failures in contingent reasoning the role of uncertainty we propose a new channel to account for the difficulties of individuals with contingent reasoning the presence of uncertainty when moving from an environment with one state of known value to one with multiple possible values two changes occur first the number of values to consider increases second the value of the state is uncertain we show in an experiment that this lack of certainty or the loss of the power of certainty impedes payoff maximization and that it accounts for a substantial portion of the difficulties with contingent reasoning

analysis of new product diffusion using a four segment trial repeat model a four segment trial repeat model is developed to model sales of a frequently purchased product in the early stage of the product s life cycle the model can be calibrated using aggregate data alone two versions of the model one emphasizing the competitive aspect of marketing communications and another emphasizing the informative aspect are estimated from data on 21 newly launched pharmaceutical products the model provides valuable diagnostics such as an early estimate of the long run market share of the new product a decomposition of total sales into trial sales due to marketing activities trial sales due to word of mouth and repeat sales the changing composition of the trial market and repeat market over time and the time when the trial market is expected to be saturated in addition the effectiveness of the entrant s marketing efforts word of mouth communication and buyers trial experience are analyzed with the model a cross sectional analysis based on the empirical estimation results of our model reveals interesting insights into product introduction strategies we find that 1 the effectiveness of the firms communication activities on trial is related mainly to product quality attributes and market growth whereas that of word of mouth is associated with product class characteristics and market competitiveness and 2 the effect of product trial on repeat purchases is related mainly to product quality attributes and various market characteristics such as size growth competitiveness and familiarity

theories of the price and quantity of physician services a synthesis and critique abstract in the traditional neoclassical model of supply and demand prices determine the allocation of economic resources the difficulty in applying this model to physician services is the rationing of resources directly by physicians themselves eliminating the allocative function of prices welfare consequences are appropriately judged in terms of efficiency and equity not departures from the structural relationships implied by supply and demand as interpreted here both competitive theories and target income theories of this market imply that physicians consider both their own welfare and the welfare of their patients in their decision making all consumer benefits and all producer costs are internalized by physicians they consequently have an incentive to obtain the maximum possible social benefit from the resources at their disposal to the extent that they are implicitly allowed to share in the resulting social gains the distributions of gains between patients and physicians is determined by professional ethics within bounds imposed by competitive forces

physician induced demand for surgery following up the earlier findings by fuchs on surgeon induced demand this paper makes numerous data and econometric improvements in conducting a test of neoclassical and inducement theories a simultaneous equation model is used to estimate physician demand and equilibrium fees for surgery from a sample of 350 psus over the 1969 76 period the results provide definite support for the notion of competitive market failure particularly in large metropolitan areas other things equal fees and utilization are higher in surgeon rich areas although our estimated shift elasticities were only about one third those found by fuchs a statistically significant albeit small price elasticity of demand for surgery was also obtained in contrast to fuchs increasing monopoly and disequilibrium models are also tested without altering the basic findings where surgeons were in short supply their availability significantly affected surgery rates although a small supply effect was found in plentiful areas as well

a parsimonious model for forecasting gross box office revenues of motion pictures the primary objective of this paper is to develop a parsimonious model for forecasting the gross box office revenues of new motion pictures based on early box office data the paper also seeks to provide insights into the impact of distribution policies on the adoption of new products the model is intended to assist motion picture exhibitor chains retailers in managing their exhibition capacity and in negotiating exhibition license agreements with distributors studios by allowing them to project the box office potential of the movies they plan to or currently exhibit based on early box office results it is also of interest to practitioners in other software industries e g music books cd roms where the distribution intensity is highly variable over the product life cycle and is an important determinant of new product adoption patterns the model and its extensions are of interest to academic researchers interested in modeling distribution effects in new product adoption as well as forecasters looking for ways to leverage historical data on related products to forecast the sales of new products we draw upon a queuing theory framework to conceptualize stochastically the consumer s movie adoption process in two steps the time to decide to see the new movie and the time to act on the adoption decision the parameter for the time to decide process captures the intensity of information intensity flowing from various information sources while the parameter for the time to act process is related to the delay created by limited distribution intensity and other factors our conceptualization extends existing new product forecasting models which assume that consumers act instantaneously on the motivating information they receive about the new product the resulting model is parsimonious yet it accommodates a wide range of adoption patterns in addition the stochastic formulation allows us to quantify the uncertainty surrounding the expected adoption pattern in the empirical testing we focus on the most parsimonious version of the modeling framework boxmod i a model that assumes stationarity with respect to the two shape parameters that characterize the adoption process the model produces fairly accurate early forecasts using at most the first three weeks of data for calibration and the predictive performance of the model compares favorably with benchmark models we propose extensions of the basic model that account for more realistic non stationary distribution intensity patterns including a wide release pattern that relies on intensive distribution and promotion and a platform release pattern that involves a gradual buildup of distribution intensity finally we present an adaptive weighing scheme that combines initial parameter estimates obtained from a meta analysis procedure with estimates obtained from early data to produce forecasts of box office revenues for a new movie when little or no box office data are available an important finding from the empirical testing is that motion picture box office revenue patterns display remarkable empirical regularity we find that there are only three classes of adoption patterns and these can all be represented within the basic model by using a two parameter exponential or erlang 2 probability distribution or a three parameter generalized gamma distribution we also find that cumulative box office revenues can be predicted with reasonable accuracy often within 10 of the actual using as little as two or three data points however our attempts to predict revenue patterns without any sales data meet with limited success while the scale parameter can be estimated reasonably well from a historical database of parameter values we find that it is considerably more difficult to predict the shape parameters using historical data the parsimony we seek in developing the model comes at the cost of several limiting assumptions we assume that the time to decide subprocess and the time to act subprocess are independent which may not be the case if decisions on continued exhibition by retailers are endogenously related to box office revenues over the life cycle in the basic model formulation we also assume that the time to act process can be represented by an exponential distribution which may not always be the case while we provide some empirical evidence to support these assumptions further research could relax these and other assumptions to enrich the basic model although this would entail some loss in parsimony

