scholarly journals Sellouts, Beliefs, and Bandwagon Behavior

2018 ◽  
Vol 19 (1) ◽  
Author(s):  
Nick Vikander
Keyword(s):  
Willingness To Pay ◽  
Private Information ◽  
Aggregate Demand ◽  
Consumer Surplus ◽  
Strategic Reasoning ◽  
Dynamic Setting ◽  
Cursed Equilibrium ◽  
Limited Reasoning

AbstractThis paper examines how a firm can strategically use sellouts to influence consumers’ beliefs about its product’s popularity. A monopolist faces a market of conformist consumers, whose willingness to pay is increasing in their beliefs about aggregate demand. Consumers are broadly rational but have limited strategic reasoning about the firm’s incentives. Formally, I apply the concept of a ‘cursed equilibrium’, where consumers neglect how the firm’s chosen actions might be correlated with its private information about demand. I show that in a dynamic setting, the firm may choose its price and capacity so as to generate sellouts, specifically to exploit consumers’ limited reasoning. It does so to effectively conceal unfavorable information from consumers about past demand in a way that increases future profits. Sellouts tend to occur when demand is low, rather than high, and may be accompanied by introductory pricing. The analysis also demonstrates that the firm’s ability to mislead some consumers always benefits certain others, and can result in higher overall consumer surplus.

scholarly journals NILAI MANFAAT EKONOMI AIR HUTAN LARANGAN ADAT RUMBIO

2015 ◽  
Vol 10 (2) ◽  
pp. 27-43
Author(s):  
Enny Insusanty ◽  
Ambar Tri Ratnaningsih
Keyword(s):  
Data Collection ◽  
Willingness To Pay ◽  
Random Sampling ◽  
Economic Value ◽  
Consumer Surplus ◽  
Domestic Use ◽  
Value Of Water ◽  
Economic Value Of Water

This study aims to determine the estimated economic value of water in Rumbio Forest Indigenous Prohibition for domestic use existing community around the forest. The method of data collection is done in a survey by random sampling. The economic value of water for domestic use Rp 347 871 206 per year. Willingness to pay (WTP) is Rp1.907.657.086 per year in order to obtain the consumer surplus of Rp 1,559,785,880 per year. In addition there are 13 businesses sales of water to three villages around the Rumbio forest indigenous prohibition.

scholarly journals Consumer Scores and Price Discrimination

2019 ◽  
Vol 87 (2) ◽  
pp. 750-791 ◽  
Author(s):  
Alessandro Bonatti ◽  
Gonzalo Cisternas
Keyword(s):  
Willingness To Pay ◽  
Price Discrimination ◽  
Consumer Surplus ◽  
Equilibrium Price ◽  
Bayes Rule ◽  
Ratchet Effect ◽  
Disaggregated Data ◽  
Price Discriminate ◽  
Linear Aggregate ◽  
Demand Sensitivity

Abstract We study the implications of aggregating consumers’ purchase histories into scores that proxy for unobserved willingness to pay. A long-lived consumer interacts with a sequence of firms. Each firm relies on the consumer’s current score–a linear aggregate of noisy purchase signals—to learn about her preferences and to set prices. If the consumer is strategic, she reduces her demand to manipulate her score, which reduces the average equilibrium price. Firms in turn prefer scores that overweigh past signals relative to applying Bayes’ rule with disaggregated data, as this mitigates the ratchet effect and maximizes the firms’ ability to price discriminate. Consumers with high average willingness to pay benefit from data collection, because the gains from low average prices dominate the losses from price discrimination. Finally, hidden scores—those only observed by the firms—reduce demand sensitivity, increase average prices, and reduce consumer surplus, sometimes below the naive-consumer level.

scholarly journals How Much Would You Pay to Change a Game before Playing It?

Entropy ◽  
2019 ◽  
Vol 21 (7) ◽  
pp. 686
Author(s):  
David Wolpert ◽  
Justin Grana
Keyword(s):  
Willingness To Pay ◽  
Decision Maker ◽  
Direct Effect ◽  
Private Information ◽  
The Other ◽  
Rational Decision ◽  
Arbitrary Solution ◽  
Quantal Response ◽  
Parameter Change ◽  
Matching Pennies

