nep-mkt New Economics Papers
on Marketing
Issue of 2011‒04‒30
thirteen papers chosen by
Joao Carlos Correia Leitao
University of Beira Interior and Technical University of Lisbon

  1. Consumer behavior towards on-net/off-net price differentiation By Haucap, Justus; Heimeshoff, Ulrich
  2. Demand Spillovers and Market Outcomes in the Mutual Fund Industry By Gavazza, Alessandro
  3. A Model of Heterogeneous Multicategory Choice for Market Basket Analysis By Dippold, Katrin; Hruschka, Harald
  4. What Do Consumers Believe About Future Gasoline Prices? By Soren T. Anderson; Ryan Kellogg; James M. Sallee
  5. A model of labeling with horizontal differentiation and cost variability: By Saak, Alexander
  6. Legacy writing among the elderly: conceptual bases, dimensioning and a proposed scale for measuring motivations By Samuel Guillemot; Bertrand Urien
  7. Product innovation and imitation in a duopoly with differentiation by attributes By Reynald-Alexandre Laurent
  8. All-Pay Auctions with Budget Constraints By Kotowski , Maciej; Li, Fei
  9. Expectations of inflation: the biasing effect of thoughts about specific prices By Wändi Bruine de Bruin; Wilbert van der Klaauw; Giorgio Topa
  10. Price convergence and market integration in Russia By Konstantin Gluschenko
  11. Strategic control of myopic best reply in repeated games By Schipper, Burkhard C
  12. Gradual Network Expansion and Universal Service Obligations By Axel Gautier; Keizo Mizuno
  13. Measuring Power and Satisfaction in Societies with Opinion Leaders : An Axiomatization By René Van Den Brink; Agnieszka Rusinowska; Frank Steffen

  1. By: Haucap, Justus; Heimeshoff, Ulrich
    Abstract: This paper explores how consumers react towards price differentiation between on-net and off-net calls in mobile telecommunications - a pricing policy that is common in many mobile telecommunications markets. Based on a survey of 1044 students we demonstrate that some consumers may suffer from a 'price differentiation bias', i.e., a fair number of consumers may overestimate the savings that result from reduced on-net and/or off-net charges, as they do not appear to weigh the prices with the probabilities of placing off-net and on-net calls. This may help to explain why it have been the smaller operators in various countries who have introduced on-net/off-net price differentiation. We also discuss the implications that such a consumer bias may have for market competition. --
    JEL: L40 L96
    Date: 2011
  2. By: Gavazza, Alessandro
    Abstract: When consumers concentrate their purchases at a single firm, a firm that offers more products than its rivals can gain market share for all its other products, as well. These spillovers induce firms to compete by offering a greater variety of products rather than lower prices, and a natural form of industry concentration with few large firms offering many products can arise if spillovers are strong enough. This paper presents a simple model that illustrates this mechanism explicitly. The empirical analysis documents strong demand spillovers in the retail segment of the U.S. mutual fund industry, in which fees are non-trivial, families offer a large number of funds, and the market is quite concentrated. Instead, spillovers are weaker, fees are lower, families offer fewer funds, and the market structure is more fragmented in the institutional segment. The current design of employer-sponsored defined-contribution retirement plans likely accounts for these differential demand patterns between the retail and the institutional segments.
    Keywords: mutual funds; retirement plans; demand spillovers; sunk costs.
    JEL: G11 L13 G23 D43 L22 D14
    Date: 2011–03–01
  3. By: Dippold, Katrin; Hruschka, Harald
    Abstract: Based on market basket data, multicategory purchase incidence models analyze demand interdependencies between product categories. We propose a finite mixture multivariate logit model to derive segment-specific intercategory effects of market basket purchase. Under the assumption that only a fraction of intercategory effects are significant, we exclude irrelevant effects by variable selection. This leads to a detailed description of consumers' shopping behavior that varies over segments not only w.r.t. parameters' values but also w.r.t. included interaction effects. We find that a homogeneous model would overestimate the intensity of interaction between product categories.
    Keywords: Marketing; market basket analysis; finite mixture model; variable selection; multivariate logistic regression; pseudo likelihood estimation; maximum likelihood approximation; multicategory purchase incidence models
    Date: 2011–04–19
  4. By: Soren T. Anderson; Ryan Kellogg; James M. Sallee
    Abstract: Researchers estimating the demand for energy-using durable goods must specify consumers' beliefs about future energy prices. Policy-relevant inference hinges on this specification, yet there is little direct evidence on the nature of consumer beliefs. We provide such evidence by analyzing two decades of data on gasoline price expectations from the Michigan Survey of Consumers. We find that average consumer beliefs are indistinguishable from a no-change forecast. This finding has important implications for the literature on consumer valuation of energy efficiency, and it implies that researchers are likely justified in assuming a no-change forecast, as is common practice.