research on the motion picture industry state of the art and new directions off the beaten track away from theatrical release the motion picture industry has been subject of extensive academic research over the last decades however most scholars focused on the u s theatrical motion picture market the number of research activities regarding even more profitable release windows such as home video or television has been substantially lower although international distribution is essential for a motion picture project to break even there has been little significant re search on most other markets this paper aims at summarizing the current state of research on the motion picture industry particularly from marketing and management perspective revealing research gaps and proposing recommendations for future research endeavors therefore a three pillar scheme is developed to systemize previous findings research on intraorganizational decision making contractual relationships between national stakeholders and international market competition are differentiated since these insights are mainly derived from u s theatrical exhibition they can hardly be applied to other markets and exhibition windows thus potential research areas are identified to expand knowledge of posttheatrical and international markets

movie advertising and the stock market valuation of studios a case of great expectations product innovation is the key revenue driver in the motion picture industry because major studios typically launch fewer than 20 movies per year the financial performance of a single release can have a major effect on the studio s profitability in this paper we study how single movie releases impact the investor valuation of the studio we analyze the change in postlaunch stock price and predict the direction and magnitude of excess returns based on the revenue expectation built up for a movie release that expectation is set in part by media support i e highly advertised movies are expected to draw larger audiences than others by using an event study methodology we isolate the impact of a movie launch on studio stock price and track the determinants of that change we examine a comprehensive data set comprising over 300 movies released by the largest studios our results indicate a clear interaction between the marketing support received by a movie and the direction and magnitude of its excess stock return post launch movies with above average prelaunch advertising have lower postlaunch stock returns than films with below average advertising our findings also suggest that movies that are hits at the box office may result in a lowering of stock price if they had high media support because of high performance expectations built up prior to launch thus prelaunch advertising plays a dual role of informing consumers about a movie s arrival as well as helping investors form expectations about the studio s profit performance

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

a bayesian model to forecast new product performance in domestic and international markets this paper attempts to shed light on the following research questions when a firm introduces a new product or service how can it effectively use the different information sources available to generate reliable new product performance forecasts how can the firm account for varying information availability at different stages of the new product launch and generate forecasts at each stage we address these questions in the context of the sequential launches of motion pictures in international markets players in the motion picture industry require forecasts at different stages of the movie launch process to aid decision making and the information sets available to generate such forecasts vary at different stages despite the importance of such forecasts the industry struggles to understand and predict sales of new movies in domestic and overseas markets we develop a bayesian modeling framework that predicts first week viewership for new movies in both domestic and several international markets we focus on the first week because industry players involved in international markets studios distributors and exhibitors are most interested in these predictions we draw on existing literature on forecasting performance of new movies to formulate our model specifically we model the number of viewers of a movie in a given week using a poisson count data model the number of screens distribution strategy movie attributes such as genre and presence absence of stars are among the factors modeled to influence viewership we employ a hierarchical bayes formulation of the poisson model that allows the determinants of viewership to vary across countries we adopt the bayesian approach for two reasons first it provides a convenient framework to model varying assumptions of information availability specifically it allows us to make forecasts by combining different sources of information such as domestic and international market specific data second this methodology provides us with the entire distribution of the new movie s performance forecast such a predictive distribution is more informative than a point estimate and provides a measure of the uncertainty in the forecasts we propose a bayesian prediction procedure that provides viewership forecasts at different stages of the new movie release process the methodology provides forecasts under a number of information availability scenarios thus forecasts can be obtained with just information from a historical database containing data on previous new product launches in several international markets as more information becomes available the forecasting methodology allows us to combine historical information with data on the performance of the new product in the domestic market and thereby to make forecasts with less uncertainty and greater accuracy our results indicate that for all the countries in the data set the number of screens on which a movie is released is the most important influence on viewership furthermore we find that local distribution improves movie sales internationally in contrast to the domestic market we also find evidence of similar genre preferences in geographically disparate countries we find that the proposed model provides accurate forecasts at the movie country level further the model outperforms all the extant models in the marketing literature that could potentially be used for making these forecasts a comparison of root mean square and mean absolute errors for movies in a hold out sample shows that the model that combines information available from the different sources generates the lowest errors a bayesian predictive model selection criterion corroborates the superior performance of this model we demonstrate that the bayesian model can be combined with industry rules of thumb to generate cumulative box office forecasts in summary this research demonstrates a bayesian modeling framework that allows the use of different information sources to make new product forecasts in domestic and international markets our results underscore the theme that each movie is unique as is each country and viewership results from an interaction of the product and the market hence the motion picture industry should use both product specific and market specific information to make new movie performance forecasts

the competitive dynamics of new dvd releases we study the market for new movie dvds in the united states our demand model captures seasonality freshness i e time between theatrical and dvd release and state dependence we also develop a structural model of dynamic competition in which studios balance waiting for high demand weeks against reduced freshness and against competitive crowding we find that studios emphasize dvd revenues from larger movies by theatrical revenue over dvd revenues from smaller movies studios also emphasize revenue from consumers who prefer larger and fresher movies these behaviors are consistent with managerial conservatism studio executives forgo dvd revenues from smaller movies to ensure the dvd success of larger movies this paper was accepted by j miguel villas boas marketing

the long term effect of marketing strategy on brand sales few studies have considered the relative role of the integrated marketing mix advertising price promotion product and place on the long term performance of mature brands instead emphasizing advertising and price promotion thus little guidance is available to firms regarding the relative efficacy of their various marketing expenditures over the long run to investigate this issue the authors apply a multivariate dynamic linear transfer function model to five years of advertising and scanner data for 25 product categories and 70 brands in france the findings indicate that the total short term plus long term sales elasticity is 1 37 for product and 74 for distribution conversely the total elasticities for advertising and discounting are only 13 and 04 respectively this result stands in marked contrast to the previous emphasis in the literature on price promotions and advertising the authors further find that the long term effects of discounting are one third the magnitude of the short term effects the ratio is reversed from other aspects of the mix in which long term effects exceed four times the short term effects underscoring the strategic role of these tools in brand sales