Envelope theorems provide a differential framework for determining how much a rational decision maker (DM) is willing to pay to alter the parameters of a strategic scenario. We generalize this framework to the case of a boundedly rational DM and arbitrary solution concepts. We focus on comparing and contrasting the case where DM’s decision to pay to change the parameters is observed by all other players against the case where DM’s decision is private information. We decompose DM’s willingness to pay a given amount into a sum of three factors: (1) the direct effect a parameter change would have on DM’s payoffs in the future strategic scenario, holding strategies of all players constant; (2) the effect due to DM changing its strategy as they react to a change in the game parameters, with the strategies of the other players in that scenario held constant; and (3) the effect there would be due to other players reacting to a the change in the game parameters (could they observe them), with the strategy of DM held constant. We illustrate these results with the quantal response equilibrium and the matching pennies game and discuss how the willingness to pay captures DM’s anticipation of their future irrationality.

scholarly journals Testing Significance of Multi-Destination and Multi-Purpose Trip Effects in a Travel Cost Method Demand Model for Whale Watching Trips

2000 ◽  
Vol 29 (2) ◽  
pp. 183-191 ◽  
Author(s):  
John Loomis ◽  
Shizuka Yorizane ◽  
Douglas Larson
Keyword(s):  
Willingness To Pay ◽  
Count Data ◽  
Cost Model ◽  
Consumer Surplus ◽  
Travel Cost ◽  
Travel Cost Method ◽  
Demand Model ◽  
Generalized Model ◽  
Travel Cost Model ◽  
Recreation Site

Inclusion of multi-destination and multi-purpose visitors has an appreciable influence on a standard count data travel cost model derived estimate of willingness to pay but the differences are not statistically significant. We adapt a more general travel cost model (TCM) of Parsons and Wilson (1997) that allows for inclusion of multi-destination visitors as incidental demand to allow estimation of an unbiased measure of single and multi-destination willingness to pay for whale viewing using a single pooled equation. The primary purpose trip values from the standard TCM and simple generalized TCM model are identical at $43 per person per day and neither are significantly different from the $50 day value from a generalized model that distinguishes between joint and incidental trips. The general models avoid underestimation of total recreation site benefits that would result from omitting the consumer surplus of multi-destination visitors.

scholarly journals Exclusive Contracts and Market Dominance

2015 ◽  
Vol 105 (11) ◽  
pp. 3321-3351 ◽  
Author(s):  
Giacomo Calzolari ◽  
Vincenzo Denicolò
Keyword(s):  
Willingness To Pay ◽  
Competitive Advantage ◽  
Private Information ◽  
Competition Policy ◽  
Exclusive Dealing ◽  
Dominant Firm ◽  
Exclusive Contracts ◽  
Market Dominance

We propose a new theory of exclusive dealing. The theory is based on the assumption that a dominant firm has a competitive advantage over its rivals, and that the buyers' willingness to pay for the product is private information. In this setting, the dominant firm can impose contractual restrictions on buyers without necessarily compensating them, implying that exclusive dealing contracts can be both profitable and anticompetitive. We discuss the general implications of the theory for competition policy and illustrate by examples its applicability to antitrust cases. (JEL D21, D43, D82, D86, K21, L13, L40)

scholarly journals ANALISIS WILLINGNESS TO PAY BERAS ORGANIK AROMATIK “BOTANIK” GAPOKTAN AL-BAROKAH DI KABUPATEN BONDOWOSO

2020 ◽  
Vol 13 (1) ◽  
pp. 38
Author(s):  
Elrey All Habib ◽  
Ebban Bagus Kuntadi
Keyword(s):  
Willingness To Pay ◽  
Tertiary Education ◽  
Family Members ◽  
Consumer Surplus ◽  
High Growth ◽  
Sampling Technique ◽  
Education Level ◽  
Healthy Food ◽  
Middle Aged ◽  
Organic Rice

The development of organic rice in Bondowoso has high growth. The superiority of the product makes the selling value of the product not cheap when compared to other rice products. The objectives of the study are (1) to determine the characteristics of aromatic organic rice consumers in Al-Barokah Gapoktan in Bondowoso, (2) the price of consumers willing to pay for aromatic organic rice, (3) the factors that influence consumers' WTP value of aromatic organic rice. Method of determining the area using a purposive method in the Botanic shop. Sampling using incidental sampling technique with a total of 45 respondents. The results show: (1) the characteristics of Botanic aromatic organic rice consumers are the majority of middle-aged men who have a tertiary education level with non-PNS jobs and have an income of> 3,000,000 000 4,000,000 and already have a total dependents of family members of 3 people, (2) willingness to pay Botanic aromatic organic rice products is Rp. 18,133 per 1kg higher when compared to prevailing prices in the shop which is Rp. 17,500 so that means there is a consumer surplus of Rp. 633, and (3) Factors factors that significantly affected the willingness to pay for organic rice in were age, education level, type of work, healthy food concern, and income. Keywords: Organic Rice, Consumer Characteristics, Willingness to Pay  

scholarly journals A Quantitative Analysis of the Used-Car Market

2014 ◽  
Vol 104 (11) ◽  
pp. 3668-3700 ◽  
Author(s):  
Alessandro Gavazza ◽  
Alessandro Lizzeri ◽  
Nikita Roketskiy
Keyword(s):  
Quantitative Analysis ◽  
Willingness To Pay ◽  
Transaction Costs ◽  
Consumer Surplus ◽  
Welfare Effects ◽  
Secondary Markets ◽  
Car Market ◽  
The Us ◽  
Used Car ◽  
Aggregate Effects