    JEL: D84 L62 Q40 Q41
    Date: 2011–04
  5. By: Saak, Alexander
    Abstract: We study optimal disclosure of variety by a multi-product firm with random costs. In our model there are two varieties that are horizontally differentiated and differ in overall quality, but buyers cannot distinguish between them without labels. The equilibrium prices for labeled varieties are increasing functions of the absolute value of the cost differential and do not reveal which variety is cheaper to produce. Nondisclosure is most common when there is moderate uncertainty about the relative input cost, not too much idiosyncrasy in consumer valuations, and not too much difference in quality across varieties. Although mandatory disclosure of variety benefits consumers, it decreases expected welfare when relative input cost variability is large and quality asymmetry is small. The cheaper variety tends to be oversupplied (undersupplied) when disclosure is voluntary (mandatory). Competition among multi-product firms that source inputs in the same upstream market may not lead to more disclosure."
    Keywords: information, product differentiation, Labeling, quality disclosure,
    Date: 2011
  6. By: Samuel Guillemot (ICI - Laboratoire Information, Coordination, Incitations - Institut Télécom - Télécom Bretagne - Université de Bretagne Occidentale - Brest : EA2652 - Université européenne de Bretagne); Bertrand Urien (ICI - Laboratoire Information, Coordination, Incitations - Institut Télécom - Télécom Bretagne - Université de Bretagne Occidentale - Brest : EA2652 - Université européenne de Bretagne)
    Abstract: This article concerns a relatively unknown phenomenon in marketing that has become, however, extremely popular among older adults: legacy writing. While the writing of "ego-documents" has been the subject of many studies in gerontology, sociology and, above all, literature, research in marketing has yet to examine its specific components. The purpose of this article is to identify the concept of legacy writing and propose an initial scale to the academic and managerial community for measuring the motivations underlying this practice. Two sets of data collected with questionnaires (202 and 508 responses) have been used to develop and confirm the validity of a scale consisting in twenty items, divided into six dimensions (flattering the ego, mending the ego, being remembered, sharing, transmitting, and bearing witness). This research offers a contribution to the theoretical corpus on special objects and intergenerational transmission. It demonstrates that the meaning of a special object is not exclusively restricted to symbolic references that may be lost or denatured, but others that are explicit and inscribed at the very core of the object.
    Keywords: Legacy writing, elderly, intergenerational transmission, identity
    Date: 2010–12
  7. By: Reynald-Alexandre Laurent (PSE - Paris-Jourdan Sciences Economiques - CNRS : UMR8545 - Ecole des Hautes Etudes en Sciences Sociales (EHESS) - Ecole des Ponts ParisTech - Ecole Normale Supérieure de Paris - ENS Paris, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris)
    Abstract: This paper considers a probabilistic duopoly in which products are described by their specific attributes, this form of differentiation embodying the horizontal and vertical dimensions. Consumers make discrete choices and follow a random decision rule based on these attributes. A three-stage game is studied in which firms develop new attributes for their products (innovation), then may imitate the attributes of the competing product and finally compete in price. At the equilibrium, the firm selling the less appreciated product is generally incited to imitate its rival. Confronted to a threat of imitation, the benchmark firm sometimes decreases strategically its attribute index in order to diminish its unit cost of innovation and the differentiation on the market, deterring the imitation in this way. This strategy is efficient when imitation costs are sufficiently concave. In the opposite case, it is preferable for the benchmark firm to accept the imitation. Thus, according to the shape of imitation costs, equilibria with "deterrence" or with "accommodation" "accommodation" occur, completing the current typology of strategic responses to a threat of imitation.