online content pricing purchase and rental markets digitization of content is changing how consumers and firms use purchase and rental markets low transaction costs make accessing content easier for consumers digital technology enables firms to create nondurable rental versions of their content and to restrict content to the purchasing consumer effectively shutting down resale markets to empirically analyze the interaction of purchase and rental markets i design a preference measurement tool to recover consumers intertemporal preferences through current period choices alone i then use these preferences to solve for a dynamic equilibrium between consumers and the firm in the context of the online home video market i find that when the firm is able to commit to holding prices fixed forever providing content through the purchase market alone is sufficient however when the firm is unable to commit it should serve both purchase and rental markets canonical theory models would predict exclusive rentals but the purchase option enables indirect price discrimination in practice i also find that when consumers place a premium on accessing new content they are less likely to intertemporally substitute thereby increasing the firm s pricing power consistent with theory commitment to future prices increases profits considerably this finding supports the rigid pricing structure of such retailers as apple despite studios push toward more pricing flexibility

the effects of shared consumption on product life cycles and advertising effectiveness the case of the motion picture market abstractconsumers frequently consume hedonic products together with other consumers and derive value from this shared experience this article investigates the impact of shared consumption a type of social influence that determines the enjoyment of joint experiences in the context of a typical hedonic product movies the authors argue that this type of influence has important consequences for the diffusion curves of hedonic goods that are consumed together and the effectiveness of advertising in generating launch and postlaunch sales an empirically validated agent based model simulates the u s motion picture market with new movies launching competing and exiting the agent based model serves as a means to demonstrate the essential role of shared consumption for explaining movie life cycles and tests how advertising expenditures accelerate and or acquire movies demand in markets with varying levels of shared consumption the results provide key theoretical insights for the new product diffusion of

decision making with naive advice in many of the decisions we make we rely on the advice of others who have preceded us for example before we buy a car choose a dentist choose a spouse find a school for our children sign on to a retirement plan etc we usually ask the advice of others who have experience with such decisions the same is true when we make major financial decisions here people easily take advice from their fellow workers or relatives as to how to choose stock balance a portfolio or save for their child s education although some advice we get is from experts most of the time we make our decisions relying only on the rather uninformed word of mouth advice we get from our friends or neighbors we call this aive advice in this paper i will outline a set of experimental results that indicate that word of mouth advice is a very powerful force in shaping the decisions that people make and tends to push those decisions in the direction of the predictions of the rational theory

a new product growth for model consumer durables this article originally appeared in management science january 1969 volume 15 number 5 pp 215 227 published by the institute of management sciences a growth model for the timing of initial purchase of new products is developed and tested empirically against data for eleven consumer durables the basic assumption of the model is that the timing of a consumer s initial purchase is related to the number of previous buyers a behavioral rationale for the model is offered in terms of innovative and imitative behavior the model yields good predictions of the sales peak and the timing of the peak when applied to historical data a long range forecast is developed for the sales of color television sets

the value of familiarity effects of knowledge and objective signals on willingness to pay for a public good we design and conduct a field experiment in which treated subjects receive a precise and objective signal regarding their knowledge about a public good before estimating their wtp for it we find that the causal effect of objective signals about the accuracy of a subject s knowledge for a public good can dramatically affect their valuation for it treatment caused a significant increase of 85 129 in wtp for well informed individuals we find no such effect for less informed subjects our results imply that wtp estimates for public goods are not only a function of true information states of the respondents but beliefs about those information states

advertising media strategies in the film industry the primary aim of this article is to estimate the multiple determinants of film advertising expenditures in four important media namely television press outdoor and radio in the uk first television advertising the leading film advertising medium is examined as part of a system of equations capturing the interdependences between advertising the number of screens on which films are initially shown and box office revenues then a reduced form model is put forward to reveal the determinants of film advertising in the four media while major distribution companies have different preferences for the use of the alternative advertising media results highlight the importance of quality signals such as critical reviews in determining advertising expenditures in the film industry moreover advertising expenditures can themselves be considered to offer potential cinema goers signals of film quality

managerial objectives the r rating puzzle and the production of violent films we analyze project choice in the motion picture industry and find evidence consistent with revenue maximization and excessive hedging we find that movies that are very violent or feature sex and violence do not provide excess returns but they increase revenues particularly in the international market further they tend to lose money less often and their returns are more predictable even though there are never mega hits this evidence is consistent with studies of other industries and it partially explains the r rating puzzle that is the preponderance of r rated films although most studies find that g and pg rated films perform better

technology and health expenditures a demand approach applied to a process innovation there is controversy among economists as to whether the diffusion of new medical technologies has been a contributing factor to rising health expenditures the economic literature is critically reviewed and another approach is advocated this alternative approach rests on the distinction between product and process innovations it is argued that the relationship between process innovations and health expenditures can be illuminated by determining if the process innovation and the original procedure are utilized as substitutes the empirical results provide no indication that alternative technologies for diagnosing diseases conditions of the upper gastrointestinal tract have been utilized as substitutes by australian medical practitioners operating on a fee for service basis this study finds no evidence to indicate that the process innovation of fibre optic endoscopy has reduced health expenditures associated with diagnosis of diseases conditions of the upper gastrointestinal tract

bose einstein dynamics and adaptive contracting in the motion picture industry audiences discover what films they like and spread the word information feedback produces bose einstein dynamics in the motion picture box office revenue distribution information cascades generate box office hits and flops the revenue distribution evolves recursively over the run as a mixture of the opening and a stochastic competition among films the motion picture run is decentralized adaptive and self organizing semistationary admission prices local information and contingency rich contracts match the film rental price and the supply of theatrical engagements to demand copyright 1996 by royal economic society

