design and analysis of simulated consumer choice or allocation experiments an approach based on aggregate data the authors integrate concepts in conjoint analysis and discrete choice theory in econometrics to develop a new approach to the design and analysis of controlled consumer choice or resource allocat

utility covariances and context effects in conjoint mnp models experimental conjoint choice analysis is among the most frequently used methods for measuring and analyzing consumer preferences the data from such experiments have been typically analyzed with the multinomial logit mnl model however there are several problems associated with the standard mnl model because it is based on the assumption that the error terms of the underlying random utilities are independent across alternatives choice sets and subjects the multinomial probit model mnp is well known to alleviate this assumption of independence of the error terms accounting for covariances in utilities in modeling choice experiments with the mnp is important because variation of the coefficients in the choice model may occur due to context effects previous research has shown that subjects utilities for alternatives depend on the choice context that is the particular set of alternatives evaluated simonson and tversky s tradeoff contrast principle describes the effect of the choice context on attribute importance and patterns of choice they distinguish local contrast effects which are caused by the alternatives in the offered set only and background contrast effects which are due to the influence of alternatives previously considered in choice experiments these effects are hypothesized to cause correlations in the utilities of alternatives within and across choice sets respectively the purpose of this study is to develop an mnp model for conjoint choice experiments this model is important for a more detailed study of choice patterns in those experiments in developing the mnp model for conjoint choice experiments several hurdles need to be taken related to the identification of the model and to the prediction of holdout profiles to overcome those problems we propose a random coefficients rc model that assumes a multivariate normal distribution of the regression coefficients with a rank one factor structure on the covariance matrix of these regression coefficients the parameters in this covariance matrix can be used to identify which attributes and levels of attributes are potentional sources of dependencies between the alternatives and choice sets in a conjoint choice experiment we present several versions of this model moreover for each of these models we allow utilities to be either correlated or independent across choice sets the independent probit ip model is used as a benchmark given the dimensionality of the integrations involved in computing the choice probabilities the models are estimated with simulated likelihood where simulations are used to approximate the integrals involved in the choice probabilities we apply and compare the models in two conjoint choice experiments in both applications the random coefficients mnp model that allows choices in different choice sets to be correlated rc displays superior fit and predictive validity compared with all other models we hypothesize that the difference in fit occurs because the rc model accommodates correlations among choice sets that are caused by background contrast effects whereas the model that treats choice sets as independent irc accounts for local contrast effects only the irc model shows superior model fit compared with the ip model but its predictions are worse than those of the ip model we find differences in the importance of local and background contrast effects for choice sets containing different numbers of alternatives the background contrast effect may be stronger for smaller choice sets whereas the local contrast effect may be stronger for bigger choice sets we illustrate the differences in simulated market shares that are obtained from the rc irc and ip models in three hypothetical situations product modification product line extension and the introduction of a me too brand in all of those situations substantially different market shares are predicted by the three models which illustrates the extent to which erroneous predictions may be obtained from the misspecified irc and ip models

green market expansion by reducing information asymmetries evidence for labeled organic food products abstract we investigate how the provision of objective information about the environmental and health impact of organic labels by policy makers can influence the willingness to pay of consumers for labeled organic apples in flanders belgium using a stated choice experiment we initially find that flemish consumers are willing to pay a positive price premium of some 33 eurocent per kilogram for labeled organic apples after the provision of information on the actual environmental and health effects of organic apple production this price premium becomes even more pronounced and increases to 57 eurocent per kilogram using a conditional logit model with covariates and a mixed logit model we find evidence of preference heterogeneity also the effect of information provision is more pronounced for certain groups of consumers such as non vegetarians infrequent buyers of organic products and members of a nature protection organization as such this paper illustrates that there is a role for policy makers and csr producers in providing more accurate and reliable information about socially responsible production processes moreover it is important to take the observed preference heterogeneity into account and tailor policies to specific consumer groups

explaining the border effect the role of exchange rate variability shipping costs and geography this paper exploits a three dimensional panel data set of prices on 27 traded goods over 88 quarters across 96 cities in the us and japan we show that a simple average of good level real exchange rates tracks the nominal exchange rate well suggesting strong evidence of sticky prices focusing on dispersion in prices between city pairs we find that crossing the us japan border is equivalent to adding as much as 43 000 trillion miles to the cross country volatility of relative prices we turn next to economic explanations for this so called border effect and to its dynamics distance unit shipping costs and exchange rate variability collectively explain a substantial portion of the observed international market segmentation relative wage variability on the other hand has little independent impact on segmentation 2001 elsevier science b v all rights reserved

distinguishing between equilibrium and integration in spatial price analysis this article introduces a new spatial price analysis methodology based on maximum likelihood estimation of a mixture distribution model incorporating price transfer cost and trade flow data this method permits differentiation between market integration and competitive market equilibrium and derivation of intuitive measures of intermarket tradability competitive market equilibrium perfect integration segmented equilibrium and segmented disequilibrium one can also use these estimates to derive semiparametric measures of time varying regime probabilities to track changing market conditions an application to trade in soybean meal among pacific rim economies demonstrates the usefulness of the method copyright 2002 oxford university press

trade costs and deviations from the law of one price the link between relative prices across countries and trade costs requires a theoretical foundation that is absent in the literature to date empirical tests on the law of one price are based on an arbitrage equation which is of very limited relevance in understanding this link the application of a new set of arbitrage equations to the tin trade market yields results that are consistent with our theoretical expectations we find evidence in favor of the law of one price between the united states and japan however evidence of price discrimination is also found for the los angeles market

estimation of consumer demand with stock out based substitution an application to vending machine products the occurrence of temporary stock outs at retail is common in frequently purchased product categories available empirical evidence suggests that when faced with stock outs consumers are often willing to buy substitute items an important implication of this consumer behavior is that observed sales of an item no longer provide a good measure of its core demand rate sales of items that stock out are right censored while sales of other items are inflated because of substitutions knowledge of the true demand rates and substitution rates is important for the retailer for a variety of category management decisions such as the ideal assortment to carry how much to stock of each item and how often to replenish the stock the estimated substitution rates can also be used to infer patterns of competition between items in the category in this paper we propose methods to estimate demand rates and substitution rates in such contexts we develop a model of customer arrivals and choice between goods that explicitly allows for possible product substitution and lost sales when a customer faces a stock out the model is developed in the context of retail vending an industry that accounts for a sizable part of the retail sales of many consumer products we consider the information set available from two kinds of inventory tracking systems in the best case scenario of a perpetual inventory system in which times of stock out occurrence and cumulative sales of all goods up to these times are observed we derive maximum likelihood estimates mles of the demand parameters and show that they are especially simple and intuitive however state of the art inventory systems in retail vend ing provide only periodic data i e data in which times of stock out occurrence are unobserved or missing for these data we show how the expectation maximization em algorithm can be employed to obtain the mles of the demand parameters by treating the stock out times as missing data we show an application of the model to daily sales and stocking data pooled across multiple beverage vending machines in a midwestern u s city the vending machines in the application carry identical assortments of six brands since the number of parameters to be estimated is too large given the available data we discuss possible restrictions of the consumer choice model to accomplish the estimation our results indicate that demand rates estimated naively by using observed sales rates are biased even for items that have very few occurrences of stock outs we also find significant differences among the substitution rates of the six brands the methods proposed in our paper can be modified to apply to many nonvending retail settings in which consumer choices are observed not their preferences and choices are constrained because of unavailability of items in the choice set one such context is in store grocery retailing where similar issues of information availability arise in this context an important issue that would need to be dealt with is changes in the retail environment caused by retail promotions

