corporate conservatism and relative compensation this paper demonstrates that in a simple setting with managerial concern for reputation and asymmetric information on ability most managers may refrain from undertaking innovations that stochastically dominate an industry standard common components of uncertainty lead to market inferences of managerial ability based on relative performance managers who undertake the industry standard are consequently evaluated with a more accurate benchmark than those innovating discontinuities in compensation when performance is low because of firings lead managers to have differing valuations of an accurate benchmark depending on type in particular very high and very low ability managers are more likely to undertake superior innovations than those of average ability

the role of brand image and product characteristics on firms entry and oem decisions we investigate the optimal market entry and original equipment manufacturer oem decisions of a firm facing a market in which firms brands can be horizontally differentiated and products can be vertically differentiated the entrant might sell under its own brand and compete with an incumbent become a supplier to the incumbent or both findings reveal that when consumers perceive the firms are horizontally and vertically differentiated the entrant profits by simultaneously entering the market and establishing an oem arrangement with the incumbent in such competitive scenarios both buyer and seller increase profits by agreeing on wholesale prices that are not too low which softens both horizontal and vertical conflict between the firms findings also show that the incumbent may prefer to pay high wholesale prices to the entrant even if the incumbent had the option to source the product independently at a lower marginal cost when firms have the capability of producing each other s product lines su

delegation and incentives this article analyzes the relation between authority and incentives it extends the standard principal agent model by a project selection stage in which the principal can either delegate the choice of project to the agent or keep the authority the agent s subsequent choice of effort depends both on monetary incentives and the selected project we find that the consideration of effort incentives makes the principal less likely to delegate the authority over projects to the agent in fact if the agent is protected by limited liability delegation is never optimal

why do salespeople spend so much time lobbying for low prices in business to business settings a company s sales force often spends considerable time lobbying internally for authorization to charge lower prices these internal lobbying activities are time consuming and divert attention from other tasks such as interacting with customers we explain why internal lobbying activities serve an important role they help the firm elicit truthful reporting of demand information from the sales force as a result it may be profitable for the firm to require lobbying and make the requirement onerous even though lobbying is a nonproductive activity that creates an additional administrative burden and imposes a deadweight loss

reasons for household food waste with special attention to packaging the amount of food waste needs to be reduced in order to sustain the world s limited resources and secure enough food to all humans packaging plays an important role in reducing food waste the kn

household food waste behaviour in eu 27 countries a multilevel analysis abstract a large amount of food is lost along the entire food supply chain causing serious environmental economic and social impacts and most food is wasted during the final consumption phase especially in industrialized countries starting from the analysis of the main regulations and initiatives at various administrative levels and by introducing a two level framework for modelling complex household food waste behaviour this paper aims at investigating the behaviour of eu 27 citizens towards food waste by referring to the 2013 flash eurobarometer survey n 388 the multilevel statistical perspective enabled us to jointly consider factors at both individual and contextual levels as potential variables associated with food waste firstly by analysing territorial variability it was possible to identify groups of countries characterized by similar behaviour patterns and therefore target them according to the need and exigency of public policy interventions secondly at individual level it was observed that people living in towns and large cities tend to produce more waste thus emphasizing the need of diversifying policy interventions at local level according to the extent of urbanization moreover education level sorting practices attitudes and concern regarding food waste proved to be associated with individuals behaviour towards food waste thirdly public private partnerships as well as targeting community based interventions to address food waste should be encouraged

the competitive newsboy we consider a competitive version of the classical newsboy problem in which a firm must choose an inventory or production level for a perishable good with random demand and the optimal solution is a fractile of the demand distribution and investigate the impact of competition upon industry inventory a splitting rule specifies how initial industry demand is allocated among competing firms and how any excess demand is allocated among firms with remaining inventory we examine the relation between equilibrium inventory levels and the splitting rule and provide conditions under which there is a unique equilibrium our most general result is that if all excess demand is reallocated i e there is perfect substitutability then competition never leads to a decrease in industry inventory

access based consumption the case of car sharing access based consumption defined as transactions that can be market mediated but where no transfer of ownership takes place is becoming increasingly popular yet it is not well theorized this study examines the nature of access as it contrasts to ownership and sharing specifically the consumer object consumer consumer and consumer marketer relationships six dimensions are identified to distinguish among the range of access based consumptionscapes temporality anonymity market mediation consumer involvement the type of accessed object and political consumerism access based consumption is examined in the context of car sharing via an interpretive study of zipcar consumers four outcomes of these dimensions in the context of car sharing are identified lack of identification varying significance of use and sign value negative reciprocity resulting in a big brother model of governance and a deterrence of brand community the implications of our findings for understanding the nature of exchange consumption and brand community are discussed

