Types Of Buyers Research Articles

Buying high and selling low in the lodging-property market

An analysis of more than 1,300 hotel transactions recorded between 1985 and 1992 revealed a pattern of consistent overpayment by some types of buyers and underselling by certain classes of sellers. Further comparisons of specific hotel-property types with various combinations of buyers and sellers showed that sale prices are frequently affected by certain combinations of property characteristics with the attributes of buyers and sellers. Individual buyers, for example, regularly overpaid for the properties they bought and were particularly influenced by average daily rate. On the other hand, the Resolution Trust Corporation created considerable market distortion by regularly discounting hotels it sold, because it undervalued its properties' proximity to city centers and their ADRs.

Expanding the Limits of Merger Arbitrage

In this paper we show that when bidders are in the S&P 500 Index, risk arbitrage portfolio returns are 85 percent larger than when they are not. We also show that acquisitions by S&P 500 buyers are more likely to be completed, and take less time to complete, than are deals by different buyers. These results indicate that risk arbitrage returns can be extended by strategies involving S&P 500 bidders. In addition, we find share price runups followed by price reversals on all buyer types when stock, and not cash, is used as currency for the acquisition. This phenomenon occurs around merger completion, which is a non-information day. Thus, our finding documents that the buyers' short-run demand curve exhibits inelastic behavior, and is evidence in support for Scholes' (1972) price-pressure hypothesis.

Simultaneous Signaling and Screening with Warranties

It is well known that sellers can use warranties to screen consumers and increase profits. The ability of warranties to signal is also well accepted. The author considers a situation in which a high quality seller needs warranty policy to both screen and signal. Through an analytical model, the objective is to identify the optimal strategy for a high quality seller that offers a base warranty and optional extended warranty for a product whose quality is not observable to buyers. The author finds that signaling can limit a seller's ability to screen, especially when buyers are willing to pay a significant premium for higher quality. To signal, the seller generally lengthens base warranties and shortens optional coverage, making the bundles for each type of buyer more and more similar. The author also provides an empirical application of the model in the Toronto used-car market.

When to Haggle

A seller faces a buyer with unknown reservation value. We show that buyer risk aversion can make it in the seller's interest to haggle. That is, the seller should make an initial offer and then, if it is rejected, make a second offer with some probability strictly less than one. This is true regardless of whether the seller haggles over price, quality, or price and quality simultaneously. The results are extended to contexts with multiple types of buyers and multiple dimensions for haggling.

Dynamics in Ownership and Firm Survival: Evidence from Corporate Germany

This study investigates the determinants of changes in corporate ownership and firm failure, taking into account different types of sellers and buyers of control blocks. For a large panel of German corporations we find that firms are more likely to fail or to be sold when performance is poor, financial pressure is high, and firm size is small. Cross ownership deters control changes, and ownership concentration has a non-linear impact on the likelihood of control transfer. In contrast to corporate shareholders, private shareholders tend to sell control blocks when financial pressure increases.

Sequential Descending-Price Auctions with Asymmetric Buyers: Evidence from a Fish Market

The paper reports an analysis of price behaviour at a fish market which is organised as a sequence of descending-price auctions and which is attended by two different types of buyers: retailers and wholesalers. The main outcome of this study is that although each type of buyer paid different prices for quality-corrected lots of fish, the trends of prices are not significantly affected by buyers' asymmetric preferences and behaviours. In addition, the observed trends are best explained by Milgrom and Weber (1982) benchmark model which assumes symmetric risk neutral buyers and by its variations which assume risk averse buyers or an uncertain supply.

The Effect of the Big Eight Accounting Firm Mergers on the Market for Audit Services

The research assesses how the two Big Eight mergers of 1989 affected the market for audit services. A data set of 1,978 firms over a 12-year period is used to test four theories of how the mergers could have affected competition and consumer welfare. The study finds that the mergers reduced the marginal costs of auditing large clients. There is no evidence that the mergers were anticompetitive or that they reduced costs for all types of audit buyers.

