nep-mkt New Economics Papers
on Marketing
Issue of 2010‒10‒16
seven papers chosen by
Joao Carlos Correia Leitao
University of Beira Interior and Technical University of Lisbon

  1. "Panel Data Analysis of Japanese Residential Water Demand Using a Discrete/Continuous Choice Approach" By Koji Miyawaki; Yasuhiro Omori; Akira Hibiki
  2. Advance-Purchase Programs: When to Introduce and What to Inform Consumers By Zhang, Tianle
  3. Are Consumers Fooled by Discounts? An Experimental Test in a Consumer Search Environment By Ralph-C Bayer; Changxia Ke
  4. Effectiveness of in-store displays in a virtual store environment. By Breugelmans, Els; Campo, Katia
  5. The Monetary Value of Winter Sport Services in the European Alps By Tim Pawlowski; Christoph Breuer
  6. Media, Aggregators and the Link Economy: Strategic Hyperlink Formation in Content Networks By Chrysanthos Dellarocas; Zsolt Katona; William Rand
  7. Is Oprah Contagious? Identifying Demand Spillovers in Product Networks By Eyal Carmi; Gal OEstreicher-Singer; Arun Sundararajan

  1. By: Koji Miyawaki (National Institute for Environmental Studies); Yasuhiro Omori (Faculty of Economics, University of Tokyo); Akira Hibiki (National Institute for Environmental Studies)
    Abstract: Block rate pricing is often applied to income taxation, telecommunication services, and brand marketing in addition to its best-known application in public utility services. Under block rate pricing, consumers face piecewise-linear budget constraints. A discrete/ continuous choice approach is usually used to account for piecewise-linear budget constraints for demand and price endogeneity. A recent study proposed a methodology to incorporate a separability condition that previous studies ignore, by implementing a Markov chain Monte Carlo simulation based on a hierarchical Bayesian approach. To extend this approach to panel data, our study proposes a Bayesian hierarchical model incorporating the random and fixed individual effects. In both models, the price and income elasticities are estimated to be negative and positive, respectively. Further, the number of members and the number of rooms per household have positive relationship to the residential water demand when we apply the model with random individual effects, while they do not in the model with fixed individual effects.
    Date: 2010–10
  2. By: Zhang, Tianle
    Abstract: We study a two-stage model in which the information processed by consumers at the first stage (advance-purchase stage) is endogenously determined. In the model, the firm decides whether to introduce an advance-purchase program, chooses what attribute information to disclose and determines an advance-purchase price and a retail price. Forward-looking consumers strategically choose, based on the disclosed information, to buy in advance or to make a purchase decision at the second stage (retail stage) when all information is revealed. We characterize the firm's optimal choice on the advance-purchase program and the strategy of information disclosure. In particular, we show that the firm always prefers to introduce the advance-purchase program except when underlying consumer preferences are extremely homogenous. In addition, we find that fully revealing horizontal product information at the advance-purchase stage is never optimal to the firm, but revealing either partial or no product information can be optimal depending on the underlying consumer preferences. Our finding that partial information disclosure is sometimes optimal to the firm is in contrast to the result in the literature of horizontal information provision that a firm maximizes profit by revealing either no or full information to consumers.
    Keywords: advance purchase; information disclosure; dynamic pricing
    JEL: M37 L12
    Date: 2010–10–02
  3. By: Ralph-C Bayer (School of Economics, University of Adelaide); Changxia Ke (Max Planck Institute)
    Abstract: In this paper we investigate experimentally if people search optimally and how price promotions influence search behavior. We implement a sequential search task with exogenous price dispersion in a baseline treatment and introduce discounts in two experimental treatments. We find that search behavior is roughly consistent with optimal search but also observe some discount biases. If subjects don't know in advance where discounts are offered the purchase probability is increased by 19 percentage points in shops with discounts, even after controlling for the benefit of the discount and for risk preferences. If consumers know in advance where discounts are given then the bias is only weakly significant and much smaller (7 percentage points).
    Keywords: Consumer Search Theory, Search Cost, Price Promotion
    JEL: D82 D83 C91
    Date: 2010
  4. By: Breugelmans, Els; Campo, Katia
    Abstract: This article examines the effectiveness of in-store displays (ISD) in an online grocery store and concentrates on two main issues. First, considering the more artificial and functional virtual store environment, we examine whether online ISD produce a similar boost in sales as they do in offline stores. Second, we examine the moderating effect of display characteristics by comparing the effects of different display types. The results show that (1) online ISD can substantially increase brand sales and (2) ISD that preempt competition through a first-order and isolated position outperform ISD that attempt to make the product stand out in the shopping zone.
    Keywords: in-store displays; online retailing; online grocery shopping; market share models;
    Date: 2010–09
  5. By: Tim Pawlowski (Institute of Sport Economics and Sport Management, German Sport University Cologne); Christoph Breuer (Institute of Sport Economics and Sport Management, German Sport University Cologne)
