nep-mkt New Economics Papers
on Marketing
Issue of 2007‒10‒27
fourteen papers chosen by
Joao Carlos Correia Leitao
University of the Beira Interior

  1. An Empirical Analysis of Search Engine Advertising: Sponsored Search and Cross-Selling in Electronic Markets By Anindya Ghose; Sha Yang
  2. La confianza, la intención de compra, la reputación y las emociones en la relación del consumidor con la marca. Aplicación al caso de la marca “Mundo Maya-México” Trust, buying intention, reputation and emotions in the consumer-brand relationship. Application to the brand “Mundo Maya-México”. By Matos Cámara, Fabricio; San Martín Gutiérrez, Sonia
  3. Deriving the Pricing Power of Product Features by Mining Consumer Reviews By Nikolay Archak; Anindya Ghose; Panagiotis G. Ipeirotis
  4. The Impacts of Shopbots on Online Consumer Search By Jie Jennifer Zhang; Bing Jing;
  5. Do Internet Converge Prices to the "Law of One Price"? Evidence from Transaction Data for Airline Tickets By Anirban Sengupta; ;
  6. Optimal Administered Incentive Pricing of Spectrum By Paul Levine; Neil Rickman
  7. Customer Infomation Sharing: Strategic Incentives and New Implications By Byung-Cheol Kim; Jay Pil Choi
  8. The Impact of Online Information on the Purchase of Certified Used Cars By Vandana Ramachandran; Siva Viswanathan; Sanjay Gosain
  9. e-Commerce as a sign: The diffusion of electronic commerce in the UK ceramic industry By Thea Hinde
  10. Price Discrimination in Two-Sided Markets By Qihong Liu; Konstantinos Serfes
  11. Do Consumers Care About How Prices Are Set? By Courty, Pascal; Pagliero, Mario
  12. Auctions with a Buy Price: The Case of Reference-Dependent Preferences By Nicholas Shunda
  13. Signaling Quality Through Prices in an Oligopoly By Maarten C.W. Janssen; Santanu Roy
  14. Influencia del talento del empresario y del tipo de página web en los resultados empresariales para las casas de turismo rural en España. Influence of the entrepreneurial talent and type of website on Rural Tourist House’s performance in Spain. By Nieto Arias, Jannine Waleska; Hernández Maestro, Rosa M.; Muñoz Gallego, Pablo A.

  1. By: Anindya Ghose (Stern School of Business, New York University); Sha Yang (Stern School of Business, New York University)
    Abstract: The phenomenon of sponsored search advertising where advertisers pay a fee to Internet search engines to be displayed alongside organic (non-sponsored) web search results is gaining ground as the largest source of revenues for search engines. Using a unique panel dataset of several hundred keywords collected from a large nationwide retailer that advertises on Google, we empirically model the relationship between different metrics such as click-through rates, conversion rates, bid prices and keyword ranks. Our paper proposes a novel framework and data to better understand what drives these differences. We use a Hierarchical Bayesian modeling framework and estimate the model using Markov Chain Monte Carlo (MCMC) methods. We empirically estimate the impact of keyword attributes on consumer search and purchase behavior as well as on firms’ decision-making behavior on bid prices and ranks. We find that the presence of retailer-specific information in the keyword increases click-through rates, and the presence of brand-specific information in the keyword increases conversion rates. Our analysis provides some evidence that advertisers are not bidding optimally with respect to maximizing the profits. We also demonstrate that as suggested by anecdotal evidence, search engines like Google factor in both the auction bid price as well as prior click-through rates before allotting a final rank to an advertisement. Finally, we conduct a detailed analysis with product level variables to explore the extent of cross-selling opportunities across different categories from a given keyword advertisement. We find that there exists significant potential for cross-selling through search keyword advertisements. Latency (the time it takes for consumer to place a purchase order after clicking on the advertisement) and the presence of a brand name in the keyword are associated with consumer spending on product categories that are different from the one they were originally searching for on the Internet.
    Keywords: Online advertising, Search engines, Hierarchical Bayesian modeling, Paid search, Clickthrough rates, Conversion rates, Keyword ranking, Bid price, Electronic commerce, Cross-Selling, Internet economics.
