Consumer responses to offline and online low price signals: The role of cognitive elaboration

Low price signals (LPS), pricing tools where retailers promise to match or beat competitors' prices, have been increasingly popular in offline and online markets. We compare consumer evaluation of offline and online LPS as a function of how deeply they process the signals. Results of an experiment indicate that regardless of retail media consumers accept an LPS as an indicator of low price when they do not elaborate sufficiently on the signal. However, at high levels of elaboration, consumers challenge the assumptions underlying their acceptance of the signal at lower levels of elaboration whereby they become more skeptical of an online signal than an offline signal resulting in lower efficacy of the former. Implications of these findings for consumer vulnerability to false low price signaling are discussed along with other theoretical and managerial implications. Additionally, directions for future research are provided.     

Discussion of “Dynamic performance measurement with intangible assets”

Carona (2008) investigates the roles of nonfinancial performance indicators and long-term commitments in an incentive contracting setting. The paper develops a multiperiod agency model in which nonfinancial performance indicators are shown to be valuable in providing the agent with desirable incentives. The relative importance of nonfinancial measures depends on the level of commitment that the principal and the agent can sustain. While long-term contracts are more efficient than short-term contracts, the analysis shows that a sequence of overlapping medium-term contracts can be as efficient as long-term contracts. In this discussion, I provide a brief review of the related streams of literature and discuss the paper’s contributions to them. The discussion also illustrates the intuition behind the paper’s main findings through a simple example and raises questions for future research.     

Better Late than Early: Vertical Differentiation in the Adoption of a New Technology

After the initial breakthrough in the research phase of R&D, a new product undergoes a process of change, improvement, and adaptation to market conditions. We model the strategic behavior of firms in this development phase. We emphasize that a key dimension to this competition is the innovation that leads to product differentiation and quality improvement. In a duopoly model with a single adoption choice, we derive endogenously the level and diversity of product innovations. We demonstrate the existence of equilibria in which one firm enters early with a low-quality product while the other continues to develop the technology and eventually markets a high-quality good. In such an equilibrium, no monopoly rent is dissipated and the later innovator makes more profits. Incumbent firms may well be the early innovators, contrary to the predictions of the "incumbency inertia" hypothesis.     

Are Good Performers Bad Acquirers?

We examine how the market reacts to announcements of mergers and acquisitions (M&As) by well‐performing acquirers and evaluate the results in light of three hypotheses: 1) managerial ability, 2) empire building, and 3) chief executive officer (CEO) overconfidence. Our results indicate that an empire‐building motive drives the relationship between past superior operating performance and M&A announcements. Long‐term operating performance drops significantly for acquiring firms with past superior operating performance. Our evidence also indicates that the presence of insider directors helps to alleviate the negative perception of acquisitions made by firms with better operating performance or empire‐building CEOs.     

Education and Public Policy

This article surveys the literature on education as a matter of public policy. We present international comparisons of expenditure on education and then discuss the contribution of education to economic growth, distinguishing between growth accounting and regression approaches, but concluding that the picture is still confused. We assess the risky nature of investment in higher education and also discuss the link between educational experience and social class. We show that this, when studied in aggregate, accounts for less than half of the persistence of earnings between fathers and sons but it nevertheless does a good job of relating fathers’ and sons’ occupations. Finally, we look at the link between education and earnings in the UK. For most subjects, the private return to university education has held at over 15 per cent p.a. despite the introduction of fees. However, some subjects offer a negative return.     

Survival and the art of profit maximization

We study the relationship between rationality and economic survival in a simple dynamic model, where agents from different populations interact repeatedly through random matching. An explicit criterion (“bankruptcy”) determines whether agents survive each interaction; all agents are presumed to be aware of this criterion. Survival in each interaction depends on two factors: the strategies agents adopt when they interact, and the wealth levels they bring to the game. The model is completely symmetric with the only difference between the agents of different populations being their objectives. We consider the case where there are two populations of agents in which all agents from one group have as their objective, maximizing the expected profits from each interaction, while all agents from the other attempt simply to maximize the probability of surviving (i.e., not going bankrupt in) the interaction. We show that under the equilibrium dynamics, the proportions of each group in the total population must be bounded away from zero, but the balance is in favor of the survival-probability maximizers in that their numbers as a fraction of total population must always exceed 1/2, and can be arbitrarily close to unity. On the other hand, the fraction of total wealth controlled by the expected profit maximizers must also be at least 1/2, and can asymptotically tend to unity.