To Whom,When, and How Much to Discount? A Constrained Optimization of Customized Temporal Discounts

Customized temporal discounts are price cuts or coupons that are tailored by size, timing, and household to maximize profits to a retailer or manufacturer. The authors show how such discounts allow companies to optimize to whom, when, and how much to discount. Such a scheme allows firms to send just enough discounts just prior to the individual's purchase of a rival brand. To do so, the authors model household purchase timing and brand choice in response to discounts and use Bayesian estimation to obtain individual household parameters. They illustrate the model on a Japanese data set having price cuts, a US data set having coupons, and another US data set having discounts. They formulate the optimization task of customized temporal coupons as a constrained multiple-knapsack problem under a given budget. They use simulations of the empirical contexts to obtain optimal solutions and to assess improvement in profits relative to existing practice and alternate models in the literature. The proposed model yields increase in profits of 18–40 percent relative to a standard model that optimizes the value but not timing of discounts.     

Making ads less complex,yet more creative and persuasive: the effects of conventional metaphors and irony in print advertising

Rhetorical tropes like metaphors and irony are widely used in print advertising. Current advertising literature assumes that these different tropes (metaphor, irony) are persuasive when they are sufficiently novel and complex to increase advertising elaboration. However, we propose that, in some cases, tropes can also be persuasive when they present conventional and concrete images of abstract product qualities. To test if conventionality can explain the persuasiveness of various tropes (metaphor, irony), we conducted a 2 (conventional metaphor vs. no metaphor) × 2 (conventional irony vs. no irony) multiple-message experiment. Results demonstrate that conventional metaphors are persuasive by reducing complexity and increasing creativity and ad appreciation. Conventional irony, in contrast, has little effect on persuasiveness. Thus, differentiating between various tropes (metaphor, irony) is important in predicting persuasion effects: advertisers should refrain from using conventional irony, but including conventional metaphors about abstract product qualities in print advertising is advisable.     

Does Agricultural Productivity Actually Matter for Food Security in a Landlocked Sub‐Saharan African Country? The Case of Burkina Faso

This paper makes use of a Computable General Equilibrium model to analyze the impact of two agricultural productivity trends on poor households’ food security in Burkina Faso: a negative trend that could arise from many different factors, including land degradation, climate change, and harmful agricultural practices; and a positive trend which may result from enhanced public investment in agriculture, notably in research and development, extension, irrigation, rural roads, rural electrification, and rural education. The results point to a high sensitivity of the poor's consumption to agricultural productivity as well as to stronger impacts on the urban poor than on the rural poor. The current situation is already characterized by severe food insecurity, such that a decline in agricultural productivity is likely to further plunge the urban poor into a deep food crisis. By contrast, positive agricultural productivity trends may help alleviate poverty and food insecurity. Agricultural productivity may indeed affect the poor's food consumption mainly through large changes in agricultural prices and real incomes. Cet article utilise un modèle d’Équilibre Général Calculable pour analyser l'impact des différentes tendances de la productivité agricole sur la sécurité alimentaire des ménages pauvres au Burkina Faso. D'une part, les tendances négatives peuvent résulter de plusieurs facteurs, y compris la dégradation des terres, le changement climatique, et les pratiques agricoles nuisibles. D'autre part, la tendance positive peut résulter de l'investissement public accru dans l'agriculture, notamment dans la recherche et développement, la vulgarisation, l'irrigation, les routes rurales, l′électrification rurale et l′éducation rurale. Les résultats montrent une sensibilité élevée de la consommation des pauvres à la productivité agricole, ainsi que des impacts plus forts sur les populations urbaines pauvres. La situation actuelle est déjà caractérisée par une insécurité alimentaire grave de sorte qu'une baisse de la productivité agricole est susceptible de plonger davantage les pauvres en milieu urbain dans une crise alimentaire profonde. En revanche, la tendance positive sur la productivité agricole peut contribuer à atténuer la pauvreté et l'insécurité alimentaire. La productivité agricole peut en effet affecter la consommation alimentaire des pauvres principalement par le biais de grandes variations des prix agricoles et des revenus réels.     

Factors influencing United States comparative advantage

One of the more famous results in international trade is Leontief's demonstration that the conventional wisdom of trade theory—the two-factor Heckscher-Ohlin model, coupled with the empirical judgement that the U.S. is capital-rich—does not appear to provide an explanation of the composition of U.S. trade. A major conclusion of many recent studies is that an adequate model of comparative advantage will be, of necessity, a multi-factor one. This paper examines the implications of a modified multi-factor-proportions model by measuring the simultaneous impact of a variety of factor intensities on the comparative advantage of all U.S. (trading) industries, classified and disaggregated by the 1958 input-output table. The novelty of the study lies in using a binary measure of comparative advantage. In order to by-pass several econometric difficulties, logit analysis is used to estimate the model. The principal conclusion of the paper is that capital-intensity has a significantly positive impact on the comparative advantage of U.S. manufacturing industries and, therefore, that the U.S. is, in fact, relatively capital-rich.     

The Dive and Disruption of Successful Current Products: Measures,Global Patterns,and Predictive Model

This study examines the diffusion of pairs of substitute products (current versus new) in five categories across 86 countries between 1977 and 2011. The study finds that current products reach a peak at about 56% of market penetration. Subsequently, they suffer a dramatic decrease in penetration of 286%, which we call the dive. A dive occurs in 96% of current products in five categories across 86 countries between 1977 and 2011. On average, the time from takeoff of new product to a peak in penetration of the current product is 6.6 years and to the dive of the current product is 8.4 years. The total time‐to‐dive includes a hidden discontinuance period (10.4 years), from the introduction of the new product to the peak of the current product, plus an overt time‐to‐dive (1.8 years), from the peak to the dive of the current product. The hidden discontinuance period and the overt time‐to‐dive are shorter, and the dive is steeper in emerging markets than in developed ones. A discrete‐time hazard model shows that the introduction of the new product, prior penetration of the current product, the population density of the country, and prior dives in other countries predict intercountry the hazard of a peak. Subsequently, takeoff of the new product, relative percentage growth in penetration of the current product prior to a peak, the length of the hidden discontinuance period, and prior dives in other countries predict the hazard of a dive. The models can predict the occurrence of a peak with true positive rate of 62% and a true negative rate of 87%, and a dive with a true positive rate of 82% and a true negative rate of 61%.     

Strategic export subsidies and reciprocal trade agreements: The natural monopoly case

Why do governments seek restrictions on the use of export subsidies through reciprocal trade agreements such as GATT? In this paper, we emphasize that subsidy competition between governments can serve to coordinate the entry decisions of firms, finding that consumers in the importing countries may suffer if the coordination afforded exporters by government subsidy programs does more to prevent entry than to promote it. In such circumstances, we show that the existence of export subsidy programs can lead to inefficiencies, and importing countries and the world as a whole can be better off when such programs are banned.