nep-mkt New Economics Papers
on Marketing
Issue of 2007‒02‒24
five papers chosen by
Joao Carlos Correia Leitao
University of the Beira Interior

  1. Advertising, Consumption and Economic Growth: An Empirical Investigation By Günther Rehme; Sara-Frederike Weisser
  2. Hedonic price functions By Lars Nesheim
  3. Pricing and Trust By Huck, Steffen; Ruchala, Gabriele K.; Tyran, Jean-Robert
  5. Microfoundations of Two-sided Markets: The Payment Card Example By James McAndrews; Zhu Wang

  1. By: Günther Rehme (Institut für Volkswirtschaftslehre (Department of Economics), Technische Universität Darmstadt (Darmstadt University of Technology)); Sara-Frederike Weisser
    Abstract: It is sometimes argued that more advertising raises consumption which in turn stimulates output and so economic growth. We test this hypothesis using annual German data expressed in terms of GDP for the period 1950-2000. We find that advertising does not Granger-cause growth but Granger-causes consumption. Consumption, in turn, Granger-causes GDP growth. The data imply that the immediate impact of more advertising on consumption is positive. However, the long-run effect is negative. Further- more, the immediate impact of higher consumption on growth is negative. But the long-run effect is positive. These results raise interesting questions for standard theory, political debates and advertising practitioners.
    Keywords: Advertising, Consumption, Economic Growth
    JEL: O4 M3 E2
    Date: 2007–02
  2. By: Lars Nesheim (Institute for Fiscal Studies)
    Abstract: A hedonic price function describes the equilibrium relationship between characteristics of a product and its price. They are used to predict prices of new goods, to adjust for quality change in price indexes, and to measure consumer and producer valuations of differentiated products. They emerge as market outcomes from both competitive and non-competitive markets. The functional form is determined by the distribution of buyers and their preferences, the distribution of sellers and their costs, and the structure of competition in the market.
    Date: 2006–09
  3. By: Huck, Steffen; Ruchala, Gabriele K.; Tyran, Jean-Robert
    Abstract: We experimentally examine the effects of flexible and fixed prices in markets for experience goods in which demand is driven by trust. With flexible prices, we observe low prices and high quality in competitive (oligopolistic) markets, and high prices coupled with low quality in non-competitive (monopolistic) markets. We then introduce a regulated intermediate price above the oligopoly price and below the monopoly price. The effect in monopolies is more or less in line with standard intuition. As price falls volume increases and so does quality, such that overall efficiency is raised by 50%. However, quite in contrast to standard intuition, we also observe an efficiency rise in response to regulation in oligopolies. Both, transaction volume and traded quality are, in fact, maximal in regulated oligopolies.
    Keywords: experience goods; markets; moral hazard; price competition; reputation; Trust
    JEL: C72 C90 D40 D80 L10
    Date: 2007–02
  4. By: Cowling, Keith (University of Warwick); Poolsombat, Rattanasuda (University of Warwick)
    Abstract: Americans are working much longer hours in the paid labour market than workers in Western Europe. Much of the debate focuses on whether this is the result of voluntary worker choice or whether this is a decision imposed on workers by their employers. This paper shows that American hours of work have become more or less stabilised as a result of the rising intensity of advertising in the U.S. : advertising may raise the desired amount of marketed goods and services for which workers find it necessary to work long hours.
    Keywords: Advertising ; Time Allocation and Labour Supply
    JEL: M37 J22
    Date: 2007
  5. By: James McAndrews; Zhu Wang
    Abstract: This paper provides a theory of two-sided market dynamics with arguably better microfoundations. These alternative microfoundations focus on observable heterogeneities of both sides of the market in a competitive framework. The theory is rich in empirical predictions and is less dependent on a particular form of imperfect competition than other approaches. Our findings in the payment card example point to adoption costs and the distribution of consumer incomes and firm sizes as the key determinants of the shares of costs borne by each side. This result provides clear implications for industry dynamics and sheds light on the puzzle of asymmetric pricing.
    Keywords: Technology Adoption; Two-sided Market; Asymmetric Pricing
    JEL: L10 D40 O30
    Date: 2007–01

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