minimum market share this paper analyzes a specific model of oligopolistic competition involving product differentiation marketing activities and economies of scale in production this model is consistent with sales response models which have been justified on theoretical and empirical bases it is shown that at a nash equilibrium each firm must have market share equal to zero or greater than a threshold value this result has implications for determination of minimum firm size the effectiveness of a low market share strategy entry barriers and the likelihood of concentration in an industry the paper explores these implications and relates them to various theories and hypotheses in industrial organization and strategic planning

competitive market structure analysis a reply szs base their discussion upon four categories of features that they contend a comprehensive method of market structure analysis should possess since we offer cmsa as a comprehensive behavioral approach for identifying competitive market structures we also offer our interpretations of what comprehensive and ideal comprehensive behavioral approaches ought to encompass in addition we discuss briefly the important differences between perceptual and behavloral approaches because we perceive a portion of szs s criticisms of cmsa not as problems but as characteristics of behavioral approaches in general since behavioral and perceptual approaches ought to be used as complements and not as substitutes their distinct roles must be recognized revealed market structure vs potential market structure

the demand for beer wine and spirits a survey of the literature the demand for alcohol literature is vast and much conflicting information about the nature of the demand for alcoholic beverages has been published this paper presents a survey of the literature and then uses the technique of meta regression analysis to establish insights into the nature of the demand for beer wine and spirits unlike previous meta studies of the demand for alcoholic beverages this study adjusts for the precision of each elasticity estimate the analysis presented suggests reported elasticity estimates will be influenced by such factors as estimation technique data frequency and time period under consideration with respect to time the findings suggest that the demand for alcoholic beverages has become less inelastic since the mid 1950s and that the income elasticity has been falling since the mid 1960s the analysis also found support for the idea that alcohol as a commodity group is a necessity and that consumers respond to price discounting with inventory behaviour rather than true substitution behaviour little support is found for the idea that the demand for alcoholic beverages varies fundamentally across most countries although wine may be an exception language en

structural workshop paper discrete choice models of consumer demand in marketing marketing researchers have used models of consumer demand to forecast future sales to describe and test theories of behavior and to measure the response to marketing interventions the basic framework typically starts from microfoundations of expected utility theory to obtain an econometric system that describes consumers choices over available options and to thus characterize product demand the basic framework has been augmented significantly to account for quantity choices to accommodate purchases of several products on a single purchase occasion multiple discreteness and multicategory purchases and to allow for asymmetric switching between brands across different price tiers these extensions have enabled researchers to bring the analysis to bear on several related marketing phenomena of interest this paper has three main objectives the first objective is to articulate the main goals of demand analysis forecasting measurement and testing and to highlight several considerations associated with these goals our second objective is to describe the main building blocks of individual level demand models we discuss approaches built on direct and indirect utility specifications of demand systems and we review extensions that have appeared in the marketing literature the third objective is to explore a few emerging directions in demand analysis including considering demand side dynamics combining purchase data with primary information and using semiparametric and nonparametric approaches we hope researchers new to this literature will take away a broader perspective on these models and see the potential for new directions in future research

competitive maps the structure underlying asymmetric cross elasticities a special case of three mode factor analysis is used to portray the systematic structure underlying asymmetric cross elasticities for a broad class of market share attraction models analysis of the variation over retail outlets and weeks reveals competitive patterns corresponding to sales for the major brands in the market as well as patterns reflecting shelf price competition analysis of the brand domain results in a joint space one set of brand positions portrays how brands exert influence over the competition the other set of points portrays how brands are influenced by others the interset distances angles provide direct measures of competitive pressures maps are formed as spatial representations of each of the competitive patterns discovered

note extending the rotterdam model to test hierarchical market structures two issues that have implications across a firm s marketing activities are the estimation of the market response functions and the determination of the structure of the market in which its products compete in a recent paper clements and selvanathan clements k w e a selvanathan 1988 the rotterdam demand model and its application to marketing marketing sci 7winter 60 75 describe how the rotterdam demand system can be used to study these two issues in a joint framework in this note we extend their model to test hierarchical market structures using data at the brand form level we also incorporate idiosyncratic response coefficients that capture the effects of advertising and or other nonprice marketing mix variables separate from the effects of a price change these extensions provide additional insights into the nature and extent of competition among brands within a product class

