Structural models of complementary choices

This article reviews the rapidly growing literature on structural models of complementary choices. It discusses recent modeling developments and identifies promising areas for future research.     

Empirical Analysis of Indirect Network Effects in the Market for Personal Digital Assistants

We present a framework to measure empirically the size of indirect network effects in high-technology markets with competing incompatible technology standards. These indirect network effects arise due to inter-dependence in demand for hardware and compatible software. By modeling the joint determination of hardware sales and software availability in the market, we are able to describe the nature of demand inter-dependence and to measure the size of the indirect network effects. We apply the model to price and sales data from the industry for personal digital assistants (PDAs) along with the availability of software titles compatible with each PDA hardware standard. Our empirical results indicate significant indirect network effects. By July 2002, the network effect explains roughly 22% of the log-odds ratio of the sales of all Palm O/S compatible PDA-s to Microsoft O/S compatible PDA-s, where the remaining 78% reflects price and model features. We also use our model estimates to study the growth of the installed bases of Palm and Microsoft PDA hardware, with and without the availability of compatible third party software. We find that lack of third party software negatively impacts the evolution of the installed hardware bases of both formats. These results suggest PDA hardware firms would benefit from investing resources in increasing the provision of software for their products. We then compare the benefits of investments in software with investments in the quality of hardware technology. This exercise helps disentangle the potential for incremental hardware sales due to hardware quality improvement from that of positive feedback due to market software provision.     

Double Moral Hazard,Monitoring, and the Nature of Contracts

generalized double-sided moral-hazard model, with risk-averse parties who mutually monitor each other (to get a reasonable idea of outcome/effort). The model considers trade-off between monitoring costs and moral hazard costs, which are endogenously determined by the extent of monitoring. Using this model, we formally prove a generalized version of Coase's conjecture – that the optimal contract minimizes the agency and risk costs. We then show how varying assumptions about the feasibility or cost of monitoring of the outcome or the worker's effort lead to different contracts being optimal. The analysis is then used to explain the nature of contracts observed in practice under many different situations. We will give an explanation as to why industrial workers typically work under wage contracts, while share contracts are common in agriculture and will explain why profit sharing is more common for senior managers than for the production workers. Received September 19, 2000; revised version received October 30, 1997     

Determinacy with nominal assets and outside money

Summary. We build a finite horizon model with inside and outside money, in which interest rates, price levels and commodity allocations are determinate, even though asset markets are incomplete and asset deliveries are purely nominal.Received: 2 July 2003, Revised: 1 December 2004 JEL Classification Numbers: D50, E40, E50, E58.Correspondence to: J. Geanakoplos     

Sources of Inequality Between Male and Female Wages in Australia

This article examines the influence of labour force status, full-time/part-time employment status, educational qualifications, work experience, and occupation as sources of inequality between male and female wages in Australia. A decomposition method is used to identify the effect of these factors on male/ female inequality. This strategy involves successively removing persons who differ with respect to each of these factors from the population under study and then decomposing the inequality in the remaining sub-population into inequality within each sex and inequality between the sexes. This decomposition is done using the I₀ inequality index proposed by Theil (1967). The study is based on unit record data from the 1981–82 Income and Housing Survey conducted by the Australian Bureau of Statistics. It finds that a significant proportion of the inequality between the wages of the sexes can be explained by their differences with respect to the factors listed above.     

Consumer shopping orientations,non-store retailers,and consumers' patronage intentions: A multivariate investigation

Over the last few years, nonstore retailing has become an important and integral part of the American retailing scene. However, very little published research exists regarding these new methods of retailing. This study examines the role of consumers' shopping orientations, and type of nonstore method on consumers' patronage intentions of a set of selected products. The results are supportive of the two research hypotheses. Theoretical and managerial implications are discussed.     

Models of consumer behavior: The state of the art

Models of consumer behavior have gained much acceptance since the early sixties. The purpose of this article is to examine the state of the art by reviewing the often cited models: Nicosia, Howard-Sheth, and Engel-Blackwell-Kollat. Specifically, a major objective is to consider these models from their practical utility standpoint, i.e., whether the models can be tested and used by marketers. To accomplish this, a set of criteria is developed for evaluation of models in general, and consumer/buyer behavior models in particular. The criteria used for evaluating the state of the art in consumer behavior models are largely derived from model building sources in various fields. The results indicate that although the models are quite impressive in scope, they are inherently weak to be of much help to the marketing practitioner. Indeed, none of the models have been tested as a whole in their original form because they lack specificity and thus are difficult, if not impossible, to operationalize. This article is partially based on a paper which received an award in an Academy of Marketing Science student paper competioion. The Academy encourages scholarly work by various groups through annual competitions and awards.