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Production disruptions in supply chain systems affect all supply chain members and lead to problems such as the ripple effect. As observed from practice that the production disruption, which is caused by labor strike, natural disaster or equipment breakdown, occurs frequently and the manufacturer has to consider this seriously so as to control the risk. In this paper, we study the problem by examining the impacts on the consumer, supply chain agents and society brought by production disruptions. We explore the different parameters influences on the optimal decisions of retail price and the profit of supply chain agents as well as the profit variance. We also further extend the model by making wholesale price or penalty fee fixed, and find that the profit will not be affectted by both of wholesale price and penalty fee. However, the wholesale price (penalty fee) will affect the profit variance of the supply chain agents. The findings imply that for risk neutral supply chain agents, wholesale price (penalty fee) is not the core factor for them, but it is crucial for the risk averse or risk seeking supply chain agents. We think this paper fills the gap by examining the profit risk in a supply chain facing production disruptions and also the impacts on consumer surplus and society. [ABSTRACT FROM AUTHOR]

The Kerandangan Nature Tourism Park (KNTP), as a conservation area, provides various ecosystem services that do not have direct market value or are intangible. These ecosystem services include benefits in climate regulation, soil protection, water purification, and habitat for biodiversity. Besides that, the KNTP has many tourist attractions, such as the biophysical potential presented in the form of waterfalls, rivers, camping ground and various flora and fauna. KNTP management has planned the development of sustainable natural tourism. The development of natural tourism that ignores the area's function as a conservation area has the potential to cause environmental degradation. Therefore, it is necessary to assess natural resources and intangible environmental services using the Willingness to Pay (WTP) and consumer surplus. The aim of this research is to measure the economic value of natural tourism environmental services in KNTP based on visitors' willingness to pay (WTP) and consumer surplus value. The approach used in this research is the travel cost approach. This approach uses travel costs to estimate the value of WTP and consumer surplus. The research results show that the average WTP value is IDR 13,300 and the consumer surplus value is IDR 171,232 per visit. The WTP value obtained is much smaller than the consumer surplus value. This shows that ticket prices for natural tourism at TWA Kerandangan can still be increased. Willingness of visitors to pay compensation costs, prevent damage to the tourist environment, support conservation and the quality of ecosystem environmental services.

The diversion of manufacturers' branded products outside the authorized channel leads to the emergence of gray markets (GMs), which is legal under the doctrine of first sale. Product diversion to GMs can negatively affect manufacturers' brand reputation. In this study, we analyze a manufacturer's strategic channel choice decision and its implications for social welfare in the presence of GMs and strategic consumers. We present scenarios in which the presence of GMs can either have a positive or negative impact on the manufacturer and the supply chain. Our findings indicate that the manufacturer and the supply chain become worse off due to product diversion to GMs under lower channel differentiation and high penalty cost for the loss of brand reputation due to product diversion. This effect is more severe for a decentralized supply chain, where product diversion does not directly affect the retailer's profitability due to the erosion of brand reputation. In such scenarios, we suggest that manufacturers should follow a brand-protection strategy to curb product diversion to GMs. However, manufacturers selling product categories with low brand equity can follow a market-expansion strategy. In such cases, the presence of GMs provides an alternative channel to expand sales by capturing untapped consumer segments without incurring additional market search or advertising costs. This strategy also facilitates indirect price discrimination among consumers. We find that social welfare is higher when channel differentiation is low under a decentralized supply chain. [ABSTRACT FROM AUTHOR]

AbstractThis research aims at [1] identifying the factors that influence visits to Bunso Eco-Park; [2] estimating the recreational demand function for the park; and [3] estimating visitors’ net benefit (consumer surplus) for embarking on an eco-park recreational trip to Bunso using a sample size of 440. Estimates indicate that the annual person value of the site is Gh¢ 191.06 ($ 22.29) translating into an annual economic value of Gh¢ 9,170,880 (US$ 1,070,114.35). There is an inverse relationship between the rate of visits and the travel cost. The positive intercept of the demand function indicates a normal demand curve for the Bunso Eco-Park. The variables of visitors’ family size, marital status, and years visitors have known the eco-park were not significant. Educational level, age, gender, and knowledge of alternative sites were found to be factors influencing the visitation to the Bunso Eco-Park. Further valuation of the non-recreational value of Bunso Eco-Park would be useful to policymakers to place suitable management plans in sustaining and improving the quality of eco-park service.

Copyright of Deutsches Institut für Wirtschaftsforschung: DIW-Wochenbericht is the property of DIW Berlin and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

Because of a growing population and shrinking arable land, the world is facing a global food crisis. One important solution could be to subsidize farmers to sustain their production so that they can produce more food for consumers and earn more money for themselves. An efficient subsidy program should also aim to reduce income inequality among farmers, as measured by the Gini coefficient of farmers' income. In this paper, we examine and compare the effects of input and output farm subsidy programs. The input subsidy reduces the farmers' input purchasing costs, whereas the output subsidy reduces the farmers' output processing costs. By considering a continuum of infinitesimal price-taking farmers who are heterogeneous in their average yield rates, our equilibrium analysis of a game-theoretical model yields three results. First, both subsidy schemes reduce the aggregate income inequality measured by the Gini coefficient. However, they create the following "opposite" effects: the input subsidy decreases the income gap among farmers (under mild conditions), whereas the output subsidy increases it. Second, farmers with low yield rates prefer the input subsidy, whereas farmers with high yield rates prefer the output subsidy. Third, the output subsidy scheme is more effective in improving the total farmer income than the input subsidy scheme, whereas the input subsidy scheme is more effective in reducing income disparities and improving consumer surplus than the output subsidy scheme. Our results provide new insights for policymakers who are crafting subsidy schemes. This paper was accepted by Jayashankar Swaminathan, operations management. Funding: This work was supported by the National Natural Science Foundation of China [Grants 71971184, 71972025, and 72032001], the Departmental General Research Fund of the Hong Kong Polytechnic University [Grant P0008761], and the Research Grants Council of Hong Kong [Grants 15504615 and 15500820]. Supplemental Material: The online appendix and data are available at https://doi.org/10.1287/mnsc.2023.4850. [ABSTRACT FROM AUTHOR]

In this article, a utility function framework is developed, serving to determine the demand for an upcoming demand responsive transportation system. A linear’public-good game’ (PGG) model is modified in a way that maximizing the consumer surplus is assumed to determine individual decision-making. This modification allows for considering the endowment effect in the function, which is expected to enable for a more precise distinction among customer segments. The purpose of this approach is to create a possibility for including descriptive behavioral economic findings in a normative modeling concept. It shall serve as a theoretical basis for coming empirical investigations.