the investor specific price of renewable energy project risk a choice experiment with incumbent utilities and institutional investors abstract renewable energy investments in germany have recently soared trebling the output of wind and solar power generation in only ten years while incumbent utilities have lagged behind in terms of investment new entrants have significantly contributed to this growth existing literature has primarily focused on explaining the lethargy of incumbents former investments although there is a growing need to investigate recent investment drivers to secure the necessary power plant capacity at a moderate cost from incumbents and new entrants alike to close this gap a choice experiment involving 1 659 investment choices by 52 european professional investors was conducted in significant contrast to the case with altruistic investors this survey underlines the importance of using financial incentives to attract professional investors given full exposure to electricity price risk incumbent utilities would facilitate projects at a 3 04 risk premium whereas institutional investors demand 6 61 generally incumbent utilities and institutional investors are equally attracted by low risk projects however when risk increases institutional investors are more hesitant to become involved while incumbent utilities confidently navigate these higher risk projects

practice prize report planning new tariffs at tele ring the application and impact of an integrated segmentation targeting and positioning tool tele ring is a mobile phone organization selling contracts and cell phones in the austrian market the market situation in 2005 was highly competitive and dynamic resulting in relatively short tariff life cycles excessively long lead times made tele ring s management feel dissatisfied with their new tariff development process furthermore a new competitor had entered the market posing a major threat and it was unclear how to effectively safeguard tele ring s position in the market in cooperation with the management we implemented and tested a new segmentation targeting and positioning tool which provides managers with information on their target markets customer preferences competitors strengths and customer segments it allows for the simultaneous visualization of these data on a single map and facilitates timely and accurate decision making in particular we report on the design and the implementation of a new pricing scheme formel 10 which became the most successful new tariff introduction in this competitive market tele ring s managers were very much impressed with our tool s ability to represent the market on a single map and with its capacity to allow for intuitive interpretation in addition the tool enhanced internal communication between its users and different stakeholders during the new tariff development process

measuring heterogeneous reservation prices for product bundles this paper develops a model for capturing continuous heterogeneity in the joint distribution of reservation prices for products and bundles our model is derived from utility theory and captures both within and among subject variability furthermore it provides dollarmetric reservation prices and individual level estimates that allow the firm to target customers and develop customized and nonlinear pricing policies our experiments show that regardless of whether the products are durables or nondurables the model captures heterogeneity and predicts well models that assume homogeneity perform poorly especially in predicting choice of the bundle furthermore the methodology is robust even when respondents evaluate few profiles self stated reservation prices do not have any informational content beyond that contained in the basic model the direct elicitation method appears to understate overstate the variation in reservation prices across consumers for low priced high priced products and bundles hence this method yields biased demand estimates and leads to suboptimal product line pricing policy the optimization results show that the product line pricing policy depends on the degree of heterogeneity in the reservation prices of the individual products and the bundle a uniformly high price strategy for all products and bundles is optimal when heterogeneity is high otherwise a hybrid strategy is optimal

purchasing power parity yet again evidence from spatially separated commodity markets abstract this paper examines the empirical validity of the law of one price by exploiting the non stationarity of prices set in us dollars of varieties of wheat that are traded simultaneously in the usa rotterdam and japan we demonstrate the crucial role of transport costs in achieving cointegration long run ppp although systematic short run deviations from ppp occur we show that this does not imply profitable arbitrage opportunities jel c5 f3 g1

the effects of unions on investment and innovation evidence from wirs the above is representative of much popular discussion of the effects of unions on investment and innovation in the professional literature the view that unions deter investment by expropriating quasi rents is also commonplace see e g simons i944 baldwin i983 grout i984 in addition it is argued that union foisted restrictive work practices might make investment a more costly process see e g denny and nickell i989 in recent years the above theoretical notions have appeared to receive some empirical support in that in the united states the level of the investment capital ratio does appear to be lower in union firms see hirsch i988 and references therein in this paper we use information contained in the i 984 workplace industrial relations survey in order to investigate the actual impact of unions on investment the rest of the paper is organised as follows in section i i we informally review the alternative channels through which unions might affect investment section i 2 contains a simple theoretical model of investment which embodies all the alternative channels our results are to be found in section ii and finally some conclusions are contained in section iii

social networks and new product choice to successfully market new products in a social network it is essential to identify influential individuals whose product recommendations influence the consumption choices of their peers in this study we use spatial econometric methods to determine how individuals revise their preferences for product attributes when exposed to product recommendations from peers and how different individuals who vary in their degree of network connectedness exert influence on the product choices of others we find evidence that consumers look to others for guidance from peers in their preference for subjective taste specific parameters but tend not to respond to peer price choices our spatial methods allow us to empirically determine the influence exerted by individual members on the consumption choices of other members of the social network we find that connected members of the social network are not always the most influential in revising the consumption choices of others our estimates reveal that network proximity explains only 8 8 of influence

likelihood estimation of consumer preferences in choice based conjoint analysis abstract in marketing research the measurement of individual preferences and assessment of utility functions have long traditions conjoint analysis and particularly choice based conjoint analysis cbc is frequently employed for such measurement the world today appears increasingly customer or user oriented wherefore research intensity in conjoint analysis is rapidly increasing in various fields or ms being no exception although several optimization based approaches have been suggested since the introduction of the hierarchical bayes hb method for estimating cbc utility functions recent comparisons indicate that challenging hb is hard based on likelihood maximization we propose a method called lm and compare its performance with hb using twelve field data sets performance comparisons are based on holdout validation i e predictive performance average performance of lm indicates an improvement over hb and the difference is statistically significant we also use simulation based data sets to compare the performance for parameter recovery in terms of both predictive performance and rmse a smaller number of questions in cbc appears to favor lm over hb

a probabilistic choice model for market segmentation and elasticity structure marketing scholars commonly characterize market structure by studying the patterns of substitution implied by brand switching though the approach is useful it typically ignores the destabilizing

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

consumer information search revisited theory and empirical analysis a comprehensive theoretical framework for understanding consumers information search behavior is presented unlike previous research our model identifies not only what factors affect consumers search behavior but also how these factors interact with each other in particular the model emphasizes the effect of prior brand perceptions on the search process we argue that when consumers have brand specific prior distributions of utility the existence of relative uncertainty among brands is necessary for search to be useful thus we explain why product class involvement or low search costs may not be sufficient to induce large amounts of search activity and why there may be an inverted u shaped relationship between search activity and experience we test our theory on consumers search behavior for new automobiles using data collected contemporaneously with consumers actual decision process our data support our theory

optimal design for multinomial choice experiments abstract the author derives d optimal designs for main effects multinomial choice experiments using attribute levels as design parameters the design solutions are similar to standard main effects designs except that one attribute is used to manipulate response probabilities the manipulator is key to implementing optimal designs in practice