executive effort and selection of risky projects this article examines the incentives of executives to adopt risky projects the agency problem considered is that of motivating the executive to expend effort to generate information about the profitability of projects and to select the best project conditional upon the information that his effort generates we show that the executive and the principal will not always agree regarding which project is best we provide conditions under which this conflict of interest leads from the principal s perspective to either an underinvestment or an overinvestment in risky projects

side payments in marketing side payments known politely as gainsharing and pejoratively as bribery are prevalent in marketing indeed many management schools have added ethics modules to their basic marketing courses to discuss these issues and there is much discussion of side payments in the literature e g adams 1995 borrus borrus amy 1995 a world of greased palms business week november 6 36 38 mauro mauro paolo 1997 why worry about corruption international monetary fund washington d c mohl mohl bruce 1996 auto dealers color surveys to polish image buyer s say salesmen tamper with makers questionnaires boston globe august 11 b1 b6 murphy murphy kate 1995 corporate gifts what s naughty or nice business week december 11 122 peterson peterson barbara s 1996 taxing question will the government make you pay for your next travel benefits frequent flyer february 27 30 and rose ackerman rose ackerman susan 1996 bribes and gifts proc conf economics values and organization april 19 20 yale university new haven ct we seek to provide insight with respect to one class of marketing side payments we hope that our analyses clarify some of the issues and suggest how these side payments affect marketing activities we begin by focusing on one common example of potential side payments salesforce ratings of internal sales support we derive two formal results and speculate on how these results generalize the two results are 1 that having one group of employees rate another implies that there are almost always incentives for side payments but 2 the side payments need not reduce the firm s profit at least in theory the firm is always able to revise the reward system to factor out these side payments the first result based on a straightforward proof has important practical implications for managers who may wish to preclude side payments they may be unable to design a ratings based reward system that does not have inherent incentives for side payments the second result in our opinion is quite surprising it suggests that marketing managers might be advised to invest more time into understanding how side payments affect employee reactions to reward systems they might want to reconsider costly efforts to monitor police or preclude such side payments while our results do not substitute for a moral discussion of side payments we hope that the formal structure for one common marketing situation provides valuable insight the system we analyze is based on a practical managerial problem we have observed the salesforce evaluates a sales support group with a real valued rating the sales support group is rewarded based on that rating whereas the sales force is rewarded based on outcomes such as sales or customer satisfaction that indicate incremental profits to the firm the reward to the salesforce might also depend upon how it rates sales support for example the salesforce might be held to a higher standard whenever it rates sales support as excellent we argue in the paper that the firm will want this to happen in addition the salesforce might ask for a side payment from the sales support group as compensation for high ratings we cast the practical problem as a formal game and incorporate the following issues 1 incremental actions taken by the salesforce and by sales support are perceived to be onerous 2 the measure of incremental profit is a noisy measure 3 both the salesforce and sales support are risk averse 4 given the reward system imposed by the firm both the salesforce and sales support will maximize their well being and 5 given the structure of the reward system the firm will seek to maximize expected profits we first show that there are almost always incentives for side payments specifically we demonstrate that sales support is better off with a side payment while the salesforce is no worse off this is not surprising because the reward to sales support is increasing in the rating while in the absence of a side payment the salesforce will select a rating such that its net marginal returns to increasing the rating are zero the exception occurs when the rating is constrained by the firm to be less than this optimal rating but even then there might be incentives for side payments we next show that the firm can anticipate these side payments and design a reward system to factor them out at no loss of profit the intuition is straightforward the firm first adjusts the marginal returns in the reward functions for sales support and for the salesforce such that they will each take the optimal actions even though they engage in side payments then the firm adjusts their fixed compensation so that the firm extracts its full profit the proof is difficult because we must show that adjusted reward systems exist and we must show that they allow the full profit to be extracted throughout the paper we discuss the practical implications of our results we close by highlighting future research opportunities

lessons from the eurocrisis for east asian monetary relations i analyse the sources of the eurozone crisis the major conclusion is that the eurozone is insufficiently embedded in a monetary union thereby making it fragile and prone to crises the lesson i draw for east asia is that despite the fact that this region appears to satisfy the traditional optimal currency area oca criteria to form a monetary union the complete absence of political unification makes the prospect of a monetary union in that region of the world both unrealistic and undesirable

