Testing the Theory: Vertical Strategic Interaction and Demand Functional Form

Formulating theoretical models inevitably requires various simplifications that assist in making analysis tractable and that facilitate deriving closed form solutions. While the strategic insights gained from theoretical models of market phenomena are often quite valuable, testing the theoretical assumptions made in these models can aid in assessing the broader applicability of the conclusions drawn. This is particularly true in the channels area, where the focus of research to date has largely been theoretical in nature. In an initial attempt to examine some of the assumptions made in previous theoretical research (e.g., Jeuland and Shugan 1983, McGuire and Staelin 1983, Choi 1991, Raju, Sethuraman and Dhar 1995), we focus on a limited set of issues. First, we empirically examine the vertical channel assumptions made in two well-cited models of retailer-manufacturer interaction: a) the Choi (1991) Manufacturer-Stackelberg (MS) model, and b) the Raju, Sethuraman and Dhar (1995) Stackelberg model addressing store brands. Specifically, empirical tests are developed for Manufacturer Stackelberg conduct and the use of proportional mark-up rules within the channel. Second, since each of these models assume relatively simple linear demand structures, we examine how well linear demands characterize actual market behavior by comparing them to a flexible non-linear form, the LA/AIDS model. The empirical analysis is conducted using data for six individual categories (milk, butter, bread, pasta, margarine and instant coffee) across 59 local markets in 1991 and 1992. The empirical results generally support the assumptions of proportional mark-up behavior by retailers and Manufacturer Stackelberg conduct (Choi 1991) within the channel. While this lends support to the assumptions made in a number of theoretical models addressing channel behavior, we reject linear demands in a favor of a more flexible non-linear form. When combined with the analytical work of Lee and Staelin (1997), this suggests that additional theoretical and empirical work is needed in order to fully understand the implications of using a linear demand specification.pricing, channels, private labels, competitive strategy, Demand and Price Analysis, Industrial Organization,

Market Share and Price Setting Behavior For Private Labels and National Brands

In this paper, we develop a framework for estimating market share and price reaction equations in an attempt to understand the nature of competitive interaction in the market for private label and branded grocery products. Specifically, we employ a Linear Approximate Almost Ideal Demand System (LA/AIDS, Deaton and Muellbauer 1980a), and specify the price reaction equations derived under the LA/AIDS demand specification. This enables us to consistently estimate shareprice relationships, accounting for demand-side and competitive reactions simultaneously. The incorporation of LA/AIDS demands into a structural equation framework represents an important departure from previous demand specifications in competitive analysis. In addition to its rigorous foundation in utility theory, LA/AIDS demands are especially flexible for demand-side estimation, provide consistent reaction functions on the supply side, and have particularly nice aggregation properties. In order to test the relative contribution of employing a flexible LA/AIDS functional form on the demand-side, and in a preliminary attempt to assess manufacturer-retailer interaction on the supply side, we compare our general framework (LA/AIDS demands with retailers following a proportional markup rule) to two alternative models of manufacturer-retailer interaction: Chois (1991) Manufacturer-Stackelberg (M-S) model under linear demands, as well as Shubik demands under Stackelberg conduct (Raju, Sethuraman and Dhar 1995a, 1995b). We first apply the proposed LA/AIDS framework to a sample pooled across 125 categories and 54 geographic markets in an attempt to produce result that generalize across the entire sample. We then estimate all three models using data on seven individual categories: bread, milk, pasta, yogurt, instant coffee, butter and margarine. We conclude that the LA/AIDS demand specification is preferred to the alternative linear demand specifications. Further, the empirical findings support our premise that consumer response to price and promotion decisions (demand) and the factors influencing firm pricing behavior (supply) jointly determine observed market prices and market shares. Most importantly, our specification with LA/AIDS demands produced excellent overall fits, as well as reasonable demand and price response elasticities.competition, competitive strategy, private labels, pricing, Demand and Price Analysis, Industrial Organization,

