nep-mkt New Economics Papers
on Marketing
Issue of 2012‒10‒20
two papers chosen by
Joao Carlos Correia Leitao
University of Beira Interior and Technical University of Lisbon

  1. Group Coupons: Interpersonal Bundling on the Internet By Yongmin Chen; Tianle Zhang
  2. Sales and Firm Entry: The Case of Wal-Mart By Glandon, PJ; Jaremski, Matthew

  1. By: Yongmin Chen (Department of Economics, University of Colorado, Boulder); Tianle Zhang (Faculty of Business, Hong Kong Polytechnic University)
    Abstract: Sellers sometimes offer goods for sale under both a regular price and a discount for group purchase if the consumer group reaches some minimum size. This selling practice, which we term interpersonal bundling, has been popularized on the Internet by companies such as Groupon. We explain why interpersonal bundling is a profitable strategy in the presence of demand uncertainty, and how it may further boost profits by stimulating product information dissemination. Other reasons for its profitability are also discussed. We provide sufficient conditions for interpersonal bundling to dominate separate selling, and identify factors that determine the size of its profit advantage.
    Keywords: Interpersonal Bundling, Group Coupon, Group Discount, Demand Uncertainty
    JEL: D4 L1 M3
    Date: 2012–09
  2. By: Glandon, PJ (Department of Economics, Colgate University); Jaremski, Matthew (Department of Economics, Colgate University)
    Abstract: Temporary price reductions or “sales†have become increasingly important in the evolution of the price level. We present a model of repeated price competition to illustrate how entry causes incumbents to alternate between high and low prices. Using a six year panel of weekly observations from a grocery chain, we find that individual stores employ more sales as the distance to Wal-Mart falls. Moreover, the increase in the frequency of sales was concentrated on the most popular products, suggesting the use of a loss-leader strategy.
    Keywords: Wal-Mart, Retail Prices, Price Competition, Temporary Sales Prices
    JEL: E30 L11 L13
    Date: 2012

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