the quality double whammy this research focuses on how consumers perceive the quality level of a complex stimulus in our case a service encounter and how this perception affects consumers overall assessment of the quality level of the firm as such it should be of interest to consumer behavior theorists as well as to those involved in marketing management issues we start our presentation by developing a normative bayesian data integration and updating model somewhat similar to that put forth by rust et al 1999 the major constructs of interest in this model are the person s belief about the overall service quality level of a firm and what will happen on the next service encounter two major results following from this baseline normative model are that the updated means of these two beliefs are identical to the dynamic updating equations put forth by boulding et al 1993 and that an underlying assumption of this model is that consumers form unbiased perceptions of the complex stimulus next based on substantial empirical evidence from the behavioral literature we incorporate into this baseline model a process by which consumers form nonrandom perceptions specifically we postulate that a person s perception of a complex service encounter is a blend of the objective dimensions of the service encounter and the person s prior overall belief about the quality level of the firm the relative weights placed on these two factors are determined at least in part by the experience level of the customer and the complexity of the service encounter we then use this expanded model to compare and test different models of service quality and provide deeper insights into the process by which consumers form perceptions of both the service transaction and the overall service quality level of a firm we test this model using data from two different experiments in each experiment we manipulate the service provided and the person s initial will and should expectations using both obtrusive and unobtrusive measures of the underlying constructs of our model we employ multiple tests to determine the veracity of our expanded model relative to the baseline model these tests support the expanded model specification as found previously and as predicted by a bayesian updating process consumers prior beliefs influence their cumulative overall opinion of service quality e g anderson and sullivan 1993 bolton and drew 1991 boulding et al 1993 rust et al 1999 perhaps more importantly these prior beliefs also influence their perceptions of the data themselves which in turn affect their new updated overall opinion these two different influences of prior beliefs on cumulative evaluations of quality constitute the double whammy referred to in the title this double whammy effect has major managerial significance specifically we see from our model development that all activities of a firm will be perceived in light of a person s prior beliefs and that these priors will be double counted relative to our baseline model thus any marketing action taken by a firm will be perceived more positively or negatively depending on the person s prior belief about the quality level of the firm as such our model provides a formal explanation for the notion of brand equity as differential leverage in marketing activities as proposed by keller 1993

measurement of market integration and arbitrage we develop a measurement theory of market integration based on two notions of integrated markets first two markets cannot be perfectly integrated in any sense if one can construct two portfolios one from each market that have identical payoffs but different prices in that case the law of one price is violated across the markets second they cannot be integrated in a stronger sense if there are cross market arbitrage opportunities two measures of market integration are developed respectively reflecting these notions the smaller the measures the more closely integrated in the respective senses the markets among other things they are interpreted as measuring pricing discrepancy between markets article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

bricks and mortar vs clicks and mortar an equilibrium analysis abstract the internet has provided traditional retailers a new means with which to serve customers consequently many bricks and mortar retailers have transformed to clicks and mortar by incorporating internet sales examples of companies making such a transition include best buy wal mart barnes noble etc despite the increasing prevalence of this practice several fundamental questions remain 1 does it pay off to go online 2 which is the equilibrium industry structure 3 what is the implication of this business model for consumers we study these issues in an oligopoly setting and show that clicks and mortar arises as the equilibrium channel structure however we find that this equilibrium does not necessarily imply higher profits for the firms in some cases rather it emerges as a strategic necessity consumers are generally better off with clicks and mortar retailers if firms align with pure e tailers to reach the online market we show that a prisoner s dilemma type equilibrium may arise

the effects of business to business e commerce on transaction costs this paper studies transaction costs changes arising from the introduction of the internet in transactions between firms we divide transaction costs into coordination costs and motivation costs we classify coordination efficiencies into three categories process improvements marketplace benefits and indirect improvements for motivation costs we focus on informational asymmetries we apply this framework to internal data from an internet based firm to measure process improvements marketplace benefits and motivation costs our results suggest potentially large process improvements and marketplace benefits we find little evidence that informational asymmetries are more important in the electronic marketplace than in the existing physical ones

understanding food sharing models to tackle sustainability challenges abstract the current global scene is characterized by a huge paradox on one side there is the scourge of poverty on the other 1 3 billion tonnes of food is wasted around the world every year to address these problems alternative distribution formats aimed at reducing food waste and generating a positive social impact are emerging particularly food banks and social supermarkets recently opportunities created by digital technology and the phenomenon of the sharing economy have boosted the increasing number of web platforms and food sharing apps that are being developed by existing organizations or by new entities that work exclusively online the main aim of this research is to highlight following an overview of existing food sharing models how alternative distribution systems change in response to digitalization and how the value propositions they claim change in the online context a hierarchical cluster analysis based on a sample of 52 food sharing cases was carried out three categories of models have emerged the sharing for money model which is primarily a b2c for profit model to reduce waste and at the same time generate revenue the sharing for charity model in which food is collected and given to non profit organizations the sharing for the community model which is a p2p model where food is shared amongst consumers by way of conclusion we suggest that food bank seems to be replicated online in the same way in the online context the sharing for charity model however the model of the social supermarket does not seems to be replicated in the same way in the digital context but changes towards a more profit oriented approach the sharing for money model additionally in the digital scenario a new model emerges the sharing for the community finally the study highlights some preliminary evidences on the effects of the new forms of sharing on social inequality