Using both the travel cost and contingent valuation methods, a case study of Lakes Prespa was utilized to assess the demand functions for carp and non-carp angling separately. An on-site survey questionnaire was used to collect the data, which was completed in 2019. The results showed that when travel costs and bid amounts are higher or when anglers are traveling in larger groups, they travel less frequently. On the other hand, the number of trips is positively correlated with income, angling experience, the use of a motorized boat, the number of trips taken to other sites, and retirement. The mean daily consumer surplus values for carp and non-carp anglers were calculated to be €7.24 and €4.33, respectively, using the trip cost method, and €7.83 and €4.61 using the contingent valuation method. Regardless of the method of valuation utilized, carp anglers' consumer surplus was more than 1.7 times that of non-carp anglers, demonstrating that ordering in fish species values is robust to valuation methods. Furthermore, the convergent validity of the two techniques was identified. The results will help fisheries managers make more successful and resource-efficient fishing decisions, as well as policymakers justify funding initiatives targeted at managing and protecting this resource.

This study examines the quantitative conditions under which an energy metering pricing model is proposed to increase both gas merchant profits and gas customer consumer surplus compared to a volumetric pricing model. The quantitative condition is found to be related to factors such as the standard unit calorific value of natural gas prescribed by the National Development and Reform Commission (NDRC) and other relevant government departments under the energy metering pricing model. This paper establishes a mathematical model based on optimization theory to explore the operational decisions of city gas suppliers in the volumetric and energy metering and pricing modes, respectively, under the condition of relatively stable natural gas sales price. The results of the study show that DAC and other authorities can regulate the standard unit calorific value of natural gas under the energy metering and pricing model by regulating the standard unit calorific value of natural gas. This affects the incentives of gas dealers to produce and operate, guides the preference of gas users for natural gas energy metering and pricing, and results in the derivation of formulas for a reasonable range of standard unit calorific values for natural gas. The findings of this paper provide theoretical support to promote the reform of natural gas energy measurement and pricing, and contribute to the development of the natural gas industry. [ABSTRACT FROM AUTHOR]

The bundling of goods/services is a technique many firms use to influence product demand, generate higher revenues, and enhance consumer surplus. In the telecommunications industry, offering incentive bundles of different mobile phone services is an effective technique to reach such goals in a competitive market. This paper presents a bundle pricing approach for mobile services, which determines the optimal content of service bundles in terms of the type and number of services offered to different customer segments. The proposed model aims to maximize the total firm's revenue and total consumer surplus, as the main mobile service operator's objectives. The model recognizes differential pricing as a useful tool in revenue management. First, an efficient segmentation of customers in terms of their taste and willingness to pay for different mobile services is conducted using the k-means clustering technique. Next, to handle customer buying behavior, the customer reservation price is considered based on the customers' arrival rates and their statistical distribution. Finally, the bundles' content and prices are optimized considering the type and number of services offered to different segments. Our computational experiments using sample data show the effectiveness of the proposed model toward the improvement of revenue as well as consumer surplus.

This study examines the quantitative conditions under which an energy metering pricing model is proposed to increase both gas merchant profits and gas customer consumer surplus compared to a volumetric pricing model. The quantitative condition is found to be related to factors such as the standard unit calorific value of natural gas prescribed by the National Development and Reform Commission (NDRC) and other relevant government departments under the energy metering pricing model. This paper establishes a mathematical model based on optimization theory to explore the operational decisions of city gas suppliers in the volumetric and energy metering and pricing modes, respectively, under the condition of relatively stable natural gas sales price. The results of the study show that DAC and other authorities can regulate the standard unit calorific value of natural gas under the energy metering and pricing model by regulating the standard unit calorific value of natural gas. This affects the incentives of gas dealers to produce and operate, guides the preference of gas users for natural gas energy metering and pricing, and results in the derivation of formulas for a reasonable range of standard unit calorific values for natural gas. The findings of this paper provide theoretical support to promote the reform of natural gas energy measurement and pricing, and contribute to the development of the natural gas industry.

This paper addresses two central questions in markets with adverse selection: How does information impact the welfare of market participants (sellers and buyers)? Also, what is the optimal information disclosure policy and how is it affected by the planner's relative welfare weight on sellers' surplus versus consumers' surplus? We find that as a result of improved information, prices become more strongly associated with the true quality of sellers and, thus, more dispersed. This will result in higher total surplus. Furthermore, we find that better information has opposing welfare effects on consumers and producers that could lead to limited disclosure depending on the social objective and market characteristics. [ABSTRACT FROM AUTHOR]

ABSTRACTIn the context of a vertically differentiated duopoly model with endogenous quality choice, we analyzes the welfare effect of overlapping ownership when the market is fully covered. The results show that overlapping ownership, while detrimental for consumer surplus, may increase or decrease social welfare and firms’ profits. In particular, when the overlapping ownership structure is such that the lower-quality firm acquires a positive share of the higher-quality firm’s profit, an increase in overlapping ownership reduces the lower-quality firm’s incentive to compete against its rival, leading to a higher level of industry profit and, therefore, a higher level of overall welfare.