corporate governance and innovation a survey abstract the traditional economics of innovation inspired by schumpeter and more recent advances on his work seem unable to explain why firms with similar external conditions may show greatly different performance in innovation contrastingly the literature on corporate governance provides some useful insights for understanding corporate innovation activity to the extent that such literature examines the economic effects of different modes of coordination between firm members the process through which individuals integrate their human and physical resources within the firm is central to the dynamics of corporate innovation this paper provides the first survey of the literature on this issue we start by discussing how various theoretical approaches to the analysis of the firm deal with technological innovation we then describe three main channels corporate ownership corporate finance and labour through which a system of corporate governance shapes a firm s innovation activity finally we examine the relationship between country level institutional settings national patterns of corporate governance and the aggregate innovation activity of corporations we conclude by suggesting that future research should focus more deeply on the interrelation between the various dimensions of corporate governance and on their joint effect on firm innovation

analyzing public preferences and increasing acceptability for the renewable portfolio standard in korea abstract in order to respond to the challenge of climate change similar to other countries korea has announced various policies to vitalize the development and uptake of renewable energy the renewable portfolio standard rps is the most striking example of a policy in this area this study employs a conjoint survey and bayesian mixed logit model to analyze consumer preferences for specific attributes of the rps policy it analyzes households marginal willingness to pay mwtp for the rps with specific attributes and simulates the degree of household acceptability of the policy through a scenario analysis comparison between costs and benefits of implementing the policy is also attempted by analyzing the households mwtp with the actual transition expense of rps implementation incurred by electricity supply companies the simulation results provide implications for improving rps policy implementation households consider the creation of new jobs as the most important policy attribute followed by increase in electricity prices damage to forests reduction in co 2 emissions and length of power outages moreover the korean household is willing to accept an increase of up to 1 39 in its electricity prices relative to 2012 and the median mwtp of each household for rps implementation is krw 734 99 month usd 0 67 month

a simulation based approach to price optimisation of the mixed bundling problem with capacity constraints abstract in this paper we analyse a service provider s mixed bundling problem for services such as sporting events or holiday packages pursuing the objective of maximising total revenue the service provider has to determine static prices for each single product at the beginning of the selling period additionally an optimal package price has to be chosen for the bundle that comprises one unit of each single product because of capacity constraints the availability of products can change over time such that consumers are forced to switch from their preferred subset of products to an alternative following dynamic substitution we propose two mixed integer linear programmes based on reservation prices that appropriately model the consumer choice process to address the bundling problem it becomes evident that the determination of the optimal prices is computationally expensive even for small problem classes therefore we develop metaheuristics using variable neighbourhoods to evaluate their performance we propose the following new approach our extensive computational study is performed using especially generated scenarios for which the optimal product prices are known for this purpose we present a set of conditions for the generation of reservation prices that guarantee the optimality of the predefined prices based on our computational results managerial insights are derived

the effectiveness of alternative preference elicitation procedures in predicting choice in a large scale national study the authors evaluated the effectiveness of several preference elicitation techniques for predicting choices the criteria for accuracy included both individual hit

issues in the use of ratings based versus choice based conjoint analysis in operations management research conjoint analysis has played an important role in helping make a number of operations management decisions including product and service design supplier selection and service operations capacity many recent advances in this area have raised questions about the most appropriate form of conjoint analysis for this research we review recent developments in the literature and provide new evidence on how the choice between ratings and choice based conjoint models might affect the estimates of customer demand used in operations management models the biggest systematic difference between ratings based rb and choice based cb parameters is consistent with the compatibility effect i e some enriched attributes like brand name tend to be more important in rb models and some comparable attributes like price are likely to be more important in cb models still there were reasonably small differences between choice and ratings based parameters parameter similarity was also seen in the lack of differences both in the choice share validations when the keep on shopping alternative was not considered and in the profiles that were predicted to maximize choice shares this suggests that the two approaches will produce similar estimates of the relative importance of various attributes in spite of demonstrated success with each method several reasons lead us to recommend the use of hierarchical bayesian choice based conjoint models first the slightly higher individual hit rate validations give us greater confidence in predictive accuracy overall as well as an increased ability to target individual customers additionally the greater ease of modeling both changes in market size and competitive reactions are attractive benefits of choice based models

decomposition of warm glow for multiple stakeholders stated choice valuation of shellfishery policy a monetary valuation study of marine management in the dutch wadden sea the largest natural area of the netherlands is presented the study is motivated by a conflict between shellfisheries and large populations of birds that forage on cockles different management scenarios are valued using multiple stakeholders namely dutch citizens local residents tourists policy makers and natural scientists a considerable difference in willingness to pay wtp between these groups is found in addition the influence of motivational profiles is examined estimates confirm the presence of two such motivations namely material and moral warm glow these allow for decomposition and correction of the wtp estimates

the choice theory approach to market research this paper surveys economic choice theory stressing developments that permit use of data from psychometric and conjoint experiments to produce market demand forecasts alternatives to the widely used multinomial logit model are summarized and a new method for estimating multinomial probits is described an integration of choice models with attitudinal scaling and perceptual mapping within a latent variable system is described estimation of such systems under either random effects or fixed effects descriptions of heterogeneity across individuals is discussed issues in the use of choice models to describe responses from conjoint experiments are presented new regression diagnostic tests for the consistency of multinomial logit representations are discussed

unions innovation and investment australian evidence machin and wadhwani have produced evidence indicating that trade unions encourage investment in the uk this paper uses comparable data to ascertain whether their finding holds with respect to australia in general and contrary to the uk study the net effect of unions on investment in australia is found to be negative nevertheless investment levels at workplaces where unions were active were above the levels at non union workplaces offering support for the union voice hypothesis which machin and wadhwani use to explain their results

the impact of utility balance and endogeneity in conjoint analysis adaptive metric utility balance is at the heart of one of the most widely used and studied methods for conjoint analysis we use formal models simulations and empirical data to suggest that adaptive metric utility balance leads to partworth estimates that are relatively biased smaller partworths are upwardly biased relative to larger partworths such relative biases could lead to erroneous managerial decisions metric utility balanced questions are also more likely to be inefficient and in one empirical example contrary to popular wisdom lead to response errors that are at least as large as nonadaptive orthogonal questions we demonstrate that this bias is because of endogeneity caused by a winner s curse shrinkage estimates do not mitigate these biases combined with adaptive metric utility balance shrinkage estimates of heterogeneous partworths are biased downward relative to homogeneous partworths although biases can affect managerial decisions our data suggest that empirically biases and inefficiencies are of the order of response errors we examine viable alternatives to metric utility balance that researchers can use without biases or inefficiencies to retain the desired properties of 1 individual level adaptation and 2 challenging questions