measuring the effects of new brand introduction on inter brand strategic interaction this paper empirically investigates the effects of a new brand introduction on the market structure of a product market i e the nature of competition among existing brands the model is based on the discrete choice multinomial logit model in which the household specific brand intercepts are decomposed into brand locations in attribute space and households importance weights for these attributes the formulation also incorporates the effects of marketing variables on brand choice behavior the relative proximity of brands in the attribute space provides a measure of the intensity of competitive rivalry among brands a new brand introduction results in an additional location in this space three consequences of the introduction are investigated i impact on brand locations of extant brands ii change in the importance weights assigned by households to the attributes iii effects on households sensitivities to marketing activities as some or all of the above could change these three effects result in eight combinations that need to be studied the general model is one in which all three components are allowed to change and this nests the remaining seven specifications the specification that is most consistent with the data can therefore be isolated via a statistical test of nested hypotheses identifying the consequences of the introduction for market structure has implications for managerial action an empirical application of the model to household scanner panel data using liquid laundry detergents is provided

competitive market structure analysis a comment on problems d etermination of market definition and structure are topics which have sparked considerable interest among marketing analysts in recent years resulting in numerous methodological approaches designed to aid managers in developing a better understanding of the markets their products serve or hope to serve see day shocker and srivastava 1979 urban and hauser 1980 and bourgeois haines and sommers 1981 for descriptions of such methods and for excellent literature summaries and critiques this proliferation of interest has at least two distinct interpretations that the area is an important one influencing decisions of considerable strategic and tactical consequence to the firm and that no one has yet evolved a totally satisfactory approach to these problems day et al 1979 concluded that market definition is inevitably arbitrary and that methods for defining markets should consequently be much affected by the managerial purposes they are designed to serve much of the work which has followed has made useful progress and has become increasingly sophisticated in handling the vagaries involved in the related problems of determining both market definition and market structure nevertheless published approaches to determining market structure have generally attacked only pieces of the problem each has exhibited certain weaknesses that researchers continue to find exceedingly difficult to eliminate in particular we contend that a comprehensive method of market structure analysis is one which possesses at a minimum 1 a means for specifying the appropriate set of products for analysis or alternatively for producing consistent results regardless of the set of products employed for example if powdered drink mixes were added to the set of soft drink products there would already be a universal or global structure to the market each particular subset of products should produce a unique structure the structure of a market i e the relationships among any subset of existing products at a given time should not be altered by the addition of other products since the representation is supposedly descriptive addition of unique products over time may of course alter future market structures

incorporating reference price effects into a theory of consumer choice although there has been a good deal of research on incorporating the effects of reference price formation into empirical models of consumer buying behavior little formal theoretical work had been undertaken to date this paper incorporates reference price effects into the traditional economic theory of consumer choice and examines the effects of reference price formation on the results of the traditional theory its marketing implications and the implications for empirical models which examine the effects of reference price formation on actual consumer behavior several implications of the theoretical model are empirically tested using weekly retail egg sales data from southern california this analysis indicates that reference price formation does have significant effects on consumer behavior furthermore these effects are asymmetric with consumers two and a half times more responsive to egg price increases that are in excess of the reference price than they are to comparable egg price decreases

economic and demographic factors in australian alcohol demand in the last two decades total pure alcohol consumption in australia has declined by about 31 and currently it is at the same level as it was in the 1950s australians consumed about 10 litres of pure alcohol per person in 1982 and now the level has declined to about 7 litres of pure alcohol per person during the last four decades per capita beer consumption has reached a peak of 140 litres in 1975 and has fallen to a low 93 litres in 1999 wine consumption has increased four fold while spirits consumption has stayed around the same level this paper using the australian consumption data for beer wine and spirits for the period 1956 1999 aims to explain the change in consumption patterns of beer wine and spirits by considering the effects due to changes in economic and demographic factors the results show that while income and prices significantly influence the consumption patterns of alcohol the increasing australian elderly population also plays an important role

salience and consumer choice we present a theory of context dependent choice in which a consumer s attention is drawn to salient attributes of goods such as quality or price an attribute is salient for a good when it stands out among the good s attributes relative to that attribute s average level in the choice set or more broadly the choice context consumers attach disproportionately high weight to salient attributes and their choices are tilted toward goods with higher quality price ratios the model accounts for a variety of disparate evidence including decoy effects and context dependent willingness to pay it also suggests a novel theory of misleading sales

