nep-mkt New Economics Papers
on Marketing
Issue of 2008‒09‒29
seven papers chosen by
Joao Carlos Correia Leitao
Technical University of Lisbon

  1. Buying Online: Sequential Decision Making by Shopbot Visitors By Dulleck, Uwe; Hackl, Franz; Weiss, Bernhard; Winter-Ebmer, Rudolf
  2. Understanding international prices: customers as capital By Lukasz A. Drozd; Jaromir B. Nosal
  3. Measuring changes in preferences and perception due to the entry of a new brand with choice data By Lutz Hildebrandt; Lea Kalweit
  4. Concentration Levels in the U.S. Advertising and Marketing Services Industry: Myth vs. Reality By Alvin J. Silk; Charles King III
  5. Motivated Consumer Innovativeness: Concept and Measurement By B. VANDECASTEELE; M. GEUENS
  6. Demanding Customers: Consumerist Patients and Quality of Care By Hai Fang; Nolan H. Miller; John A. Rizzo; Richard J. Zeckhauser
  7. Multinational supermarket chains in developing countries: Does local agriculture benefit By Hildegunn Ekroll Stokke

  1. By: Dulleck, Uwe (School of Economics and Finance, Queensland University of Technology, Brisbane, Australia); Hackl, Franz (Department of Economics, University of Linz, Linz, Austria); Weiss, Bernhard (Department of Economics, University of Linz, Linz, Austria); Winter-Ebmer, Rudolf (Department of Economics, University of Linz, Linz, Austria, and Department of Economics and Finance, Institute for Advanced Studies, Vienna, Austria)
    Abstract: In this article we propose a two stage procedure to model demand decisions by customers who are balancing several dimensions of a product. We then test our procedure by analyzing the behavior of buyers from an Austrian price comparison site. Although in such a market a consumer will typically search for the cheapest price for a given product, reliability and service of the supplier are other important characteristics of a retailer. In our data, consumers follow such a two stage procedure: they select a shortlist of suppliers by using the price variable only; finally, they trade off reliability and price among these shortlisted suppliers.
    Keywords: E-commerce, price comparison, decision theory, heuristics, seller reputation
    JEL: L81 D83
    Date: 2008–09
  2. By: Lukasz A. Drozd; Jaromir B. Nosal
    Abstract: This paper develops a theory of pricing-to-market driven by marketing and bargaining frictions. Our key innovation is a capital theoretic model of marketing in which relations with customers are valuable. In our model, producers search and form long-lasting relations with their customers, and marketing helps overcome the search frictions involved in forming such matches. In the context of international business cycle patterns, the model accounts for observations that are puzzles for a large class of theories: (i) pricing-to-market, (ii) positive correlation of aggregate real export and import prices, (iii) excess volatility of the real exchange rate over the terms of trade, and (iv) low short-run and high long-run price elasticity of international trade flows. The behavior of quantities is shown to be on par with standard international business cycle theories that, in contrast to our model, assume low intrinsic elasticity of substitution between domestic and foreign goods.
    Keywords: Business cycles ; Prices ; International business enterprises
    Date: 2008
  3. By: Lutz Hildebrandt; Lea Kalweit
    Abstract: Context effects can have a major influence on brand choice behavior after the introduction of a new product. Based on behavioral literature, several hypotheses about the effects of a new brand on perception, preferences and choice behavior can be derived, but studies with real choice data are still lacking. We employ an internal market structure analysis to measure context effects caused by a new product in scanner panel data, and to discriminate between alternative theoretical explanations. An empirical investigation reveals strong support for categorization effects and changes in perception, which affect customers in two out of five segments.
    Keywords: context effects, categorization, brand choice models, new brand introduction
    JEL: M31 C23 C51
    Date: 2008–08
  4. By: Alvin J. Silk (Harvard Business School); Charles King III (Greylock McKinnon Associates, Cambridge, MA)
