the environmental kuznets curve environmental protection policy and income distribution abstract the effect of economic growth on pollution emissions differs substantially among high income countries i address this issue by analyzing public environmental policy decisions individual heterogeneity relative income effect and the political framework in which policy decisions are taken determine the emergence of the downward sloping segment of the environmental kuznets curve ekc income inequality produces a gap between the country s ability to pay for environmental protection and a country s willingness to pay i test this result by using oecd data on public r d expenditure for environmental protection the conclusion is that contrary to the ek hypothesis moments of the income distribution function other than the mean may be important for the emergence of a virtuous path of sustainable growth in high income countries

product and price competition in a duopoly this paper examines the role of consumer preferences costs and price competition in determining the competitive product strategy of a firm in the model studied here there are two identical firms competing on product quality and price they face consumers who prefer a higher quality product to a lower quality product but differ in how much they are willing to pay for quality the consumers can also choose a substitute if they don t like the product price offerings of the two firms for the firms a higher quality product costs more to produce than a lower quality product the paper shows that the equilibrium strategy for each firm should be to differentiate its product from its competitor with the firm choosing the higher quality choosing the higher margin as well this differentiation however is not efficient that is it is possible to choose two other products and offer them at prices that cover their marginal cost and still satisfy consumers needs better in the aggregate a monopolist by contrast would differentiate his product line efficiently this suggests that cannibalization has different effects on product strategy than competition the paper also shows that if one firm enters the market first then it can defend itself from later entrants and gain a first mover advantage by preempting the most desirable product position

brand equity and vertical product line extent this paper addresses the question of how the vertical structure of a product line relates to brand equity does the presence of premium or high quality products in a product line enhance brand equity conversely does the presence of economy or low quality products in a product line diminish brand equity economists and marketing researchers refer to variation in quality levels of products within a category as vertical differentiation whereas variation in the function or category of the products is referred to as horizontal differentiation much of the existing research on the relationship between product line structure and brand equity has focused on the horizontal structure of the product lineand has been primarily concerned with brand extensions what happens when the product line of a brand is extended horizontally into new categories researchers have been concerned primarily with how the extension fares but the effect of the extension on the core products is also important there is an analogous question of what happens when the product line of a brand is extended vertically either up market or down market this question of vertical extensions is part of the more general issue of how the vertical structure of a product line relates to brand equity the specific research questions addressed in this paper are 1 do premium or high quality products enhance the brand equity associated with the other products in the line 2 conversely do economy or low quality products diminish the brand equity associated with the other products in the line these research questions are relevant to three managerial issues in product line strategy first what are the costs and benefits of including down market products within a brand second what are the implications of including high end models within a brand third when should high end and low end products be offered under an existing brand umbrella and when should these products be offered under separate brands we address these research questions empirically through an analysis of the models and brands within the u s mountain bicycle industry we use price premium above that which can be explained by the physical characteristics of the bicycle as a metric for brand equity we then test several hypotheses related to the relationship between extension of the product line upward and downward and the price premium commanded by the brand we further support this analysis with a simple laboratory experiment the analysis reveals that price premium in the lower quality segments of the market is significantly positively correlated with the quality of the lowest quality model in the brand s product line and that for the upper quality segments of the market price premium is also significantly positively correlated with the quality of the highest quality model in the brand s product line the results of the analysis are supported by the outcome of an experiment in which 63 percent of the subjects preferred a product offered by a high end brand to the equivalent product offered by a low end competitor these results imply that managers wishing only to maximize the equity of their brands would offer only high quality products and avoid offering low quality products however this result must be moderated by the overall objective of maximizing profits maximizing profits is likely to involve a tradeoff between preserving high brand equity and therefore high margins and pursuing the volume typically located in the lower end of the market one of the most significant implications of this research is that product line managers need to be mindful not just of the incremental cannibalization or stimulation of sales of products that are immediate neighbors of an extension to the product line but also the effect of such an extension on the brand equity in other possibly quite different parts of the product line

