nep-mkt New Economics Papers
on Marketing
Issue of 2009‒10‒10
eight papers chosen by
Joao Carlos Correia Leitao
Polytechnic Institute of Portalegre and Technical University of Lisbon

  1. Shopping Cost and Brand Exploration in Online Grocery By Andrea Pozzi
  2. Music for a Song: An Empirical Look at Uniform Song Pricing and its Alternatives By Ben Shiller; Joel Waldfogel
  3. Promoting Southern Asia as an exotic destination : a viable asset or a short term perspective ? By Matthieu Thiercy
  4. Make or Buy in a mature industry? Models of client-supplier relationships under TCT and RBV perspectives By Manuel Portugal Ferreira; Fernando A. Ribeiro Serra
  5. Retail Redlining: Are gasoline prices higher in poor and minority neighborhoods? By Caitlin Knowles Myers; Grace Close; Laurice Fox; John William Meyer; Madeline Niemi
  6. Price Discrimination under Customer Recognition and Mergers By Rosa Branca Esteves; Hélder Vasconcelos
  7. To what extent can environmental issues play a role in the traveller's choice of a holiday destination ? By Solenn Mornet
  8. Wealth effect in the US: evidence from brand new micro-data By Salotti, Simone

  1. By: Andrea Pozzi (Einaudi Institute for Economics and Finance (EIEF))
    Abstract: This paper explores differences in consumers' grocery shopping behavior when they shop online and in a brick-and-mortar store. To do so, I assemble a new scanner dataset that tracks customers' grocery purchases in-store and on the Internet. This allows comparison in behavior of the same households, shopping in the same chain, for identical items and for identical prices, eliminating many possible confounding factors. I focus on the breakfast cereals category, and start by documenting that brand exploration is systematically more prevalent in-store than online. I propose three possible explanations for this finding: (i) shocks to the instantaneous utility of time correlated with the decision to shop online (ii) features of the grocer's website; and (iii) difficulty in assessing quality of unknown items while shopping online. I then continue by developing and estimating a model of consumer behavior that allows me to quantify each effect. I find that all of these effects contribute to hamper trial of new brands online. The counterfactual shows that altering the design of the website to remove potential obstacles to new trials increases brand exploration by 23%. More generally, in contrast to the conventional wisdom of the Internet reducing entry barriers, my work points to features of the online environment that in certain contexts actually could make entry of new brands more difficult.
    Keywords: retail, e-commerce, panel data, entry barriers
    JEL: L22 L81 M21
    Date: 2008–09
  2. By: Ben Shiller; Joel Waldfogel
    Abstract: Economists have well-developed theories that challenge the wisdom of the common practice of uniform pricing. With digital music as its context, this paper explores the profit and welfare implications of various alternatives, including song-specific pricing, various forms of bundling, two-part tariffs, nonlinear pricing, and third-degree price discrimination. Using survey-based data on nearly 1000 students’ valuations of 100 popular songs in early 2008 and early 2009. We find that various alternatives – including simple schemes such as pure bundling and two-part tariffs – can raise both producer and consumer surplus. Revenue could be raised by between a sixth and a third relative to profit-maximizing uniform pricing. While person-specific uniform pricing can raise revenue by over 50 percent, none of the non-discriminatory schemes raise revenue’s share of surplus above 40 percent of total surplus. Even with sophisticated pricing, much of the area under the demand curve for this product cannot be appropriated as revenue.
    JEL: L12 L82
    Date: 2009–10
  3. By: Matthieu Thiercy (USTV - Université du Sud Toulon-Var - UFR Lettres et Sciences Humaines - Ministère de l'Enseignement Supérieur et de la Recherche Scientifique)
    Abstract: As soon as it was discovered by the Western world a few centuries ago, Southeast Asia started to inspire and fascinate. As centuries went by, conquistadores became travelers until these travelers became tourists: these bustling conquerors of a new kind. Straightaway, the unknown began to be subjected to our own colonialist perceptions and loose approaches of otherness. What used to be exotic, because it was untouched by the illnesses of our modern worlds, has turned into what is intrinsically within our constant reach. Exoticism has become something we deal with frequently and eagerly aim at. Our lives are full of goals we desperately seek to attain. Travels and tourism have successfully lured their practitioners into thinking this ‘better other living elsewhere' has always been within reach. If our willingness to control and define otherness according to our own standards is inherent to all tourists, it now turns out to be the contrary. Exoticism is now chasing after markets and ruling over a powerful marketing machinery that does not fail to have important consequences over destinations, hosts and guests alike. In response to that, tourists and the industry as a whole are trying to manage exoticism so that it does not turn down on what it has been primarily brought up for. However, how coherent is this willingness to manage otherness and conflict with the Other? How does Southeast Asia promote its exoticism in the first place? This is what I will try to answer in this work...
    Date: 2009–09
  4. By: Manuel Portugal Ferreira (Escola Superior de Tecnologia e Gestão - Instituto Politécnico de Leiria); Fernando A. Ribeiro Serra (UNISUL ? Universidade do Sul de Santa Catarina)
    Abstract: In this paper, we use the transaction cost theory (TCT) and the resource-based view (RBV) to discuss three propositions on the models of client-supplier relationships in mature industries. The two theories seem to advance different organizational forms of the client-supplier relationships, and in some instances contradictory. How should firms organize to prosper and grow, namely in the international markets? Through the case study of three Portuguese packaging firms, with primary (interviews) and secondary data, we discuss how the three firms deploy three distinct strategic organization models in a mature industry. One firm utilizes market-based governance mechanisms, and concentrates its production in a few selected locations. Another firm vertically integrates almost the entire value chain of the product to provide full service to its clients. The third firm operates in a model of integrated outsourcing, with the installation "wall to wall" to its clients. The models client-supplier assumed by these firms are based on efficient, stable, and trustworthy relationships, that permit the focus on their core competences and the reduction of the transaction costs. Firms? superior performance requires a proper alignment of hierarchical and relational governance taking in consideration the dimensions of the transactions.
