Burning a hole in the budget: tobacco spending and its crowd-out of other goods.

Smoking is an expensive habit. Smoking households spend, on average, more than $US1000 annually on cigarettes. When a family member quits, in addition to the former smoker's improved long-term health, families benefit because savings from reduced cigarette expenditures can be allocated to other goods. For households in which some members continue to smoke, smoking expenditures crowd-out other purchases, which may affect other household members, as well as the smoker. We empirically analyse how expenditures on tobacco crowd-out consumption of other goods, estimating the patterns of substitution and complementarity between tobacco products and other categories of household expenditure. We use the Consumer Expenditure Survey data for the years 1995-2001, which we complement with regional price data and state cigarette prices. We estimate a consumer demand system that includes several main expenditure categories (cigarettes, food, alcohol, housing, apparel, transportation, medical care) and controls for socioeconomic variables and other sources of observable heterogeneity. Descriptive data indicate that, comparing smokers to nonsmokers, smokers spend less on housing. Results from the demand system indicate that as the price of cigarettes rises, households increase the quantity of food purchased, and, in some samples, reduce the quantity of apparel and housing purchased.

Typical delay determines waiting time on periodic-food schedules: Static and dynamic tests.

Pigeons and other animals soon learn to wait (pause) after food delivery on periodic-food schedules before resuming the food-rewarded response. Under most conditions the steady-state duration of the average waiting time, t, is a linear function of the typical interfood interval. We describe three experiments designed to explore the limits of this process. In all experiments, t was associated with one key color and the subsequent food delay, T, with another. In the first experiment, we compared the relation between t (waiting time) and T (food delay) under two conditions: when T was held constant, and when T was an inverse function of t. The pigeons could maximize the rate of food delivery under the first condition by setting t to a consistently short value; optimal behavior under the second condition required a linear relation with unit slope between t and T. Despite this difference in optimal policy, the pigeons in both cases showed the same linear relation, with slope less than one, between t and T. This result was confirmed in a second parametric experiment that added a third condition, in which T + t was held constant. Linear waiting appears to be an obligatory rule for pigeons. In a third experiment we arranged for a multiplicative relation between t and T (positive feedback), and produced either very short or very long waiting times as predicted by a quasi-dynamic model in which waiting time is strongly determined by the just-preceding food delay.

Hypoallergenic legume crops and food allergy: factors affecting feasibility and risk.

Currently, the sole strategy for managing food hypersensitivity involves strict avoidance of the trigger. Several alternate strategies for the treatment of food allergies are currently under study. Also being explored is the process of eliminating allergenic proteins from crop plants. Legumes are a rich source of protein and are an essential component of the human diet. Unfortunately, legumes, including soybean and peanut, are also common sources of food allergens. Four protein families and superfamilies account for the majority of legume allergens, which include storage proteins of seeds (cupins and prolamins), profilins, and the larger group of pathogenesis-related proteins. Two strategies have been used to produce hypoallergenic legume crops: (1) germplasm lines are screened for the absence or reduced content of specific allergenic proteins and (2) genetic transformation is used to silence native genes encoding allergenic proteins. Both approaches have been successful in producing cultivars of soybeans and peanuts with reduced allergenic proteins. However, it is unknown whether the cultivars are actually hypoallergenic to those with sensitivity. This review describes efforts to produce hypoallergenic cultivars of soybean and peanut and discusses the challenges that need to be overcome before such products could be available in the marketplace.

I'll have what she's having: Effects of social influence and body type on the food choices of others

This research examines how the body type of consumers affects the food consumption of other consumers around them. We find that consumers anchor on the quantities others around them select but that these portions are adjusted according to the body type of the other consumer. We find that people choose a larger portion following another consumer who first selects a large quantity but that this portion is significantly smaller if the other is obese than if she is thin. We also find that the adjustment is more pronounced for consumers who are low in appearance self-esteem and that it is attenuated under cognitive load. © 2009 by Journal of Consumer Research, Inc.

"Call for prices": Strategic implications of raising consumers' costs

Many consumer durable retailers often do not advertise their prices and instead ask consumers to call them for prices. It is easy to see that this practice increases the consumers' cost of learning the prices of products they are considering, yet firms commonly use such practices. Not advertising prices may reduce the firm's advertising costs, but the strategic effects of doing so are not clear. Our objective is to examine the strategic effects of this practice. In particular, how does making price discovery more difficult for consumers affect competing retailers' price, service decisions, and profits? We develop a model in which a manufacturer sells its product through a high-service retailer and a low-service retailer. Consumers can purchase the retail service at the high-end retailer and purchase the product at the competing low-end retailer. Therefore, the high-end retailer faces a free-riding problem. A retailer first chooses its optimal service levels. Then, it chooses its optimal price levels. Finally, a retailer decides whether to advertise its prices. The model results in four structures: (1) both retailers advertise prices, (2) only the low-service retailer advertises price, (3) only the high-service retailer advertises price, and (4) neither retailer advertises price. We find that when a retailer does not advertise its price and makes price discovery more difficult for consumers, the competition between the retailers is less intense. However, the retailer is forced to charge a lower price. In addition, if the competing retailer does advertise its prices, then the competing retailer enjoys higher profit margins. We identify conditions under which each of the above four structures is an equilibrium and show that a low-service retailer not advertising its price is a more likely outcome than a high-service retailer doing so. We then solve the manufacturer's problem and find that there are several instances when a retailer's advertising decisions are different from what the manufacturer would want. We describe the nature of this channel coordination problem and identify some solutions. © 2010 INFORMS.

Can exchange rates forecast commodity prices?

