nep-mkt New Economics Papers
on Marketing
Issue of 2006‒03‒11
nine papers chosen by
Joao Carlos Correia Leitao
Universidade da Beira Interior

  1. Supermarket Pricing Strategies By Ellickson, Paul; Misra, Sanjog
  2. Using Predicted Outcome Stratified Sampling to Reduce the Variability in Predictive Performance of a One-Shot Train-and-Test Split for Individual Customer Predictions By G. VERSTRAETEN; D. VAN DEN POEL
  3. Consumer Innovativeness and GLB: A comparative study By B. VANDECASTEELE; M. GEUENS
  4. The economics and empirics of the allocation of public consumptio n expenditures By George TRIDIMAS
  5. Consumption of Cigarettes, Nicotine, and Tar under Anti-smoking Policies: Japan as a Case Study By Junmin Wan
  6. Relationship banking and the credit market in India: An empirical analysis By Dilip M. Nachane; Prasad P. Ranade
  7. Prediction Markets in Theory and Practice By Justin Wolfers; Eric Zitzewitz
  8. Untalented but successful By Olivier Gergaud; Vincenzo Verardi
  9. SME Development in Malaysia: Domestic and Global Challenges By Saleh, Ali Salman; Ndubisi, Nelson Oly

  1. By: Ellickson, Paul; Misra, Sanjog
    Abstract: Most supermarket firms choose to position themselves by offering either "Every Day Low Prices" (EDLP) across several items or offering temporary price reductions (promotions) on a limited range of items. While this choice has been addressed from a theoretical perspective in both the marketing and economic literature, relatively little is known about how these decisions are made in practice, especially within a competitive environment. This paper exploits a unique store level dataset consisting of every supermarket operating in the United States in 1998. For each of these stores, we observe the pricing strategy the firm has chosen to follow, as reported by the firm itself. Using a system of simultaneous discrete choice models, we estimate each store's choice of pricing strategy, conditional on its expectation over the choices of its rivals. We find evidence that firms cluster by strategy, choosing actions that agree with those of its rivals. We also find a significant impact of various demographic and firm characteristics, providing some qualified support for several specific predictions from marketing theory.
    Keywords: EDLP, promotional pricing, positioning strategies, supermarkets, discrete games
    JEL: M31 L11 L81
    Date: 2006
    Abstract: Since it is generally recognized that models evaluated on the data that was used for constructing them are overly optimistic, in predictive modeling practice, the assessment of a model’s predictive performance frequently relies on a one-shot train-and-test split between observations used for estimating a model, and those used for validating it. Previous research has indicated the usefulness of stratified sampling for reducing the variation in predictive performance in a linear regression application. In this paper, we validate the previous findings on six real-life European predictive modeling applications for marketing and credit scoring using a dichotomous outcome variable. We find confirmation for the reduction in variability using a procedure we describe as predicted outcome stratified sampling in a logistic regression model, and we find that the gain in variation reduction is – also in large data sets – almost always significant, and in certain applications markedly high.
    Date: 2006–01
    Abstract: Many companies survive because of the development and the introduction of successful new products3. According to Hultink and Schoormans (2004), 40 to 50 percent of the return and the profit of US and UK companies comes from products introduced on the market less than five years ago. However, new products often do not find their way to buyers: Hultink and Schoormans (2004) state that 30 to 50% of new products fail. The diffusion literature (e.g. Rogers, 2003) counts on innovative people to make a new product successful. When these innovative persons are known, a deliberate and efficient communication campaign can be developed and innovators can be targeted (Fell et al. 2003). But, who are innovative persons and how can they be effectively targeted? Marketers often try to reach and attract them via mass media communication and mass sampling, without much success though. Therefore, it would be interesting to find a subgroup within the society that is significantly more innovative than others. In this respect, several non-academic articles refer to the assumed innovativeness of gays, lesbians and bisexuals (GLB) (Kolko et al. 2003, Wilke 2000, 2000). GLB are supposed to be trendsetters and are called “the avant-garde of consumers” (Bilsen et al., 2000, p. 242). Kolko et al. (2003) state that “gays lead in the adoption of a whole host of emerging technologies and almost every online activity […]” (p.2). Nevertheless, to our knowledge, no academic research has been carried out measuring the innovativeness of GLB. Therefore, the purpose of this article was to investigate the innovativeness of both GLB and heterosexuals and to see whether empirical evidence can be found for the myth that GLB are more innovative and trendsetting than heterosexuals. Moreover, also the extent to which this innovativeness translates in new product trial was studied.
    Date: 2006–01
  4. By: George TRIDIMAS
    Abstract: The paper investigates the allocation of public consumption expen ditures in the UK. After reviewing the empirical literature on th e demand for public services, which is based on applied consumer analysis, it discusses the budgetary making process in the UK. It proceeds by estimating a system of demand equations for general government consumption expenditures in the UK during the period 1 963-96. In addition to estimating the effects of relative prices, total expenditure and demographic variables, it finds that the c onstraints of homogeneity and symmetry cannot be rejected.
    Keywords: Allocation of public consumption expenditure, Consumer demand systems, UK General Government consumption expenditure.
  5. By: Junmin Wan (Osaka School of International Public Policy, Osaka University)
