nep-mkt New Economics Papers
on Marketing
Issue of 2009‒04‒13
twelve papers chosen by
Joao Carlos Correia Leitao
Technical University of Lisbon

  1. Learning How to Consume and Returns to Product Promotion By Babutsidze, Zakaria
  2. Sales and Advertising Rivalry in interwar US Department Stores By Peter Scott; James Walker
  3. Do vendors benefit from marketing actions in a multi-vendor loyalty program? By Dorotic, Matilda; Fok, Dennis; Verhoef, Peter C.; Bijmolt, Tammo H.A.
  4. Changing the Numbers: UK Directory Enquiries Deregulation and the Failure of Choice By Pollock, R.
  5. Commerce équitable et signaux : entre information et illusion By Lupton, Sylvie
  6. Advertising and Business Cycle Fluctuations By Benedetto Molinari; Francesco Turino
  7. Habit Formation, Demand and Growth through Product Innovation By Garcia-Torres, M. Abraham
  9. An Analysis of Key Factors in the Adoption and Use of Web-Based Technologies by Small and Medium-Sized Companies Around the World By Fahri Unsal; Hormoz Movassaghi
  10. The competitive repositioning of automotive firms in Turin: innovation, internationalisation and the role of ICT By Massimo Florio; Cristina Castelli; Anna Giunta
  11. Map Based Visualization of Product Catalogs By Kagie, M.; Wezel, M.C. van; Groenen, P.J.F.
  12. The demand for Euromillions lottery tickets: An international comparison By Patrick Roger

  1. By: Babutsidze, Zakaria (UNU-MERIT)
    Abstract: This paper presents the computational model of consumer behaviour. We consider two sources of product specic consumer skill acquisition, termed here as learning how to consume: learning by consuming and consumer socialization. Consumers utilize these two sources in order to derive higher valuations for products they are consuming. In this framework we discuss the behavior of returns to product promotion relative to the changes in product characteristics, such as quality and userfriendliness, as well as in case of varying intensity of consumer socialization. The main finding is that in case of duopoly the dependence of returns to advertising on product quality is not monotonic as it has been claimed by earlier studies. Additional important finding indicating the importance of the models with interacting agents is that returns to advertising exhibit qualitatively different behavior in case of zero intensity of consumer socialization.
    Keywords: Consumer skills, learning by consuming, consumer socialization, product promotion, returns to advertising
    JEL: D11 M37 C63
    Date: 2009
  2. By: Peter Scott (Centre for International Business History Henley Business School at the University of Reading); James Walker (Centre for International Business History Henley Business School at the University of Reading)
    Abstract: Department stores represented one of the most advertising-intensive sectors of American inter-war retailing. Yet it has been argued that a competitive spiral of high advertising spending, to match the challenge of other local department stores, contributed to a damaging inflation of costs that eroded long-term competitiveness. We test these claims, using both qualitative archival data and establishment-level national data sets. Returns to stores’ advertising are shown to have fallen over the period, while own advertising led to retaliatory advertising by rival department stores, which substantially lowered returns on advertising dollars in the 1930s (but not the 1920s).
    Keywords: Department stores, Interwar U.S. economic history, Advertising, Marketing
    JEL: L81 M37 N82
    Date: 2009
  3. By: Dorotic, Matilda; Fok, Dennis; Verhoef, Peter C.; Bijmolt, Tammo H.A. (Groningen University)
    Abstract: Multi-vendor loyalty programs are a common phenomenon in loyalty marketing. Such programs use marketing actions to engage their members in purchase behaviour at cooperating vendors. This study assesses the impact of marketing actions on vendors? sales and the number of collectors attracted in a multi-vendor loyalty program. In analysing this impact a distinction is made between own-effects of an action and cross-vendor effects. Our findings indicate limited effects of these actions. Only when two mediums (e-mails and direct mailings) are used in an integrated way we find an effect on sales and attraction of collectors. These effects do, however, die out rapidly (within two or three weeks). In line with prior findings on cross-category effects of sales promotions, we find little support for the existence of cross-vendor effects. In addition, the results show that a reduction in the saving benefits of a program does not necessarily reduce the number of collectors attracted to stores.