price discrimination by u s and german exporters the insensitivity of the u s trade balance to the sharp depreciation of the dollar in the past three years has revived interest in the relationship between exchange rates and the trade balance a central issue in most analyses of the relation between the current account and the exchange rate concerns the price adjustment process the simple integrated competitive market model predicts that local currency prices should change in proportion to the nominal exchange rate for a country too small to influence world prices the relationship between local currency import prices and exchange rates has been referred to as the pass through relationship in the empirical literature in international economics if the proportional relationship between import prices and exchange rates holds pass through is said to be complete accounts of recent u s experience cite the failure of dollar prices of imported goods to rise in proportion to exchange rates i e incomplete pass through as an important factor in explaining the persistence of the trade deficit unfortunately observations on pass through alone provide limited insight into the behavior of markets since incomplete pass through is consistent with at least two fundamentally different paradigms one is the standard competitive model of trade in which the law of one price holds but exchange rate fluctuations are associated with large changes in import demand due to other factors for example if dollar appreciation is correlated with increases in world demand and industry marginal cost is increasing then pass through will be less than complete the other is an imperfectly competitive model in which exporters are capable of price discriminating across destination markets a phenomenon paul krugman 1987 has labeled pricing to market in this model incomplete pass through is typically associated with fluctuations in the markup of price over marginal cost on exports 2 these fluctuations in markups are believed to be countryspecific they do not reflect the behavior of prices to other export destinations both models are plausible explanations of recent u s experience unfortunately it is impossible to distinguish between these competing models using only information on import prices and exchange rates for a single country in order to distinguish between the competing models an empirical analysis of goods prices and exchange rates must be capable of measuring either marginal cost or the markup over marginal cost either of these tasks poses formidable empirical problems much of the empirical literature in industrial organization has been concerned with precisely these issues since markups are an important measure of the competitiveness of industries

how inferences about missing attributes decrease the tendency to defer choice and increase purchase probability most purchases involve choices among options with incomplete attribute information in such situations consumers often have the option not to choose any of the alternatives to avoid uncertainty alternatively consumers can make inferences about the missing attributes these inferences may occur spontaneously or they may be strategically prompted in five studies it is shown that both explicitly and implicitly prompting consumers to make inferences about the missing attributes reduces the tendency to select the no choice option and increases the likelihood of making a purchase decision in parallel consumers who generate spontaneous inferences are also less likely to defer their choices

are choice experiments incentive compatible a test with quality differentiated beef steaks this study compares hypothetical and nonhypothetical responses to choice experiment questions we test for hypothetical bias in a choice experiment involving beef ribeye steaks with differing quality attributes in general hypothetical responses predicted higher probabilities of purchasing beef steaks than nonhypothetical responses thus hypothetical choices overestimate total willingness to pay for beef steaks however marginal willingness to pay for a change in steak quality is in general not statistically different across hypothetical and actual payment settings

optimization and analysis of the profitability of tariff structures with two part tariffs abstract service providers often offer tariff structures with several two part tariffs that consist of a fixed fee and a usage price such that consumers may pick the tariff they prefer prices of tariffs have significant impacts on service providers profit because they simultaneously influence consumers tariff choices and their usage the number of tariffs also plays an important role because more tariffs segment the market better but also increase the administrative burden and require more marketing effort this article presents a mixed integer nonlinear programming optimization problem to determine profit maximizing tariffs compares several heuristic search methods in particular the gradient method stochastic search and simulated annealing to solve this problem analyses the profitability of different tariff structures and outlines the factors that drive differences in profitability across various tariff structures the results show that especially for large samples of more than 100 consumers simulated annealing performs best and deviates only 0 2 from the optimum structures with fewer two part tariffs are generally sufficient because additional two part tariffs only negligibly increase service providers profit

augmenting conjoint analysis to estimate consumer reservation price consumer reservation price is a key concept in marketing and economics theoretically this concept has been instrumental in studying consumer purchase decisions competitive pricing strategies and welfare economics managerially knowledge of consumer reservation prices is critical for implementing many pricing tactics such as bundling tar get promotions nonlinear pricing and one to one pricing and for assessing the impact of marketing strategy on demand despite the practical and theoretical importance of this concept its measurement at the individual level in a practical setting proves elusive we propose a conjoint based approach to estimate consumer level reservation prices this approach integrates the preference estimation of traditional conjoint with the economic theory of consumer choice this integration augments the capability of traditional conjoint such that consumers reservation prices for a product can be derived directly from the individuallevel estimates of conjoint coefficients with this augmentation we can model a consumer s decision of not only which product to buy but also whether to buy at all in a category thus we can simulate simultaneously three effects that a change in price or the introduction of a new product may generate in a market the customer switching effect the cannibalization effect and the market expansion effect we show in a pilot application how this approach can aid product and pricing decisions we also demonstrate the predictive validity of our approach using data from a commercial study of automobile batteries

modeling competitive pricing and market share anatomy of a decision support system even with today s high emphasis on management decision support systems relatively little has been published on the motivations tribulations and post mortems that generally accompany the development of such systems this paper reports in a mixture of narrative style and more formal model exposition how a computerized decision support system for optimal price determination was developed implemented and finally applied to a broad range of industry problems

two new features in discrete choice experiments to improve willingness to pay estimation that result in sdr and sadr separated adaptive dual response discrete choice experiments such as choice based conjoint and dual response are popular preference elicitation methods yet they can suffer from context effects extreme response behavior and problems with estimating consumers willingness to pay accurately when the purchase probability is high this study proposes two new features to avoid these limits a strictly separating all forced and all free choice questions and b an adaptive mechanism to select fewer but more informative free choice questions the use of these two features invokes two new discrete choice experiment methods separated dual response sdr with just the first feature and separated adaptive dual response sadr with both features a conceptual comparison simulation study tests to address endogeneity concerns and three empirical studies demonstrate the appeal of these two new features relative to the benefits of existing discrete choice experiments especially when estimating willingness to pay data as supplemental material are available at http dx doi org 10 1287 mnsc 2015 2367 this paper was accepted by pradeep chintagunta marketing

the law of one price in international commodity markets a reformulation and some formal tests abstract we report formal tests of whether the law of one price lop holds in the long and in the short run for commodities traded in orgnized markets we formalize the distinction between short and long run by introducing lagged price adjustments also we introduce expectations explicitly tests support the long run lop but they reject the short rn lop the long run lop holds better for future prices than for spot prices on average 90 per cent of the deviation from lop is eliminated within 10 weeks but this ranges from 1 to 120 weeks

product line selection and pricing under a share of surplus choice model abstract product line selection and pricing decisions are critical to the profitability of many firms particularly in today s competitive business environment in which providers of goods and services are offering a broad array of products to satisfy customer needs we address the problem of selecting a set of products to offer and their prices when customers select among the offered products according to a share of surplus choice model a customer s surplus is defined as the difference between his utility willingness to pay and the price of the product under the share of surplus model the fraction of a customer segment that selects a product is defined as the ratio of the segment s surplus from this particular product to the segment s total surplus across all offered products with positive surplus for that segment we develop a heuristic procedure for this non concave mixed integer optimization problem the procedure utilizes simulated annealing to handle the binary product selection variables and a steepest ascent style procedure that relies on certain structural properties of the objective function to handle the non concave continuous portion of the problem involving the prices we also develop a variant of our procedure to handle uncertainty in customer utilities in computational studies our basic procedures perform extremely well producing solutions whose objective values are within about 5 of those obtained via enumerative methods our procedure to handle uncertain utilities also performs well producing solutions with expected profit values that are roughly 10 higher than the corresponding expected profits from solutions obtained under the assumption of deterministic utilities