research note multinational diffusion models an alternative framework the literature on cross national diffusion models is gaining increased importance today due to the needs of present day managers new product sales growth in a given nation or society is affected by many factors rogers 1995 and of these sociocontagion or word of mouth has been found to be the most important factor that characterizes the diffusion process bass 1969 moore 1995 hence it is interesting and perhaps challenging to analyze what would happen if a new product diffuses in parallel in two neighboring but culturally different countries not only will we expect the diffusion process in the two countries to be different but we will also expect some interaction among them especially if the two societies mingle with each other there are two streams of research in cross national diffusion the first type focuses on exploring the differences between diffusion processes in two countries and finding out whether those differences can be attributed to social and cultural differences between the countries involved examples of this type of research are found in takada and jain 1991 gatignon et al 1989 helsen et al 1993 and kumar et al 1998 these studies did find some relationship between the cultural differences of the countries studied and the differences in the diffusion process the second stream of research focuses on modeling explicitly the interaction between the diffusion processes in two countries the interaction is typically captured through lead lag effect eliashberg and helsen 1996 kalish et al 1995 where the sales process in the lead country i e the country where the product was first introduced is modeled to affect the sales process in the lag country i e the country where the product was introduced a few years later another method to study the interaction among the diffusion processes in two countries was suggested by putsis et al 1997 who used a mixing model to empirically explore the existence of such interactions these studies basically observed that when a new product is introduced early in one country and with a time lag in subsequent countries the consumers in the lag countries learn about the product from the lead country adopters resulting in a faster diffusion rate in the lag countries ganesh and kumar 1996 formulized this effect as the learning effect and subsequently ganesh et al 1997 found this learning effect to be influenced by country specific factors cultural similarity economic similarity and time lag elapsed between the lead and the lag countries and product specific factors continuous vs discontinuous innovation and the presence or absence of a standardized technology a careful analysis of the extant literature on the second stream of research would reveal that neither the learning effect model nor the mixing model can be modified to accommodate the other model our contribution to the literature exactly addresses this point in this paper an alternative framework is proposed that has two unique features first the framework is flexible enough to not only account for the lead country affecting the lag countries and vice versa but also to accommodate the simultaneous interaction among countries in explaining the diffusion processes in the countries concerned using multiple product categories and a variety of new product introduction situations we empirically demonstrate the flexibility and efficiency of our proposed framework we found strong evidence of all types of interactions namely lead lag lag lead and simultaneous which evidence suggests that one cannot afford to omit any of the interactions the second unique feature of our paper is the estimation procedure that we used because statistical estimation of a dynamic process that includes lead lag lag lead and simultaneous types of causality within a single framework is not straightforward we suggest an iterative estimation procedure for the estimation this new procedure not only proved to be flexible in accommodating different types of interaction but also converged rather quickly in all of the cases that we empirically tested noting that the statistical properties of these estimators are not generally available we carried out a simulation exercise that clearly revealed the efficiency of the proposed estimation procedure after analyzing the interaction we went further and showed that the magnitude of the cross national influences is affected by certain country specific and product specific factors the flexibility of the proposed method over the existing methods is demonstrated through obtaining superior forecasts with the proposed method several interesting insights for managers concerned with formulating international marketing strategies are offered

forecasting marketing mix responsiveness for new products abstract before a new product launch marketers need to infer how demand will respond to various levels of marketing mix variables to set an appropriate marketing plan a critical challenge in estimating marketing mix responsiveness from historical data is that the observed decisions were affected by private information possessed by managers about the heterogeneous effects of marketing mix variables on sales the authors refer to this as the slope endogeneity problem such endogeneity differs from the intercept endogeneity problem which has been widely acknowledged in the literature to correct for the slope endogeneity bias the authors develop a conceptually simple control function approach that is amenable to multiple endogenous variables and marketing mix carryover effects the method is applied to forecasting advertising responsiveness in the u s dvd market the results suggest that advertising responsiveness varies substantially across dvd titles and that estimated marketing mix elasticities w

moviemod an implementable decision support system for prerelease market evaluation of motion pictures in spite of the high financial stakes involved in marketing new motion pictures marketing science models have not been applied to the prerelease market evaluation of motion pictures the motion picture industry poses some unique challenges for example the consumer adoption process for movies is very sensitive to word of mouth interactions which are difficult to measure and predict before the movie has been released in this article we undertake the challenge to develop and implement moviemod a prerelease market evaluation model for the motion picture industry moviemod is designed to generate box office forecasts and to support marketing decisions for a new movie after the movie has been produced or when it is available in a rough cut but before it has been released unlike other forecasting models for motion pictures the calibration of moviemod does not require any actual sales data also the data collection time for a product with a limited lifetime such as a movie should not take too long for moviemod it takes only three hours in a consumer clinic to collect the data needed for the prediction of box office sales and the evaluation of alternative marketing plans the model is based on a behavioral representation of the consumer adoption process for movies as a macroflow process the heart of moviemod is an interactive markov chain model describing the macro flow process according to this model at any point in time with respect to the movie under study a consumer can be found in one of the following behavioral states undecided considerer rejecter positive spreader negative spreader and inactive the progression of consumers through the behavioral states depends on a set of movie specific factors that are related to the marketing mix as well as on a set of more general behavioral factors that characterize the movie going behavior in the population of interest this interactive markov chain model allows us to account for word of mouth interactions among potential adopters and several types of word of mouth spreaders in the population marketing variables that influence the transitions among the states are movie theme acceptability promotion strategy distribution strategy and the movie experience the model is calibrated in a consumer clinic experiment respondents fill out a questionnaire with general items related to their movie going and movie communication behavior they are exposed to different sets of information stimuli they are actually shown the movie and finally they fill outpostmovie evaluations including word of mouth intentions these measures are used to estimate the word of mouth parameters and other behavioral factors as well as the movie specific parameters of the model moviemod produces forecasts of the awareness adoption intention and cumulative penetration for a new movie within the population of interest for a given base marketing plan it also provides diagnostic information on the likely impact of alternative marketing plans on the commercial performance of a new movie we describe two applications of moviemod one is a pilot study conducted without studio cooperation in the united states and the other is a full fledged implementation conducted with cooperation of the movie s distributor and exhibitor in the netherlands the implementations suggest that moviemod produces reasonably accurate forecasts of box office performance more importantly the model offers the opportunity to simulate the effects of alternative marketing plans in the dutch application the effects of extra advertising extra magazine articles extra tv commercials and higher trailer intensity compared to the base marketing plan of the distributor were analyzed we demonstrate the value of these decision support capabilities of moviemod in assisting managers to identify a final plan that resulted in an almost 50 increase in the test movie s revenue performance compared to the marketing plan initially contemplated management implemented this recommended plan which resulted in box office sales that were within 5 of the moviemod prediction moviemod was also tested against several benchmark models and its prediction was better in all cases an evaluation of moviemod jointly by the dutch exhibitor and the distributor showed that both parties were positive about and appreciated its performance as a decision support tool in particular the distributor who has more stakes in the domestic performance of its movies showed a great interest in using moviemod for subsequent evaluations of new movies prior to their release based on such evaluations and the initial validation results moviemod can fruitfully and inexpensively be used to provide researchers and managers with a deeper understanding of the factors that drive audience response to new motion pictures and it can be instrumental in developing other decision support systems that can improve the odds of commercial success of new experiential products

