly pricing when 1 the proportion of internet users is high enough 2 when nondigital attributes are relevant but not overwhelming 3 when consumers have a more favorable prior about the brand they currently own and 4 when the purchase situation can be characterized by destination shopping more surprising we also show that in such cases the use of the internet not only leads to higher prices but can also discourage consumers from engaging in search as such an important message of the paper is that under some conditions the internet might represent an opportunity for firms to leverage their brand loyalty and increase their profits the intuition behind our results is the following the internet allows consumers to evaluate digital attributes easily i e without visiting the stores however nondigital attributes can only be evaluated through physical presence as such for goods where both types of attributes are important the introduction of the net changes the effective cost of search for consumers without the internet the cost of search is the cost of visiting more than one store with the introduction of the net however nonsearching consumers do not have to undertake the shopping trip at all because they can order products on the net thus in the presence of the internet the cost of search is related to the cost of undertaking the entire shopping trip in the case of destination shopping i e when the fixed cost of undertaking the shopping trip is higher than the cost of visiting an additional store the presence of the internet creates higher effective search costs for consumers given this shift of paradigm in search costs due to the internet consumers may not take the risk of searching for products with better nondigital attributes but instead remain with the product they are familiar with this results in increased consumer loyalty which induces firms to increase their prices our results have important managerial implications first they provide guidelines for firms on when i e for which product categories they should consider expanding their distribution network to the internet in this respect an important additional insight of the paper is that the internet can lower price competition and lead to reduced consumer search even if it is more expensive than the traditional distribution channel this can easily be the case if distribution through the internet represents additional costs such as the costs associated with shipping and handling and return policies second the paper also provides guidelines on how to plan the firm s internet strategy interestingly the results suggest that with the general availability of the internet the role of stores might actually become more important while we do not explicitly model a dynamic market our findings together with klemperer s 1987 results suggest that stores might have a key role in consumer acquisition while the internet can help leverage the acquired customer base through demand fulfillment this might imply that for certain product categories firms should actually allocate additional resources to improve their in store environment when considering the internet as a complementary distribution channel

belief in a just world and redistributive politics international surveys reveal wide differences between the views held in different countries concerning the causes of wealth or poverty and the extent to which people are responsible for their own fate at the same time social ethnographies and experiments by psychologists demonstrate individuals recurrent struggle with cognitive dissonance as they seek to maintain and pass on to their children a view of the world where effort ultimately pays off and everyone gets their just deserts this paper offers a model that helps explain i why most people feel such a need to believe in a just world ii why this need and therefore the prevalence of the belief varies considerably across countries iii the implications of this phenomenon for international differences in political ideology levels of redistribution labor supply aggregate income and popular perceptions of the poor the model shows in particular how complementarities arise endogenously between individuals desired beliefs or ideological choices resulting in two equilibria a first american equilibrium is characterized by a high prevalence of just world beliefs among the population and relatively laissez faire policies the other european equilibrium is characterized by more pessimism about the role of effort in economic outcomes and a more extensive welfare state more generally the paper develops a theory of collective beliefs and motivated cognitions including those concerning money consumption and happiness as well as religion

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

does wealth imply secularization and longevity we develop a simple life cycle model with endogenous longevity where religious firms influence religious beliefs using donations as an input the model suggests that either wealth and economic development or competition by religiousfirms can explain cross countryvariationinreligiousbeliefs buttoexplaincross countryvariationinreligiousbeliefs longevity and consumption both development and competition are required our results depend on the wealth and substitution effects that accompany economic development and religious market competition

