How do Different Sources of the Variance of Consumer Ratings Matter?

We examine the effect of the variance of consumer ratings on product pricing and sales using an analytical model, which considers goods that are characterized by experience attributes and informed search attributes (i.e., experience attributes that were transformed in search attributes by consumer ratings). For pure informed search goods, equilibrium price increases and demand decreases in variance. For pure experience goods, equilibrium price and demand decrease in variance. For hybrid goods with low total variance, equilibrium price and demand increase with an increasing relative share of variance caused by informed search attributes when the average rating and total variance of ratings are held constant. Hence, risk-averse consumers may prefer a more expensive good with a higher variance of ratings out of two similar goods with the same average rating. Moreover, our analytical model provides a theoretical foundation for the empirically observed j-shaped distribution of consumer ratings in electronic commerce

What Adds Value in Specialty Coffee? Managerial Implications from Hedonic Price Analysis of Central and South American E-Auctions

We analyze price and quality information at the procurement level in the specialty coffee supply chain using data from small and large volume e-auctions. Hedonic price equations reveal that the Cup of Excellence auction is a more differentiated market disclosing more information about coffee values associated with ratings, rankings, quantities available, and country reputations whereas information in the Q auction is more limited and tends to be remunerated to a lesser extent. These results indicate that there are different business models and valuation of product characteristics within the specialty coffee industry. Management implications are drawn for specialty coffee producers and roasters.specialty coffee, e-auctions, hedonic analysis, business models, Demand and Price Analysis,

Who benefits when firms game corrective policies?

Firms sometimes comply with externality-correcting policies by gaming the measure that determines policy. We show theoretically that such gaming can benefit consumers, even when it induces them to make mistakes, because gaming leads to lower prices by reducing costs. We use our insights to quantify the welfare effect of gaming in fuel-consumption ratings for automobiles, which we show increased sharply following aggressive policy reforms. We estimate a structural model of the car market and derive empirical analogs of the price effects and choice distortions identified by theory. We find that price effects outweigh distortions; on net, consumers benefit from gaming

Are neighbors equal?

"A methodology to produce disaggregated estimates of inequality is implemented in three developing countries: Ecuador, Madagascar, and Mozambique. These inequality estimates are decomposed into progressively more disaggregated spatial units and the results in all three countries are suggestive that even at a very high level of spatial disaggregation, the contribution of within-community inequality to overall inequality remains very high. The results also indicate there is a considerable amount of variation across communities in all three countries. The basic correlates of local-level inequality are explored, and it is consistently found that geographic characteristics are strongly correlated with inequality, even after controlling for demographic and economic conditions." Authors' AbstractEquality ,Spatial analysis (Statistics) ,

In Search for Yield? New Survey-Based Evidence on Bank Risk Taking

There is growing consensus that the conduct of monetary policy can have an impact on financial and economic stability through the risk-taking incentives of banks. Falling interest rates might induce a “search for yield” and generate incentives to invest into risky activities. This paper provides evidence on the link between monetary policy and commercial property prices and the risk-taking incentives of banks. We use a factor-augmented vector autoregressive model (FAVAR) for the U.S. for the years 1997-2008. We include standard macroeconomic indicators and factors summarizing information provided in the Federal Reserve’s Survey of Terms of Business Lending. These data allow modeling the reactions of banks’ new lending volumes and the riskiness of new loans. We do not find evidence for a risk-taking channel for the entire banking system after a monetary policy loosening or an unexpected increase in property prices. This masks, however, important differences across banking groups. Small domestic banks increase their exposure to risk, foreign banks lower risk, and large domestic banks do not change their risk exposure.FAVAR, bank risk taking, macro-finance linkages, monetary policy, commercial property prices

Who benefits when firms game corrective policies?

Firms sometimes comply with externality-correcting policies by gaming the measure that determines policy. We show theoretically that such gaming can benefit consumers, even when it induces them to make mistakes, because gaming leads to lower prices by reducing costs. We use our insights to quantify the welfare effect of gaming in fuel-consumption ratings for automobiles, which we show increased sharply following aggressive policy reforms. We estimate a structural model of the car market and derive empirical analogs of the price effects and choice distortions identified by theory. We find that price effects outweigh distortions; on net, consumers benefit from gaming

The Thrift Industry and the Community Reinvestment Act: Assessing the Cost of Social Responsibility

A stochastic frontier cost function indicates that the annual cost of complying with the anti-redlining Community Reinvestment Act (CRA) is $171,000 per thrift institution, roughly 2.3 percent of variable costs. But compliance cost is significantly less than the estimated 21 percent cost inefficiency. Based on published estimates of the incremental number of mortgage loans induced by CRA, the marginal cost is$38,000 per loan. The regulations whose compliance cost is estimated apply to about 80 percent of all U.S. banks.

Strategic and tactical price decisions in hotel revenue management

Dynamic pricing techniques allow using a number of variables in a tactical way compared to standard catalogue prices. This study merges in a conceptual model the relevance of the tactical and the strategic dimension of these variables, classified according to their tangible, reputational or contextual nature. To empirically validate the hypotheses, a database of 21.596 price observations was retrieved from booking.com. The study presents a hedonic price function, using the Shapley-Owen decomposition of the Rsquared to elicit the importance of each group of factors. Further, a hierarchical cluster analysis measures the presence of heterogeneity across operators. The results show that online reputation is gaining importance over the traditional star rating. Despite the tangible variables remain of paramount importance, the findings suggest the relevant role of contextual variables in short-run price variations. The players operating in the tourism and hospitality industries should integrate these findings when designing pricing strategies

What Drives Media Slant? Evidence from U.S. Daily Newspapers

We construct a new index of media slant that measures whether a news outlet.s language is more similar to that of a congressional Republican or Democrat. We apply the measure to study the market forces that determine political con- tent in the news. We estimate a model of newspaper demand that incorporates slant explicitly, estimate the slant that would be chosen if newspapers independently maximized their own profits, and compare these ideal points with .rms. actual choices. Our analysis confirms an economically significant demand for news slanted toward one's own political ideology. Firms respond strongly to consumer preferences, which account for roughly 20 percent of the variation in measured slant in our sample. By contrast, the identity of a newspaper's owner explains far less of the variation in slant. We also present evidence on the role of pressure from incumbent politicians, tastes of reporters, and newspaper competition in determining slant.

Consumer Perceptions of Sustainable Farming Practices: A Best-Worst Scenario

This paper uses data collected in the summer and fall of 2010 from a national, web-based survey of 1002 households to initiate the process of examining consumer inferences and valuations of food products making "sustainably produced” claims. A Best-Worst scaling framework was implemented to identify what consumers believe “sustainably produced” labels mean and their preferences for each of the individual sustainable farming practices. The best-worst survey method forces respondents to make trade-offs by simultaneously choosing the most and least preferred attributes. The measured level of concern is then applied to a ratio scale. The ability of a firm to differentiate their product hinges critically on an accurate understanding of the perceptions consumers hold regarding what a credence labelling claim implies. Building upon existing work evaluating other food attribute labels (e.g., genetically-modified products, region of origin, use of growth hormones) and the impact of consumer inferences (e.g., implicit associations made from explicitly provided information), this work begins to address gaps in the literature regarding food products with “sustainably produced” claims.Sustainably Produced Food, Consumer Perceptions, Best-Worst, Agricultural and Food Policy, Consumer/Household Economics, Research Methods/ Statistical Methods, Q01, Q13, Q11,