Quantitatively, we investigate the allocative and welfare effects of secondary markets for cars. An important source of gains from trade in these markets is the heterogeneity in the willingness to pay for higher-quality (newer) goods, but transaction costs are an impediment to instantaneous trade. Calibration of the model successfully matches several aggregate features of the US and French used-car markets. Counterfactual analyses show that transaction costs have a large effect on volume of trade, allocations, and the primary market. Aggregate effects on consumer surplus and welfare are relatively small, but the effect on lower-valuation households can be large. (JEL D23, L62, L81)

Managerial Performance Evaluation and Real Options

2015 ◽  
Vol 91 (3) ◽  
pp. 741-766 ◽  
Author(s):  
Tim Baldenius ◽  
Alexander A. Nezlobin ◽  
Igor Vaysman
Keyword(s):  
Performance Evaluation ◽  
Real Options ◽  
Performance Measures ◽  
Private Information ◽  
Time Preferences ◽  
Managerial Performance ◽  
Dynamic Setting ◽  
Productive Asset ◽  
Accounting Rules ◽  
Idle Capacity

ABSTRACT In a dynamic setting with demand following a random process, we ask how investment and operating decisions can be delegated to a manager with unknown time preferences. Only the manager observes the demand realization in each period and, therefore, has private information when choosing whether to acquire the productive asset and, subsequently, how to utilize it. We derive accrual accounting-based performance measures under which the manager will make the efficient decisions provided the investment date is exogenously given. We show that in an environment where demand follows a martingale process, the corresponding accounting rules are more decelerated if the firm has the option to idle capacity in case of negative demand shocks. We then describe the limitations of accounting-based performance measures in a scenario where the investment date is endogenously determined, i.e., the firm has an option to wait.

scholarly journals The Design and Price of Information

2018 ◽  
Vol 108 (1) ◽  
pp. 1-48 ◽  
Author(s):  
Dirk Bergemann ◽  
Alessandro Bonatti ◽  
Alex Smolin
Keyword(s):  
Willingness To Pay ◽  
Private Information ◽  
Decision Problem ◽  
Stochastic Matrix ◽  
Explicit Construction ◽  
Statistical Experiments

A data buyer faces a decision problem under uncertainty. He can augment his initial private information with supplemental data from a data seller. His willingness to pay for supplemental data is determined by the quality of his initial private information. The data seller optimally offers a menu of statistical experiments. We establish the properties that any revenue-maximizing menu of experiments must satisfy. Every experiment is a non-dispersed stochastic matrix, and every menu contains a fully informative experiment. In the cases of binary states and actions, or binary types, we provide an explicit construction of the optimal menu of experiments. (JEL D42, D81, D82, D83)

scholarly journals Willingness to Pay for Margalla Hills National Park: Evidence from the Travel Cost Method

2006 ◽  
Vol 11 (2) ◽  
pp. 43-70 ◽  
Author(s):  
Himayatullah Khan
Keyword(s):  
Willingness To Pay ◽  
Household Income ◽  
Economic Benefit ◽  
National Park ◽  
Consumer Surplus ◽  
Travel Cost ◽  
Travel Cost Method ◽  
Annual Budget ◽  
Recreational Benefits

This study, which is among the first in Pakistan to value recreational benefits, estimates the benefits of the Margalla Hills National Park near Islamabad. The study examines how much park visitors are willing to pay to visit the park. Annual benefits from the park are considerable—the total annual consumer surplus or economic benefit obtained from recreation in the park is approximately Rs. 23 million (US $ 0.4 million). Various factors influence the value visitors obtain from the park — these include travel cost, household income, and the quality of the park. Improvements in the quality of the park are estimated to increase recreational benefits by 39%. The study recommends that a park entrance fee of Rs. 20 per person be introduced, which could be utilized for park management. This would generate nearly Rs. 11 million in revenues annually, a sizable amount of money that represents about 4% of the annual budget allocated to the environment sector in Pakistan.

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