    Abstract: Considering the increasing stress of competition in winter sports, e.g., caused by the increasing popularity of sun holidays in the winter season or recently developed new ski areas, cable-car companies have to optimize their price-performance ratio with a modified marketing management approach. For most decisions regarding the marketing mix (e.g. the price calculation of new supply attributes), the knowledge about the monetary value of the different single attributes a consumer receives when purchasing a ski-lift ticket is indispensable. Since economics in general has a certain value for practical decision-taking in leisure management we follow other authors and transfer the economic concept of ‘hedonic prices’ to the field of empirical leisure research to derive the monetary value of some core service attributes in winter sports. The study is based on data of n=260 ski areas in five countries of the European Alps (Austria, France, Germany, Italy, and Switzerland). While the developed hedonic price models show rather high-variance explanatory power, most of the estimated attribute prices differ significantly between the countries studied. Possible implications for the price and product policies of cable-car companies are presented and discussed.
    Keywords: Winter sports, hedonic approach, monetary value, ski, service, price
    JEL: D01 D12 L83
    Date: 2010–10
  6. By: Chrysanthos Dellarocas (School of Management, Boston University); Zsolt Katona (Haas School of Business, University of California, Berkeley); William Rand (Robert H. Smith School of Business, University of Maryland)
    Abstract: A key property of the World Wide Web is the possibility for firms to place virtually costless links to third-party content as a substitute or complement to their own content. This ability to hyperlink has enabled new types of players, such as search engines and content aggregators, to successfully enter content ecosystems, attracting traffic and revenues by hosting links to the content of others. This, in turn, has sparked a heated controversy between content producers and aggregators regarding the legitimacy and social costs/benefits of uninhibited free linking. This work is the first to model the implications of interrelated and strategic hyper-linking and content investments. Our results provide a nuanced view of the much-touted Òlink economyÓ, highlighting both the beneficial consequences and the drawbacks of free hyperlinks for content producers and consumers. We show that content sites can reduce competition and improve profits by forming links to each other; in such networks one site makes high investments in content and other sites link to it. Interestingly, competitive dynamics often preclude the formation of link networks, even in settings where they would improve everyone's profits. Furthermore, such networks improve economic efficiency only when all members have similar abilities to produce content; otherwise the less capable nodes can free-ride on the content of the more capable nodes, reducing profits for the capable nodes as well as the average content quality available to consumers. Within these networks, aggregators have both positive and negative effects. By making it easier for consumers to access good quality content they increase the appeal of the entire content ecosystem relative to the alternatives. To the extent that this increases the total traffic flowing into the content ecosystem, aggregators can help increase the profits of the highest quality content sites. At the same time, however, the market entry of aggregators takes away some of the revenue that would otherwise go to pure content sites. Finally, by placing links to only a subset of available content, aggregators further increase competitive pressure on content sites. Interestingly, this can increase the likelihood that such sites will then attempt to alleviate the competitive pressure by forming link networks.
    Keywords: hyperlinks; content networks; content aggregators; strategic network formation.
    JEL: D83 D85 L14 O34
    Date: 2010–09
  7. By: Eyal Carmi (Tel Aviv University); Gal OEstreicher-Singer (Tel Aviv University); Arun Sundararajan (New York University)
    Abstract: We study the online contagion of exogenous demand shocks generated by book reviews featured on the Oprah Winfrey TV show and published in the New York Times, through the co-purchase recommendation network on These exogenous events may ripple through and affect the demand for a “network” of related books that were not explicitly mentioned in a review but were located “close” to reviewed books in this network. Using a difference-in-differences matched-sample approach, we identify the extent of the variations caused by the visibility of the online network and distinguish this effect from variation caused by hidden product complementarities. Our results show that the demand shock diffuses to books that are up to five links away from the reviewed book, and that this diffused shock persists for a substantial number of days, although the depth and the magnitude of diffusion varies widely across books at the same network distance from the focal product. We then analyze how product characteristics, assortative mixing and local network structure, play a role in explaining this variation in the depth and persistence of the contagion. Specifically, more clustered local networks “trap” the diffused demand shocks and cause it to be more intense and of a greater duration but restrict the distance of its spread, while less clustered networks lead to wider contagion of a lower magnitude and duration. Our results provide new evidence of the interplay between a firm’s online and offline media strategies and we contribute methods for modeling and analyzing contagion in networks.
    Keywords: networks, product networks, electronic commerce, ecommerce, recommender systems, identification, exogenous shocks
    JEL: L11 L81 M31
    Date: 2010–09

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