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on Marketing |
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Issue of 2012‒10‒27
eleven papers chosen by Joao Carlos Correia Leitao University of Beira Interior and Technical University of Lisbon |
| By: | Babur De los Santos (Department of Business Economics and Public Policy, Indiana University Kelley School of Business); Sergei Koulayev (Keystone Strategy) |
| Abstract: | While considering differentiated products for purchasing decisions, it is costly for consumers to obtain the necessary information to weigh the various alternatives. The vast amount of information available online has revolutionized the way firms present consumers with product options. Presenting the best alternatives reduces search costs associated with a consumer finding the right product. Heterogeneity in consumers' preference for products with multiple attributes makes it challenging to present a relevant ranking, especially when important characteristics, such as price, differ between the formation of the underlying ranking and the consumer's search process. We use novel data on consumer click-stream behavior from a major web-based hotel comparison platform to estimate a random coefficient discrete choice model. We are then able to infer consumer preferences regarding a set of product attributes and propose an optimal ranking tailored to anonymous consumers with different price sensitivity. We are able to customize rankings by relating price sensitivity to their request parameters, such as the length of stay, number of guests, and day of the week of the stay. In contrast to a myopic popularity-based ranking, our model accounts for the rapidly changing prices that characterize the hotel industry, consumers' expected search strategies including result sorting and filtering, and consumer heterogeneity. The platform must determine which hotel ordering maximizes consumers' click-through rates (CTR) based on the information available to the platform at that time, its assessment of consumers' preferences, and the expected consumer type based on request parameters. We find that consumers' CTRs more than double when consumers are provided consumers with customized rankings that refl ect the price/quality trade-off inferred from the consumer's request parameters. We show that the optimal ranking results in consumers' welfare 173 percent greater on average than in the original ranking. |
| Keywords: | consumer search, hotel industry, popularity rankings, platform, collaborative fitering, click-through ates, customization |
| JEL: | D43 D83 L13 |
| Date: | 2012–05 |
| URL: | http://d.repec.org/n?u=RePEc:iuk:wpaper:2012-04&r=mkt |
| By: | Yabing Jiang (Lutgert College of Business, Florida Gulf Coast University) |
| Abstract: | The success of the Kindle e-book platform and the increased popularity of e-books among members of the reading community have attracted extensive interest in the high-tech industry. New platform providers are jumping in the market to compete for device and e-book sales. In this paper, we model the direct competition in the e-book platform market through a two-sided network externality model. We show that publishers can influence consumers’ e-book platform adoption decisions and the total e-book sales by strategically deciding the size of contents available on each platform. |
| Keywords: | analytical modeling, e-book technology, network externality, platform competition, product differentiation, two-sided market |
| JEL: | D43 D62 L11 L13 L82 M15 |
| Date: | 2012–09 |
| URL: | http://d.repec.org/n?u=RePEc:net:wpaper:1219&r=mkt |
| By: | Doh-Shin Jeon (Toulouse School of Economics); Nikrooz Nasr Esfahani (Toulouse School of Economics) |
| Abstract: | In this paper, we study how the presence of a news aggregator affects competition among (horizontally differentiated) newspapers in the Internet. For this purpose, we build a model of multiple issues which allows each newspaper to choose quality on each issue. Our model provides a micro foundation for the service offered by the aggregator and captures both the "business-stealing effect" and the "readership-expansion effect" of the aggregator. We find that the presence of the aggregator leads each newspaper to specialize in terms of news coverage. In this case, its presence changes quality choices from strategic substitutes to strategic complements. In the case of symmetric newspapers, this leads to an increase in the quality of newspapers and an increase in consumer surplus, with an ambiguous effect on newspapers’ profits. In the case of asymmetric newspapers, quality can increase or decrease depending on the sensitivity of advertising revenue to quality. |
| Keywords: | Newspapers, News Aggregator, Internet, Quality, Strategic Substitutes, Strategic Complements, Advertising, Business-stealing, Readership-expansion, Opting Out. |
| JEL: | D21 D43 L13 L82 |
| Date: | 2011–07 |
| URL: | http://d.repec.org/n?u=RePEc:net:wpaper:1220&r=mkt |
| By: | Luijten, A.L.J.M. |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:ner:tilbur:urn:nbn:nl:ui:12-5659175&r=mkt |
| By: | Simon P. Anderson (Department of Economics, University of Virginia - Uniiversity of Virginia); André De Palma (ENS Cachan - Ecole Normale Supérieure de Cachan - École normale supérieure de Cachan - ENS Cachan) |
| Abstract: | Advertising competes for scarce consumer attention, so more profitable advertisers send more messages to break through the others' clutter. Multiple equilibria can arise: more messages in aggregate induce more "shouting to be heard", dissipating profit. Equilibria can involve a small range of loud shouters or large range of quiet whisperers. All advertisers prefer there to be less shouting. There is the largest diversity in message levels for a middling width of advertiser types: both a very wide or very narrow width have only one message per advertiser. The number of advertisers at each message level decreases with the level if the profit distribution is log-convex. Increasing the cost of sending messages can make all advertisers better off. A new technique is given for describing multiple equilibria, by determining how much examination is consistent with a given marginal advertiser. |