Objective: To explore the changes in social welfare before and after the implementation of the national volume-based procurement (NVBP). Explore whether the NVBP promotes the healthy development of manufacturers under the premise of benefiting patients. Then put forward relevant suggestions on how to effectively intervene the government in the pharmaceutical market. Methods: Starting with consumer surplus and producer surplus, social welfare was studied from the three perspectives of price, supply, and demand. Results: Consumer surplus was significantly increased, and the drug welfare of patients was significantly improved. The profits of the whole pharmaceutical industry have decreased but will increase in the future. The welfare of individual pharmaceutical enterprises varies. Overall social welfare has been significantly improved. Conclusion: The core purpose of the NVBP is to improve the medication welfare of patients, and through the increase of consumer surplus, it can affect the increase of producer surplus. Under such a linkage mechanism, the diversified linkage system of "price, demand, and supply" will achieve the effect of "1 + 1+1 > 3". [ABSTRACT FROM AUTHOR]

This study examines whether and how an online service marketplace can leverage refund options endorsed by different parties (i.e., the platform or sellers) to address the "lemons" problem that is due to the intangibility, variability, and unreturnable nature of the services sought. We show that both platform refund insurance and a seller-guaranteed refund increase service demand, with platform refund insurance as the more effective option and hence having a more effective signaling mechanism, and that sellers with a better reputation or less popularity might benefit less from refund options. An investigation on further use of the more effective refund option, a "having platform refund insurance or being cast out" policy (i.e., retaining platform refund-insured sellers but expelling uninsured ones), reveals the effectiveness of this policy in filtering out low-quality sellers, shown as an improved quality of sellers on the platform due to new sellers' replacing those who were expelled, yet a cost (i.e., a loss in demand and consumer welfare) for the platform due to the changes in characteristics (e.g., price) of sellers. This cost, however, is lower than the benefit from the improved quality of the sellers, so that the platform's overall performance improves. This study examines whether and how an online service marketplace can leverage refund options endorsed by different parties (i.e., the platform or sellers) to address the "lemons" problem that is caused by the intangibility, variability, and unreturnable nature of the services sought. Through developing a signaling mechanism and a corresponding demand estimation model, we show that both platform refund insurance and a seller-guaranteed refund increase service demand, with platform refund insurance as the more effective option and hence having a more effective signaling mechanism. A reduced-form analysis suggests that sellers with a better reputation or less popularity might benefit less from refund options. An investigation on further use of the more effective refund option, a "having platform refund insurance or being cast out" policy (i.e., retaining platform refund-insured sellers but expelling uninsured ones), using counterfactual simulations and supply-side single interrupted time series designs, reveals the effectiveness of this policy in filtering out low-quality sellers, shown as an improved quality of sellers on the platform due to the change in sellers (i.e., new sellers' replacing those who were expelled) both immediately after the policy and in the (near) equilibrium, yet a cost (i.e., a loss in demand and consumer welfare) for the platform in the (near) equilibrium due to the changes in characteristics (e.g., price) of sellers. This cost, however, is lower than the benefit from the improved quality of the sellers, so that the platform's overall performance improves. The study also quantifies the consumer welfare of the online service marketplace and provides practical insight for consumers, sellers, and online service marketplace operators. History: Juan Feng, Senior Editor; Beibei Li, Associate Editor. Funding: This work was supported by the National Natural Science Foundation of China [Grants 71972047, 71831005, and 91746302]. Supplemental Material: The online supplement is available at https://doi.org/10.1287/isre.2022.1162. [ABSTRACT FROM AUTHOR]

The goal of this study is to assess and quantify the potential employment accessibility benefits of shared-use automated vehicle (AV) mobility service (SAMS) modes across a large diverse metropolitan region considering heterogeneity in the working population. To meet this goal, this study proposes employing a welfare-based (i.e. logsum-based) measure of accessibility, obtained via estimating a hierarchical work destination-commute mode choice model. The employment accessibility logsum measure incorporates the spatial distribution of worker residences and employment opportunities, the attributes of the available commute modes, and the characteristics of individual workers. The study further captures heterogeneity of workers using a latent class analysis (LCA) approach to account for different worker clusters valuing different types of employment opportunities differently, in which the socio-demographic characteristics of workers are the LCA model inputs. The accessibility analysis results in Southern California indicate: (i) the accessibility benefit differences across latent classes are modest but young workers and low-income workers do see higher benefits than high- and middle-income workers; (ii) there are substantial spatial differences in accessibility benefits with workers living in lower density areas benefiting more than workers living in high-density areas; (iii) nearly all the accessibility benefits come from the SAMS-only mode as opposed to the SAMS+Transit mode; and (iv) the SAMS cost per mile assumption significantly impacts the magnitude of the overall employment accessibility benefits.

This article challenges the conventional wisdom that decreases in total revenue always cause firms to be worse off. Instead, innovations and entry causing clockwise rotations or parallel supply shifts can increase producer surplus even when total revenue decreases. Textbooks claiming producers are worse off when total revenue declines are misleading because producer surplus increases initially even when revenue declines. Schumpeterian entrepreneurs who create innovations that benefit low-productivity/high-marginal-cost production cause clockwise supply rotations, and entrepreneurs that create innovations that provide similar benefits to both high- and low-productivity producers cause parallel supply shifts. The article's focus on entry and innovation illustrates the importance of Julian Simon's argument that focusing on allocation rather than innovation often leads to wrong conclusions and Alchian's argument that uncertain foresight makes profit maximization meaningless as a guide to specifiable action. Though producer surplus increases then declines, consumer and total surplus always increase. Producer surplus eventually declines when clockwise supply rotations lead supply to be more elastic than demand, where the price-reducing effect of the innovation dominates the costreducing and quantity-enhancing effects. Entry and innovation that generate rightward parallel supply shifts cause producer surplus to increase at an increasing rate when supply is elastic until the inflection point where supply is unit elastic. Beyond the inflection point, parallel rightward supply shifts cause producer surplus to increase at a decreasing rate and, eventually, decline. Last, we conduct a numerical 3D analysis illustrating how entry and innovation that cause supply to rotate and shift affect producer surplus. [ABSTRACT FROM AUTHOR]

Lake Tana is a well-known tourist spot in northern Ethiopia that lures both domestic and foreign tourists. The lake's value is still underrated, despite the site's immense potential for recreation and tourism. In this study, the recreational value of Lake Tana is estimated, and the consumer characteristics associated with recreational demand are analyzed. The study employs a Zero-Truncated Poisson (ZTP) regression model for data generated by the Individual Travel Cost Method (ITCM) and draws information from 1094 on-site surveys. According to ZTP regression results, variables that are significantly and positively associated with demand for Lake Tana recreation include the monthly income and age of the visitors and their preference for other recreation destinations such as Tis-Abay and Gondar Fasiledes Royal Castle. However, respondents' leisure time, overall cost, and residential distance from the recreational site are all negatively associated with the demand for recreation. It is also evident that Lake Tana is endowed with a wealth of attributes, ranging from natural beauty to ancient religious and cultural heritages, making the lake a highly desirable recreation destination. According to the estimation, Lake Tana has a yearly recreational value of around USD 68.5 million. However, it also demonstrates that if lake settings were to improve in quality, the value of Lake Tana would rise considerably, reaching USD 151 million. The value of sentimental attachment implies that determining Lake Tana's recreational value is a key element in the resource's sustainable utilization and management. To make greater use of Lake Tana's recreational amenities, however, uncontrolled waste disposal, favorable recreation facilities, and the spread of water hyacinth should be addressed immediately. Furthermore, it is imperative to maintain the lake's diverse attributes, as the integration of these attributes is what gives the lake its primary appeal. [ABSTRACT FROM AUTHOR]