fairness incentives and contractual choices this paper examines how the presence of a non negligible fraction of reciprocally fair actors changes the provision of incentives through contracts we provide experimental evidence that principals have a strong preference for less complete contracts although the standard self interest model predicts that they should prefer the more complete contract our theoretical analysis shows that fairness concerns can explain this preference for less completeness fair principals keep their promises which provides strong pecuniary incentives through an incomplete contract selfish principals free ride and exploit the agents counter intuitively selfish agents are induced to work by an incomplete contract while fair agents shirk

simultaneous decision making in competitive and cooperative environments we experimentally investigate simultaneous decision making in two contrasting environments a competitive environment a contest and a cooperative environment a voluntary contribution mechanism we find that the cooperative nature of the voluntary contribution mechanism spills over to the contest decreasing sub optimal overbidding in the contest however contributions to the public good are not affected by simultaneous participation in the contest there is a significant negative correlation between decisions made in competitive and cooperative environments i e more cooperative subjects tend to be less competitive and vice versa this correlation can be rationalized by heterogeneous social preferences towards inequality but not by bounded rationality theory

technical note aggregating individual purchases to the household level household level panel data are the input for many types of marketing studies an interesting but until now unaddressed question is what is the effect of aggregating individual members purchases to the household level under standard assumptions the answer is unambiguous the household brand switching pattern looks more zero order than the typical individual family member s behavior when the standard assumptions are relaxed the overall spirit of the results do not change these conclusions give comfort to those who use brand switching data to partition product categories those looking for variety seeking behavior from household data are given some cause for concern as well as reasons for reinterpreting previous studies

inertia and variety seeking in a model of brand purchase timing previous research on state dependence indicates that a brand s purchase probabilities vary over time and depend on the levels of inertia and variety seeking and on the identity of the previously purchased brand brand choice probabilities obtained from models such as the logit and the probit are however fixed over time conditional on the previous brand purchased and on the levels of marketing variables consequently state dependence has largely been studied as a time invariant phenomenon in brand choice models with the levels of inertia and variety seeking assumed to be constant over time to account for the time varying nature of state dependence would require a model in which brand switching probabilities depend upon interpurchase times one modeling framework that can account for this dependence is based on the hazard function approach the proposed approach works as follows all other factors being equal an inertial household purchasing a brand on a particular occasion is most likely to repurchase that brand on the next occasion if the household switches it will be to a brand located perceptually close in attribute space to the previously purchased brand in other words an inertial household has the highest switching hazard for the same origin and destination brands with a progressively lower hazard rate for brands perceptually located farther and farther away from the origin brand the amount by which the hazard is lowered depends upon the perceptual distance and the inertia level of the household on the other hand if the household is variety seeking the most likely brand purchased would be a brand located farthest away from the previously purchased brand in attribute space in other words the hazard rate of repurchase is the lowest with the rate increasing with the distance of the destination brand from the origin brand and the level of that household s variety seeking tendency the effects of inertia and variety seeking are therefore incorporated at the attribute level into a brand purchase timing model in doing so we attempt to provide greater insight into the nature of state dependence in models of purchase timing our model and estimation procedure will enable us to distinguish between households that are inertial and those that are variety prone in addition to accounting for state dependence the model also accounts for the effects of unobserved heterogeneity among households in their brand preferences and in their sensitivities to marketing activities a majority of studies in marketing using the hazard function approach to investigate purchase timing have not accounted for heterogeneity in marketing mix effects the study integrates recent methods that incorporate the effects of inertia and variety seeking in brand choice models with a semi markov model of purchase timing and brand switching the proposed model enables us to 1 infer market structure via a perceptual map for the sample households and 2 investigate implications for the introduction of a line extension we provide empirical applications of the proposed method using three different household level scanner panel data sets we find that differing levels of inertia and variety seeking characterize the three data sets the findings are consistent with prior beliefs regarding these categories in addition our results indicate that the nature of interbrand purchase timing behavior depends upon the extent of inertia or variety seeking in the data we are also able to characterize the structure of the three product markets studied this provides implications for interbrand rivalry in the market further we demonstrate how the model and results can be used to predict the location of a line extension in the perceptual space of households finally we obtain implications for the timing of brand promotions

