nep-mkt New Economics Papers
on Marketing
Issue of 2012‒09‒22
seven papers chosen by
Joao Carlos Correia Leitao
University of Beira Interior and Technical University of Lisbon

  1. Liability versus Regulation for Dangerous Products When Consumers Vary in Their Susceptibility to Harm and Misperceive Risk By Thomas J. Miceli; Rebecca Rabon; Kathleen Segerson
  2. A Simple Model of Bertrand Duopoly with Noisy Prices By Kaminski, Bogumil; Latek, Maciej
  3. Retail demand for voluntary carbon offsets – a choice experiment among Swiss consumers By Blasch, Julia; Farsi, Mehdi
  4. Price Competition and Consumer Confusion By Ioana Chioveanu; Jidong Zhou
  5. Congestion Pricing and Net Neutrality By Jullien, Bruno; Sand-Zantman, Wilfried
  6. "Smart shopping": Implications of hard-discounters and multiple-store patronage. By Vroegrijk, M.J.J.
  7. Optimal Pricing of Public Lotteries and Comparison of Competing Mechanisms By David Scrogin; Chen Ling

  1. By: Thomas J. Miceli (University of Connecticut); Rebecca Rabon (University of Connecticut); Kathleen Segerson (University of Connecticut)
    Abstract: When consumers vary in their susceptibility to product-related harm, safety regulation dominates liability because when consumers bear their own damages they are induced to selfselect in their purchase decisions. When consumers also misperceive risk, however, liability may be preferred because the price of the product accurately conveys the risk, thereby eliminating any distortions due to misperception. Generally, regulation is preferred when consumers accurately perceive risk, and liability is preferred when they do not. JEL Classification: K13, L51 Key words: Products liability, regulation, risk perceptions
    Date: 2012–08
  2. By: Kaminski, Bogumil; Latek, Maciej
    Abstract: We examine a market in which consumers are forced to rely on noisy price signals to select between homogeneous products. The noise originates either from firms' price obfuscation or consumers' bounded information processing capabilities. Standard models and empirical experiments of markets with noise or price obfuscation show that it leads to higher prices detrimental to consumers' welfare. This paper identifies conditions under which an opposite result can be expected. In particular, it shows that a moderate level of noise is beneficial to consumers in a market with a cost leader.
    Keywords: noisy pricing; bounded rationality; Bertrand oligopoly; game theory
    JEL: L13 C02 D43 C72
    Date: 2012–09–14
  3. By: Blasch, Julia; Farsi, Mehdi
    Abstract: Using a choice experiment conducted among more than a thousand Swiss consumers, we analyze the individual demand for voluntary carbon offsets in different contexts. The analysis is used to identify the consumers’ underlying motives for offsetting emissions, the context effects on their willingness to pay and the influence of the offsetting project characteristics on their propensity for contribution. Furthermore, the characteristics of potential buyers as well as the possibilities of behavioral rebound are explored. To support our results, we assess whether the hypothetical preferences are consistent with the revealed behavior. The adopted latent class model accounts for heterogeneity of preferences with respect to offset products offered in the market. The results provide a quantitative assessment of consumers’ marginal valuation of carbon offsets and a better understanding of individual preferences. The results also point to strong heterogeneity among individuals favoring targeted policy measures to induce voluntary contribution.
    Keywords: Voluntary carbon offsets; Willingness to pay; Choice experiment; Latent class model
    JEL: D03 D12 Q54
    Date: 2012–09
  4. By: Ioana Chioveanu; Jidong Zhou
    Abstract: This paper proposes a model in which identical sellers of a homogenous product compete in both prices and price frames (i.e., ways to present price information). Frame choices affect the comparability of price offers, and may cause consumer confusion and lower price sensitivity. In equilibrium, firms randomize their frame choices to obfuscate price comparisons and sustain positive profits. The nature of equilibrium depends on whether frame differentiation or frame complexity is more confusing. Moreover, an increase in the number of competitors induces firms to rely more on frame complexity and this may boost industry profits and lower consumer surplus.
    Date: 2012–07
  5. By: Jullien, Bruno (Toulouse School of Economics (GREMAQ-CNRS and IDEI)); Sand-Zantman, Wilfried (Toulouse School of Economics (GREMAQ and IDEI))
    Abstract: We consider a network that intermediates traffic between content producers and consumers. The content is heterogenous in the cost of traffic. While, consumers do not know the traffic cost when deciding on consumption, a content producer knows his cost but may not con- trol the consumption. The network observes only the resulting total cost of traffic and can charge a congestion price to one or both of the parties, along with an ex-ante hook-up fee to consumers. We fi…rst show that, if the content is a paid content, the network charges only the content producers and capping congestion prices for content in this case is sub-optimal. In the case of free content, the network extracts some rent from content with congestion prices and may exclude some content. We show that there is efficient or excessive exclusion of traffic. We then endogenize the choice of business model by allowing the content producers to choose between a paid model and a free model. In this case, the network charges higher congestion prices to content but the cost is smaller as some content can stay under a paid model that would be excluded otherwise. At last, we characterize an optimal mechanism which consists in letting the content producers choose between di¤erent public cate- gories associated with different congestion prices for content and for consumers.
    Date: 2012–06
  6. By: Vroegrijk, M.J.J. (Tilburg University)
    Abstract: Abstract: The recent economic downturn has made consumers more focused on obtaining good value-for-money and on keeping their spending in check. This dissertation covers the implications of two recent developments indicative of such “smart shopping”: the increased popularity of the “hard-discounter” format, and a rise in systematic multiple-store patronage. The first essay focuses on how the local entry of a hard-discounter affects the market performance of “traditional” supermarkets. It is argued that multiple-store shopping plays an important role in shaping these effects, and helps to both identify possible antecedents, as well as viable response strategies that traditional retailers may undertake. The second essay studies the competitive impact of hard-discounters at a more detailed (category-by-category) level, and examines whether an economy private label – as is employed by many supermarkets in response to hard-discounters – can indeed be effective in reducing this impact. The third essay theorizes and tests how much grocery buyers actually spend across different shopping patterns (such as those involving a hard-discounter and/or multiple stores), given that savings are a common reason for consumers to engage in such patterns. Taken together, this dissertation provides more insight into two phenomena that have remained fairly understudied in the academic marketing literature, but are highly relevant for today’s grocery retailing sector.
    Date: 2012
  7. By: David Scrogin (University of Central Florida, Orlando, FL); Chen Ling (Southwestern University of Finance and Economics, Chengdu, Sichuan, China)
    Abstract: The negative effects of price controls on consumer surplus in competitive markets are well known. But what of consumer surplus if supply is fixed, as with rival but otherwise non-excludable goods held in public trust? This paper establishes optimal pricing rules for rationing indivisible units of such goods by lottery or mixture of a lottery and auction. The solution to the pricing problem appears in classic inverse elasticity form that may be directly implemented. Analysis of a rich class of private value distributions indicates the optimal lottery yields sizable gains in expected consumer surplus over competitive pricing and zero pricing.
    Keywords: lotteries, price control, surplus
    JEL: D61 H27
    Date: 2012–09

This nep-mkt issue is ©2012 by Joao Carlos Correia Leitao. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.