nep-mkt New Economics Papers
on Marketing
Issue of 2006‒01‒24
nineteen papers chosen by
Joao Carlos Correia Leitao
Universidade da Beira Interior

  1. Environmental Implications of the Foodservice and Food Retail Industries By Davies, J. Clarence; Konisky, David
  2. The Political Economy of %u201CTruth-in-Advertising%u201D Regulation During the Progressive Era By Zeynep Hansen; Marc T. Law
  3. Private Profits and Public Health: Does Advertising Smoking Cessation Products Encourage Smokers to Quit? By Rosemary Avery; Donald Kenkel; Dean R. Lillard; Alan Mathios
  4. Technology Timing and Pricing In the Presence of an Installed Base By Qiu_Hong Wang; Kai-Lung Hui
  5. Perceived risk and trust associated with purchasing at Electronic Marketplaces By Verhagen, Tibert; Meents, Selmar; Tan, Yao-Hua
  6. Strategic Information Disclosure: The Case of Multi-Attribute Products with Heterogeneous Consumers By V. Joseph Hotz; Mo Xiao
  7. Il credito commerciale: problemi e teorie By Massimo Omiccioli
  8. The Decision to Adopt Internet-based E-Commerce : An Empirical Analysis Based on Swiss Firm-level Data By Heinz Hollenstein; Martin Woerter
  9. Demand-Based Option Pricing By Garleanu, Nicolae B.; Pedersen, Lasse Heje; Poteshman, Allen M
  10. A Quality-Adjusted Cost Index for Estimating Future Consumer Surplus from Innovation By Austin, David; Macauley, Molly
  11. Electricity Restructuring: Consequences and Opportunities for the Environment By Burtraw, Dallas; Palmer, Karen; Heintzelman, Martin
  12. Environmental Implications of the Tourism Industry By Davies, J. Clarence; Cahill, Sarah
  13. Public Participation in Environmental Planning in the Great Lakes Region By Konisky, David; Beierle, Thomas
  14. Public Support for Pollution Fee Policies for Motor Vehicles: Survey Results By Krupnick, Alan; Harrington, Winston; Alberini, Anna
  15. Searching for the Profit in Pollution Prevention: Case Studies in the Corporate Evaluation of Environmental Opportunities By Boyd, James
  16. Green Giving: An Analysis of Contributions to Major U.S. Environmental Groups By Richer, Jerrell
  17. Network Asymmetries and Access Pricing in Cellular Telecommunications By Viktória Kocsis
  18. A Discrete Choice Model of Consumption of Cultural Goods in Italy: the Case of Music By Donata Favaro; Carlofilippo Frateschi
  19. An Introduction to Water Management By P Nair; Deepak Kumar

  1. By: Davies, J. Clarence (Resources For the Future); Konisky, David
    Abstract: The growing size and importance of service sector industries in the U.S. economy raises questions about the suitability of the current environmental management system to deal with perhaps a changing set of environmental concerns. This paper analyzes the environmental impacts associated with the activities undertaken and influenced by two service sector industries—foodservice (e.g., restaurants) and food retail (e.g., grocery stores). This paper is not a definitive analysis of the magnitude of the environmental effects of these industries, but is intended to be a comprehensive survey of the types of environmental implications—positive and negative—of these two service sectors. The foodservice and food retail industries are components of a larger industrial system, the food marketing system, that extends from the production of food to the marketing of food products to consumers. The U.S. foodservice industry comprises an estimated 831,000 individual establishments, employs an estimated 11 million people (about 8.6% of the U.S. workforce), and is expected to have total sales of $376 billion in 2000. The U.S. food retail industry encompasses approximately 126,000 grocery stores, employs approximately 3.5 million people (about 2.7% of the U.S. workforce), and had sales totaling $449 billion in 1998. For this analysis, we use a simple conceptual framework that segregates the environmental impacts of these industries into three categories- direct, upstream, and downstream. We conclude that, while the direct environmental impacts (e.g., energy use, solid waste generation; air and water emissions; food safety concerns; refrigerants) of these industries are important to recognize and address, opportunities also exist for these industries to address their upstream and downstream environmental impacts.