    JEL: C33 C51 D12 L10 M31 M37 L81
    Date: 2007–09
  2. By: Matos Cámara, Fabricio (Departamento de Economía y Administración de Empresas, Facultad de Ciencias Económicas y Empresariales, Universidad de Burgos); San Martín Gutiérrez, Sonia (Departamento de Economía y Administración de Empresas, Facultad de Ciencias Económicas y Empresariales, Universidad de Burgos)
    Abstract: Cada destino turístico es una marca que puede elegir el consumidor (turista) a la hora de viajar. Este trabajo examina, a través de un modelo causal que contrastamos empíricamente para el caso de Mundo Maya-México, el papel que desempeña la reputación, las emociones y la confianza en la intención de compra de los consumidores de un destino turístico. Desarrollamos un marco teórico multidisciplinar con aportaciones de la teoría de señales, las teorías de emociones y del marketing de relaciones. Se ha realizado una encuesta personal a consumidores que acuden a las agencias de viajes. Los resultados obtenidos corroboran la mayoría de nuestras hipótesis y arrojan resultados interesantes: tanto la reputación de una buena gestión y alta notoriedad del destino como el agrado y la confianza del consumidor respecto del destino resultan determinantes de la intención del turista de ir a un destino turístico. Each tourist destination is a brand the consumer can choose at the moment of travelling. This work analyzes, through a causal model empirically tested for the case of Mundo Maya-México, the paper that reputation, emotions and trust play in the consumer’s intention to go to a tourist destination. A multidisciplinary theoretical frame is developed with contributions of the signalling theory, emotions theories and relationship marketing. A face-to-face survey was carried out with consumers in travel agencies. Results confirm most of the proposed hypotheses and show interesting results: a reputation of a good management and high awareness of the tourist destination and consumer pleasure and trust in the destination reveal as antecedents of consumer intention to go to a certain tourist destination.
    Keywords: Confianza, intención de compra, reputación, emociones, destino turístico. Trust, buying intention, reputation, emotions, tourist destination.
    JEL: M1 M3 F1
    Date: 2006–11
  3. By: Nikolay Archak (Stern School of Business, New York University); Anindya Ghose (Stern School of Business, New York University); Panagiotis G. Ipeirotis (Stern School of Business, New York University)
    Abstract: The increasing pervasiveness of the Internet has dramatically changed the way that consumers shop for goods. Consumer-generated product reviews have become a valuable source of information for customers, who read the reviews and decide whether to buy the product based on the information provided. In this paper, we use techniques that decompose the reviews into segments that evaluate the individual characteristics of a product (e.g., image quality and battery life for a digital camera). Then, as a major contribution of this paper, we adapt methods from the econometrics literature, specifically the hedonic regression concept, to estimate: (a) the weight that customers place on each individual product feature, (b) the implicit evaluation score that customers assign to each feature, and (c) how these evaluations affect the revenue for a given product. Towards this goal, we develop a novel hybrid technique combining text mining and econometrics that models consumer product reviews as elements in a tensor product of feature and evaluation spaces. We then impute the quantitative impact of consumer reviews on product demand as a linear functional from this tensor product space. We demonstrate how to use a low-dimension approximation of this functional to significantly reduce the number of model parameters, while still providing good experimental results. We evaluate our technique using a data set from consisting of sales data and the related consumer reviews posted over a 15-month period for 242 products. Our experimental evaluation shows that we can extract actionable business intelligence from the data and better understand the customer preferences and actions. We also show that the textual portion of the reviews can improve product sales prediction compared to a baseline technique that simply relies on numeric data.
    Keywords: consumer reviews, e-commerce, econometrics, electronic commerce, electronic markets, hedonic analysis, Internet, opinion mining, product review, sentiment analysis, text mining, user-generated content.