Evolving market structure: An ACE model of price dispersion and loyalty

We present an agent-based computational economics (ACE) model of the wholesale fish market in Marseille. Two of the stylized facts of that market are high loyalty of buyers to sellers, and persistent price dispersion, although it is every day the same population of sellers and buyers that meets in the same market hall. In our ACE model, sellers decide on quantities to supply, prices to ask, and how to treat loyal customers, while buyers decide which sellers to visit, and which prices to accept. Learning takes place through reinforcement. The model explains both stylized facts price dispersion and high loyalty. In a coevolutionary process, buyers learn to become loyal as sellers learn to offer higher utility to loyal buyers, while these sellers, in turn, learn to offer higher utility to loyal buyers as they happen to realize higher gross revenues from loyal buyers. The model also explains the effect of heterogeneity of the buyers. We analyze how this leads to subtle differences in the shopping patterns of the different types of buyers, and how this is related to the behavior of the sellers in the market.

Identifying The Demand For Features: An Application To Mainframe Computers

This paper examines the mainframe computer market from 1985–1991 and attempts to identify the types of buyers that demand particular computer features, such as speed and memory. To identify these buyers, demand for computer characteristics is estimated using a demand model based on Rosen (1974). Through these demand estimates we are able to show that the advent of on-line transactions processing was pushing the demand for computer speed and memory to some extent. However, beyond this specialized application, only a few industries seemed to be demanding the newest technology, while the majority of buyers continued to buy small mainframes throughout the sample period.

Multidimensional Mechanism Design for Auctions with Externalities

In an auction with externalities, a buyer's type is multidimensional and specifies the payoff he would get for each of theN+1 possible outcomes: the seller keeps the object or buyeri(i=1,…,N) gets the object. We provide a characterization of multidimensional incentive compatible mechanisms similar to that for one-dimensional mechanisms. Although reservation utilities are endogenous and type-dependent, the participation constraint is binding for only one “critical” type. A main difficulty in a multidimensional setting is the “integrability” condition. We present a geometric characterization for discontinuous conservative vector fields. In auctions where the buyers submit scalar bids and the seller transfers the object to one of the buyers for sure, a second-price auction maximizes revenue. With two buyers, this auction remains optimal even if the seller can set a reservation price.Journal of Economic LiteratureClassification Numbers: C7, C72.

Multiproduct Outputs and Scale Economies in Electric Power Production: Some New Estimates

The present study offers an argument, through a technical exposition, which suggests that there are cost differences inherent in serving different types of buyers in the electric utilities industry. To this end, we employ a translog joint cost function (for electricity production) with three outputs, which allows for the examination of the cost differences between wholesale and retail trade for vertically integrated, investor-owned companies in the industry. The regression estimates suggest different costs at the means, however the estimated marginal cost curve for wholesale power is not as robust as those for low-voltage and industrial power.

The distribution structure in three continents: an evolutionary analysis of Italy, Japan and the United States

Relying on internationally comparable input-output tables, the paper compares the cost of distribution services to market prices in Italy, Japan and the United States between 1970 and 1990, for various types of final buyers and for various product groups. While this ratio is shown to be stable over time in the United States, it rises significantly in both Italy and Japan over the last two decades. However, disaggregate rates for product groups reveal significant differences between Italy and Japan. We present an evolutionary interpretation of this observed behaviour based on the industrial organisation of the distribution system.