choice map inferring a product market map from panel data this paper describes choice map a model that infers a product market map from panel data choice map is a stochastic brand choice model a random utility quantal choice model and a multidimensional scaling procedure choice map combines the parsimony of stochastic choice models the rationale of random utility models and the ability of multidimensional scaling procedures to simultaneously infer both brand positions and consumer preferences from preference choice data choice map assumes that consumers have stationary purchase probabilities for the observational period which makes the model best suited to frequently bought mature product categories neither experimental nor survey data are required traditional mapping methods that scale such data may not yield the same structure for low involvement products as will a procedure like choice map that scales behavioral data choice map s descriptive and predictive validity exceeds that of an alternative stochastic brand choice model the dirichlet multinomial for a test data set

a sparsity based model of bounded rationality this article defines and analyzes a sparse max operator which is a less than fully attentive and rational version of the traditional max operator the agent builds as economists do a simplified model of the world which is sparse considering only the variables of first order importance his stylized model and his resulting choices both derive from constrained optimization still the sparse max remains tractable to compute moreover the induced outcomes reflect basic psychological forces governing limited attention the sparse max yields a behavioral version of basic chapters of the microeconomics textbook consumer demand and competitive equilibrium i obtain a behavioral version of marshallian and hicksian demand arrow debreu competitive equilibrium the slutsky matrix the edgeworth box roy s identity and so on the slutsky matrix is no longer symmetric nonsalient prices are associated with anomalously small demand elasticities because the consumer exhibits nominal illusion in the edgeworth box the offer curve is a two dimensional surface rather than a one dimensional curve as a result different aggregate price levels correspond to materially distinct competitive equilibria in a similar spirit to a phillips curve the arrow debreu welfare theorems typically do not hold this framework provides a way to assess which parts of basic microeconomics are robust and which are not to the assumption of perfect maximization jel codes d01 d03 d11 d51

a unified approach to identifying estimating and testing demand structures with aggregate scanner data a one to one map between a specific demand structure and a restricted cross elasticity matrix is developed and tested using a random utility model the resulting demand structure can be used to evaluate a firm s ability to differentiate its products and can help determine if demand is characterized by factors that are easy to change similar brands are assumed to share common attributes that are stochastically evaluated by the consumer resulting in a random utility model with correlated errors the map results in more precise cross elasticity estimates and can be used to both identify and test possible structures

global business cycles convergence or decoupling we analyze the evolution of the degree of global cyclical interdependence over the period 1960 2008 using a dynamic factor model we decompose macroeconomic fluctuations in output consumption and investment into a global factor factors specific to country groups and country specific factors we find that during 1985 2008 there is some convergence of business cycle fluctuations among industrial economies and among emerging market economies surprisingly there is a concomitant decline in the relative importance of the global factor we conclude that there is evidence of business cycle convergence within each of these two groups of countries but divergence or decoupling between them

examining asymmetries in the transmission of monetary policy in the euro area evidence from a mixed cross section global var model abstract i estimate the transmission of a common euro area monetary policy shock across individual euro area economies to do so i develop a global var model in which all euro area economies are included individually while at the same time their common monetary policy is modelled as a function of euro area aggregate output growth and inflation the results suggest that the transmission of monetary policy across euro area economies displays asymmetries and that in line with economic theory these are driven by differences in economies structural characteristics in particular euro area economies in which a higher share of aggregate output is accounted for by sectors servicing interest rate sensitive demand exhibit a stronger transmission of monetary policy to real activity similarly even though the evidence is less conclusive euro area economies which feature more real wage and or fewer unemployment rigidities also appear to display a stronger transmission of monetary policy to real activity

when does lag structure really matter in optimizing advertising expenditures a paper by bultez and naert in the may 1979 issue of management science tentatively concludes that profits are relatively insensitive to misspecification of the lag structure of advertising we examine the conditions under which a firm s profits are most likely to be sensitive to the misspecification of the lag structure our analysis indicates how this sensitivity is related to a the form of the true lag structure b the demand function c the cost function and d the firm s discount rate