    Abstract: This paper analyzes changes in concentration levels in the U.S. Advertising and Marketing Services (A&MS) industry using publicly released data that have been largely ignored in past discussions of the industrial organization of this industry, namely those available from the U.S. Census Bureau's quinquennial Economic Census and the Service Annual Survey. We define the A&MS industry in terms of nine sectors, each of which is represented by a separate 5 digit NAICS category. In so doing, we have sought to redress some of the measurement problems surrounding estimates found in the existing literature. Our main findings are threefold. First, in the case of the core and largest sector, Advertising Agencies, firm level concentration as measured by Herfindahl-Hirschman Index (HHI) increased slightly but remained relatively low from 1977 to 2002. All of the HHI estimates readily satisfied the standard widely used to characterize an industry as "unconcentrated." We find mixed support for the hypotheses that the ranks of mid-sized agencies were depleted by ongoing waves of mergers and acquisitions and resulted in a polarized size structure. The size distributions of agency revenue have become more polarized in the sense that over time they appear more skewed, more dispersed, and exhibit greater inequality. The share of total receipts realized by small agencies fell while that of large agencies rose. However, the position of mid-sized agencies appears to have changed little over the period 1977- 2002, as measured by the shares of agencies and receipts they represent. Second, concentration levels in 1997 and 2002 varied across the nine sectors comprising the A&MS industry, but all were within the range generally considered as indicative of a competitive industry. Third, we developed concentration ratios at the level of holding companies (HC's) and find that the four largest HC's captured between a fifth and a quarter of total revenue from the A&MS industry, a share that remained quite stable over the period, 2002-2006. These estimates are lower by an order of magnitude than estimates often cited in the trade press. Reasons for the discrepancy are discussed.
    Date: 2008–09
    Abstract: Existing consumer innovativeness scales ignore the multitude of motivation sources of buying innovations. The objective of this paper is to incorporate recent motivation research into a multi-dimensional innovativeness scale to better account for the consumer-product relation. An exploratory and confirmatory study (with 780 respondents in total) indicates that four types of motivations underlie consumer innovativeness: functional, hedonic, social and cognitive. The proposed 28-item Motivated Consumer Innovativeness scale proves to be reliable, valid and goes beyond existing innovativeness scales.
    Keywords: Consumer innovativeness, Motivation, Scale development
    Date: 2008–08
  6. By: Hai Fang; Nolan H. Miller; John A. Rizzo; Richard J. Zeckhauser
    Abstract: Consumerism arises when patients acquire and use medical information from sources apart from their physicians, such as the Internet and direct-to-patient advertising. Consumerism has been hailed as a means of improving quality. This need not be the result. Consumerist patients place additional demands on their doctors' time, thus imposing a negative externality on other patients. Our theoretical model has the physician treat both consumerist and ordinary patient under a binding time budget. Relative to a world in which consumerism does not exist, consumerism is never Pareto improving, and in some cases harms both consumerist and ordinary patients. Data from a large national survey of physicians shows that high levels of consumerism are associated with lower perceived quality. Three different measures of quality were employed. The analysis uses instrumental variables to control for the endogeneity of consumerism. A control function approach is employed, since our dependent variable is ordered and categorical, not continuous.
    JEL: D82 I11 I12
    Date: 2008–09
  7. By: Hildegunn Ekroll Stokke (Department of Economics, Norwegian University of Science and Technology)
    Abstract: There is no consensus in the empirical literature on how entry of multinational supermarket chains affects farmers in developing countries. We quantify the dynamic effects of supermarket expansion on agriculture within a structural framework that clarifies the adjustment mechanisms involved. The model specification takes the potential productivity linkage between supermarkets and local suppliers into account. While econometric analyses struggle with causality issues, we analyze the endogenous interaction between supermarkets’ choice of suppliers and agricultural productivity. Based on numerical simulations, two results emerge. First, we offer a possible understanding of the conflicting evidence in the empirical literature. Whether farmers benefit from supermarkets or get stuck in a low productivity trap depends on the extent of local constraints related to production capacity and market access. Second, supply chain development initiated by supermarkets can help farmers escape the low productivity trap. While supermarkets face a short run cost, they gradually gain from more productive local suppliers.
    Date: 2008–09–08

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