nep-mkt New Economics Papers
on Marketing
Issue of 2007‒07‒20
three papers chosen by
Joao Carlos Correia Leitao
University of the Beira Interior

  1. Can Higher Prices Stimulate Product Use? Evidence from a Field Experiment in Zambia By Nava Ashraf; James Berry; Jesse M. Shapiro
  2. How Does Income Inequality Affect Market Outcomes in Vertically Differentiated Markets? By Yurko, Anna
  3. Demand-Driven Scheduling of Movies in a Multiplex By Eliashberg, J.; Hegie, Q.; Ho, J.; Huisman, D.; Miller, S.J.; Swami, S.; Weinberg, C.B.; Wierenga, B.

  1. By: Nava Ashraf; James Berry; Jesse M. Shapiro
    Abstract: The controversy over whether and how much to charge for health products in the developing world rests, in part, on whether higher prices can increase use. We test this hypothesis in a field experiment in Zambia using door-to-door marketing of a home water purification solution. Our methodology separates the screening effect of prices (charging more changes the mix of buyers) from the psychological effect of prices (charging more stimulates greater use for a given buyer). We find that higher prices screen out those who use the product less. The amount paid does not have a psychological effect on use, but there is some evidence that the act of paying increases use. We use our data to estimate an economic model of product use, simulate counterfactuals, and develop tentative implications for pricing policy.
    JEL: C93 D12 L11 L31
    Date: 2007–07
  2. By: Yurko, Anna
    Abstract: The distribution of consumer incomes is a key factor in determining the structure of a vertically differentiated industry when consumer's willingness to pay depends on his income. This paper computes the Shaked and Sutton (1982) model for a general specification of consumers' income distribution to investigate the effect of inequality on firms' entry, product quality, and pricing decisions. The main findings are that greater inequality in consumer incomes leads to the entry of more firms and results in more intense quality competition among the entrants. This is due to the elasticity of consumer demand for quality being higher in more inegalitarian economies. More intense quality competition among firms causes them to locate their products in higher ranges of the quality spectrum, closer to each other, decreasing the degree of product differentiation. Competition between more similar products tends to reduce their prices. However, when income inequality is very high, the top quality producer chooses to serve only the rich segment of the market, and the low price elasticity of demand of these consumers allows him to charge a higher price. The conclusion is that income inequality has important implications for the degree of product differentiation, price level, industry concentration, and consumer welfare.
    Keywords: vertical differentiation; income inequality; computational game theory
    JEL: C61 L13 L11
    Date: 2006–05
  3. By: Eliashberg, J.; Hegie, Q.; Ho, J.; Huisman, D.; Miller, S.J.; Swami, S.; Weinberg, C.B.; Wierenga, B. (Erasmus Research Institute of Management (ERIM), RSM Erasmus University)
    Abstract: This paper describes a model that generates weekly movie schedules in a multiplex movie theater. A movie schedule specifies within each day of the week, on which screen(s) different movies will be played, and at which time(s). The model consists of two parts: (i) conditional forecasts of the number of visitors per show for any possible starting time; and (ii) an optimization procedure that quickly finds an almost optimal schedule (which can be demonstrated to be close to the optimal schedule). To generate this schedule we formulate the so-called movie scheduling problem as a generalized set partitioning problem. The latter is solved with an algorithm based on column generation techniques. We have applied this combined demand forecasting /schedule optimization procedure to a multiplex in Amsterdam where we supported the scheduling of fourteen movie weeks. The proposed model not 2 only makes movie scheduling easier and less time consuming, but also generates schedules that would attract more visitors than the current ?intuition-based? schedules.
    Keywords: Optimization of movie schedules;Integer programming;Column generation;Demand forecasting;
    Date: 2007–05–10

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