spot and futures prices and the law of one price the law of one price lop is tested for narrowly defined commodities traded in futures markets in different countries during the period 1973 80 although the lop holds as an average tendency for most of the commodities there are instances of large riskless arbitrage returns before transactions costs deviations from the lop tend to be commodity specific rather than due to a common external factor and they tend to be smaller the longer the maturity of the futures contract in this paper we examine how well the law of one price lop holds for commodities traded internationally the answer to this question is important for two reasons the first is that in most modern theories of exchange rates price arbitrage for at least some goods is a necessary condition to determine the level of exchange rates but recent empirical research on the behavior of various price indices casts doubt on the empirical validity of the lop across countries for even the most disaggregated indices if it is not possible to identify any commodities for which the lop works satisfactorily then models incorporating the lop will not provide an adequate description of exchange rates the second reason for studying individual commodities is to gain information on the efficiency and the degree of integration of international commodity markets in efficient markets international commodity arbitrage implies that for a standard commodity prices in two markets expressed in a common currency will not differ but for transport costs

technical note simplified estimation procedures for mci models structural transformations of the mci model are presented which make the model easily estimated using dummy variables with widely available regression packages the mci model is empirically shown to provide better predictive power than several other models of similar form but ones which do not produce logically consistent market share estimates

combining revealed and stated data to examine housing decisions using discrete choice analysis abstract this paper uses stated preference and revealed preference data separately and jointly to examine individuals housing choices in particular it combines an established revealed preference approach discrete choice analysis of actual housing purchases and a relatively new stated preference approach choice based conjoint analysis of hypothetical housing purchases to provide us with a better understanding of the factors driving housing decisions these methods are appropriately combined since they reflect the same decision process households select the dwelling that provides the best combination of attributes from the feasible set of alternatives in total this paper analyzes three data sets only actual housing purchases only hypothetical housing purchases and both types of purchases combined analysis finds that actual and hypothetical housing purchases are similar decision processes with respect to some attributes yet are dissimilar with respect to other attributes nevertheless combining the two types of data improves identification of both categories of attributes journal of economic literature classification number r21

some further evidence on the law of one price the law of one price still holds international trade models often postulate the existence of a representative price i e the price which prevails at all markets this is known as the law of one price in this paper the law of one price is tested for seven commodities among four countries by explicitly considering transaction costs the empirical evidence suggests that in most cases the law of one price cannot be rejected asa maintained hypothesis furthermore for the remaining cases transaction costs seem to cause the failure

perceptions versus objective measures of environmental quality in combined revealed and stated preference models of environmental valuation abstract this study examines perceptions and objective attribute measures in discrete choice models of recreation site choice behavior these forms of attribute measurement are examined in individual and combined revealed preference stated preference models our results suggest that the model based on perceptions slightly outperforms the models based on objective attribute measures however issues such as the definition of the choice set and the measurement of welfare present significant challenges when using perceptions data

do hypothetical and actual marginal willingness to pay differ in choice experiments application to the valuation of the environment abstract in this paper we test the validity of choice experiments with donations for environmental projects in particular we test whether or not there are differences in preferences between a hypothetical and an actual choice experiment our experiments indicate no differences in addition internal tests of validity indicate transitive and stable preferences in both experiments although there are some indications of possible learning effects during the experiment

the law of one price in scandinavian duty free stores many empirical studies have rejected the law of one price that prices of a good differ across locations has been explained by differences in product attributes and costs of local inputs transport costs trade barriers and that buyers have imperfect information about prices in different locations see penelopi k goldberg and michael m knetter 1997 for a survey we examine the law of one price in situations where none of the mentioned reasons for its failure can be invoked it has also been suggested that deviations from the law of one price are a consequence of rigid nominal prices and that different countries typically have different currencies we explore whether this can contribute to our understanding of deviations from the law of one price our data are taken from three scandinavian duty free outlets where each product at the same location has price tags in at least two currencies hence a consumer has the option to choose between several prices for the same identical good in such a setting there is a strong prior that the law of one price lop hereafter holds well however the potential for arbitrage will arise because nominal prices are not continuously adjusted while exchange rates fluctuate daily based on standard tests we reject lop at all duty free outlets given that lop does not hold here it is less surprising that many previous studies have found that prices of similar products at different locations differ significantly nevertheless the main conclusion of the paper is that in this natural experiment lop remains a useful guide to the behavior of relative prices as deviations become large nominal prices are adjusted to reduce the deviations from lop thereby limiting arbitrage opportunities the patterns at the duty free outlets suggest that there is a band of inaction so that small deviations from lop may persist for almost a decade in one case but that large deviations quickly lead firms to adjust relative prices the findings are consistent with costly arbitrage and fixed costs of adjusting nominal prices

price as a stimulus to think the case for willful overpricing consumers aware of a new benefit will often experience uncertainty about its personal relevance or usage value this paper shows that the decision to deliberate further to resolve this uncertainty and reach a polarized judgment of personal relevance critically depends on the posted price in particular a price above the consumer s initial willingness to pay might be thought provoking and enhance the perception of relevance with a certain probability this behavioral mechanism is introduced formally and by way of an experiment with reference to the purchase of organic lettuce and fair trade coffee accounting for the effect of price as a stimulus to think a monopolistic firm should either over price transgressive pricing or under price regressive pricing in comparison to the consumer s willingness to pay under certain circumstances the firm should also empower consumers with means that reduce the effort of deliberation

an empirical comparison of logit choice models with discrete versus continuous representations of heterogeneity abstract currently there is an important debate about the relative merits of models with discrete and continuous representations of consumer heterogeneity in a recent jmr study andrews ansari and currim 2002 hereafter aac compared metric conjoint analysis models with discrete and continuous representations of heterogeneity and found no differences between the two models with respect to parameter recovery and prediction of ratings for holdout profiles models with continuous representations of heterogeneity fit the data better than models with discrete representations of heterogeneity the goal of the current study is to compare the relative performance of logit choice models with discrete versus continuous representations of heterogeneity in terms of the accuracy of household level parameters fit and forecasting accuracy to accomplish this goal the authors conduct an extensive simulation experiment with logit models in a scanner data context using an experimental design based on aac and other

export quality and the dynamics of north south competition this paper introduces and applies a new methodology to deal with competition among exporters of vertically differentiated products the novel methodology is applied to imports of manufactured goods from japan at the most detailed level of classification it is shown that the north lost market share in direct competition with the south in all of the three product segments low medium and high and in every sub period from 1988 to 2010 except in the high segment in the 1988 91 sub period most of the north s direct loss to the south took place in the low and medium segments china accounts for most of the south s direct gains in these two segments while the rest of the developing countries of asia accounts for most of these gains in the high segment

preference for the workplace investment in human capital and gender we use a hypothetical choice methodology to estimate preferences for workplace attributes from a sample of high ability undergraduates attending a highly selective university we estimate that women on average have a higher willingness to pay wtp for jobs with greater work flexibility and job stability and men have a higher wtp for jobs with higher earnings growth these job preferences relate to college major choices and to actual job choices reported in a follow up survey four years after graduation the gender differences in preferences explain at least a quarter of the early career gender wage gap

designing discrete choice experiments do optimal designs come at a price in discrete choice experiments design decisions are crucial for determining data quality and costs while high statistical efficiency designs are desirable they may come at a price if they increase the cognitive burden for respondents we address this problem by designing 44 experiments that systematically vary numbers of attributes and attribute level differences our results for two product categories suggest that respondents systematically are less consistent in answering choice questions as statistical efficiency increases this relationship holds regardless of the number of attributes and is statistically significant even if one accommodates preference heterogeneity implications for practice and future research are discussed