  2. By: Zeynep Hansen; Marc T. Law
    Abstract: This paper explores the origins and impact of "truth-in-advertising" regulation during the Progressive era. Was advertising regulation adopted in response to rent-seeking on the part of firms who sought to limit the availability of advertising as a competitive device? Or was advertising regulation desired because it furnished a mechanism through which firms could improve the credibility of advertising? We find the available qualitative and quantitative evidence to be more consistent with the latter hypothesis.
    JEL: M37 K20 N41 N42
    Date: 2006–01
  3. By: Rosemary Avery; Donald Kenkel; Dean R. Lillard; Alan Mathios
    Abstract: To shed new light on the role private profit incentives play in promoting public health, in this paper we conduct an empirical study of the impact of pharmaceutical industry advertising on smoking cessation decisions. We link survey data on individual smokers with an archive of magazine advertisements. The rich survey data allow us to measure smokers' exposure to smoking cessation advertisements based on their magazine-reading habits. Because we observe the same information about the consumers that the advertisers observe, we can control for the potential endogeneity of advertising due to firms' targeting decisions. We find that when smokers are exposed to more advertising, they are more likely to attempt to quit and are more likely to have successfully quit. While some of the increased quitting behavior involves purchases of smoking cessation products, our results indicate that advertisements for smoking cessation products also increase the probability of quitting without the use of any product. Thus, the public health returns to smoking cessation product advertisements exceed the private returns to the manufacturers. Because advertising of a wide range of consumer products may have important and under-studied spillover effects on various non-market behaviors, our results have broad implications for the economics of advertising.
    JEL: I1 L1
    Date: 2006–01
  4. By: Qiu_Hong Wang (Department of Information Systems, National University of Singapore); Kai-Lung Hui (Department of Information Systems, National University of Singapore)
    Abstract: This study relaxes the conventional assumption in the literature of new product introduction that all consumers possess nothing at the beginning of the game. We generalize consumers’ utility function to a market in the presence of an installed base and characterize its specific properties pertaining to various market contexts with different consumer heterogeneity and technology improvement. In such a general setting, we investigate various feasible combinations of timing, pricing and product line strategies that the seller can employ in a two-period game for selling the new product to consumers with different purchase history and heterogeneous preference on product quality. Our subgame-perfect- equilibrium results suggest that other than the upgrade policy, the seller can maximize her profits via intertemporal price discrimination, or delayed introduction, or pooling pricing, depending on the characteristics of market structure and technology improvement. Without the concern about cost, social welfare directly depends on whether the seller can sustain her monopoly power facing the mutual cannibalization between the old and new products and the mutual arbitrage between the heterogeneous consumers.
    Keywords: New product introduction, intertemporal price discrimination, delayed product introduction, installed base, upgrade policy
    JEL: L
    Date: 2005–12–28
  5. By: Verhagen, Tibert (Vrije Universiteit Amsterdam, Faculteit der Economische Wetenschappen en Econometrie (Free University Amsterdam, Faculty of Economics Sciences, Business Administration and Economitrics); Meents, Selmar; Tan, Yao-Hua
    Abstract: Understanding consumer behaviour is of vital importance to consumer oriented e-business models today. In this paper we study the relationships between consumer perceptions of risk and trust and the attitude towards purchasing at a consumer-to-consumer electronic marketplace. Typical for electronic marketplace settings is that consumer behaviour is subject to perceptions of the selling party as well as the institutional structures of the intermediary that is operating the electronic marketplace. Building upon the well-established literature of trust we consider the concepts of institutional trust and party trust. We extend this categorization by introducing the concepts of institutional risk and party risk. We developed measurement instruments for institutional risk and party risk. All measurement scales have acceptable alphas and are unidimensional. An empirical study is conducted to explore the relationships between the risk and trust types and consumer purchase attitude. The results reveal significant, direct effects of party trust and party risk. Second order effects of institutional trust and institutional risk are investigated and reported. The paper concludes with general observations and recommendations for research and practice.