international business cycles world region and country specific factors the paper investigates the common dynamic properties of business cycle fluctuations across countries regions and the world we employ a bayesian dynamic latent factor model to estimate common components in macroeconomic aggregates output consumption and investment in a 60 country sample covering seven regions of the world the results indicate that a common world factor is an important source of volatility for aggregates in most countries providing evidence for a world business cycle we find that region specific factors play only a minor role in explaining fluctuations in economic activity we also document similarities and differences across regions countries and aggregates jel f41 e32 c11 c32

investigating household purchase timing decisions a conditional hazard function approach the purchase timing decision is an important component of the dynamics of a household s purchase behavior this decision is influenced by marketing and other variables and the modeling of this dependence has recently received attention in the literature in this paper we build on previous studies and develop a comprehensive stochastic model that incorporates the major factors influencing interpurchase times specifically we use a generalized version of cox s proportional hazard model to test among competing probability distributions for the interpurchase times while incorporating effects due to marketing variables observed household characteristics and unobserved heterogeneity across households the empirical finding from analyzing the iri coffee data suggests that the interpurchase times cannot be adequately described by probability distributions such as exponential erlang 2 or weibull the effects of unobserved heterogeneity are significant and they impact the estimates of the effects of the covariates we also find that a nonparametric procedure for estimating the effects of unobserved heterogeneity provides the best overall fit to the data and yields covariate estimates that are more consistent with prior expectations our model is validated by replicating the substantive empirical findings on an additional product category

the demand for beer wine and spirits a systemwide analysis the systemwide approach to the analysis of consumer demand considers the multivariate structure of the problem in which the consumer allocates his income to all goods simultaneously this approach combines the theory of the consumer with empirical analysis and has enjoyed much popularity over the past decade for surveys of these developments see brown and deaton 1972 phlips 1974 powell 1974 theil 1975 76 1980 barten 1977 and theil and clements 1980 most previous applications of the systemwide approach have used national accounts commodity groups food clothing housing and so on for many business and government policy purposes however these groups are much too broad for example to analyze the effects on consumption of all but the simplest changes in indirect taxes we would need considerably more disaggregation similarly market researchers need to analyze demand at the individual product level for purposes of forecasting and formulating pricing and other policies the objective of this paper is to use the consumption of beer wine and spirits to illustrate how the approach can be apthis paper illustrates how the systemwide approach to consumer demand can be extended so that it can be applied to narrowly defined commodity groups we use the consumption of beer wine and spirits to show how the approach can be applied to estimate income and price elasticities of demand when the consumer s utility function is appropriately separable in alcoholic beverages and all other goods it is possible to confine our attention to the three beverages and ignore all other goods we use the demand model for a number of simulations designed to analyze the rapid growth of wine consumption we are indebted to john davis peter goldschmidt and kal stening for excellent research assistance to michael wohlgenant and henri theil for helpful comments and discussion and to the new south wales drug and alcohol authority for their partial financial support of this research

competitive market structures a subset selection analysis market structure models are used to identify submarkets or to test for the presence of submarkets where within group competition is much stronger than across group competition the implicit assumption in such models is that the brands in a submarket compete on the basis of their shared product features however if significant variety seeking effect exist in the market such an assumption may not be valid we present a model based on a subset selection procedure for analyzing competitive market structures and develop tests of significance for variety seeking effects present in the market for each brand in the market the subset selection procedure identifies sets submarkets of brands that are in close competition the competitive market structure is defined by the possibly overlapping submarkets that are identified for each brand and the model provides insights on whether the brands in a submarket are of a reinforcing or a variety seeking kind the application of our model to two different consumer packaged goods markets highlights its contribution relative to extant methods

cross country alcohol consumption comparison an application of the rotterdam demand system this paper analyses the consumption patterns of the three beverages beer wine and spirits in nine countries australia canada finland japan new zealand norway sweden the uk and the us using the rotterdam demand system a cross country comparison of the results shows that in most countries i wine consumption has grown at a fasteer rate than beer and spirits ii the proportion of consumers expenditure on alcohol is declining iii beer is a necessity and spirits is a luxury iv the demand for the three beverages is price inelastic and iv all three beverages are pair wise substitutes we also investigated the hypothesis of identical parameters for all countries by pooling the data across countries and found that the data do not support the hypothesis