union rent seeking intangible capital and market value of the firm abstract this study considers the effect of unions on intangi ble capital investment and profitability within the context of a market value rather than a more traditional accounting based approach theory is provided suggesting unions are able to affect profitability by sharing in the economic returns to firm specific intangible capital in support of this hypothesis we find unionization reduces the returns to r d and produces a corresponding limiting influence on r d investment at the firm level i introduction a n extensive literature in economics has ex amined the determinants of profitability with much of the focus centering on the role of market structure only recently however have the effects of labor unions on profitability been analyzed ths is surprising since labor economists long have emphasized union influences on wages and productivity that in turn may affect profitabil ity in recent studies freeman 1983 and karier 1985 report a significant limiting influence of unions on price cost margins in high concentra tion manufacturing industries using firm level data and the market based tobin s

the evolution of price dispersion in the european car market car prices in europe are characterized by large and persistent differences across countries the purpose of this paper is to document and explain this price dispersion using a panel data set extending from 1980 to 1993 we first demonstrate two main facts concerning car prices in europe i the existence of significant differences in quality adjusted prices across countries with italy and the u k systematically representing the most expensive markets 2 substantial year to year volatility that is to a large extent accounted for by exchange rate fluctuations and the incomplete response of local currency prices to these fluctuations these facts are analysed within the framework of a multiproduct oligopoly model with product differentiation the model identifies three potential sources for the international price differences price elasticities generating differences in markups costs and import quota constraints local currency price stability can be attributed either to the presence of a local component in marginal costs or to markup adjustment that is correlated with exchange rate volatility the latter requires that the perceived elasticity of demand is increasing in price we find that the primary reason for the higher prices in italy is the existence of a strong bias for domestic brancs that generates high markups for the domestic firm fiat in the u k higher prices are mainly attributed to better equipped cars and or differences in the dealer discount practices the import quota constraints are found to have a significant impact on japanese car prices in italy france and the u k with respect to local currency price stability a large percentage of the documented price inertia can be attributed to local costs and a smaller fraction to markup adjustment that is indicative of price discrimination based on these results we conjecture that the emu will substantially reduce the year to year volatility observed in the car price data but without further measures to increase european integration it will not completely eliminate existing cross country price differences

the trade reducing effects of market power in international shipping abstract developing countries pay substantially higher transportation costs than developed nations which leads to less trade and perhaps lower incomes this paper investigates price discrimination in the shipping industry and the role it plays in determining transportation costs in the presence of market power shipping prices depend on the demand characteristics of goods being traded we show theoretically and estimate empirically that ocean cargo carriers charge higher prices when transporting goods with higher product prices lower import demand elasticities and higher tariffs and when facing fewer competitors on a trade route these characteristics explain more variation in shipping prices than do conventional proxies such as distance and significantly contribute to the higher shipping prices facing the developing world a simple back of the envelope calculation suggests that eliminating market power in shipping would boost trade volumes by 5 9 for the us to 15 2 for latin america our findings are also important for evaluating the impact of tariff liberalization cargo carriers decrease shipping prices by 1 2 for every 1 reduction in tariffs

using choice experiments to value the environment this paper we outline the choice experiment approach to environmental valuation this approach has its roots in lancaster s characteristics theory of value in random utility theory and in experimental design we show how marginal values for the attributes of environmental assets such as forests and rivers can be estimated from pair wise choices as well as the value of the environmental asset as a whole these choice pairs are designed so as to allow efficient statistical estimation of the underlying utility function and to minimise required sample size choice experiments have important advantages over other environmental valuation methods such as contingent valuation and travel cost type models although many design issues remain unresolved applications to environmental issues have so far been relatively limited we illustrate the use of choice experiments with reference to a recent uk study on public preferences for alternative forest landscapes this study allows us to perform a convergent validity test on the choice experiment estimates of willingness to pay

unions and investment in british industry this paper presents an empirical analysis of investment in british industry using data at the industry level and focusing on union effects the authors find that the rate of investment is around 28 percent lower in firms that recognize unions and have an average union density relative to those in which unions are not recognized this is the gross effect holding wages product prices and productivity constant if we take account of union effects on these as well the overall effect is an investment reduction of 16 percent in competitive firms and 3 percent in noncompetitive firms copyright 1992 by royal economic society

the law of one price revisited new evidence on the behavior of international prices i introduction the law of one price asserts that prices of identical goods should be equalized internationally when expressed in a common currency and adjusted for any contract differences transportation costs and trade distortions the intuition is that international arbitrage should work to eliminate any persistent price discrepancies due solely to differences in the country of origin or sale of goods thus stated the law of one price is frequently assumed to hold in theoretical and empirical models of international trade yet based on evidence from the 1950s 1960s and early 1970s the proposition does not appear to characterize the actual price behavior of many traded goods the evidence further indicates that deviations from absolute price equalization are often both large and protracted even during periods of comparative exchange rate stability 1 the relative version of the law of one price posits that rates of change in prices will be equalized meaning that exchange rate adjusted inflation rates should be the same for similar traded goods empirical support for this alternative has also been lacking 2 as isard 1977b indicates this evidence calls into question any appeal to microfoundations as a basis for macroeconomic price convergence in the form of purchasing power parity ppp it also casts doubt on the role of price linkages in both international market integration and the transmission of economic disturbances across national borders the prevailing view on international price equalization derives from evidence and analyses which are dated and need not apply to current economic conditions most published studies involve data from fixed rate periods very early episodes of floating rates or the first years of the present flexible rate system an analysis based on more contemporary data is warranted in view of the substantial exchange rate movements and the perceived increase in international integration that have occurred since these earlier studies 3 in addition a fresh look at the evidence can make use of both the longer time series data and new time series techniques that are now available accordingly this study updates the microeconomic evidence on international price equalization while investigating the existence and nature of the long run relationship between traded goods prices it analyzes the behavior of u s export prices relative to japanese and german dollar export prices for carefully matched identically weighted categories of manufactured goods over the current floating rate period stationarity and cointegration tests are used to assess the time series properties of these relative export prices and to determine the extent to which the common currency prices of similar exports are related internationally in the long run while these methods have been used in analyses of purchasing power parity they have not been extended to studies of traded goods prices at the microeconomic level ii data description this study is based on a set of quarterly relative dollar export price indexes constructed by the bureau of labor statistics bls the data represent ratios of u s export prices to german or japanese export prices expressed in dollars for highly comparable product groups conceptually the series measure the average price of a particular set of u s exports to all foreign markets relative to a dollar price index for a similar set of exports from germany or japan the indexes are weighted averages of transactions contract prices of individual exports reported on an f o b free on board or f a s free along side ship basis for the final month of each quarter and adjusted for quality changes the categories are fairly disaggregated e g valves trucks over 2000cc so that the comparison is between relatively narrow product categories two additional features in the bls s design of the series ensure a high degree of comparability between the pairs of export categories

designing conjoint choice experiments using managers prior beliefs abstract the authors provide more efficient designs for conjoint choice experiments based on prior information elicited from managers about the parameters and their associated uncertainty the authors use a bayesian design procedure that assumes a prior distribution of likely parameter values and optimizes the design over that distribution the authors propose a way to elicit prior information from managers and show in monte carlo studies that the procedure provides more efficient designs than the current procedures the authors provide an empirical application in which they elicit prior information on the parameter values and the associated uncertainty from managers here the bayesian design provides 30 50 lower standard errors of the estimates and an expected predictive validity that is approximately 20 higher