the sharing economy a pathway to sustainability or a nightmarish form of neoliberal capitalism the sharing economy seemingly encompasses online peer to peer economic activities as diverse as rental airbnb for profit service provision uber and gifting freecycle the silicon valley success stories of airbnb and uber have catalysed a vibrant sharing economy discourse participated in by the media incumbent industries entrepreneurs and grassroots activists within this discourse the sharing economy is framed in contradictory ways ranging from a potential pathway to sustainability to a nightmarish form of neoliberalism however these framings share a common vision of the sharing economy a niche of innovation decentralising and disrupting established socio technical and economic structures regimes here i present an analysis of the online sharing economy discourse identifying that the sharing economy is framed as 1 an economic opportunity 2 a more sustainable form of consumption 3 a pathway to a decentralised equitable and sustainable economy 4 creating unregulated marketplaces 5 reinforcing the neoliberal paradigm and 6 an incoherent field of innovation although a critique of hyper consumption was central to emergence of the sharing economy niche 2 it has been successfully reframed by regime actors as purely an economic opportunity 1 if the sharing economy follows this pathway of corporate co option it appears unlikely to drive a transition to sustainability

mail versus mall a strategic analysis of competition between direct marketers and conventional retailers consumers now purchase several offerings from direct sellers including catalog and internet marketers these direct channels exist in parallel with the conventional retail stores the availability of multiple channels has significant implications for the performance of consumer markets the literature in marketing and economics has however been dominated by a focus on the conventional retail sector this paper is an effort toward modeling competition in the multiple channel environment from a strategic viewpoint at the outset a parsimonious model that accommodates the following consumer and market characteristics is introduced first the relative attractiveness of retail shopping varies across consumers second the fit with the direct channel varies across product categories third the strength of existing retail presence in local markets moderates competition fourth in contrast with the fixed location of the retail store that anchors its localized market power the location of the direct marketer is irrelevant to the competitive outcome the model is first applied in a setting where consumers have complete knowledge of product availability and prices in all channels in the resulting equilibrium the direct marketer acts as a competitive wedge between retail stores the direct presence is so strong that each retailer competes against the remotely located direct marketer rather than against neighboring retailers this outcome has implications for the marketing mix of retailers which has traditionally been tuned to attract consumers choosing between retail stores in the context of market entry conditions under which a direct channel can access a local market in retail entry equilibrium are derived our analysis suggests that the traditional focus on retail entry equilibria may not yield informative or relevant findings when direct channels are a strong presence next the role of information in multiple channel markets is modeled this issue is particularly relevant in the context of direct marketing where the seller can typically control the level of information in the marketplace sometimes on a customer by customer basis e g by deciding on the mailing list for a catalog campaign when a certain fraction of consumers does not receive information from the direct marketer the retailers compete with each other for that fraction of the market the retailer s marketing mix has to be tuned in this case to jointly address direct and neighboring retail competition the level of information disseminated by the direct marketer is shown to have strategic implications and the use of market coverage as a lever to control competition is described even with zero information costs providing information to all consumers may not be optimal under some circumstances in particular when the product is not well adapted to the direct channel the level of market information about the direct option should ideally be lowered the only way to compete with retailers on a larger scale with a poorly adapted product is by lowering direct prices which lowers profits lowering market information levels and allowing retailers to compete more with each other facilitates a higher equilibrium retail price in turn this allows a higher direct price to be charged and improves overall direct profit on the other hand when the product is well adapted increasing direct market presence and engaging in greater competition with the retail sector yields higher returns the finding that high market coverage may depress profits raises some issues for further exploration first implementing the optimal coverage is straightforward when the seller controls the information mechanism as in the case of catalog marketing the internet in contrast is an efficient mechanism to transmit information but does not provide the sellers with such control over the level of market information a key reason is that the initiative to gather information on the internet lies largely with consumers the design and implementation of mechanisms to control aggregate information levels in electronic markets can therefore be an important theme for research and managerial interest second direct marketers have traditionally relied on the statistical analysis of customer records to decide on contact policies the analysis in this paper reveals that these policies can have significant strategic implications as well research that integrates the statistical and strategic aspects could make a valuable contribution the paper concludes with a discussion of issues for future research in multiple channel markets including avenues to model competition in settings with multiple direct marketers

