a model of demand with interactions among consumers abstract the aim of this paper is to study emergent patterns of demand when there are social interactions between different consumers specifically our concern is with the case in which consumers preferences are influenced by the consumption behaviour of others the analysis recognises three reference groups the first is a peer group of similar consumers with whom the individual interacts on a regular basis and with whom the individual desires to share some consumption activities the second is one or several contrast group s with which the individual seeks actively not to interact and from whom the individual wishes to distinguish himself herself the third is an aspirational group with whom the individual does not interact on a regular basis but wishes that he she did and with whom the individual would like to share consumption activities but cannot in this relatively simple model these groups influence the individual s behaviour the paper derives steady state and dynamic properties of the distribution of consumption over users the degree to which consumption is restricted to a small group of similar agents is determined by the strength of the contrast and aspiration effects these effects also drive the distribution away from the natural distribution i e the one that would prevail were consumers to consider only the properties of the good and not the actions of other consumers the paper discusses the potential application of this modeling framework in a large number of consumption settings

informational constraints and the overlapping generations model folk and anti folk theorems this paper analyses the sustainability of inter generational transfers in samuelson s consumption loan model when agents are imperfectly informed about past events we find that with mild informational constraints transfers cannot be supported by pure strategy equilibria mixed strategies allow transfers to be sustained even if agents have little information so that a version of the folk theorem holds however these equilibria are not robust if each agent s utility function is subjected to a small random perturbation as in harsanyi 1973 these mixed strategy equilibria unravel and only the zero transfer allocation survives as the unique rationalizable outcome this result is an example of mixed strategy equilibrium of an extensive form game which cannot be purified

habit formation interdependent preferences and demographic effects in the almost ideal demand system the authors model myopic habit formation interdependence of preferences among consumers and demographic effects as taste shifters in a micro consumer demand model of the almost ideal demand variety the model is estimated for dutch micro data the authors investigate the dynamic properties of the model and find that it behaves very differently from models without interdependence of preferences the implications for micro macro modeling are discussed copyright 1991 by royal economic society

cooperation in ongoing organizations this paper argues that overlapping games can provide a natural theory of long lived organizations it shows that participation in organizations of infinite duration changes the incentives of agents with finite lives and will induce more cooperation than a static model would predict after developing the general theory we apply it to the description of career paths in organizations and show that it can be optimal to give the youngest workers the most arduous tasks

interdependent preferences an econometric analysis the theoretical model of gaertner 1974 and pollak 1976 for the interdependence of preferences in the linear expenditure system is estimated for a cross section of households the interdependence of consumption of different households has implications for the stochastic structure of the model and for the identifiability of its parameters both aspects are dealt with the empirical results indicate a significant role played by the interdependence of preferences one of its implications is that predictions of the effects of changes in a household s exogenous variables differ according to whether the exogenous variable only changes for this household or for all households jointly c 1997 john wiley sons ltd

modeling interdependent consumer preferences abstract a consumer s preference for an offering can be influenced by the preferences of others in many ways ranging from social identification and inclusion to the benefits of network externalities in this article the authors introduce a bayesian spatial autoregressive discrete choice model to study the preference interdependence among individual consumers the autoregressive specification can reflect patterns of heterogeneity in which influence propagates within and across networks these patterns cannot be modeled with standard random effect specifications and can be difficult to capture with covariates in a linear model the authors illustrate their model of interdependent preferences with data on automobile purchases and show that preferences for japanese made cars are related to geographically and demographically defined networks

worth waiting for delayed compensation training and turnover in the united states and japan this article utilizes a rich data set on workers and their employers in the united states and japan to test several predictions of human capital theory the data set incorporates both prospective and retrospective measures of turnover includes multiple measures of training and provides a basis for calculating plant specific returns to tenure contrary to human capital theory there is no evidence that establishments with high levels of training have either high returns to tenure or low levels of turnover surprisingly establishments with high returns to tenure do not have low levels of turnover

a theory of wage dynamics a dynamic equilibrium model of long term implicit labour contracts under incomplete but symmetric information is developed workers are assumed to be risk averse and of unknown ability or productivity risk neutral firms learn as do workers about each worker s productivity by observing the worker s output over time it is shown that equilibrium contracts provide for wages which never decline with age and increase only when the worker s market value increases above his current wage in addition to characterizing the equilibrium wage contract we also derive some of its implications for the behaviour of aggregate wages across various groups of workers these implications explain some findings in the recent empirical literature on ageearnings profiles in particular our model can explain why earnings may be positively related to experience even after controlling for productivity as some empirical studies have indicated