    Date: 2009
  4. By: Pollock, R.
    Abstract: In 2003, the UK `liberalised' its telephone directory enquiries service with the aim of introducing competition so as to improve quality and lower costs. Unfortunately the results did not match expectations. Proliferation of numbers led to consumer confusion and high price firms with no discernible quality advantages but which employed heavy advertising came to dominate the market. Consumer and total welfare appear to have declined. This example raises important questions for regulators. In particular, with limits on information and rationality, it may sometimes be better to limit choice but increase competition to supply that choice.
    Keywords: Competition, Deregulation, Advertising, Bounded Rationality
    JEL: L51 L43
    Date: 2009–04–07
  5. By: Lupton, Sylvie
    Abstract: Literature on signals has developed the importance of signals to inform consumers on product quality. However, a majority of economists suppose that the signals perfectly indicate quality to consumers, and that their perceptions correspond to the real quality issued by signals. Most economists have not considered situations of extreme asymmetrical information (Parker, 1995)in which consumers have an illusion about the signalled quality. This illusion is the condition of the functioning of certain markets, and especially applies to Potemkin goods (Tietzel and Weber, 1991), for which neither the consumer nor exterior institutions can control the quality of goods. Hence, the percieved quality of the good does not correspond to the good's actual quality. Our paper sheds lights on the question of a quality illusion shared by consumers, that is not dealt with by signals. The market functions perfectly well, albeit this illusion on product quality. This will be based on an empirical case study of fair trade signals on goods.
    Keywords: Signals; faire trade; asymmetrical information; illusion; product quality
    JEL: D82 L15
    Date: 2009–04–09
  6. By: Benedetto Molinari (Universidad Pablo de Olavide); Francesco Turino (Universidad de Alicante)
    Abstract: This paper provides new empirical evidence for quarterly U.S. aggregate advertisingexpenditures, showing that advertising has a well defined pattern over the BusinessCycle. To understand this pattern we develop a general equilibrium model wheretargeted advertising increases the marginal utility of the advertised good. Advertisingintensity is endogenously determined by profit maximizing firms. We embed thisassumption into an otherwise standard model of the business cycle withmonopolistic competition. We find that advertising affects the aggregate dynamics ina relevant way, and it exacerbates the welfare costs of fluctuations for the consumer.Finally, we provide estimates of our setup using Bayesian techniques.
    Keywords: Advertising, DSGE model, Business Cycle fluctuations, Bayesian
    JEL: D11 E32 J22 M37
    Date: 2009–03
  7. By: Garcia-Torres, M. Abraham (UNU-MERIT)
    Abstract: Growth theory has mainly focused on process innovation, either through an increase in quality of the product or a reduction on the cost. The main contributions in growth theory that includes product innovation has been done in the Dixit and Stiglitz framework. This framework works with oversimplifying restrictions on the demand side: Preferences of consumers are assumed to be constant and equal for all goods. This paper introduces vertical and horizontal differentiation in final goods. Goods are different in their habit formation parameters. Innovation is not the normal reduction in costs but an increase in the capacity to satisfy consumers’ needs. Growth in this model is defined as the growth of the final value added.
    Keywords: growth, product innovation, technical change, consumption
    JEL: O47 E21 D11 O31 M37
    Date: 2009
  8. By: Valerien O. Pede (Raymond J.G.M. Florax; Matthew T. Holt; Department of Agricultural Economics, Purdue University, West Lafayette, IN)
    Abstract: Spatial regression models incorporating non-stationarity in the regression coefficients are popular. We propose a spatial variant of the Smooth Transition AutoRegressive (STAR) model that is more parsimonious than commonly used approaches and endogenously determines the extent of spatial parameter variation. Uncomplicated estimation and inference procedures are demonstrated using a neoclassical convergence model for United States counties.