product customization and price competition on the internet the internet provides an unprecedented capability for sellers to learn about their customers and offer custom products at special prices in addition customization is more feasible today because of advances in manufacturing technologies that have improved sellers manufacturing flexibility we first develop a model of product customization and flexible pricing to incorporate the salient roles of the internet and flexible manufacturing technologies in reducing the costs of designing and producing tailored consumer goods we show how a monopoly seller may earn the highest profits by producing both standard and custom products and can raise prices for both types of products as customization and information collection technologies improve simultaneous adoption of customization in a duopoly reduces the differentiation between their standard products but does not intensify price competition compared with a two facility monopolist the duopoly may underinvest in customization consumer surplus improves after sellers adopt customization but does not monotonically increase as customization technologies advance when firms face a fixed entry cost and adopt customization sequentially the first entrant always achieves an advantage and may be able to deter subsequent entry by choosing its customization scope strategically

doing more with less innovation input and output in family firms family firms are often portrayed as an important yet conservative form of organization that is reluctant to invest in innovation however simultaneously evidence has shown that family firms are flourishing and in fact constitute many of the world s most innovative firms our study contributes to disentangling this puzzling effect we argue that family firms owing to the family s high level of control over the firm wealth concentration and importance of nonfinancial goals invest less in innovation but have an increased conversion rate of innovation input into output and ultimately a higher innovation output than nonfamily firms empirical evidence from a meta analysis based on 108 primary studies from 42 countries supports our hypotheses we further argue and empirically show that the observed effects are even stronger when the ceo of the family firm is a later generation family member however when the ceo of the family firm is the firm s founder innovation input is higher and contrary to our initial expectations innovation output is lower than that in other firms we further show that the family firm innovation input output relationships depend on country level factors namely the level of minority shareholder protection and the education level of the workforce in the country

when and how is the internet likely to decrease price competition conventional wisdom seems to claim that by lowering the cost of distribution and by making search easier for consumer the introduction of the internet is likely to intensify price competition this paper intends to challenge this view by asking when and how is the internet likely to decrease the level of price competition between firms to answer this question we develop an analytic model with the following characteristics on the demand side consumers need to gather information on two types of product attributes digital attributes which can be communicated on the web at very low cost and nondigital attributes for which physical inspection of the product is necessary consumers choose between two brands but are familiar with the nondigital attributes of only the brand purchased on the last purchase occasion on the supply side firms use traditional stores and the internet to inform consumers about their products attributes and to sell their products in this setup we show that the impact of the internet on competition will be radically different depending on the relative importance of parameters describing the relevant shopping and distribution context specifically we find that the introduction of the internet might lead to monopoly pricing when 1 the proportion of internet users is high enough 2 when nondigital attributes are relevant but not overwhelming 3 when consumers have a more favorable prior about the brand they currently own and 4 when the purchase situation can be characterized by destination shopping more surprising we also show that in such cases the use of the internet not only leads to higher prices but can also discourage consumers from engaging in search as such an important message of the paper is that under some conditions the internet might represent an opportunity for firms to leverage their brand loyalty and increase their profits the intuition behind our results is the following the internet allows consumers to evaluate digital attributes easily i e without visiting the stores however nondigital attributes can only be evaluated through physical presence as such for goods where both types of attributes are important the introduction of the net changes the effective cost of search for consumers without the internet the cost of search is the cost of visiting more than one store with the introduction of the net however nonsearching consumers do not have to undertake the shopping trip at all because they can order products on the net thus in the presence of the internet the cost of search is related to the cost of undertaking the entire shopping trip in the case of destination shopping i e when the fixed cost of undertaking the shopping trip is higher than the cost of visiting an additional store the presence of the internet creates higher effective search costs for consumers given this shift of paradigm in search costs due to the internet consumers may not take the risk of searching for products with better nondigital attributes but instead remain with the product they are familiar with this results in increased consumer loyalty which induces firms to increase their prices our results have important managerial implications first they provide guidelines for firms on when i e for which product categories they should consider expanding their distribution network to the internet in this respect an important additional insight of the paper is that the internet can lower price competition and lead to reduced consumer search even if it is more expensive than the traditional distribution channel this can easily be the case if distribution through the internet represents additional costs such as the costs associated with shipping and handling and return policies second the paper also provides guidelines on how to plan the firm s internet strategy interestingly the results suggest that with the general availability of the internet the role of stores might actually become more important while we do not explicitly model a dynamic market our findings together with klemperer s 1987 results suggest that stores might have a key role in consumer acquisition while the internet can help leverage the acquired customer base through demand fulfillment this might imply that for certain product categories firms should actually allocate additional resources to improve their in store environment when considering the internet as a complementary distribution channel

