How does face influence the purchase of imitative new products? Moderating roles of product design characteristics

Face plays a profound role in consumption, but the question of how it impacts the purchase of imitative new products remains unanswered in the current literature. Imitative new products, which are legitimate innovations bearing similarities to existing products, are prevalent in many markets. This study investigates how two dimensions of face consciousness—the desire to gain face and the fear of losing face—influence consumers' purchase intentions regarding imitative new products by considering three product design characteristics (new product imitation locus, new product imitation scope, and product hedonism) as boundary conditions. We find through experiments carried out with adult Chinese consumers that the desire to gain face strengthens, but the fear of losing face weakens purchase intention. Moreover, the positive effects of the desire to gain face are weakened by imitation locus (form vs. function imitation) but enhanced by imitation scope (either form or function imitation vs. both form and function imitation); whereas the negative effects of the fear of losing face are strengthened by imitation locus but weakened by imitation scope. Product hedonism enhances the positive effects of the desire to gain face and augments the negative effects of the fear of losing face. This study thus contributes to the face literature by differentiating the roles of two dimensions of face consciousness in affecting consumption of imitative new products. In addition, this study contributes two important constructs—new product imitation locus and new product imitation scope—to the literature on imitative new products.     

Welfare effects of short-sale constraints under heterogeneous beliefs

This paper examines the welfare effects of short-sale constraints in an overlapping generations model of a financial economy with heterogeneous beliefs by focussing on the case of rational beliefs in the sense of Kurz (Econ Theory 4:877–900, 1994). To measure the social welfare, we adopt a measure that is based on the ex post social welfare concept in the sense of Hammond (Economica 48:235–250, 1981), instead of the standard ex ante criterion, since heterogeneity in beliefs invalidates it. Simulation results indicate the existence of socially optimal short-sale constraints.     

Modelling exchange of probabilistic opinions

Summary. This paper studies how communication or exchange of opinions influences correlation of beliefs. The paper focuses on a situation in which agents communicate with each other infinitely many times without observing data. It is an extension to the ‘Expert Problem’ in Bayesian theory, where the informational flow is asymmetric. Moreover, this paper generalizes the existing literature of communication that employs the common prior assumption (CPA) by allowing for heterogeneous beliefs. Some basic convergence results are shown in contrast with the results obtained under the CPA. Furthermore, several economic implications of the basic results are provided. Received: August 27, 2001; revised version: April 16, 2002 RID="*" ID="*" The results presented in this paper are taken from my Ph.D. thesis at Stanford University. I gratefully acknowledge the inspiration obtained from innumerable discussions with Mordecai Kurz about this subject. Also, I appreciate comments from Kenneth J. Arrow, Peter J. Hammond, Maurizio Motolese, Carsten K. Nielsen, Ho-Mou Wu and the anonymous referee.     

Enhancing New Product Adoption at the Base of the Pyramid: A Contextualized Model

Companies are recognizing and pursuing the opportunity to serve the market known as the base of the pyramid (BOP), i.e., consumers who live in poverty in developing countries. The BOP constitutes the largest remaining global market frontier for businesses. Until recently, it has been ignored because of its seeming unattractiveness and insurmountable challenges compared with middle‐ and high‐income markets. However, BOP consumers desire and are able to pay for quality products tailored to their needs. In response, firms are developing new products specific to the demands and conditions of this low‐income population. To innovate effectively, ensuring new products are well received, firms need to know how to enhance new product adoption among these consumers despite the barriers of poverty. We address this need by developing a model of adoption contextualized to the BOP. Based on theories of innovation and poverty, and drawing on the emergent subsistence market literature, we propose that certain new product characteristics, social context dynamics, and marketing environment approaches moderate or counter some of the limits of poverty, making adoption possible. We then discuss the managerial and theoretical implications of our model for innovation practitioners and researchers.     

Enhancing market discipline in banking: The role of subordinated debt in financial regulatory reform

The increasing complexity of large financial firms has led to consideration of alternative regulatory structures. This has intensified recently because of the worldwide turmoil in financial markets. One important consideration has been to increase reliance on market discipline—most notably, increased reliance on subordinated debt (sub-debt) in the bank capital structure to discipline banks’ risk taking. This proposal, however, has been subject to criticism related to the quality of the signal generated in current sub-debt markets. We argue that previous studies evaluating the potential usefulness of sub-debt proposals have evaluated sub-debt spreads in a very different environment from that characterized by a fully implemented sub-debt program, where the market will become deeper, issuance will be more frequent, debt will be viewed as a more viable means to raise capital, bond dealers will be less reluctant to publicly disclose more details on debt transactions, and generally, the market will be more closely followed. As a test to see how the quality of the signal may change, we evaluate the risk-spread relationship—accounting for the enhanced liquidity and market transparency surrounding new debt issues. Our empirical results indicate a superior risk-spread relationship surrounding the period of new debt issuance due, we posit, to greater liquidity and transparency. Our results overall suggest that the degree of market discipline would be significantly enhanced by a mandatory sub-debt program, thus suggesting a potential role for sub-debt in the banking regulatory reform.     

Crafting an environment to foster integration in new product teams

The integration of functionally diverse members in new product teams is a long-standing managerial challenge. This study addresses two questions to help meet this challenge: 1) how can the environment around teams be crafted to foster integration, and 2) does integration help teams to create superior or more advantageous new products? Based on a survey of 206 cross-functional new product teams, we learned that certain environmental factors (market-oriented reward system, planning process formalization, managerial encouragement to take risks, and managerial involvement in new product projects) facilitate integration in teams, which, in turn, leads to the creation of superior or more advantageous new products.