Assessing the Competitive Interaction Between Private Labels and National Brands

In contrast to single-equation cross-sectional studies of private label share, developing a complete understanding of the nature of the competitive interaction between national brands and private labels requires an understanding of the determinants of both demand and strategic pricing decisions by firms. Consequently, we estimate a simultaneous system of share and price for private labels and national brands. From the empirical results, two measures of market response are derived. The unilateral demand elasticity measures the pure own demand response, while the residual (or total) elasticity also captures the impact of competitive price reaction (Baker and Bresnahan 1985). When taken together, these provide important strategic insights into the pricing interaction between national brands and private labels. In our empirical analysis, we employ a flexible, non-linear demand specification, the Linear Approximate Almost Ideal Demand System (LA/AIDS, Deaton and Muellbauer 1980a), and specify the price reaction equations derived under the LA/AIDS demand specification. Incorporating LA/AIDS demands into a structural equation framework represents an important departure from previous demand specifications in competitive analysis. Using the proposed LA/AIDS framework, we perform a detailed intra-category analysis using data on six individual categories: bread, milk, pasta, instant coffee, butter and margarine. In addition, in an attempt to generalize the results to a broader set of categories and in order to enable us to compare our results to previous cross-section studies, we also estimate using a sample pooled across 125 categories and 59 geographic markets. Consistent with our objectives, we find that consumer response to price and promotion decisions (demand) and the factors influencing firm pricing behavior (supply) jointly determine observed market prices and market shares. Further, estimates of residual demand elasticities suggest that examination of partial demand elasticities alone may provide an incomplete picture of the ability of brands to raise price. Managerial implications, limitations and suggestion for future research are discussed.competition, competitive strategy, private labels, pricing, Demand and Price Analysis,

Annealing of defects in Fe after MeV Heavy ion irradiation

We report study of recovery dynamics, followed by in-situ resistivity measurement after 100 MeV oxygen ion irradiation, in cold rolled Fe at 300K. Scaling behavior with microstructural density and temperature of sample have been used to establish stress induced defects formed during irradiation as a new type of sink. The dynamics after irradiation has been shown to be due to migration of defects to two types of sinks i.e. stress induced defect as variable sinks and internal surfaces as fixed sinks. Experimental data obtained under various experimental conditions have been fitted to theoretical curves. Parameters thus obtained from fitting are employed to establish effect of electronic energy loss and temperature on recovery dynamics and stress associated with variable sinks.Comment: 12 pages, 7 figures. Europhysics Letter (in press

Melting as a String-Mediated Phase Transition

We present a theory of the melting of elemental solids as a dislocation-mediated phase transition. We model dislocations near melt as non-interacting closed strings on a lattice. In this framework we derive simple expressions for the melting temperature and latent heat of fusion that depend on the dislocation density at melt. We use experimental data for more than half the elements in the Periodic Table to determine the dislocation density from both relations. Melting temperatures yield a dislocation density of (0.61\pm 0.20) b^{-2}, in good agreement with the density obtained from latent heats, (0.66\pm 0.11) b^{-2}, where b is the length of the smallest perfect-dislocation Burgers vector. Melting corresponds to the situation where, on average, half of the atoms are within a dislocation core.Comment: 18 pages, LaTeX, 3 eps figures, to appear in Phys. Rev.

Socio-economic utility and chemical potential

In statistical physics, the conservation of particle number results in the equalization of the chemical potential throughout a system at equilibrium. In contrast, the homogeneity of utility in socio-economic models is usually thought to rely on the competition between individuals, leading to Nash equilibrium. We show that both views can be reconciled by introducing a notion of chemical potential in a wide class of socio-economic models, and by relating it in a direct way to the equilibrium value of the utility. This approach also allows the dependence of utility across the system to be determined when agents take decisions in a probabilistic way. Numerical simulations of a urban economic model also suggest that our result is valid beyond the initially considered class of solvable models.Comment: 6 pages, 3 figures, final versio

Crystalline Order on a Sphere and the Generalized Thomson Problem

We attack generalized Thomson problems with a continuum formalism which exploits a universal long range interaction between defects depending on the Young modulus of the underlying lattice. Our predictions for the ground state energy agree with simulations of long range power law interactions of the form 1/r^{gamma} (0 < gamma < 2) to four significant digits. The regime of grain boundaries is studied in the context of tilted crystalline order and the generality of our approach is illustrated with new results for square tilings on the sphere.Comment: 4 pages, 5 eps figures Fig. 2 revised, improved Fig. 3, reference typo fixe

Detrimental effects of RNAi: a cautionary note on its use in Drosophila ageing studies

