nep-mkt New Economics Papers
on Marketing
Issue of 2011‒10‒09
seven papers chosen by
Joao Carlos Correia Leitao
University of Beira Interior and Technical University of Lisbon

  1. Comparison sites By Moraga-Gonzalez, Jose L.; Wildenbeest, Matthijs R.
  2. The Price Effects of Cash Versus In-Kind Transfers By Cunha, Jesse; De Giorgi, Giacomo; Jayachandran, Seema
  3. Durability of consumption goods and market competition: an agent-based modelling By Eric BROUILLAT (GREThA, CNRS, UMR 5113)
  4. Consumer search costs and the incentives to merge under Bertrand Competition By Moraga-Gonzalez, Jose L.; Petrikaite, Vaiva
  5. Pricing and Efficiency in the Market for IP Addresses By Benjamin Edelman; Michael Schwarz
  6. Formation and development of marketing channel management theory By Kiryukov, Sergey I.
  7. Evolutionary Model of Non-Durable Markets By Joachim Kaldasch

  1. By: Moraga-Gonzalez, Jose L. (IESE Business School); Wildenbeest, Matthijs R. (Indiana University)
    Abstract: Web search technologies are fundamental tools for navigating the Internet. One particular type of search technology is "shopbots", or comparison sites. The emergence of Internet shopbots and their implications for price competition and market efficiency are the focus of this paper. We develop a simple model where a price comparison site tries to attract (possibly vertically and horizontally differentiated) online retailers, on the one hand, and consumers, on the other. Analysis of the model reveals that differentiation among the products of the retailers and their ability to price discriminate between on- and off-comparison-site consumers play a critical role. When products are homogeneous, if online retailers cannot charge different on- and off-the-comparison-site prices, then the comparison site has incentives to charge fees so high that some firms are excluded, which generates price dispersion and an inefficient outcome. By contrast, when on- and off-comparison-site prices can be different, the comparison site attracts all the players to the platform and the allocation is efficient. A similar result obtains when products are horizontally differentiated. In that case, the comparison site becomes an aggregator of product information and no matter whether firms can price discriminate or not, the comparison site attracts all the players to the platform and an efficient outcome ensues. We argue that the lack of vertical product differentiation may also be critical for this efficiency result. In fact, we show that when quality differences are large, the comparison site may find it profitable to charge fees that effectively exclude low quality producers, thereby inducing an inefficient outcome.
    Keywords: shopbots; two-sided market; intermediation; price discrimination; product differentiation;
    Date: 2011–07–09
  2. By: Cunha, Jesse; De Giorgi, Giacomo; Jayachandran, Seema
    Abstract: This paper compares how cash and in-kind transfers affect local prices. Both types of transfers increase the demand for normal goods, but only in-kind transfers also increase supply. Hence, in-kind transfers should lead to lower prices than cash transfers, which helps consumers at the expense of local producers. We test and confirm this prediction using a program in Mexico that randomly assigned villages to receive boxes of food (trucked into the village), equivalently-valued cash transfers, or no transfers. The pecuniary benefit to consumers of in-kind transfers, relative to cash transfers, equals 11% of the direct transfer.
    Keywords: Cash and In-Kind Transfers; Prices
    JEL: D4 O12
    Date: 2011–09
  3. By: Eric BROUILLAT (GREThA, CNRS, UMR 5113)
    Abstract: This paper presents an agent-based simulation model that explores the dynamics of product lifetimes on a competitive market. The main objective of this modelling exercise is to investigate the conditions under which product-life extension strategies can be effective. In this model, change in products’ characteristics is driven by an endogenous stochastic process relying on the interplays between heterogeneous consumers and firms. The main contribution of the paper is to present a detailed modeling of demand which enables to analyze more thoroughly how decisions of bounded rational consumers impact on the dynamics of the system and, more particularly, how purchase process shapes market selection and strategies of firms. While most existing literature on product lifetime investigates durable goods monopolists, our study highlights that competition and diversity matter. The coexistence of competing products with different lifetimes can encourage firms to market long lifetime products. Our results also stress the critical role played in market dynamics by the processes driving purchase decision. The purchasing behavior of consumers in itself will greatly guide firms’ strategies and in fine shape market structure.