    Keywords: quality choices ; differentiation by attributes ; product innovation, product imitation
    Date: 2011–04–18
  8. By: Kotowski , Maciej; Li, Fei
    Abstract: Consider an all-pay auction with interdependent, affiliated valuations and private budget constraints. We characterize a symmetric equilibrium for the case of two players. In contrast with the second-price auction, making budgets more severe can depress the bids of unconstrained bidders
    Keywords: All-Pay Auction; Budget Constraints; Lobbying; War of Attrition; Common Values; Private Values
    JEL: D44
    Date: 2011–03–20
  9. By: Wändi Bruine de Bruin; Wilbert van der Klaauw; Giorgio Topa
    Abstract: National surveys follow consumers’ expectations of future inflation, because they may directly affect the economic choices they make, indirectly affect macroeconomic outcomes, and be considered in monetary policy. Yet relatively little is known about how individuals form the inflation expectations they report on consumer surveys. Medians of reported inflation expectations tend to track official estimates of realized inflation, but show large disagreement between respondents, due to some expecting seemingly extreme inflation. We present two studies to examine whether individuals who consider specific price changes when forming their inflation expectations report more extreme and disagreeing inflation expectations due to focusing on specific extreme price changes. In Study 1, participants who were instructed to recall any price changes or to recall the largest price changes both thought of various items for which price changes were perceived to have been extreme. Moreover, they reported more extreme year-ahead inflation expectations and showed more disagreement than did a third group that had been asked to recall the average change in price changes. Study 2 asked participants to report their year-ahead inflation expectations, without first prompting them to recall specific price changes. Half of participants nevertheless thought of specific prices when generating their inflation expectations. Those who thought of specific prices reported more extreme and more disagreeing inflation expectations, because they were biased toward various items associated with more extreme perceived price changes. Our findings provide new insights into expectation formation processes and have implications for the design of survey-based measures of inflation.
    Keywords: Consumer surveys ; Inflation (Finance) ; Prices
    Date: 2011
  10. By: Konstantin Gluschenko
    Abstract: After a period of growing disconnectedness of regional markets following the 1992 price liberalization in Russia, a process of improvement in market integration started since about 1994. This paper analyzes the spatial pattern of goods market integration in the country in 1994-2000, characterizing Russian regions into three states: integrated with a benchmark region, not integrated but tending toward integration with it, and not integrated and not tending toward integration. The standard AR(1) model serves to test for market integration. To capture a movement toward integration (price convergence), a nonlinear time series model with an asymptotically decaying trend is proposed. The results obtained suggest that only a bit more than one fifth of the Russian regions can be deemed not integrated and not tending toward integration with the benchmarkregion over 1994–2000.
    Keywords: Law of one price, Price dispersion, Non-linear trend, Russian regions.
    JEL: C32 P22 R10 R15
    Date: 2010–09–01
  11. By: Schipper, Burkhard C
    Abstract: How can a rational player strategically control a myopic best reply player in a repeated two-player game? We show that in games with strategic substitutes or strategic complements the optimal control strategy is monotone in the initial action of the opponent, in time periods, and in the discount rate. As an interesting example outside this class of games we present a repeated ``textbook-like'' Cournot duopoly with non-negative prices and show that the optimal control strategy involves a cycle.
    Keywords: strategic teaching; learning; adaptive heuristics; dynamic optimization; strategic substitutes; strategic complements; myopic players
    JEL: C70 C72 C73
    Date: 2011–04–05
  12. By: Axel Gautier; Keizo Mizuno
    Abstract: Universal service obligations are usually not competitively neutral as they modify the wayfirms compete in the market. In this paper, we consider a continuum of local markets in a dynamic setting with a stochastically growing demand. The incumbent must serve all markets (ubiquity) possibly at a uniform price and an entrant decides on its market coverage before firms compete in prices. Connecting a market involves a sunk cost. We show that the imposition of a uniform price constraint modifies the timing of entry: for low connection cost markets, entry occurs earlier while for high connection cost markets, entry occurs later.
    Date: 2011
  13. By: René Van Den Brink (Department of Econometrics - Timbergen Institute - VU University); Agnieszka Rusinowska (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I); Frank Steffen (University of Liverpool Management School (ULMS) - University of Liverpool Management School)
    Abstract: A well-known model in sociology and marketing is that of opinion leadership. Opinion leaders are actors who are able to affect the behavior of their followers. Hence, opinion leaders have some power over their followers, and they can exercise this power by influencing their followers choice of action. We study a two-action model for a society with opinion leaders. We assume that each member of the society has an inclination to choose one of these actions and that the collective choice is made by simple majority of the actions chosen by each member. For this model, we axiomatize satisfaction and power scores, which allow us to investigate the effects of different opinion leader-follower structures.
    Keywords: Collective choice, follower, opinion leader, power, satisfaction, axiomatization.
    Date: 2011–03

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