nep-mkt New Economics Papers
on Marketing
Issue of 2006‒11‒18
twelve papers chosen by
Joao Carlos Correia Leitao
Universidade da Beira Interior

  1. comparative Advertising By Simon P. Anderson; Régis Renault
  2. Interaction Between Food Attributes in Markets: The Case of Environmental Labeling By Gilles Grolleau; Julie A. Caswell
  3. The Effect of Wal-Mart Supercenters on Grocery Prices in New England By Richard J. Volpe III; Nathalie Lavoie
  4. Transformation of the Rice Marketing System and Myanmar's Transition to a Market Economy By Okamoto, Ikuko
  5. Alliances between competitors and consumer information By Paolo Garella; Martin Peitz
  6. Market Power in Direct Marketing of Fresh Produce: Community Supported Agriculture Farms By Daniel A. Lass; Nathalie Lavoie; T. Robert Fetter
  7. Newspapers market shares and the theory of the circulation spiral By J. J. Gabszewicz; Paolo Garella; N. Sonnac
  8. Minimum Quality Standards and Consumers Information By Paolo Garella; Emmanuel Petrakis
  9. The Regulation of Food Advertising and Obesity Prevention in Europe: What Role for the European Union By Armandine Garde
  10. Reference Pricing of Pharmaceuticals By Kurt R. Brekke; Ingrid Königbauer; Odd Rune Straume
  11. Price Variation Antagonism and Firm Pricing Policies By Pascal Courty; Mario Pagliero
  12. Searching the eBay Marketplace By Katharina Sailer

  1. By: Simon P. Anderson (Department of Economics, University of Virginia); Régis Renault (Université de Cergy-Pontoise (Théma))
    Abstract: Consumer information on products affects competition and profits. We analyze firms' decisions to impart product information through advertising: comparative advertising also allows them to impart information about rivals' products. If firms sell products of similar qualities, both want to advertise detailed product information that enables consumers to determine their matches: there is no role for comparative advertising. If qualities are sufficiently dissimilar, the high-quality one will not want to disclose match information. If legal, the low-quality firm rival would like to advertise match information about its rival. Such "comparative" advertising may have a detrimental impact on welfare by leading more consumers to consume the low quality product: this effect can dominate the benefits from improved consumer information and reduce social welfare if qualities are different enough.
    Keywords: comparative advertising, information, product differentiation, quality
    JEL: D42 L15 M37
    Date: 2006
  2. By: Gilles Grolleau (Centre d’Economie et Sociologie appliquées à l’Agriculture et aux Espaces Ruraux); Julie A. Caswell (Department of Resource Economics, University of Massachusetts Amherst)
    Abstract: Some consumers derive utility from using products produced with specific processes, such as environmentally friendly practices. Means of verifying these credence attributes, such as certification, are necessary for the market to function effectively. A substitute or complementary solution may exist when consumers perceive a relationship between a process attribute and other verifiable product attributes. We present a model where the level of search and experience attributes influences the likelihood of production of eco-friendly products. Our results suggest that the market success of ecofriendly food products requires a mix of environmental and other verifiable attributes that together signal credibility.
    Keywords: environmental labeling, food attributes, food marketing, quality perception
    JEL: L15 Q13 Q18
    Date: 2005–04
  3. By: Richard J. Volpe III (Department of Agricultural and Resource Economics, University of California at Davis); Nathalie Lavoie (Department of Resource Economics, University of Massachusetts Amherst)
    Abstract: This study examines the competitive price effect of Wal-Mart Supercenters on national brand and private label grocery prices in New England. For this purpose, we use primary price data collected on a basket of identical products from six Supercenters in Massachusetts, Connecticut, and Rhode Island as well as a sample of conventional supermarkets. Taking into account demographics, store characteristics, and market conditions, we estimate the average prices charged by (1) Supercenters, (2) supermarkets competing directly with Supercenters, and by (3) supermarkets geographically distant from Supercenters. By comparing prices at competing stores and at distant stores, we show that the effect of Wal-Mart Supercenters is to decrease prices by 6 to 7 percent for national brand goods and 3 to 7 percent for private label goods. Price decreases are most significant in the dry grocery and dairy departments. Moreover, Wal-Mart sets prices significantly lower than its competitors in the food industry.
