nep-mkt New Economics Papers
on Marketing
Issue of 2010‒07‒17
nine papers chosen by
Joao Carlos Correia Leitao
University of Beira Interior and Technical University of Lisbon

  1. Do defaults matter? Willingness to pay to avoid GM food vis-à-vis organic and conventional food in Denmark, Great Britain and Spain. By Costa-Font, Montserrat; Tranter, Richard; Gil, José M; Jones, Philip; Gylling, Morten
  2. Advertising Competition in Retail Markets By Kyle Bagwell; Gea M. Lee
  3. An Analysis of the Consumption of Sausages in Scotland using Supermarket Data By Revoredo-Giha, Cesar; Kupiec-Teahan, Beata; Wrieden, Wendy; Davis, Victoria; Milne, Anne; Leat, Philip
  4. Advertising Collusion in Retail Markets By Kyle Bagwell; Gea M. Lee
  5. Are consumers beef quality perceptions in accordance with objective beef quality? By BanoviÄ, Marija; Cristina Monteiro, Ana; Lemos, José Pedro Cardoso; Madalena Barreira, Maria; Fontes, Magda Aguiar
  6. A Hedonic Metric Approach to Estimating the Demand for Differentiated Products: An Application to Retail Milk Demand By Gulseven, Osman; Wohlgenant, Michael
  7. Cloud Computing Value Chains Understanding Businesses and Value Creation in the Cloud By Ashraf Bany Mohammed; Jorn Altmann; Junseok Hwang
  9. Margins and Market Shares:Pharmacy Incentives for Generic Substitution By Kurt R. Brekke; Tor Helge Holmås; Odd Rune Straume

  1. By: Costa-Font, Montserrat; Tranter, Richard; Gil, José M; Jones, Philip; Gylling, Morten
    Abstract: The introduction and communication of new technologies in the food industries has given rise in the past to some scientific uncertainty that hampers informed choice. Here we draw upon the case of Genetically Modified (GM) technology and, in particular, on different types of GM food, to investigate consumersâ behavioural reactions to GM food as well as their willingness to pay for avoiding GM food in three EU countries, Denmark, GB and Spain in 2007. Our unique contribution lies in that our empirical analysis concerns two food products containing different characteristics. In particular, we compare consumersâ reactions to cornflakes (to represent a processed food) and tomatoes (to represent a 'fresh' food) juxtaposed with GM and conventionally produced food. Our results reveal that, although GM food is the least preferred production process (vis-à-vis organic or conventional food), consumers can be divided into two groups depending on their preferences for organic food. Namely, a first group is made up of GB and Spain where consumers are willing to pay a small, or modest, premium over the respective market average price, and a second group is that of Denmark where consumersâ willingness to pay is significantly larger. Although risk is an influential characteristic, risk rankings indicate that GM food is perceived as less risky than irradiation, artificial growth hormones in food or pesticides used in the production process.
    Keywords: Genetically modified food, consumer behaviour, choice models, Denmark, Grate Britain and Spain., Food Security and Poverty,
    Date: 2010–03–29
  2. By: Kyle Bagwell (Stanford University); Gea M. Lee (School of Economics, Singapore Management University)
    Abstract: We consider non-price advertising by retail firms that are privately informed as to their respective production costs. We construct an advertising equilibrium, in which informed consumers use an advertising search rule whereby they buy from the highest-advertising firm. Consumers are rational in using the advertising search rule, since the lowest-cost firm advertises the most and also selects the lowest price. Even though the advertising equilibrium facilitates productive efficiency, we establish conditions under which firms enjoy higher expected profit when advertising is banned. Consumer welfare falls in this case, however. Under free entry, social surplus is higher when advertising is allowed. In addition, we consider a benchmark model of price competition; we provide comparative-statics results with respect to the number of informed consumers, the number of firms and the distribution of costs; and we consider the possibility of sequential search.