How advertising works: the role of research

Introduction - John Philip Jones PART ONE: MARKETS AND ADVERTISING The Advertising Process - Timothy Joyce The Turbulent Depths of Marketing - Leo Bogart Brand Growth - Josh McQueen, Alice K Sylvester and Scott D Moore The Past, The Present Penetration, Brand Loyalty and the Penetration Supercharge - John Philip Jones Repetitive Advertising and the Consumer - Andrew S C Ehrenberg Is Advertising Still Salesmanship? - John Philip Jones Expansion Advertising - Brian Wansink PART TWO: RESEARCH BEFORE THE ADVERTISING RUNS Market Research - John Philip Jones Why We Need To Be Careful Likeability - Alexander L Biel Why Advertising That Is Well Liked Sells Well Qualitative Research in Advertising - Jan S Slater Perceptual Mapping - John Philip Jones Brain Wave Measures of Media Involvement - Herbert E Krugman Consumer Preferences as Predictions - Alfred Politz and W Edwards Deming Quantitative Pretesting for Television Advertising - John Philip Jones Rough versus Finished Commercials in Research - Paula Pierce Electronic Media Audience Measurement - Fiona Chew Consumer Purchasing, Starch, and STAS - John Philip Jones Does Magazine Advertising Produce an Immediate Effect? PART THREE: RESEARCH AFTER THE ADVERTISING HAS RUN Retail Research, Consumer Panels, Store Checking - John Philip Jones Campaign Evaluation through Modeling - Simon Broadbent Tracking Studies - Paul Feldwick Television Advertising - Nigel Hollis Short- and Long-Term Effects Do Award-Winning Commercials Sell? - Donald Gunn Single-Source Research - John Philip Jones Is STAS a Uniform Measure for All Types of Buyers? - John Philip Jones PART FOUR: ADVERTISING EFFECTS, INCLUDING SOME UNEXPECTED ONES How Much Advertising Works? - John Philip Jones Reduced Advertising and Its Impact on Profitability and Market Share in a Recession - Alexander L Biel Margin and Price Effects of Manufacturers' Brand Advertising - Robert L Steiner Macroeconomic Effects - John Philip Jones The Influence of Advertising on Overall Sales Levels

A model of pricing behavior: An econometric case study

Empirical pricing studies are scarce in the modern literature in spite of their obvious importance for understanding competition. The present study employs a structural model to identify deviations of individual pricing routines from the commonly assumed single-period profit maximization. It is applied to individual wholesale firms, because wholesale pricing has a decisive influence on the price formation in the entire economic system and because hardly any research exists in this area. The results show that wholesale firms operate in imperfectly competitive world markets providing a highly differentiated service package. Traders apply pricing rules consistent with cost mark-up pricing. The mark-up varies among traders with the extent to which a firm's pricing strategy deviates from full profit maximization. This divergent behavior is associated with firm size, the type of buyers served and other aspects of the wholesale service package.

Repeated Signalling Games and Dynamic Trading Relationships

A seller of a nondurable good repeatedly faces a buyer who is privately informed about the position of his demand curve. The seller offers a price in each period. The buyer chooses a quantity given the price. The quantity demanded reveals information about the buyer. An equilibrium is characterized with the feature that buyer types separate completely in the first period. This equilibrium uniquely satisfies a modified refinement of the Cho-Kreps criterion. Despite the immediate separation, the buyer distorts his behavior throughout the game. The requirement to signal types can raise the utility of all types of informed players. Copyright 1998 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

Strategic groups as subsets of strategic scope groups in the Belgian brewing industry

This research report proposes a distinction between strategic scope groups and strategic groups whereby strategic groups are delineated within strategic scope groups. A strategic scope group (SSG) includes firms within an industry that define their business using a four-dimensional ‘strategic space’ consisting of buyer types, product types, geographical reach and level of vertical integration, in a similar way. Within each SSG there may be several strategic groups (SGs). An SG includes firms within an SSG that deploy their resources in a similar way and that compete in the same way. While all firms within an SSG may compete against each other, firms within the same SG compete against each other in a similar way. Within the brewing industry in Belgium five SSGs could be identified. These SSGs differ statistically significantly on a risk-adjusted return on assets measure. SGs themselves did not differ on this performance measure. One may therefore conclude that mobility barriers between SSGs are higher than they are between SGs. © 1997 by John Wiley & Sons, Ltd.