    Keywords: Consumer behaviour; e-Commerce
    JEL: M31
    Date: 2006
  6. By: V. Joseph Hotz; Mo Xiao
    Abstract: We examine the incentives for firms to voluntarily disclose otherwise private information about quality attributes of differentiated products. In particular, we focus on the case of differentiated products with multiple attributes and consumers that are heterogeneous in their preferences over these attributes. We show that there exist certain configurations of consumer preferences under which a firm producing a high-quality product, even with zero costs of disclosure, may choose not to reveal the quality of its product. This failure of firms to voluntarily disclose the quality of their products will arise when providing consumers with more information results in more elastic demands for these products, which, in turn, triggers more intensive price competition and leads to lower prices and profits for all firms. As a result, the equilibrium in which disclosure is voluntary may diverge from that in which disclosure is mandatory.
    JEL: L15 L5
    Date: 2006–01
  7. By: Massimo Omiccioli (Banca d'Italia)
    Abstract: This paper presents a survey of the literature on the determinants of inter-firm credit and on its implications for the transmission mechanism of monetary policy. Theoretical explanations for trade credit can be divided in two categories: a) theories based on real functions performed by trade credit; b) theories based on transaction and financial motivations. The former category includes theories that interpret the supply of trade credit as a tool to achieve a variety of marketing objectives (to build customer relationships, as a guarantee for product quality, as a mechanism for price discrimination, as a response to demand variability). The latter category includes theories that consider trade credit as a tool to reduce transaction costs (as a substitute for money) or as a financial alternative to bank credit or to other forms of financing. The paper also examines the macroeconomic implications of these theories, with special reference to the relations between trade credit and monetary policy. Conclusions set forward some hypotheses for research, by looking at preliminary evidence on European countries, which are characterised by strong differences in the length of payment terms that led to the adoption of an EC Directive on combating late payment in commercial transactions.
    Keywords: credito commerciale, dilazioni di pagamento, politica monetaria
    JEL: G32 L14 E52
    Date: 2004–06
  8. By: Heinz Hollenstein (Swiss Institute for Business Cycle Research (KOF), Swiss Federal Institute of Technology Zurich (ETH)); Martin Woerter (Swiss Institute for Business Cycle Research (KOF), Swiss Federal Institute of Technology Zurich (ETH))
    Abstract: The paper aims at explaining empirically the diffusion of E-commerce based on two largescale sample surveys conducted in the Swiss economy. The paper adds to previous work in two ways: firstly, we estimate separate models for E-selling and E-purchasing, and, secondly, we distinguish between inter-firm diffusion (i.e. technology adoption) and intra-firm diffusion (i.e. intensity of technology use). It turns out that the pattern of explanation strongly differs between the two types of E-commerce as well as the two types of diffusion. Therefore, further studies dealing with the diffusion of E-commerce should differentiate along these two dimensions. Besides, it is shown that institutional, technological and economic uncertainty as well as adjustment costs, which are neglected in most studies of diffusion, are important explanatory variables. Moreover, it turned out that “rank effects” are clearly more important drivers of adoption and intra-firm diffusion of the two types of E-commerce than “epidemic effects”, which are of some importance only in case of adoption.
    Keywords: Technology diffusion; Inter- vs. intra-firm diffusion; E-commerce; E-selling vs. E-purchasing; Information and Communication Technologies (ICT); Rank and epidemic effects of diffusion
    JEL: L2 O31 O33
    Date: 2004–07
  9. By: Garleanu, Nicolae B.; Pedersen, Lasse Heje; Poteshman, Allen M
    Abstract: We model the demand-pressure effect on prices when options cannot be perfectly hedged. The model shows that demand pressure in one option contract increases its price by an amount proportional to the variance of the unhedgeable part of the option. Similarly, the demand pressure increases the price of any other option by an amount proportional to the covariance of their unhedgeable parts. Empirically, we identify aggregate positions of dealers and end users using a unique dataset, and show that demand-pressure effects contribute to well-known option-pricing puzzles. Indeed, time-series tests show that demand helps explain the overall expensiveness and skew patterns of both index options and single-stock options.