We show that "commodity currency" exchange rates have surprisingly robust power in predicting global commodity prices, both in-sample and out-of-sample, and against a variety of alternative benchmarks. This result is of particular interest to policy makers, given the lack of deep forward markets in many individual commodities, and broad aggregate commodity indices in particular. We also explore the reverse relationship (commodity prices forecasting exchange rates) but find it to be notably less robust. We offer a theoretical resolution, based on the fact that exchange rates are strongly forward-looking, whereas commodity price fluctuations are typically more sensitive to short-term demand imbalances. © 2010 by the President and Fellows of Harvard College and the Massachusetts Institute of Technology.

Entry and competition in generic biologics

Patents for several blockbuster biological products are expected to expire soon. The Food and Drug Administration is examining whether biologies can and should be treated like pharmaceuticals with regard to generics. In contrast with pharmaceuticals, which are manufactured through chemical synthesis, biologies are manufactured through fermentation, a process that is more variable and costly. Regulators might require extensive clinical testing of generic biologies to demonstrate equivalence to the branded product. The focus of the debate on generic biologies has been on legal and health concerns, but there are important economic implications. We combine a theoretical model of generic biologies with regression estimates from generic pharmaceuticals to estimate market entry and prices in the generic biologic market. We find that generic biologies will have high fixed costs from clinical testing and from manufacturing, so there will be less entry than would be expected for generic pharmaceuticals. With fewer generic competitors, generic biologies will be relatively close in price to branded biologies. Policy makers should be prudent in estimating financial benefits of generic biologies for consumers and payers. We also examine possible government strategies to promote generic competition. Copyright © 2007 John Wiley & Sons, Ltd.

Gold mining in the Peruvian Amazon: global prices, deforestation, and mercury imports.

Many factors such as poverty, ineffective institutions and environmental regulations may prevent developing countries from managing how natural resources are extracted to meet a strong market demand. Extraction for some resources has reached such proportions that evidence is measurable from space. We present recent evidence of the global demand for a single commodity and the ecosystem destruction resulting from commodity extraction, recorded by satellites for one of the most biodiverse areas of the world. We find that since 2003, recent mining deforestation in Madre de Dios, Peru is increasing nonlinearly alongside a constant annual rate of increase in international gold price (∼18%/yr). We detect that the new pattern of mining deforestation (1915 ha/year, 2006-2009) is outpacing that of nearby settlement deforestation. We show that gold price is linked with exponential increases in Peruvian national mercury imports over time (R(2) = 0.93, p = 0.04, 2003-2009). Given the past rates of increase we predict that mercury imports may more than double for 2011 (∼500 t/year). Virtually all of Peru's mercury imports are used in artisanal gold mining. Much of the mining increase is unregulated/artisanal in nature, lacking environmental impact analysis or miner education. As a result, large quantities of mercury are being released into the atmosphere, sediments and waterways. Other developing countries endowed with gold deposits are likely experiencing similar environmental destruction in response to recent record high gold prices. The increasing availability of satellite imagery ought to evoke further studies linking economic variables with land use and cover changes on the ground.

Sensory information and associative cues used in food detection by wild vervet monkeys.

Understanding animals' spatial perception is a critical step toward discerning their cognitive processes. The spatial sense is multimodal and based on both the external world and mental representations of that world. Navigation in each species depends upon its evolutionary history, physiology, and ecological niche. We carried out foraging experiments on wild vervet monkeys (Chlorocebus pygerythrus) at Lake Nabugabo, Uganda, to determine the types of cues used to detect food and whether associative cues could be used to find hidden food. Our first and second set of experiments differentiated between vervets' use of global spatial cues (including the arrangement of feeding platforms within the surrounding vegetation) and/or local layout cues (the position of platforms relative to one another), relative to the use of goal-object cues on each platform. Our third experiment provided an associative cue to the presence of food with global spatial, local layout, and goal-object cues disguised. Vervets located food above chance levels when goal-object cues and associative cues were present, and visual signals were the predominant goal-object cues that they attended to. With similar sample sizes and methods as previous studies on New World monkeys, vervets were not able to locate food using only global spatial cues and local layout cues, unlike all five species of platyrrhines thus far tested. Relative to these platyrrhines, the spatial location of food may need to stay the same for a longer time period before vervets encode this information, and goal-object cues may be more salient for them in small-scale space.

Prices versus quantities versus bankable quantities

Quantity-based regulation with banking allows regulated firms to shift obligations across time in response to periods of unexpectedly high or low marginal costs. Despite its wide prevalence in existing and proposed emission trading programs, banking has received limited attention in past welfare analyses of policy choice under uncertainty. We address this gap with a model of banking behavior that captures two key constraints: uncertainty about the future from the firm's perspective and a limit on negative bank values (e.g. borrowing). We show conditions where banking provisions reduce price volatility and lower expected costs compared to quantity policies without banking. For plausible parameter values related to U.S. climate change policy, we find that bankable quantities produce behavior quite similar to price policies for about two decades and, during this period, improve welfare by about a $1 billion per year over fixed quantities. © 2012 Elsevier B.V.

Validation of the Food-Linked Virtual Response task.

This research validates a computerized dietary selection task (Food-Linked Virtual Response or FLVR) for use in studies of food consumption. In two studies, FLVR task responses were compared with measures of health consciousness, mood, body mass index, personality, cognitive restraint toward food, and actual food selections from a buffet table. The FLVR task was associated with variables which typically predict healthy decision-making and was unrelated to mood or body mass index. Furthermore, the FLVR task predicted participants' unhealthy selections from the buffet, but not overall amount of food. The FLVR task is an inexpensive, valid, and easily administered option for assessing momentary dietary decisions.