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on Marketing |
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Issue of 2009‒12‒05
four papers chosen by Joao Carlos Correia Leitao Polytechnic Institute of Portalegre and Technical University of Lisbon |
| By: | Alexandre de Cornière |
| Abstract: | This article investigates the role of a search engine as an intermediary between firms and consumers. Search engines enable firms to target consumers who have revealed some specific needs through their query. In a framework with horizontal product differentiation, imperfect product information and in which consumers incur search costs, I show that introducing a "neutral" targeted advertising mechanism reduces social inefficiencies and tends to reduce the equilibrium price. Moreover, the accuracy of the mechanism has a non monotonic effect on the price of the good: the price is lowest when the accuracy is intermediate. |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:pse:psecon:2009-48&r=mkt |
| By: | Maarten Janssen; Paul Pichler; Simon Weidenholzer |
| Abstract: | A large variety of markets, such as retail markets for gasoline or mortgage markets, are characterized by a small number of firms offering a fairly homogenous product at virtually the same cost, while consumers, being uninformed about this cost, sequentially search for low prices. The present paper provides a theoretical examination of this type of market, and confronts the theory with data on retail gasoline prices. We develop a sequential search model with incomplete information and characterize a perfect Bayesian equilibrium in which consumers follow simple reservation price strategies. Firms strategically exploit consumers being uninformed about their production cost, and set on average higher prices compared to the standard complete information model. Thus, consumer welfare is lower. Using data on the gasoline retail market in Vienna (Austria), we further argue that incomplete information is a necessary feature to explain observed gasoline prices within a sequential search framework. |
| JEL: | D40 D83 L13 |
| Date: | 2009–09 |
| URL: | http://d.repec.org/n?u=RePEc:vie:viennp:0914&r=mkt |
| By: | Ali Choudhary; Thorlakur Karlsson; Gylfi Zoega (Department of Economics, Mathematics & Statistics, Birkbeck) |
| Abstract: | This paper uses survey data from Iceland on 884 firms to test for the theory of customer markets proposed by Phelps and Winter (1970) and Okun (1981). The results provide support for the customer market theory in that managers agree that customers are valuable to firms – they rank them second only to employees – and they use various means of augmenting and retaining their customer base, such as advertising. Surprisingly, however, price setting appears not to be an important ploy for attracting and retaining customers. In this we confirm the earlier results of Lye and Sibly (1994) using Australian data. Instead, advertising and direct contact with customers are listed as significantly more important. |
| Date: | 2009–11 |
| URL: | http://d.repec.org/n?u=RePEc:bbk:bbkefp:0916&r=mkt |
| By: | Ellis, Colin (Daiwa Securities SMBC Europe Ltd) |
| Abstract: | This paper examines the behaviour of supermarket prices in the United Kingdom, using weekly scanner data supplied by Nielsen. A number of stylised facts about pricing behaviour are uncovered. First, prices change very frequently in supermarkets, with 40% of prices changing each week, and even controlling for ‘temporary’ changes, a quarter of prices change each week. Importantly, there is evidence that focusing on monthly observations, rather than weekly ones, overstates the implied stickiness of prices. Second, the probability of price changes is not constant over time – all product categories have declining hazard functions. Third, the range of price changes is very wide, with some very large price cuts and price rises; but despite this, a significant number of price changes are very small. Fourth, there appears to be little link between the frequency and magnitude of price changes – prices that change less frequently do not tend to change by more. Fifth, the strongest correlation between price and volume changes is contemporaneous, suggesting that prices and volumes move together from week to week. And sixth, rough analysis based on simplifying assumptions suggests that consumers are fairly price sensitive: volumes change by more than prices. |
| Keywords: | Supermarket prices; behaviour of prices; demand elasticities |
| JEL: | D40 E31 |
| Date: | 2009–11–27 |
| URL: | http://d.repec.org/n?u=RePEc:boe:boeewp:0378&r=mkt |