nep-mkt New Economics Papers
on Marketing
Issue of 2009‒11‒27
seven papers chosen by
Joao Carlos Correia Leitao
Polytechnic Institute of Portalegre and Technical University of Lisbon

  1. Consideration Sets and Competitive Marketing By Eliaz, Kfir; Spiegler, Ran
  2. Combined Influence of Selective Focus and Decision Involvement on Attitude-Decision Consistency in a Memory-based Decision Context By A. VAN KERCKHOVE; I. VERMEIR; M. GEUENS
  3. Consumer preferences for country-of-origin, geographical indication, and protected designation of origin labels By Menapace, Luisa; Colson, Gregory; Grebitus, Carola; Facendola, Maria
  4. Improved Marketing Decision Making in a Customer Churn Prediction Context Using Generalized Additive Models By K. COUSSEMENT; D. F. BENOIT; D. VAN DEN POEL
  5. Does Information Change Behavior? By Huffman, Wallace
  6. Do Food Scares Explain Supplier Concentration? An Analysis of EU Agri-food Imports By Cadot, Olivier; Jaud, Mélise; Suwa Eisenmann, Akiko
  7. Third-Degree Price Discrimination and Consumer Surplus By Simon Cowan

  1. By: Eliaz, Kfir; Spiegler, Ran
    Abstract: We study a market model in which competing firms use costly marketing devices to influence the set of alternatives which consumers perceive as relevant. Consumers in our model are boundedly rational in the sense that they have an imperfect perception of what is relevant to their decision problem. They apply well-defined preferences to a “consideration set”, which is a function of the marketing devices employed by the firms. We examine the implications of this behavioral model in the context of a competitive market model, particularly on industry profits, vertical product differentiation, the use of marketing devices and consumers’ conversion rates.
    Keywords: Advertising; Bounded rationality; Consideration sets; Irrelevant alternatives; Limited attention; Marketing; Persuasion
    JEL: C72 D11 D21 D43
    Date: 2009–09
    Abstract: Marketers often use salient stimuli to draw consumers’ attention to a specific brand in the hope that a selective focus on the own brand increases the sales of this brand. However, previous studies are inconsistent concerning the impact that selectively focusing on a specific brand has on final brand choice. To offer an explanation for these inconsistent results, this paper introduces decision involvement as a moderator of the relation between selective focus and attitude-decision consistency. Two studies indicate that selectively focusing on a not most preferred alternative indeed alters choice decisions, but only when decision involvement is low. Study 1 further shows that this interaction effect between selective focus and involvement takes place in the selection rather than the brand consideration stage. By introducing level of processing next to decision involvement, Study 2 shows that the interaction effect emerges even in limited processing conditions. The study also reconciles different explanations for the negative effect of selective focus on attitude-behavior consistency. Selectively focusing on a not preferred choice option when consumer are low involved and use limited processing seems to lead to inconsistent choices because of an increased accessibility of the focal option, whereas selective focus on a not preferred option when consumers are low involved and use deep processing lead to inconsistent choices because of attitude polarization.
    Keywords: Attitude-behavior relation, consideration set, decision involvement, accessibility
    Date: 2009–07
  3. By: Menapace, Luisa; Colson, Gregory; Grebitus, Carola; Facendola, Maria
    Abstract: Motivated by the recognition that geography is often correlated with and/or an important determinant of the overall quality of agricultural products, consumer groups, industry representatives, and domestic and trade representatives have increasingly considered the potential role of geographical origin labels as consumer information and marketing tools. We investigate whether consumers recognize and value the informational content of a variety of nested geographical origin labels. In particular, this study disentangles and assesses three nested types of origin labels: country of origin (COOL), geographical indications (GI), and PDO/PGI. We find that, within the context of a high quality valueadded commodity such as extra virgin olive oil, consumers' willingness to pay varies across different countries of origin, and that within a country consumers have a greater willingness to pay for GI-labeled than non-GI labeled products. We also find evidence that consumers value PDOs more than PGIs, but the result is not as strong as that found for GI versus non-GI. Overall, our findings support the recent surge in interest by both developed and developing nations in reaching an agreement for stricter and more widespread protection of GIs within ongoing WTO discussions and harnessing them as marketing tools for expanding shares in export markets.
    Keywords: Consumer preferences, geographical indications, country of origin labels, PDO, PGI, olive oil
    Date: 2009–11–10
    Abstract: Nowadays, companies are investing in a well-considered CRM strategy. One of the cornerstones in CRM is customer churn prediction, where one tries to predict whether or not a customer will leave the company. This study focuses on how to better support marketing decision makers in identifying risky customers by using Generalized Additive Models (GAM). Compared to Logistic Regression, GAM relaxes the linearity constraint which allows for complex non-linear fits to the data. The contributions to the literature are three-fold: (i) it is shown that GAM is able to improve marketing decision making by better identifying risky customers; (ii) it is shown that GAM increases the interpretability of the churn model by visualizing the non-linear relationships with customer churn identifying a quasi-exponential, a U, an inverted U or a complex trend and (iii) marketing managers are able to significantly increase business value by applying GAM in this churn prediction context.
    Date: 2009–07
  5. By: Huffman, Wallace
    Abstract: This paper reviews and synthesizes the theory of information economics and empirical evidence on how information changes the behavior of consumers, households and firms. I show that consumers respond to new information in food experiments but perhaps not in retirement account management. Some seeming perverse consumer/investor decision making may be a result of a complex decision with a low expected payoff.
    Keywords: information economics, consumer behavior, behavioral economics, moral hazard, adverse selection.
    JEL: A0
    Date: 2009–11–19
  6. By: Cadot, Olivier; Jaud, Mélise; Suwa Eisenmann, Akiko
    Abstract: This paper documents a decreasing trend in the geographical concentration of EU agro-food imports. Decomposing the concentration indices into intensive and extensive margins components, we find that the decrease in overall concentration indices results from two diverging trends: the pattern of trade diversifies at the extensive margin (EU countries have been sourcing their agri-food products from a wider range of suppliers), while geographical concentration increases at the intensive-margin (EU countries have concentrated their imports on a few major suppliers). This leads to an increasing inequality in market shares between a small group of large suppliers and a majority of small suppliers. We then move on to exploit a database of food alerts at the EU border that had never been exploited before. After coding it into HS8 categories, we regress the incidence of food alerts by product on determinants including exporter dummies as well as HS8 product dummies. Coefficients on product dummies provide unbiased estimates of the intrinsic vulnerability of exported products to food alerts, as measured at the EU border. We incorporate the product risk coefficient as an explanatory variable in a regression of geographical concentration and show that concentration is higher for risky products.
    Keywords: agricultural trade; European Union; food; import concentration; sanitary risk
    JEL: F1 O3
    Date: 2009–09
  7. By: Simon Cowan
    Abstract: his paper presents simple conditions for monopoly third-degree price discrimination to have negative or positive effects on aggregate consumer surplus. Consumer surplus is often reduced by discrimination, for example when total welfare (consumer surplus and profits) falls. Surplus increases with discrimination, however, in two cases: first, when the marginal revenues without discrimination are close together and inverse demand in the market where the price will fall with discrimination is more convex; second, when inverse demand functions are highly convex and the discriminatory prices are close together.
    Keywords: Third-degree price discrimination, Monopoly, Consumer surplus
    JEL: D42 L12 L13
    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.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.