Arizona State and Local Government Documents Collection

Supermarket retailers make strategic pricing decisions in a high-frequency, repeated game environment both in buying and selling fresh produce. In this context, there is some question as to whether a non-cooperative equilibrium can emerge that produces margins above the competitive level. Supermarket pricing results from tacitly collusive equilibria supported by trigger price strategies played in upstream markets. Upstream activities are, in turn, driven by periodic retail price promotions. We test this hypothesis using a sample of fresh produce pricing data from 20 supermarket chains in markets distributed throughout the U.S. Our results support the existence of tacitly collusive non-cooperative equilibria in upstream and downstream markets.

Many public programs promote diets rich in fruits and vegetables based on evidence on the derived health benefits. Sill, produce consumption in the U.S. lags behind other nations, even its most culturally similar neighbor–Canada. This study uses a structural latent variable model to test the role quality and health information play in explaining observed differences in produce consumption. The Alchian-Allen effect predicts that higher quality, higher absolute margin produce will be exported, suggesting that quality may be an important demand factor in importing nations such as Canada. The results show that dietary health information is significant in expanding demands. Quality also promotes fruit consumption in Canada.

Product-line length, or variety, is a key competitive tool used by retailers to differentiate themselves from rivals. Theoretical models of price and variety competition suggest that both store and product heterogeneity are key determinants of price and variety strategies, but none test this hypothesis in a rigorous way. This study provides the first empirical evidence on supermarket retailers’ combined price and variety strategies using a nested CES modeling framework. Unlike other discrete-choice models of product differentiation, the NCES model is sufficiently general to admit both corner and interior solutions in both store and product choice. The model is estimated using store-level scanner data for all grocery chains in a major West Coast market and finds that retailers do indeed use both price and product-line strategies to compete for market share, but tend to follow moderately cooperative pricing strategies and price and more cooperative strategies in variety.

Supermarkets use periodic price promotions, or “sales” on a regular basis for a variety of products. Relatively little is understood about why supermarkets promote perishable items such as fresh fruits and vegetables, dairy products or meat. The primary contribution of this paper lies in demonstrating that sales among perishable food items are mixed-strategy equilibria among multi-product retailers in which managers choose both the size of the promotion and the number of products to promote.

This paper presents a general method for pricing weather derivatives. Specification tests find that a temperature series for Fresno, California follows a mean-reverting Brownian motion process with discrete jumps and ARCH errors. Based on this process, we define an equilibrium pricing model for cooling degree day weather options. Comparing option prices estimated with three methods: a traditional burn-rate approach, a Black-Scholes-Merton approximation, and an equilibrium Monte Carlo simulation reveals significant differences. Equilibrium prices are preferred on theoretical grounds, so are used to demonstrate the usefulness of weather derivatives as risk management tools for California specialty crop growers.

Native American obesity and the associated health conditions are generally thought to result in part from a genetic predisposition to overeating fats and carbohydrates, called the “thrifty gene.” Although coined by nutritional scientists, this study maintains the origin of the thrifty gene lies in economics. Apparently harmful overconsumption and addiction constitute economically rational behavior if the increment to current utility from adding to one’s stock of “consumption capital” is greater than the present value of utility lost in the future due to ill health and the costs of withdrawal. Tests of these conditions for such “rational addiction” are conducted using two-stage household production approach. The results obtained by estimating this model in a panel of Native and non-Native supermarket scanner data show that both Natives and non-Natives tend to be inherently forward-looking in their nutrient choices, but Natives tend to have far higher long-run demand elasticities for carbohydrates compared to non-Natives. Consequently, reductions in real food prices over time, primarily among foods that are dense in simple carbohydrates, leads Native Americans to over-consume potentially harmful nutrients relative to their traditional diet.

Agricultural cooperatives tend to be riskier than investor-oriented firms, both in a business and financial sense. However, cooperative managers are often reluctant to actively manage risk. Although the “risk management irrelevance proposition” suggests that cooperative managers should be unable to add shareholder value through risk management activities, this study argues that there are several reasons why this is not likely to be the case for cooperatives. Several empirical examples are provided through numerical simulation of pro-forma financial statements from representative agricultural cooperatives. Using mean variance, expected utility and valueat-risk metrics, the results of these simulations show that various risk management strategies can improve the risk-return profile of a typical cooperative.

The Lanchester model of strategic interaction typically considers only two-firm rivalry and one strategic tool. This paper presents an alternative that considers rivalry among several firms using multiple tools. Marketing decisions are dynamically optimal and use equations of motion for market share that are consistent with optimal consumer choice. Using a single-market case study that consists of five years of monthly data on ready to eat cereal sales, advertising, product development investments and new product introductions, we test our model against a similar Lanchester specification. Non-nested specification tests fail to reject the proposed model, but reject the Lanchester alternative.

MGT of America, Inc. was retained to conduct a study for the Arizona Department of Transportation to determine whether there was a compelling interest to justify a disadvantaged business enterprise program for ADOT. MGT found that minority, women and disadvantaged business enterprises were substantially underutilized as prime contractors in construction and construction-related professional services. African American, Hispanic American, and Asian-owned firms were under-utilized as construction subcontractors. The study provides factual predicate evidence for the selective use of project goals for African American, Hispanic American, and Asian American construction subcontractors.