    Keywords: industrial dynamics; obsolescence; product durability; product lifetimes; simulation model; sustainable consumption
    JEL: O33 D11 D21 Q57
    Date: 2011
  4. By: Moraga-Gonzalez, Jose L. (IESE Business School); Petrikaite, Vaiva (University of Groningen)
    Abstract: This paper studies the incentives to merge in a Bertrand competition model where firms sell differentiated products and consumers search the market for satisfactory deals. In the pre-merger market equilibrium, all firms look alike and so the probability a firm is next in the queue consumers follow when visiting firms is equal across non-visited firms. However, after a merger, insiders raise their prices more than the outsiders, so consumers search for good deals first at the non-merging stores and only then, if they do not find any product satisfactory enough, at the merging stores. When search cost are negligible, the results of Deneckere and Davidson (1985) hold. However, as search costs increase, the merging firms receive fewer customers, so mergers become unprofitable for sufficiently large search costs. This new merger paradox is more likely the higher the number of non-merging firms.
    Keywords: mergers; search; insiders; outsiders; order of search;
    JEL: D40 D83 L13
    Date: 2011–07–11
  5. By: Benjamin Edelman (Harvard Business School, Negotiation, Organizations & Markets Unit); Michael Schwarz (Yahoo! Research Labs)
    Abstract: We consider market rules for the transfer of IP addresses, numeric identifiers required by all computers connected to the Internet. Excessive fragmentation of IP address blocks causes growth in the Internet's routing table, which is socially costly, so an IP address market should discourage subdividing IP address blocks more than necessary. Yet IP address transfer rules also need to facilitate purchase by the networks that need the addresses most, from the networks who value them least. We propose a market rule that avoids excessive fragmentation while almost achieving social efficiency, and we argue that implementation of this rule is feasible despite the limited powers of central authorities. We also offer a framework for the price trajectory of IPv4 addresses. In a world with- out uncertainty, the unit price of IPv4 is constant before the first time when all blocks of IPv4 addresses are in use and decreasing after that time. With uncertainty, the price before that time is a martingale, and the price trajectory afterwards is a supermartingale.
    Date: 2011–09
  6. By: Kiryukov, Sergey I.
    Abstract: In this paper the problems of formation and development of marketing channel management theory are considered. The definition and components of marketing channels are presented. Marketing channel management process and key management decisions are described. The major stages of marketing channel management theory evolution are provided. Perspectives of marketing channel management theory development and issues of demand chain management concept are considered. Executive summary is available at p. 42.
    Keywords: Marketing Channels, Distribution Channels, Marketing Channel Management Theory, Strategic Marketing Channel Management, Demand Chain Management,
    Date: 2011
  7. By: Joachim Kaldasch
    Abstract: Presented is an evolutionary model of consumer non-durable markets, which is an extension of a previously published paper on consumer durables. The model suggests that the repurchase process is governed by preferential growth. Applying statistical methods it can be shown that in a competitive market the mean price declines according to an exponential law towards a natural price, while the corresponding price distribution is approximately given by a Laplace distribution for independent price decisions of the manufacturers. The sales of individual brands are determined by a replicator dynamics. As a consequence the size distribution of business units is a lognormal distribution, while the growth rates are also given by a Laplace distribution. Moreover products with a higher fitness replace those with a lower fitness according to a logistic law. Most remarkable is the prediction that the price distribution becomes unstable at market clearing, which is in striking difference to the Walrasian picture in standard microeconomics. The reason for this statement is that competition between products exists only if there is an excess supply, causing a decreasing mean price. When, for example by significant events, demand increases or is equal to supply, competition breaks down and the price exhibits a jump. When this supply shortage is accompanied with an arbitrage for traders, it may even evolve into a speculative bubble. Neglecting the impact of speculation here, the evolutionary model can be linked to a stochastic jump-diffusion model.
    Date: 2011–09

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