estimating a firm s age productivity profile using the present value of workers earnings in hiring new workers risk neutral employers equate the present expected value of each worker s compensation to the present expected value of his her productivity data detailing how present expected compensation varies with the age of hire embed therefore information about how productivity varies with age this paper infers age productivity profiles using data on the present expected value of earnings of new hires of a fortune 1000 firm for each of the five occupation sex groups considered productivity falls with age with productivity exceeding earnings for young workers and vice versa for older workers

unobserved retailer behavior in multimarket data joint spatial dependence in market shares and promotion variables marketing scholars and practitioners frequently infer market responses from cross sectional or pooled cross section by time data such cases occur especially when historical data are either absent or are not representative of the current market situation we argue that inferring market responses using cross sections of multimarket data may in some cases be misleading because these data also reflect unobserved actions by retailers for example because the opportunity costs of doing so do not outweigh the gains retailers are predisposed against promoting small share brands as a consequence local prices and promotion variables depend on local market shares the higher the local share the higher the local observed promotion intensity we refer to this reverse causation as an endogeneity ignoring it will inflate response estimates because both the promotion effects on share as well as the reverse effects are in the same direction in this paper we propose a solution to this inference problem using the fact that retailers have trade territories consisting of multiple contiguous markets this implies that the unobserved actions of retailers cause a measurable spatial dependence among the marketing variables the intuition behind our approach is that by accounting for this spatial dependence we account for the effects of the retailer s behavior in this context our study hopes to make the following contributions at the core of which lies the above intuition first we separate the market response effect from the reverse retailer effect by computing responses to price and promotion net of any spatial and therefore retailer influence second underlying this approach is a new variance decomposition model for data with a panel structure this model allows to test for endogeneity of prices and promotion variables in the cross sectional dimension of the data this test aims to complement the one developed by villas boas and winer 1999 who test for endogeneity along the temporal dimension third to illustrate the approach we use information resources inc iri market share data for brands in two mature and relatively undifferentiated product categories across 64 iri markets whereas we only use data with very short time horizons to estimate price and promotion responses with the spatial model we do have data over long time windows we use the latter to validate the approach specifically within market estimates of price and promotion response are not subject to the same endogeneity because we hold the set of retailers constant therefore comparing within and across market estimates of price and promotion responses is a natural way to validate the approach consistent with our argument ignoring the reverse causation in the cross sectional data leads to inferences of price and promotion elasticities that are farther away from zero than the elasticities obtained from within market analysis in contrast cross sectional spatial estimates and time series estimates show convergent validity from a practical point of view this means it is possible to obtain reasonable within market estimates of price and promotion elasticities from predominantly cross sectional data this may benefit marketing managers the manager who would act on the inflated elasticities will over allocate marketing resources to promotions because she ignores retailers censorship of promotions on the basis of already existing high share we explore other approaches to correct for the inference bias and discuss further managerial issues and future research

occupational mobility and the distribution of occupational success among young men interpretation of the distribution of occupational success depends crucially on an understanding of the process of mobility if the holders of low paying jobs this year are just as likely as anyone else to hold good jobs next year then the lower tail of the earnings distribution is not a matter of great social concern further if the distribution of success is primarily determined by a random process the prospects for a significant reduction in the inequality of earnings are unfavorable on the other hand high mobility in the short run may conceal systematic stratification of the labor force it may be that the same individuals spend most of their time in the worst jobs if so luck and random events may play a small role in the distribution of well being inequality may be a major issue and the elimination of stratification may hold out the promise of an important reduction in inequality simple tabulation of distributions of success and of mobility among categories of success cannot answer the basic question of the role of stratification in this paper we develop a model and statistical method for studying mobility and relating it to characteristics upon which stratification may be based our study rests on annual interviews conducted from 1966 through 1969 with about 3 000 white males born between 1942 and 1952 1 we find that mobility is closely related to personal characteristics especially intelligence and education men with high iqs and extensive education are more likely to move to high paying jobs and are more likely to remain in them nevertheless random events dominate the distribution of occupational success in the short run our results strongly support the finding of christopher jencks and his collaborators that redistribution of the determinants of earnings would do almost nothing to reduce the observed inequality of annual earnings