testing competitive market structures an accurate understanding of the structure of competition is important in the formulation of many marketing strategies for example in new product launch product reformulation or positioning decisions the strategist wants to know which of his competitors will be most affected and hence most likely to respond many marketing science models have been proposed to identify market structure in this paper we examine the managerial problem and propose a criterion by which to judge an identified market structure basically our criterion is a quantification of the intuitive managerial criterion that a submarket is a useful conceptualization if it identifies which products are most likely to be affected by our marketing strategies we formalize this criterion within the structure of classical hypothesis testing so that a marketing scientist can use statistical statements to evaluate a market structure identified by 1 behavioral hypotheses 2 managerial intuition or 3 market structure identification algorithms mathematically our criterion is based on probabilities of switching to products in the situation where an individual s most preferred product is not available submarkets are said to exist when consumers are statistically more likely to buy again in that submarket than would be predicted based on an aggregate constant ratio model for example product attributes e g brand form size use situations e g coffee in the morning versus coffee at dinner and user characteristics e g heavy versus light users are specified as hypotheses for testing alternate competitive structures measurement and estimation procedures are described and a convergent approach is illustrated an application of the methodology to the coffee market is presented and managerial implications of six other applications are described briefly

competitive market structure analysis principal partitioning of revealed substitutabilities in this paper competitive market structure analysis cmsa is introduced the approach is based on a behavioral model of revealed consumer substitution and utilizes principal component analysis of revealed substitutabilities to identify groups of competing brands or products in a market the proposed partitioning criterion the index of revealed substitutability irs yields estimates of the degrees of competition between all pairs of items in a market through use of household interpurchase times the proposed partitioning methodology principal partitioning pp identifies groups of competing items through the use of principal component analysis of irs values through combination of the partitioning criterion measure and methodology competitive market structures are analytically identified

a model of focusing in economic choice we present a generally applicable theory of focusing based on the hypothesis that a person focuses more on and hence overweights attributes in which her options dier more our model predicts that the decisionmaker is too prone to choose options with concentrated advantages relative to alternatives but maximizes utility when the advantages and disadvantages of alternatives are equally concentrated in intertemporal choice because the relative concentrations of an option s costs and benets can be dierent from the perspective of a single period and the perspective of the entire choice problem the decisionmaker often exhibits a form of time inconsistency she is present biased when the costs of current misbehavior are distributed over many future dates such as in harmful consumption but future biased when the benet of many

assessing monetary policy in the euro area a factor augmented var approach in order to overcome the omitted information problem of small scale vector autoregression var models this study combines the var methodology with dynamic factor analysis and assesses the effects of monetary policy shocks in the euro area in the period during which there is a single monetary policy using the factor augmented vector autoregressive favar approach of bernanke et al 2005 we summarize the information contained in a large set of macroeconomic time series with a small number of estimated factors and use them as regressors in recursive vars to evaluate the impact of the nonsystematic component of the european central bank s ecb s actions overall our results suggest that the inclusion of factors in the var allows us to obtain a more coherent picture of the effects of monetary policy innovations both by achieving responses easier to understand from the theoretical point of view and by increasing the precision of such responses moreover this framework allows us to compute impulse res

an empirical investigation of the dynamic mcfadden model of purchase timing and brand choice implications for market structure purchase timing and brand choice decisions of households are jointly investigated using the dynamic mcfadden model of heckman and singer the hazard of brand purchase is decomposed into the category purchase hazard and the probability of brand choice conditional on category purchase the former is modeled using the hazard function approach and the latter using a logit model unobserved heterogeneity in brand preferences marketing effects and baseline hazard parameters is accounted for in the empirical analysis the distribution of preference heterogeneity identifies the locations of brands in multiattribute perceptual space and the distribution of attribute importance weights across households

chapter 6 market share models publisher summary this chapter describes that three basic principles motivate the specification of the market share models market share models should be competitive descriptive as well as predictive and profit oriented being fundamentally competitive implies that one cannot know the effect or effectiveness of a marketing action without accounting for the actions of competitors market share models are models for understanding how the marketing efforts of every brand impact the results in a competitive marketplace only by describing the influence of each marketing instrument can one gain a basis for marketing planning prediction alone is not enough time series models that forecast the future from the past sales provide no insight into how sales are generated the emphasis on being descriptive also embraces the need to understand the areas in which consumer choice probabilities are synonymous with market shares as well part of the goal of description transcends what can be done by market share models alone managers need to understand that their efforts have potentially competitive effects and potentially market expansive effects in sales response models these effects are comingled but by combining descriptive market share models for the competitive effects with descriptive category volume models for the market expansive effects managers obtain a much richer understanding of the market the profit oriented goal of market share analysis urges us to ask how the firm s allocations of resources to aspects of the marketing mix produce bottom line results

