Functional Demand Satiation and Industrial Dynamcis - The Emergence of the Global Value Chain for the U.S. Footwear Industry

Around 1940 Schumpeter draws on an analysis of the U.S. footwear industry as an exemplar case to formulate his famous hypothesis about the positive relation between market concentration and innovative activity. Starting in the 1970s the value chain of U.S. footwear producers disintegrates, eventually separating the process of product innovation from manufacturing in this industry. Studies testing Schumpeter’s hypothesis commonly do not account for the modularity and globalization of an industry’s value chain. Schumpeter having neglected the demand side in his theorizing, we argue that the separation of product innovation and manufacturing in the U.S. footwear industry is influenced by functional satiation effects on demand. If the functional requirements of consumers are met, their willingness to pay for ever more product varieties decreases. Since the early 1970s the ‘oversupply’ of new product varieties and the simultaneously decreasing price level drive market growth beyond functional satiation (Frenzel Baudisch, 2006b). In this paper we argue that this simultaneous price and innovation competition separates the product innovation process from manufacturing to gain economies in both of these processes simultaneously. Discussing the consumers’ motivations to buy products beyond their functional requirements offers a deeper qualitative understanding of the business practices revealed in the historical case of the U.S. footwear industry.Industrial organization, Schumpeter hypothesis, Modular Value Chain, Consumer Behavior, Footwear Industry

Inflation targeting in a St. Louis model of the 21st century

Federal Reserve Bank of St. Louis ; Inflation (Finance)

Uncertain Demand, Consumer Loss Aversion, and Flat-Rate Tariffs

The so called flat-rate bias is a well documented phenomenon caused by consumers' desire to be insured against fluctuations in their billing amounts. This paper shows that expectation-based loss aversion provides a formal explanation for this bias. We solve for the optimal two-part tariff when contracting with loss-averse consumers who are uncertain about their demand. The optimal tariff is a flat rate if marginal cost of production is low compared to a consumer's degree of loss aversion and if there is enough variation in the consumer's demand. Moreover, if consumers differ with respect to the degree of loss aversion, firms' optimal menu of tariffs typically comprises a flat-rate contract

Zero inflation and the Friedman rule: a welfare comparison

Inflation (Finance) ; Prices

General equilibrium in asset markets with or without short-selling

Equilibrium Theory;Assets

Value perception and post-purchase behaviors of recurring customers: evidence in hedonic services with contractual and non-contractual linkage

[ES]Los modelos de formación de la utilidad tienen la capacidad de predecir el beneficio que los consumidores perciben en diferentes bienes y servicios. Sin embargo, existen evidencias en diferentes sectores de la necesidad de explorar estos modelos para la creación de una oferta de valor que sea atractiva para los consumidores a lo largo del tiempo, y, al mismo tiempo, rentable para la empresa. La percepción de valor por el consumidor en productos de compra repetitiva, además de por otros factores, cambia a lo largo de los sucesivos momentos de interacción con la categoría de producto. El efecto de estas interacciones se ha considerado en las teorías de formación de hábitos y saciedad, las cuales explican como el nivel habitual de consumo y la saciedad influyen en la formación de utilidad. Con el objetivo de explorar cómo mantener una oferta de valor atractiva a lo largo del tiempo para diferentes segmentos de consumidores, esta tesis examina empíricamente el efecto no lineal de la formación de hábitos y saciedad sobre el valor percibido y los comportamientos poscompra de los clientes recurrentes en un contexto de servicios hedónicos. Se analiza cómo cambia la disposición a pagar respecto a alojamientos turísticos en función del nivel habitual de consumo y la saciedad en un contexto con relación no contractual. Una vez comprobado este efecto, se estudia cómo influye la saciedad sobre el valor percibido y los comportamientos poscompra a lo largo del tiempo en un contexto con relación contractual (servicios por suscripción). Los resultados obtenidos en los diferentes estudios realizados concluyen que la disposición a pagar de un consumidor cambia en función de su nivel habitual de consumo, mostrando un incremento en su disposición a pagar respecto a la anterior visita si se encuentra en fases de sensibilización con el servicio y una disminución en caso de habituación. A su vez, el efecto de la saciedad juega también un papel determinante en la formación de utilidad. Se concluye que los consumidores que experimentan saciedad muestran una menor disposición a pagar y, por tanto, una mayor sensibilidad a los precios. Además, se demuestra que, en modelos de pago por suscripción, esta variable tiene la capacidad de anticipar la decisión de no continuar la suscripción del servicio contratado. Esta tesis contribuye a la literatura previa aportando evidencias empíricas sobre la formación de utilidad en diferentes servicios de uso hedónico, aclarando respecto a la literatura anterior que un precio de referencia no siempre influye de forma lineal y positiva sobre la disposición a pagar. Segundo, amplía el conocimiento sobre cómo la saciedad influencia el valor percibido en servicios con alto riesgo y muestra como esta variable es capaz de anticipar comportamientos desleales, ya que estudiamos tanto la intención de cancelar la suscripción en el corto como en el largo plazo. Finalmente, consideramos que los resultados obtenidos tienen importantes implicaciones, siendo clave incorporar en el análisis del comportamiento del consumidor en productos de compra repetitiva estas dos variables de segmentación de los clientes, el nivel habitual de consumo y la saciedad. [EN]Utility formation models have the ability to predict the benefit that consumers perceive in different goods and services. However, there is evidence in several sectors of the necessity to explore these models for the development of a value offer that is attractive to consumers over time, while also being profitable for the company. The perceived value of consumers in repetitive consumption, along with other factors, undergoes changes over the successive moments of interaction with the product category. The effect of these successive purchases has been considered in habit formation and satiation theories, which explain how the habitual level of consumption and satiation influence utility formation. With the aim of exploring how to maintain an attractive value offer over time for different consumer segments, this dissertation empirically examines the non-linear effect of the habitual level of consumption and satiation formation on perceived value and post-purchase behaviors of repeat customers in a hedonic services context. The study analyzes how willingness to pay for tourism accommodations changes based on habitual level of consumption and satiation in a non-contractual relationship setting. Upon confirming this effect, the study further explores the influence of satiation on perceived value and post-purchase behaviors over time in a contractual relationship setting (subscription retailing sector). The results obtained from the various studies lead to the conclusion that a consumer's willingness to pay is subject to change based on their habitual level of consumption. Specifically, there is an increase in willingness to pay compared to the previous stay if they are in a sensitization phase with the service, and a decrease in the case of habituation. Additionally, the effect of satiation plays a determining role in utility formation. It is concluded that consumers who experience satiation exhibit a lower willingness to pay and, therefore, greater price sensitivity. In turn, it is demonstrated that in subscription retailing, this variable has the ability to anticipate the decision to cancel the contracted subscription. This thesis contributes to previous literature by providing empirical evidence on utility formation in different hedonic services, clarifying that the influence of a reference price on willingness to pay is not always linear and positive, unlike previous literature. Second, it broadens the understanding of how satiation influences perceived value in high-risk services. Furthermore, it demonstrates the capability of this variable to predict unloyalty behaviors, as we examine both short and long-term subscription cancellation. Finally, we consider that the results obtained have important managerial implications being of utmost importance to incorporate these two customer segmentation variables, habitual level of consumption and satiation, into the analysis of consumer behavior in repetitive purchase products

