CONSUMER DIRECT FULFILLMENT PERFORMANCE IN INTERNET RETAILING: EMERGENCY TRANSSHIPMENTS AND DEMAND DISPERSION

The collaborative fulfillment of consumer orders by Internet retailers and wholesalers has proven important in the realization of sustainable levels of online profitability. Concentrating on consumer direct fulfillment (or drop shipping), an empirical simulation model evaluates avenues for improving logistical performance. The empirical simulation model centers on the online music CD retailing industry. It evaluates the effects of emergency transshipments and demand dispersion on inventory and product‐release performance, as well as on transportation costs, in consumer direct fulfillment operations. Results show that emergency transshipments improve inventory and product‐release performance in these operations. Furthermore, the inventory‐performance improvements are maximized when inventory facilities fulfill demand that is uniformly balanced across markets primarily assigned to each facility. Finally, gains in inventory and release performance obtained from emergency transshipments outweigh additional transportation costs incurred from a greater reliance on emergency transshipments for consumer direct fulfillment.     

贸易成本、异质性企业与扩大内需:理论框架与中国经验

扩大内需是现阶段稳定我国经济增长的关键因素之一。在现有异质性企业模型的基础上,本文通过建立一个异质性企业选择模型阐述了贸易成本对内部需求的影响机制。该模型表明贸易成本是影响企业国内外市场选择行为的关键因素,政府可以通过调节企业的相对贸易成本来实现扩大内部需求的目标。同时利用我国工业企业层面的数据,对模型进行了实证检验,检验结果符合理论模型的基本预测。     

Industry demand characteristics and the structure-performance relationship

Theoretical models of industrial profitability have included the price clasticity of demand among the structural elements that explain profitability. Empirical studies have accounted for variations in demand characteristics across industries by sample partition or use of broadly defined dummy variables.Variations in demand characteristics across industries can be modeled directly, by including among the variables that explain industrial profitability the share of industry sales going to different classes of consumers, for example, final consumer demand and different segments of the public sector.In empirical tests, inclusion of such demand share variables improves the explanatory power of the model, especially for consumer goods industries.     

Too close to be similar: Product and price competition in retail gasoline markets

We examine how product and pricing decisions of retail gasoline stations depend on local market demographics and the degree of competitive intensity in the market. We are able to shed light on the observed empirical phenomenon that proximate gasoline stations price very similarly in some markets, but very differently in other markets. Our analysis of product design and price competition between firms integrates two critical dimensions of heterogeneity across consumers: Consumers differ in their locations and in their travel costs, as in models of horizontal differentiation. They also differ in their relative preference or valuations for product quality dimensions, in terms of the offered station services (such as pay-at-pump, number of service bays or other added services), as in models of vertical differentiation. We find that the degree of local competitive intensity and the dispersion in consumer incomes are sufficient to explain variations in the product and pricing choices of competing firms. Closely located retailers who face sufficient income dispersion across consumers in a local market may differentiate on product design and pricing strategies. In contrast, retailers that are farther apart from each other may adopt similar product design and pricing strategies if the market is relatively homogeneous on income. Using empirical survey data on prices and station characteristics gathered across 724 gasoline stations in the St. Louis metropolitan area, and employing a multivariate logit model that predicts the joint probability of stations within a local market differentiating on product design and pricing strategies as a function of market demographics and local competitive intensity, we find strong support for the central implications of the theory.

A model of demand,productivity and foreign location decision among Taiwanese firms

We develop a theoretical framework to examine the relative importance of firm demand and productivity in firm decisions to export and where to locate foreign direct investments. The model shows that the equilibrium firm decision depends on product technology, consumer preference for product quality, fixed investment costs of establishing a foreign subsidiary, transportation costs and relative wages. Our empirical results confirm the predictions of the theoretical model. Firm-level demand and productivity components are important in explaining the decision to participate in foreign markets with their relative importance depending on the firm's organizational form (exports versus FDI) and the destination of the investments. In general, FDI firms are more productive than exporting firms regardless of FDI destinations. FDI firms also have a higher demand component than exporters and this demand component is stronger than productivity. Finally, among FDI firms, while those with a high demand index and productivity have a significantly higher propensity to invest in high-income countries, firm productivity is the sole determinant of firms undertaking FDI in low-income countries.     

