Economics Insights @ CBS

Several researchers have proposed models of buyer behavior in noncontractual settings that assume that customers are "alive" for some period of time and then become permanently inactive. The best-known such model is the Pareto/NBD, which assumes that customer attrition (dropout or "death") can occur at any point in calendar time. A recent alternative model, the BG/NBD, assumes that customer attrition follows a Bernoulli "coin-flipping" process that occurs in "transaction time" (i.e., after every purchase occasion).

A complete model of smile interpretation needs to incorporate its social context. We argue that embodied simulation is an unlikely route for understanding dominance smiles, which typically occur in the context of power. We support this argument by discussing the lack of eye contact with dominant faces and the facial and postural complementarity, rather than mimicry, that pervades hierarchical relationships.

We consider a pricing problem in an environment where the customers' willingness-to-pay (WtP) distribution may change at some point over the selling horizon. Customers arrive sequentially and make purchase decisions based on a quoted price and their private reservation price. The seller knows the WtP distribution pre- and post-change, but does not know the time at which this change occurs. The performance of a pricing policy is measured in terms of regret: the loss in revenues relative to an oracle that knows the time of change prior to the start of the selling season.

The financial crisis of 2007 to 2009 can be divided into two distinct phases. The first and more limited phase from August 2007 to August 2008 stemmed from losses in one relatively small segment of the U.S. financial system — namely, subprime residential mortgages. Despite this disruption to financial markets, real GDP in the United States continued to rise into the second quarter of 2008, and forecasters were predicting only a mild recession. In mid-September 2008, however, the financial crisis entered a far more virulent phase.

Five experiments investigated the hypothesis that perspective taking — actively contemplating others' psychological experiences — attenuates automatic expressions of racial bias. Across the first 3 experiments, participants who adopted the perspective of a Black target in an initial context subsequently exhibited more positive automatic interracial evaluations, with changes in automatic evaluations mediating the effect of perspective taking on more deliberate interracial evaluations.