efficient and competitive rationing abstract the contracts that interest us here are called priority service contracts the salient feature of such contracts is that they specify each customer s priority in obtaining service that is they specify the tank order in which a customer is served out of the available supply until all customers are served or supply is exhausted such contracts essentially establish queues for customers in section 1 the author provides some background about priority service section 2 formulates a basic model and offer several illustrations also describes two main examples that motivate the theoretical development section 3 derives some key results that show how the prices of priority service contracts are designed to induce customers to self select efficient service orders in section 4 the author discusses various ways that state enterprises can organize markets that implement priority service efficiently in section 5 we study the operation of competitive markets for priority service section 6 concludes with some summary remarks two themes are emphasized one is that a state enterprise can promote substantial efficiency gains by substituting priority service for absent spot markets the other is that oligopolistic firms may have insufficient incentives to offer efficient product diversity consequently allocative efficiency depends on entry of numerous firms even so dispersal of supplies among many firms can prevent productive efficiency when there are advantages from pooling supplies

direct marketing indirect profits a strategic analysis of dual channel supply chain design the advent of e commerce has prompted many manufacturers to redesign their traditional channel structures by engaging in direct sales the model conceptualizes the impact of customer acceptance of a direct channel the degree to which customers accept a direct channel as a substitute for shopping at a traditional store on supply chain design the customer acceptance of a direct channel can be strong enough that an indepent manufacturer would open a direct channel to compete with its own retailers here direct marketing is used for strategic channel control purposes even though it is inefficient on its own and surprisingly it can profit the manufacturer even when so direct sales occur specifically we construct a price setting game between a manufacturer and its independent retailer direct marketing which indirectly increases the flow of profits through the retail channel helps the manufacturer improve overall profitability by reducing the degree of inefficient price double marginalization while operated by the manufacturer to constrain the retailer s pricing behavior the direct channel may not always be detrimental to the retailer because it will be accompanied by a wholesale price reduction this combination of manufacturer pull and push can benefit the retailer in equilibrium finally we show that the mere threat of introducing the direct channel can increase the manufacturer s negotiated share of cooperative profits even if price efficiency is obtained by using other business practices

crime and punishment again the economic approach with a psychological twist abstract akerlof and dickens 1982 suggested that in a model of criminal behavior which considered the effects of cognitive dissonance increasing the severity of punishment could increase the crime rate this paper demonstrates that that conjecture was correct with cognitive dissonance people may have to rationalize not committing crimes under normal circumstances if punishment is not severe the rationalization may lead them to underestimate the expected utility of committing crimes when opportunities present themselves if punishment is severe then rationalization may not be necessary and people may be more likely to commit crimes when opportunities arise

systematic peak load pricing congestion premia and demand diverting empirical evidence abstract this paper finds empirical support to systematic peak load pricing in airlines higher fares in ex ante known congested periods it estimates a congestion premia and supports the main empirical prediction in gale and holmes gale i holmes t 1993 advance purchase discounts and monopoly allocation of capacity american economic review 83 135 146 less discount seats on peak flights

why so much stability one of duncan black s 1958 more important contributions was a classically simple proof that with complex issues and majority voting a stable outcome is unlikely this very simple proof that there would normally be no motion which can get a majority against all others and hence that any possible outcome is dominated by another has been elaborated and made more precise by later work without most improbable conditions endless cycling would be expected this is particularly true when logrolling is present as it normally is if we look at the real world however we observe not only is there no endless cycling but acts are passed with reasonable dispatch and then remain unchanged for very long periods of time thus theory and reality seem to be not only out of contact but actually in sharp conflict it is the purpose of this article to demonstrate that our existing theory when properly looked at does indeed imply a relatively stable outcome to voting in some cases however this stability will not be a true equilibrium because a random member of a large set will be chosen and then that random outcome will be left unchanged for long periods of time it does not dominate all other outcomes but is retained merely because of its particular history there are already several possible explanations for the observed stability in the literature we will take them up as they become relevant to the general line of reasoning i should however warn the reader that my own previous work including joint work with buchanan will play a major role here this may simply reflect egotism but i think that some of the early work which is now partially forgotten can provide solutions for more modern problems much recent public choice work has involved spatial models and these models frequently ignore logrolling the reason presumably is that it is very hard to put logrolling in a two dimensional diagram we shall begin considering such special models and assume that the issues are the sort that does not lead to logrolling and then turn to more complex logrolling problems with respect to the first situation in which logrolling does not occur there is already one possible explanation for the observed stability in the literature

