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on Marketing |
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Issue of 2007‒09‒30
four papers chosen by Joao Carlos Correia Leitao University of the Beira Interior |
| By: | Levent Celik |
| Abstract: | This paper analyzes informative advertising in a duopoly market with differentiated products when consumer search is costless. If consumers are fully rational, exposure to a single advertisement is sufficient for them to obtain complete market information. In this case, firms undersupply advertising compared to the social optimum because of free-riding. If consumers are not fully rational, they may ignore the existence of another firm when the only advertisement they receive quotes the monopoly price. In this case, both firms advertise the monopoly price, and the market may produce too much or too little advertising compared to the social optimum. |
| Keywords: | Search, Duopoly, Informative Advertising, Product Differentiation. |
| JEL: | L13 M37 |
| Date: | 2007–07 |
| URL: | http://d.repec.org/n?u=RePEc:cer:papers:wp332&r=mkt |
| By: | Bernardo S. da Silveira (Department of Economic, New York University); João Manoel Pinho de Mello (Department of Economics, PUC-Rio) |
| Abstract: | Despite the “minimal effects” conventional wisdom, the question of whether campaign advertising influence elections outcome remains open. This is paradoxical because in the absence of a causal link from advertising to candidate performance, it is difficult to rationalize the amounts spent on campaigns in general, and on TV advertising in particular. Most studies using US data, however, suffer from omitted variable bias and reverse causality problems caused by the decentralized market-based method of allocating campaign spending and TV advertising. In contrast with received literature, we explore a quasi-natural experiment produced by the Brazilian electoral legislation, and show that TV and radio advertising has a much larger impact on election outcomes than previously found by the literature. In Brazil, by law, campaign advertising is free of charge and allocated among candidates in a centralized manner. Gubernatorial elections work in a runoff system. While in the first round, candidates’ TV and radio time shares are determined by their coalitions’ share of seats in the national parliament, the two most voted candidates split equally TV time if a second round is necessary. Thus, differences in TV and radio advertising time between the first and second rounds are explored as a source of exogenous variation to evaluate the impact of TV advertising on election outcomes. Estimates suggest that a one percentage point increase in TV time causes a 0.241 percentage point increase in votes. Since TV advertising is the most important item in campaign expenditures, this result sheds light on the more general question of the effect of campaign spending on elections outcome. |
| Keywords: | Campaign Expenditures, Election Outcomes, Endogeneity, Quasi-Natural Experiments |
| JEL: | G12 C22 C53 E44 |
| Date: | 2007–08 |
| URL: | http://d.repec.org/n?u=RePEc:rio:texdis:550&r=mkt |
| By: | Pollock, Rufus |
| Abstract: | A sizable literature has grown up in recent years focusing on two-sided markets in which economies of scale combined with complementarities between a platform and its associated `software' or `services' can generate indirect network effects (that is positive feedback between the number of consumers using that platform and the utility of an individual consumer). In this paper we introduce a model of `porting' in such markets where porting denotes the conversion of `software' or `services' developed for one platform to run on another. Focusing on the case where a dominant platform exists we investigate the impact on equilibrium and the consequences for welfare of the ability to control porting. Specifically, we show that the welfare costs associated with the `control of porting' may be more significant than those arising from pricing alone. This model and its associated results are of particular relevance because of the light they shed on debates about the motivations and effects of actions by a dominant platform owner. Recent examples of such debates include those about Microsoft's behaviour both in relation to its operating system and its media player, Apple's behaviour in relation to its DRM and iTunes platform, and Ebay's use of the cyber-trespass doctrine to prevent access to its site. |
| Keywords: | Network Effects; Two-Sided Markets; Porting; Antitrust; Competition |
| JEL: | L13 L15 L12 |
| Date: | 2005–07 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:5023&r=mkt |
| By: | Fischer, Andreas M; Lutz, Matthias; Wälti, Manuel |
| Abstract: | Survey information on Swiss exporters is used to test the hypothesis that firm-specific factors, in particular firm size, are important determinants of pricing--to-market (PTM). The survey asked exporters whether they set different prices across markets and, if so, whether price segmentation occurred because of pricing conditions in the local market or other factors. The empirical analysis is based on a probit model that regresses a binary-choice variable of PTM on firm size and other control variables. The main empirical finding is that firm size and PTM are positively and significantly correlated. A further result is that while firms whose main export market is in the Euro area are less likely to engage in PTM, firm size plays a bigger role for them. These results are robust across different PTM classifications, regression specifications, export destinations, and industrial sectors. |
| Keywords: | firm size; local currency pricing; Pricing to markets |
| JEL: | F10 F14 |
| Date: | 2007–09 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:6442&r=mkt |