    JEL: C33 D12 L10 M31 M37 L81
    Date: 2007–09
  4. By: Jie Jennifer Zhang (College of Business Administration, University of Texas at Arlington); Bing Jing (Cheung Kong Graduate School of Business);
    Abstract: Online price comparison agents (shopbots) allow consumers to instantaneously receive price and other information from many online retailers. Online consumer clickstream data from ComScore Inc.demonstrate that consumers are increasingly using shopbots to conduct search. This phenomenon raises such questions as "how do shopbots change consumers’ search behavior?" and "do they reduce consumers’ online search?" Conventional wisdom suggests that consumers are expected to search less because shopbots have displayed prices and other relative information from retailers on the search result page(s). Surprisingly, this study demonstrates the opposite result. That is, consumers are actually visiting more online retailer web sites after using shopbots. This finding suggests that after searching for an item through a shopbot and receiving the price information, consumers will continue to look for detailed information about the online retailers by visiting their web sites. The empirical finding is explained by an analytical model, which shows that on the one hand shopbots reduce the marginal benefit of searching additional online stores; on the other hand they reduce the cost of search. Therefore whether shopbots reduce consumer search depends on the cost of reducing per unit of risk, which is decided by a number of factors, such as marginal search costs, price dispersion and quality differentiation among stores, price and quality correlation, and consumers’ relative preference for service quality.
    Keywords: Sequential Search; Online Behavior; Shopbots; Internet Retailing; Clickstream Data; Service Quality
    JEL: L15 C12 D11 D12 D83
    Date: 2007–09
  5. By: Anirban Sengupta (Texas A&M University); ;
    Abstract: Internet presumably reduces search cost driving price to the competitive level. Evidence from empirical research quantifying dispersion in the electronic based markets has yield mixed results. More recent research has documented near zero dispersion in the electronic markets using transaction prices. This paper is one of only a handful of papers to examine the impact of internet on price dispersion using contemporaneous online and offline transaction data for airline ticket prices. The paper finds strong empirical evidence of lower dispersion in the electronic markets compared to the traditional markets, but fails to find evidence of near zero dispersion in the electronic markets, even with transaction prices. The results suggest that electronic markets exhibits significantly lower but positive dispersion, in contrary to the near zero dispersion as found in more recent empirical literature.
    Keywords: Price Dispersion, Search cost, Online, Offline, Transaction Prices
    JEL: L9
    Date: 2007–09
  6. By: Paul Levine (University of Surrey); Neil Rickman (University of Surrey & CEPR)
    Abstract: Administered Incentive Pricing (AIP) of radio spectrum as advocated by Smith/NERA (1996) and recently assessed by Indepen (2003) envisages an incremental path towards e±cient pricing, with revealed and stated prefer- ence methods being used to reveal opportunity costs. We build on the latter to develop and optimal pricing scheme that allows for consumer surplus, in- terference constraints and their implications for productive e±ciency, revenue implications and market structure. We demonstrate the subtle relationship between the interference constraints and the pricing and channel use decisions of network operators. We proceed to show that the optimal AIP is higher in sectors where spectrum can be shared and that it acts as Ramsey tax across sectors of the economy, i.e., is inversely related to the elasticity of demand. As a special case of our model we examine optimal pricing where the regula- tor is constrained to ignore the revenue implications. Then optimal spectrum prices are lower and the relationship between prices and the ability to share spectrum is reversed.
    Keywords: radio spectrum, spectrum pricing, administered incentive pricing
    JEL: L10 L50 L96
    Date: 2007–10
  7. By: Byung-Cheol Kim (Michigan State University); Jay Pil Choi (Michigan State University)
    Abstract: We study oligopolistic firms' incentives to share customer information about past purchase history in a situation where firms are uncertain about whether a particular consumer considers the product offerings complements or substitutes. By addressing this new type of behavior-based price discrimination, we show that both the incentive to share customer information and its effects on consumers depend crucially on the relative magnitudes of the prices that would prevail in the complementary and substitute markets if consumers were fully segmented according to their preferences. This paper has important implications for merger analysis when the primary motive for merger is the acquisition of another firm's customer lists. We also find that the informational regime in which firms reside can have an influence upon the choice of product differentiation. Additionally, our analysis suggests a new role of middlemen as information aggregators.