the assortment packing problem multiperiod assortment planning for short lived products motivated by retailers frequent introduction of new items to refresh product lines and maintain their market shares we present the assortment packing problem in which a firm must decide in advance the release date of each product in a given collection over a selling season our formulation models the trade offs among profit margins preference weights and limited life cycles a key aspect of the problem is that each product is short lived in the sense that once introduced its attractiveness lasts only a few periods and vanishes over time the objective is to determine when to introduce each product to maximize the total profit over the selling season even for two periods the corresponding optimization problem is shown to be np complete as a result we study a continuous relaxation of the problem that approximates the problem well when the number of products is large when margins are identical and product preferences decay exponentially its solution can be characterized it is optimal to introduce products with slower decays earlier the structural properties of the relaxation also help us to develop several heuristics for which we establish performance guarantees we test our heuristics with data on sales and release dates of women s handbags from an accessories retailer the numerical experiments show that the heuristics perform very well and can yield significant improvements in profitability this paper was accepted by yossi aviv operations management

learning from the behavior of others conformity fads and informational cascades learning by observing the past decisions of others can help explain some otherwise puzzling phenomena about human behavior for example why do people tend to converge on similar behavior why is mass behavior prone to error and fads the authors argue that the theory of observational learning and particularly of informational cascades has much to offer economics business strategy political science and the study of criminal behavior

does twitter chatter matter online reviews and box office revenues with a rapid rise of text based social media and online word of mouth wom activity millions of people express their thoughts and opinions on a variety of topics considering that nowadays wom is

innovation diffusion in the presence of supply restrictions innovation diffusion models are developed to represent the spread of a new product from its manufacturers to its ultimate users in the marketplace however the growth of a new product can be retarded by supply restrictions such as the unavailability of the product due to limitations on the production capacity or difficulties encountered in setting up distribution systems in the presence of supply restrictions diffusion models must be developed to capture the dynamics of supply restrictions and to allow management to evaluate the impact of such supply restrictions on the growth of a new product in the market place based on the bass innovation diffusion model the objective of this paper is to suggest a parsimonious diffusion model that integrates the demand side dynamics with the supply side restrictions the sensitivity of innovation diffusion patterns in the presence of supply restrictions is examined an application examining the diffusion of new telephones in israel is documented to illustrate the usefulness of the proposed model

mixing behavior in cross country diffusion diffusion models represent one of the key successes in marketing science we understand a great deal about what influences and shapes within country diffusion patterns however we understand far less about what influences and shapes cross country or inter country diffusion patterns clearly for firms operating in a truly global environment understanding to what extent prior adoption in one country affects current and consequently future adoption in another country can be an important consideration further understanding how the pattern of interaction across countries impacts the diffusion process can have profound implications for product launch strategies for new durable products in this paper we address the extent to which prior adoption of a new product in one country affects adoption in other countries in particular we investigate the importance of the pattern of interaction what we call mixing across countries in the context of a new product diffusion model more specifically mixing refers to the pattern of communication within and across countries for example do italians communicate only with other italians or do they influence consumers in other countries understanding and empirically estimating how these mixing patterns across countries influence the subsequent diffusion process is the central research objective of this paper while previous research in marketing addressing cross country diffusion has assumed very specific forms of cross country interaction the present study develops and estimates a flexible form of mixing that allows for the simultaneous estimation of mixing patterns across multiple countries in particular we examine the effect of mixing behavior across populations on new product adoption viewing mixing as occurring across a continuum with segregation no mixing at one end and random mixing at the other intermediate forms of mixing lie along this continuum and are called bernoulli mixing in order to produce generalizable results we obtained sales data on four product categories in the european community ec nations vcrs from 1977 1990 microwave ovens 1975 1990 compact disc players 1984 1993 and home computers 1981 1991 for each product data were collected for 10 ec nations great britain germany france italy spain belgium denmark netherlands sweden and austria a diffusion model that incorporates cross country prior adoption cross country mixing patterns and individual country covariates was estimated simultaneously across the 10 countries for each of the four products on the basis of the empirical results we conclude that mixing behavior across segments is an important consideration in new product diffusion specifically the observed pattern of mixing and the strength of cross segment influences are important considerations in allocating the marketing mix during product introduction stages the practical implication of mixing behavior is that if one wishes to understand diffusion in belgium for example it is important to not only know the diffusion parameters in belgium but also those in other ec nations accordingly these results should be of interest to managers responsible for coordinating new product launches across countries and to researchers interested in investigating cross country diffusion issues as an example of the strategic implications of the results we note that under bernoulli mixing future country launches will benefit not only from prior adoption in countries with high overall contact rates but in particular from countries with high rates of contact with other countries although there is some variance across products in general germany france italy and spain are the most gregarious as measured by the rate of contact the results suggest that a strategy of first focusing on germany france italy and spain will maximize adoption in subsequent countries each of these countries tends to have a higher percentage of its contacts with individuals internal to its borders as well as with other countries this suggests that these countries would have relatively quick adoption internally while having a strong influence externally further for countries such as denmark netherlands austria and sweden a higher percentage of their contacts are derived from outside their borders thus seeding the diffusion process by introducing first in germany france italy and spain would benefit later adoption in countries such as denmark netherlands austria and sweden although the strength of the individual country influence varies from product to product this result is generally consistent across the four products