A Competitive Distribution of Auctions

In this paper a competitive distribution of auctions is described for an economy consisting of an infinite number of buyers and sellers, all of whom differ according to their valuation for the single indivisible object being traded. A competitive distribution of auctions is such that no seller can improve his profits by deviating to any alternative direct mechanism. It is shown that the competitive distribution of auctions will have the property that each buyer and seller's best reply is independent of his beliefs about the tastes of other buyers and sellers on the market. The purpose of this paper is to provide an equilibrium for an economy in which sellers compete by offering different direct mechanisms to buyers. No attempt is made to give a complete characterization of all possible equilibria, rather we focus on one equilibrium in which the contracts that are offered by sellers in equilibrium, and buyer's behaviour under these contracts, are both independent of traders' beliefs about one another. The equilibrium illustrates one of the reasons why contracts that are employed in practice may not be as finely tuned to beliefs as the theory of mechanism design says that they should be. The answer is simply that contracts are not offered in a vacuum. Sellers in the model studied in this paper need to compete with one another in order to attract buyers. Highly-tuned mechanisms tend to extract buyer surplus. In such an environment, sellers are able to attract many buyers by offering to use cruder mechanisms that leave some surplus for buyers. In this paper, sellers are allowed to have different costs for the commodity that is being traded. Nonetheless, the equilibrium (for the limit economy in which there are infinitely many buyers and sellers) is such that every seller offers a second-price auction and publicizes a reserve price equal to his cost. In a standard monopoly auction the optimal reserve price for the seller exceeds his cost by an amount that depends on his beliefs about buyers' valuations (Myerson (1981)). A seller who raises his reserve price has his profits affected in two distinct ways. By raising his reserve price the seller makes it unprofitable for some buyer types to participate in his auction. The seller therefore loses any surplus that he might have earned by trading with these buyers. The buyers who still find it profitable to participate in the seller's auction will end up having to pay a higher price when they win because of this increase in the seller's reserve price. This means that the seller will be able to extract a bit more surplus from buyers who continue to participate. The seller raises the reserve price until the marginal cost associated with raising the reserve price is just equal to the marginal gain associated with the ability to extract more surplus from remaining buyers. Competition mitigates this argument since there is a limit to the amount of surplus that the seller can extract from remaining buyers before they decide that they should instead choose one of the alternative auctions that are being held on the market. With

Buying High and Selling Low in the Lodging-Property Market

An analysis of more than 1,300 hotel transactions recorded between 1985 and 1992 revealed a pattern of consistent overpayment by some types of buyers and underselling by certain classes of sellers. Further comparisons of specific hotel-property types with various combinations of buyers and sellers showed that sale prices are frequently affected by certain combinations of property characteristics with the attributes of buyers and sellers. Individual buyers, for example, regularly overpaid for the properties they bought and were particularly influenced by average daily rate. On the other hand, the Resolution Trust Corporation created considerable market distortion by regularly discounting hotels it sold, because it undervalued its properties' proximity to city centers and their ADRs.

Middlemen in Bilateral Search Markets

This article examines the role of middlemen in bilateral search markets (e.g., employment agencies, real estate brokers). It is shown that the middleman narrows the set of buyer (firm) and seller (worker) types who search; seller types with high valuations and buyer types with low valuations drop out of the search market and instead trade through the middleman. The middleman also decreases the equilibrium search intensities of those agents who search. It is proven that the middleman improves welfare if search is very costly and inefficient and decreases welfare if search is effectively costless and very efficient.

Classifying buyers to gain marketing insight: A relationships approach to professional services

The service industry firms are increasingly engaged in international operations. The significance of international marketing of services is increasing. It is being recognized that forming relationships with the customers is important to sell professional services. The existing service marketing literature has paid little attention to this aspect of service marketing. In this paper a buyer-seller relationship-based marketing scheme is developed. Two dimensions of buying situations are identified. Combining the above two buying dimensions four different types of buyers are identified and appropriate marketing strategies are discussed. The paper is based on face-to-face interviews with the executives. The paper also develops a scheme for movement from one marketing situation to another.