    Date: 2009–12
  3. By: Revoredo-Giha, Cesar; Kupiec-Teahan, Beata; Wrieden, Wendy; Davis, Victoria; Milne, Anne; Leat, Philip
    Abstract: This paper addresses consumersâ choices by looking into: current food choices made by different socio-economic groups; price barriers for diet improvement; and ways in which marketing may affect product choice. The study seeks: first, to analyze the differences in consumption of sausages of different nutritional composition among different socio-demographic and lifestage groups; and second, to measure whether it is possible to improve diet quality without affecting household expenditure. Sausages represent a relatively high proportion of red and processed meat purchases in Scotland, contributing significantly to the fat and sodium in the Scottish diet. The data used consisted of two-years of weekly information from a top-4, UK supermarket. The results suggest that it is possible to purchase similar quantities of a lower saturated fat or lower sodium sausage for the same price as a higher saturated fat or sodium sausage. However, it would cost more for some the groups to replace both a lower saturated fat and a lower sodium sausage in the householdâs food basket.
    Keywords: Scotland, saturated fats, sodium, consumer choices, sausages consumption, Food Consumption/Nutrition/Food Safety, D1,
    Date: 2010–03–29
  4. By: Kyle Bagwell (Stanford University); Gea M. Lee (School of Economics, Singapore Management University)
    Abstract: We analyze non-price advertising by retail firms, when the firms are privately informed about their respective costs of production. In a static advertising game, an advertising equilibrium exists in which lower-cost firms select higher advertising levels. In this equilibrium, informed consumers rationally employ an advertising search rule in which they buy from the highest- advertising firm, since lower-cost firms also select lower prices. In a repeated advertising game, colluding fims face a tradeoff: the use of advertising can promote productive efficiency but only if sufficient current or future advertising expenses are incurred. At one extreme, if firms pool at zero advertising, they sacrifice productive efficiency but also eliminate current and future advertising expenses. Focusing on symmetric perfect public equilibria for the repeated advertising game, we establish conditions under which optimal collusion entails pooling at zero advertising. More generally, full or partial pooling is observed in optimal collusion. Such collusive agreements reduce consumer welfare, since they restrict informed consumers' ability to locate the lowest available price in the market.
    Date: 2009–12
  5. By: BanoviÄ, Marija; Cristina Monteiro, Ana; Lemos, José Pedro Cardoso; Madalena Barreira, Maria; Fontes, Magda Aguiar
    Abstract: The consumer has the final word in food choice, which is determined by his perceived quality. Within a project coordinated by the Faculty of Veterinary Medicine we tried to relate objective quality with the consumer quality evaluation. To do so, we have measured the expected and experienced quality of a sample of Portuguese consumers towards three types of beef (PDO, national and imported) at the shop, and compared this subjective evaluation with the beef objective quality. Results at the consumer level show that respondents perceived PDO beef to be of higher quality than the two other types of beef for different attributes and for overall quality at the shop location. In terms of objective quality results, the three types of beef showed highly similar physicochemical characteristics and there were no differences, on average, in terms of the aspects mostly considered by the consumers - tenderness, colour and fat content. Hence, it was not possible to show that physicochemical characteristics are good predictors of consumer preferences. However shear force revealed a positive asymmetry showing a higher probability to find a tender beef in PDO than in the other types of beef. This should constitute an area for further research.
    Keywords: PDO beef, perceived quality, objective quality, Food Consumption/Nutrition/Food Safety, Q130,
    Date: 2010–03–29
  6. By: Gulseven, Osman; Wohlgenant, Michael
    Abstract: This article introduces the Hedonic Metric (HM) approach as an original method to model the demand for differentiated products. Using this approach, initially we create an n-dimensional hedonic space based on the characteristic information available to consumers. Next, we allocate products into this space and estimate the elasticities using distances. What distinguishes our model from traditional demand models such as Almost Ideal Demand System (AIDS) and Rotterdam Model is the way we link elasticities with product characteristics. Moreover, our model significantly reduces the number of parameters to be estimated, thereby making it possible to estimate large number of differentiated products in a single demand system. We applied our model to estimate the retail demand for fluid milk products. We also compared our results with the Distance Metric (DM) approach of Rojas and Peterson (2008) using the estimation results from traditional models as a benchmark point. Our approach is shown to give superior results and better approximations to original models.
