A theory of self-fulfilling political expectations

In their pursuit of being re-elected, politicians might not choose high-quality policies but just conform to popular wisdom. The larger are the office spoils, and the more precise is an incumbent's knowledge of voter opinion, the more likely that she will resort to such populism. My main result is that the public's trust or distrust in politicians' behavior may be self-fulfilling. When voters assess the quality of an incumbent politician, they will compare her policy choices with their own prior opinion. If voters think that the incumbent was just trying to conform, a failure to do so will be even more damaging for the incumbent's election chances. However, this only increases the incumbent's incentives to conform, which indeed confirm voters' skepticism. Loosely put, a skeptic voter attitude tends to generate conformist politicians, while a trusting attitude tends to generate confident ones.     

Grocery retail loyalty program effects: self-selection or purchase behavior change?

In the retail sector, consumers typically patronize multiple outlets for a variety of products, which raises the important issue of how outlets can gain a greater share of consumer expenditures. One such way is to increase repeat purchases through loyalty programs. This article examines the impact of loyalty programs, which target existing customers, on repurchase behavior in grocery stores. It finds that heavier, more frequent customers of a store enroll in the loyalty program earlier; that buying behavior changes only slightly after buyers join the program; and that small changes in loyalty appear to erode 6–9 months after buyers join.     

Dividends in the theory of derivative securities pricing

This paper develops the fundamental aspects of the theory of martingale pricing of derivative securites in a setting where the cumulative gains processes are Itô processes while the cumulative dividend processes of both the underliers and the derivative securities are general enough to cover all cases encountered in practical applications. A key ingredient is a general formula for how to change the unit of account of a cumulative dividend process. The formula is inconsistent with parts of the earlier literature. It obeys a unit-invariance rule for trading strategies, satisfies a consistency property when the unit is changed twice in a row, gives the correct results in well-known and uncontroversial special cases, and fits perfectly into a generalization of the martingale valuation theory. Using that generalized theory, we show that the value of a dividend process equals the value of a claim to the nominal amount of dividends yet to be accumulated plus the value of a flow of interest on the cumulative dividends at each point in time.     

Market participation in delegated and intrinsic common‐agency games

We study how competition in nonlinear pricing between two principals (sellers) affects market participation by a privately informed agent (consumer). When participation is restricted to all or nothing (“intrinsic” agency), the agent must choose between both principals' contracts and selecting her outside option. When the agent is afforded the additional possibilities of choosing only one contract (“delegated” agency), competition is more intense. The two games have distinct predictions for participation. Intrinsic agency always induces more distortion in participation relative to the monopoly outcome, and equilibrium allocations are discontinuous for the marginal consumer. Under delegated agency, relative to monopoly, market participation increases (respectively, decreases) when contracting variables are substitutes (respectively, complements) on the intensive margin. Equilibrium allocations are continuous for the marginal consumer and the range of product offerings is identical to both the first‐best and the monopoly outcome.     

Exclusive versus Common Dealership

In a setting with two differentiated producers and identical retailers, we analyzed whether the producers will have a distribution system with one or several retailers. In contrast to the existing literature, we allow for full foreclosure under both types of distribution systems. We find, in contrast to what has been shown in the received literature, that the producers will prefer a distribution system with a single common retailer to a system with separate exclusive dealers.     

Financial constraints of private firms and bank lending behavior

We investigate whether and how financial constraints of private firms depend on bank lending behavior. Bank lending behavior, especially its scale, scope and timing, is largely driven by bank business models which differ between privately owned and state-owned banks. Using a unique dataset on private small and medium-sized enterprises (SMEs) we find that an increase in relative borrowings from local state-owned banks significantly reduces firms’ financial constraints, while there is no such effect for privately owned banks. Improved credit availability and private information production are the main channels that explain our result. We also show that the lending behavior of local state-owned banks can be sustainable because it is less cyclical and neither leads to more risk taking nor underperformance.     

Flow and consumers in e-based self-services: New provider–consumer relations

This paper examines how consumers' attention can be captured and maintained in an e-based self-service relationship. We investigate how a consumption environment can be constructed that uses ‘flow’ to capture the attention of the consumer. By means of two case studies, the article explores how knowledge services can be appropriated along these lines given that the service is delivered in the form of a self-service. We argue that the service must remain in ‘flow’ at various points of consumption, which are critical; this is in order to produce the positive reactions of ‘improvement’ and ‘voice’. Whether this happens depends on the ‘flow competencies’ of the consumer.     

Same Service,Different Ad Claims: The Moderating Role of Need for Cognition

Advertisers can choose among different ad claims when framing commercial messages about a new service offer. Two alternative ad claims are functional ad claims, focusing on product or service attributes and benefits, and experiential ad claims, focusing on future experiences with the product or service. This article proposes that different ad claims evoke different memory structures (semantic vs. episodic), and that different memory structures require different types of cognitive processing (system 1 vs. system 2). In two experiments using need for cognition as a dispositional trait of level of cognitive processing, this article shows that a new service entrant with experiential ad claims will be less favorably evaluated when consumers engage in more effortful, or system 2, processing, than when consumers engage in less effortful processing (system 1). For functional claims, however, the evaluation of the new service does not differ between the two types of cognitive processing (system 1 vs. system 2).