nep-mkt New Economics Papers
on Marketing
Issue of 2011‒03‒12
seven papers chosen by
Joao Carlos Correia Leitao
University of Beira Interior and Technical University of Lisbon

  1. The relationship between in-store marketing and observed sales of sustainable products: A shopper marketing view By Nierop, Erjen van; Herpen, Erica van; Sloot, Laurens
  2. Consumer Response to Cigarette Excise Tax Changes By Chiou, Lesley; Muehlegger, Eric
  3. Brand names act like marketing placebos By Moty Amar; Maya Bar-Hillel; Ziv Carmon; Chezy Ofir
  4. Misleading Advertising in Duopoly By Keisuke Hattori; Keisaku Higashida
  5. Measuring disagreement in UK consumer and central bank inflation forecasts By Richhild Moessner; Feng Zhu; Colin Ellis
  6. Competing with Costco and Sam's Club: Warehouse Club Entry and Grocery Prices By Courtemanche, Charles; Carden, Art
  7. A Hotelling Style Model of Spatial Competition for Convenience Goods By B. Curtis Eaton; Jesse Tweedle

  1. By: Nierop, Erjen van; Herpen, Erica van; Sloot, Laurens (Groningen University)
    Abstract: To stimulate sales of sustainable products, retailers need to know whether their in-store instruments effectively influence their market shares. This study uses actual sales data and a multilevel modeling approach to describe the market shares of sustainable brands according to price level, price promotions, and shelf layout factors, while controlling for the customer base and competitive environment. As expected, a price premium compared with the leading brand in a category decreases market share for sustainable brands, but the location on the shelf and the arrangement of the entire product category also influence market shares considerably. In particular, where literature has described conflicting findings for horizontal location on the shelf, in our study sustainable brands receive more market share when placed in the middle of the shelf space devoted to the category, and eye level is the best vertical position. Higher market share is observed when the entire category is arranged by brand. This study therefore suggests that where sustainable brands are located on the shelf may be just as important, if not more than, how many facings they have.
    Date: 2011
  2. By: Chiou, Lesley (Occidental College); Muehlegger, Eric (Harvard University)
    Abstract: We use a rich dataset of weekly cigarette sales to examine how consumers adapt their behavior before and after excise tax increases--whether by reducing demand, stockpiling, traveling to low-tax jurisdictions, or substituting towards lower-cost brands. Consumer response varies substantially for different types of cigarettes. Stockpiling primarily occurs for discount cigarettes and is most pronounced at stores far from lower-tax jurisdictions. Border-crossing is greatest at stores close to low-tax jurisdictions and occurs primarily for cigarettes sold by the carton. Finally, we find modest short-run substitution towards lower-cost brands following a tax-increase, consistent with consumers smoothing the transition to higher cigarette taxes. These differences in consumer behavior lead to meaningful differences in tax incidence--pass-through is higher for discount cigarettes which have more inelastic demand. Pass-through is lower near low-tax borders, especially for cigarettes sold by the carton for which cross-border evasion is greatest.
    JEL: D10 D40 H20 H70
    Date: 2010–06
  3. By: Moty Amar; Maya Bar-Hillel; Ziv Carmon; Chezy Ofir
    Abstract: This research illustrates the power of reputation, such as that embodied in brand names, demonstrating that names can enhance objective product efficacy. Study participants facing a glaring light were asked to read printed words as accurately and as quickly as they could, receiving compensation proportional to their performance. Those wearing sunglasses tagged Ray-Ban made fewer errors, yet read more quickly, than those wearing the identical pair of sunglasses when tagged Mango (a less prestigious brand). Similarly, ear-muffs blocked noise more effectively, and chamomile tea improved mental focus more, when otherwise identical target products carried more reputable names.
    Date: 2011–02
  4. By: Keisuke Hattori (Faculty of Economics, Osaka University of Economics); Keisaku Higashida (School of Economics, Kwansei Gakuin University)
    Abstract: In this paper, we build a model of strategic misleading advertising in duopolistic markets with horizontal product differentiation and advertising externality between firms. We investigate the effects of regulating misinformation on market competition, behavior of firms, and social welfare. We show that the degree of advertising externality and the magnitude of advertising costs are crucial for determining the welfare effects of several regulations, including prohibiting misleading advertising, educating consumers, taxing production, and taxing misleading advertising. We then extend the model by introducing two types of heterogeneities; heterogeneous consumers and heterogeneous production costs between firms.
    Keywords: Misleading Advertising, Regulation; Duopoly, Product Differentiation, Advertising Externality
    JEL: L13 L15 M37
    Date: 2011–03
  5. By: Richhild Moessner; Feng Zhu; Colin Ellis
    Abstract: We provide a new perspective on disagreement in inflation expectations by examining the full probability distributions of UK consumer inflation forecasts based on an adaptive bootstrap multimodality test. Furthermore, we compare the inflation forecasts of the Bank of England's Monetary Policy Committee (MPC) with those of UK consumers, for which we use data from the 2001-2007 February GfK NOP consumer surveys. Our analysis indicates substantial disagreement among UK consumers, and between the MPC and consumers, concerning one-year- ahead inflation forecasts. Such disagreement persisted throughout the sample, with no signs of convergence, consistent with consumers' inflation expectations not being "well-anchored" in the sense of matching the central bank's expectations. UK consumers had far more diverse views about future inflation than the MPC. It is possible that the MPC enjoyed certain information advantages which allowed it to have a narrower range of inflation forecasts.
    Keywords: Adaptive kernel method, adaptive multimodality test, consumer survey, inflation forecasts, nonparametric density estimation
    Date: 2011–02
  6. By: Courtemanche, Charles (University of North Carolina at Greensboro, Department of Economics); Carden, Art (University of North Carolina at Greensboro, Department of Economics)
    Abstract: Research shows that grocery stores reduce prices to compete with Walmart Supercenters. This study finds evidence that the competitive effects of two other big box retailers – Costco and Walmart-owned Sam's Club – are quite different. Using city-level panel grocery price data matched with a unique data set on Walmart and warehouse club locations, we find that Costco entry is associated with higher grocery prices at incumbent retailers, and that the effect is strongest in cities with small populations and high grocery store densities. This is consistent with incumbents competing with Costco along non-price dimensions such as product quality or quality of the shopping experience. We find no evidence that Sam’s Club entry affects grocery stores’ prices, consistent with Sam’s Club’s focus on small businesses instead of consumers.
    Keywords: Wal-Mart; Walmart; Costco; Sam’s Club; warehouse clubs; grocery prices; competition; retail
    JEL: L11 L13 L81 R10
    Date: 2011–02–28
  7. By: B. Curtis Eaton; Jesse Tweedle
    Abstract: Ordinarily people do not make special purpose trips to acquire goods like gasoline or roceries, but instead buy them as the need arises in the course of their daily lives. Such goods are commonly called convenience goods. We modify Hotelling's model of spatial competition so that we can analyze the price equilibrium of duopolists that retail a convenience good. Certain features of the duopolists' demand functions suggest that price competition is more severe in the convenience goods model than in the Hotelling model. The same features complicate the analysis because they mean that a pure strategy price equilibrium does not exists for many locational con-figurations. Although we are not able to find the mixed strategy price equilibrium analytically, we do present some numerical results on equilibrium prices that broadly confirm this suggestion. We also provide a more general product differentiation interpretation of the convenience good model.
    Date: 2011–01–01

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