nep-mkt New Economics Papers
on Marketing
Issue of 2010‒09‒25
eight papers chosen by
Joao Carlos Correia Leitao
University of Beira Interior and Technical University of Lisbon

  1. Getting into Your Head(Ache): The Information Content of Advertising in the Over-the-Counter Analgesics Industry By Anderson, Simon; Ciliberto, Federico; Liaukonyte, Jura
  2. Uncertain Demand, Consumer Loss Aversion, and Flat-Rate Tariffs By Fabian Herweg
  3. Romanian public marketing in terms of necessity, collaboration and mix By Grigorescu, Adriana
  4. Competition for attention in the information (overload) age By S. Anderson; André De Palma
  5. The Impact of Supply Learning on Customer Demand: Model and Estimation Methodology By Nathan Charles Craig; Nicole DeHoratius; Ananth Raman
  6. Do price-tags influence consumers' willingness to pay ? On external validity of using auctions for measuring value By Muller, L.; Ruffieux, B.
  7. Credence goods, experts and risk aversion By Bonroy, O.; Lemarié, S.; Tropéano, J.P.
  8. E-governmental services in the Baltic Sea Region By Lille, Maria; Prause, Gunnar

  1. By: Anderson, Simon; Ciliberto, Federico; Liaukonyte, Jura
    Abstract: We study how much information firms include in their advertisements and what determines their choices. We use data from advertisement videos from the US OTC analgesics industry between 2001 and 2005 to measure information content in ads. For each video we code the number of cues it contains. The correlation between any two cues is rarely large, suggesting that each cue provides different information. We find: i) brands with inherently better characteristics (e.g. faster relief) transmit more information; ii) comparative advertisements contain significantly more information than self-promotion ads; iii) market share is negatively associated with the amount of information content; iv) a higher market share of the generic version of a brand is also associated with less information by the brand. Not controlling for endogeneity of market share and the decision to use comparative advertising would lead to significant estimation bias. Result (iii) is consistent with recent theoretical work that larger firms disclose less information, while result (iv) indicates the likely presence of information spillovers from brands to their generic counterparts.
    Keywords: Information Content; Advertising; Comparative Advertising; Content Analysis
    JEL: M37 D83 L15
    Date: 2010–08–10
  2. By: Fabian Herweg
    Abstract: The so called flat-rate bias is a well documented phenomenon caused by consumers' desire to be insured against fluctuations in their billing amounts. This paper shows that expectation-based loss aversion provides a formal explanation for this bias. We solve for the optimal two-part tariff when contracting with loss-averse consumers who are uncertain about their demand. The optimal tariff is a flat rate if marginal cost of production is low compared to a consumer's degree of loss aversion and if there is enough variation in the consumer's demand. Moreover, if consumers differ with respect to the degree of loss aversion, firms' optimal menu of tariffs typically comprises a flat-rate contract.
    Keywords: Consumer Loss Aversion; Flat-Rate Tariffs; Nonlinear Pricing; Uncertain Demand
    JEL: D11 D43 L11
    Date: 2010–07
  3. By: Grigorescu, Adriana
    Abstract: The paper carries out a short literature review on public sector and public marketing terms. The findings of the paper’s study shows that the Romanian public sector should give more importance to marketing activities, as 87% of the respondents sustained when asked about their necessity. Within a public institution, the marketing specialists should cooperate with research& development, sales and financial departments. The study results reaffirm the importance of the 4 P of the marketing mix when making an offer, and place them on the top positions.
    Keywords: public marketing; knowledge; specialists; cooperation
    JEL: M31 I20 H83
    Date: 2010–05–14
  4. By: S. Anderson (Department of Economics, University of Virginia - Uniiversity of Virginia); André De Palma (ENS Cachan - Ecole Normale Supérieure de Cachan - École normale supérieure de Cachan - ENS Cachan, Department of Economics, Ecole Polytechnique - CNRS : UMR7176 - Polytechnique - X)
    Abstract: Limited consumer attention limits product market competition: prices are stochastically lower the more attention is paid. Ads compete to be the lowest price in a sector but compete for attention with ads from other sectors: equilibrium ad shares follow a CES form. When a sector gets more proÞtable, its advertising expands: others lose ad market share. The "information hump" shows highest ad levels for intermediate attention levels. The Information Age takes off when the number of viable sectors grows, but total ad volume reaches an upper limit. Overall, advertising is excessive, though the allocation across sectors is optimal.
    Keywords: economics of attention, information age, price dispersion, advertising distribution, consumer attention, information Þltering, size distribution of Þrms, CES, information congestion.
