smallholder market participation concepts and evidence from eastern and southern africa abstract this paper reviews the evidence on smallholder market participation with a focus on staple foodgrains i e cereals in eastern and southern africa in an effort to help better identify what interventions are most likely to break smallholders out of the semi subsistence poverty trap that appears to ensnare much of rural africa the conceptual and empirical evidence suggests that interventions aimed at facilitating smallholder organization at reducing the costs of intermarket commerce and perhaps especially at improving poorer households access to improved technologies and productive assets are central to stimulating smallholder market participation and escape from semi subsistence poverty traps macroeconomic and trade policy tools appear less useful in inducing market participation by poor smallholders in the region

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

pricing under quality of service uncertainty market segmentation via statistical qos guarantees abstract this article examines how performance contingent pricing schemes with long term statistical performance guarantees can be applied to many it services we study two forms of performance contingent pricing with rebate proportional to failure rate and fixed rebate for below threshold performance we show that threshold performance contingency pricing can increase both profits and fairness customers who receive higher benefits pay higher effective price relative to standard pricing but an even better solution is to offer a menu of performance guarantees this can increase the firm s profit and segment the market only service providers whose performance level is sufficiently better than the industry standard can benefit from this pricing mechanism

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

prices and price dispersion on the web evidence from the online book industry using data collected between august 1999 and january 2000 covering 399 books we examine pricing by thirty two online united states based bookstores at the aggregate level we find that both advertising and competitive structure had the predicted effects more competition led to lower prices and to lower price dispersion holding competitive structure constant more widely advertised items also had lower prices at the firm level we observe considerable heterogeneity in behavior firms had differentiated or attempted to differentiate on dimensions such as brand price and selection

managing online auctions current business and research issues the internet s computational power and flexibility have made auctions a widespread and integral part of both consumer and business markets though online auctions are a multi billion dollar annual activity with a growing variety of sophisticated trading mechanisms scientific research on them is at an early stage this paper analyzes the current state of management science research on online auctions it develops a broad research agenda for issues such as the behavior of online auction participants the optimal design of online auctions the integration of auctions into the ongoing operation of firms and the use of the data generated by online auctions to inform future trading mechanisms these research areas will draw from applied and theoretical work spanning management science economics and information systems

choice of varieties by sri lanka rice farmers comparing alternative decision models sri lanka rice farmers are faced with a choice between traditional and high yielding rice varieties three risky choice models are compared to explain producer behavior forty farmers with typically small rice areas were studied choice criteria compared were multiple two attribute utility maximization single profit attribute utility maximization and expected profit maximization expected utility maximization performed better than expected profit maximization single attribute utility maximization outperformed the more complex multiattribute utility model the importance of careful elicitation of subjective probability distributions is emphasized rice farmers appear to allocate their land between available technologies in an economically rational way

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

buy as you need nutrition and food storage imperfections abstract in this paper we investigate whether and how a more steady supply of foodgrain in local markets impacts the nutritional status measured with body mass indexes of both children and adults in a context characterized by large seasonal fluctuations in the price and availability of foodgrain taking advantage of the random scaling up of a program of food security granaries in burkina faso we reach three conclusions first especially in remote areas where local markets are thin the program considerably dampens nutritional stress the effect is strongest among children and young children in particular for whom deficient nutrition has devastating long term consequences second we argue that it is a change in the timing of food purchases translated into a change in the timing of consumption that drives the nutritional improvement a simple two period model shows that once we account for various forms of storage costs an increase in nutrition does not necessarily require larger quantity of food purchases or even consumption our last and unexpected conclusion is that the losses associated with foodgrain storage do not stem from physical losses in household granaries but rather from inefficient seasonal bodymass fluctuations one plausible mechanism behind this particular storage imperfection rests on the households urge to consume readily available foodgrain

cash crop production food price volatility and rural market integration in the third world large farmers in the third world often devote to cash crops a larger share of their land than do small farmers this paper suggests a possible explanation even in the presence of food markets third world farmers food security is best assured by food self sufficiency a model of crop portfolio choice under multivariate risk is used to show that reasonable assumptions regarding risk and preferences reproduce the observed pattern simulations further indicate that food market integration reduces the need for food self sufficiency policy implications are drawn regarding domestic trade liberalization and agricultural technology

an empirical analysis of digital music bundling strategies we use panel data on digital song and album sales coupled with a quasi random price experiment to determine own and cross price elasticities for songs and albums we then develop a structural model of consumer demand to estimate welfare under various policy relevant counterfactual scenarios this approach represents an early application of the big data management paradigm within the media industries and provides managers with detailed guidance on optimal pricing and marketing strategies for digital music our results show that tiered pricing coupled with reduced album pricing increases revenue to the labels by 18 relative to uniform pricing policies traditionally preferred by digital marketplaces while also increasing consumer surplus by 23 thus optimal tiered pricing can yield a pareto improvement over the prior status quo additionally our results indicate that even without tiered pricing unbundling albums outperforms album only pricing policies that dominated the era of physical cd cassette sales this paper was accepted by alok gupta special issue on business analytics

