consideration review of research and prospects for future insights the authors review the behavioral underpinnings of consideration set formation and revisit the theoretical and empirical evidence that led them to develop an individual level model of consideration

a dynamic multinomial probit model for brand choice with different long run and short run effects of marketing mix variables in this paper we propose a dynamic multinomial probit model in order to estimate the long run and short run effects of marketing mix variables on brand choice the latent variables which contain the unobserved perceived utilities follow a first order vector error correction autoregressive process of order 1 with current and lagged explanatory variables the unrestricted autoregressive parameter matrix concerns the intertemporal correlation in perceived utilities of households over purchase occasions and indicates the persistence in brand choice as explanatory variables we consider relative prices and promotional activities like feature and display an important and novel feature of our model is that it allows for different long run and short run effects of promotional activities thereby extending the models that are currently available in the literature additionally to account for different base preferences for brands across households we allow for consumer heterogeneity our application concerns a panel of households choosing among several brands of a fmcg our estimated model turns out to be an improvement over a static model and over a model with only short run effects in terms of in sample fit and out of sample forecasts copyright 2000 john wiley sons ltd

retrieving unobserved consideration sets from household panel data the authors propose a new model to capture unobserved consideration from discrete choice data this approach allows for unobserved dependence in consideration among brands easily copes with many brands and accommodates different effects of the marketing mix on consideration and choice as well as unobserved consumer heterogeneity in both processes an important goal of this study is to establish the validity of the existing practice to infer consideration sets from observed choices in panel data the authors show with experimental data that underlying consideration sets can be reliably retrieved from choice data alone and that consideration is positively affected by display and shelf space next the model is applied to information resources inc panel data the findings suggest that promotion effects are larger when they are included in the consideration stage of the two stage model than in a single stage model the authors also find that consideration covaries across brands and that this covariation is mainly driven by unobserved consumer heterogeneity finally the authors show the implications of the model for promotion planning relative to a more standard model of choice

when random assignment is not enough accounting for item selectivity in experimental research experimental methods are critical tools in marketing psychology and economics to isolate the effects of key variables from vagaries intrinsic to field data as such they are often considered exempt from the sort of sample selectivity artifacts widely documented in empirical research in part because participants are randomly assigned to experimental conditions to conserve time and resources experiments often focus on items participants have chosen or are familiar with for example postchoice satisfaction ratings certain free recall tasks or specifying consideration sets preceding brand choice when consumer input even partially influences the items about which researchers request subsequent data the potential for item selectivity arises in such situations analyses are contingent on both the choice context s of the experiment and the alternatives participants elect to evaluate potentially leading to substantial item selectivity overall and to differing degrees across conditions we examine sit

two stage discrete choice models for scanner panel data an assessment of process and assumptions discrete choice models such as the multinomial logit assume that consumers choose from the full set of alternatives available to them however because i consumers may not be able to recall or recognize available brands ii consumers may not have the cognitive capacity or mental energy to process information pertaining to all available brands or iii careful consideration of all available brands might be suboptimal from an economic standpoint given the cost of information search consumers tend to make choices from a relatively small subset of the available brands this study assesses the process assumptions of existing two stage models for scanner panel data and their consistency with the actual processes believed to be used by consumers in forming choice sets after reviewing what is known from two stage models in scanner data applications we highlight issues in need of research

rational expectations and policy credibility following a change in regime we examine the dynamic path of an economy after a change in regime when neither the policy to be followed nor the reactions of the public are known the model is an application of kreps and wilson s reputation model to barro and gordon s macroeconomic policy game equilibrium is defined to be the dynamically consistent solution to a game between the government and the private sector it involves mixed strategies and bayesian learning by both sides until the uncertainty about government and public behaviour is resolved the absence of complete credibility of government policy and intransigence of private sector wage demands increase the output loss of disinflation the analysis also sheds light on the strategic nature of economic policymaking and the role of information in macroeconomics