pricing prototypical products when we think of colas coca cola first comes to mind products such as cola cola tide laundry detergent and chapstick lip balm are the prototypical products in their respective categories for more than three decades research in consumer psychology has accumulated evidence on how prototypicality influences memory shapes the composition of consideration set and affects purchase decision yet there is no research on how it changes the competitive behavior of firms in a horizontally differentiated market for example some prototypical products are priced lower than other products in their category whereas in certain other categories the prototypical product is priced higher we propose a novel model of spatial competition where the prototypicality of a product influences the probability of the product being included in consumers consideration sets without affecting its valuation using the model we examine theoretically the impact of prototypicality on the pricing decisions of competing firms our analysis shows that when consumer valuations are low the prototypical product is priced lower than a nonprototypical product and earns more profits however when consumer valuations are high the rank order of the prices of the prototypical product and a nonprototypical product is reversed but not the order of profits we subject these predictions to an empirical test the experimental results lend support for the qualitative predictions of the model

context dependent preferences and innovation strategy disruptive innovations introduce a new performance dimension into a product category but often suffer from inferior performance on key performance dimensions of their existing substitutes hence the followers of these innovations face an important decision to make they must choose to improve the new technology either on the key performance dimension shared with the old technology or on the new performance dimension this paper investigates which path firms should choose when they face such a dilemma in the absence of any cost or capability issues in doing so we integrate customer response into the theory of technological evolution and allow preferences on the product choices to be context dependent we show that context dependent preferences may encourage the follower to improve the new technology on the new performance dimension later we extend our game to a dynamic one and show that the context dependent preferences may cause the pioneer to innovate less this paper was accepted by j miguel villas boas marketing

consumer preference for a no choice option the traditional focus in the decision making literature has been on understanding how consumers choose among a given set of alternatives the notion that preference uncertainty may lead to choice deferral when no single alternative has a decisive advantage is tested in seven studies building on recent research the article shows that the decision to defer choice is influenced by the absolute difference in attractiveness among the alternatives provided and is not consistent with trade off difficulty or the theory of search these findings are then extended to show that choice deferral can also be modified for the same alternatives by manipulations that make them appear more similar in attractiveness or that decrease the need to differentiate among them the results are consistent with the notion that preference uncertainty results in a hesitation to commit to any single action since small differences in attractiveness among the alternatives are potentially reversible consistent with this premise the effect of attractiveness difference on choice deferral decreased significantly when subjects were first allowed to practice making monetary trade offs among the available alternatives

the making of a hot product a signaling explanation of marketers scarcity strategy every marketer s dream is to create a hot product that customers would absolutely want to have thus generating considerable profit to the marketer according to one school of thought marketers should make products hard to get in order to create really hot products in this paper using a game theoretic model we investigate if such scarcity strategies can indeed be optimal while a scarcity strategy may appear to be a viable approach for making a firm s product successful further analysis raises some puzzling issues in particular it is not clear why a firm would not increase its price to get demand and supply in sync and increase its profit in the process we therefore offer a signaling explanation for the optimality of such strategies and show that a high quality seller may optimally choose to make the product scarce in order to credibly signal the quality of its product to uninformed customers our analysis indicates that a high quality seller optimally employs scarcity as a signaling device in product markets that are characterized ceteris paribus by a small difference in marginal cost between high and low quality products a low reservation price for a low quality product a greater heterogeneity in reservation prices for a high quality product and a moderate number of informed consumers our results provide a rationale for the fact that scarcity strategies are usually observed for discretionary or specialty products but not for commodity products staple products or new to the world products

overchoice and assortment type when and why variety backfires almost universally research and practice suggest that a brand that increases its product assortment or variety should benefit through increased market share in this paper we show this is not always the case we introduce the construct assortment type and demonstrate that the effect of assortment size on brand share is systematically moderated by assortment type we define an alignable assortment as a set of brand variants that differ along a single compensatory dimension such that choosing from that assortment only requires within attribute trade offs in contrast we define a nonalignable assortment as a set of brand variants that simultaneously vary along multiple noncompensatory dimensions demanding between attribute trade offs in turn we argue that an alignable assortment can efficiently meet the diverse tastes of consumers thereby increasing brand share but that a nonalignable assortment increases both the cognitive effort and the potential for regret faced by a consumer thereby decreasing brand share we term this effect overchoice across three studies we provide evidence of overchoice and tie the effect to the effort and regret brought about by nonalignability in the process we demonstrate that simplification of information presentation reversibility of choice and a reduction in underlying nonalignability serve to reduce or eliminate this effect