the economics of faith using an apocalyptic prophecy to elicit religious beliefs in the field abstract we model religious faith as a demand for beliefs following the logic of the pascalian wager we show how standard experimental interventions linking financial consequences to falsifiable religious statements can elicit and characterize beliefs we implemented this approach with members of a group that expected the end of the world to occur on may 21 2011 by varying monetary prizes payable before and after may 21st to our knowledge this is the first incentivized elicitation of religious beliefs ever conducted the results suggest that the members held extreme sincere beliefs that were unresponsive to experimental manipulations in price

introduction to the economics of religion after a very long hiatus economists have begun again to study the relationship between economics and religion this article seeks to summarize and evaluate the principal themes and empirical findings that have appeared in some 200 recent papers on the economics of religion although some of the research concerns the economic consequences of religiosity most applies standard economic theory to the study of individual religious activity the characteristics of religious groups and the impact of regulation and competition on religious markets

advance purchase discounts and monopoly allocation of capacity optimal pricing by a monopoly airline that faces capacity constraints during the peak demand period is studied the existence of capacity constraints means that in order to expand output the airline must divert demand from the peak period to the off peak period a particular advance purchase discount policy is shown to be the profit maximizing method of selling tickets if the advance purchase requirement were infeasible output and total surplus would both be lower jel l12 substantial discounts for air travel are generally available to travelers who are willing to purchase tickets a week or more in advance of the departure date this paper demonstrates why the imposition of an advance purchase requirement may be a profit maximizing strategy for a monopoly airline facing capacity constraints during times of peak demand 1 the practice of imposing an advance purchase requirement on discount tickets is also placed in a favorable light in terms of its impact on social

partial repeat bidding in the name your own price channel this paper presents an initial examination of an emerging business model the name your own price nyop channel as popularized by priceline com focusing on how to optimally structure such market interactions i ask whether it is more profitable to restrict individuals to a single bid as is currently done by priceline or conversely to allow consumers to continue bidding if the previous offer was rejected i find that both market structures yield the same expected profit in practice a single bid policy may not be perfectly enforceable especially in the internet environment because a sophisticated user can circumvent such a policy by camouflaging one s identity or otherwise manipulating the bidding procedure thus priceline s single bid restriction is likely to result in partial repeat bidding the case in which some consumers are limited to a single bid while other sophisticated users may rebid i ask whether such surreptitious bidding is detrimental to the nyop firm and find that profits are lower than if such opportunistic behavior were absent surprisingly i find that the impact of the number of repeat bidders on profits is not monotonic thus if it is prohibitively costly or logistically infeasible for the nyop firm to eliminate surreptitious rebidding behavior the firm may in fact benefit from encouraging rather than discouraging users to rebid the direction that increases profits depends on the percentage of sophisticated bidders

shortages segmentation and self selection this paper considers the rationality and implications of using shortages as a self selection device shortages lead to uncertain access and enable sellers to offer ensured access either to the good or to a preferred variety of the good at a higher price or as part of a bundle it is shown that such activities allow firms to span nonconcavities in their revenue function firms respond to changes in demand and costs through changes in quantity and or the premium for ensured access but not through changes in the base price

on the stability of legislative outcomes this paper argues that by arranging vote trades in the face of information costs legislative committees contribute to the stability of legislative outcomes a structure of permanent committees and subcommittees facilitates informational specialization and helps legislators acquire experience in their specializations committees arrange vote trades by adjusting amounts of recommended spending on separate items in bills that receive majority support each legislator is allotted a roughly equal amount of legislative spending that he can influence plus an additional amount that depends on his skill and experience as a committee member

buyer behavior under the best offer mechanism a theoretical model and empirical evidence from ebay motors abstract we use data from ebay best offer listings to analyze haggling over prices in transactions with one seller and a series of potential buyers for a limited supply product we characterize this transaction mechanism as a sequential move game to investigate buyer behavior our model suggests that a buyer s offer price increases in relations to the number of buyers who have previously made an offer on the item and the buy it now price chosen by the seller on the other hand the offer price decreases for items which have been listed on ebay for a longer period of time we empirically test our theoretical predictions using data on the sales of toyota camry cars on ebay motors the empirical evidence is consistent with our model