food losses in food service institutions examples from sweden lowering food losses is a potential measure to overcome hunger and reduce the ecological side effects from the food system however few observations of food losses have been reported in the liter

optimal sales force compensation in dynamic settings commissions vs bonuses this paper studies optimal sales force compensation plans in a multiperiod moral hazard model when the firm wants to implement high effort in every period but only obtains aggregate information on sales the sales agent chooses effort each period after observing previous sales and his incentive responsiveness might change over time the paper derives conditions under which a linear incentive scheme a pure commission dominates a bonus plan and vice versa a commission is optimal if the agent is most difficult to motivate in the last period otherwise combining the commission with a bonus plan can lower the firm s cost of providing incentives in earlier periods the results are robust to different types of cost externalities and demand externalities across periods however if the firm obtains intermediate sales information bonus plans dominate commissions this paper was accepted by j miguel villas boas marketing

direct marketing indirect profits a strategic analysis of dual channel supply chain design the advent of e commerce has prompted many manufacturers to redesign their traditional channel structures by engaging in direct sales the model conceptualizes the impact of customer acceptance of a direct channel the degree to which customers accept a direct channel as a substitute for shopping at a traditional store on supply chain design the customer acceptance of a direct channel can be strong enough that an indepent manufacturer would open a direct channel to compete with its own retailers here direct marketing is used for strategic channel control purposes even though it is inefficient on its own and surprisingly it can profit the manufacturer even when so direct sales occur specifically we construct a price setting game between a manufacturer and its independent retailer direct marketing which indirectly increases the flow of profits through the retail channel helps the manufacturer improve overall profitability by reducing the degree of inefficient price double marginalization while operated by the manufacturer to constrain the retailer s pricing behavior the direct channel may not always be detrimental to the retailer because it will be accompanied by a wholesale price reduction this combination of manufacturer pull and push can benefit the retailer in equilibrium finally we show that the mere threat of introducing the direct channel can increase the manufacturer s negotiated share of cooperative profits even if price efficiency is obtained by using other business practices

consumer deliberation and product line design this paper studies optimal product line design when consumers need to incur costly deliberation to uncover their valuations for quality to induce deliberation a firm must maintain quality dispersion and cut the price of the high end product so that consumers are motivated to deliberate in the hope that high end consumption fits their needs to prevent deliberation the firm may have to offer downgraded quality at a low price so that an impulsive purchase will not appear too wasteful whether the firm should induce deliberation depends on how much surplus it creates by aligning the supply of quality with heterogeneous demand for quality and how much surplus it captures during this process interestingly equilibrium firm profit consumer surplus and social welfare can all increase with the cost of deliberation we extend the model to accommodate consumers heterogeneous prior beliefs of their valuations for quality we also discuss how market research could benefit from taking into account the endogeneity of consumer deliberation

agricultural price transmission across space and commodities during price bubbles this article investigates agricultural price transmission during price bubbles the empirical approach concerns the horizontal transmission of cereal prices both across different market places and across different commodities the trade policy intervention put forward to mitigate the impact of price exuberance is considered the analysis is performed using italian and international weekly spot cash price data over years 2006 2010 a period of generalized turbulence of agricultural markets firstly the properties of price time series are explored then interdependence across prices is specified and estimated by adopting appropriate cointegration techniques results suggest that the bubble had only a slight impact on the price spread and the temporary trade policy measure when effective has limited this impact

choice and procrastination author s o donoghue ted rabin matthew abstract recent models of procrastination due to self control problems assume that a procrastinator considers just one option and is unaware of her self control problems we develop a model where a person chooses from a menu of options and is partially aware of her self control problems this menu model replicates earlier results and generates new ones a person might forego completing an attractive option because she plans to complete a more attractive but never to be completed option hence providing a non procrastinator additional options can induce procrastination and a person may procrastinate worse pursuing important goals than unimportant ones

consumer heterogeneity and strategic quality decisions though recent studies show that quality differentiation is an equilibrium outcome products of similar qualities frequently are observed in the marketplace this inconsistency may be explained by incorporating consumer heterogeneity along unobservable attributes into a model of competition in this paper consumers not only take into account the quality and price of a product but also their heterogeneous tastes along other attributes which are unobservable to firms we investigate the effect of heterogeneity along the unobservable attributes on both quality and price equilibrium in a two stage game framework we show that when consumers are sufficiently heterogeneous along the unobservable attributes the firms offer products of identical qualities in equilibrium under low levels of heterogeneity along the unobservable attributes however our results are consistent with past research which argues for quality differentiation

