nep-mkt New Economics Papers
on Marketing
Issue of 2010‒12‒11
nine papers chosen by
Joao Carlos Correia Leitao
University of Beira Interior and Technical University of Lisbon

  1. Sales, Quantity Surcharge, and Consumer Inattention By Sofronis Clerides; Pascal Courty
  2. Fighting Junk Food Marketing to Kids By Berkeley Media Studies Group BMSG
  3. The Economic and Social Role of Internet Intermediaries By Karine Perset
  4. E-Commerce and Digital Divide: Impact on Consumers By T.P. Rama Rao
  5. Why Consumers Pay Voluntarily: Evidence from Online Music By Tobias Regner
  6. Overcoming Consumer Biases in the Choice of Pricing Schemes: A Lab Experiment By Natalia Shestakova
  7. Sports Retailing in India: Opportunities, Constraints and Way Forward By Arpita Mukherjee; Ramneet Goswami; Tanu M Goyal; Divya Satija
  8. Loss Leading as an Exploitative Practice By Zhijun Chen; Patrick Rey
  9. Does the EU Sugar Policy Reform Increase Added Sugar Consumption? An Empirical Evidence on the Soft Drink Market By Bonnet, Céline; Réquillart, Vincent

  1. By: Sofronis Clerides; Pascal Courty
    Abstract: Quantity surcharges occur when firms market a product in two sizes and offer a promotion on the small size: the large size then costs more per unit than the small one. When quantity surcharges occur the sales of the large size decrease only slightly despite the fact that the small size is a cheaper option - a clear arbitrage opportunity. This behavior is consistent with the notion of rationally inattentive consumers that has been developed in models of information frictions. We discuss implications for consumer decision making, demand estimation, and firm pricing.
    Keywords: quantity surcharge, sales, promotions, consumer inattention, quantity discounts, nonlinear pricing.
    Date: 2010–11
  2. By: Berkeley Media Studies Group BMSG
    Abstract: Since 1980, overweight rates have doubled among children and tripled among adolescents. So it is important that parents and children be aware about the bad effects of eating junk food
    Keywords: childre, overweight, junk food, marketing, advertising, kids, parents, obesity, adolescents, diabetes, nutrition, inactivity,
    Date: 2010
  3. By: Karine Perset
    Abstract: As the Internet has grown to permeate all aspects of the economy and society, so too has the role of Internet intermediaries that give access to, host, transmit and index content originated by third parties or provide Internet-based services to third parties. They enable a host of activities through both wired and increasingly, mobile technologies. Internet access intermediaries and hosting and data processing providers provide the platform for new, faster, and cheaper communication technologies, for innovation and productivity gains, and for the provision of new products and services. As to online e-commerce intermediaries, they have brought unprecedented user and consumer empowerment through greater information, facilitating product and price comparisons and creating downward pressure on prices or, in the case of auction platforms, meeting supply and demand and creating new markets. Search engines, portals and participative networked platforms for their part facilitate access to an unparalleled wealth of information, as well as providing opportunities for new innovative activities and social interactions.
    Date: 2010–04–08
  4. By: T.P. Rama Rao
    Abstract: This paper discusses the concerns on the digital divide and illustrates, through case studies, how the recent developments in the Information and Communication Technology can be gainfully employed in social development and in bridging the digital divide. It also addresses the phenomenon of E-Commerce and identifies the efforts made by different industry groups, international organizations and ministries in addressing the concerns related to E-Commerce and consumer protection.
    Keywords: Information and Communication Technology, E-Commerce, international organizations, ministries, consumer protection
    Date: 2010
  5. By: Tobias Regner (Max Planck Institute of Economics, Jena)
    Abstract: Customers at the online music label Magnatune can pay what they want for albums, as long as the payment is within a given price range ($5-$18). Magnatune recommends to pay $8, and on average customers paid $8.20 (Regner and Barria, 2009). We ran an online survey and collected responses from 227 frequent Magnatune customers to gain insights about the underlying motivations to pay more than necessary. We control for individual response- and sample selection-bias, and find that reciprocity and guilt appear to be the major drivers for generous voluntary payments. Being inclined to follow social norms is a positive determinant for payments around the recommended price.
    Keywords: social preferences, other-regarding behaviour, music industry, reciprocity, guilt, social norms, altruism, fairness, social-image concerns, survey
    JEL: D82 M21 L82 L86
    Date: 2010–11–30
  6. By: Natalia Shestakova
    Abstract: This paper uses experimental data to investigate possible biases in consumers' choice of pricing schemes when their demand is perfectly inelastic but uncertain. I consider threepart pricing schemes (i.e. fixed fee, included units, extra-unit price). The analysis suggests a strong bias towards the pricing scheme with the number of included units equal to the expected demand. I interpret this bias as an “anchoring effect” of the expected demand on consumer decisions. Interestingly, subjects invest less effort into the choice problem when the opportunity cost of a mistake is higher. Still, the higher opportunity cost of a mistake helps subjects overcome the bias.