invited commentary making sense of these million dollar babies rationale behind superstar profit participation contracts the article by eliashberg et al 2006 provides a comprehensive review of current research on the motion picture industry with a special focus on managerially relevant issues on the supply side it walks the readers through the three distinct stages in the movie value chain of production distribution and theatrical exhibition and it points out promising avenues of future research the contractual issues between talents and the stu

information cascades in the laboratory when a series of individuals with private information announce public predictions initial conformity can create an information cascade in which later predictions match the early announcements this paper reports an experiment in which private signals are draws from an unobserved urn subjects make predictions in sequence and are paid if they correctly guess which of two urns was used for the draws if initial decisions coincide then it is rational for subsequent decisionmakers to follow the established pattern regardless of their private information rational cascades formed in most periods in which such an imbalance occurred copyright 1997 by american economic association

stereotypes and false consensus how financial professionals predict risk preferences abstract we analyze the prediction of risk preferences of others using an artefactual field experiment with financial professionals and students for their prediction the subjects receive information on multiple demographic characteristics and a self assessment of risk taking of the target when analyzing the predictions we find three significant effects subjects use the demographic information for stereotyping as well as the target s self assessment on risk taking and we find a considerable false consensus effect the false consensus effect is the strongest for experienced professionals regarding the prediction s accuracy we find that the forecasts of the professionals are more accurate than the forecasts of the students

social contagion and income heterogeneity in new product diffusion a meta analytic test standard diffusion models capture social contagion only coarsely and do not allow one to operationalize different contagion mechanisms moreover there is increasing skepticism about the importance of contagion and as has long been known s shaped diffusion curves can also result from heterogeneity in the propensity to adopt we present hypotheses about conditions under which specific contagion mechanisms and income heterogeneity are more pronounced and test these hypotheses using a meta analysis of the q p ratio in applications of the bass diffusion model the ratio is positively associated with the gini index of income inequality in a country supporting the heterogeneity in thresholds interpretation the ratio also varies as predicted by the gamma shifted gompertz diffusion model but the evidence vanishes after controlling for national culture as to contagion the q p ratio varies with the four hofstede dimensions of national culture for three of them in a direction consistent with the social contagion interpretation furthermore products with competing standards have a higher q p ratio which is again consistent with the social contagion interpretation finally we find effects of national culture only for products without competing standards suggesting that technological effects and culturally moderated social contagion effects might not operate independently from each other

retailer entry conditions and wholesaler conduct the theatrical distribution of motion pictures abstract i add to the empirical literature on vertical contracting and wholesaler conduct by using retailer entry conditions to infer unobserved choice variables and equilibrium responses to prices and advertising after estimating the us demand for theatrical motion pictures from 1990 96 i apply these techniques to compare observed outcomes to predictions under various distributor conduct hypotheses while several caveats apply results indicate that the hypothesis of competition among distributors fails to describe advertising levels or aggregate payments of theaters to studios the hypothesis of some collusion among distributors however matches the data fairly well

endogeneity in marketing decision models there are many critical concerns including the accounting for endogeneity when one is properly estimating response functions however it is sometimes certainly not always better to leave some variables exogenous when building mathematical models intended to help decision makers the exogenous variables allow the decision maker to better adapt the mathematical model to different situations and to incorporate myriad variables and constraints outside of the model

the impact of advice on women s and men s selection into competition we conduct a laboratory experiment to study how advice by a more experienced and better informed person affects an individual s entry into a real effort tournament and the gender gap our experiment is motivated by the concerns raised by approaching the gender gap through affirmative action policies overall advice improves the entry decision of subjects in that forgone earnings due to wrong entry decisions go significantly down the improvements are mainly driven by increased entry of strong performing women who also become more confident and reduced entry of weak performing men we find that the overall gender gap persists even though it disappears among low and strong performers the persistence is due to an emerging gender gap among intermediate performers driven by women men following more the advice to stay out of enter the tournament in this performance group this paper was accepted by uri gneezy behavioral economics

network effects bargaining power and product review bias theory and evidence i construct a theoretical framework for expert product reviews and demonstrate how the existence of positive network effects can make review inflation profitable even when consumers are rational this finding moreover suggests that product reviews may serve as a coordination mechanism for early adopters in an empirical application to the video game journalism industry i find evidence that reviews are inflated for games produced by large firms and for those that are part of pre existing game franchises additionally i find variation in inflation across genres that would be inconsistent with common alternative theories of inflation such as consumer naivete

a repeated game with finitely lived overlapping generations of players abstract this paper analyzes infinitely repeated noncooperative games where the players have finite but overlapping terms thus the nature of the game remains constant but the identity of the players changes over time this type of scenario depicts the situation facing firm managers in regulated or oligopolistic environments despite finite lives which lead players to always choose opportunistic actions at the end of their careers it is shown that there are equilibria where cooperative behavior emerges in this noncooperative setting further a folk theorem result is obtained any individually rational payoffs can be realized as a subgame perfect equilibrium journal of economic literature classification numbers 022 026