looking for loss aversion in scanner panel data the confounding effect of price response heterogeneity recent work in marketing has drawn on behavioral decision theory to advance the notion that consumers evaluate attributes and therefore choice alternatives not only in absolute terms but asdeviations from a reference point the theory has important substantive and practical implications for the timing and execution of price promotions and other marketing activities choice modelers using scanner panel data have tested for the presence of these reference effects in consumer response to an attribute such as price in applications of the theory of reference dependent choice tversky and kahneman 1991 some modelers report empirical evidence of loss aversion when a consumer encounters a price above his or her established reference point a loss the response is greater than for a price below the reference point a gain researchers have gone so far as to suggest that evidence for the so called reference effect make it an empirical generalization in marketing e g kalyanaram and winer 1995 meyer and johnson 1995 it is our contention that the measurement of loss aversion in empirical applications of the reference dependent choice model is confounded by the presence of unaccounted for heterogeneity in consumer price responsiveness our reasoning is that the kinked price response curve implied by loss aversion is confounded with the slopes of the response curves across segments that are differentially responsive to price a more price responsive consumer with a steeper response function tends to have a lower price level as a reference point this consumer faces a larger proportion of prices above his reference point thus the response curve is steeperin the domain of losses similarly the less price responsive consumer sees a greater proportion of prices below his reference point so the response curve is less steep within the domain of gains as a result any cross sectional estimate of loss aversion that does not take this into account will be biased upward researchers who do not control for heterogeneity in price responsiveness may arrive at incorrect substantive conclusions about the phenomenon it is interesting to note that in this instance failure to control for heterogeneity induces a bias infavor of finding an effect rather than the more typical case of attenuation of the effect toward zero we first test our assertion regarding the referencedependent model using scanner panel data on refrigerated orange juice and subsequently extend this analysis to 11 additional product categories in all cases we find as predicted that accounting for price response heterogeneity leads to lower and frequently nonsignificant estimates of loss aversion we do however find some categories in which the effect does not disappear altogether we also estimate loss aversion using a sticker shock model of brand choice in which the reference prices arebrand specific in line with the results of the majority of prior literature we find smaller and insignificant estimates of loss aversion in this model we show that this is because in the sticker shock model there is no apparent correlation between the price responsiveness of the consumer and the representation of reference effects as losses or gains our findings strongly suggest that loss aversion may not in fact be a universal phenomenon at least in the context of frequently purchased grocery products

confronting the environmental kuznets curve t he environmental kuznets curve posits an inverted u relationship between pollution and economic development kuznets s name was apparently attached to the curve by grossman and krueger 1993 who noted its resemblance to kuznets s inverted u relationship between income inequality and development in the first stage of industrialization pollution in the environmental kuznets curve world grows rapidly because people are more interested in jobs and income than clean air and water communities are too poor to pay for abatement and environmental regulation is correspondingly weak the balance shifts as income rises leading industrial sectors become cleaner people value the environment more highly and regulatory institutions become more effective along the curve pollution levels off in the middle income range and then falls toward pre industrial levels in wealthy societies the environmental kuznets curve model has elicited conflicting reactions from researchers and policymakers applied econometricians have generally accepted the basic tenets of the model and focused on measuring its parameters their regressions typically fitted to cross sectional observations across countries or regions suggest that air and water pollution increase with development until per capita income reaches a range of 5000 to 8000 when income rises beyond that level pollution starts to decline as shown in the conventional ekc line in figure 1 in developing countries some policymakers have interpreted such results as conveying a message about priorities grow first then clean up numerous critics have challenged the conventional environmental kuznets curve both as a representation of what actually happens in the development process and as a policy prescription some pessimistic critics argue that crosssectional evidence for the environmental kuznets curve is nothing more than a