Influence of Brand Name in Variety Seeking Behavior of Consumers: An Empirical Analysis

The variety-seeking behavior and the brand choice among the consumers have been discussed extensively in the previous research contributions from the stochastic point of view. This study argues that although consumers are seeking novelty and unexpectedness in a brand that they have not bought before, their purchase will be selective, in reference to the empirical investigation. The study has been conducted in Mexican retail business environment with a focus to explore the tendency of decision making of consumers towards buying unfamiliar brands in considering the importance of brand name. The discussions in the paper have been woven around the issues of perceived risk, perceived brand difference, association of brand name and customer values as major influencing factors in making buying decisions towards unfamiliar brands. The study reveals that the perceptions on brand name in reference to brand risk and brand differences have been the prime factors in making buying decision for new brands among the consumers. Consumers also ascertain the brand name associated with the unfamiliar brands as they feel high risk averse and entangle in decision making with perceived brand differences.Cognitive behavior, personality traits, brand loyalty, brand perceptions, decision making, customer value

Uncertain Demand, Consumer Loss Aversion, and Flat-Rate Tariffs

The so called flat-rate bias is a well documented phenomenon caused by consumers' desire to be insured against fluctuations in their billing amounts. This paper shows that expectation-based loss aversion provides a formal explanation for this bias. We solve for the optimal two-part tariff when contracting with loss-averse consumers who are uncertain about their demand. The optimal tariff is a flat rate if marginal cost of production is low compared to a consumer's degree of loss aversion and if there is enough variation in the consumer's demand. Moreover, if consumers differ with respect to the degree of loss aversion, firms' optimal menu of tariffs typically comprises a flat-rate contract.Consumer Loss Aversion; Flat-Rate Tariffs; Nonlinear Pricing; Uncertain Demand

Crowding, satiation, and saturation: the days of television series' lives

The performance of firms depends not just on the structure of the industries in which they compete but also on their relative positioning within those industries, in terms of operating within particular niches. We propose that demand for these niches depends endogenously on the historical ecology of the products offered: Niches become saturatedreduced in their ability to support productsas a large number of previous offerings allows the audience to satisfy its desire for products of a particular type. Analyzing the survival rates of television series aired in the United States from 1946 to 2003, we found that the survival rates of future entrants fell with the extensiveness of recent offerings in the niche, and that the negative association between crowding and survival also weakened with this saturation.We gratefully acknowledge financial support from the Italian Ministry of University and Research (project CUP B41J12000160008), the Ministerio de Economia y Competitividad in Spain (Grant ECO2012-34734), and the Juan de la Cierva Fellowship Programme of the Ministry of Science and Innovation of Spain

Policy implications of the New Keynesian Phillips curve

This article surveys recent advancements in the theory of optimal monetary policy in models with a New Keynesian Phillips curve. It identifies four policy implications. First, near price stability is optimal. Second, simple interest rate feedback rules that respond aggressively to price inflation deliver near-optimal equilibrium allocations. Third, interest rate rules that respond to deviations of output from trend may carry significant welfare costs. Fourth, the zero bound on nominal interest rates does not appear to be a significant obstacle for the actual implementation of low and stable inflation.Inflation (Finance) ; Phillips curve