An analysis of asymmetric demand response to price changes: The case of local telephone calls

Asymmetric demand responses to price changes are not an observable implication of classical demand theory, which predicts that consumers will react to a small price increase in much the same way as they do to a small price decrease. Yet applied researchers have long speculated that consumers are more sensitive to price increases than they are to price decreases. In addition, recent empirical studies generally support the theory of asymmetric demand responses. We construct a dynamic model based on data gathered from monthly telephone bills for 128 New York Telephone customers over a five-year period. Our results support the conclusion that customers react more quickly and strongly when prices go up than they do when prices go down.We would like to thank Manny Haas and Bernie Reddy for their comments and suggestions.     

Corruption: Where to Draw the Line?

Just what is corruption, and what should, or can, be done about it? The author is Head of the Management Centre at South Bank University, London.     

State promotion of high-definition television

Governments have used a number of mechanisms to support research and production in domestic industries that are considered strategic. In recent years the Japanese system of administrative guidance and support for pre-competitive research joint ventures has arguabh proved the most successul High-dgfnition teleuislon ( H D V provides an interesting new case study in government support for high-tech industries. Wzile the failure of the EC's venture in this jeld is perhaps unsurprising, the MUSE pryect in Japan has suffered a similar fate. Success in HDTV har been achieved by the US government's novel use ofpre-competitive contests in which domestic and overseas companies are free to form consortia and to arrange side-payments which share out the winning 'prize'. This innovation in the state's promotion of innovation may haue wider applications, though its repeated use could inhibit research by individual companies able tojee-ride on the contest winners.     

Humor and cognitive responses to advertising stimuli: A trace consolidation approach

Despite the predictions of several attitude change theories, most empirical research suggests that humorous communications are no more persuasive than their serious counterparts. The present study adopted a trace consolidation theory approach and tested the hypothesis that humorous appeals are more persuasive than serious appeals when time for trace consolidation is allowed. The trace consolidation theory hypothesis was supported most directly by shifts in cognitive responses. On some measures, sex differences were also observed. Specifically, males were found to be more susceptible than females to the humorous persuasive appeal.     

A stochastic control approach to buffer stock management in the Taiwan rice market

Buffer stock management of agricultural commodities is an intertemporal optimization problem under uncertainty. Stochastic optimal control techniques are presented as a means of solving this problem and then applied to the problem of farmer income support and price stabilization of the rice market in Taiwan. Deterministic results show that the price variation of a free market solution can be substantially reduced with little favoring of one group over another. Operation of a buffer stock under supply uncertainty is shown to generate greater variability in consumer expenditures and producer income than a free market solution.     

ON THE CORRESPONDENCE BETWEEN THE BAUMOL-TOBIN AND MILLER-ORR OPTIMAL CASH BALANCE MODELS

In this note, the author identifies a correspondence relationship between the Baumol-Tobin (BT) and Miller-Orr (MO) optimal cash balance frameworks and specifies the conditions under which both models imply the same level of optimal cash balances. Realistic applications of these models will concern net cash flows that exhibit behavior somewhere between the two extremes of BT entirely deterministic and MO completely random. The author demonstrates that if the correspondence relationship is satisfied, either the BT or the MO cash balance model can be employed since both models imply the same result. One conjecture open for empirical verification is that cash balance models perform more (less) adequately for groups of firms that satisfy (violate) the correspondence relationship.