some factors affecting mobility in the labor market for academic economists this study examines the effects of publication geographic preferences and institutional preferences on the mobility of academic economists during the period 1955 69 using a sample of 3813 economists who published at least one article during this period the analysis indicates that publications do promote upward mobility but to a limited extent the number of publications rather than their quality promotes mobility but movement occurs primarily within well defined geographic regions the market for academic economists appears to be strongly segmented along geographic lines moves within geographic regions tend to be to departments of equal or lesser prestige than the department from which the individual has moved

when more is less and less is more the role of ideal point availability and assortment in consumer choice contrary to the common wisdom that more choice is always better selections made from large assortments can lead to weaker preferences building on the extant literature this research identifies ideal point availability as a key factor moderating the impact of assortment on choice it is proposed that in the case of large assortments ideal point availability can simplify choice leading to a stronger preference for the selected alternative in contrast for choices made from smaller assortments ideal point availability is proposed to have the opposite effect leading to weaker preferences data obtained from four experiments lend support for the theory and the empirical predictions advanced in this article

competitive price discrimination we model firms as supplying utility directly to consumers the equilibrium outcome of competition in utility space depends on the relationship u between profit and average utility per consumer public policy constraints on the deals firms may offer affect equilibrium outcomes via their effect on u f rom this perspective we examine the profit utility and welfare implications of price discrimination policies in an oligopolistic framework we also show that an equilibrium outcome of competitive nonlinear pricing when consumers have private information about their tastes is for firms to offer efficient two part tariffs

product assortment in a triopolgy producers of super premium ice cream such as haagen dazs offer a smaller assortment of flavors than the producers of lesser quality ice cream examples of this phenomenon can be found in other industries as well in many industries the producers of higher quality products offer a smaller assortment of flavors colors sizes patterns textures fragrances tones styles models designs types or other options this paper explores when and why producers of super premium products should find it profitable to offer a smaller assortment than the producers of nonpremium products we derive a nash equilibrium both on prices and product assortments for a triopoly at the nash equilibrium we show that additional product quality increased consumer price sensitivity and greater assortment costs discourages product assortment we also show that a larger market potential greater competitive costs and sharper competition encourage more assortment by the super premium producer

modeling loss aversion and reference dependence effects on brand choice based upon a recently developed multiattribute generalization of prospect theory s value function tversky and kahneman 1991 we argue that consumer choice is influenced by the position of brands relative to multiattribute reference points and that consumers weigh losses from a reference point more than equivalent sized gains loss aversion we sketch implications of this model for understanding brand choice we develop a multinomial logit formulation of a reference dependent choice model calibrating it using scanner data in addition to providing better fit in both estimation and forecast periods than a standard multinomial logit model the model s coefficients demonstrate significant loss aversion as hypothesized we also discuss the implications of a reference dependent view of consumer choice for modeling brand choice demonstrate that loss aversion can account for asymmetric responses to changes in product characteristics and examine other implications for competitive strategy

does environmental information disclosure benefit waste discharge reduction evidence from china as a tool for regulating the environment in china does environmental information disclosure reduce pollutant discharge to answer this question we empirically analyzed the emission data of the three wastes i e waste gas wastewater and solid waste in unit industrial gdp in 31 provincial units as a measure to reduce institutional emission environmental information disclosure only slightly influenced waste discharge reduction in the implementation period of the eleventh five year plan of china instead command control and market based tools significantly affected waste discharge reduction representative measures included penalties and charges with the continuously enhanced pressure of control environmental information disclosure facilitates the effects of command control tools on waste discharge reduction content analysis of environmental information disclosed by sample listed companies in jiangsu province was conducted the disclosure of insufficient environmental information on emission reduction can be attributed to adverse selection in system performance i e the selective disclosure trend considering greenwashing in the listed companies and to the limited quality of overall environmental information disclosure this study provides empirical evidence for chinese policy makers to improve the system for environmental information disclosure of listed companies

environment friendly behaviour and competitiveness a study of pulp and paper industry in india this paper seeks to examine the relationship between competitiveness and environment friendly behaviour of producers under an economic liberalisation regime for that purpose it employs a probit model and estimates the influence of the prime movers of industrial growth such as technical change and economies of scale on environmental degradation the empirical results of the study of pulp and paper industry identified as one of the most polluting industries in india indicate that these variables as the key players of competitiveness improvement have positive influence on environment friendly behaviour such findings therefore fail to provide support to a view that articulates ruthless exploitation of the environment under economic liberalisation programme