debt dependent effects of fiscal expansions abstract economists often postulate that fiscal expansions are less stimulative when government debt is high than when it is low empirical evidence however is ambiguous using a nonlinear neoclassical growth model we show that the difference in government spending effects between high and low debt environments depends on the wealth effect on labor supply and on whether the government uses taxes or spending to retire debt because of interrelated state variables structural var estimations conditioning on debt alone can fail to isolate debt dependent effects also uncertainty on when the government will conduct fiscal consolidations generates wide confidence bands for spending multipliers further complicating efforts to estimate debt dependent government spending effects

fiscal stimulus with spending reversals abstract the short run effects of fiscal policy depend not only on current tax and spending choices but also on expectations about future policy adjustment while general equilibrium models typically restrict medium term adjustment to taxation we highlight the importance of government spending dynamics first we provide time series evidence for the united states suggesting that an exogenous increase in government spending prompts a rise in public debt followed over time by a reduction in spending below trend second we show how expected spending reversals alter the short run impact of fiscal policy in a new keynesian model bringing it closer in line with the evidence

bayesian methods for dynamic multivariate models if dynamic multivariate models are to be used to guide decisionmaking it is important that probability assessments of forecasts or policy projections be provided when identified bayesian vector autoregression var models are presented with error bands in the existing literature both conceptual and numerical problems have not been dealt with in an internally consistent way in this paper the authors develop methods to introduce prior information in both reduced form and structural var models without introducing substantial new computational burdens their approach makes it feasible to use a single large dynamic framework for example twenty variable models for tasks of policy projections copyright 1998 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

heterogeneous transmission mechanism monetary policy and financial fragility in the eurozone the eurozone economic activity and banking sector have shown substantial fragility over the last years with remarkable country heterogeneity using detailed data on lending conditions and standards we analyse along several key dimensions of heterogeneity how financial fragility has affected the transmission mechanism of the single eurozone monetary policy the analysis shows that the monetary transmission mechanism is time varying and influenced by the financial fragility of the sovereigns banks firms and households the impact of monetary policy on aggregate output is stronger during the financial crisis especially in countries facing increased sovereign financial distress this amplification mechanism moreover operates through the credit channel both the bank lending and the non financial borrower balance sheet channels our results suggest that the bank lending channel has been to a large extent neutralized by the ecb non standard monetary policy interventions but the policy framework until the end of 2011 was insufficient to overcome credit availability problems stemming from deteriorated firm net worth and risk conditions especially for small firms in countries under stress matteo ciccarelli angela maddaloni and jose luis peydro

spillover effects from euro area monetary policy across europe a factor augmented var approach i analyze spillover effects from a euro area monetary policy shock to fourteen european countries outside the euro area the analysis is based on a factor augmented var model with two blocks which exploits a large cross country data set after a euro area monetary policy expansion production increases in most non euro area countries whereas short term interest rates and financial uncertainty decline these effects are on average comparable to the responses in the aggregate euro area however the size of spillover effects varies with country characteristics spillovers on production are larger in non euro area economies with higher trade openness whereas financial variables react to a higher extent in countries with higher financial integration regarding the exchange rate regime countries with fixed exchange rates show stronger spillovers both in terms of production and interest rates finally prices increase in western european economies outside the euro area but decline or do not respond in central and eastern europe

consistency and heterogeneity of individual behavior under uncertainty by using graphical representations of simple portfolio choice problems we generate a very rich dataset to study behavior under uncertainty at the level of the individual subject we test the data for consistency with the maximization hypothesis and we estimate preferences using a two parameter utility function based on faruk gul 1991 this specification provides a good interpretation of the data at the individual level and can account for the highly heterogeneous behaviors observed in the laboratory the parameter estimates jointly describe attitudes toward risk and allow us to characterize the distribution of risk preferences in the population