silverscreener a modeling approach to movie screens management managing the allocation of shelf space for new products is a problem of significant importance for retailers the problem is particularly complex for exhibitors the retailers in the motion picture supply chain because they face dynamic challenges given the short life cycles of movies the changing level of demand over time the scarcity of shelf space and the complex revenue sharing contract between the exhibitor and the distributor in the face of this complexity the aim of current research is to provide a structure for analyzing management problems of exhibitors in the movie industry using a mathematical programming approach and a fast but readily accessible algorithm we propose a decision support model silverscreener whose aim is to help exhibitors make effective and timely decisions regarding theater screens management the major objective is to help select and schedule movies for a multiple screens theater over a fixed planning horizon in such a way that the exhibitor s cumulative profit is maximized by treating the multiple screens as parallel machines and the movies as jobs we provide an analogy of the current problem to the parallel machine scheduling problem we formulate the resulting problem as an integer program we depart from the typical parallel machine scheduling problems by introducing the time indexed formulation that is particularly useful for solving the current problem an important distinction between the current problem and typical machine scheduling problems is that the present approach allows for the choice of which movies to play typically in machine scheduling all jobs have to be scheduled we provide various analyses of normative versus actual decision making based on publicly available data the developed model is readily implementable and appears to lead to improved profitability in different comparative cases through sensitivity analysis we demonstrate that the above results are robust to variations in various parameters of the problem the main findings and insights from the normative policy suggest the following 1 based on silverscreener s recommendations the exhibitor can achieve substantially higher cumulative profit 2 the improvement over actual decisions in terms of profitability appears to result from a combination of better selection and scheduling of the movies 3 the general structure of the exhibitor s normative decision is choose fewer right movies and run them longer we propose a two tier integrated application of the model to show how the model can be applied to realistic decisionmaking the first tier involves development of a movie selection plan to help the manager plan an entire season and bid for movies before the start of that season an ex ante revenue prediction scheme is developed based intuitively on a matching of the forthcoming movies with similar movies played in this theater previously if the forthcoming season s scheduling plan can be visualized as a two dimensional week by screen matrix then that matrix contains only empty cells before the first tier after a bid plan is developed the exhibitor can fill some of those empty cells the remaining empty cells represent slots which can be decided during the season by either extending movies the exhibitor booked before the season or by scheduling other movies which may become available later in the season this motivates the second tier adaptive scheduling approach of the integrated approach the second tier helps the exhibitor in weekly decision making during the season this application involves rolling and updating data from one time window to another the approaches followed in the two tiers of the integrated application are quite general in that they can incorporate a sophisticated demand prediction model managerial judgments or a combination of both we also propose an alternative behavioral decision rule heuristic which exemplifies relationship dilemmas in the movie industry this heuristic shows that the exhibitors need to be selective in their choice of movies and may suffer a substantial loss in profitability if they place too much emphasis on accommodating distributors

something to talk about social spillovers in movie consumption we exploit the randomness of weather and the relationship between weather and moviegoing to quantify social spillovers in movie consumption instrumenting for early viewership with plausibly exogenous weather shocks captured in lasso chosen instruments we find that shocks to opening weekend viewership are doubled over the following five weekends our estimated momentum arises almost exclusively at the local level and we find no evidence that it varies with either ex post movie quality or the precision of ex ante information about movie quality suggesting that the observed momentum is driven in part by a preference for shared experience and not only by social learning

empirical analysis of metering price discrimination evidence from concession sales at movie theaters prices for goods such as blades for razors ink for printers and concessions at movies are often set well above cost theory has shown that this could yield a profitable price discrimination strategy often termed metering the idea is that a customer s intensity of demand for aftermarket goods e g the concessions provides a meter of how much the customer is willing to pay for the primary good e g admission if this correlation in tastes for the two goods is positive a high price on the aftermarket good allows firms to extract a greater total price admissions plus concessions from higher type customers this paper develops a simple aggregate model of discrete continuous demand to motivate how this correlation can be tested using simple regression techniques and readily available firm data model simulations illustrate that the regressions can be used to predict whether aftermarket prices should be above below or equal to their marginal cost we then apply the approach to box office and concession data from a chain of spanish theaters and find that high priced concessions do extract more surplus from customers with a greater willingness to pay for the admission ticket

modeling movie life cycles and market share we examine box office sales in the context of a market share model this is accomplished by developing a combination of a sliding window logit model and a gamma diffusion pattern in a hierarchical bayes framework we show that accounting for the full choice set available every week not only increases the fit of weekly movie sales but also leads to parameter estimates that depict a richer picture of the movie industry we show that movie studios appear to have a good understanding of the products they produce knowing when to support them and when not to we also show that the effect of the number of opening week screens is overestimated in traditional models our research indicates that actors have a direct and directors an indirect effect on consumers movie choice releasing a movie contemporaneously with other movies of the same genre adversely affects box office performance all around releasing a movie against movies of the same motion picture association of america mpaa rating hurts its sales in the beginning but there is a displacement effect which leads to a less severe sales loss in the long run

rational herding in microloan markets microloan markets allow individual borrowers to raise funding from multiple individual lenders we use a unique panel data set that tracks the funding dynamics of borrower listings on prosper com the largest microloan market in the united states we find evidence of rational herding among lenders well funded borrower listings tend to attract more funding after we control for unobserved listing heterogeneity and payoff externalities moreover instead of passively mimicking their peers irrational herding lenders engage in active observational learning rational herding they infer the creditworthiness of borrowers by observing peer lending decisions and use publicly observable borrower characteristics to moderate their inferences counterintuitively obvious defects e g poor credit grades amplify a listing s herding momentum as lenders infer superior creditworthiness to justify the herd similarly favorable borrower characteristics e g friend endorsements weaken the herding effect as lenders attribute herding to these observable merits follow up analysis shows that rational herding beats irrational herding in predicting loan performance this paper was accepted by pradeep chintagunta marketing

on the determination of the us aggregate health care expenditure per capita real health care expenditure is examined against three major groups of explanatory variables economic demographic and health stock and it is found that the three groups of variables have an impact on real health care spending other subcategories such as real private and government health care pharmaceutical dental home nursing ambulatory personal medical consumption and in patient expenditures have also been examined and have been found to be affected by the explanatory variables for several subcomponents there is evidence of supplier inducement of the demographic group of variables the ageing population had an impact only on the per capita real overall and private health care outlay and pharmaceutical spending also cointegrating relationships were found and consistent estimators of the elasticities found

sunspots in the laboratory we show that extrinsic or nonfundamental uncertainty influences markets in a controlled environment this work provides the first direct evidence of sunspot equilibria these equilibria require a common understanding of the semantics of the sunspot variable and they appear to be sensitive to the flow of information sunspots always occur in a closed book call market but they happen only occasionally in a double auction where inframarginal bids and offers are observable