    Abstract: Japan has implemented a number of anti-smoking policies; these include information disclosures, taxation, and smoking bans. These measures have increased the information available to consumers, as well as tax rates on tobacco products. First, this paper shows, theoretically, the association between a lack of information and over-consumption of cigarettes, and then examines the effects of smoking policies using monthly data from 1951 to 1999. Long-term policies have had greater effects than short-term policies. Taxation has reduced consumption, but income differences have had no significant effect. Following health disclosures in 1964 and 1967, many consumers switched to filtered cigarettes and low-nicotine and low-tar products, respectively. The move to lower tar and nicotine products was further accelerated by the "harmful to health" label applied to cigarettes in 1972, although many smokers then raised the number of cigarettes they smoked to keep up their intake of nicotine. Other policies have decreased cigarette, nicotine, and tar consumption since 1972.
    Keywords: anti-smoking, health information, nicotine-tar, compensative behavior, rational addiction
    JEL: I18 D11 D12
    Date: 2004–06
  6. By: Dilip M. Nachane (Indira Gandhi Institute of Development Research); Prasad P. Ranade (Narsee Monjee Institute of Management Research)
    Abstract: Relationship banking based on Okun's "customer credit markets" has important implications for monetary policy via the credit transmission channel. Studies of LDC credit markets from this point of view seem to be scanty and this paper attempts to address this lacuna. Relationship banking implies short-term disequilibrium in credit markets, suggesting the VECM (vector error-correction model) as an appropriate framework for analysis. We develop VECM models in the Indian context (for the period April 1991- December 2004 using monthly data) to analyse salient features of the credit market. An analysis of the ECMs (error-correction mechanisms) reveals that disequilibrium in the Indian credit market is adjusted via demand responses rather than supply responses, which is in accordance with the customer view of credit markets. Further light on the working of the model is obtained through the "generalized" impulse responses and "generalized" error decompositions (both of which are independent of the variable ordering). Our conclusions point towards firms using short-term credit as a liquidity buffer. This fact, together with the gradual adjustment exhibited by the "persistence profiles" provides substantive evidence in favour of "customer credit markets".
    Keywords: customer credit markets, monetary policy, co-integration, impulse response, persistence profiles
    JEL: C32 E51
    Date: 2005
  7. By: Justin Wolfers (Wharton, University of Pennsylvania, CEPR, NBER and IZA Bonn); Eric Zitzewitz (Stanford GSB)
    Abstract: Prediction Markets, sometimes referred to as "information markets", "idea futures" or "event futures", are markets where participants trade contracts whose payoffs are tied to a future event, thereby yielding prices that can be interpreted as market-aggregated forecasts. This article summarizes the recent literature on prediction markets, highlighting both theoretical contributions that emphasize the possibility that these markets efficiently aggregate disperse information, and the lessons from empirical applications which show that market-generated forecasts typically outperform most moderately sophisticated benchmarks. Along the way, we highlight areas ripe for future research.
    Keywords: prediction markets, information markets, information aggregation
    JEL: C53 D8 G14
    Date: 2006–03
  8. By: Olivier Gergaud (OMI, Université de Reims Champagne-Ardenne et CES-TEAM); Vincenzo Verardi (ECARES, Université Libre de Bruxelles)
    Abstract: When studying the problem of the emergence of superstars, scholars face great difficulties in measuring talent, obtaining confidential data on earnings, and finding econometric techniques that lead to results that are robust to the presence of outliers (superstars). In this paper we use an original dataset from the Pokemon trading card game in which (i) there is no unidentifiable heterogeneity and (ii) all characteristics of individuals are public domain. To prevent the results to be distored by the presence of outliers, we estimate the " fair " price of each individual, using the robust " Least Trimmed of Squares " regression technique in a hedonic prices framework, and check the effective price at which they are sold. This allows to identify superstars, i.e. individuals that are sold at a price which represents several times their intrinsec value. We find that the two main theories of superstars developed by Rosen (1981), who awards a central importance to talent, and by Adler (1985), who awards more importance to the need of consumers to share a common culture are complementary and not mutually exclusive as is often claimed.
    Keywords: Superstars, robust estimation, hedonic prices, leisure games.
    JEL: C4 D4
    Date: 2006–02
  9. By: Saleh, Ali Salman (Monash University Malaysia); Ndubisi, Nelson Oly (Monash University Malaysia)
    Abstract: The primary objectives of this paper are to analyze and discuss the development of Malaysian SMEs and their role, as well as various contributions, in the national economy. The paper goes further by reviewing extant literature to identify the major challenges facing this sector in Malaysia as well as government policies aimed at the development of SMEs. We find that, while the government has implemented many programs to strengthen the performance of SMEs in the economy, Malaysian SMEs still face many challenges, both domestic and external, which could hinder their resilience and competitiveness. A number of strategies which could assist them to access new markets, increase their revenues and expand their customer bases are identified.
    Keywords: Malaysian economy, Malaysian SMEs, government assistance programs
    Date: 2006

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