Copyright of Revista de Economia e Sociologia Rural is the property of Sociedade Brasileira de Economia e Sociologia Rural and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

In many settings, consumer surplus directly impacts a firm or organization's objective, and the profit‐only objective becomes inadequate. Our paper is the first to consider the dual objective of profit and consumer surplus in multi‐product pricing under the multinomial logit demand, where the prices are continuously set. We define a firm's marginal consumer surplus as its marginal contribution to the expected customer utility transformed into monetary unit. Although the profit is concave in the choice probability space, the marginal consumer surplus is convex, complicating the analysis. We identify the optimal monopoly pricing solution and develop solution approaches for the equilibrium solutions of both price‐competition and quantity‐competition oligopolies. In the monopolistic setting, we solve the optimal solution in a near‐closed‐form expression, and show that the firm's markup and profit decline as its emphasis for marginal consumer surplus increases and eventually drops to zero when the firm turns into a social welfare maximizer. Therefore, social welfare is maximized only when the monopolist is willing to endure zero profit. In competitive settings, if one firm's emphasis on marginal consumer surplus increases, then the improvement in marginal consumer surplus can magnify through competitive forces, reflected in reduced equilibrium prices for all firms. Moreover, we find that, while the overall marginal consumer surplus always increases with any firm's weight on marginal consumer surplus in its objective (referred to as the CS weight), a firm's marginal consumer surplus increases in its own CS weight but decreases in other firms' CS weight. Finally, we prove that, all else equal, a firm with a higher CS weight can earn a higher profit than its profit‐maximizing competitors, which is counterintuitive. In the quantity competition, a firm may even increase its absolute profit level by increasing its CS weight. [ABSTRACT FROM AUTHOR]

This article estimates the life-cycle value of risperidone as representative of second-generation antipsychotics (SGA) relative to haloperidol (first-generation antipsychotics). We estimated the number of patients treated with risperidone in Sweden and the United Kingdom, from 1994 to 2017, using data of usage and volume sales. We collected data from the literature on the effectiveness (quality-adjusted life-years per patient per year), direct costs (health services), and indirect costs (productivity) of risperidone and haloperidol. We proxied the incremental value added by the new class (SGA) using a comparator from the inferior class. Next, we modeled the life-cycle uptake of risperidone to estimate the life-cycle incremental cost (ie, direct, indirect, and medicine costs), incremental quality-adjusted life-years, and net monetary benefit of risperidone. We also assessed the life-cycle distribution of the social surplus between the payer (consumer surplus) and the innovator (producer surplus). For the United Kingdom, consumer surplus represents around 72% of the total surplus before patent expiration and around 95% after patent expiration. For Sweden, the consumer surplus represents around 94% of the total surplus before patent expiration and around 99% after generic competition. These results suggest that the value added by SGAs to the system is higher than the expected value estimated using cost-effectiveness analysis at launch. Pricing and reimbursement decisions could recognize the full life cycle of value of innovative medicines. This not only presents a challenge of estimation but also of assessing the appropriate division of shares of social value. [ABSTRACT FROM AUTHOR]

Conventional cost-effectiveness analysis (CEA) for the value-based pricing of new medicines largely ignores the implications of limited market exclusivity (ie, patent-protection periods plus any exclusivity granted by regulators). This paper explores the implications of this methodological shortcoming, which produces several pricing anomalies with potentially unintended effects on research and development (R&D) incentives. We illustrate these implications by comparing 4 stylized examples of increasing complexity, from short-term cures for acute conditions to long-term cures for rare, health-catastrophic conditions. (1) Conventional-CEA will project a different result than an adjusted CEA that considers generic or biosimilar entry; (2) free and flexible pricing of long-term treatments (eg, statins for hypercholesterolemia) or repeated-dose cures (eg, insulin for type 1 diabetes) for chronic conditions will likely result in predictable price increases at the end of the exclusivity period that may be perceived as unjustified or unsupported; and (3) one-time administration "cures" (eg, gene therapy for spinal muscular atrophy) have the potential to allocate a large share of the social surplus to the manufacturer over the product lifetime, which may or may not be dynamically efficient per se , but may also inadvertently disadvantage the development of valuable long-term treatments or repeated-dose cures for chronic conditions. We highlight the need for additional research on long-term solutions to these issues that would aim to promote dynamically efficient global R&D. More work is needed on the following: (1) relationships between social surplus allocation and the amount and composition of global R&D, as we may be as likely to be encouraging excessive R&D in some areas as to be undersupplying it in others; and (2) relating the size of the surplus reward to R&D cost and, thus, the return on investment. • Conventional cost-effectiveness analyses have generally not taken patent expiry (or, similarly, "loss of exclusivity") into account, and overlook the impact on sharing of social surplus between the manufacturer and society following the loss of exclusivity. • Different medicinal products are rewarded vastly different shares over an assumed product lifetime of 30 years, even when all are assumed and modeled to 12 years of exclusivity. • These practices generate pricing "anomalies" that might inadvertently create an unlevel playing field across different products, especially curative ones, and may be distorting prices, rewards, and incentives for the size and composition of pharmaceutical research and development in unintended ways. [ABSTRACT FROM AUTHOR]

