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We measure the change in household spending caused by receipt of the economic stimulus payments of 2008, using questions added to the Consumer Expenditure Survey and variation from the randomized timing of disbursement. Households spent 12–30 percent (depending on specification) of their payments on nondurable goods during the three-month period of payment receipt, and a significant amount more on durable goods, primarily vehicles, bringing the total response to 50–90 percent of the payments. The responses are substantial and significant for older, lower-income, and home-owning households. Spending does not vary significantly with the method of disbursement (check versus electronic transfer). (JEL D12, D14, E21, E62)

We identify retail brokers that seemingly route orders to maximize order flow payments, by selling market orders and sending limit orders to venues paying large liquidity rebates. Angel, Harris, and Spatt argue that such routing may not always be in customers' best interests. For both proprietary limit order data and a broad sample of trades from TAQ, we document a negative relation between several measures of limit order execution quality and rebate/fee level. This finding suggests that order routing designed to maximize liquidity rebates does not maximize limit order execution quality and thus brokers cannot have it all.

A wide body of empirical evidence finds that approximately 25 percent of fiscal stimulus payments (e.g., tax rebates) are spent on nondurable household consumption in the quarter that they are received. To interpret this fact, we develop a structural economic model where households can hold two assets: a low-return liquid asset (e.g., cash, checking account) and a high-return illiquid asset that carries a transaction cost (e.g., housing, retirement account). The optimal life-cycle pattern of portfolio choice implies that many households in the model are \"wealthy hand-to-mouth\": they hold little or no liquid wealth despite owning sizable quantities of illiquid assets. Therefore, they display large propensities to consume out of additional transitory income, and small propensities to consume out of news about future income. We document the existence of such households in data from the Survey of Consumer Finances. A version of the model parameterized to the 2001 tax rebate episode yields consumption responses to fiscal stimulus payments that are in line with the evidence, and an order of magnitude larger than in the standard \"one-asset\" framework. The model's nonlinearities with respect to the rebate size and the prevailing aggregate economic conditions have implications for policy design.

Channel rebates and returns policies are common mechanisms for manufacturers to entice retailers to increase their order quantities and sales ultimately. However, when the underlying demand depends on the retail price, it has been known that channel coordination cannot be achieved if only one of these mechanisms is deployed. In this article, we show that a policy that combines the use of wholesale price, channel rebate, and returns can coordinate a channel with both additive and multiplicative price‐dependent demands. In addition to determining the sufficient conditions for the contract parameters associated with the equilibrium policy, we show that multiple equilibrium policies for channel coordination exist. We further explore how the equilibrium policy can be adjusted to achieve Pareto improvement. Other issues such as the maximum amount of expected profit that the manufacturer can share under the coordinated channel, the structural properties of the contracts under both the additive and multiplicative price‐dependent demand functions are also discussed.

A new model of consumer behavior is developed using a hybrid of cognitive psychology and microeconomics. The development of the model starts with the mental coding of combinations of gains and losses using the prospect theory value function. Then the evaluation of purchases is modeled using the new concept of \"transaction utility.\" The household budgeting process is also incorporated to complete the characterization of mental accounting. Several implications to marketing, particularly in the area of pricing, are developed. This article was originally published in Marketing Science , Volume 4, Issue 3, pages 199–214, in 1985.

We use a new panel data set of credit card accounts to analyze how consumers responded to the 2001 federal income tax rebates. We estimate the monthly response of credit card payments, spending, and debt, exploiting the unique, randomized timing of the rebate disbursement. We find that, on average, consumers initially saved some of the rebate, by increasing their credit card payments and thereby paying down debt. But soon afterward their spending increased, counter to the permanent income model. Spending rose most for consumers who were initially most likely to be liquidity constrained, whereas debt declined most (so saving rose most) for unconstrained consumers.

We examine the role of algorithmic traders (ATs) in liquidity supply and demand in the 30 Deutscher Aktien Index stocks on the Deutsche Boerse in Jan. 2008. ATs represent 52% of market order volume and 64% of nonmarketable limit order volume. ATs more actively monitor market liquidity than human traders. ATs consume liquidity when it is cheap (i.e., when the bid-ask quotes are narrow) and supply liquidity when it is expensive. When spreads are narrow ATs are less likely to submit new orders, less likely to cancel their orders, and more likely to initiate trades. ATs react more quickly to events and even more so when spreads are wide.

This paper studies the impact of strategic customer behavior on supply chain performance. We start with a newsvendor seller facing forward-looking customers. The seller initially charges a regular price but may salvage the leftover inventory at a lower salvage price after random demand is realized. Customers anticipate future sales and choose purchase timing to maximize their expected surplus. We characterize the rational expectations equilibrium, where we find that the seller's stocking level is lower than that in the classic model without strategic customers. We show that the seller's profit can be improved by promising either that quantities available will be limited (quantity commitment) or that prices will be kept high (price commitment). In most cases, both forms of commitment are not credible in a centralized supply chain with a single seller. However, decentralized supply chains can use contractual arrangements as indirect commitment devices to attain the desired outcomes with commitment. Decentralization has generally been associated with coordination problems, but we present the contrasting view that disparate interests within a supply chain can actually improve overall supply chain performance. In particular, with strategic customer behavior, we find that (i) a decentralized supply chain with a wholesale price contract may perform strictly better than a centralized supply chain; (ii) contracts widely studied in the supply chain coordination literature (e.g., markdown money, sales rebates, and buyback contracts) can serve as a commitment device as well as an incentive-coordinating device; and (iii) some of the above contracts cannot allocate profits arbitrarily between supply chain members because of strategic customer behavior.

Using questions expressly added to the Consumer Expenditure Survey, we estimate the change in consumption expenditures caused by the 2001 federal income tax rebates and test the permanent income hypothesis. We exploit the unique, randomized timing of rebate receipt across households. Households spent 20 to 40 percent of their rebates on nondurable goods during the three-month period in which their rebates arrived, and roughly two-thirds of their rebates cumulatively during this period and the subsequent three-month period. The implied effects on aggregate consumption demand are substantial. Consistent with liquidity constraints, responses are larger for households with low liquid wealth or low income.

A feebate on the purchase of new cars, the Bonus/Malus, was introduced in France in 2008. Less polluting cars benefited from a price reduction of up to 1,000 euro, whereas the most polluting ones were subject to a taxation of 2,600 euro. We estimate the impact of this policy on carbon dioxide emissions in the short and long run. If the shift towards the classes benefiting from rebates is considerable, we estimate the environmental impact of the policy to be negative. While feebates may be efficient tools for reducing CO₂ emissions, they should thus be designed carefully to achieve their primary goal.