nep-mkt New Economics Papers
on Marketing
Issue of 2008‒03‒01
three papers chosen by
Joao Carlos Correia Leitao
University of the Beira Interior

  1. Chain-Store Competition: Customized vs. Uniform Pricing By Dobson, Paul W.; Waterson, Michael
  2. Consumer awareness and the use of payment media: evidence from young Finnish consumers By Hyytinen, Ari; Takalo, Tuomas
  3. On the Informational Role of Prices with Rational Expectations By Cheng-Zhong Qin; Xiaojuan Hu

  1. By: Dobson, Paul W. (Loughborough University Business School); Waterson, Michael (University of Warwick)
    Abstract: Retail chains essentially practice one of two broad strategies in setting prices across their stores. The more straightforward is to set a chain- or country- wide price. Alternatively, managers of retail chains may customize prices to the store level according to local demand and competitive conditions. For example, a chain may price lower in a location with lower demand and/or more competition. However, despite having the ability to customize prices to local market conditions, some choose instead to commit to uniform pricing with a “one price policy” across their entire store network. As an illustration, we focus on UK supermarket chains. Is there an advantage to be gained from deliberately choosing not to price discriminate across locations? We show generally and illustrate through means of a specific model that there exists a strategic incentive to soften competition in competitive markets by committing not to customize prices at the store level and instead adopt uniform pricing across the store network, and to raise overall profits thereby. Furthermore, we characterize quite precisely the circumstances under which uniform pricing is, and is not, profitable and illustrate that under a range of circumstances uniform pricing may be the preferable strategy.
    Keywords: Chain-store retailers ; price discrimination ; uniform pricing ; local pricing ; commitment
    Date: 2008
  2. By: Hyytinen, Ari (University of Jyväskylä and Bank of Finland); Takalo, Tuomas (Bank of Finland Research)
    Abstract: In the market for payment media, some consumers use only one medium when paying for their point-of-sale transactions, while others use many. This pattern reflects the diffusion of new payment media, because a payment method innovation is typically first used simultaneously with the established methods. We study the use of multiple payment media by employing data on young Finnish consumers. We find that the use of multiple payment media is directly related to consumer awareness and that not controlling for the endogeneity of awareness can bias its effect downwards. These results suggest that increasing consumer awareness may have been underlying the rise of debit card use around the world. It could also speed up the adoption of new means of payment, such electronic money and mobile payments. To the extent that antitrust concerns in the market for payment media stem from the lack of information, improving consumer awareness could be a remedy.
    Keywords: payment media; consumer awareness; adoption of financial technology
    JEL: E59 G20
    Date: 2008–02–27
  3. By: Cheng-Zhong Qin (University of California, Santa Barbara); Xiaojuan Hu (University of California, Santa Barbara)
    Abstract: Traders' expected utilities in fully revealing rational expectations equilibrium (REE) are shown to decrease as the number of informed traders is increased for an asset market model with diverse information as in Grossman (1976). It follows that no trader has any incentive to acquire information even if no other traders do. Consequently, when information acquisition is endogenous, there exists unique overall equilibrium with no trader acquiring information that has the fully revealing REE as an integral part, so that prices would fully reveal private information were it to be acquired by traders. This result provides a strengthening of the fundamental conflict between the efficiency with which markets spread information through the prices and the incentive to acquire information. Both the existence and the no information acquisition feature of the overall equilibrium do not depend on whether traders are endowed with the risky asset or not.
    Keywords: asymmetric information, Grossman Paradox, Hirshleifer Effect, rational expectations equilibrium,
    Date: 2006–05–20

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