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

social interactions in voting behavior distinguishing between strategic voting and the bandwagon effect prior studies of strategic voting in multi party elections potentially overestimate the extent of it by counting erroneously votes cast under different motivations as strategic votes we propose a method that corrects some of this overestimation by distinguishing between strategic voting voting for a candidate other than the most preferred one to reduce the likelihood of an election victory by a third candidate that is disliked even more and the votes cast under the bandwagon effect voting for the expected winner instead of the most preferred party to conform to the majority or to be on the winning side our method follows from the observation that a vote cannot be strategic unless the voter believes that it will affect the outcome of the election with a non zero probability while a vote cast under the bandwagon effect requires no such belief employing survey data that include the respondent s assessment of the importance of his vote we illustrate this method by estimating the extent of strategic voting in the 2005 uk general election the estimated extent of strategic voting 4 22 is strictly less than self reported strategic voting 6 94 but the discrepancy cannot be attributed in a statistically significant way to the bandwagon effect suggesting that motivations other than those identified in the literature may be at work

how is the liberalization of food markets progressing market integration and transaction costs in subsistence economies we propose a modification of baulch s parity bounds model to measure the market integration of food markets in developing countries instead of extrapolating a single observation of transaction costs we estimate transaction costs predicted transaction costs compare well with survey data of traders probabilities of market regimes computed on the basis of predicted transaction costs fluctuate significantly and do not support fixed regime probabilities over time the probability of market integration with trade decreases consistently during food shortages increasing either the probability of no trade or loss making trade or the probability of profitable but unexploited trade opportunities the data further support a negative trend in market integration with trade

econometric estimation of producers risk attitudes general methods are proposed for the identification and econometric estimation of the parameters of the distribution of risk attitudes in a producer population the proposed methods also provide the basis for the development of statistical tests of model specification and of behavioral hypotheses econometric risk attitude estimation is shown to be possible under less restrictive conditions than previously believed a moment based version of the general model is applied to indian data and the econometrically estimated risk attitudes are presented and compared to experimental results for a similar group of producers

implications of expected changes in the seller s price in name your own price auctions the seller s threshold price in name your own price auctions varies over time however consumers must bid without knowing when these variations occur because the threshold price is unobservable to them this paper uses an analytical model and laboratory auctions to explore how the frequency of changes in the threshold price impacts consumer bidding behavior in name your own price auctions in particular we consider how the frequency of these expected changes affects the optimal pattern of bid sequences e g strictly increasing over time or following a nonmonotonic pattern we find that when the probability of a price change is moderate consumers may have an incentive to use nonmonotonic bidding patterns rather than steadily increasing their bids over time consumers will at some point in the bid sequence decrease their bid however when the expected probability of a price change is very low or very high consumers do not have an incentive to use nonmonotonic bidding patterns interestingly impatient bidders are more likely to decrease their bids at some point in the bid sequence than patient bidders finally we find that more frequent price changes may increase customer satisfaction

determinants of income diversification amongst rural households in southern mali abstract household level panel data from a representative sample of rural households in southern mali describing the different sources of household income are used to examine the determinants of income diversification a conditional fixed effects logit model is employed in the analysis to control for household specific effects we find evidence that poorer households have fewer opportunities in non cropping activities such as livestock rearing and non farm work and hence less diversified incomes this appears to reflect their relative lack of capital which makes it difficult for them to diversify away from subsistence agriculture the results also indicate that households in remote areas are less likely to participate in the non cropping sector than their counterparts closer to local markets while households with educated heads are more likely to participate in the non farm sector than those with illiterate heads the significance of entry constraints in explaining portfolio diversification suggests that the role of government in making assets as well as improved infrastructure available to poorer households is still essential in promoting income diversification