toward a reconciliation of market power and information theories of advertising effects on price elasticity prior work on the economic effects of advertising has presented conflicting views some authors have suggested that advertising creates market power by artificially differentiating brands and thereby lowering price elasticity others have viewed advertising as an efficient source of information about the existence of substitutes arguing that advertising increases price elasticity the present research proposes a unifying theoretical model in which advertising affects price elasticity through its influence on two mediating constructs the size of the consideration set and the relative strength of preference pretests 1 and 2 examine the effects of advertising on these two constructs results from the main experiment show that in accordance with the theoretical framework the same advertisements that increased price elasticity in some decision environments decreased it in others

cournot equilibrium in large markets under increasing returns abstract we consider cournot partial equilibria in large markets where firms have decreasing average costs it is shown that the outcome of competition is approximatelyefficient if entry is free

monetary targeting and policy credibility in a non market clearing model a simple macroeconomic model is used to examine issues of monetary policy credibility in this model prices do not clear the market and output may be demand constrained the results differ from those that emerge from the natural rate models commonly used disinflation has an inevitable unemployment cost which may be prolonged under certain conditions preannounced monetary targets act as a device to signal a disinflationary policy stance in a context of incomplete information it is likely that the private sector will test out the government s commitment to disinflation copyright 1991 by royal economic society

all things considered the role of choice set formation in diversification abstract the diversification effect a tendency toward greater variety as multiple choices are made simultaneously in advance of consumption is a robust and important phenomenon researchers have typically explained the diversification effect in terms of differences in the process by which people select items from among those available this precludes the possibility that the locus of the effect lies in people s choice sets themselves that is how people decide which options to consider when making choices the authors examine the effects of set formation using an experimental choice sequence task and conjoined stochastic model of set formation and conditional choice the findings demonstrate that set formation plays a critical role in diversification previously chosen options are indeed discounted but only for simultaneous choices and only in the set formation portion of the model furthermore the expected number of choice set items is substantially greater in multiple versus single item choice s

market boundaries and product choice illustrating attraction and substitution effects what happens to the share of choices each item receives when the choice set boundaries are extended by adding a new item that is extremely good on one dimension but poor on the others first there is a substitution effect whereby the new item takes choice share mainly from similar items in the set second there is an attraction effect resulting in a general shift of preference toward the added item experimental studies show that choice patterns conflict with current theoretical and common sense ideas about the effect of added alternatives on choice

limited information and advertising in the u s personal computer industry traditional discrete choice models assume buyers are aware of all products for sale in markets where products change rapidly the full information assumption is untenable i present a discrete choice model of limited consumer information where advertising influences the set of products from which consumers choose to purchase i apply the model to the u s personal computer market where top firms spend over 2 billion annually on advertising i find estimated markups of 19 over production costs where top firms advertise more than average and earn higher than average markups high markups are explained to a large extent by informational asymmetries across consumers where full information models predict markups of one fourth the magnitude i find that estimated product demand curves are biased toward being too elastic under traditional models i show how to use data on media exposure to improve estimated price elasticities in the absence of micro ad data

choice set formation for outdoor destinations the role of motivations and preference discrimination in site selection for the management of public expenditures on protected areas effective public expenditure currently dominates the management focus of many protected areas this calls for explicit modeling of constraints and motivations that respectively obstruct and stimulate visits to selected outdoor destinations choice set formation is the result of screening and or inclusion of specific sites alternatives to form the set of sites considered in real choices evidence shows that the omission of a structural representation of choice set formation is harmful to econometric inference yet the literature has largely ignored the underlying behavioral phenomenon we show using a discrete choice experiment involving selection among seven recreational sites in an italian national park that choice set formation is behaviorally relevant even after controlling for preference discrimination motivations why visit are important determinants of preliminary site screening for choice set inclusion as well as site selection justifying the additional value of such modeling extension

welfare losses under cournot competition abstract in a market for a homogeneous good where firms are identical compete in quantities and produce with constant returns the percentage of welfare losses pwl is small with as few as five competitors for a class of demand functions which includes linear and isoelastic cases we study markets with positive fixed costs and asymmetric firms we provide exact formulae of pwl and robust constructions of markets were pwl is close to one in these two cases we show that the market structure that maximizes pwl is either monopoly or dominant firm depending on demand finally we prove that pwl is minimized when all firms are identical a clear indication that the assumption of identical firms biases the estimation of pwl downwards

