GROWTH AND BUBBLES WITH CONSUMPTION EXTERNALITIES*

This paper explores the role of consumption externalities in an overlapping generations economy with capital accumulation. If consumers in each generation are concerned with other agents’ consumption behaviours, there exist intergenerational as well as intragenerational consumption externalities. It is the presence of intergenreational consumption externalities that may produce fundamental effects both on equilibrium dynamics and on steady‐state characterization of the economy. This paper demonstrates this fact in the context of a simple model of endogenously growing, overlapping‐generations economy with or without asset bubbles.     

A model of repeat advertising

Advertising conveys information not only about product characteristics but also about the number of consumers who know about the product. More advertising may shift expectations towards a larger consumer base, increasing buyers' valuation when there are consumption externalities.     

Financial Markets and Stochastic Growth

The authors study the effect of financial markets on the investment of a two-good two-country economy with stochastic production in a dynamic framework. Each country produces and invests only one good and, therefore, makes decisions as a central planner in an optimal growth model. Trade between consumers of both countries, however, takes place on competitive (spot or financial) markets. The authors compare the investment–consumption decisions of both "market" models with the benchmark case of an integrated world-equilibrium. In the log-linear case, it is possible to uniquely characterize the state-dependent preferences of consumers that lead to dynamically efficient investment decisions. It is shown that the investment decisions in both "market" models are, in general, inefficient compared with the efficient, or integrated world economy, case.     

WELFARE IMPLICATIONS OF THE INTERACTION BETWEEN HABITS AND CONSUMPTION EXTERNALITIES*

We analyze the welfare properties of the equilibrium path of a growth model where both habits and consumption externalities affect the utility of consumers. Our analysis highlights the crucial role played by complementarities between externalities and habits in order to generate an inefficient dynamic equilibrium. In particular, we show that the competitive equilibrium is inefficient when consumption externalities and habit‐adjusted consumption are not perfect substitutes.     

Geographical and industrial spillovers in entry decisions across export markets

This article addresses sequential entry decisions in export markets. It focuses on externalities derived from previous export activity in countries close to those for which a potential entry decision is made (geographical spillovers) and externalities derived from previous presence of other firms in the same industry (industrial spillovers). The empirical analysis uses Spanish microdata for the period 2000–2010 in a firm decision model that also integrates country and industry characteristics. The results suggest that these two types of spillovers have a positive effect in explaining entry decisions in new export markets, though both are smaller in magnitude than the effects coming from previous presence in the same specific destination.     

CONSUMPTION AND LEISURE EXTERNALITIES, ECONOMIC GROWTH AND EQUILIBRIUM EFFICIENCY

This paper analyzes the effects of consumption and leisure externalities on growth and welfare in a two‐sector endogenous growth model with human capital accumulation. Both types of externalities are shown to affect the long‐run equilibrium and optimal growth rates in a rather different way. The relationship between the steady state of the market and the centrally planned economy is also analyzed. The optimal growth path can be decentralized by resorting to consumption or labor income taxation, whereas capital income should be untaxed. Numerical simulations suggest that growth and welfare effects of mild consumption and leisure externalities may be quantitatively important.     

Personalized mobile advertising: Its key attributes,trends, and social impact

Advertising media are a means of communication that creates different marketing and communication results among consumers. Over the years, newspaper, magazine, TV, and radio have provided a one-way media where information is broadcast and communicated. Due to the widespread application of the Internet, advertising has entered into an interactive communications mode. In the advent of 3G broadband mobile communication systems and smartphone devices, consumers' preferences can be pre-identified and advertising messages can therefore be delivered to consumers in a multimedia format at the right time and at the right place with the right message. In light of this new advertisement possibility, designing personalized mobile advertising to meet consumers' needs becomes an important issue. This research uses the fuzzy Delphi method to identify the key personalized attributes in a personalized mobile advertising message for different products. Results of the study identify six important design attributes for personalized advertisements: price, preference, promotion, interest, brand, and type of mobile device. As personalized mobile advertising becomes more integrated in people's daily activities, its pros and cons and social impact are also discussed. The research result can serve as a guideline for the key parties in mobile marketing industry to facilitate the development of the industry and ensure that advertising resources are properly used.     

MOVIES,MASS CONSUMERS,AND CRITICS: ECONOMICS AND POLITICS OF A TWO‐SIDED MARKET

Most analyses of the film market treat it as a single entity where producers make films based on average consumer interest while critics serve as forecasters or signalers of film quality to these consumers. We describe the film market as two‐sided—a mass market (average consumer) side and a high quality/artistic (cineaste) side—that each influence film maker production decisions and critical reviews as critics balance the preferences of mass market consumers and their own more artistic inclination. Using 1,824 films released during 2000–2014, we examine determinants of box office revenues and critical reviews, while addressing the overlap between them. Our results indicate that consumers and critics respond differently not only to film rating but also to film budgets, story sources, genre, and political content. We then use the dichotomy between average and high quality, artistic film consumers as a basis for understanding the normative views of the film markets relative to other two‐sided markets as well as the political economy of film regulation. (JEL C30, D10, Z11)     

A laboratory study of advertising and price competition

We use a laboratory experiment to study advertising and pricing behavior in a market where consumers differ in price sensitivity. Equilibrium in this market entails variation in the number of firms advertising and price dispersion in advertised prices. We vary the cost to advertise as well as varying the number of competing firms. Theory predicts that advertising costs act as a facilitating device: higher costs increase firm profits at the expense of consumers. We find that higher advertising costs decrease demand for advertising and raise advertised prices, as predicted. Further, this comes at the expense of consumers. However, advertising strategies are more aggressive than theory predicts with the result that firm profits do not increase.     