    Keywords: Client-supplier relationship models; Outsourcing; TCT; RBV; Strategic Governance
    JEL: M0 M1
    Date: 2009–09–10
  5. By: Caitlin Knowles Myers; Grace Close; Laurice Fox; John William Meyer; Madeline Niemi
    Abstract: Higher retail prices are frequently cited as a cost of living in poor, minority neighborhoods. However, the empirical evidence, which primarilycomes from the grocery gap literature on food prices, has been mixed. This study uses new data on retail gasoline prices in three major U.S.cities to provide evidence on the relationship between neighborhood characteristics and consumer prices. We find that gasoline prices do not varygreatly with neighborhood racial composition, but that prices are higher in poor neighborhoods. For a 10 percentage point increase in the percentof families with incomes below the poverty line relative to families with incomes between 1 and 2 times the poverty line, retail gasoline prices are estimated to increase by an average of 0.70 percent. This differential is reduced to 0.22 percent once we add controls for costs, competition, and demand. Finally, we provide evidence that the remaining, small, price differential for poor neighborhoods is likely the result of traditional price discrimination in response to less competition and/or more inelastic demand in these locations.
    Date: 2009–06
  6. By: Rosa Branca Esteves (Universidade do Minho - NIPE); Hélder Vasconcelos (Univ. Católica Portuguesa (CEGE) - CEPR)
    Abstract: This paper studies the interaction between horizontal mergers and price discrimination by endogenizing the merger formation process in the context of a repeated purchase model with two periods and three firms wherein firms may engage in Behaviour-Based Price Discrimination (BBPD). From a merger policy perspective, this paper's main contribution is two-fold. First, it shows that when firms are allowed to price discriminate, the (unique) equilibrium merger gives rise to significant increases in profits for the merging firms (the ones with information to price-discriminate), but has no effect on the outsider firm's profitability, thereby eliminating the so called "free-riding problem". Second, this equilibrium merger is shown to increase industry profits at the expense of consumers' surplus, leaving total welfare unaffected and, therefore, suggesting that competition authorities should scrutinize with greater zeal mergers in industries where firms are expected to engage in BBPD.
    Keywords: Behaviour-Based Price Discrimination, Customer Poaching, Horizontal Mergers
    JEL: L13 L15 L41 D43
    Date: 2009
  7. By: Solenn Mornet (USTV - Université du Sud Toulon-Var - UFR Lettres et Sciences Humaines - Ministère de l'Enseignement Supérieur et de la Recherche Scientifique)
    Abstract: It has been decades since we could hear about sustainable tourism with such buzzwords as “ecotourism”, “green tourism” and many others. Today the tourism sector is the world's biggest economic activity. Travel responsibly is gaining importance due to the now rampant awareness regarding environmental issues all over the World. It is nowadays fashionable to sell something “green” and not only in the tourism sector. It has become a commercial argument and that is why we can wonder about the real commitments it involves. In a meantime, if “green” is a marketing purpose, does it mean anything to the consumer and does it influence their choices? Taking care of the environment may be a fad these years, but it is a worldwide one. What does it mean in terms of actions? And as we know travelling is felt as something important to everyone and as everybody feels concerned by environmental issues, then why is ecotourism still marginal within the tourism sector?
    Keywords: Ecotourisme, Environnement, Green
    Date: 2009–09
  8. By: Salotti, Simone
    Abstract: This article investigates how wealth and capital gains affected household consumption in the USA in the period 1989-2004. The empirical evidence brought so far by a large literature that investigates the role of wealth shocks on consumption is mixed, due to the low quality of the data more readily available. We use a statistical matching procedure to create our own unique dataset, merging data from the Consumer Expenditure Survey and the Survey of Consumer Finances. The high quality data that result from this operation allow us to perform a detailed analysis on the mechanism of the wealth effect. We divide between durables and non durables consumption, and we also investigate the roles of the different components of household wealth, both gross and net. Our estimates indicate that there is a significant tangible wealth effect, and its economic importance lies in the low range of the estimates of the previous empirical literature. Decomposing tangible wealth in the house of residence and other real estate leads us to conclude that both contribute to the total wealth effect, but the former is quantitatively more important. On the contrary, financial wealth seems to have no significant effects on consumption. This last finding tends to confirm the evidence found in a number of previous studies that use both micro and macro-level data. Interestingly, the effects of tangible wealth on consumption disappears in 2004, maybe because US households perceived that the rising property prices due to the housing bubble were not permanent, thus they did not modify savings. The estimation of the model with a Pooled OLS on the repeated cross sections confirms the initial findings, and, allowing for some interaction terms, permits a better understanding of the role played by aged people. The importance of tangible wealth is confirmed by this final estimation.
    Keywords: Consumption; Household Wealth; Wealth Effect; Statistical Matching
    JEL: D12 E21
    Date: 2009

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