Many studies have been conducted to analyze the impact of road capacity restrictions on transportation networks. Numerous studies related to network capacity restrictions have focused on estimating the inconvenience caused by an increase in travel time as a measurement indicator for capacity restrictions occurring over a short period of time. In terms of network capacity restrictions, this study focuses on monetary loss from the perspective of economic welfare analysis. Using an agent-based model, this study analyzes the effect of disrupting all modes over the short and long term as the capacity of roads is reduced because of area-wide road capacity restrictions. Many studies have used the method of estimating inconvenience caused by increased travel time as an effect analysis, but this study uses logsum-based benefit method; benefit estimated results by the two methods are then compared. A large difference between the two benefit calculation methods was found. In detail, although there was a large loss in terms of increased travel time because of capacity reduction, despite the increase in average travel time because of the long-term change of modes, the derived consumer surplus inconvenience was relatively small because of the adjustment in the utility between modes. The effect of mode conversion was reflected in the benefits of consumer surplus from the perspective of a consumer welfare analysis. The case study showed that the scale of the inconvenience of the consumer surplus method was small because of the highly influential transport policy in small study area, where it was easy to switch between walking and cars. The present study targeted drastic policies that are expected to be quite difficult to accept socially, but a somewhat relaxed scenario analysis is also needed. In addition, it is necessary to consider inconvenient loss for changing the departure time and route in the further studies. [ABSTRACT FROM AUTHOR]

In the cost–benefit analysis of transportation investment, although the benefit estimation method due to the effect of travel time saving has been widely used, several limitations with the method have been pointed out in a number of studies. As an alternative, a logsum-based benefit calculation has been widely adopted, with most of the research focused on urban transportation. Therefore, it is rarely applied to interregional transportation. In this study, we applied a logsum-based approach to the calculation of benefits for expressway road projects in Korea's long-term transportation plan. To calculate the logsum, this study used input data from both the mode choice and destination choice models, finding that an analysis of the feasibility of inter-regional road investment was possible. Various studies have calculated the benefits based on one of the two models. The two methods have similar formulas; however, varying results were derived due to differences in the application of formulas for parameter estimation and benefit estimation. In conclusion, the proposed methods are expected to enable a more comprehensive evaluation of the transport system. Looking at more detailed research results, the logsum based on the mode choice model had great benefits in the Seoul metropolitan area where demand was high; however, the logsum of the destination-based model showed a large difference in distribution of benefits evenly by various metropolitan areas. On the other hand, it was found that the traditional reduction of travel time was much less by region than the logsum methods, but the effect was large in the metropolitan area. From the perspective of the theoretical and practical consumer surplus analysis, we suggest open discussions regarding which method to choose when calculating benefits from the mode choice logsum model, the destination logsum model and travel time savings method. [ABSTRACT FROM AUTHOR]

The "right-to-repair" (RTR) movement calls for government legislation that requires manufacturers to provide repair information, tools, and parts so that consumers can independently repair their own products with more ease. The initiative has gained global traction in recent years. Repair advocates argue that such legislation would break manufacturers' monopoly on the repair market and benefit consumers. They further contend that it would reduce the environmental impact by reducing e-waste and new production. Yet the RTR legislation may also trigger a price response in the product market as manufacturers try to mitigate the profit loss. This paper employs an analytical model to study the pricing, welfare, and environmental implications of RTR. We find that, as the RTR legislation continually lowers the independent repair cost, manufacturers may initially cut the new product price and then raise it. This nonmonotone price adjustment may further induce a nonmonotone change in consumer surplus, social welfare, and the environmental impact. Strikingly, the RTR legislation can potentially lead to a lose–lose–lose outcome that compromises manufacturer profit, reduces consumer surplus, and increases the environmental impact despite repair being made easier and more affordable. This paper was accepted by Charles Corbett, operations management. Funding: Chen Jin gratefully acknowledges the Singapore Ministry of Education Academic Research Fund [Tier 1, Grant R-253-000-144-133]. Supplemental Material: The online appendix is available at https://doi.org/10.1287/mnsc.2022.4401. [ABSTRACT FROM AUTHOR]

In order to promote the high-quality development of Zhoushan City′s tourism industry, this paper used the form of questionnaire and the method of travel cost interval analysis to evaluate the value of Zhoushan City′s marine tourism resources, and put forward countermeasures and suggestions. The results showed that the total travel cost of Zhoushan City was in a reasonable range. According to the calculation results of consumer surplus, the overall satisfaction of sample tourists with Zhoushan City′s tourism was not high. In 2019, the value of marine tourism resources in Zhoushan City was 139.915 billion yuan, and marine tourism resources were the precious wealth of Zhoushan City. Zhoushan City′s tourism industry had a lot of room for development. In the future, the construction of tourism environment should be strengthened, marine tourism formats be enriched, emerging tourism products be developed, a tourist demand response mechanism be established and the satisfaction of tourists at different levels be improved.

Introduction: Recent work examining the impact of climate-change induced extremes on food-energy-water systems (FEWS) estimates the potential changes in physical flows of multiple elements of the systems. Climate adaptation decisions can involve tradeoffs between different system outcomes. Thus, it is important for decision makers to consider the potential changes in monetary value attributed to the observed changes in physical flows from these events, since the value to society of a unit change in an outcome varies widely between thing like food and energy production, water quality, and carbon sequestration.Methods: We develop a valuation tool (FEWSVT) that applies theoretically sound valuation techniques to estimates changes in value for four parameters within the food-energy-water nexus. We demonstrate the utility of the tool through the application of a case study that analyzes the monetary changes in value of a modelled heat wave scenario relative to historic (baseline) conditions in two study regions in the United States.Results: We find that food (corn and soybeans) comprises the majority (89%) of total changes in value, as heatwaves trigger physical changes in corn and soybeans yields. We also find that specifying overly simplified and incorrect valuation methods lead to monetary values that largely differ from FEWSVT results that use accepted valuation methods.Discussion: These results demonstrate the value in considering changes in monetary value instead of just physical flows when making decisions on how to distribute investments and address the many potential impacts of climate change-induced extremes.

