Estimating fertiliser demand

The availability of improved data will determine whether the search for new methodologies, which are more accurate than present ones for determining fertiliser demand, is successful. The author briefly reviews various ways of estimating fertiliser demand and emphasises the need for analysts to make clear the assumptions and limitations of the methods used which may influence their value to policy makers.     

Estimating demand from eBay prices

This paper presents results for identification and estimation of the value distribution from eBay auction prices. The paper presents results for eBay type auctions with independent private values and unobserved participation. It is first shown that the distribution of values is identified from observing the distribution of prices and knowing the distribution of potential bidders. The main identification result presents conditions for which the distribution of values and the distribution of potential bidders are simultaneously identified. Not surprisingly, the intuition is similar to the standard results for identifying demand from observed equilibrium prices. The estimation method suggested by the identification results is used to estimate the value distribution for the “C5” Chevrolet Corvette sold on eBay. The results suggest that a simple OLS model on prices will over estimate the mean value of the item. The estimation results are then used to calculate the optimal reserve price for these cars. The estimated optimal reserves are compared to the actual reserves. Actual hidden reserves are set much higher than actual non-hidden reserves. The evidence suggests sellers set Buy-It-Nows and hidden reserves optimally to account for re-listing opportunities.     

Risk averse retail pricing with robust demand forecasting

Good demand estimates are the key to effective pricing decision-making. However, they are subject to a high degree of uncertainty due to various factors that are unpredictable or difficult to model, thus making pricing decisions risky. This research provides a simple proposal for a robust optimization methodology that incorporates both demand uncertainty and the decision maker's degree of risk aversion. Uncertainty is explicitly considered for two coefficients of a linear demand function, price expressions are derived, and a criterion is proposed for defining the degree of risk aversion. The resulting model is also applied to an exponential demand case to better reflect a more realistic retail setting.     

An empirical analysis of competitive nonlinear pricing

We estimate a model of competitive nonlinear pricing with multidimensional preference heterogeneity using individual level data on advertisements bought by local businesses (e.g., doctors, electricians) from two Yellow Page Directories in one U.S. city-market. Variation in individual choices and payments allows us to identify the joint density of preferences, marginal costs of publishing and common utility parameters. Our estimates suggest substantial welfare loss due to asymmetric information. Comparing duopoly outcomes with (counterfactual) monopoly outcomes, we find that with less competition (i) producer surplus increases substantially; (ii) more “low-type” consumers are excluded; (iii) product variety increases, but benefits accrue only to the “high-type” consumers; (iv) total consumer surplus decreases; (v) but its distribution, across consumers, does not change.     

Estimating demand for cellular phone services in Japan

Since the 1990s, the telecommunications industry has changed dramatically with the wide diffusion of mobile telecommunications. In spite of this, the nature of the cellular phone market has not yet been explored sufficiently. This paper analyzes the demand for cellular phone services using data on the Japanese cellular phone market in the late 1990s. It finds that the market is highly product-differentiated and conventional network externalities are no longer decisive factors in choosing a mobile phone carrier. The evidence also shows that the demand for cellular phone services is quite price-elastic, with estimated elasticity from 1.30 to 2.43 in absolute value.     

Optimal nonlinear pricing by a monopolist with information ambiguity

We consider the optimal nonlinear pricing by an ambiguity-averse monopolist. The monopolist's subjective belief about the distribution of buyers is described by ϵ-contamination of an additive probability. We find that under a maxmin utility decision rule and with a continuum of buyers, ambiguity aversion leads to bunching at the bottom in the optimal contract, and the distortion at the bottom is reduced. Other high valuation buyers are offered the same quantity as in the case without ambiguity, but they get a greater discount.     

Intra-LATA toll elasticities

Regulatory commission hearings on intra-LATA toll competition have focused, for the purpose of revenue rebalancing, on the market elasticity of demand for intra-LATA toll service. This paper presents estimates of the intra-LATA toll elasticity based on a detailed model of residential customers' demand for short-haul service. The results are compared with those from other studies. The consensus of the studies indicates a residential elasticity of around -0.4.     

Estimating the demand for ADSL and ISDN services in Greece

The aim of this paper is to investigate the demand for broadband services in Greece and to estimate the price elasticity of the demand for ADSL and ISDN services as well as the cross-price elasticity between the two services. The empirical analysis uses the 384 kbps connections since for the period examined, over 85% of the total ADSL customers in Greece are connected at this bandwidth. The empirical analysis is based on an ad-hoc specification of the demand equation, with no reference to the utility maximization problem of the representative consumer. The results of the analysis show that both demands are inelastic. In addition, cross-price elasticity for ADSL is negative, indicating that ISDN is a complement to ADSL, whereas the demand for ISDN is almost neutral to ADSL.     

Estimating obsolescence risk from demand data to enhance inventory control—A case study

In this paper obsolescence of service parts is analyzed in a practical environment. Based on the analysis, we propose a method that can be used to estimate the risk of obsolescence of service parts, which is subsequently used to enhance inventory control for those parts. The method distinguishes groups of service parts. For these groups, the risk of obsolescence is estimated using the behavior of similar groups of service parts in the past. The method uses demand data as main information source, and can therefore be applied without the use of an expert's opinion. We will give numerical values for the risk of obsolescence obtained with the method, and the effects of these values on inventory control will be examined.     

