Showing papers in "The Journal of Business in 1965"

Market Segmentation and the Effectiveness of a Brand's Price and Dealing Policies

Abstract: HE marketing program of many firms is predicated on the assumption that their customers are heterogeneous with respect to purchasing habits. This assumption is often supported by data reporting that certain segments of customers buy more of a product than others. These customer segments are usually classified in terms of socioeconomic status, life cycle, location, and/or personality characteristics. The authors show that this simple view of market segmentation is not sufficient to provide an effective guide for management decisions. They advance a more precise conceptual framework for the evaluation of market segmentation as a strategy, based on estimates of the demand elasticities of individual market segments. In addition, they present the results of a research project aimed at estimating elasticities with respect to price and dealing activities for selected market segments for a frequently purchased food product. Their work represents an attempt to make the concept of market segmentation more operational and managerially meaningful. INTRODUCTION

Buying behavior: some research findings*

Abstract: TEH is article reviews, collates, and summarizes results of empirical research on buying behavior of household consumers. Some related information of the buying behavior of farmers and doctors is also included. The research objectives are to discover specific buying activities which have been investigated in a competent, professional manner and adequately described; to discover explanations of buying behavior which have been hypothesized and empirically tested; and to establish more general empirical propositions supported by a variety of pieces of evidence from a number of studies. The review should also lead to a definition of problem areas in the study of buying behavior where additional research would be desirable both from the standpoint of the marketer and other social scientists.

Some Problems of Pricing and Resource Allocation in a Non-Profit Industry- The Hospitals

Abstract: W THAT can be said of the implications of an industry in which the market constraints of competition and profit motivation are either absent or extremely weak, and there is no effective substitute device for stimulating efficiency? This paper considers certain relationships between prices, costs, capacity utilization, and resource allocation in such an industry hospitals. This is not a complete analysis of the hospital industry. Rather, it is an examination of but two aspects: the structure of room prices and the instability of demand. Under competitive conditions, prices in an industry consisting of profit-maximizing firms will equal marginal private costs in the short run and also average full costs in the long run. If private costs equal social-opportunity costs, the industry behavior will be optimal in the Pareto sense, given the existing resources, state of technology, and distribution of income. But hospitals constitute an industry in which competition is constrained by financial and other barriers to entry and by institutional arrangements which limitaccess by a patient to the one or more hospitals with which his physician is associated.' It is also an industry in which support by taxation or private philanthropy diminishes financial pressures and in which public opinion opposes profit. It is my contention that the resulting insulation of the industry from some important market pressures permits pricing and investment practices to develop which appear to be non-optimal; I shall seek to demonstrate this. The implication of the argument is that, even if the hospital industry remains essentially non-profit, economic efficiency could be increased if hospitals would act more frequently as if they were profit maximizers. Greater attention to costs in general and to marginal costs in particular is required. The remainder of this paper is divided into two sections. The first analyzes the structure of effective hospital room rates; the second analyzes the instability of demand for hospital facilities and the resulting idle capacity. The sections are essentially independent, except that they deal with problems which continue to exist in part because of the protection of the hospital industry from efficiency inducing pressures.

An Incomes Policy for the United States

Abstract: THE term "incomes policy" has been widely used in western Europe as a name for policies designed to restrain the increase of wages, profits, and other claims to income under conditions of full employment. The closest comparable policy in the United States is the announcement of price-wage guideposts in the Economic Report of the President. If there is a difference in meaning between the two terms, it is that term "incomes policy" suggests direct or separate measures to restrain the rise in profits, interest, and rent, while price-wage guideposts would restrain them indirectly and as a group by limiting the margin between prices and wages. Incomes policies are an attempt to make possible a low rate of unemployment without inflation. There can be little doubt that in and of itself, such a result would be desirable. Low unemployment and stable prices are both widely accepted goals of economic policy, and to get more of one with no less of the other would be universally applauded. There is room for doubt, however, about the effectiveness and costs of incomes policies. I have not myself studied the operation of incomes policies in western Europe. However, my colleague Arnold R. Weber has been studying these policies and has concluded that their effectiveness has been very limited both in extent and in duration. Wage and price restraint, especially if requested during a time of major economic difficulties such as a balance-of-payments crisis, will for a while have a noticeable impact. As time goes on, however, this impact weakens; the support given to the policies becomes eroded; and the underlying inflationary pressures reassert themselves. In many cases, the result has been a socalled wage drift-a rise in earnings above the increases in wages called for in collective-bargaining agreements. The sources of wage drift include shifts in occupational composition, or upgrading; increases in piecework or incentive earnings; and even the payment of "black wages" above the level specified by contract. One of the most interesting examples of the operation of incomes policies has been the Netherlands, which has a highly centralized system of tripartite collective bargaining in which wages are determined through complex negotiations among employer organizations, trade unions, and government economists and planners. The decisions reached through this unique process have the force of law. Nevertheless, the hourly earnings of male workers in the Netherlands rose 15.6 per cent in 1954, 8.5 per cent in 1956, and 10.8 per cent in 1957. Weber concludes, "Dutch experience indicates that governmental restraints and labor responsibility . . . can diminish immediate pressures on the general level of wages. Nonetheless, in a period of continued full employment, labor market forces will in* This paper is a slightly revised version of the one presented to the Conference of Business Economists, University of Chicago, April, 1965.

Note on a Theory of Firm Growth

Abstract: rTIHE problem of developing growth models for the individual firm is perenially interesting to the economist. One of the more recent and provocative of these attempts has been developing in the works of William J. Baumol.1 However, although Baumol's superstructure is formally correct, many of his assumptions are left implicit and many of the arguments are underexplained. When this structure is examined carefully, it may offer no great advance beyond the profit-maximization models.