why do shoppers use cash evidence from shopping diary data des etudes recentes montrent que l argent comptant demeure un mode de paiement privilegie pour les transactions de faible montant malgre la prevalence d autres moyens de paiement comme les cartes de debit et de credit pour les decideurs publics il importe de savoir si les consommateurs preferent vraiment regler en especes ou plutot si les commercants restreignent l usage de ces cartes

the shopping basket a model for multicategory purchase incidence decisions consumers make multicategory decisions in a variety of contexts such as choice of multiple categories during a shopping trip or mail order purchasing the choice of one category may affect the selection of another category due to the complementary nature e g cake mix and cake frosting of the two categories alternatively two categories may co occur in a shopping basket not because they are complementary but because of similar purchase cycles e g beer and diapers or because of a host of other unobserved factors while complementarity gives managers some control over consumers buying behavior e g a change in the price of cake mix could change the purchase probability of cake frosting co occurrence or co incidence is less controllable other factors that may affect multi category choice may be unobserved household preferences or observed household demographics we also argue that not accounting for these three factors simultaneously could lead to erroneous inferences we then develop a conceptual framework that incorporates complementarity co incidence and heterogeneity both observed and unobserved as the factors that could lead to multi category choice we then translate this framework into a model of multi category choice our model is based on random utility theory and allows for simultaneous interdependent choice of many items this model the multivariate probit model is implemented in a hierarchical bayes framework the hierarchy consists of three levels the first level captures the choice of items for the shopping basket during a shopping trip the second level captures differences across households and the third level specifies the priors for the unknown parameters we generalize some recent advances in markov chain monte carlo methods in order to estimate the model specifically we use a substitution sampler which incorporates techniques such as the metropolis hit and run algorithm and the gibbs sampler the model is estimated on four categories cake mix cake frosting fabric detergent and fabric softener using multicategory panel data the results disentangle the complementarity and co incidence effects the complementarity results show that pricing and promotional changes in one category affect purchase incidence in related product categories in general the cross price and cross promotion effects are smaller than the own price and own promotions effects the cross effects are also asymmetric across pairs of categories i e related category pairs may be characterized as having a primary and a secondary category thus these results provide a more complete description of the effects of promotional changes by examining them both within and across categories the co incidence results show the extent of the relationship between categories that arises from uncontrollable and unobserved factors these results are useful since they provide insights into a general structure of dependence relationships across categories the heterogeneity results show that observed demographic factors such as family size influence the intrinsic category preference of households larger family sizes also tend to make households more price sensitive for both the primary and secondary categories we find that price sensitivities across categories are not highly correlated at the household level we also find some evidence that intrinsic preferences for cake mix and cake frosting are more closely related than preferences for fabric detergent and fabric softener we compare our model with a series of null models using both estimation and holdout samples we show that both complementarity and co incidence play a significant role inpredicting multicategory choice we also show how many single category models used in conjunction may not be good predictors of joint choice our results are likely to be of interest to retailers and manufacturers trying to optimize pricing and promotion strategies across many categories as well as in designing micromarketing strategies we illustrate some of these benefits by carrying out an analysis which shows that the true impact of complementarity and co incidence on profitability is significant in a retail setting our model can also be applied to other domains the combination of item interdependence and individual household level estimates may be of particular interest to database marketers in building customized cross selling strategies in the direct mail and financial service industries

perfectly competitive markets as the limits of cournot markets a perfectly competitive partial equilibrium market for a single homogeneous good with a bounded continuum of infinitesimal firms is considered cost functions are essentially unrestricted and are allowed to vary smoothly across firms a sequence net of cournot markets each with a finite number of firms which converge smoothly to the perfectly competitive limit in terms of both the inverse demand functions and the distributioon of firm technologies is introduced and it is shown that all markets sufficiently far along the sequence have a cournot equilibrium and all the cournot equilibria converge to the perfectly competitive equilibrium of the limit market

on the rate of convergence of oligopoly equilibria in large markets an example abstract in this note we explore the rate of convergence of cournot nash equilibria with free entry and those with an entry deterring monopolist in a replicated market where the market demand functions is linear and firms face linear cost curves