    Keywords: Customer Information Sharing, Complements and Substitutes, Product Differentiation, Behavior-Based Price Discrimination, Merger and Acquisition, Middlemen
    JEL: D43 D62 D83 L14 L51 M31
  8. By: Vandana Ramachandran (Robert H Smith School of Business, University of Maryland); Siva Viswanathan (Robert H Smith School of Business, University of Maryland); Sanjay Gosain (Capital Group, CA.)
    Abstract: Secondary markets have adopted a number of quality signaling mechanisms such as certification to reduce information asymmetries between buyers and sellers in these markets. However the importance and value of these signals depends on the nature and extent of information asymmetries. With the growth of the Internet, consumers seeking to purchase used goods now have access to a plethora of information on various aspects of their purchase process. What then is the impact of such information on the salience and value of a traditional quality signal such as certification? We draw upon a unique and extensive dataset of consumers who obtained vehicle and transaction related information from online sources in their used vehicle purchase process to examine the impact of their information-acquisition on the choice of certification, as well as the price paid. We compare the outcomes of sales where consumers purchased certified used cars with sales of used-cars where there was no certification. Our findings highlight that product-related information substitutes, and price-related information complements, certification as indicated by their differential impacts on demand and price of certified used cars. We discuss the relevance of our findings for buyers and sellers and outline implications for online information providers as well.
    Keywords: certification, online information, quality signals, uncertainty reduction, used cars
    JEL: M31 O33 C01 C42
    Date: 2007–09
  9. By: Thea Hinde (SCEME, University of Stirling, UK)
    Abstract: ‘E-commerce’ is conventionally understood to refer to a discrete set of Internet-related business practices, with discussions focused on their potential to improve the efficiency and reach of business. However, there is evidence that in practice, the term ‘e-commerce’ is applied to a wide range of activities often bearing little or no relation to the Internet. Reporting from the ceramics industry, this paper argues that despite involving significant cost and sometimes adversely affecting the business, ‘e-commerce’ activities are often pursued unquestioningly and largely enthusiastically. Through a series of case studies, it reviews the range of these ‘e-commerce’ activities, and identifies the implicit strategies to use e-commerce as a way to alter the way that the company is experienced or perceived. Thus conceived, we cannot continue to consider ‘doing e-commerce’ as a purely technical endeavour: it is also intimately connected with managing impressions and expectations. Drawing on the work of Barthes’ ‘Mythologies’ (1957), the paper explains how e-commerce can have associations that are not directly linked to its conventional or literal meaning.
    Keywords: electronic-commerce, ceramics-industry, Roland-Barthes, myth
    JEL: L81 L61 Z1 B41
    Date: 2007–10
  10. By: Qihong Liu (Department of Economics, University of Oklahoma); Konstantinos Serfes (LeBow College of Business, Drexel University)
    Abstract: We examine the profitability and the welfare implications of price discrimination in two-sided markets. Platforms have information about the preferences of the agents that allows them to price discriminate within each group. The conventional wisdom from one-sided horizontally differentiated markets is that price discrimination hurts the firms and benefits consumers, prisoners' dilemma. Moreover, it is well-known that the presence of indirect externalities in two-sided markets can intensify the competition. Despite all these, we show that the possibility of price discrimination, in a two-sided market, may actually soften the competition. Therefore, the implications of price discrimination from one-sided markets may not carry over to two-sided markets. This is the case regardless of whether prices are public or private, although private prices boost profits. Our analysis also sheds light on the welfare properties of price discrimination in intermediate goods markets, such as Business-to-Business (B2B) markets.
    Keywords: Price discrimination, Two-sided markets, Indirect network externalities, Market segmentation.
    JEL: D43 L13
    Date: 2007–09
  11. By: Courty, Pascal; Pagliero, Mario
    Abstract: Using a survey approach, we ask consumers to reveal their preferences over pricing schemes that may differ in terms of the average price of consumption, the amount of price variation, and the probability of being rationed. We find that consumers dislike pricing schemes that vary prices more but that they are willing to trade off price variation and rationing. Surprisingly, they are not willing to trade off an increase in price variation for a decrease in expected prices. We discuss the implications of these findings for firm pricing policies.