measuring consumers willingness to pay at the point of purchase abstract economists psychologists and marketing researchers rely on measures of consumers willingness to pay wtp in estimating demand for private and public goods and in designing optimal price schedules existing market research techniques for measuring wtp differ in whether they provide an incentive to consumers to reveal their true wtp and in whether they simulate actual point of purchase contexts the authors present an empirical comparison of several procedures for eliciting wtp that are applicable directly at the point of purchase in particular the authors test the applicability of becker degroot and marschak s 1964 well known incentive compatible procedure for assessing the utility of lotteries to measuring consumers wtp in three studies the authors explore the reliability validity and feasibility of the procedure and show that it yields lower wtp estimates than do non incentive compatible methods such as open ended and double bounded contingent valuation they show experimentally t

tourist preferences for rural house stays evidence from discrete choice modelling in spain abstract although the appeal of rural houses for tourists lies mainly in the natural surroundings and their intrinsic rural characteristics there are other factors which are also important such as their size type of building quality of equipment services and activities offered to evaluate the tourists preferences for these potential or effective attributes a stated preference experiment was conducted in the northwest area of the region of murcia and the data are analysed using discrete choice modelling methodology consistent specifications for multinomial logit and mixed logit models that consider variations in tastes within tourists preferences are found the results could be of use to promoters and owners of rural houses when planning marketing and promotional campaigns or when taking effective investment decisions

research note on managerially efficient experimental designs in most marketing experiments managerial decisions are not based directly on the estimates of the parameters but rather on functions of these estimates for example many managerial decisions are driven by whether or not a feature is valued more than the price the consumer will be asked to pay in other cases some managerial decisions are weighed more heavily than others the standard measures used to evaluate experimental designs e g a efficiency or d efficiency do not accommodate these phenomena we propose alternative managerial efficiency criteria m errors that are relatively easy to implement we explore their properties suggest practical algorithms to decrease errors and provide illustrative examples realistic examples suggest improvements of as much as 30 in managerial efficiency we close by considering approximations for nonlinear criteria and extensions to choice based experiments

coffee market liberalisation and the implications for producers in brazil guatemala and india the standard approach to modelling the relationship between world and producer prices of coffee does not incorporate the effects of changing government policies and market structures these changes have led to large structural breaks in the relationship between the prices implying the standard estimates are biased we model coffee prices in brazil guatemala and india allowing for the structural breaks and show that the liberalisation of coffee markets has benefited producers substantially both in terms of a higher share of the world price of coffee and higher real prices this suggests that calls to re regulate coffee markets may be misplaced

exchange rates and traded goods prices abstract this paper presents a partial equilibrium model of the determination of domestic and export prices by a monopolistic competitive firm the model stresses the role of exchange rate uncertainty and expectations the most important result of the analysis is that the stochastic properties of deviations from the law of one price are crucially affected by the currency of denomination of export prices using data on domestic and dollar export prices of japanese goods i find that deviations from the law of one price are due to exchange rate surprises but also to price staggering and ex ante price discrimination

public preferences for carbon tax attributes the impacts of climate change are already visible throughout the world recognizing the threats posed by climate change the durban platform the 17th session of the conference of parties cop 17 underscores that the global nature of climate change calls for the widest possible cooperation and ambitious action by all countries a crucial starting point for the design of effective and publicly acceptable policies is to explore public preferences for climate policy instruments using a choice experiment this study investigates public preferences for carbon tax attributes in a developing country context the results account for heterogeneity in preferences and show that turkish people prefer a carbon tax with a progressive cost distribution rather than one with a regressive cost distribution the private cost has a negative effect on the probability of choosing the tax earmarking carbon tax revenues increases the public acceptability of the tax moreover there is a preference for a carbon tax that promotes public awareness of climate change

australian evidence on the exit voice model of the labor market two predictions of the exit voice model of union activity that have been confirmed by empirical research in the united states are that union workers will have longer tenures and lower quit rates th

observed and unobserved preference heterogeneity in brand choice models this paper extends the scanner based choice literature by explicitly incorporating individual level brand preference data we illustrate our model using a unique data set that combines survey and scanner data collected from the same individuals the addition of individual specific brand preference information significantly improves fit and prediction furthermore this observed heterogeneity better explains choice than does unobserved heterogeneity in the standard scanner model s parameters more importantly we find that the standard model underestimates the importance of consumers brand preferences and overestimates both brand loyalties and price sensitivities brand loyalty is overestimated because models without preference information confound state dependence heterogeneity and preference effects price sensitivities are inflated because the average preference based consumer is implicitly assumed to be more willing to switch from his preferred brand than is the real preference based consumer further standard models overestimate the heterogeneity in price and loyalty sensitivities and misidentify both price and loyalty sensitive consumers the managerial implications of our findings and the applicability of our methodology when survey data are collected infrequently and for only a subsample of consumers are pursued we demonstrate that even under these circumstances better populationwide pricing and promotion decisions are identified and more accurate targeting results

goods prices and exchange rates what have we learned import prices typically change by a smaller proportion than the exchange rate between the exporting and importing country recent research indicates that common currency relative prices for similar goods exported to different markets are highly correlated with exchange rates between those markets this evidence suggests that incomplete pass through is a consequence of third degree price discrimination while distance matters for market segmentation borders have independent effects the source of the border effect has not been clearly identified furthermore there is little evidence yet to suggest substantial market power is implied by the observed price discrimination

research note using basket composition data for intelligent supermarket pricing how can supermarkets use the vast data they have to design strategies to compete for large basket shoppers potentially their most profitable customers we say analyze the data to glean basket composition of heterogeneous consumers of theoretical and practical interest is the question will our suggestion improve supermarket profits and if so by what pricing strategies by answering this we can also answer the question do results of extant research on single product marketing that using such information intensifies competition and lowers profits generalize to multiproduct marketing by supermarkets that carry several products and whose patrons purchase multiple items we derive equilibrium data based intelligent pricing strategies that also produce increased supermarket profits what is more interesting is our result that data analysis is profitable whether or not a competitor undertakes data analysis if not too costly implementing data analysis is a dominant strategy moreover with comprehensive data analysis connecting basket information and household data stores can increase profits further by targeting rewards at individual households thereby segmenting the market more completely in contrast to past research findings we show that for supermarkets even under competition use of information on past purchases enables intelligent pricing better segmentation and higher profits

a contract and balancing mechanism for sharing capacity in a communication network we propose a method for determining how much to charge users of a communication network when they share bandwidth our approach can be employed either when a network owner wishes to sell bandwidth for a specified period of time to a number of different users or when users cooperate to build a network to be shared among themselves our proposed contract and balancing mechanism can mediate between rapidly fluctuating prices and the longer time scales over which bandwidth contracts may be traded an advantage of the process is that it avoids perverse incentives for a capacity provider to increase congestion