This paper studies a green manufacturer's strategic licensing of its green technology to a brown rival under the consideration of the green manufacturer's environmental concerns. Consumers in the market have green awareness. Adopting the green technology not only helps manufacturers to reduce carbon emissions, but also to increase market sizes. The green manufacturer can choose from three technology licensing strategies, i.e., no licensing (N), royalty licensing (R) or fixed-fee licensing (F). The equilibrium licensing strategy can be derived by comparing the respective payoff after adopting the three strategies. It is found that the green manufacturer should choose fixed-fee licensing strategy when the market size expansion effect is strong, and the competition intensity is moderate; otherwise, the green manufacturer should choose royalty licensing strategy. Furthermore, it is found that when the green manufacturer is more concerned about environmental impacts, it will be more willing to choose fixed-fee licensing strategy, rather than royalty licensing strategy. Through numerical tests, some interesting results are also found. For example, the brown manufacturer might be hurt even if the cost reduction effect of technology licensing is relatively stronger. Moreover, it is found that consumer surplus and social welfare nonmonotonically change with the substitution level. In summary, this research tries to provide some guidelines to the industry and the society on better managing green technology diffusions. [ABSTRACT FROM AUTHOR]

This study aims to determine the economic value of tourism objects and whether there is a consumer surplus at the Petrus Kafiar beach based on the Travel Cost Method (TCM). The consumer surplus value is obtained by using the Individual Travel Cost Method (ITCM) approach and willingness to pay to calculate the willingness to pay of tourists visiting Petrus Kafiar Beach. The value of WTP obtained is Rp 23.358,21 per person per visit. Meanwhile, the average WTP (willingness to pay) per year for one visit is only Rp 5.491,23. The results of the integral calculation to find the consumer surplus of visitors to the Petrus beach tourism object, the consumer surplus is ranged from Rp 5.201,5 to Rp 10.403,91 per individual/visit. As for the factors that influence the number of visits to Petrus Kafiar beach, two significant variables were found, namely the level of income and distance at the 95% confidence level. [ABSTRACT FROM AUTHOR]

Tis-Abay Waterfall is a famous tourist destination in northern Ethiopia, attracting both domestic and international visitors. Although the site's recreation and tourism potential are enormous, the value of the waterfall remains underestimated; an application of economic valuation methods can provide information to better utilize the resource. This study estimates the recreational value of Tis-Abay Waterfall and analyzes the consumer characteristics associated with recreational demand. Drawing on data from 1044 on-site surveys, the study uses the Individual Travel Cost Method (ITCM) with a Zero-Truncated Poisson (ZTP) regression model. Results of the ZTP regression suggest that visitors' age, monthly income, and interest in alternative recreation sites like Lake Tana and Gondar Fasiledes Royal Castle are variables significantly and positively related with recreational demand for the Tis-Abay Waterfall. However, visitors' recreational demand is negatively associated with respondents' distance from the site, leisure time, and total cost of site access. The appraisal suggests that the Tis-Abay Waterfall has a significant annual recreational value of $9.5 million. But it also shows that the waterfall's value would increase significantly, up to $17.3 million, with hypothetical quality improvements in the waterfall settings. The value attachment suggests that estimating the recreation value for Tis-Abay Waterfall is a central component in the sustainable use and management of the resource. However, the presence of unfavorable trade-offs with the electric power plant and the inadequate infrastructure and services for reaching the site are major concerns that require immediate attention to make better use of Tis-Abay Waterfall's recreational services.

We investigate a modification of the Dixit–Stiglitz model supplemented by retailing; namely, we consider various situations of Stackelberg equilibrium under retailer leadership and the condition of free entry of manufacturers to the market. For each of the situations, we provide detailed solutions considered taking into account the preferences of participants in the market interaction. This allows one to understand which of the considered situations are most beneficial to occur for retailer, manufacturers, and for society as a whole. Moreover, optimal taxation is considered. Situations are revealed when it is beneficial for the state to tax and when, on the contrary, to subsidize the producer. [ABSTRACT FROM AUTHOR]

In recent years, online reviews are increasingly getting more concerns by firms and consumers because they can help mitigate consumers' uncertainty on product quality and experienced attributes and significantly affect firms' operational decisions. We in this study attempt to examine the remanufacturing entry and pricing strategies of manufacturers in the presence of online reviews. We consider an original equipment manufacturer (OEM) selling a new product over two periods in online retailing and determine whether and when to adopt a remanufacturing entry strategy in the market. We uncover online reviews' quality-dimensional effect and experienced dimensional effect that jointly determine the OEM's pricing and remanufacturing strategies. We show that in the presence of online reviews, the OEM will cautiously determine whether to adopt the first-period remanufacturing entry strategy and may also adopt the second-period remanufacturing entry strategy under certain conditions. Interestingly, the OEM will adopt the penetration pricing strategy for the new product and the remanufactured product (if available) when the actual product quality is sufficiently high, but the skimming pricing strategy otherwise, which is different from the uniform pricing strategy in the absence of online reviews. Our results also show that online reviews significantly affect the OEM's profit and consumer surplus. In particular, when the actual product quality is high enough, the OEM and consumers will attain the "win–win" situation. [ABSTRACT FROM AUTHOR]

This paper estimates the consumer surplus that Uber brings for consumers. The estimation uses three datasets: individual-level choice dataset—the National Household Travel Survey (NHTS) data of 2008–2009, origin-destination level dataset—Uber data, and Google data of 2017. Firstly, we use NHTS data to identify consumer's preferences in 2008 under a discrete-choice framework. Assuming unchanged preferences of consumers, we use the coefficients of the discrete-choice model to reveal passengers' demand on different transportation modes in 2017. After revealing the demand curve, this paper calculates the consumer surplus by differencing the consumer surplus in the circumstance where Uber is available with the consumer surplus of the scenario if Uber is not available. We find that Uber brings at least $0.76 gains for each trip. The overall consumer surplus generated by Uber in San Francisco is around $100 million per year.

Copyright of Journal of Agricultural Economics & Social Sciences is the property of Egyptian National Agricultural Library (ENAL) and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

Business rivals often collaborate on specific aspects of their operations in order to achieve cost efficiency. To better understand and manage such an operational collaboration, we formulate a multi‐stage duopoly competition model to study the strategic and welfare implications of a cost‐reducing cooperation between competing firms. Without any additional agreement beyond the collaborative effort in deterministic cost reduction, we characterize intuitive conditions under which there exists a unique equilibrium for the operational collaboration, where the high‐cost firm inputs more effort. Furthermore, the equilibrium cost reduction would benefit both firms when they have similar costs and/or their products have small substitutability. Moreover, such a pure operational collaboration never hurts consumer surplus. We then consider the effect of facilitating agreements and find that, with a properly designed unit transfer payment, the competition may be softened so that both firms are willing to collaborate. However, consumer surplus may decrease as a consequence. Finally, we assume that firms could receive signals of some random shock on the cost reduction process and examine the resulting Bayesian game. If the random shock is on the cost reduction fraction, then firms' equilibrium efforts could be independent of the random signal. If, however, the random shock is on the effort, then we apply simplifying assumptions and use special stochastic orders to capture the impact of signal variability on firms' effort levels. Our findings provide useful managerial insights into the underlying drivers of an operational collaboration between rivals. [ABSTRACT FROM AUTHOR]