choice set heterogeneity and the role of advertising an analysis with micro and macro data abstract the authors show how to use microlevel survey data from a tracking study on brand awareness in conjunction with data on sales and advertising expenditures to improve the specification estimation and interpretation of aggregate discrete choice models of demand in a departure from the commonly made full information assumption they incorporate limited information in the form of choice sets to reflect that consumers may not be aware of all available brands at purchase time they find that both the estimated brand constants and the price coefficient are biased downward when consumer heterogeneity in choice sets is ignored these biased estimates can lead firms to make costly price setting mistakes in addition the tracking data enable the authors to identify separately two processes by which advertising influences market shares they find that advertising has a direct effect on brand awareness inclusion in choice set in addition to its effect on consumer preferences increase in utility this

an integrated choice model incorporating alternative mechanisms for consumers reactions to in store display and feature advertising the marketing literature has suggested two prominent decision mechanisms through which in store display and feature advertising can affect brand choice which i call the price cut proxy effect and the consideration set formation effect the primary objective of this study is to propose an integrated brand choice model that incorporates these two possible behavioral mechanisms which have been shown to work by previous research the model allows consumers to use various combinations of the decision mechanisms with different probabilities and thus enables one to jointly assess the extent to which each effect might occur in actual purchase data and to investigate how consumers might differ in their tendencies to engage in these decision processes by incorporating these likely behavioral mechanisms the proposed model alleviates the problems caused by multicollinearity and produces sensible parameter estimates for the joint effects of promotion vehicles in store display feature ad and price discount which contributes to better managerial decision making

quality perceptions and asymmetric switching between brands rotating indifference curves are used to induce an income effect that favors superior brands at the expense of inferior brands in a discrete choice model when calibrated on scanner panel data the model yields an objective measure of brand quality which is related to the rate of rotation the model also leads to asymmetric responses to price promotions where switching up to high quality brands is more likely than switching down the model is capable of nesting the standard logit model and is similar to a nested logit model when there exists clusters of brands of like quality the model is used to explore a product line pricing decision where profits are maximized subject to the constraint that consumer utility is maintained

cournot equilibrium with free entry the case of decreasing average cost functions this paper investigates in the context of a market for a homogeneous commodity the asymptotic properties of cournot equilibria with free entry when the size of the market increases indefinitely the analysis focuses on the case where the average cost function is always decreasing and the marginal cost function is non decreasing for all sufficiently large outputs

price uncertainty and consumer search a structural model of consideration set formation we offer an econometric framework that models consumer s consideration set formation as an outcome of her costly information search behavior because frequently purchased products are characterized by frequent price promotions of varying depths of discounts a consumer faces significant uncertainty about the prices of the brands the consumers engage in a fixed sample search strategy that results in their discovering the posted prices of a subset of the available brands this subset is referred to as the consumer s consideration set the proposed model is estimated using the scanner data set for liquid detergents our key empirical results are i consumers zincur significant search costs to discover the posted prices of the brands ii whereas in store displays and feature ads do not influence consumers quality perceptions of the brands they significantly reduce search costs for observing the prices of the brands iii per capita income of consumer s household significantly increases her search costs and iv the consumers price sensitivity is seriously underestimated if we were to assume that consumers get to know all the posted prices at zero cost the proposed model is also estimated for the ketchup category to enable us to do cross category comparisons of consumers price search behavior

limited choice sets local price response and implied measures of price competition it is becoming increasingly evident that a consumer s brand choice decision in low involvement categories does not involve full search evaluation and comparison of price information of all brands available at point of purchase global price response the authors propose a two stage choice process in which the consumer first identifies a subset of brands within the universal set of brands called the choice set and then evaluates only those brands that are in the choice set relative to one another to select a single brand the authors find that consistent with reports of the extent of external price search of consumers response to shelf price variations is limited to the brands in the choice set local price response their results indicate that employing the assumption of global price response may lead to biased estimates of price elasticity and derived measures of clout and vulnerability to enable a managerially meaningful and useful assessment of a brand s competitive clout and vulnerability the