nep-mkt New Economics Papers
on Marketing
Issue of 2012‒04‒23
five papers chosen by
Joao Carlos Correia Leitao
University of Beira Interior and Technical University of Lisbon

  1. Informing Consumers about their own Preferences By Peitz, Martin; Inderst, Roman
  2. Does umbrella branding really work? Investigating cross-category brand loyalty By Nadja Silberhorn; Lutz Hildebrandt;
  3. The role of market frictions on the price differential: A search-theoretical approach By Chang, Chia-Ying
  5. The Advertiser is Mentioned Twice. Media Bias in Belgian Newspapers By De Smet, Dries; Vanormelingen, Stijn

  1. By: Peitz, Martin; Inderst, Roman
    Abstract: We analyze a model of monopolistic price discrimination where only some consumers are originally sufficiently informed about their preferences, e.g., about their future demand for a utility such as electricity or telecommunication. When more consumers become informed, we show that this benefits also those consumers who remain uninformed, as it reduces the firm’s incentives to extract information rent. By reducing the costs of information acquisition or forcing firms to supply consumers with the respective information about past usage, policy can further improve welfare, as contracts become more efficient. The last observation stands in contrast to earlier findings by Crémer and Khalil (American Economic Review 1992), where all consumers are uninformed.
    Keywords: Nonlinear pricing , price discrimination , monopolistic screening , information acquisition
    JEL: D42 D82 L12
    Date: 2012
  2. By: Nadja Silberhorn; Lutz Hildebrandt;
    Abstract: Numerous studies on the drivers of brand extension success [Aaker and Keller, 1990, Broniarczyk and Alba, 1994, Hem et al., 2003, Völckner and Sattler, 2006] found evidence that parent-brand characteristics and the fit between parent brand and transfer product are the main and most influential factors driving brand extension success. However, the ability of a brand to transfer its brand loyal customers from the parent to the extension category has been widely neglected. Brand loyalty can be regarded as a consequence of the underlying assumption of customers transferring their quality perceptions, their brand knowledge, and their experience with the brand from one category to the other [Erdem and Swait, 1998]. We find empirical evidence that consumers who are loyal to the brand in the leading (parent) product category show a higher probability to be loyal to that same brand in another (extension) category compared to those consumers who are not loyal in the leading category. Moreover, as the overall success of the extension includes positive retroactive effects of the extension product on the parent product or brand [Erdem, 1998], the arising question is whether there are differences between extension product categories regarding their attachment to the parent category and their ability to stimulate brand loyal purchases in the parent category, i.e., speaking of ’leader’ and ’follower’ categories in terms of brand loyal purchase behavior. This might even hold true for the relationship of any two categories the brand competes.
    Keywords: cross-category brand loyalty, loyalty leverage index, share of category requirements
    JEL: M31 C43
    Date: 2012–04
  3. By: Chang, Chia-Ying
    Abstract: To shed light on how market frictions and the waiting time of imitators affect prices and how effective research subsidy and patent protection affect the price differential, this paper adopts a direct search-theoretical approach to capture the searching behaviors of consumers and producers in the innovative and imitative markets. As a result, this model shows that the price differential with endogenous market frictions would react to the change of quality the least. A shorter durability would result in a wider price differential in the model without the extra state for imitators than in the model with the extra state. While a research subsidy shrinks the price differential, and improve consumers’ flow values, the patent protection widens the price differential, hurts imitators’ profits and may not improve the consumers’ flow values. The innovators could take the advantage of the effects of durability on price differential by inventing products which might influence the durability of the products currently hold by the consumers. This finding might provide an explanation on why the latest versions of computer products are invented less likely convertible to older versions of Windows or associated software.
    Keywords: market frictions, price differential, direct search, innovation, imitation,
    Date: 2012–03–16
  4. By: Somekh, Babak (Department of Economics, University of Haifa)
    Abstract: We demonstrate how firm pricing strategy and determinants of household location can interact to determine city structure. We go beyond previous work on spatial income segregation by endogenizing the tradeoff between households' choice of location and shopping behavior, as well as solving for the firms' optimal pricing strategy in a general equilibrium framework. In this city, consumers and firms live on a continuous line interval. Our model consists of two types of firms; many high-cost perfectly competitive "Corner Stores" located in the Central Business District, and one large low-cost "Superstore", choosing its location and price strategically. We begin by considering a model with homogenous consumers in order to determine the strategy for the Superstore in a spatial model. Then we consider the impact of introducing different income classes to our city structure. We show how the shopping habits of the consumer population, as determined by the relative price of the Superstore and the Corner Stores, can contribute to the various income segregation outcomes described in previous literature. In addition we consider the impact of city income structure on the pricing decision of firms.
    Date: 2012–02–19
  5. By: De Smet, Dries (Center of Economic Studies and Licos Centre for Institutions and Economic Performance KULeuven); Vanormelingen, Stijn (Hogeschool-Universiteit Brussel (HUB))
    Abstract: Do newspapers write more about their advertisers? We try to answer this question on two levels. In our theoretical model, we show that the answer is yes, if readers do not mind bias too much and if bias is relatively effective for advertisers. In an empirical study, we find that advertisers in Belgian Dutch-language newspapers receive a significantly higher coverage.
    Keywords: advertising, advertising bias, commercial bias, media bias, newspapers
    Date: 2012–01

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