    Keywords: heuristics; price discrimination; experiment.
    JEL: D42 D83
    Date: 2010–09
  7. By: Arpita Mukherjee; Ramneet Goswami; Tanu M Goyal; Divya Satija (Indian Council for Research on International Economic Relations)
    Abstract: Sports retail is a small but fast growing segment of modern retail in India. Recently, the country has been hosting many international sports and this has given a boost to this sector. Many foreign and domestic corporate retailers have entered sports retail. Sports goods manufacturing is a focus area in the Foreign Trade Policy (2009-2014) and the government is taking a fresh look at the current foreign direct investment policy in retail. In the above context, this paper provides an overview of the sports retail sector in India. Specifically, it presents the different retail formats, consumer profile, retailers’ supply chain and sourcing. It also examines the retail and sports policies and their implications for this segment of retail, analyses the barriers faced by this sector and suggests policy reforms. The study found that the policy of allowing 51 per cent FDI in the single-brand format has not benefited this sector. The FDI ban on multi-brand retail is not an entry barrier since foreign retailers can establish their presence in India through other routes. The study found that since this is a niche segment of retail, FDI would not have an adverse impact on traditional retailers. It concludes that government should allow 51 per cent FDI in multi-brand sports retail. This will increase sourcing from India, lead to diffusion of technology, proliferation of brands, investment in sports and sports promotion, among others.
    Keywords: Retail, Sports, Government Policy, Trade, Consumer Survey
    JEL: L67 L81 L83 L88
    Date: 2010
  8. By: Zhijun Chen (Department of Economics, Ecole Polytechnique - CNRS : UMR7176 - Polytechnique - X, Department of Computer Science [Auckland] - The University of Auckland); Patrick Rey (Toulouse School of Economics - Toulouse School of Economics)
    Abstract: Large retailers, enjoying substantial market power in some local markets, often compete with smaller retailers who carry a narrower range of products in a more efficient way. We find that these large retailers can exercise their market power by adopting a loss-leading pricing strategy, which consists of pricing below cost some of the products also offered by smaller rivals, and raising the prices on the other products. In this way, the large retailers can better discriminate multi-stop shoppers from one-stop shoppers — and may even earn more profit than in the absence of the more efficient rivals. Loss leading thus appears as an exploitative device, designed to extract additional surplus from multi-stop shoppers, rather than as an exclusionary instrument to foreclose the market, although the small rivals are hurt as a by-product of exploitation. We show further that banning below-cost pricing increases consumer surplus, small rivals' profits, and social welfare. Our insights apply generally to industries where a firm, enjoying substantial market power in one segment, competes with more efficient rivals in other segments, and procuring these products from the same supplier generates customer-specific benefits. They also apply to complementary products, such as platforms and applications. There as well, our analysis provides a rationale for below-cost pricing based on exploitation rather than exclusion.
    Keywords: loss leading, exploitative practice, retail power
    Date: 2010–11–29
  9. By: Bonnet, Céline; Réquillart, Vincent
    Abstract: National Health authorities recommend a decrease in the consumption of addedsugar. At the same moment, a reform of the Common Organisation of the Sugar Market will lead to a decrease by more than 30% of the sugar price in the EU. Using French data on the soft drinks purchases, this paper investigates the impact of this reform on the consumption of sugar sweetened beverages and on added sugar consumption. The soft drink market is composed of highly differentiated products with different sugar content. Hence the reform of the EU sugar policy leads to a decrease in regular soft drink prices by more than 3% in average and varies from 1.7% to 6.5% according to the brand. To assess substitution within the food category of sugar sweetened beverages, we use a structural econometric model, the random-coefficients logit model. Our model also takes into account observed and unobserved heterogeneity in the consumersbehavior and then allows to estimate the impact of the sugar price decrease on the soft drink consumption according to the type of consumers. Results suggest that price changes would lead to an increase in market shares of regular products by 7.5% and a decrease in market share of diet products by 3.5%. On the whole, it would rise the consumption of regular soft drinks by more that 1 liter per year and per person and the consumption of added sugar by 124 grams per year and per person. Moreover, the reform leads to substitution between brands at the bene…t of products with the highest sugar content. The increase in per person consumption is larger in households composed of overweight and obese individuals.
    JEL: D12 I18 Q18
    Date: 2010–10

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