nep-mkt New Economics Papers
on Marketing
Issue of 2007‒08‒18
six papers chosen by
Joao Carlos Correia Leitao
University of the Beira Interior

  1. Comprehensive Analysis of Exclusive Brand Store Customer in Indian Market By Kureshi Sonal; Sood Vandana; Koshy Abraham
  2. The effect of relative thinking on firm strategy and market outcomes: A location differentiation model with endogenous transportation costs By Azar, Ofer H.
  3. Fiscal Discrimination Between Consumer Groups: Tax Burden Distribution Under Price Discrimination By Jörg Plewka
  4. Linking leadership empowerment behavior to employee attitudes and behavioral intentions: testing the mediating role of psychological empowerment By Dewettinck, K.; van Ameijde, M.
  5. Demand Elasticities for Mobile Telecommunications in Austria By Ralf Dewenter; Justus Haucap
  6. “Competing with Menus of Tariff Options” By Eugenio Miravete; ;

  1. By: Kureshi Sonal; Sood Vandana; Koshy Abraham
    Abstract: Segmentation classifies customers into groups which enables the retailers identify their target segment and provide the desired value. This paper is an attempt to group the customers and generate a profile of the revenue generating customer by identifying significant differences across lifestyle, demographic variables and information search. For this study, a scale for measuring the attitude, interest and opinion (AIO) for profiling the consumers of a single brand store is, specifically developed and tested for reliability. Implications for retailers are drawn and future research directions are indicated. Significant differences were found between different groups on their attitude, interest and opinion dimensions. The purposive and the purposive patrons were far more appearance conscious than the browsers. There was substantial difference in the product and quality expectations between browser and the purposive customers. The purposive and purposive patrons wanted to remain slim only for the sake of appearance and looks. So far, little work has been done towards segmenting the Indian consumer in the context of retailing which is available in the public domain. The results of this study have direct managerial implications. It would be helpful in planning and formulating the retailing mix. A detailed profile of their revenue generating customers would be useful for the conversion of footfall to sales by customizing its offerings.
    Date: 2007–08–07
  2. By: Azar, Ofer H.
    Abstract: Consumers often have to decide whether to go to a remote store for a lower price. Only the absolute price difference between the stores should be relevant in this case, but several experiments showed that people exhibit "relative thinking": they are affected also by the relative savings (relative to the good's price). This article analyzes the effects of this bias on firm strategy and market outcomes using a two-period game-theoretic model of location differentiation. Relative thinking causes consumers to make less effort to save a constant amount when they buy more expensive goods. In the location differentiation context this behavior can be modeled by consumers who behave as if their transportation costs are an increasing function of the good's price. This gives firms an additional incentive to raise prices, in order to increase the perceived transportation costs of consumers, which consequently softens competition and allows higher profits. Therefore, the response of firms to relative thinking raises prices and profits and reduces consumer surplus, in both periods. Total welfare is unchanged in the first period, and in the second period it is either unchanged or reduced, depending on whether the objective or subjective transportation costs are used to compute welfare. The main results of the model (firms' response to relative thinking increases prices and reduces consumer surplus) are likely to hold also in the context of search. The article also explains why "relative thinking" is a more appropriate term than "mental accounting" (which was often used before) to describe this behavior, and discusses why people might exhibit relative thinking.
    Keywords: Competitive Strategy; Relative Thinking; Pricing; Mental Accounting; Consumer Psychology; Consumer Attitudes & Behavior; Cognitive Processes; Behavioral Decision Making; Industrial Organization; Product Differentiation.
    JEL: D10 M31 L10 L13 D43
    Date: 2007
  3. By: Jörg Plewka
    Abstract: In this paper it is analysed, how, under price discrimination, the tax burden is shared between the distinct consumer groups. Unit and ad valorem taxes are compared, revealing an impossibility of fiscal discrimination with regard to price changes. Contrary to conventional tax incidence analysis, it is shown that quantities traded do matter. Relative market shares are decisive for the distribution of tax burdens thereby opening up an opportunity for fiscal discrimination in choosing tax types. This discriminatory potential is limited and not caused by price discrimination per se but rather due to monopolistic supply.
    Keywords: Tax incidence, unit tax, ad valorem tax, price discrimination
    JEL: H22 L11
    Date: 2007–07
  4. By: Dewettinck, K.; van Ameijde, M. (Vlerick Leuven Gent Management School)
    Abstract: To improve their overall flexibility and efficiency, many organisations have replaced traditional hierarchical management structures with empowered (semi-autonomous or self-managing) work teams. Managers, once charged with directing and controlling work, are now asked to take on a new set of roles and responsibilities in order to lead these teams (Lawler, 1992). Arnold and colleagues (2000) identified five categories of empowering leadership behavior and constructed and validated a scale for measuring those behaviors. We build on their work by investigating how these behaviors relate to employee attitudes and behavioral intentions. We do so by developing a model in which psychological empowerment (Spreitzer, 1995, 1996; Thomas & Velthouse, 1990) mediates the relationship between empowering leadership behavior and employee job satisfaction and affective organizational commitment. We also modeled the relationship between these employee attitudes and intention to stay as a final outcome variable. Based on a sample of 381 service employees from four companies, we empirically tested this model using structural equation modeling in AMOS. Our results show that psychological empowerment is partially mediating the relationship between perceived empowering leadership behavior and employee job satisfaction and affective commitment. This indicates that perceived leadership behavior does relate toe employee attitudes through its impact on employee motivation. However, leadership behavior also shows to be directly related to employee attitudes, which in turn are strongly related to an employee's intention to stay working for the organisation. Implications for theory and managerial practice are discussed.
    Date: 2007–08–10
  5. By: Ralf Dewenter; Justus Haucap
    Abstract: This paper analyses price elasticities in the Austrian market for mobile telecommunications services using data on firm specific tariffs in the period between January 1998 and March 2002. Dynamic panel data regressions are used to estimate short-run and long-run demand elasticities for business customers and for private consumers with both postpaid contracts and prepaid cards.We find that business customers have a higher elasticity of demand than private consumers, where postpaid customers tend to have a higher demand elasticity than prepaid customers. Also demand is generally more elastic in the long run. In addition, the paper also provides estimates for firm-specific demand elasticities which range from –0.47 to –1.1.
    Keywords: Mobile telephony, price elasticities, unbalanced panel data, dynamic panel data analysis
    JEL: C23 L13 L96
    Date: 2007–06
  6. By: Eugenio Miravete (University of Texas at Austin); ;
    Abstract: I study how firms actually compete in nonlinear tariffs by analyzing whether the incumbent and entrant’s decisions to offer a given number of tariff options are interrelated. The goal is to shed some light on those dynamic and strategic aspects of tariff menus that are currently ignored by theoretical models of nonlinear pricing competition in order to highlight some basic features of the market that future theoretical work should address. This paper also introduces a generalized multivariate count data model that allows to account for the possibility of correlation of any sign among the pricing decisions of competing firms in a manner that is robust to the existence of over and underdispersion of counts. Pricing strategies appear to be strategic complements that respond positively to the existing heterogeneity of consumers’ tastes. While this is a common source driving the number of tariff options offered, results also show that previous pricing decisions by the incumbent affect the entrant’s current offering of tariff options, thus free riding on information about the market revealed by the likely better informed firm of the industry. The strategic complementarity result disappears when we only consider non-dominated tariffs.
    Keywords: Nonlinear Pricing Competition; Tariff Menus; Strategic Complementarity; Bivariate Count Data Regression
    JEL: D43 L96 M21
    Date: 2007–01

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