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

pricing an option on revenue from an innovation an application to movie box office revenue we develop a model for valuing revenue streams from innovations the stochastic properties of revenue from innovations create a more difficult environment in which to value options than when the underlying is a security there is no initial revenue and cumulative revenue cannot decrease revenues from innovations are characterized by different lives and different rates of the resolution of uncertainty a common deterministic model for predicting revenue from an innovation is known as the bass model we embed the bass model in a gamma process resulting in a stochastic process with moments proportional to the mean of the bass model to illustrate this model we choose the valuation of options on movie box office revenue these options enable film distributors to manage the risk of a movie and they offer diversification opportunities for investors we develop the econometric methodology for ex ante parameter estimation and a bayesian updating scheme using markov chain monte carlo simulation as data after release become available call prices obtained using the maximum likelihood ml parameter estimates from the full data set closely approximate the average discounted value of ex post call payouts that would have occurred at option maturity

an empirical model of the demand for health care in belgium the paper presents an empirical model of the demand of health care in belgium the analysis pertains to 17 categories of medical care and to two subgroups of health insurance beneficiaries namely the active and the widows orphans pensioners and invalids the estimation results show that income and relative prices matter in the demand for medical care supplier induced demand is also detected for a number of medical care categories other explanatory variables in the model include the size of the child population climatic conditions and a time trend representing technological advances in health care

welfare cost and health insurance a disaggregated approach using duality theory and australian data the present study draws on the fundamental duality between consumer expenditure and utility to provide a hicksian measure of the welfare cost or moral hazard arising from health insurance in australia the theoretical approach is empirically applied to a homogeneous set of medical services associated with diagnosis of the upper gastrointestinal tract viz barium meal radiology the empirical results indicate that the welfare loss represents 1 3 of the total expenditures and 1 5 of the health insurance rebates on barium meal radiology for the year 1984 85 sensitivity analysis indicates that the welfare loss in relatively invariant to changes in the coinsurance rate when the latter takes on values of less than 0 5

a failure to communicate an experimental investigation of the effects of advice on strategic play abstract we investigate why two person teams beat the truth wins benchmark in signaling games cooper and kagel 2005 cooper and kagel 2009 by studying an advice treatment where advisees have the benefit of two individuals insight but not bilateral communication the tw benchmark states that the performance of a team for problems with a demonstrable correct solution should be no worse than the performance of its most able individual if one individual solves the problem the team solves it as well advisees whose advisors play strategically have significantly higher levels of strategic play but fall well short of the truth wins benchmark as i many advisors who play strategically do not provide advice to this effect and ii many advisees fail to follow sound advice effect i is largely attributable to female advisors who are far less likely to provide advice than men whether or not advice contains a clear explanation for its effectiveness has no effect on the likelihood of advisees strategic play a result at odds with the idea that economic agents regularly consider all the available alternatives

growing growing gone cascades diffusion and turning points in the product life cycle research on the product life cycle plc has focused primarily on the role of diffusion this study takes a broader theoretical perspective on the plc by incorporating informational cascades and developing and testing many new hypotheses based on this theory on average across 30 product categories the authors find that i new consumer durables have a typical pattern of rapid growth of 45 per year over 8 years ii this period of growth is followed by a slowdown when sales decline by 15 and stay below those of the previous peak for 5 years iii slowdown occurs at 34 population penetration and about 50 of ultimate market penetration iv products with large sales increases at takeoff tend to have larger sales declines at slowdown v leisure enhancing products tend to have higher growth rates and shorter growth stages than nonleisure enhancing products time saving products tend to have lower growth rates and longer growth stages than nontime saving products vi lower probability of slowdown is associated with steeper price reductions lower penetration and higher economic growth vii a hazard model can provide reasonable predictions of the slowdown as early as the takeoff the authors discuss the implications of these findings

factors determining uk album success this article uses a recently compiled dataset on the uk album sales to determine which factors contribute to best selling album sales success we control for factors including length of time since release nationality of artist artist type and album type testing the increasing returns to information hypothesis information on general public online review scores for the albums in the dataset allows for a strong test of the accuracy of online reviews in predicting music sales as online reviews are a relatively recent phenomenon while the release of many of the albums predates the widespread use of internet

demand and supply dynamics for sequentially released products in international markets the case of motion pictures we develop an econometric model to study a setting in which a new product is launched first in its domestic market and only at a later stage in foreign markets and where the product s performance demand and availability supply are highly interdependent over time within and across markets integrating literature on international diffusion success breeds success trends and the theatrical motion picture industry the focus of the empirical analysis we develop a dynamic simultanenous equations model of the drivers and interrelationship of the behavior of consumers audiences and retailers exhibitors our findings emphasize the importance of considering the endogeneity and simultaneity of audience and exhibitor behavior and challenge conventional wisdom on the determinants of box office performance which is predominantly based on modeling frameworks that fail to account for the interdependence of performance and availability specifically we find that variables such as movie attributes and advertising expenditures which are usually assumed to influence audiences directly mostly influence revenuesindirectly namely through their impact on exhibitors screen allocations in addition consistent with the idea that the buzz for a movie is perishable we find that the longer is the time lag between releases the weaker is the relationship between domestic and foreign market performance an effect mostly driven by foreign exhibitors screen allocations

modeling multinational diffusion patterns an efficient methodology the objective of this study is to develop an econometric model for the diffusion of innovations at the individual country level but which also allows the parameters of the process to differ systematically across countries the conceptualization rests on behavioral and spatial theories of diffusion and extends the domain to international markets the cross national model of innovation diffusion which is developed highlights substantive differences and similarities among international markets it also provides estimates for the diffusion parameters even for countries where sales data are not available thereby yielding some insights into the nature of the expected diffusion pattern in these countries prior to market entry