the effect of local consideration sets on global choice between lower price and higher quality a set of alternatives under consideration is often divided into subsets or local sets by some external e g product display format at the store or internal e g a decision rule factor we propose that the manner in which a global set of alternatives varying in price and quality is divided into local sets can have a systematic effect on consumer choice between a lower price alternative and a higher quality alternative three such effects are investigated 1 consumers who first choose from pairs of products a b b c a c and then choose from the set of all three products a b c are more likely to prefer the cheapest alternative than consumers who only choose from the complete set 2 the choice share of a low price low quality brand is greater when alternatives varying in price quality and features are displayed by brand i e each display presents different models of one brand as compared to a display by feature level i e each display presents comparable models of different brands and 3 consumers considering a pair of two option local sets each consisting of different brands and feature levels e g a feature enhanced model of a low quality brand vs a basic model of a high quality brand are more likely to select a feature enhanced model from the global set of four options than those who consider the same alternatives in other local set configurations or consider only the global set these predictions were supported in seven studies which also provided insights into the boundaries of the effects focusing on the paired comparison effect we discuss the theoretical and practical implications of the findings

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

adding asymmetrically dominated alternatives violations of regularity and the similarity hypothesis an asymmetrically dominated alternative is dominated by one item in the set but not by another adding such an alternative to a choice set can increase the probability of choosing the item that dominates it this result points to the inadequacy of many current choice models and suggests product line strategies that might not otherwise be intuitively plausible

the bright side of loss aversion in dynamic and competitive markets a well established phenomenon of consumer buying behavior is that consumers evaluate prices relative to a reference point and exhibit loss aversion i e their propensity to buy is more negatively affected by prices above the reference point than it is positively affected by prices below the reference point the objective of this paper is to analytically examine how the competitive strategy and profitability of firms are affected by the presence of consumer loss aversion in the price dimension although we assume that consumer loss aversion increases consumer propensity to search for lower prices we find that it does not necessarily lead to lower prices or profits when firms compete over multiple periods and when the consumer reference price in subsequent periods is affected by current prices specifically consumer loss aversion could lead to higher prices and profits when consumer valuation is sufficiently high relative to search costs and the proportion of consumers with positive search costs is in an intermediate range we also show that when forward looking firms incorporate the negative effect of price promotions on future profits the equilibrium range of price promotions may actually increase

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

consumer uncertainty and purchase decision reversals theory and evidence this research examines how prepurchase information that reduces consumer uncertainty about a product or service can affect consumer decisions to reverse an initial product purchase or service enrollment decision one belief commonly held by retailers is that provision of greater amounts of information before the purchase reduces decision reversals we provide theory and evidence showing conditions under which uncertainty reducing information provided before the purchase decision can actually increase the number of decision reversals predictions generated from an analytical model of consumer behavior incorporating behavioral theory of reference dependence are complemented by empirical evidence from both a controlled behavioral experiment and econometric analysis of archival data combined the theory and evidence suggest that managers should be aware that their information provision decisions taken to reduce decision reversals may actually increase them data as supplemental material are available at http dx doi org 10 1287 mksc 2015 0906

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

determinants of pollution abatement in developing countries evidence from south and southeast asia abstract developing countries pa ticularly those in asia are fast adopting industrial pollution control standards similar to those in developed countries formal regulation has been greatly hampered however by the absence of clear and legally binding regulations limited institutional capacity lack of appropriate equipment and trained personnel and inadequate information on emissions one would predict highly pollution intensive production under such conditions our research however has uncovered strongly contradictory evidence despite weak or nonexistent formal regulation there are many clean plants in the developing countries of south and southeast asia of course there are also many plants which are among the world s most serious polluters what explains such extreme interplant variation this paper reviews evidence drawn from three empirical studies of plant level abatement practices conducted 1992 1994 the analyses test the importance of plant characteristics economic considerations and external pressure in determining environmental performance the results consistently show that pollution intensity is negatively associated with scale productive efficiency and the use of new process technology it is strongly and positively associated with public ownership but foreign ownership has no significant effect once other plant characteristics are taken into account among external sources of pressure community action or informal regulation emerges as a clear source of interplant differences in all three studies the results suggest that local income and education are powerful predictors of the effectiveness of informal regulation they also show that existing formal regulation has measurably beneficial effects even when it is quite weakly developed