    Keywords: Wal-Mart; Supermarket Competition; Grocery Prices; National Brands, Private Labels
    JEL: D21 D43 L11 L13 L81
    Date: 2006–10
  4. By: Okamoto, Ikuko
    Abstract: Creating a rice marketing system has been one of the central policy issues in Myanmar's move to a market economy since the end of the 1980s. Two liberalizations of rice marketing were implemented in 1987 and 2003. This paper examines the essential aspects of the liberalizations and the subsequent transformation of Myanmar's rice marketing sector. It attempts to bring into clearer focus the rationale of the government's rice marketing reforms which is to maintain a stable supply of rice at a low price to consumers. Under this rationale, however, the state rice marketing sector continued to lose efficiency while the private sector was allowed to develop on condition that it did not jeopardize the rationale of stable supply at low price. The paper concludes that the prospect for the future development of the private rice marketing sector is dim since a change in the rice market's rationale is unlikely. Private rice exporting is unlikely to be permitted, while the domestic market is approaching the saturation point. Thus, there is little momentum for the private rice sector to undertake any substantial expansion of investment.
    Keywords: Myanmar, Rice, Marketing system, Liberalization, Marketing, Transition to market economy
    JEL: P39 Q13 Q18
    Date: 2006–10
  5. By: Paolo Garella (University of Milano, Italy); Martin Peitz (International University in Germany, Bruchsal (Germany))
    Abstract: Alliances between competitors in which established firms provide access to proprietary resources, e.g. their distribution channels, are important business practices. We analyze a market where an established firm, firm A, produces a product of well-known quality, and a firm with an unknown brand, firm B, has to choose to produce high or low quality. Firm A observes firm B's quality choice but consumers do not. Hence, firm B is subject to a moral hazard problem which can potentially be solved by firm A. Firm A can accept or reject to form an alliance with firm B, which is observed by consumers. If an alliance is formed, firm A implicitly certifies the rival's product. Consumers infer that firm B is a competitor with high quality, as otherwise why would the established firm accept to form an alliance? The mechanism we discover allows for an economic interpretation of several types of business practices.
    Keywords: alliances, brand sharing, asymmetric information, signaling, exclusion, moral hazard, entry assistan
    JEL: L15 L13 L24 L42
    Date: 2006–00–01
  6. By: Daniel A. Lass (Department of Resource Economics, University of Massachusetts Amherst); Nathalie Lavoie (Department of Resource Economics, University of Massachusetts Amherst); T. Robert Fetter (Science Applications International Corporation)
    Abstract: CSA farms establish a loyal customer base and, potentially, market power. A new empirical industrial organization (NEIO) approach and survey data from Northeast CSA farms are used to determine whether CSA farms have market power and the extent to which they exercise their market power. Results suggest CSA farms exert about two percent of their potential monopoly power.
    Keywords: Community Supported Agriculture; New Empirical Industrial Organization; Market Power; Fresh Produce; Organic Agriculture
    JEL: D42 L12 Q13
    Date: 2005–01
  7. By: J. J. Gabszewicz (CORE, Universit´e Catholique de Louvain); Paolo Garella (University of Milano, Italy); N. Sonnac (CREST-LEI and Universit´e Paris II)
    Abstract: We consider a model of daily newspapers’ competition to test the validity of the so called ”theory of the circulation spiral”. According to it, the interaction between the newspapers and the advertising markets drives the newspaper with the smaller readership into a vicious circle, finally leading it to death. In a model with two newspapers, we show that, contrary to this conjecture, the dynamics envisaged by the proposers of the theory, does not always lead to the elimination of one of them.