    Keywords: antagonism; Consumer demand; demand fluctuation; fairness; rationing
    JEL: A12 D01 D12
    Date: 2007–10
  12. By: Nicholas Shunda (University of Connecticut)
    Abstract: In an auction with a buy price, the seller provides bidders with an option to end the auction early by accepting a transaction at a posted price. The "Buy-It-Now" option on eBay is a leading example of an auction with a buy price. This paper develops a model of an auction with a buy price in which bidders use the auction's reserve price and buy price to formulate a reference price. The model both explains why a revenue-maximizing seller would want to augment her auction with a buy price and demonstrates that the seller sets a higher reserve price when she can affect the bidders' reference price through the auction's reserve price and buy price than when she can affect the bidders' reference price through the auction's reserve price only. Introducing a small reference-price effect can shrink the range of buy prices bidders are willing to exercise. The comparative statics properties of bidding behavior are in sharp contrast to equilibrium behavior in other models where the existence and size of the auction's buy price have no effect on bidding behavior.
    Keywords: Auction, Buy price, Internet, Reference-dependence?
    JEL: D44 D82 L86
    Date: 2007–10
  13. By: Maarten C.W. Janssen (Tinbergen Institute and Erasmus University); Santanu Roy (Southern Methodist University)
    Abstract: Firms signal high quality through high prices even if the market structure is highly competitive and price competition is severe. In a symmetric Bertrand oligopoly where products may differ only in their quality, production cost is increasing in quality and the quality of each firm's product is private information (not known to consumers or to other firms), we show that there exist fully revealing equilibria in mixed strategies. In such equilibria, low quality firms enjoy market power when other firms are of high quality. High quality firms charge higher prices than low quality firms but lose business to rival firms with higher probability. Some of the revealing equilibria involve high degree of market power (price close to full information monopoly level) while others are more "competitive". Under certain conditions, if the number of firms is large enough, information is revealed in every equilibrium.
    Keywords: Signaling; Quality; Oligopoly; Incomplete Information.
    JEL: L13 L15 D82 D43
    Date: 2007–10
  14. By: Nieto Arias, Jannine Waleska (Departamento de Administración y Economía de la Empresa, Facultad de Economía y Empresa, Universidad de Salamanca); Hernández Maestro, Rosa M. (Departamento de Administración y Economía de la Empresa, Facultad de Economía y Empresa, Universidad de Salamanca); Muñoz Gallego, Pablo A. (Departamento de Administración y Economía de la Empresa, Facultad de Economía y Empresa, Universidad de Salamanca)
    Abstract: El Turismo rural ha alcanzado un auge muy fuerte en España e internet se ha convertido en una herramienta vital en el sector. En este trabajo se persigue: 1) analizar la importancia del talento del empresario en la implantación de páginas web; 2) examinar la influencia de este talento y de las características de la página web sobre los resultados de la empresa y 3) determinar el efecto moderador de la experiencia del empresario. Con una muestra de 150 casas rurales en España y utilizando la metodología de ecuaciones estructurales, se observa cómo el contenido de la página web tiene una influencia sobre los resultados de la empresa, cómo la experiencia modera la relación entre el talento del empresario y los resultados y cómo la experiencia modera también la relación entre el talento y el diseño de la página web. In Spain, rural tourism has rapidly been on the increase and the internet has become an essential tool for this economic sector. The objectives of this project are: 1) to analyse the importance of the entrepreneurial talent on website’s implementation; 2) to study the influence of both the entrepreneurial talent and website’s features on enterprise’s performance; and 3) to determine the moderating effect of the businessman’s expertise. Based upon a sample of 150 Rural Tourist Houses in Spain and a Structural Equation Model, it should be noted: 1) the influence of the website’s contents on enterprise’s performance; 2) the businessman’s expertise moderating effect on entrepreneurial talent and performance relationship; and 3) the businessman’s expertise moderating effect on entrepreneurial talent and website design relationship.
    Keywords: Talento emprendedor, características de la página web, turismo rural, nuevas tecnologías. entrepreneurial talent, website features, rural tourism, new technologies.
    JEL: O14 O18 O32
    Date: 2007–04

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