    Date: 2010–09–15
  5. By: Nathan Charles Craig (Harvard Business School); Nicole DeHoratius (University of Portland); Ananth Raman (Harvard Business School, Technology and Operations Management Unit)
    Abstract: To set service levels, firms must understand how changes in service affect customer demand. Supply learning is a process whereby customers use past supplier performance to build beliefs about supplier capabilities and hence about future supplier performance. This paper presents a multi-period model of service level competition among suppliers selling substitutable products to a customer that engages in supply learning. We observe how a supplier's service level performance molds a customer's beliefs as well as how a customer's beliefs affect its order quantities. We identify two dimensions of supplier performance: consistency, the probability that a supplier delivers in the current period conditional on availability in the prior period, and recovery, the probability that a supplier delivers in the current period conditional on a stockout in the prior period. We also provide a method for estimating the impact of changes in supplier performance along these two dimensions on customer demand. Using data from Hugo Boss, a manufacturer of branded apparel, we find increases in consistency and recovery to be associated with increases in orders from Hugo Boss's retailer customers.
    Date: 2010–09
  6. By: Muller, L.; Ruffieux, B.
    Abstract: The paper considers the external validity of the growing set of literature that uses laboratory auctions to reveal consumers' willingness to pay for consumer goods, when the concerned goods are sold in retailing shops through posted prices procedures. Here, the quality of the parallel between the field and the lab crucially depends on whether being informed of the actual field price influences a consumer's willingness to pay for a good or not. We show that the elasticity of the WTP revision, according to the field price estimation error, is significant, positive and can be roughly approximate to one quarter of the error. We then discuss the normative implications of these results for future experiments aimed at eliciting private valuations through auctions.
    JEL: C91 D44
    Date: 2010
  7. By: Bonroy, O.; Lemarié, S.; Tropéano, J.P.
    Abstract: The existing literature in expert-customer relationship concludes that when: i) consumers are homogenous, ii) consumers are committed with an an expert once this one made a recommendation, and iii) the type of treatment provided is verifiable, an expert finds optimal to serve efficiently his customers. This work shows that the previous result may not occur when consumers are not risk-neutral. Our result, that holds in a monopoly setting and under Bertrand competition, suggests that risk averse consumers have more likely to be mistreated by experts.
    JEL: D40 D82 L15
    Date: 2010
  8. By: Lille, Maria; Prause, Gunnar
    Abstract: This paper will present results of the surveys and new trends which were related to e-governmental issues. A common understanding of e-government is usage of ICT means in the public sector for delivering information and services to its customers and enterprises. The objective is improvement of public services and strengthening democratic processes. E-government is a popular topic in the political agenda throughout the Baltic Sea Region (BSR) with all countries having ICT development strategies, policies or agendas. However, often are missing goals for thematic developments which would take into account the needs of potential users. The structure of the paper is ordered to present firstly, the overall objectives of e-governance and e-services. Secondly, the data about the satisfaction level of enterprises for e-services is given. As there are not many comparable results available about the needs of the enterprises, the paper is based on two main sources. One of the important outcomes of the LogOn Baltic project was to provide empirical data about satisfaction level of enterprises with existing eservices and about the needs for new services. The aim of the INTERREG III B project LogOn Baltic was to present solutions for improving the interplay between Logistics and Information and Communication Technologies (ICT) competence and spatial planning, strengthening the small and medium-sized enterprises' (SMEs) competitiveness in the BSR. The ICT-related results of the LogOn Baltic project provide an overview of the existing ICT structures and services in the BSR, mainly based on a web-based scientific survey with nearly 1,100 responses. A second source is the survey on the satisfaction level with public services among enterprises in Estonia in the City of Tallinn, which shows similar trends with the LogOn Baltic project. The third part of the paper introduces some case studies on innovative e-services in Estonia and Germany together with the European initiative for the BSR to improve e-services for companies. --
    JEL: L86 L96 R58
    Date: 2009

This nep-mkt issue is ©2010 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.