context dependent preferences the standard theory of choice based on value maximization associates with each option a real value such that given an offered set the decision maker chooses the option with the highest value despite its simplicity and intuitive appeal there is a growing body of data that is inconsistent with this theory in particular the relative attractiveness of x compared to y often depends on the presence or absence of a third option z and the market share of an option can actually be increased by enlarging the offered set we review recent empirical findings that are inconsistent with value maximization and present a context dependent model that expresses the value of each option as an additive combination of two components a contingent weighting process that captures the effect of the background context and a binary comparison process that describes the effect of the local context the model accounts for observed violations of the standard theory and provides a framework for analyzing context dependent p

quantity discounts managerial issues and research opportunities marketing managers frequently administer pricing policies involving substantial quantity discounts however our understanding of the precise role of these discounts and their design is quite limited this paper reviews and integrates the economics and marketing literature and presents a detailed analysis of the policies of four firms in order to i specify the variety of motivations for quantity discounts ii provide guidelines to managers in designing quantity discount schedules and iii set out the most fruitful directions for future research

consumer deliberation and product line design this paper studies optimal product line design when consumers need to incur costly deliberation to uncover their valuations for quality to induce deliberation a firm must maintain quality dispersion and cut the price of the high end product so that consumers are motivated to deliberate in the hope that high end consumption fits their needs to prevent deliberation the firm may have to offer downgraded quality at a low price so that an impulsive purchase will not appear too wasteful whether the firm should induce deliberation depends on how much surplus it creates by aligning the supply of quality with heterogeneous demand for quality and how much surplus it captures during this process interestingly equilibrium firm profit consumer surplus and social welfare can all increase with the cost of deliberation we extend the model to accommodate consumers heterogeneous prior beliefs of their valuations for quality we also discuss how market research could benefit from taking into account the endogeneity of consumer deliberation

optimal product line pricing the influence of elasticities and cross elasticities the authors focus on the determination of optimal prices for products in a product line most firms offer more than a single brand and ultimately are concerned with the overall results of the enti

contextual inference in markets on the informational content of product lines context can influence decisions this malleability of choice is usually invoked as evidence that people do not maximize stable preference orderings in a market equilibrium however context conveys payoff relevant information to consumers consequently these consumers rationally violate naive formulations of standard choice theoretic principles i identify informational asymmetries under which apparently anomalous behaviors namely the compromise effect and choice overload arise as market equilibria firms respond to consumers contextual inference in case of the compromise effect a firm may introduce premium loss leaders expensive goods of overly high quality that increase the demand for other goods

multiproduct nonlinear pricing typically work on mechanism design has assumed that all private information can be captured in a single scalar variable this paper explores one way in which this assumption can be relaxed in the context of the multiproduct nonlinear pricing problem it is shown that the firm will choose to exclude some low value consumers from all markets a class of cases that allow explicit solution is derived by making use of a multivariate form of integration by parts in such cases the optimal tariff is cost based

a rational reconstruction of the compromise effect using market data to infer utilities this article explores the possibility that consumers use market data to make inferences about product utilities the argument is made by means of an example based on the compromise effect found in extant experimental data this phenomenon is generally looked at as a manifestation of deviations from rationality in choice however assuming full rationality i describe a decision rule that is based on consumers inferences about their personal valuation of alternatives from the portfolio of market offerings and some information about their own relative tastes through a number of examples i will argue that consumers often use this or similar decision rules to make inferences about utility i then show that the decision rule may generate compromise effects in experiments and that it may be sustainable the compromise effect could therefore be seen as preliminary evidence that consumers make such inferences

