The different faces of coupon elasticity

Coupons account for over two-thirds of all consumer promotional efforts initiated by the manufacturers of consumer goods. In this study, the impact of coupons on brand sales is investigated and how that impact decays over the life of the coupon is demonstrated. Specifically, we present an econometric model that can capture coupon effects in terms of equivalent price reduction, account for coupon effects over time, allow inference of coupon effects when retailers decide to double or triple the coupon value, and provide both self-coupon and cross-coupon elasticities at different levels of aggregation. A widely used sales response model is adapted, and an analytical model is proposed to estimate both the self-coupon and cross-coupon (face value) elasticities of sales at the store level. From the store-level elasticity estimates for a given week, the authors analytically derive the coupon elasticities for the chain level by aggregating across stores, and over the life of the coupon by aggregating over time. The proposed sales response model is estimated with the data obtained from three markets for various product categories, and the coupon elasticities are computed. The proposed framework allows one to demonstrate the hypothetical equivalence of a shelf-price reduction for a given coupon face value in each week. Also, the effect of doubling the face value of a coupon results in more than a proportionate increase in elasticity. The authors find that both self and cross-coupon elasticities are much smaller in magnitude than the average self and cross-price elasticity measures reported in the literature.     

Dividend Pricing Models and REITs

Dividend pricing/present value models relate current stock prices to expectations of future dividends. In this study we apply the West and Campbell–Shiller tests of the dividend pricing relation to an index of real estate investment trusts (REITs). REITs provide a unique test of these models since, during our study period, REITs were mandated to pay out at least 95% of taxable income as dividends. While our results complement previous research which finds that the dividend pricing model cannot be rejected if share repurchase is included as part of dividends, our data contain a much less significant amount of share repurchase, so that our approach to the issue of the viability of dividend pricing models offers an alternative insight. Our research suggests that, for our REIT population, dividend pricing models cannot be rejected.     

Theory-Driven Choice Models

We explore issues in theory-driven choice modeling by focusing on partial-equilibrium models of dynamic structural demand with forward-looking decision-makers, full equilibrium models that integrate the supply side, integration of bounded rationality in dynamic structural models of choice and public policy implications of these models.     

Market competition,earnings management,and persistence in accounting profitability around the world

We examine how cross-country differences in product, capital, and labor market competition, as well as earnings management affect mean reversion in accounting return on assets. Using a sample of 48,465 unique firms from 49 countries, we find that accounting returns mean revert faster in countries where there is more product and capital market competition, as predicted by economic theory. Country differences in labor market competition and earnings management are also related to mean reversion in accounting returns—but the relation varies with firm performance. Country labor competition increases mean reversion when unexpected returns are positive but slows it when unexpected returns are negative. Accounting returns in countries with higher earnings management mean revert more slowly for profitable firms and more rapidly for loss firms. Thus earnings management incentives to slow or speed up mean reversion in accounting returns are accentuated in countries where there is a high propensity for earnings management. Overall, these findings suggest that country factors explain mean reversion in accounting returns and are therefore relevant for firm valuation.     

The common external tariff of a customs union: Alternative approaches

The most prominent exception to the cardinal ‘most favoured nation’ principle of the General Agreement on Tariffs and Trade (GATT) of 1947 is in its Article XXIV relating to Customs Unions (CUs) and Free Trade Areas (FTAs). This article required, first, the general incidence of the duties and regulations of commerce imposed by members of the CU with respect to trade with non-members shall not on the whole be higher or more restrictive than those that were applicable prior to the formation of CU or FTA, and, second, that substantially all the trade among members be free. Neither requirement was very operational, because the phrases ‘general incidence’ and ‘substantially all’ being difficult legal concepts to apply. The agreement of 1994 establishing the World Trade Organization (WTO) has made ‘general incidence’ precise by defining it import-weighted average of height of barriers but without offering any rationale for the definition. Now that preferential trading arrangements such as FTAs are proliferating, reform of Article XXIV is of importance. This paper describes alternative approaches to the central question of common external tariffs of a CU. Taking off from the work of Kemp and Wan who showed the existence of a common external tariff of CU that keeps the welfare of non-members unchanged while revising that of the CU as compared to the situation prior to the formation of CU, it characterizes such a tariff structure for two leading benchmark examples as consumption-weighted average of pre-union tariffs and subsidies in the member countries.     

Effects of offline ad content on online brand search: insights from super bowl advertising

Individuals watch TV shows while simultaneously and/or immediately searching online. Thus, the content of offline TV ads can affect online brand search, a key predictor of sales. Yet there are few insights on the effect of offline ad content on online brand search. We develop hypotheses relating the informational and emotional content of TV ads on online brand search, independently, and in conjunction with two attentional content elements of the ad campaign, prior media publicity and brand website prominence in the TV ad. We test the hypotheses using a quasi-experimental study, the telecast of TV ads on the annual Super Bowl event between 2004 and 2012 (n = 293 observations). We measure online brand search by online brand search lift, i.e., the growth in online brand search following the telecast of the brand’s ad on Super Bowl. The findings indicate that the informational content of the TV ad increases online brand search, while both attentional content elements decrease this effect. We find no support for the effect of emotional content of the TV ad on online brand search. Our findings extend marketing theory on online search and generate managerial implications for designing TV ads to increase online brand search.     

Stock Price Index and Exchange Rate Nexus in African Markets

This paper examines the relationship between stock price index and exchange rate in six African markets using monthly data for the period January 2007 to October 2015. A quantile regression approach is used. This methodology is shown to perform better than the ordinary least squares estimators, particularly when the conditional distribution is heterogeneous. Our empirical evidence reveals an interesting pattern in the association of these two financial markets in Africa, which shows that the negative relationship between stock and foreign exchange markets is more apparent when exchange rates are extremely low or high. The negative relationship between the two variables is in line with the portfolio balance effect.     

Grain price stabilization in India: Evaluation of policy alternatives

Stabilization of prices is an important element of food policy in India as in most other countries — both developing and eveloped. However, since the magnitude of grain stocks held for this purpose as well as the costs of physical storage have become prohibitively high, there is now a need for finding cost-effective alternatives including non interventionist and market-oriented methods for price stabilization. In this paper we consider the case of rice and wheat which are staple foodgrains in India. We make a comparison between alternative price stabilization policies including that of holding buffer stocks in terms of their impact on domestic price stability, producer and consumer welfare and government costs. A multi-market equilibrium framework is used where private storage, consumption, supply and prices of rice and wheat are determined simultaneously. Indian exports and imports are assumed to affect world prices. The alternative price stabilizing mechanisms are ranked according to both the criteria, welfare and price stability achieved. The main findings are as follows. The ranking of alternatives varies with the criterion used. Greater price stability need not necessarily imply greater welfare. The option of variable levies on private external trade turns out to be the most inexpensive and that of domestic buffer stocks the costliest in achieving price stability. Further, the efficacy of buffer stocks and subsidy to private storage in stabilizing prices is lower under free trade as compared to the case where the economy is closed to private external trade.