Product Characteristics and Price Advertising with Consumer Search

Many advertisements inform the consumer about product characteristics, while others give price information with very little product information, and some provide both types of information. We propose a framework to analyze the incentives for firms to provide various types of information. We consider the case of a single seller. There is no incentive to provide information on product characteristics only, since doing so leads to a holdup problem that the consumers would rationally expect the firm to charge such a high price that no consumer would wish to incur the prior search cost. (A more general argument applies to markets with several firms.) However, price-only and price-and-characteristics advertising can arise depending on the relative strength of product differentiation and consumer search costs. Even when it costs the firm very little to inform consumers the firm may have no incentive to advertise if consumers will sample it anyway. For low search costs the firm has a strict incentive NOT to let consumers know because the firm garners higher profit when consumers have sunk the search cost. Forced disclosure and dissemination of information improves social welfare by eliminating useless search behavior that leads to no purchases (as well as enabling consumers to buy at lower prices). Second, even when the firm must advertise to bring in consumers (i.e., for larger search costs), the firm may prefer to keep consumers in the dark about how much they like the product - this behavior again entails excessive search. Finally, even when the firm finds it optimal to inform consumers of both their match values and the price charged, the level of advertising is too small because the firm only accounts for its private benefit per consumer informed when determining how much to advertise, and not the extra benefit to consumers of making a valuable match.

Consumer Information and Firm Pricing: Negative Externalities from Improved Information

We analyze the effect of consumer information on firm pricing in a model where consumers search for prices and matches with products. We consider two types of consumers. Uninformed consumers do not know in advance their match values with firms, whereas informed consumers do. Prices are lower the greater the proportion of uninformed consumers. Hence uninformed consumers exert a positive externality on the others, in contrast to standard results. This leads to socially excessive investment in gathering prior information when aggregate demand is price-sensitive.

Pricing, product diversity, and search costs: a Bertrand-Chamberlin-Diamond model

We study price competition in the presence of search costs and product differentiation. The limit cases of the model are the ‘‘Bertrand Paradox,’’ the ‘‘Diamond Paradox,’’ and Chamberlinian monopolistic competition. Market prices rise with search costs and decrease with the number of firms. Prices may initially fall with the degree of product differentiation because more diversity leads to more search and hence more competition. Equilibrium diversity rises with search costs, while the optimum level falls, so entry is excessive. The market failure is most pronounced for low preference for variety and high search costs.

Effciency and surplus bounds in Cournot competition

We derive bounds on the ratios of deadweight loss and consumer surplus to producer surplus under Cournot competition. To do so, we introduce a parameterization of the degree of curvature of market demand using the parallel concepts of ½-concavity and ½-convexity. The ”more concave” is demand, the larger the share of producer surplus in overall surplus, the smaller is consumer surplus relative to producer surplus, and the lower the ratio of deadweight loss to producer surplus. Deadweight loss over total potential surplus is at …rst increasing with demand concavity, then eventually decreasing. The analysis is extended to asymmetric …rm costs.Cournot equilibrium, social surplus analysis, deadweight loss, market performance.

Emotional Qualities of VR Space

The emotional response a person has to a living space is predominantly affected by light, color and texture as space-making elements. In order to verify whether this phenomenon could be replicated in a simulated environment, we conducted a user study in a six-sided projected immersive display that utilized equivalent design attributes of brightness, color and texture in order to assess to which extent the emotional response in a simulated environment is affected by the same parameters affecting real environments. Since emotional response depends upon the context, we evaluated the emotional responses of two groups of users: inactive (passive) and active (performing a typical daily activity). The results from the perceptual study generated data from which design principles for a virtual living space are articulated. Such a space, as an alternative to expensive built dwellings, could potentially support new, minimalist lifestyles of occupants, defined as the neo-nomads, aligned with their work experience in the digital domain through the generation of emotional experiences of spaces. Data from the experiments confirmed the hypothesis that perceivable emotional aspects of real-world spaces could be successfully generated through simulation of design attributes in the virtual space. The subjective response to the virtual space was consistent with corresponding responses from real-world color and brightness emotional perception. Our data could serve the virtual reality (VR) community in its attempt to conceive of further applications of virtual spaces for well-defined activities.Comment: 12 figure

Operationalizing R4D and innovation platforms in East and Southern Africa

United States Agency for International Developmen

The Promise and Peril of Charitable Choice: Religion, Poverty Relief, and Welfare Reform in the South

This study analyzes narratives of welfare reform and faith-based poverty relief articulated by religious leaders in rural Mississippi congregations. These congregations are situated in and around Mississippi\u27s Golden Triangle Region, a locale that includes a diverse group of small and mid-sized towns, as well as remote rural areas. As a state with entrenched social disadvantage, a thriving religious economy, and the nation\u27s first faith-based welfare reform program, Mississippi is an ideal locale to study this important issue. We begin by discussing the charitable choice provision in welfare reform legislation. This legal provision bars discrimination against religious organizations as social service providers. We then briefly outline the poverty relief strategies utilized in a purposive sample of thirty Mississippi religious congregations that vary by denomination, racial composition, and size. Finally, we analyze pastors\u27 appraisals of charitable choice, paying special attention to the various rationales they enlist to justify their evaluations of this policy initiative. We conclude by discussing our study\u27s implications for charitable choice implementation in the rural South