optimal product line design when consumers exhibit choice set dependent preferences in a market of consumers with varying willingness to pay using product line as a discrimination tool may extract higher profits than serving all consumers with a single product local context effects however point to yet another consideration in designing product lines how the appeal of a product changes with the context provided by other products in the choice set i present a model of product line design that incorporates both discrimination and context management goals and offers recommendations for the variety and positioning of products to this end the model makes use of a framework that allows preferences to be choice set dependent given this framework i study how the firm manages externalities between products created by such dependencies the firm creates distortions above and beyond those resulting from discrimination motives alone for example in a vertically differentiated market for quality quality distortions exist even for the consumers with the highest valuations the range of quality provisions given the number of products is compressed as the relative importance of unfavorable comparisons among products increases surprisingly this compression may even lead the firm to forego discrimination among consumers regardless of the cost of offering distinct products

choice based on reasons the case of attraction and compromise effects building on previous research this article proposes that choice behavior under preference uncertainty may be easier to explain by assuming that consumers select the alternative supported by the best reasons this approach provides an explanation for the so called attraction effect and leads to the prediction of a compromise effect consistent with the hypotheses the results indicate that 1 brands tend to gain share when they become compromise alternatives in a choice set 2 attraction and compromise effects tend to be stronger among subjects who expect to justify their decisions to others and 3 selections of dominating and compromise brands are associated with more elaborate and difficult decisions

measuring cross category price effects with aggregate store data our objective is to understand the cross category effects of marketing activities using aggregate store level scanner data for this we provide a framework derived from household utility maximizing behavior which assumes that a household chooses the bundle of products with the highest utility we use a second order taylor series approximation to an arbitrary utility function to represent bundle utility aggregate sales or shares in each category are derived under the assumption that households are heterogeneous in their preferences and in their sensitivities to marketing activities our estimation accounts for potential price endogeneity in demand using store level scanner data on four product categories liquid laundry detergents powdered laundry detergents liquid fabric softeners and sheet fabric softeners we find evidence for a complementary relationship between liquid softeners and both forms of detergents we also find that the magnitude of cross category elasticities are brand specific i e different brands in a category have a different price impact on the demand for a brand in another category the results have implications for retailers in terms of the potential need for cross category management as well as for manufacturers such as procter gamble that participate in all four categories we compare our model with a log log regression specification on three criteria estimated elasticities hold out sample predictions and retailer cross category pricing we find that the proposed model produces more reasonable estimates relative to the log log model it predicts better and is more useful for pricing purposes further in a simulation study we show that our proposed model can recover the elasticities from a data generating process that simulates household level joint outcomes across categories even after these data have been aggregated to brand level shares within each category by contrast the log log regression model is unable to do so

informal regulation of pollution in a developing country evidence from india abstract recent policy discussions recognise the limitations of formal regulations to stem pollution in developing countries as a result there is a growing interest in the potential of informal regulations to achieve environmental goals in india many polluting industries fall under the rubric of the unorganised sector in such a context localised pollution may be influenced by discussions and reports on pollution in the vernacular press this study attempts to test the hypothesis that the press can act as an informal agent of pollution control this hypothesis is tested using monthly water pollution data from four hot spots in the state of gujarat india for the period 1996 to 2000 the results show that the press can function as an informal regulator if there is sustained interest in news about pollution however not all pollution agents are affected by pollution news press coverage appears to mainly influence industrial estates with a mix of small medium and large industries

rationalizing choice with multi self models this paper studies a class of multi self decision making models proposed in economics psychology and marketing in this class choices arise from the set dependent aggregation of a collection of utility functions where the aggregation procedure satises some simple properties we propose a method for characterizing the extent of irrationality in a choice behavior and use this measure to provide a lower bound on the set of choice behaviors that can be rationalized with n utility functions under an additional assumption scale invariance we show that generically at most ve reasons are needed for every mistake

the discriminating consumer product proliferation and willingness to pay for quality abstract the authors propose that a crowded product space motivates consumers to better discriminate between options of different quality specifically this article reports evidence from three controlled experiments and one natural experiment that people are prepared to pay more for high quality products and less for low quality products when they are considered in the context of a dense as opposed to a sparse set of alternatives to explain this effect the authors argue that consumers uncertain about the importance of quality learn from observing market outcomes product proliferation reveals that other consumers care to discriminate among similar alternatives and in turn this inference raises the importance of quality in decision making