Market potential, increasing returns and geographic concentration

In this paper, I examine the spatial correlation between wages and consumer purchasing power across U.S. counties to see whether regional demand linkages contribute to spatial agglomeration. First, I estimate a simple market-potential function, in which wages are associated with proximity to consumer markets. Second, I estimate an augmented market-potential function derived from the Krugman model of economic geography, parameter estimates for which reflect the importance of scale economies and transport costs. The estimation results suggest that demand linkages between regions are strong and growing over time, but quite limited in geographic scope.     

The impact of trade facilitation on poverty and inequality: Evidence from low- and middle-income countries

This paper using a trade model of imperfect competition and product differentiation, examines the welfare effects of two popular tariff-tax reforms: (i) a tariff cut combined with an equal increase in the consumption tax and (ii) a tariff cut combined with an increase in the consumption tax that leaves the consumer price of the imported good unchanged. It is shown that if tax revenues are lump-sum distributed and firms compete over prices, then coordinated tariff-tax reforms improve welfare for a low degree of product differentiation, whereas these reforms are welfare-reducing for any degree of product differentiation under Cournot competition. When, instead, revenues are used to finance the provision of public goods, then the total effect of these reforms on welfare depends, under plausible assumptions, on the strength of the consumer's valuation of the public good.     

不同消费者分布下双寡头产品差异化策略博弈分析

对产品实施差异化是企业的一种重要的竞争策略。传统的Hotelling模型通过假定消费者均匀分布在市场之中,研究企业产品差异化问题。在传统模型的基础上建立了一种消费者非均匀分布的双寡头定位定价竞争模型,用动态博弈论的方法求出了模型的子博弈纳什均衡,并根据均衡结果分析了几种消费者分布下双寡头企业的产品差异化策略、定位策略以及定价策略。     

A Comparison of Buyback and Trade‐In Policies to Acquire Used Products for Remanufacturing

We study how acquisition policies for used products as a source for a remanufactured consumer product affect system performance. We introduce a consumer choice model of new product purchase and used product return, which is consistent with the classic Bass diffusion model of sales over time. We capture new and remanufactured product sales, the evolution of the install base, and consumer return and repurchase decisions over the life cycles of new and remanufactured product. Our analyses lead to two main findings on the acquisition policies. First, if the buyback price is less than the margin of a new product, then a trade‐in policy is likely to yield higher profit than a buyback policy. Second, we show that the profitability is highest when the time lag between the introduction of a new product and initial demand for a remanufactured version of the product is at or near the sweet spot, which is the age of the product at which the costs of acquisition and remanufacturing are at minimum. Further, when the time lag between the introduction of a new product and initial demand for its remanufactured version is near the sweet spot, then simple pricing methods are close to optimal.     

Designing the content of advertising in a differentiated market

In many markets, consumers use attribute information to assess the value they expect from purchasing a product or service. This includes many low involvement experience goods including take-out food, many packaged good categories and restaurants. In these markets, quality differences exist but many differences are horizontal in nature: the consumer is interested in finding a product that meets her unique tastes. Beyond ensuring that consumers know the brand, the category and the price; it seems advertising should provide consumers with attribute information. However, a significant proportion of advertising does not provide it. In fact, within the same category, competitors respond to messages that emphasize detailed attribute information with messages that are devoid of attribute information. These messages are uninformative about product attributes. We explore how competition in a differentiated market is affected by the ability of a firm has to choose uninformative messages. We construct a model to investigate the factors that affect a firm’s decision to use advertising with detailed attribute information or advertising that does not provide it. The model demonstrates that content decisions about advertising are affected by the differences between products, the range of heterogeneity in consumer tastes and the degree to which costs increase as a function of the quantity of information in advertising. Surprisingly, even when the cost to increase the quantity of information in advertising is low, uninformative campaigns can be more profitable than campaigns with attribute information. The analysis also demonstrates that firms can be more likely to provide attribute information when there are less consumers that are attribute-sensitive. Finally, the model shows that uninformative messages can create “artificial differentiation” in some situations.     