demand signalling under unobservable effort in franchising linear and nonlinear price contracts we study the signalling strategy of a principal who is privately informed about its high demand potential to an uninformed risk neutral agent we analyze the model in the context of a contract between a franchisor and a franchisee we examine the distortions of a two part pricing scheme necessary to credibly inform the franchisee agent we also study whether the inability of the franchisor principal to observe the agent s effort moderates or exaggerates the distortions from the first best two part pricing scheme a surprising outcome is that even though the principal incurs greater signalling cost the magnitude of distortion in the two part scheme is smaller when service is unobservable than when it is not thus a signalling strategy employing the fixed and variable fees is harder to detect under moral hazard empirical studies failing to control for moral hazard may incorrectly conclude that signalling strategy does not occur we later consider a three part scheme to verify whether or not the schem

temporal aggregation the data interval bias and empirical estimation of bimonthly relations from annual data in an important study reviewing the literature on econometric studies of the relationship between advertising and sales clarke clarke darral g 1976 econometric measurement of the duration of advertising effects on sales j marketing res 13 november 345 357 concluded that the implied duration interval of the effects of advertising on sales were too long when the studies used annual data a theoretical explanation is provided here for the observation of parameter estimates which vary with the data interval employed in the analysis parameter estimates are developed on the basis of data aggregated at various levels of temporal aggregation and compared with theoretical values it is demonstrated that it is possible to recover bimonthly parameters when only annual data are available

inventory competition under dynamic consumer choice we analyze a model of inventory competition among n firms that provide competing substitutable goods each firm chooses initial inventory levels for their good in a single period newsboy like inventory model customers choose dynamically based on current availability so the inventory levels at one firm affect the demand of all competingfirms this creates a strategic interaction amongthe firms inventory decisions our work extends earlier work on variations of this problem by karjalainen 1992 lippman and mccardle 1997 and parlar 1988 specifically we model demand in a more realistic way as a stochastic sequence of heterogeneous consumers who choose dynamically from amongthe available goods or choose not to purchase based on a utility maximization criterion we also use a sample path analysis so minimal assumptions are imposed on this demand process we characterize the nash equilibrium of the resulting stocking game and prove it is unique in the symmetric case we show there is a bias toward overstocking caused by competition specifically reducing the quantity stocked at any equilibrium of the game increases total system profits and at any joint optimal set of stocking levels each firm has an individual incentive to increase its own stock for the symmetric case we show that as the number of competing firms increases the overstockingbecomes so severe that total system and individual firm profits approach zero finally we propose a stochastic gradient algorithm for computing equilibria and provide several numerical examples

why are bad products so hard to kill it is puzzling that firms often continue to invest in product development projects when they should know that demand will be low we argue that bad products are hard to kill because firms face an inherent conflict when designing managers incentives rewarding success encourages managers to forge ahead even when demand is low to avoid investing in low demand products the firm must also reward decisions to kill products however rewarding managers for killing products effectively undermines the rewards for success the inability to resolve this tension forces the firm to choose between paying an even larger bonus for success and accepting continued investment in low demand products we explore the boundaries of this argument by analyzing how the timing of demand information affects product investment decisions

u s equity and commodity futures markets hedging or financialization abstract in this paper we investigate the hedging versus the financialization nature of commodity futures vis a vis the equity market using a arma filter based correlation approach our results suggest that while gold futures are typically seen as a hedge against unfavorable fluctuations in the stock market the majority of commodity futures appears to be treated as a separate asset class in line with their increasing financialization our results are robust to the presence of inflation highlight the hedging role played by fuel energy commodity futures in the nineties and reveal that the commodity financialization boosted since the 2000s we also show that gold futures are partially a safe haven for equity investments in the short term but not in the mid term finally we uncover some hedging financialization of crude oil futures associated to global demand oil supply shocks

aggregation and linearity in the provision of intertemporal incentives we consider the problem of providing incentives over time for an agent with constant absolute risk aversion the optimal compensation scheme is found to be a linear function of a vector of n accounts which count the number of times that each of the n kinds of observable events occurs the number n is independent of the number of time periods so the accounts may entail substantial aggregation in a continuous time version of the problem the agent controls the drift rate of a vector of accounts that is subject to frequent small random fluctuations the solution is as if the problem were the static one in which the agent controls only the mean of a multivariate normal distribution and the principal is constrained to use a linear compensation rule if the principal can observe only coarser linear aggregates such as revenues costs or profits the optimal compensation scheme is then a linear function of those aggregates the combination of exponential utility normal distributions and linear compensation schemes makes computations and comparative statics easy to do as we illustrate we interpret our linearity results as deriving in part from the richness of the agent s strategy space which makes it possible for the agent to undermine and exploit complicated nonlinear functions of the accounting aggregates