research note price discrimination as an adverse signal why an offer to spread payments may hurt demand firms often search enthusiastically for distinguishing traits that they may use to price discriminate between segments yet there are occasions in which firms forgo the opportunity to price discriminate and instead charge a single price traditional explanations for why retailers forgo the opportunity to price discriminate focus on the cost of discriminating including operational costs explicit discrimination costs and implicit discrimination costs in this paper we identify an additional reason for why firms may forgo an opportunity to price discriminate by revealing that a product is being sold to a broad range of segments a retailer implicitly claims that the product is suitable for each segment however claiming that a premium quality product is suitable for price sensitive consumers undermines the credibility of a retailer s quality claim the signaling explanation was motivated by extensive discussions over more than a year with a major catalog retailer that sells premium quality jewelry and gifts discussions with managers revealed that they were reluctant to use any price discrimination mechanism that signals their products are targeted at price sensitive customers for example the catalog does not include sale or clearance sections and does not target more price sensitive customers by using separate items however management was under some pressure to consider installment billing offers which allow customers to pay over a series of periods rather than in a lump sum management feared that offering installment billing may adversely affect customers quality perceptions and demand to investigate this issue we develop a general game the oretic model illustrate how the model extends to installment billing and conduct a large scale field test the general model illustrates how selling to multiple segments may lead to an adverse quality signal we illustrate how the model extends to installment billing offers in a direct mail catalog installment billing offers allow customers to spread the total payment over a series of payments all customers have the option of using installment billing and customers who use the plan receive an economic benefit an interest free loan we would normally expect this type of offer to increase demand or at a minimum leave demand unchanged however because installment billing offers target credit constrained customers we predicted that the introduction of installment billing would prompt an unfavorable quality inference and reduce demand among quality sensitive customers we empirically investigated this prediction in a large scale field test with a catalog that offers premium quality jewelry and gifts two versions of the catalog were created a test version that contained an installment billing offer and a control version in which installment billing was not offered importantly the prices in both the test version and control version were identical approximately 240 000 catalogs were mailed and customers were randomly assigned to either the test version or control version results show that the installment billing offer test version was associated with both a reduction in the number of orders received and a reduction in aggregate revenue offering installment billing resulted in approximately 15 000 in lost revenue the only plausible explanation for this counterintuitive finding appears to be the signaling theory to investigate the long term effects the catalog agreed to survey their customers to measure how an offer of installment billing affects their customers quality perceptions similar to the field test two versions of a catalog were created and customers were randomly mailed a catalog along with a short survey respondents were asked to browse through the catalog and return their responses in a replypaid envelope the findings are consistent with customer beliefs in the signaling model offering installment billing lowers the perceived quality of the items in the catalog the field test and survey findings were both statistically significant and managerially relevant together the results convinced the catalog not to include installment billing offers in future catalogs

a general choice model for bundles with multiple category products application to market segmentation and optimal pricing for bundles abstract the attribute based approach to study customer choices cannot deal with bundles of heterogeneous components which are usually drawn from different product categories the authors develop the comparability based balance model which is a unified framework for modeling bundle choices the model can be employed for any bundle regardless of the heterogeneity of bundle components under a pure bundling strategy the conjoint model and balance model are special cases of the general model the authors use mixture distributions in a hierarchical bayesian framework to incorporate consumer heterogeneity in a more flexible manner than the extant approaches such as latent class and random coefficient models the empirical tests of the model show that most attribute effects are significant and consistent with the model s predictions the model is superior to those that do not consider the issues of comparability of attributes latent class structure and heterogeneity among respondents the authors show how

anticipated regret and product innovation when a firm introduces a product with new features some consumers may find it difficult to assess their valuations for these new attributes their purchase decisions made under such uncertainty may lead to postpurchase regret it has been experimentally shown that consumers may anticipate their potential postpurchase regret and make their current choices to mitigate or minimize it that is a consumer s anticipated regret can significantly impact his purchase decision given the trend that firms in various markets invoke regret to stimulate sales this paper analytically explores whether and how anticipated regret affects competing firms profits and product innovation our analyses reveal that the presence of anticipated regret can increase or decrease firms profits and foster or hinder product innovation depending on whether it makes the consumer segments more or less polarized in other words anticipated regret has a nonmonotonic effect on firms profits and the entrant s optimal quality therefore