Selling to the moneyed masses

Over the past decade, the distribution of household incomes has shifted so much that a much larger proportion of consumers now earn significantly higher-than-average incomes--while still falling short of being truly rich. As a result, what used to be a no-man's-land for new product introductions has in many categories become an extremely profitable "new middle ground." How can marketers capitalize on this new territory? The key, say the authors, is to rethink the positioning and design of offerings and the ways they can be brought to market. Take, for instance, how Procter & Gamble redefined the positioning map for tooth-whitening solutions. A decade ago, dental centers were popularizing expensive bleaching techniques that put the price of a professionally brightened smile in the 400 dollars range. At the low end, consumers also had the choice of whitening toothpastes that cost anywhere from 2 dollars to 8 dollars. P&G wisely positioned itself between the two ends, successfully targeting the new mass market with its 35 dollars Whitestrips. In product categories where it's clear the middle ground has already been populated, it's important for companies to design or redesign offerings to compete. An example is the Polo shirt. How do you sell a man yet another one after he's bought every color he wants? Add some features, and call it a golf shirt. Here, marketers have introduced designs based on the concept of "occasional use" in order to stand out. Finally, companies wishing to reach the "almost rich" can change how they go to market. Perhaps no mass retailer has made a stronger bid for the mass affluent than Target Stores, which has pioneered a focus the company itself characterizes as upscale discount. The strategy has made Target an everyday shopping phenomenon among well-heeled urbanites and prosperous professionals.     

Consumption loans under uncertainty

A stationary equilibrium for a sequence of markets under uncertainty is defined as a stationary stochastic process of temporary market equilibria. The purpose of this paper is to apply this equilibrium concept to a consumption-loans model with stochastic resources. Given that agents live for only two periods, that resources are allocated independently and identically, and that traders make “admissible” consumption decisions, it is shown that the sequence of equilibrium trades on forward markets is a Markov chain. When this chain is strictly stationary with a unique invariant distribution, the sequence of markets is in stationary equilibrium. Using Gale's classification scheme, a strictly stationary chain exists for each type of economy (classical, Samuelson, mixed). Questions concerning convergence to the invariant distribution for each type of economy are addressed by determining when the chain satisfies various recurrence conditions.     

Evidence of Stock Returns and Abnormal Trading Volume: A Threshold Quantile Regression Approach

This paper presents a capital asset pricing model‐based threshold quantile regression model with a generalized autoregressive conditional heteroscedastic specification to examine relations between excess stock returns and “abnormal trading volume”. We employ an adaptive Bayesian Markov chain Monte Carlo method with asymmetric Laplace distribution to study six daily Dow Jones Industrial stocks. The proposed model captures asymmetric risk through market beta and volume coefficients, which change discretely between regimes. Moreover, they are driven by market information and various quantile levels. This study finds that abnormal volume has significantly negative effects on excess stock returns under low quantile levels; however, there are significantly positive effects under high quantile levels. The evidence indicates that each market beta varies with different quantile levels, capturing different states of market conditions.     

Explaining asset pricing puzzles associated with the 1987 market crash

The 1987 market crash was associated with a dramatic and permanent steepening of the implied volatility curve for equity index options, despite minimal changes in aggregate consumption. We explain these events within a general equilibrium framework in which expected endowment growth and economic uncertainty are subject to rare jumps. The arrival of a jump triggers the updating of agents' beliefs about the likelihood of future jumps, which produces a market crash and a permanent shift in option prices. Consumption and dividends remain smooth, and the model is consistent with salient features of individual stock options, equity returns, and interest rates.     

Environmental taxes in a differentiated mixed duopoly

Beladi and Chao (2006) and Bárcena-Ruiz and Garzón (2006) considered the role of environmental policy on the decision whether to privatize a public firm in different market structures. This paper re-examines whether privatization improves (or deteriorates) the environment in a mixed duopolistic framework with differentiated product and pollution abatement. It is shown that, due to privatization, less attention is paid to pollution abatement by all the firms coupled with less environment taxes levied by the government in a differentiated duopoly, and the environment is more (less) damaged when the product is less (more) substitutable. When the product is highly substitutable, industry profits increase because this softens the intensity of the product market, but social welfare deteriorates accompanied with the path of privatization because the loss of consumer surplus and tax revenue exceeds the increases in profits, even if the environment is less damaged.     

The effect of general counsel prominence on the pricing of audit services

We investigate the effect of corporate general counsel (GC) ascension to the senior management team on the pricing of audit services. Prior research suggests that the GC position may have a significant influence in setting the tone at the top by promoting corporate integrity, ethics, and serving as a governance and monitoring mechanism, but also recognizes that prominent GCs may face ethical dilemmas, causing them to disregard professional responsibilities to curry the favor of the CEO and other executives. Using audit fees to proxy for audit engagement risk, we find a negative association between GC ascension to top management and audit fees. We investigate the mechanisms behind this relation and find GC ascension is associated with a reduction in both default risk and financial misstatement risk, which supports auditors’ perceived reduction in client business risk and audit risk, respectively.     

THE CASE AGAINST MELIORISM: VEILED TRAGEDIES, OR WHEN COST–BENEFIT ANALYSIS IS IN PRINCIPLE IMPOSSIBLE

The philosophy of meliorism seeks to spread the cost of the tragedies of the few over the many, thus easing the suffering of the few, while hardly burdening the many. The problem with this is that such cost-spreading itself causes tragedies, except that the tragedies are veiled – they are not only unknown; they cannot, in principle, be known. Thus meliorism distributes not from the tragic few to the ordinary many, but from the visibly tragic few to another group of tragic few, the latter group unseen and unknown, hence unable to complain about this state of affairs.     

Tests of functional form in dynamic econometric models: Some empirical experience

Econometric theory has provided several rival tests of functional form specifications in economic relations, but there is little empirical experience in using many of them. This note reports some practical applications, and compares the performance of various tests, in specifying dynamic econometric models.