RNA interference (RNAi) provides an important tool for gene function discovery. It has been widely exploited in Caenorhabditis elegans ageing research because it does not appear to have any non-specific effects on ageing-related traits in that model organism. We show here that ubiquitous, adult-onset activation of the RNAi machinery, achieved by expressing a double stranded RNA targeting GFP or lacZ for degradation, or by increasing expression of Dicer substantially reduces lifespan in Drosophila melanogaster. Induction of GFPRNAi construct also alters the response of lifespan to nutrition, exacerbating the lifespan-shortening effects of food containing a high quantity of yeast. Our study indicates that activation of the RNAi machinery may have sequence-independent side-effects on lifespan, and that caution needs to be exercised when employing ubiquitous RNAi in Drosophila ageing studies. However, we also show that RNAi restricted to certain tissues may not be detrimental to lifespan

Comparative effectiveness of endovascular versus open repair of ruptured abdominal aortic aneurysm in the Medicare population

ObjectiveEndovascular aortic repair (EVAR) for abdominal aortic aneurysm (AAA) is increasingly used for emergent treatment of ruptured AAA (rAAA). We sought to compare the perioperative and long-term mortality, procedure-related complications, and rates of reintervention of EVAR vs open aortic repair of rAAA in Medicare beneficiaries.MethodsWe examined perioperative and long-term mortality and complications after EVAR or open aortic repair performed for rAAA in all traditional Medicare beneficiaries discharged from a United States hospital from 2001 to 2008. Patients were matched by propensity score on baseline demographics, coexisting conditions, admission source, and hospital volume of rAAA repair. Sensitivity analyses were performed to evaluate the effect of bias that might have resulted from unmeasured confounders.ResultsOf 10,998 patients with repaired rAAA, 1126 underwent EVAR and 9872 underwent open repair. Propensity score matching yielded 1099 patient pairs. The average age was 78 years, and 72.4% were male. Perioperative mortality was 33.8% for EVAR and 47.7% for open repair (P < .001), and this difference persisted for >4 years. At 36 months, EVAR patients had higher rates of AAA-related reinterventions than open repair patients (endovascular reintervention, 10.9% vs 1.5%; P < .001), whereas open patients had more laparotomy-related complications (incisional hernia repair, 1.8% vs 6.2%; P < .001; all surgical complications, 4.4% vs 9.1%; P < .001). Use of EVAR for rAAA increased from 6% of cases in 2001 to 31% in 2008, whereas during the same interval, overall 30-day mortality for admission for rAAA, regardless of treatment, decreased from 55.8% to 50.9%.ConclusionsEVAR for rAAA is associated with lower perioperative and long-term mortality in Medicare beneficiaries. Increasing adoption of EVAR for rAAA is associated with an overall decrease in mortality of patients hospitalized for rAAA during the last decade

Synoptic conditions conducive for compound wind-flood events in Great Britain in present and future climates

Extreme wind is the main driver of loss in North-West Europe, with flooding being the second-highest driver. These hazards are currently modelled independently, and it is unclear what the contribution of their co-occurrence is to loss. They are often associated with extra-tropical cyclones, with studies focusing on co-occurrence of extreme meteorological variables. However, there has not been a systematic assessment of the meteorological drivers of the co-occurring \textit{impacts} of compound wind-flood events. This study quantifies this using an established storm severity index (SSI) and recently developed flood severity index (FSI), applied to the UKCP18 12km regional climate simulations, and a Great Britain (GB) focused hydrological model. The meteorological drivers are assessed using 30 weather types, which are designed to capture a broad spectrum of GB weather. Daily extreme compound events (exceeding 99th percentile of both SSI and FSI) are generally associated with cyclonic weather patterns, often from the positive phase of the North Atlantic Oscillation (NAO+) and Northwesterly classifications. Extreme compound events happen in a larger variety of weather patterns in a future climate. The location of extreme precipitation events shifts southward towards regions of increased exposure. The risk of extreme compound events increases almost four-fold in the UKCP18 simulations (from 14 events in the historical period, to 55 events in the future period). It is also more likely for there to be multi-day compound events. At seasonal timescales years tend to be either flood-prone or wind-damage-prone. In a future climate there is a larger proportion of years experiencing extreme seasonal SSI and FSI totals. This could lead to increases in reinsurance losses if not factored into current modelling