    Date: 2005–11–05
  8. By: Paolo Garella (University of Milano, Italy); Emmanuel Petrakis (Department of Economics, University of Crete, Greece)
    Abstract: The literature so far has analyzed the effects of Minimum Quality Standards in oligopoly, using models of pure vertical differentiation, with only two firms, and perfect information. We analyze products that are differentiated horizontally and vertically, with imperfect consumers information, and more than two firms. We show that a MQS changes the consumers’ perception of produced qualities. This increases the firms’ returns from quality enhancing investments, notwithstanding contrary strategic effects. As a consequence, MQS policies may be desirable as both, firms and consumers, can gain. This contrasts with previous results in the literature and provides a justification for the use of MQS to improve social welfare.
    Keywords: Minimum Quality Standards, Imperfect Consumer Information,
    JEL: L0 L5
    Date: 2005–02–16
  9. By: Armandine Garde
    Abstract: Since 1998, the World Health Organisation has recognised obesity as a problem of epidemic proportions. As none of the EU Member States is spared, the European Commission has recently published a Green Paper aimed at gathering evidence on how it could develop an obesity prevention strategy at European level. It is therefore the right moment to reflect on the principles which should guide EU policy in this field. This paper concentrates on one particular aspect of obesity prevention, namely the role that the European Union can play to curb the epidemic by regulating how food is marketed to consumers. That is not to say that the regulation of food advertising will, on its own, solve this public health issue. Obesity being by definition a multifactorial disease, the concerted action of all stakeholders is crucial to the successful outcome of the strategy which the Commission will choose to adopt
    Keywords: law; European law; competences; harmonisation
    Date: 2006–05–01
  10. By: Kurt R. Brekke; Ingrid Königbauer; Odd Rune Straume
    Abstract: We consider a therapeutic market with potentially three pharmaceutical firms. Two of the firms offer horizontally differentiated brand-name drugs. One of the brand-name drugs is a new treatment under patent protection that will be introduced if the profits are sufficient to cover the entry costs. The other brand-name drug has already lost its patent and faces competition from a third firm offering a generic version perceived to be of lower quality. This model allows us to compare generic reference pricing (GRP), therapeutic reference pricing (TRP), and no reference pricing (NRP). We show that competition is strongest under TRP, resulting in the lowest drug prices (and medical expenditures). However, TRP also provides the lowest profits to the patent-holding firm, making entry of the new drug treatment least likely. Surprisingly, we find that GRP distorts drug choices most, exposing patients to higher health risks.
    Keywords: pharmaceuticals, reference pricing, product differentiation
    JEL: I11 L13 L51 L65
    Date: 2006
  11. By: Pascal Courty; Mario Pagliero
    Abstract: Survey evidence suggests firms do not use pricing policies that vary prices in response to demand changes because they fear that such practices would antagonize consumers. We investigate this hypothesis using a dataset from a firm that has experimented with different pricing schemes. Each scheme is characterized by how much prices respond to demand variations. We find evidence that is consistent with the hypothesis that consumers take advantage of the opportunities offered by price changes and inconsistent with the hypothesis that consumers are antagonized by price changes caused by demand shocks.
    Keywords: Consumer demand, responsive pricing, fairness, price rigidit
    JEL: D01 D12 L86
    Date: 2006
  12. By: Katharina Sailer
    Abstract: This paper proposes a framework for demand estimation with data on bids, bidders' identities, and auction covariates from a sequence of eBay auctions. First the aspect of bidding in a marketplace environment is developed. Form the simple dynamic auction model with IPV and private bidding costs it follows that if participation is optimal the bidder searches with a "reservation bid" for low-price auctions. Extending results from the empirical auction literature and employing a similar two-stage procedure as has recently been used when estimating dynamic games it is shown that bidding costs are non-parametrically identified. The procedure is tried on a new data set. The median cost is estimated at less than 2% of transaction prices.
    JEL: C23 C51 D44 D82 D83 L10 L81
    Date: 2006

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