With the development of data-intensive internet services, the world has witnessed explosive growth in mobile data consumption during the last couple of years. The upcoming generation of 5G-capable phones and networks will continue and even accelerate that process. At the same time, consumers are becoming more conscious about their data consumption because their monthly caps of mobile data plans can be easily exhausted by premium content, such as high-definition videos and virtual-reality games. In response, the mobile network operators (MNOs) have proposed a new business model, the so-called sponsored data plans, to subsidize consumers by transferring at least part of the data bills from consumers to content providers. Although industry practitioners claim that sponsored data plans increase consumer welfare, our analysis reveals that the impact of sponsored data on consumer surplus depends crucially on whether the MNO has complete information of the consumers' valuation of mobile data. Our analysis helps provide a clearer picture of the impact of sponsored data on consumer surplus while reconciling the conflicting views from scholars, digital rights groups, and the network carriers. With the upcoming next-generation 5G networks, mobile network operators (MNOs, such as AT&T, T-Mobile, and Verizon) are investigating new business models that encourage content providers (such as Netflix and Spotify) to sponsor data for consumers. Sponsored data allow customers to browse, stream, and enjoy content from their data sponsors without impacting their monthly data plan allowance. We analyze this recent phenomenon using an incomplete information game-theoretical model, where the MNO does not observe consumers' types (personal valuation of mobile data) and provides multiple data plans to consumers. We find that the impact of sponsored data on consumer surplus crucially depends on whether the MNO has complete information over consumer types: Under complete information, sponsored data do not improve consumer surplus. However, under incomplete information, sponsored data increase consumer surplus. Our analysis also shows that under incomplete information, the MNO should allow sponsored data in a wider range of market conditions than those under complete information. Our study suggests that prior literature tends to underestimate both the long-run detrimental effect of sponsored data on content diversity and the short-run beneficial effect on consumer surplus. Our findings offer important managerial implications for the MNO, who is interested in optimizing the data plans, and for policymakers who regulate the wireless internet market. [ABSTRACT FROM AUTHOR]

Consumer Surplus is traditionally defined for the case where demand is a deterministic function of the price. However, demand is usually stochastic and hence stock‐outs can occur. Policy makers who consider the impact of different regulations on Consumer Surplus often ignore the impact of demand uncertainty. We present a definition of the Consumer Surplus under stochastic demand. We then use this definition to study the impact of demand and supply uncertainty on consumers in several cases (additive and multiplicative demand noise). We show that, in many cases, demand uncertainty hurts consumers. We also derive analytical bounds on the ratio of the Consumer Surplus relative to the deterministic setting under linear demand. Our results suggest that ignoring uncertainty may severely impact the Consumer Surplus value. [ABSTRACT FROM AUTHOR]

This study aims to estimate the welfare gains of the Philippine milkfish industry in establishing local fry hatcheries to reduce imports from Indonesia and Taiwan. It also seeks to identify the industry stakeholders who gain from this import substitution endeavour. The economic surplus model was used to estimate the welfare gains from the commercialization of the hatchery-bred milkfish fry in the fishery sector. Specifically, the changes in consumer and/or producer surplus per stakeholder were compared to determine who the biggest gainers are. Results of the study showed that the consumer surplus from the milkfish fry industry was larger than its producer surplus. On the other hand, the reverse was true for the grow-out industry. It is interesting to note that the consumers in the fry industry and the producer in the grow-out industry were the same set of stakeholders, i.e., the milkfish grow-out operators, who gained the most from this development. The study also showed that commercializing the local milkfish hatchery technologies can bring about more benefits to the country than importing fry and fingerlings. Hence, the development of local hatcheries for other aquaculture species can be expected to bring similar welfare gains. More importantly, the technical and financial assistance that were extended by the government’s fishery institutions through the GAINEX project as pioneered by DOST-PCAARRD can serve as an effective catalyst to prospective hatchery operators in reducing the risks, especially when setting-up a new enterprise like the hatchery-bred fry for an emerging aquaculture species in the country.

Copyright of Notas Económicas: Revista da Faculdade de Economia da Universidade de Coimbra is the property of Imprensa da Universidade de Coimbra and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

Service contracts are common practice in some industries while being eliminated in others. To investigate this phenomenon, we identify expectation–reality discrepancy (ERD) as a key determinant. A provider's ERD is defined as consumers' ex‐ante expected valuation minus their ex‐post realized valuation of the provider's service. Our analysis reveals that providers' contract strategies critically depend on their ERDs rather than the true service valuations. A provider with a higher ERD is more likely to enforce contracts, regardless of whether the true service valuation is higher than that of the competitor. Providers should enforce contracts only when they have positive ERDs. Furthermore, contracts have a competition‐intensifying effect: when providers enforce contracts, their competition on promoting consumer expectations through marketing efforts is intensified, leading to higher ERDs with contracts than without contracts. Finally, consumers and society as a whole may benefit from higher switching costs because positive ERDs may mislead consumers to make wrong switching decisions and switching costs can help deter such switching behaviors. [ABSTRACT FROM AUTHOR]

Price postponement is an effective mechanism to hedge against the adverse effect of supply random yield. However, its effectiveness and the resulting production decisions have not been studied for risk-averse firms. In this paper, we investigate the impact of price postponement and risk aversion under supply yield risk. Specifically, we study a risk-averse monopoly firm's production and pricing decisions under supply random yield with two distinct pricing schemes: (1) ex ante pricing in which the firm simultaneously makes the sales price and sourcing decisions before production takes place and (2) responsive pricing in which the pricing decision is postponed until after the production yield realization. We adopt conditional value at risk (CVaR) as the risk-aversion measurement and investigate the impact of the firm's risk-aversion level on its optimal decisions and the corresponding profit. Among other results, we show that, for each pricing scheme, there exists a unique risk-aversion threshold under which the firm chooses not to produce. Interestingly, price postponement has no impact on the risk-aversion threshold as the cutoff values under both pricing schemes are the same. We further show that the value of CVaR improvement from responsive pricing may not be monotonic in the firm's risk-aversion level. Consequently, our results indicate that, although price postponement induces operational flexibility by better matching demand with available supply, whether the firm should adopt responsive pricing needs to be carefully evaluated as the benefit may not justify the potential fixed cost associated with price postponement, especially for a highly risk-averse firm. In addition, we show that responsive pricing, even with its ex post revenue-maximization behavior, benefits the end-market consumers in equilibrium. Finally, we conduct extensive numerical studies to check and confirm the robustness of our results. This paper was accepted by Charles Corbett, operations management. [ABSTRACT FROM AUTHOR]