    Keywords: spatial autoregression, smooth transition, spatial econometrics, STAR, GWR
    JEL: C21 C51 R11 R12
    Date: 2009
  9. By: Fahri Unsal (Ithaca College); Hormoz Movassaghi (Ithaca College)
    Abstract: Internet and Web-based technologies have provided firms significant opportunities to improve their value chain activities, both in primary and support functions. The main focus of this paper is to examine the literature on small- and medium-size enterprises' (SMEs) experience with such technologies in terms of how they have been utilized, how they are perceived to have benefited firms, the main challenges encountered in their implementation and most specifically, the factors that seem to have influenced firms' adoption decisions. While the literature reported includes experience of firms of all sizes, this study focuses on SMEs for their crucial role in all economies, with those in developing countries in particular.This paper was presented May 23, 2008, at the 18th International Conference of the International Trade and Finance Association, meeting at Universidad Nova de Lisboa, Lisbon, Portugal.
    Date: 2008–08–15
  10. By: Massimo Florio (DEAS, Università di Milano); Cristina Castelli (Istituto nazionale per il Commercio Estero (ICE)); Anna Giunta (Università degli Studi Roma 3)
    Abstract: Following the increasing competitive pressure and the emergence of new industrial poles within the auto industry, Italian firms have been the protagonists of an intense reorganisation, which is still ongoing. This case-study involves 13 supplier firms, operating in the automotive industry, localised in Turin, that have adopted a series of strategies aimed at improving their international competitiveness. The empirical findings show that there is a particularly strong innovative drive for the interviewed firms to position themselves in activities with greater added value and to undertake internationalisation strategies, from the 'lighter' to the more 'complex' forms, coupled with a use of information and communication technologies epresents a case of excellence.
    Keywords: Innovation, Internationalisation, ICT, Automotive Industry
    JEL: O31 L62 L63 F23
    Date: 2008–06–18
  11. By: Kagie, M.; Wezel, M.C. van; Groenen, P.J.F. (Erasmus Research Institute of Management (ERIM), RSM Erasmus University)
    Abstract: Traditionally, recommender systems present recommendations in lists to the user. In content- and knowledge-based recommendation systems these list are often sorted on some notion of similarity with a query, ideal product specification, or sample product. However, a lot of information is lost in this way, since two even similar products can differ from the query on a completely different set of product characteristics. When using a two dimensional, that is, a map-based, representation of the recommendations, it is possible to retain this information. In the map we can then position recommendations that are similar to each other in the same area of the map. Both in science and industry an increasing number of two dimensional graphical interfaces have been introduced over the last years. However, some of them lack a sound scientific foundation, while other approaches are not applicable in a recommendation setting. In our chapter, we will describe a framework, which has a solid scientific foundation (using state-of-the-art statistical models) and is specifically designed to work with e-commerce product catalogs. Basis of the framework is the Product Catalog Map interface based on multidimensional scaling. Also, we show another type of interface based on nonlinear principal components analysis, which provides an easy way in constraining the space based on specific characteristic values. Then, we discuss some advanced issues. Firstly, we discuss how the product catalog interface can be adapted to better fit the users' notion of importance of attributes using click stream analysis. Secondly, we show an user interface that combines recommendation by proposing with the map based approach. Finally, we show how these methods can be applied to a real e-commerce product catalog of MP3-players.
    Keywords: dissimilarity measure;map-based interface;multidimensional scaling;nonlinear principal components analysis;recommender systems
    Date: 2009–03–08
  12. By: Patrick Roger (Laboratoire de Recherche en Gestion et Economie, Université de Strasbourg)
    Abstract: We analyze the demand of the Euromillions lottery tickets, a European lotto-like game launched in 2004 and played simultaneously in nine countries with the same rules and the same draws. Using the effective price methodology, we show that price elasticities are very different across countries. Especially, Spain and Portugal exhibit a low price elasticity and high mean sales, meaning a low sensitivity to jackpot increases. On the contrary, Ireland and the United Kingdom exhibit very high long-run elasticities and a large sensitivity to jackpot variations. The interpretations of these results are linked to lower GDP in the two former countries and, for Spain, to the large development of syndication play, and to the bookmaking activities and the highly competitive betting market in Ireland and the UK. Moreover, we show that Spanish and Portuguese players pay a much higher effective price than UK gamblers, meaning that in a certain sense the former subsidize the latter.
    Keywords: Lottery, gambling, demand estimation, price elasticity.
    JEL: D81 H71
    Date: 2009

This nep-mkt issue is ©2009 by Joao Carlos Correia Leitao. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
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