External spillovers, internal spillovers and the geography of production and innovation

We consider a three-location duopoly model such that (i) firms choose production and innovation locations before (Bertrand) competition takes place and (ii) there are internal and external knowledge spillovers. We show: (1) agglomerations where firms earn negative profits may exist when there are both external and internal knowledge spillovers; (2) greater external spillovers do not necessarily favor agglomeration; (3) decreasing communication costs tend to favor agglomeration; (4) there are exactly two types of agglomeration equilibria: either both firms innovate in the agglomeration, or there is an innovator and an imitator; and (5) if there is a location where both firms produce, then innovation must take place in this location.     

The relevance of irrelevance in brand communication

Brand managers strive to achieve an outstanding position in the psyche of the user by differentiating the product and service. In order to do so, brands are now often promoted by communications that focus on a trivial attribute difference. The current study tests both how the use of such an irrelevant attribute affects the perceptions of the consumer and how they rate the brand when the irrelevance of the attribute is previously revealed. The results of a controlled experiment (n = 894) show that the use of irrelevant attributes generally has a positive effect on buying behavior and that this effect is obtained even when the actual irrelevance is previously proven to the consumer. Further, the results are consistent across a variety of outcome variables, including attention, perceived uniqueness, price fairness, attitude toward the brand, and intention to buy the brand. © 2010 Wiley Periodicals, Inc.     

A preference foundation for constant loss aversion

Following prospect theory and in particular the concept of loss aversion, introduced by Kahneman and Tversky (1979), we consider decision making under risk in which the decision maker’s preferences depend on a reference outcome. An outcome below this reference outcome is regarded as resulting from a loss: a loss decreases the decision maker’s basic utility more than a comparable gain increases this utility. An elegant and simple way to model this phenomenon was proposed by Shalev (2002): the utility of an outcome below the reference outcome is obtained from the basic utility by subtracting a multiple of the loss in basic utility: this multiple, the loss aversion coefficient, is constant across different reference outcomes. We provide a preference foundation for this loss aversion model.     

Club theory and household formation

The relationship between our general equilibrium model with multi-member households and club models with multiple private goods is investigated. The main distinction in the definitions consists in the equilibrium concepts. As a rule, competitive equilibria among households where no group of consumers can benefit from forming a new household and valuation equilibria prove equivalent in the absence of consumption externalities, but not in their presence.     

Review Essay

Sen's capability approach has a culturally specific side, with capabilities influenced by social structures and institutions. Although Sen acknowledges this, he expresses his theory in individualistic terms and makes little allowance for culture or social structure. The present paper draws from recent social theory to discuss how the capability approach could be developed to give an explicit treatment of cultural and structural matters. Capabilities depend not only on entitlements but on institutional roles and personal relations: these can be represented openly if capabilities are disaggregated into individual, social and structural capacities. The three layers interact, and a full analysis of capabilities should consider them all. A stratified method implies that raising entitlements will not on its own be enough to enhance capabilities and that cultural and structural changes will be needed.