In order to develop the biomedical industry, government subsidy of biosimilars is an incentive policy which has been used by the government. Different government subsidy strategies have an impact on drug price, consumer surplus, social welfare, the income of biosimilars enterprises and the demand of biosimilars, which have been deeply analyzed through backward induction of the dynamic game theory. The analysis shows that the price coefficient and the influence of the subsidy on demand will affect the choice of government subsidy strategies. It is concluded that under different subsidy strategies, consumer surplus, social welfare and the income of biosimilars enterprises are positively correlated with the amount of subsidy per unit product. This paper provides a decision-making basis for developing government subsidy strategies scientifically.

The objective of this paper is to introduce the Causal Theory of Action (CTA) based utility and consumer surplus, and compare it to the standard utility and consumer surplus that is based on Tversky's normative theory of choice. In addition to utility and consumer surplus, price level setting is also altered based on the (CTA). (CTA) based pricing is introduced. [ABSTRACT FROM AUTHOR]

In this paper, we investigate if an increasing competition in an oligopolistic market will enhance the real incomes and consumer surplus in the long run. For this purpose, we apply a twosector overlapping generation model in which members of the young generation own the oligopolistic firms. We show that increasing competition in the oligopolistic market leads to ambiguous outcomes regarding the real income and consumer surplus in the long run. However, we show that the distribution of income will become fairer if the competition increases, but it is possible that the price for a fairer distribution is a lower income for all members of the economy. [ABSTRACT FROM AUTHOR]

The nonlinear dynamical behaviors of economic models have been extensively examined and still represented a great challenge for economists in recent and future years. A proposed boundedly rational game incorporating consumer surplus is introduced. This paper aims at studying stability and bifurcation types of the presented model. The flip and Neimark–Sacker bifurcations are analyzed via applying the normal form theory and the center manifold theorem. This study helps determine an appropriate choice of decision parameters which have significant influences on the behavior of the game. The duopoly game that is formed by considering bounded rationality and consumer surplus is more realistic than the ordinary duopoly game which only has profit maximization. And then, some numerical simulations are provided to verify the theoretical analysis. Finally, we compare the dynamical behaviors of the built model with that of Bischi–Naimzada model so as to better understand the performance of the duopoly game with consumer surplus. [ABSTRACT FROM AUTHOR]

Online streaming wars are intensifying. Netflix is known as the market leader in the streaming business. However, since 2019, Netflix has been losing subscribers in the United States and is at a turning point where it needs to reassess its current position in the market. While Netflix is losing dominance, rivals Amazon Prime and Hulu continue to gain market shares. Studies from Deloitte and PricewaterhouseCoopers indicated a new shift in the streaming landscape caused by the abundance of streaming options and rising subscription costs. Recent surveys showed that consumers are excited about new streaming services, such as Disney +. Nearly two-thirds of consumers intend to terminate or downgrade one or more of their current subscriptions to make room for a new service. Moreover, it seems that consumers want ad-supported options. In Deloitte's latest Digital Media Trends survey, 65% responded that they would watch ads to eliminate or reduce subscription costs. Seventy percent of Hulu's subscribers choose its lower-priced ad-supported plan. NBC recently launched its own streaming service, Peacock, with a free ad-supported option. This opposes Netflix's brand identity of "no ads" and premium differentiation. With increasing pressure from competition and the growing risk of subscriber loss, Netflix needs to diversify its price plans. The company could try implementing the lower-priced mobile-only plan they are currently testing or plan to test in other regions. Netflix should also consider features or benefits for loyal subscribers to maintain a stronger consumer base. [ABSTRACT FROM AUTHOR]

Modeling Choices with Different Variabilities In "Heteroscedastic Exponomial Choice" (HEC), Aydın Alptekinoğlu and John Semple investigate a discrete choice model that can handle choices with utilities having different variances. This new model, the HEC model, nests the exponomial choice (EC) model as a special case. Like EC, HEC has excellent structure and permits the choice probabilities, demand elasticities, and consumer surplus to be expressed in an analytically convenient (closed) form. Determining optimal monopoly prices for products in an assortment as well as determining equilibrium prices for an oligopoly of single-product firms are both tractable problems. Moreover, fitting the choice model to real data is straightforward, given the shape (log-concavity) of the likelihood function for a given variance structure. The HEC model performed well against MNL (multinomial logit) and EC models in empirical tests on household panel data for 30 categories of grocery products. In particular, brand variance was statistically significant in virtually every product category tested. We investigate analytical and empirical properties of the Heteroscedastic Exponomial Choice (HEC) model to lay the groundwork for its use in theoretical and empirical studies that build demand models on a discrete choice foundation. The HEC model generalizes the Exponomial Choice (EC) model by including choice-specific variances for the random components of utility (the error terms). We show that the HEC model inherits some of the properties found in the EC model: closed-form choice probabilities, demand elasticities, and consumer surplus; optimal monopoly prices that are increasing with ideal utilities in a hockey-stick pattern; and unique equilibrium oligopoly prices that are easily computed using a series of single-variable equations. However, the HEC model has several key differences with the EC model, which show that variances matter: the choice probabilities (market shares) as well as equilibrium oligopoly prices are not necessarily increasing with ideal utilities; and the new model can include choices with deterministic utility or choices with zero probability. However, because the HEC model uses more parameters, it is harder to estimate. To justify its use, we apply HEC to grocery purchase data for 30 product categories and find that it significantly improves model fit and generally improves out-of-sample prediction compared with EC. We go on to investigate the more nuanced impact of the variance parameters on oligopoly pricing. We find that the individual and collective incentives differ in equilibrium: firms individually want lower error variability for their own product but collectively prefer higher error variability for all products—including their own—because higher error variability softens the price competition. [ABSTRACT FROM AUTHOR]