    Keywords: dealers; demand; hedging; implied volatility; intermediation; market makers; option; price pressure; risk; valuation
    JEL: G0 G12 G13 G14 G2
    Date: 2005–12
  10. By: Austin, David; Macauley, Molly (Resources For the Future)
    Abstract: This paper describes a model for estimating, in a probabilistic framework, expected future consumer surplus from planned new product innovations. The model has been applied to estimations of taxpayer benefits from NASA's New Millenium Program (NMP), which develops new technologies for space science, and to the digital data storage technologies being supported by the Department of Commerce's Advanced Technology Program (ATP). The model uses cost index methods based on consumers' estimated marginal valuation for quality improvements in the technology. Probabilistic values for performance increases are taken from the innovators' own expectations. The analysis reveals the sensitivity of welfare increases to these values, which are assumed to be biased upward. The cost index, when combined with an expected rate of adoption, estimates consumer benefits from the innovation, gross of its research and development costs. Benefits are estimated net of a dynamic baseline defined by the best available substitute technology, which is also assumed to improve over time. Findings are therefore expressed in terms of the economic value of the innovation to consumers, compared to advances that might occur in the absence of the NMP or ATP investments. Illustrative results—estimated cost indices and 95% confidence bounds—are presented for technologies that are expected to improve consumer welfare and for those that, on a quality-adjusted cost basis, are likely to be outperformed by the selected baseline technology.
  11. By: Burtraw, Dallas (Resources For the Future); Palmer, Karen (Resources For the Future); Heintzelman, Martin
    Abstract: The universal theme of deregulation of the electricity industry is the dismantling of the exclusive franchise, opening up some segments of the industry to competition. Technological changes in generation have helped eliminate the perception that generation is a natural monopoly, but this change has not occurred in transmission and distribution services. Marketing functions have also been opened up to competition in many places. This paper includes a brief overview of the different approaches to restructuring that have been adopted in selected countries around the world. It also surveys the existing literature that explores various aspects of how electricity restructuring is likely to affect the environment. The effect of restructuring on the environment consists of four constituent influences- (1) changes in electricity demand and how it substitutes for (and complements) the consumption of other products, (2) the substitution among fuels and other inputs in electricity production, (3) efficiency improvements that stem from the introduction of competition, and (4) the interaction of firm behavior and market structure with existing and new incentive-based approaches to environmental regulation. Notwithstanding the possibility that electricity consumption displaces the use of other fuels in end uses, most studies find some negative environmental effect from increased consumption, especially with respect to carbon emissions. However, the efficiency gains that can be expected in delivering electricity services create the opportunity for additional environmental controls. Regulatory reform has arrived in the electricity sector, and it is expected to offer welfare gains that can be shared between economic and environmental objectives.
  12. By: Davies, J. Clarence (Resources For the Future); Cahill, Sarah
    Abstract: This report analyzes the environmental impacts of the tourism industry, which is the third largest retail industry in the United States, behind only automotive dealers and food stores. In 1998, travel and tourism contributed $91 billion to the U.S. economy, supporting 16.2 million jobs directly and indirectly. While extensive research has documented the significant economic impact of such service industries as tourism, little has been written about their effect on environmental quality. This study uses a framework developed from the industrial ecology literature to assess the impacts of the tourism industry on the environment. Three categories of impact are discussed- direct impacts, including impacts from the travel to a destination, the tourist activities in and of themselves at that destination, such as hiking or boating, and from the creation, operation, and maintenance of facilities that cater to the tourist; "upstream" impacts, resulting from travel service providers’ ability to influence suppliers; and "downstream" impacts, where service providers can influence the behavior or consumption patterns of customers. We have identified impacts from tourist-related transportation, including aircraft, automobiles, and recreational land and marine vehicles; tourist-related development, tourist activities, and direct impacts of the lodging and cruise industries. Although the direct impacts of the lodging and cruise industries and impacts of tourist-related transportation were not very significant, we found on the other hand that tourist activities can have significant impacts, depending on the type and location of activity. Tourist-related development can also have significant cumulative impacts on water quality and the aesthetics of host communities. Opportunity for upstream and downstream leverage within the tourism industry is considerable. Hotels can exert upstream influence on their suppliers to provide environmentally sound products, such as recyclable toiletries. Similarly, the cruise industry can use its leverage to convince suppliers to improve the environmental quality of shipboard products. Opportunity for downstream influence exists as well. Travel agents can influence where and how a tourist travels, and tour operators can educate tourists about ways to minimize their impact on the environment. The fragmented nature of the tourism industry is not conducive to regulation that encompasses all aspects of the industry. Therefore, educational efforts aimed at supporting existing regulations and encouraging environmentally responsible behavior where no regulations exist seem most promising as a management scheme. These educational efforts should be framed in accordance with the targeted audience (i.e., tourists and industry sectors). Tourists may be more receptive to educational initiatives that focus on the environmental benefits of altering their behavior, while industry sectors are more likely to be responsive to educational efforts that emphasize cost savings and an improved public image.