a bargaining model based on the commitment tactic abstract this paper studies a one shot simultaneous move bargaining game each bargainer makes a partial commitment a share of the unit size cake that she would like to get which can later be revoked at some cost to the player the payoffs are defined in part by the nash bargaining solution where the feasible utility set is affected by the players partial commitments under certain assumptions on the two cost of revoking functions we establish that the model has a unique nash equilibrium it is shown that a player s equilibrium share of the cake is strictly increasing in her marginal cost of revoking a partial commitment an application of our model selects a unique equilibrium in nash s demand game journal of economic literature classification number c78

identifying interdependent behaviour in an empirical model of labour supply in this paper we test a particular form of interdependent behavior namely the hypothesis that individuals choices of hours of work are influenced by the average hours of work in a social reference group there are problems to empirically disentangle the effects of interdependent behavior and preference variation across groups we show that panel data or data from several points in time are needed in the empirical analysis we combine cross section data from 1973 1980 and 1990 our results support the hypothesis of interdependent behavior the implication is that conventional tax policy predictions in which preference interdependencies are neglected will tend to underestimate the effect of a tax reform on hours of work our point estimates suggest that conventional calculations would capture only about a third of the actual change in hours of work

repeated games played by overlapping generations of players the present paper tries to explain cooperative behaviour in an organization run by a sequence of long but finitely lived agents we show that the folk theorem holds for infinitely repeated games with overlapping generations of finitely lived players any mutually beneficial outcome can approximately be sustained if the player s life span and the overlapping periods are long enough the result is stronger than the usual folk theorems in that it employs no assumption on the stage game such as the full dimensionality of payoff set or multiplicity of equilibria

identification of endogenous social effects the reflection problem this paper examines the reflection problem that arises when a researcher observing the distribution of behaviour in a population tries to infer whether the average behaviour in some group influences the behaviour of the individuals that comprise the group it is found that inference is not possible unless the researcher has prior information specifying the compisition of reference groups if this information is available the prospects for inference depend critically on the population relationship between the variables defining reference groups and those directly affecting outcomes inference is difficult to implossible if these variables are functionally dependent or are statistically independent the prospects are better if the variables defining reference groups and those directly affecting outcomes are moderately related in the population

recursive contracts firm longevity and rat races an experimental analysis abstract this paper reports the results from a laboratory experiment which investigates the structure of contracts that emerge in overlapping generation firms where future ownership is a perquisite of employment workers in the young generation are offered employment contracts designed by the firms owners who belong to the old generation when old employed workers are granted ownership rights as long as the firm continues to operate in line with theoretical predictions the results indicate that as firm longevity increases the recursive nature of the contracts leads to a rat race characterized by low wages high effort levels and rent dissipation these results have important implications for the optimal management of long lived firms such as partnerships

managerial incentives and collusive behavior abstract i characterize the effects of empirically observed managerial incentives on long run oligopolistic competition when managers have a preference for smooth time paths of profits as revealed by the empirical literature on income smoothing manager led firms can sustain collusive agreements at lower discount factors capped bonus plans and incumbency rents with termination threats make collusion supportable at any discount factor independent of contracts duration when managers have these preferences incentives and demand fluctuates price wars during booms need not occur the most collusive price may then be pro cyclical

intergenerational conflicts of interest and seniority systems in organizations this paper studies the role of a proposed seniority system in an organization the organization consists of at least three overlapping generations of short lived members and chooses either a shortsighted or a farsighted action in each period this results in intergenerational conflicts of interest the old generation desires to obtain an immediate profit while the middle and young generations have incentives to invest for future profits we use a model of infinitely repeated games and demonstrate that the seniority system solves these conflicts in the sense that the farsighted action profile is sustainable in equilibrium

firm specific seniority and wages this article studies the relationship between seniority and wages micro data with more than one observation from each firm are utilized to single out the seniority effect on wages arising within firms from the total seniority wage effect the results show that the seniority effect arises within firms but do not support the human capital explanation of the seniority wage profile employees with high levels of firm specific on the job training requirements have less steep wage profiles the results give some support to the theory of delayed compensation as piece rate workers have negligible returns to seniority