Optimal Goodwill Model with Consumer Recommendations and Market Segmentation

We propose a new dynamic model of product goodwill where a product is sold in many market segments, and where the segments are indicated by the usage experience of consumers. The dynamics of product goodwill is described by a partial di erential equation of the Lotka{Sharpe{ McKendrick type. The main novelty of this model is that the product goodwill in a segment of new consumers depends not only on advertising e ort, but also on consumer recommendations, for which we introduce a mathematical representation. We consider an optimal goodwill model where in each market segment the control variable is the company's advertising e orts in order to maximize its pro ts. Using the maximum principle, we numerically nd the optimal advertising strategies and corresponding optimal goodwill paths. The sensitivity of these solutions is analysed. We identify two types of optimal advertising campaign: `strengthening' and `supportive'. They may assume di erent shapes and levels depending on the market segment. These experiments highlight the need for both researchers and managers to consider a segmented advertising polic

Mythical Expectations

According to the conventional account, economists have relied on three types of expectations: static (contained in the original Keynesian Phillips curve); adaptive (introduced by Milton Friedman’s in the course of his Monetarist counter-revolution) and rational (part of Robert Lucas’s natural rate New Classical counter revolution). This chapter argues that there is a fourth expectational type: the myths associated with these natural rate counter revolutions. ISBN: 978140394959

Risk Aversion, Insurance, and the Efficiency-Equality Tradeoff

Under conditions of informational asymmetry, redistributing the property rights may improve work incentives but lead to an inefficient choice of entrepreneurial risk. We present a model in which reassignment of property rights does not affect factor prices and we show that there exist egalitarian asset redistributions that enhance allocative efficiency. The scope for such redistributions can be broadened by offering fair insurance protecting the independent entrepreneur against risk unassociated with the production process and against production uncertainties that are unrelated to the quality of their individual decisions. The market will generally supply insurance of this type suboptimally.

Aggregated dynamic demand equations for specialistic-outpatient medical care:(Estimated from a time-series of cross-sections)

In this paper a dynamic model is presented which describes the development of the demand for specialistic medical care in The Netherlands, during the period 1960-1972. The "regionally correlated, time-wise auto-regressive" model is consistently estimated from a time-series of cross-sections, using a modified Aitken estimator. The dependent variables are the number of publicly insured patients referred from general care to specialistic care, and the amount of care consumed per patient referred. As independent variables we took demographic factors, the supply of different levels of medical care and the insurance system. The estimation results show a.o. important substitution possibilities between general and specialistic care, and a significant influence of supply and supply-related variables on the demand for specialistic care.</p

Optimal Filtering of an Advertising Production System with Deteriorating Items

In this paper, we consider an integrated stochastic advertising-production system in the case of a duopoly. Two firms spend certain amounts to advertise some product. The expenses processes evolve according to the jumps of two homogeneous, finite-state Markov chains. We assume that the items in stock may be subject to deterioration and the deterioration parameter is assumed to be random

Time-Series Models in Marketing

Marketing data appear in a variety of forms. An often-seen form is time-series data, like sales per month, prices over the last few years, market shares per week. Time-series data can be summarized in time-series models. In this chapter we review a few of these, focusing in particular on domains that have received considerable attention in the marketing literature. These are (1) the use of persistence modelling and (2) the use of state space models.Marketing;Persistence;State Space;Time Series

Taxation, Saving and the Rate of Interest

After exploring both the crucial role of the interest elasticity of the saving rate in the analysis of a wide variety of issues in economic - particularly tax - policy and reasons why previous studies of the effect of interest rates on consumption and saving have biased the estimated elasticity toward zero, this study presents new estimates of consumption functions based on aggregate U.S. time series data. The results are striking: a variety of functional forms, estimation methods and definitions of the real after-tax rate of return invariably lead to the conclusion of a substantial interest elasticity of saving.