Balancing Profitability and Customer Welfare in a Supermarket Chain

We investigate the impact of price discrimination by a large Chicago supermarket chain. First we measure the impact of the chain's current zone-pricing policy on shelf prices, variable profits and consumer welfare across its stores. Using the chain's database to simulate a finer store-specific micro-pricing policy, we study the implications of this policy on profits and welfare. We show how a store-pricing policy that is constrained to offer consumers at least as much surplus as a uniform chain wide pricing policy still enables the retailer to generate substantial incremental profits.To ensure our pricing problem exhibits a well-defined optimum, we use the parsimonious, mixed-logit demand function that allows for flexible substitution patterns across brands and also retains a link to consumer theory. We discuss the issue of price endogeneity when estimating the demand parameters with weekly store-level data. Standard instrumental variables techniques used to account for such endogeneity also seem to increase the magnitudes of own-price elasticities thereby offsetting the problem encountered by previous researchers of predicted prices from a demand model exceeding those in the actual data.     

Usefulness of Economics in Explaining Consumer Complaints

Based on an economic model of consumer demand, a multinomial logit model is estimated to predict the probability of a consumer falling into one of four categories of complaint action: no action, private, public, or both private and public complaints. Automobile repair and medical services are used as examples of more and less competitive industries. There are differences across industries with regard to variables that explain variation in complaints. Once variables representing the cost/benefit, learning, restraints, and personality models are accounted for, most of the variation in complaint behavior for both industries is explained by the learning and restraints models. Characteristics of individuals are important in explaining complaint behavior for both auto repair and medical services, while supply side characteristics are important in explaining variation in complaint behavior for auto repair services.     

Incorporating Subsistence into Hedonic Price and Nutrient Demand Equations

The characteristics model of consumer choice is modified to accommodate subsistence. Implications of the model for evaluation of the hedonic price equations and nutrient demand equations are explored. The new model is tested using the 1977–1978 Nationwide Food Consumption Survey.     

Television ad-skipping,consumption complementarities and the consumer demand for advertising

Endogenous consumption of advertising is common. Consumers choose to change channels to avoid TV ads, click away from paid online video ads, or discard direct mail without reading advertised details. As technological advances give firms improved abilities to target individual consumers through various media, it is becoming increasingly important for models to reflect the endogenous nature of ad consumption and to consider the implications that ad choice has for firms’ targeting strategies. With this motivation, we develop an empirical model of consumer demand for advertising in which demand for ads is jointly determined with demand for the advertised products. Building on Becker and Murphy (The Quarterly Journal of Economics, 108(4), 941–964 1993)’s ideas, the model treats advertising as a good over which consumers have utility and obtains demands as the outcome of a joint utility maximization problem. Leveraging new data that links household-level TV ad-viewing with product purchases, we provide empirical evidence that is consistent with the model: ad-skipping is found to be lower when a household has purchased more of the advertised brand, and purchases are higher when more ads have been watched recently, suggesting that advertising and product consumption are jointly determined. Fitting a structural model of joint demand to the data, we evaluate consumer welfare and advertiser profitability in advertising targeting counterfactuals motivated by an “addressable” future of TV. We find that targeting on the predicted ad-skip probability is an attractive strategy, as it indirectly selects consumers that value the product. Reflecting the positive view of advertising in the model, we also find that net consumer welfare may increase in several targeting scenarios. This occurs because under improved targeting, firms shift advertising to those who are likely to value it. At the same time, consumers that do not value the ads end up skipping them, mitigating possible welfare losses. Both forces are relevant to assessing advertising effects in a world with improved targeting and ad-skipping technology.     

Product differentiation and duration of US import trade

We examine the extent to which product differentiation affects duration of US import trade relationships. The results are consistent with a matching model of trade formation. Using highly disaggregated product level data we estimate the hazard rate is at least 23% higher for homogeneous goods than for differentiated products. The results are not only highly robust but are often strengthened under alternative specifications. As the smallest relationships are dropped, differences across product types increase. Controlling for potential measurement errors also results in larger differences across product types.     

