Provision Point Mechanisms and Field Validity Tests of Contingent Valuation

Past field validity tests of contingent valuation have relied on voluntary contribution mechanisms to elicit actual willingness to pay, and may overestimate hypothetical bias because of free riding in the actual contributions. This paper argues that provision point mechanisms are a preferred alternative for field validity tests of contingent valuation because they increase the proportion of demand revealed in cases in which public goods can be provided in a step function. The results of a contingent valuation validity study of participation in a green electricity pricing program that uses a provision point mechanism are reported, and hypothetical open-ended and dichotomous choice responses are compared to actual participation. Calibration of hypothetical responses is also explored.     

Costs, Institutional Mobility Barriers, and Market Structure: Advertising Agencies as Multiproduct Firms

What accounts for the diversity and limited concentration that has long characterized the organization of the advertising agency industry? This question is addressed by treating an advertising agency as a multiproduct firm. The firm's product line or service mix is defined in terms of the set of different media categories where an agency places the advertising messages that it creates on behalf of its clients. Evidence is presented indicating that the structure of demand and costs in the advertising agency industry conforms to the conditions that MacDonald and Slivinski showed were required for an industry to sustain an equilibrium with diversified firms. Building on this framework, we formulate a set of three hypotheses relating to the realization of product-specific scale and scope economies. The first two hypotheses posit that given low fixed costs and minimal entry barriers, both media-specific scale and scope economies are available and can be exploited by relatively small-size agencies. The third hypothesis suggests that large agencies may experience diseconomies of scope as a consequence of excessive diversification induced by two pervasive industry institutional phenomena: (1) “bundling” of agency services to match client demand for a mix of media advertising, and (2) “conflict policy,” which prohibits an agency from serving competing accounts and operates as a mobility constraint. Utilizing a multiproduct cost function, we estimate media-specific scale and scope economies for a cross section of 401 U.S. agencies in 1987. The results obtained support the set of three hypotheses outlined above. The paper concludes with a discussion of the implications of these findings for the restructuring currently underway in this industry.     

The Lévy LIBOR model

Models driven by Lévy processes are attractive because of their greater flexibility compared to classical diffusion models. First we derive the dynamics of the LIBOR rate process in a semimartingale as well as a Lévy Heath-Jarrow-Morton setting. Then we introduce a Lévy LIBOR market model. In order to guarantee positive rates, the LIBOR rate process is constructed as an ordinary exponential. Via backward induction we get that the rates are martingales under the corresponding forward measures. An explicit formula to price caps and floors which uses bilateral Laplace transforms is derived.     

Correction to: Carry Trade Returns and Segmented Risk Pricing

Atlantic Economic Journal - A correction to this paper has been published: https://doi.org/10.1007/s11293-021-09708-3     

The Antecedents and Consequences of Affordable Value Innovations for Emerging Markets

Emerging markets offer tremendous growth opportunities for firms. While established multinational firms typically focus on premium segments in emerging markets, they often fail to leverage additional growth opportunities in so‐called good enough or low‐income segments in emerging markets. Customers in these low‐income markets have substantially different requirements and are very price sensitive. Theoretical and case‐based research suggests that innovating for these low‐income segments in emerging markets differs significantly from innovating for premium or traditional Western markets. We argue that tapping successfully into low‐income segments in emerging markets requires the development of new products that meet the low price expectations while at the same time offering also value to customers in these segments. We refer to these new products as affordable value innovations. We analyze the antecedents of affordable value innovation for emerging markets. We draw on institutional theory to derive three potentially relevant antecedents of affordable value innovation for emerging markets. These are bricolage, local embeddedness, and standardization. We test our hypotheses using multiple informant data from 47 multinational corporations involving 103 innovation projects that target low‐income customers in emerging markets. Our empirical analysis shows that all three antecedents have significant effects on the level of affordable value innovation: while bricolage and local embeddedness are positively related to the level of affordable value innovation, standardization has a negative impact. We also examine the relationship between the level of affordable value innovation and performance. We find evidence for our basic assumption that a firm's capability to develop and launch affordable value innovations is key to success in emerging markets. It indicates that a firm's investments in affordable value innovations for emerging markets pay off financially. Finally, a cross‐regional comparison of our data shows that the key findings on antecedents of affordable value innovation and its impact on performance do not vary across various emerging markets. Overall, our findings offer important implications for research on and the practice of innovation for low‐income segments in emerging markets.     

Beitragsfinanzierung im „demografiegestressten“ Rentensystem möglich

Wirtschaftsdienst - Trotz des demografischen Wandels ist ein beitragsfinanziertes Rentensystem in Deutschland möglich und wünschenswert. Ein Rentenniveau von beispielsweise 50 % kann auch...     

Disentangling location-based advertising: the effects of location congruency and medium type on consumers' ad attention and brand choice

Research on location-based advertising (LBA) suggests that the merits of LBA lie in the fact that consumers can be targeted with location-congruent ads on their personal mobile devices. However, LBA consists of two underlying constructs: a mobile (vs. point-of-sales) advertising medium and location congruency (vs. location incongruency). This study aims to disentangle these underlying constructs by showing that they differentially affect the efficacy of an ad. Using a virtual reality lab experiment, this study shows that location-congruent ads result in increased choice for the target brand as compared to location-incongruent ads, independent of medium type. However, in location-incongruent situations, mobile ads attracted more attention than point-of-sales display ads. The advantages of LBA thus do not seem to emanate from medium type, but rather from the congruency between the ad and product location. When the ad is received at a different location than the product, the mobile medium is able to enhance consumers' ad attention.