New entrants in a mature market: An empirical study of the detergent market

An analysis of the UK and German detergent markets provides useful evidence for the development of a model to predict the share changes that occur when a new product enters the market. A simple share order effect (SOE) model based on Luce's Axiom of the Independence of Irrelevant Alternatives (IIA) is tested on four different new product launches. Of these, only the product with both a new brand name and a new product format is consistent with the model. In the remaining three cases, all line extensions, the empirical data deviate from the model's predictions. The two UK line extensions appear to be affected by product format; the German line extension cannibalizes the parent. From these studies, it is suggested that radical line extensions do not cannibalize whereas line extensions that have a close fit with the parent are more likely to take sales from the core brand.     

Efficiency with Non-Convexities: Extending the “Scandinavian Consensus” Approaches

There are two distinct “Scandinavian consensus” approaches to public good supply, both based on agents' willingness to pay. A Wicksell–Foley public competitive equilibrium arises from a negative consensus in which no change of public environment, together with associated taxes and subsidies which finance it, will be unanimously approved. Alternatively, in a Lindahl or valuation equilibrium, charges for the public environment induce a positive consensus. To allow general non-convexities to be regarded as aspects of the public environment, we extend recent generalizations of these equilibrium notions and prove counterparts to both the usual fundamental efficiency theorems of welfare economics.     

Determinants of Income Growth in Metropolitan and Nonmetropolitan Labor Markets

This article analyzes determinants of growth across labor markets in the United States, using a production function approach based on four inputs: labor, manufacturing investment, human capital investment, and public capital investment. We find little role for public capital investment in growth, but that manufacturing investment spurred growth in nonmetropolitan areas, in contrast to metropolitan areas. We also find that human capital investment mattered more for metropolitan areas than for nonmetropolitan areas. Further, the presence of more colleges and universities, more household amenities, and lower tax rates are all found to have encouraged human capital accumulation in U.S. labor markets.     

Endogenous tastes and stable long-run choice

Suppose that short-run preferences depend upon consumption one period earlier. Then there is an acyclic long-run strict preference relation iff, for every finite set, every conservative choice sequence converges. If long-run preferences are acyclic, then a unique long-run choice from a compact set is globally stable. If the long-run choice set includes multiple choices, there is a weaker stability property. Under special assumptions these results are extended to cases when the short-run consumption set is endogenous, and when more previous periods affect the present.     

Serving the world's poor,profitably

By stimulating commerce and development at the bottom of the economic pyramid, multi-nationals could radically improve the lives of billions of people and help create a more stable, less dangerous world. Achieving this goal does not require MNCs to spearhead global social-development initiatives for charitable purposes. They need only act in their own self-interest. How? The authors lay out the business case for entering the world's poorest markets. Fully 65% of the world's population earns less than $2,000 per year--that's 4 billion people. But despite the vastness of this market, it remains largely untapped. The reluctance to invest is easy to understand, but it is, by and large, based on outdated assumptions of the developing world. While individual incomes may be low, the aggregate buying power of poor communities is actually quite large, representing a substantial market in many countries for what some might consider luxury goods like satellite television and phone services. Prices, and margins, are often much higher in poor neighborhoods than in their middle-class counterparts. And new technologies are already steadily reducing the effects of corruption, illiteracy, inadequate infrastructure, and other such barriers. Because these markets are in the earliest stages of economic development, revenue growth for multi-nationals entering them can be extremely rapid. MNCs can also lower costs, not only through low-cost labor but by transferring operating efficiencies and innovations developed to serve their existing operations. Certainly, succeeding in such markets requires MNCs to think creatively. The biggest change, though, has to come from executives: Unless business leaders confront their own preconceptions--particularly about the value of high-volume, low-margin businesses--companies are unlikely to master the challenges or reap the rewards of these developing markets.