  13. By: Konisky, David; Beierle, Thomas
    Abstract: The need for greater public involvement in environmental decision-making has been highlighted in recent high-profile research reports and emphasized by leaders at all levels of government. In some cases, agencies have opened the door to greater participation in their programs. However, there is relatively little information on what can be gained from greater public involvement and what makes some programs work while others fail. This paper addresses these questions through an evaluation of public participation in environmental planning efforts in the Great Lakes region. The success of participation is measured using five criteria- educating participants, improving the substantive quality of decisions, incorporating public values into decision-making, reducing conflict, and building trust. The paper then discusses the relationship between success and a number of contextual and procedural attributes of a variety of cases. Data come from a "case survey," in which the authors systematically extract information from previously published studies of 30 individual participation cases. The authors conclude that public participation can accomplish important societal goals and that success depends, in large part, on the actions and commitment of government agencies.
  14. By: Krupnick, Alan (Resources For the Future); Harrington, Winston (Resources For the Future); Alberini, Anna
    Abstract: In this paper we report on the results of a telephone survey conducted in Southern California during August and September 1996. The purpose of the survey was to inform respondents about a set of rather complex pricing policies designed to reduce motor vehicle emissions and to estimate respondent support for those policies. After receiving extensive information about these policies, respondents were polled on whether they would support, i.e., vote for, any or all of these options. The pollution fee survey elicited support for a plan that levied a fee on vehicles in the region, depending on the vehicle's emissions per mile and on the miles driven. The sample was then split in two, with half the respondents being told that a portion of the revenues would be returned to the public in the form of reductions in motor vehicle fees or sales tax reductions, and half told that these returns would be made in the form of coupons. Nearly 40 percent of respondents agreed to support the base plan (42 percent of those expressing an opinion). More than 50 percent supported the fees with rebates, including support of 54 percent when all the available revenues are returned to the public (57 percent of the sample expressing an opinion). Support for the coupon policy was intermediate between the base and rebate policies, attracting 42 percent of the sample (45 percent of those expressing an opinion). Statistical analyses were performed on the data to explain the voting patterns observed. Generally, the levels of support were significantly affected by the design features of the plans, such as the size of the fee paid and the rebate, as well as by a host of socio-demographic and perceptual variables, such as ethnicity, age, political affiliation, expected efficacy of the policy, and the degree to which air pollution affects the respondent or his or her family. Examination of these statistical results may be useful in the development of pollution fee programs to present to the public, as well as in the design of public information campaigns and the allocation of marketing resources to win support for these programs.
  15. By: Boyd, James (Resources For the Future)
    Abstract: The concept of pollution prevention, or "P2," signifies a new, proactive environmental mindset that targets the causes, rather than the consequences, of polluting activity. While anecdotal evidence suggests that P2 opportunities exist and that many have been pursued, there is also the perception that the pace of P2 is far too slow. To explore that claim—and to shed light on barriers to P2 innovation—this paper presents case studies of industrial P2 projects that were in some way unsuccessful. While based on a very limited sample, the evidence contradicts the view that firms suffer from organizational weaknesses that make them unable to appreciate the financial benefits of P2 investments. Instead, the projects foundered because of significant unresolved technical difficulties, marketing challenges, and regulatory barriers. Based on evidence from the cases, the paper concludes with a discussion of environmental policy reforms likely to promote P2 innovation..