rivalry between strategic alliances abstract rivalry between strategic alliances is investigated in a model where each alliance member maximizes its own profit and some share of its partner s profit a complementary alliance confers a strategic advantage by allowing the partners to credibly commit to greater output owing to both within alliance complementarities and cross alliance substitutabilities although rivalry between different alliances can sometimes lead to a prisoners dilemma for firms it tends to improve economic welfare on the other hand an alliance that arises due purely to the threat of entry may reduce welfare

implications of reduced search cost and free riding in e commerce this paper examines a market where the provision of information service is costly but information service has the characteristics of a public good consumers on the other hand can use the information service to make an informed purchase decision and derive higher utility from consuming their ideal product however after receiving the information service from an information service provider consumers can easily free ride by purchasing at low price sellers who do not provide any information service the paper examines the competition where sellers compete by providing information service for horizontally differentiated products and where technology reduces consumers search cost it is found that in this market a seller needs to establish itself as an information service provider in order to make positive profits even when there is free riding a seller however cannot make positive profits by free riding all the time also with an increase in competition in the information service market sellers have reduced incentives to provide information service it is also found that in this market a decrease in search cost may increase or decrease social welfare

linearity with project selection and controllable diffusion rate in continuous time principal agent problems i extend holmstrom and milgrom s model by allowing the agent to control privately or publicly the diffusion rate process and show that the optimal contract is still linear i discuss the conditions under which conflicts over the choice of diffusion rate do and do not arise as an application i examine project selection problems of a firm conflicts between the manager and investors arise because giving the manager too much incentive to work to increase the profit from ongoing operations can induce him to be too conservative in project selection possibly resulting in optimal contracts with low sensitivities

optimal sales force compensation we analyze a dynamic moral hazard model to derive optimal sales force compensation plans without imposing any ad hoc restrictions on the class of feasible incentive contracts we explain when the compensation plans that are most common in practice fixed salaries quota based bonuses commissions or a combination thereof are optimal fixed salaries are optimal for small revenue cost ratios quota based bonuses commissions should be used if the revenue cost ratio takes intermediate large values if firms face demand uncertainty markets are rather thin and the revenue cost ratio large firms should combine a commission with a quota based bonus if word of mouth advertising affects sales a dynamic commission that increases over time can be optimal when entering a new market or launching a new product firms should install long term bonus plans

the capital budgeting process incentives and information we study the capital allocation process within firms observed budgeting processes are explained as a response to decentralized information and incentive problems it is shown that these imperfections can result in underinvestment when capital productivity is high and overinvestment when it is low we also investigate how the budgeting process may be expected to vary with firm or division characteristics such as investment opportunities and the technology for information transfer there is general agreement that investment decisions are the most important decisions made by corporations the choice of projects and the level of investment is critical not just for stakeholders of the firm but also for the economic well being of society as a whole it has been alleged that u s firms invest too little and tend to overemphasize short term results for example porter 1992 citing poterba and summers 1992 asserts that u s firms use hurdle rates to evaluate investment projects that are higher than their estimated costs of capital to understand the investment behavior of firms one must consider both the process by which external capital is made available to firms and the process by which internally and externally raised capital is allocated to investment projects within the firm considerable attention has been paid to how firms raise external capital the fundamental insight in this area is the celebrated result of modigliani and miller mm that capital structure is irrelevant in the absence of capital market frictions accordingly in the three decades since their contribution research on how external capital is raised has focused on market frictions including information and incentive problems relatively little research has focused on the internal allocation process and its relationship to the organization of the firm modern finance theory prescribes allocating capital according to the net present value npv rule just as the mm result itself provides no theory of the arrangements under which

samurai accountant a theory of auditing and plunder a risk neutral principal wishes to exact a payment from a risk neutral agent whose wealth he does not know but may verify through a costly auditing procedure we characterize efficient schemes for the principal when he is allowed to choose schedules for preaudit and postaudit payments and audit probabilities subject to the constraint that only monetary incentives can be used and that the principal may never make a net payment to the agent the main results are that efficient schemes involve preaudit payments which are increasing in the agent s wealth audit probabilities are decreasing in the agent s wealth and also satisfy certain constraints as equalities in general such schemes involve stochastic auditing and rebates after an audit in this paper we analyse the problem of a principal extracting wealth from an agent who is reluctant to part with it and is also better informed than the principal as to the amount he owns we assume that the principal has a costly means of discovering the agent s