Joint pricing and inventory control for non-instantaneous deteriorating items with partial backlogging and time and price dependent demand

In this paper, a joint pricing and inventory control for non-instantaneous deteriorating items is developed. We adopt a price and time dependent demand function. Shortages is allowed and partially backlogged. The major objective is to determine the optimal selling price, the optimal replenishment schedule and the optimal order quantity simultaneously such that, the total profit is maximized. We first show that for any given selling price, optimal replenishment schedule exists and unique. Then, we show that the total profit is a concave function of price. Next, we present a simple algorithm to find the optimal solution. Finally, we solve a numerical example to illustrate the solution procedure and the algorithm.     

A new look at residential electricity demand using household expenditure data

Many electricity demand estimates have been obtained based on the assumption that consumers optimize with respect to known marginal prices, but increasing empirical evidence suggests that consumers are more likely to respond to average prices. Under this assumption, this paper develops a new strategy based on Generalized Method of Moments to estimate household electricity demand. Our demand estimation approach uses publicly available expenditure data and utility-level consumption data from several major U.S. cities, complementing studies that use individual billing data which are richer yet often proprietary. We estimate the price elasticity near − 0.50, which is at the upper end (in magnitude) among the estimates from previous studies. This could have important implications for policy analysis such as those on climate policies that may affect electricity prices.     

Estimating broadband diffusion in the EU using NUTS 1 regional data

In this paper we use panel data on NUTS 1 regional data for 27 EU countries in the years 2006–2010 to analyze determinants of broadband diffusion. We estimate both linear demand specification and the logistic diffusion function. We find that, after controlling for regional differences due to socioeconomic factors, inter-platform competition approximated by an inter-platform Herfindahl index has a significant positive impact on broadband diffusion. Broadband deployment is lower in countries in which DSL has a greater share in Internet access and it is higher in countries in which cable modem has a greater share in Internet access. Moreover, we find that competition between DSL providers has a significant and positive impact on broadband penetration. First, higher prices for a fully unbundled local loop connection, which represent the cost of providing copper-based Internet services, have a significant and negative impact on broadband penetration. Second, a greater incumbent share in DSL connections has a significant and negative impact on broadband penetration.     

Estimating scale economies of the wireless telecommunications industry using EVA data

This paper proposes a new estimation method of total cost and average cost curves and applies it to the telecommunications industry. The method is more flexible and entails less hassle for data collection than traditional methods. The results show that the long-run average cost (LRAC) curve is downward sloping, revealing the presence of economies of scale in production. The two largest Korean mobile network operators are realizing full economies of scale, while the smallest operator is not. Finally, the paper recommends three policy alternatives that the Ministry of Information and Communication of Korea can draw on to increase efficiency in the Korean mobile telecommunications market.     

Estimating the effects of agri-environmental measures using difference-in-difference coarsened exact matching

This paper studies the effect of agri-environmental measures (AEMs) in improving greener farming practices. We focus on the quantification of the effectiveness of AEMs implemented in the Rural Development Programme of the Lombardy Region, during the 2007–2013 programming period. Our work attempts to address the well-known potential failures of these kinds of policy instruments – such as adverse selection effects – by relying on an innovative matching procedure, the coarsened exact matching (CEM). This methodology presents a number of interesting properties that are worth considering in policy-evaluation analyses. Our empirical analysis focuses on three AEM schemes protecting and enhancing the environment, Crops diversification, Grassland maintenance and Organic farming. Overall, our results suggest that AEMs were apparently effective in improving the farms’ environmental performances. However, our preliminary cost-benefit analysis highlights that the costs of implementing this policy, when compared to the additional results obtained, tend to be quite large.     

Input demands and elasticities in U.K. defence industries

It is often claimed that U.K. arms industries are inefficient. This paper considers the input demand behaviour of defence industries. Two hypotheses are formulated relating to input inelasticity and the resource effects of cuts in military spending. First, it is predicted that the demand elasticities of inputs in defence industries will be lower than those in similar civilian sectors. Second, defence reviews are expected to have a ‘shock effect’ resulting in a ‘shake-out’ of resources from weapons producers. The evidence suggests that the U.K.'s defence industries do not respond to price changes nor to defence reviews.     

A strategic approach to industrial product pricing: The pricing plan

Price planning is one of the most overlooked areas in industrial marketing. Traditionally, emphasis is placed on product development, advertising strategy, and distribution channel formation before any consideration is given to pricing. The result is that industrial pricing decisions are made quickly without the necessary market and cost factors included in the final decision. The pricing decision is at the core of every business plan and impacts directly on the critical components of a company's marketing strategy. In this article, the importance of price planning in industrial marketing is discussed including the major components needed to make an industrial pricing strategy successful.     

Estimating the tradeoff between risk protection and moral hazard with a nonlinear budget set model of health insurance

Insurance induces a tradeoff between the welfare gains from risk protection and the welfare losses from moral hazard. Empirical work traditionally estimates each side of the tradeoff separately, potentially yielding mutually inconsistent results. I develop a nonlinear budget set model of health insurance that allows for both simultaneously. Nonlinearities in the budget set arise from deductibles, coinsurance rates, and stoplosses that alter moral hazard as well as risk protection. I illustrate the properties of my model by estimating it using data on employer sponsored health insurance from a large firm.     

Contestability and two-part pricing

This paper contributes to the debate over the relevance of contestability by demonstrating that the welfare properties claimed by proponents depend on the inability of incumbent firms to divide the market. Given the ability to divide the market using two-part prices, the incumbent can protect profitability. This possibility further illustrates the extremity of the assumptions upon which contestability rests as two-part pricing is commonly observed in some of the very markets that might be suggested to be more nearly contestable.The authors thank Barnali Gupta, William G. Shepherd and two reviewers for suggestions on earlier drafts.