    Keywords: Hedonic Metrics, Distance Metrics, Rotterdam Model, Almost Ideal Demand System, Differentiated Products, Milk Demand., Food Security and Poverty, C30, C80, Q11, Q13, Q18,
    Date: 2010–03–29
  7. By: Ashraf Bany Mohammed; Jorn Altmann; Junseok Hwang (Technology Management, Economics, and Policy Program (TEMEP), Seoul National University)
    Abstract: Based on the promising developments in Cloud Computing technologies in recent years, commercial computing resource services (e.g. Amazon EC2) or software-as-a-service offerings (e.g. came into existence. However, the relatively weak business exploitation, participation, and adoption of other Cloud Computing services remain the main challenges. The vague value structures seem to be hindering business adoption and the creation of sustainable business models around its technology. Using an extensive analyze of existing Cloud business models, Cloud services, stakeholder relations, market configurations and value structures, this Chapter develops a reference model for value chains in the Cloud. Although this model is theoretically based on porter's value chain theory, the proposed Cloud value chain model is upgraded to fit the diversity of business service scenarios in the Cloud computing markets. Using this model, different service scenarios are explained. Our findings suggest new services, business opportunities, and policy practices for realizing more adoption and value creation paths in the Cloud.
    Keywords: Cloud computing, value chain, business models, Grid computing, service oriented computing, value networks, software-as-a-service, Grid economics, services, service sciences.
    JEL: D02 D21 D23 D46 D85 L14 L23 L86 M21
    Date: 2010–06
  8. By: Erdem, Seda; Rigby, Dan; Wossink, Ada
    Abstract: We report results of an analysis of the attribution of relative responsibility across the stages of the food chain for ensuring food safety. Specifically, we identify perceptions of the share of the overall responsibility that each stage in the food chain has to ensure that the meat people cook and eat at home does not cause them to become ill. Results are reported for two groups of stakeholders: consumers and farmers, and for two types of meat: chicken and beef. The stakeholdersâ opinions regarding the relative degrees of responsibility of the sequential food chain stages (feed supplier, farmer, livestock transportation, abattoir,⦠consumer) are elicited via surveys using the Maximum Difference technique (best-worst scaling). The data are analyzed using mixed logit models estimated via Bayesian techniques. We find that consumers and farmers both tend to allocate a relatively low share of responsibility to their own food safety role. So, consumes tend to think farmers are more responsible for ensuring meat safety than farmers do. Similarly, farmers tend to think consumers have a greater degree of responsibility than consumers themselves believe. Thus, there is a consistent pattern of downplaying the extent of oneâs own responsibility. Further, consumers tend to allocate the highest shares of responsibility to the middle stages of the meat food chain. This contrasts with farmers who tend to allocate the highest shares of responsibility to the latter stages of the chain towards consumers, believing that the earlier stages of the chain (until the livestock arrive at the abattoir) have a relatively low share of responsibility. In the conclusion, we elaborate on the implications of our findings for further research into food safety economics.
    Keywords: Food Consumption/Nutrition/Food Safety, Q18, Q51, D03, D12,
    Date: 2010–03–29
  9. By: Kurt R. Brekke (Department of Economics and Helth Economics Bergen, Norwegian School of Economics and Business Administration); Tor Helge Holmås (Health Economics Bergen (HEB), University of Bergen); Odd Rune Straume (Universidade do Minho - NIPE)
    Abstract: We study the impact of product margins on pharmacies. incentive to promote generics instead of brand-names. First, we construct a theoretical model where phar-macies can persuade patients with a brand-name prescription to purchase a generic version instead. We show that pharmacies.substitution incentives are determined by relative margins and relative patient copayments. Second, we exploit a unique product level panel data set, which contains information on sales and prices at both producer and retail level. In the empirical analysis, we .nd a strong relationship between the margins of brand-names and generics and their market shares. In terms of policy implications, our results suggest that pharmacy incentives are crucial for promoting generic sales.
    Keywords: Pharmaceuticals; Pharmacies; Generic Substitution
    JEL: I11 I18 L13 L65
    Date: 2010

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