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

some stronger measures of risk aversion in the small and the large with applications the arrow pratt measures of risk aversion for von neumann morgenstern utility functions have become workhorses for analyzing problems in the microeconomics of uncertainty they have been used to characterize the qualitative properties of demand in insurance and asset markets to examine the properties of risk taking in taxation models and to study the interaction between risk and life cycle savings problems to name just a few applications equally importantly they have generated the linear risk tolerance class of utility functions which has provided canonical examples in such diverse areas as portfolio theory and the theory of teams despite these successes there have been a number of areas for which the results have been weaker than hoped it is natural to use the risk aversion measures to compare the behavior of individuals in risky choice situations for example consider the individual portfolio choice problem in a two asset world with a riskless asset and a risky asset if individual a has a uniformly higher arrow pratt coefficient of risk aversion than individual b then b will always choose a portfolio combination with more wealth invested in the risky asset but suppose that both assets are risky now there is no obvious sense in which the more risk averse individual can be said to hold a less risky portfolio but it seems strange that such a simple alteration should destroy the analytics which support the basic intuition similarly consider the basic insurance problem if one individual a is more risk averse than another b in the arrow pratt sense it follows that a will pay a larger premium to insure against a random loss than will b typically though an individual evaluates partial rather than total insurance that is only some gambles can be insured against and others must be retained in this case even when the gambles which are retained are independent from those which are insured it is no longer true that the individual whose arrow pratt measure of risk aversion is higher will pay a larger insurance premium the situation is no better when we consider comparative statics exercises for a single individual decreasing absolute risk aversion in the sense of arrow and

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

price dispersion and differentiation in online travel an empirical investigation previous research has examined whether price dispersion exists in theoretically highly efficient internet markets however much of the previous work has been focused on industries with low cost and undifferentiated products in this paper we examine the presence of price dispersion and product differentiation using data on the airline ticket offerings of online travel agents otas we find that different otas offer tickets with substantially different prices and characteristics when given the same customer request some of this variation appears to be due to product differentiation different otas specialize by systematically offering different trade offs between ticket price and ticket quality minimizing the number of connections matching requested departure and return time however even after accounting for differences in ticket quality ticket prices vary by as much as 18 across otas in addition otas return tickets that are strictly inferior to the ticket offered by another ota for the same request between 2 2 and 28 of the time overall this suggests the presence of both price dispersion and product differentiation in the online travel market

measurement of consumer gains from market stabilization for most cases of practical significance in which partial equilibrium analysis is appropriate there is little difference between exact measures of consumer gains from market stabilization and approximations such as expected change in marshallian or hicksian consumer surplus careful specification of the nature of stabilization is more crucial than the choice of welfare measure it is important to represent correctly the demand curvature and supply response and to determine whether general equilibrium responses can be ignored in any event an improved analytical approximation and a simple numerical method for calculating the exact measures make it unnecessary to rely on suspect measures

risk pooling through physical probabilistic selling abstract this paper investigates the impacts of a new type of probabilistic selling p s where the retailer orders specific products and package some as a discounted physical probabilistic product ppp rather than merely a virtual choice we call this p s strategy as physical probabilistic selling p p s the price gap between the specific products and the probabilistic product results in demand reshape i e some customers who originally buy specific products will switch to buying the probabilistic product which decreases aggregate demand uncertainty however the price discount decreases the profit margin considering this trade off we develop a three product newsvendor model to address the question of how to set the price for the ppp and make inventory allocation decisions we prove that there are two effects under p p s namely the risk pooling effect due to demand reshape and the risk diversification effect due to inventory flexibility with demand uncertainty p p s can improve the retailer s profit at lower inventory levels with proper demand reshape induced by the optimal price discount p p s is more profitable with smaller product differentiation higher customer price sensitivity higher demand uncertainty and lower package cost with supply uncertainty we demonstrate through numerical studies that p p s is a viable strategy to combat asymmetrical supply risk that yields higher profits and service levels

on the effects of consumer search and firm entry in a multiproduct competitive market this paper studies a model in which consumers search among multiple competing firms for products that match their preferences at a reasonable price we focus on how easier search possibly due to the adoption of search facilitating technologies such as the internet influences equilibrium prices assortments firm profits and consumer welfare conventional wisdom suggests that easier search creates a competition intensifying effect that puts pressure on firms to lower their prices and reduce assortments however in our model we demonstrate that search also exhibits a market expansion effect that encourages firms to expand their assortment easier search means that each firm is searched by more consumers because of broader assortments consumers are more likely to find products that better match their ideal preferences improving the efficiency of the market in fact we demonstrate that the market expansion effect can even dominate the competition intensifying effect potentially leading to higher prices broader assortments more profits and expanded welfare