Demand methods of price management: An empirical research

One factor which companies often take as a reference point for their pricing decisions is demand. This, however, is often done only partially, with priority being given to quantitative factors rather than qualitative factors. In this context, the aim of this study was to supply companies with a tool to facilitate and enhance price management in areas related to demand. In order to achieve this objective, the following procedure was implemented. Firstly, an extensive review of existing literature was carried out. This has made it possible to identify a set of factors which can influence consumer behaviour with respect to prices, and which should therefore be taken into account when making pricing decisions. The factors identified were then grouped into several categories (variables related to price, variables related to the product, variables related to the characteristics and the behaviour of the consumer, and variables related to the context of the purchase), in order to offer an overall, linked view. An empirical study was then carried out, interviewing price managers in a selection of companies from Andalusia (Spain). The objective was to gather data on their methods of price management, and to evaluate the practical usefulness of the sets of factors identified. The results of the study have made it possible to draw some interesting conclusions on price management. One of these is the importance which companies attach to pricing decisions. These decisions were taken in all cases by higher management teams. However, on analysing the factors which intervene in pricing decisions, it has been observed that their number is limited. In general, cost is still the major factor, while demandrelated aspects, in particular qualitative aspects, play a secondary role. On investigating the reasons for the priority given to quantitative rather than qualitative data, interviewees basically gave two answers. On the one hand, quantitative information (costs and sales) is easier to obtain, use and interpret than qualitative information (motivation, perception and attitude). On the other hand, most companies, and in particular the smaller ones, have no budget available for qualitative market studies. There may be a third reason for this behaviour, which was not explicitly mentioned at first by interviewees. This is the lack of knowledge regarding qualitative demand factors: their nature, their meaning, their usefulness and the way in which they can be incorporated into pricing decisions. This study is a first step towards solving this deficiency, since it proposes a chart which contains numerous restrictions in an integrated, organised fashion. Logically, it would be impractical to take them all into account simultaneously. This is where the work of each company begins, using market studies to establish priorities between the different factors

Situational Duress and the Aberrance of Electronic Contracts

This article explains how the aberrant nature of electronic contracts has unique implications, which contract law should recognize. Companies, taking advantage of these unique implications, may use electronic contracts in an unfair and coercive manner, which is why this article proposes expanding the definition of duress to include “situational duress.” Situational duress would not encompass all electronic contracting scenarios, but would be limited to situations where (1) a drafting company uses an electronic contract to block consumer access to a product or service; (2) the consumer has a “vested interest” in that product or service; and (3) the consumer accepts the terms because she was blocked from the product or service after attempting to reject or decline them. Thus, situational duress would be limited to those situations where consumers are uniquely vulnerable because of the nature of their interest in the product or service. In these situations, the consumer’s action should not be effective as a manifestation of assent and the contract should be void, not voidable

From the Hands of an Early Adopter's Avatar to Virtual Junkyards: Analysis of Virtual Goods' Lifetime Survival

One of the major questions in the study of economics, logistics, and business forecasting is the measurement and prediction of value creation, distribution, and lifetime in the form of goods. In "real" economies, a perfect model for the circulation of goods is impossible. However, virtual realities and economies pose a new frontier for the broad study of economics, since every good and transaction can be accurately tracked. Therefore, models that predict goods' circulation can be tested and confirmed before their introduction to "real life" and other scenarios. The present study is focused on the characteristics of early-stage adopters for virtual goods, and how they predict the lifespan of the goods. We employ machine learning and decision trees as the basis of our prediction models. Results provide evidence that the prediction of the lifespan of virtual objects is possible based just on data from early holders of those objects. Overall, communication and social activity are the main drivers for the effective propagation of virtual goods, and they are the most expected characteristics of early adopters.Comment: 28 page

Structural Change and the Income Distribution: a Post-Keynesian disequilibrium model

This paper extends the out-of-equilibrium literature to analyse a structural transition characterized by the emergence of a new sector that satisfies a want lower in the hierarchical scale. In particular, the dynamic interaction demand-supply can be a source of multiple long-run outcomes if both preferences and the technology evolve endogenously. It will be shown that a successful transition to a two-sector economy is ensured by a balanced distribution of innovative rents. Moreover, the full-employment region lies between two regions of classical and Keynesian unemployment, in contrast with the standard view of a negative relationship between real wages and employment. Finally, demand shortages, due to an unbalanced distribution, can bring about a long-run slump.Structural Change, Income Distribution, Unemployment, Innovation, Habit formation

Predicting utility under satiation and habituation

We introduce a modification of the discounted utility model that accounts for both habituation and satiation in intertemporal choice. Habituation level and satiation level are state variables that induce changes in preferences as those states vary. We examine several properties of our model, discuss willingness to pay for an additional unit of consumption, and characterize the optimal consumption path. Predicted utility under projection bias and narrow bracketing is compared to actual realized utility. We argue that projection bias and narrow bracketing successfully explain the hedonic treadmill in the research area of happiness and life satisfaction.Time preference; discounted utility; habituation; satiation; local substitution; well-being; life satisfaction;

Does more money buy you more happiness?

Why do we believe that more money will buy us more happiness (when in fact it does not)? In this paper, we propose a model to explain this puzzle. The model incorporates both adaptation and social comparison. A rational person who fully accounts for the dynamics of these factors would indeed buy more happiness with money. We argue that projection bias, that is, the tendency to project into the future our current reference levels, precludes subjects from correctly calculating the utility obtained from consumption. Projection bias has two effects. First, it makes people overrate the happiness that they will obtain from money. Second, it makes people misallocate the consumption budget by consuming too much at the beginning of the planning horizon, or consuming too much of adaptive goods.Happiness; Life Satisfaction; Social Comparison; Consumer Life-Cycle Planning; Projection Bias;

Happiness Adaptation to Income and to Status in an Individual Panel

We study "habituation" to income and to status using individual panel data on the happiness of 7,812 people living in Germany from 1984 to 2000. Specifically, we estimate a "happiness equation" defined over several lags of income and status and compare the long run effects. We can (cannot) reject the hypothesis of no adaptation to income (status) during the four years following an income (status) change. In the short-run (current year) a one standard deviation increase in status and 52% of one standard deviation in income are associated with similar increases in happiness. In the long-run (five year average) a one standard deviation increase in status has a similar effect to an increase of 285% of a standard deviation in income. We also present different estimates of habituation across sub-groups. For example, we find that those on the right (left) of the political spectrum adapt to status (income) but not to income (status).

The Half-Life of Happiness: Hedonic Adaptation in the Subjective Well-Being of Poor Slum Dwellers to a Large Improvement in Housing

A fundamental question in economics is whether happiness increases pari passu with improvements in material conditions or whether humans grow accustomed to better conditions over time. We rely on a large-scale experiment to examine what kind of impact the provision of housing to extremely poor populations in Latin America has on subjective measures of well-being over time. The objective is to determine whether poor populations exhibit hedonic adaptation in happiness derived from reducing the shortfall in the satisfaction of their basic needs. Our results are conclusive. We find that subjective perceptions of wellbeing improve substantially for recipients of better housing but that after, on average, eight months, 60% of that gain disappears.Centro de Estudios Distributivos, Laborales y Sociales (CEDLAS