  16. By: Richer, Jerrell
    Abstract: Data are compiled from the tax records of 29 major environmental organizations for the period 1980-1994 to identify factors that influence voluntary contributions. I examine the effects of organizational characteristics, such as fundraising expenditures and alternative sources of revenue, along with the impact of general economic conditions and the political climate. I find that government grants to the organizations had a positive and statistically significant impact on voluntary contributions rather than a crowding out effect. Contributions were price inelastic, where the price is defined as the effective cost to the donor of achieving a one-dollar increase in the provision of program services. Resources devoted to fundraising had a strong and positive impact on donations, suggesting that the environmental organizations fell short of maximizing both total and net revenues. Contributions were also affected by factors largely outside of the organizations' control. Increases in the unemployment rate were associated with reductions in giving, while donations are shown to be greater in years when a Republican President was in office.
  17. By: Viktória Kocsis (Corvinus University of Budapest)
    Abstract: Network shares and retail prices are not symmetric in the telecommunications market with multiple bottlenecks which give rise to new questions of access fee regulation. In this paper we consider a model with two types of asymmetry arising from different entry timing, i.e. a larger reputation for the incumbent and lower cost of servicing for the entrant as a result of more advanced technology. As a result firms have divergent preferences over the access fee. In case of linear and non-linear prices the access fee might still act as the instrument of collusion, but only if a side-payment is permitted which is generally welfare decreasing. Moreover, in contrast with the European regulatory framework, the access fee on the basis of termination cost might not necessarily be a socially preferable solution.
    Keywords: cost asymmetry; brand loyalty; imperfect competition; network interconnection; access fee
    JEL: L11 L13 L51 L96
    Date: 2005–09–16
  18. By: Donata Favaro (University of Padua); Carlofilippo Frateschi (University of Padua)
    Abstract: In this paper we present an empirical analysis of the 'patterns of cultural choice' in the musical domain in Italy. By employing micro data from the Italian Survey on Households. Citizens and Leisure, we investigate the way in which musical tastes appear to be differentiated in the Italian society. The main goal of the paper is to verify whether musical tastes could be characterised by the traditionally accepted dichotomy between an elite of 'cultural snobs' and a mass of consumers of 'lowbrow' genres or whether they are diversified, with the presence of a new group of "cultural omnivores". By applying the discrete choice analysis, we implement a multivariate logit model in which each equation represents the choice of one of the mutually exclusive alternatives. Our dependent variable is constructed in a way to exactly identify the set of the alternatives and to include all possible individual choices. Our estimates point to the existence of different 'degrees of omnivorouness' and capture the differences between individuals listening to (or attending concerts of) only one musical genre, more than one genre or all genres.
    JEL: D12 C25 Z1
    Date: 2005–12
  19. By: P Nair (ICFAI University ,Hyderabad,India); Deepak Kumar (ICFAI University Press , Hyderabad,India)
    Abstract: The UN has declared 2005-15 as “Water for Life” period. This means how to use available water and find out the alternative measures for future. This states the urgency to come out of thinking that water is a “free resource” on this planet as for millennia, this has been true.The population of human beings was well below the level the planet could support. But once the advancements of science and technology have enabled this race of Homo sapiens to weather the “vicissitudes of nature” at least to a greater extent than before, the population and standard of living have begun to rise. This has been particularly so over the last 300 years, starting with the Industrial revolution in the West. In case of India and China, the need of water is increasing with burgeoning population that needs more water for domestic consumption than ever. The crisis of water in the cities of India during summer season is the live example of such a situation. Apart from domestic consumption, water is very much needed for industrial and agricultural purposes. This article discusses the present water scenario in the world, drinking water scenario in India, water management and agriculture, challenges in marketing water, ecological affairs, administrative control of water and provides some international examples.
    Keywords: Water Management,Infrastructure
    JEL: R
    Date: 2005–12–30

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