Distribution of tastes and skills and the provision of local public goods

This paper introduces into the Tiebout model individuals with different skills. It is shown that the production techniques, the distribution of tastes and skills and intercommunity trade will affect the pattern of communities. In the suggested model competition with local public goods is Pareto optimal: communities will not be composed of identical people. The optimal solution requires that every community will tax everybody according to his marginal social cost. A Pareto efficient redistribution policy can be carried out only by a central government using lump-sum taxes. A federal income tax will affect community patterns and therefore is inefficient.     

When does the majority become a majority? Empirical analysis of the time at which main market adopters purchase the bulk of our sales

The idea of a dual-market structure in the early stages of a product's life cycle has become one of the most widely accepted ideas among new product marketing practitioners in the past decade. Concepts such as “Early Market/Main Market” and “Visionaries/Pragmatists” have entered the lexicon of high-tech executives to express the notion that the market for new products is composed of early and main markets with a discontinuity in the diffusion process in between them. Moreover, these concepts have been at least partially tested and verified in the marketing academic literature in the past few years.We extend this branch of research by investigating the timing issues in dual-market cases. We define Change-of-Dominance Time (CD-Time) as the number of years it takes main market adopters to outnumber early market adopters. We empirically investigate this timing issue on a comprehensive data set of new product sales in the consumer electronics industry. We find that regarding explanatory determinants of CD-Time, external influence, such as advertising, to the early market is the most important explanatory variable.We examine the relationship between CD-Time and other early product life cycle phenomena: Takeoff, Saddle, and Rogers' size of adopter categories. We found relatively high correlations between these phenomena and CD-Time.The answer to the question “When does the majority become a majority?” is indeed “at 16%”! In a dual-market setting, the average time at which the main market outnumbers the early market is when 16% of the market has already adopted the product. In terms of time, in 75% of the cases the majority becomes a majority in 5 to 10 years.     

Demarketing as a differentiation strategy

Demarketing discourages consumers from buying. This paper shows that demarketing can be a profitable alternative when differentiation through product improvements is not cost effective. The impact of differentiating demarketing on profit, market share, consumers, and total welfare is investigated.This research began while Hess was visiting MIT's Sloan School of Management and was finished while visiting University of Haifa; he thanks both for their support.     

Quantities,qualities and multiple public services in the Tiebout model

This paper introduces a new, more realistic characterization of local public services. This characterization fits education, parks, and streets, none of which are a pure Samuelsonian good. It is shown that Tiebout's hypothesis holds for this new type of services, provided correct user charges are adopted. Introducing several local services considerably affects the results. The paper emphasizes the difference in tastes with regard to quality as opposed to quantity. Earlier literature is shown to apply to the role of quality and ignores the role of quantity. The effect of the latter makes mixed communities more efficient than segregated ones. It is shown that efficient allocation with mixed communities is an equilibrium in a costless mobility, Tiebout-type setting.     

Delegated Portfolio Management and Rational Prolonged Mispricing

This paper examines how information becomes reflected in prices when investment decisions are delegated to fund managers whose tenure may be shorter than the time it takes for their private information to become public. We consider a sequence of managers, where each subsequent manager inherits the portfolio of their predecessor. We show that the inherited portfolio distorts the subsequent manager's incentive to trade on long-term information. This allows erroneous past information to persist, causing mispricing similar to a bubble. We investigate the magnitude of the mispricing. In addition, we examine endogenous information quality. In some cases, information quality increases when the manager's expected tenure decreases.