understanding the evolution of world business cycles abstract this paper studies the changes in world business cycles during the period 1960 2003 we employ a bayesian dynamic latent factor model to estimate common and country specific components in the main macroeconomic aggregates output consumption and investment of the g 7 countries we then quantify the relative importance of the common and country components in explaining comovement in each observable aggregate over three distinct time periods the bretton woods bw period 1960 1 1972 2 the period of common shocks 1972 3 1986 2 and the globalization period 1986 3 2003 4 the results indicate that the common g 7 factor explains on average a larger fraction of output consumption and investment volatility in the globalization period than it does in the bw period

endogenous depth of reasoning we introduce a model of strategic thinking in games of initial response unlike standard models of strategic thinking in this framework the player s depth of reasoning is endogenously determined and it can be disentangled from his beliefs over his opponent s cognitive bound in our approach individuals act as if they follow a cost benet analysis the depth of reasoning is a function of the player s cognitive abilities and his payos the costs are exogenous and represent the game theoretical sophistication of the player the benet instead is related to the game payos behavior is in turn determined by the individual s depth of reasoning and his beliefs about the reasoning process of the opponent thus in our framework payos not only aect individual choices in the traditional sense but they also shape the cognitive process itself our model delivers testable implications on players chosen actions as incentives and opponents change we then test the model s predictions with an experiment we administer dierent treatments that vary beliefs over payos and opponents as well as beliefs over opponents beliefs the results of this experiment which are not accounted for by current models of reasoning in games strongly support our theory we also show that the predictions of our model are highly consistent both qualitatively and quantitatively with well known unresolved empirical puzzles our approach therefore serves as a novel unifying framework of strategic thinking that allows for predictions across games

the 11 20 money request game a level k reasoning study we study experimentally a new two player game each player requests an amount between 11 and 20 shekels nis he receives the requested amount and if he requests exactly one shekel less than the other player he receives an additional 20 shekels level k reasoning is appealing due to the natural starting point requesting 20 and the straightforward best response operation nevertheless almost all subjects exhibit at most three levels of reasoning using two variants of the game we demonstrate that the depth of reasoning is not increased by enhancing the attractiveness of the level 0 strategy or by reducing the monetary cost of undercutting the other player

debt and stabilization policy evidence from a euro area favar abstract the euro area poses a unique problem in evaluating policy a currency union with a shared monetary policy and country specific fiscal policy analysis can be further complicated if high levels of public debt affect the performance of stabilization policy we construct a framework capable of handling these issues with an application to euro area data in order to incorporate multiple macroeconomic series from each country but simultaneously treat country specific fiscal policy we develop a hierarchical factor augmented var with zero restrictions on the loadings that yield country level factors monetary policy then responds to area wide conditions but fiscal policy responds only to its country level conditions we find that there is broad quantitative variation in different countries responses to area wide monetary policy and both qualitative and quantitative variation in responses to country specific fiscal policy moreover we find that debt conditions do not diminish the effectiveness of policy in a significant manner suggesting that any negative effects must come through other channels

the rotterdam demand model and its application in marketing this paper shows how the system wide approach to demand analysis can be utilized in marketing in the context of the rotterdam model we describe how the approach can be applied to narrowly defined groups of goods such as beer wine and spirits to estimate income and price elasticities of demand the paper also provides extensions to deal with advertising and introduces a new way of identifying market structure

attention in games an experimental study abstract a common assumption in game theory is that players concentrate on one game at a time however in everyday life we play many games and make many decisions at the same time and have to decide how best to divide our limited attention across these settings in this paper we ask how players solve this attention allocation problem we find that players attention is attracted to particular features of the games they play and how much attention a subject gives to a given game depends on the other game that the person is simultaneously attending to

monopolist pricing with dynamic demand and production cost this paper deals with pricing of a new product over time by a monopolist who maximizes the discounted profit stream the interdependency of cost and demand on cumulative production makes the problem inherently dynamic cost is assumed to be declining with cumulative production learning curve effect while demand is a function of price and cumulative sales representing word of mouth and saturation effects the paper addresses this problem in a general framework that includes several previous results as special cases and provides new insights in other situations while the learning curve and word of mouth effect cause prices to be lower than the price that maximizes immediate revenues the saturation factor has the opposite effect the price path over time is affected by these factors and the interest rate we characterize the price path under several different situations and interpret the results for policy guidelines