practice prize article chan4cast a multichannel multiregion sales forecasting model and decision support system for consumer packaged goods we discuss the development and implementation of chan4cast a sales forecasting model by pack size category channel region customer account and a web based decision support system dss for consumer packaged goods in addition to capturing the effects of such variables as past sales trend own and competitor prices and promotional variables and seasonality the model accounts for the effects of temperature significant holidays new product introductions trading day corrections and adjustments to the wholesale level in general the model forecasts sales volume satisfactorily for a leading consumer packaged goods company the dss enables top and mid level executives in sales marketing strategic planning and finance to develop accurate forecasts of sales volume plan prices and promotional activities over a long time horizon to track sales response to marketing actions over time and to simulate forecast scenarios based on possible marketing decisions and other variables chan4cast is being rolled out for more users and more divisions in the company the key take aways are that successful development and implementation of a rigorous marketing science model require a strong internal champion a careful balance between modeling sophistication and practical relevance good diagnostic features regular validations and greater attention to the development of a fast and responsive dss

the spatial representation of market information to be used effectively market knowledge and information must be structured and represented in ways that are parsimonious and conducive to efficient managerial decision making this manuscript proposes a new latent structure spatial model for the representation of market information that meets this requirement when applied to a priori defined e g socioeconomic segments our proposed methodology provides a new way to display marketing data parsimoniously via dimension reduction through a factor analytic specification in post hoc studies we simultaneously derive market segments from the data and represent the structure of market information within each of the unobserved derived groups segments we summarize all relevant information concerning derived market segments via a series of maps that prove conducive to the quick and accurate dissemination of customer and competitor market information the associations between the variables are captured in a reduced space where each variable is represented by a vector that emanates from the origin and terminates on a hypersphere of unit the vector length is arbitrary radius e g a unit circle in a two dimensional space the angles between the variable vectors capture the correlation structure in the reduced space the method is very general and can be utilized to identify latent structures in a wide range of marketing applications we present an actual commercial marketing application involving the normalized prescription shares of specialists of ethical drugs to demonstrate the effectiveness of representing market information in this manner and to reveal the advantage of the proposed methodology over a more general finite mixture based method the proposed methodology derives three segments that tend to group specialists with respect to the stage of adoption of innovation in this therapeutic category the specialists in the first group appear to be laggards because they prescribe more of the older class of brands however they also have a higher than average preference for a newer and somewhat cheaper brand this suggests that some of the specialists belonging to this segment may be price sensitive while others may exhibit a slower adoption cycle replacing the older class with the newer brands and thus skip one stage in the cycle of innovation the specialists in the second segment are heavy users of the newer class of brands but are not particularly fast to adopt the latest brands finally the last segment clearly consists of innovators traditionally pharmaceutical marketers have viewed specialists in one of two extremes all specialists are the same i e the market has only one segment or all specialists are very different i e the market consists of 10 000 segments of one physician each not surprisingly this analysis suggests a more moderate perspective specialists adopt new products at different rates

using a discrete choice experiment to estimate health state utility values in this study we explored a novel application of the discrete choice experiment dce that resembles the time trade off tto task to estimate values on the health utility scale for the eq 5d the dce was tested in a survey alongside the tto in a sample of english speaking canadians recruited by a market research company the study found that the dce is able to derive logical and consistent values for health states valued on the full health dead scale the dce overcame some issues identified in the version of tto currently used to value eq 5d notably allowing for fewer data exclusions and incorporating values considered worse than dead without introducing a separate valuation procedure this has important implications for providing robust values that represent the preferences of all respondents

a model of spatial arbitrage with transport capacity constraints and endogenous transport prices this article solves a high frequency model of price arbitrage incorporating storage and trade when the amount of trade is limited by transport capacity constraints in equilibrium there is considerable variation in transport costs because transport costs rise when the demand to ship goods exceeds the capacity limit this variation is necessary to attract shipping capacity into the industry in turn prices in different locations differ by a time varying amount thus while the law of one price holds it holds because of endogenous variation in transport costs

predictive testing of consumer choice models not subject to independence of irrelevant alternatives the probabilistic modeling of the relationship between objective or perceived characteristics of multiattribute alternatives and consumer choice is receiving increased attention in marketing and ot

willingness to pay estimation with choice based conjoint analysis addressing extreme response behavior with individually adapted designs the increasing consideration of behavioral aspects in operations management models has prompted greater use of choice based conjoint cbc studies in operations research such studies can elicit consumers willingness to pay wtp a core input for many optimization models however optimization models can yield valid results only if consumers wtp is estimated accurately a simulation study and two field studies show that extreme response behavior in cbc studies such that consumers always or never choose the no purchase option harms the validity of wtp estimates reporting the share of consumers who always and never select the no purchase option allows for detecting extreme response behavior this study suggests an individually adapted design that avoids extreme response behavior and thus significantly improves wtp estimation accuracy

demand and innovation in services the case of mobile communications abstract this paper aims to analyse the pricing strategies of mobile communications operators and examine the role of demand characteristics in the development of new tariff plans in so doing we depart from a traditional industrial organization approach to price discrimination and interpret new tariff plans as innovations in the spirit of schumpeter we look at competition in this sector as depending upon this form of innovation and we argue that given the specific features of the industry the development of new tariff plans is strongly related to the users characteristics and behaviour our main point is that in a context of uncertainty demand affects firms innovative strategies in two ways first by providing information on user behaviour and by increasing the capability of market segmentation and second by providing the incentives to innovate this argument is supported by an empirical analysis carried out on the basis of an original dataset which includes all the tariff plans on offer in the history of the italian market between 1992 and 2005 we find that both a firm s installed customer base and the level of market saturation play a role in shaping firms innovative pricing strategies in terms of the number and characteristics of the new tariff plans

does the law of one price really hold for commodity prices in spite of the empirical failure of the law of one price it is usually assumed that commodity prices are perfectly arbitraged at least in the long run this paper argues that this assumption is counterfactual and that much of the empirical evidence provided to support it is flawed and affected by econometric shortcomings spurious regressions nonstationarity in the data inappropriate use of first differences an alternative methodology co integration by which a long run relationship between nonstationary series can be tested is proposed tests of nonstationarity and co integration for a group of commodities show quite uniformly that the law of one price as a long run relationship fails and that deviations from the pattern are permanent

real world performance of choice based conjoint models conjoint analysis is one of the most important tools to support product development pricing and positioning decisions in management practice for this purpose various models have been developed it is widely accepted that models that take consumer heterogeneity into account outperform aggregate models in terms of hold out tasks the aim of our study is to investigate empirically whether predictions of choice based conjoint models which incorporate heterogeneity can successfully be generalized to a whole market to date no studies exist that examine the real world performance of choice based conjoint models by use of aggregate scanner panel data our analysis is based on four commercial choice based conjoint pricing studies including a total of 43 stock keeping units sku and the corresponding weekly scanning data for approximately two years an aggregate model serves as a benchmark for the performance of two models that take heterogeneity into account hierarchical bayes and latent class our empirical analysis demonstrates that in contrast to the performance using hold out tasks the real world performance of hierarchical bayes and latent class is similar to the performance of the aggregate model our results indicate that heterogeneity cannot be generalized to a whole market and suggest that aggregate models are sufficient to predict market shares author s abstract

international comparisons of pricing to market behavior this paper measures the degree of price discrimination across export destinations that is associated with exchange rate changes using u s u k german and japanese industry level data given the industries sampled more price discrimination across destinations is observed in the u k german and japanese data for industries that match across source countries however behavior is very similar across source countries furthermore destination specific price adjustment on exports to the united states from germany and japan is similar to price adjustment observed on shipments to other destinations most variation in the data appears to be related to industry copyright 1993 by american economic association