centralized vote trading this paper presents a model of centralized vote trading in a legislature in this model legislators trade only with party leaders who set prices at which they will buy needed vote changes and sell promises to pass or defeat particular bills each legislator trades away votes on bills of little concern to him and of high concern to leaders and purchases promises from the leaders to pass or defeat particular bills of high concern to the legislator relative to the price the leguslator must pay

research note overselling with opportunistic cancellations in many business sectors such as airlines hotels trucking and media advertising customers arrivals and willingness to pay are uncertain managers must decide whether to quote a price low enough to guarantee early sales or to quote a higher price and risk that some units remain unsold in allocating capacity they face a trade off between two types of potential losses 1 yield loss selling at a low price and losing a better price later and 2 spoilage loss waiting in vain to sell at a high price and losing the opportunity of an earlier low price offer yield loss means that consumers who value the product most do not get to use it and spoilage loss means that valuable products are wasted because no consumers get to use them sellers typically hedge against the risk of spoilage loss by selling some units early at low prices and against the risk of yield loss by blocking some units in hope of selling them later at a high price in this paper we show that the use of overselling with opportunistic cancellations can increase expected profits and improve allocation efficiency under this strategy the seller deliberately oversells capacity if high paying consumers show up even when capacity is already fully booked the seller then cancels the sale to some low paying customers while providing them with appropriate compensation we derive a new rule to optimally allocate capacity to consumers when overselling is used and show that overselling helps limit the potential yield and spoilage losses yield loss is reduced because the seller can capture more high paying customers by compensating low paying customers who give up their right to the product spoilage loss is reduced because the compensation decreases the price spread perceived by the seller and as a result the seller is less anxious to speculate and block units overselling with opportunistic cancellations assures that the product will be sold to consumers who value it most this means that everybody wins and resources are allocated more efficiently than in conventional selling

posted pricing vs bargaining in sequential selling process we study the role of bargaining in a firm s sequential selling process the seller firm under consideration sequentially sells a fixed amount of stock to a random arrival stream of potential buyers who are heterogeneous in product valuation based on the stock level and the time to the end of the selling season the seller may dynamically choose either to post a take it or leave it price or to engage in bargaining with an arriving buyer we introduce a stochastic order called the scaled pricing order for the buyer s valuation distribution the scaled pricing order measures the average portion of trade surplus that the seller can obtain by posting a price for distributions with increasing length biased hazard rate checking the property of increasing decreasing scaled pricing order boils down to verifying the concavity convexity of the mills ratio we fully characterize the family of distributions that are invariant in the scaled pricing order which includes uniform and exponential distributions

when choosing makes a good thing better temporal variations in the valuation of hedonic consumption abstract this research investigates how the valuation of delayed consumption of hedonic products such as concerts and chocolate varies with the passage of time between choice and consumption the authors find that when consumers make their own choices they exhibit increases in evaluations of delayed consumption but only if the interval between choice and consumption is relatively short the effect attenuates over longer periods resulting in an inverted u shaped relationship between evaluations and time in contrast when somebody else chooses the same option for the consumer evaluations decrease with the passage of time these effects depend on the extent of intrinsic motivation toward the object of consumption and occur only for consummatory consumption that is of inherent interest moreover anticipatory increases in evaluations before consumption have ironic negative effects on postconsumption evaluations the authors discuss implications and directions for further research

an econometric model of a public university s income and enrollments abstract an econometric model of a public organization s income and outputs is applied to a public university and contains equations representing legislative demand for enrollments students attendance demand and university supply the results support the hypotheses that supply and the two demands determine the university s instructional funding and enrollments and that interest groups affect legislative demand while per student legislative funding for high cost graduate and professional students was not found to exceed that of undergraduates evidence is presented that these enrollments are financed by the estimated discretionary funds resulting from the legislature s high cost of controlling academic activities