| Keywords: | information overload; congestion; advertising; lottery; junk mail; e-mail; tele-marketing; multiple equilibria; ad caps |
| Date: | 2012–10–15 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-00742240&r=mkt |
| By: | Archishman Chakraborty (Baruch College, City University of New York); Rick Harbaugh (Department of Business Economics and Public Policy, Indiana University Kelley School of Business) |
| Abstract: | Sellers often make explicit or implicit product claims without providing evidence. We show that such "puffery" of product attributes through pure cheap talk is credible and helps buyers make a better decision. Puffing one attribute of a product leads buyers to positively update their impression of the product on that attribute, but also to negatively update their impression of the product on other attributes. Such updating pulls in buyers who value the puffed attribute, but pushes away other buyers who value other attributes. When the initial probability of a sale is low, there are more buyers to pull in than to push away, so the seller benefits from puffery. The legal distinction that permits puffery about subjective claims, but precludes puffery about objective facts, is shown to be consistent with the differences between cheap talk and persuasion models of communication. |
| Keywords: | cheap talk, discrete choice, sales talk, comparative advertising, negative advertising, unique selling point, privacy |
| JEL: | D82 L15 C72 D72 |
| Date: | 2012–10 |
| URL: | http://d.repec.org/n?u=RePEc:iuk:wpaper:2012-05&r=mkt |
| By: | Zhou, Yiyi |
| Abstract: | In the dynamic two-sided market environment, overpricing one side of the market not only discourages demand on that side but also discourages participation on the other side. Over time, this process can lead to a death spiral. This paper develops a dynamic structural model of the video game market to study launch failures in two-sided markets. The paper models consumers’ purchase decisions for hardware platforms and affiliated software products and software firms’ entry and pricing decisions. This paper also develops a Bayesian Markov Chain Monte Carlo approach to estimate dynamic structural models. The results of the counterfactual simulations show that a failed platform could have survived if it had lowered its hardware prices and that it could not have walked out of the death spiral if it had subsidized software entry. |
| Keywords: | Bayesian Markov Chain Monte Carlo (MCMC) Estimation; Failure to Launch; Two-Sided Market; Indirect Network Effect; Forward-Looking Consumer; Video Game Market |
| JEL: | L11 L68 C61 C11 |
| Date: | 2012–10–16 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:42002&r=mkt |
| By: | Berg, V.A.C. van den |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:vuarem:2012-3&r=mkt |
| By: | Maxime Agbo; Marc Santugini; Jonathan W. Williams |
| Abstract: | We study second-degree price discrimination for a congestible network good. We show that the seller does not always provide distinct contracts (i.e., it is not always optimal to price discriminate) and that it is more likely for the low-valuation buyer to be excluded. Because of the network externality through congestion, no buyer receives an efficient allocation. In particular, the high-valuation buyer might be offered a higher or a lower quality (relative to the first-degree price discrimination offer). Moreover, with congestion and for values of the parameters for which all types are serviced, consumer surplus under second-degree price discrimination may be greater than consumer surplus under no price discrimination. |
| Keywords: | Congestion, Network, Price Discrimination |
| JEL: | D40 D62 D86 L14 |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:lvl:lacicr:1239&r=mkt |
| By: | Romao, J.; Neuts, B.; Nijkamp, P.; Leeuwen, E.S. van |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:vuarem:2012-2&r=mkt |
| By: | Maha, Andreea; Donici, Andreea Nicoleta; Postolachi, Andrei Teofil |
| Abstract: | The purpose of this paper is related to the idea of providing the theoretical and empirical findings in the literature about the E-Tourism concept. The objective of the paper is resumed to the influence that new IT&C technologies developed during the last decade of the past century, starting the 1990`s influenced the tourism area, highlighting some of the references about the theme in literature. We have identified some specific concepts, like: Computer Reservation Systems, Global Distribution systems, Global Distribution systems, Property Management Systems or Social media that are in direct connection with the e-tourism, and which in current paper are defined and explained. The latest specific actions and development in last period show a rising and accelerating interaction between the tourism and technology, which as result, concluded to fundamental changes in this industry and on the entire global perception on the phenomenon. As it is shown below, there is a lot and consistent literature between the 1980`s to present time that is concentrated on the changes and the influences that new technologies deter in the tourism mechanism, on it`s both main sides: the supply and demand. In final part there is a brief presentation of the consumer of touristic products and services along with short statistics of the Romanian accommodations and internet usage. |
| Keywords: | E-tourism; ICT; Romania; Internet; Technology |
| JEL: | L8 |
| Date: | 2012–10–05 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:41745&r=mkt |