Decision neuroscience and consumer decision making

This article proposes that neuroscience can shape future theory and models in consumer decision making and suggests ways that neuroscience methods can be used in decision-making research. The article argues that neuroscience facilitates better theory development and empirical testing by considering the physiological context and the role of constructs such as hunger, stress, and social influence on consumer choice and preferences. Neuroscience can also provide new explanations for different sources of heterogeneity within and across populations, suggest novel hypotheses with respect to choices and underlying mechanisms that accord with an understanding of biology, and allow for the use of neural data to make better predictions about consumer behavior. The article suggests that despite some challenges associated with incorporating neuroscience into research on consumer decision processes, the use of neuroscience paradigms will produce a deeper understanding of decision making that can lead to the development of more effective decision aids and interventions.     

A macroeconomic model of international price discrimination

This paper builds a baseline two-country model of real and monetary transmission in the presence of optimal international price discrimination by firms. Distributing traded goods to consumers requires nontradables, making the price elasticity of demand country-specific and a function of the exchange rate. Profit-maximizing monopolistic firms drive a wedge between prices across countries, optimally dampening the response of import and consumer prices to exchange-rate movements. We derive general equilibrium expressions for the pass-through into import and consumer prices, tracing the differential impact of real and monetary shocks on marginal cost and markup fluctuations through the exchange rate.     

Generalizing patterns of store-type patronage: an analysis across major Chinese cities

A systematic, analytical study is presented of patterns of patronage across store types (including hypermarkets, supermarkets, grocery stores and free/wet markets) in urban China. Using consumer panel data collected from a cumulative sample of almost 5000 households, results are generalized across 8 major cities (from the North, South, East and West of China) and 6 packaged goods categories (including traditional Chinese items like soy sauce and more contemporary items such as packaged laundry detergent). Analyses show that there are definite patterns of store-type patronage in urban China, most of which are predictable from the NBD–Dirichlet model (e.g. double jeopardy and the duplication of purchase rule). These patterns generalize across all the city/category combinations studied in this paper, although some important deviations are also identified (e.g. an excess loyalty premium). It is shown how retailers and planners can make use of the observations and theoretical predictions to assess key measures of patronage.     

Assessing the demand for value‐based organic meats in Canada: a combined retail and household scanner‐data approach

We apply sets of weekly retail and household scanner data to estimate consumer demand of selected organic and conventional fresh beef products in the Canadian retail market. The main contribution of our study stems from the application of a two‐stage procedure that provides new and deeper insight into consumers' responses to changing retail environment and pricing for organic and conventional meat products. Combined knowledge of point‐of‐sale consumer behaviour for value‐based products, such as organic products, and distinct socio‐demographic profiles of buyers vs. non‐buyers of meat is especially interesting for retail managers and meat industry stakeholders. First, household meat consumption patterns are investigated based on household scanner data that track household's meat purchases in the period 2006–2007. The second step of analysis then involves the estimation of an almost ideal demand system for selected organic and conventional fresh beef products using retail scanner data for the period 2000–2007. The introduction of greater selections in organic product lines across mainstream supermarkets in Canada in response to consumer health concerns is expected to spur retail competition in an otherwise saturated Canadian retail market. The analysis of socio‐demographic profiles in beef consumption using individual household's purchase data reveals that besides regional differences in preferences, household size and resource characteristics are major determinants of point‐of‐sale beef purchase decisions. Our demand system results indicate that organic beef is highly dependent on price and expenditures, whereas demand for conventional beef is mostly driven by income, habits and ‘typical’ Canadian seasonal beef consumption patterns. Altogether, our conclusions on organic beef vs. conventional beef buyers may have further implications for institutional regulations.     

Consumer and Corporate Debt: A Neo‐Kaleckian Synthesis

We present a neo‐Kaleckian growth model with both consumer and corporate debt. The model's macrodynamic and stability characteristics differ from singleߚdebt models, yet some steadyߚstate results persist. For example, a surge in ‘animal spirits’ is good for steadyߚstate growth, and consumer borrowing can help to sustain aggregate demand. Stable steady states are characterized by a kind of ‘euthanasia of the rentier’. Consumer credit conditions influence effective demand, the profit rate and economic growth. Looser consumer credit conditions have a steadyߚstate growth effect and can enhance system stability. In this restricted sense, looser consumer credit conditions are good for macroeconomic stability.