Price competition when consumer behavior is characterized by conformity or vanity

It has long been recognized that the pleasure of consuming a good may be affected by the consumption choice of other consumers. In some cases, social pressures may lead to conformity; in some others, individuals may feel the need of exclusiveness under the form of vanity. Such externalities have proven to be important in several markets. However, the market implication of these externalities are still unclear. To investigate them, we propose to combine the consumption externality model and the spatial duopoly model. When conformity is present but not too strong, both firms remain in business but price competition is fiercer and results in lower prices. The market share of the large firm increases with the population size; as the population keeps rising, the large firm may serve the entire market and set a price that has the nature of a limit price. When conformity is strong enough, different equilibria may exist. In most of these equilibria, a single firm captures the whole market. At the other extreme, when vanity is at work, price competition is relaxed.     

Tax Rate Variability and Public Spending as Sources of Indeterminacy

We consider a constant returns to scale, one sector economy with segmented asset markets of the Woodford type. We analyze the role of public spending, financed by labor income and consumption taxation, on the emergence of indeterminacy. We find that what is relevant for indeterminacy is the variability of the distortion introduced by government intervention. We show that the degree of public spending externalities in preferences affects the combinations between the tax rate and its variability under which indeterminacy occurs. Moreover, we find that consumption taxes can lead to local indeterminacy when asset markets are segmented.     

广告支出与消费增长:基于1981年～2009年时间序列数据的经验研究

理论分析显示广告支出与消费增长相互依存,广告可以通过诱导消费者的潜在需求从而刺激消费,消费增长也会促使企业增加广告支出。笔者在多变量VAR模型的基础上,采用中国1981年～2009年度数据,运用协整检验发现:广告支出、城市居民消费支出和农村居民消费支出之间存在某种长期均衡关系,广告支出是城市和农村消费增长的格兰杰原因。脉冲响应和方差分解表明,广告对消费的刺激效应不断下降,呈现出长期均衡的趋势。从宏观整体的视角来看,企业广告长期投放应保持理性,广告支出应维持在相对稳定合理的状态。     

Imports, Status Preference, and Foreign Borrowing

This paper considers the implications of consumption and borrowing externalities in a small open economy framework. The former reflect the assumption that status conscious agents care about the relative consumption of imported goods, while the latter arise because agents do not take into account the effects of their borrowing decisions on the interest rate on debt. We analyze in the paper the impact of an increase in the degree of status preference on the saddlepath adjustment of the decentralized economy. In addition, the contrasting steady‐state and dynamic properties of the social planner’s economy are derived, along with the corresponding optimal tax and subsidy policies.     

Consumption adaptation,anticipation‐bias,and optimal income taxation

Adaptation is omnipresent but people systematically fail to correctly anticipate the degree to which they adapt, leading them to make irrational intertemporal decisions. This paper concerns optimal income taxation to correct for such anticipation‐biases in a framework where consumers adapt to earlier consumption levels. The analysis is based on a general equilibrium OLG model with endogenous labor supply and savings where each consumer lives for three periods. The results show how a paternalistic government may correct for the effects of anticipation‐bias through a combination of time‐variant marginal labor income taxes and savings subsidies/taxes. The optimal policy mix remains the same, irrespective of whether consumers commit to their original life time plan for work hours and consumption or reoptimize later on when realizing that they have already adapted more than expected.     

R&D incentives in compatible networks

Network externalities describe the phenomenon that a good becomes more valuable to each user the more other consumers use the same or a compatible troduct. Whereas most of the recent literature on network effects has focused on the adoption of products, this paper shows that network externalities can have important feedback effects on the incentives to carry out R&D and develop new products. Even if the products are compatible, network effects can lead to strategic overinvestment or underinvestment. The firms' R&D decisions are compared with the socially optimal ones.     

Advertising in consumer allocation models: choice of functional form

This study investigates the empirical performance of four different functional forms for advertising-augmented consumer allocation models. The investigation is carried out within the context of the UK alcoholic drinks markets. The aims of the study are twofold: (i) to assess which of the four functional forms provides the best explanation of the data and may serve, therefore, as the most suitable framework for investigating advertising effects in these markets; and (ii) to consider whether the findings with regard to advertising effects are robust and consistent across model specifications. Advertising is found to have had no significant effect upon the ‘product composition’ or ‘level’ of total alcoholic drink consumption in the UK over the period from 1964 to 1996, and this result is robust with respect to variations in the specification of functional form. The consumption of alcoholic drink is affected by relative prices, total consumer budgeted expenditures and, to some extent, by autonomous shifts in tastes. The balance of the evidence from tests for functional form appeared to favour the Almost Ideal Demand system as a framework for investigating the influence of advertising and other factors on drink consumption.     

VOTING,LOBBYING, AND THE DECENTRALIZATION THEOREM

This paper revisits the well‐known fiscal “Decentralization Theorem” by relaxing the role of the assumption that governments are benevolent, while retaining the assumption of policy uniformity. If, instead, decisions are made by majority voting, the theorem fails. Specifically, (i) centralization can welfare‐dominate decentralization even if there are no externalities and regions are heterogeneous and (ii) decentralization can welfare‐dominate centralization even if there are positive externalities and regions are homogeneous. Similar results are obtained if a benevolent government is subject to lobbying. Hence, the Decentralization Theorem is not robust to relatively minor deviations away from the benchmark of a purely benevolent government.