nep-mkt New Economics Papers
on Marketing
Issue of 2013‒05‒19
six papers chosen by
Joao Carlos Correia Leitao
University of Beira Interior and Technical University of Lisbon

  1. Pricing information goods with piracy and heterogeneous consumers By Waters, James
  2. Software Upgrades under Monopoly By Jiri Strelicky; Kresimir Zigic
  3. From city marketing to museum marketing and opposed By Metaxas, Theodore
  4. Search Costs, Demand-Side Economies and the Incentives to merge under Bertrand Competition By Jose L. Moraga-Gonzalez; Vaiva Petrikaite
  5. Managing Sales Forecasters By Bert de Bruijn; Philip Hans Franses
  6. Advantaged Bidders in Franchise Auctions By Vincent van den Berg

  1. By: Waters, James
    Abstract: We present an information good pricing model with persistently heterogeneous consumers and a rising marginal propensity for them to pirate. Three offsetting pricing mechanisms occur: skimming, compressing price changes, and delaying product launch. We identify a novel trade off in piracy's effect on welfare. We find that piracy quickens sales times and raises welfare in fixed capacity markets, and does the opposite in growing markets. In our model, consumers benefit from piracy except at very high rates in rapidly expanding markets, legal sellers always dislike it, and pirate providers like high but not very high rates. Purchase delay, transient heterogeneity, inelastic demand, and network externalities reduce piracy's effect, but demand uncertainty doesn't.
    Keywords: Information goods; software; piracy; skimming; intertemporal price discrimination; prices; pricing; welfare
    JEL: D60 L11 L86
    Date: 2013–05–12
  2. By: Jiri Strelicky; Kresimir Zigic
    Abstract: We study price discrimination in a monopolistic software market. The monopolist charges different prices for the upgrade version and for the full version. Consumers are heterogeneous in taste for infinitely durable software and there is no resale. We show that price discrimination leads to a higher software quality but raises both absolute price and price per quality. This price discrimination does not increase sales and it decreases the total number of consumers compared to no discrimination. Finally, such discrimination decreases consumers' surplus but increases the developer's profit and social welfare that attains the social optimum in the limit.
    Keywords: monopoly; durable goods; software; upgrades; price discrimination;
    JEL: C61 L12 L15
    Date: 2013–01
  3. By: Metaxas, Theodore
    Abstract: European cities today need to confront the challenges of the current socio economic changes. In this framework the role of city marketing becomes essential especially during the socio economic crisis. City marketing is important because it is related to procedures connected with city global competition, tourist attraction, urban management, urban government and the special identity of cities (city branding). Many European cities take initiatives either creative or innovative to improve their competitiveness through cultural and tourism development/growth. Further, the majority of applied city marketing policies concern the culture and tourism. City marketing have encounter criticism like a)replace urban planning, b) emphasis on profit, c) emphasis on tourism attraction, d) regenerate socio geographical inequalities. In Greece only recently city marketing has been developed while even more new phenomenon is the process of field studies. The first case study is the Pilot Strategic Planning of City Marketing in Nea Ionia Magnisia which is part of the CultMark programme “Cultural heritage, local identity and place marketing for sustainable development” (contacted under INTERREG IIIc in five European locations during 2004-2006 (Nea Ionia, Magnisia (leader partner), UK, Kainou/Finland, Rostok-TLM/Germany and Pafos/Cyprus. Museums are one of the top/main categories of cultural locations which contribute to the cultural and tourism development of cities. Cities benefit from the existence of museums in specific ways but in order to work effectively it is necessary to be promoted in an organized way and with a strategic perspective which will be implemented by a Strategic Pilot Marketing Plan. A second case study is the unique Museum of Tobacco in Kavala, Greece. The scope of it is to show how the museum could contribute as a unique “tourism and cultural good/product to reinforce the city image and its development under a Strategic Marketing Plan for the city with main axe the Museum. This paper uses data from recent primary field studies contacted on enterprises, citizens of the city and visitors in order to form a strategic frame in which the (intrinsic) promotion of the Museum will work effectively on the general development of the Museum and the city of Kavala.
    Keywords: cultural planning, tourism development, Strategic Pilot Marketing Plan, Nea Ionia Magnisia, Tabacco Museum of Kavala
    JEL: O21 R58 R59
    Date: 2013
  4. By: Jose L. Moraga-Gonzalez (VU University Amsterdam); Vaiva Petrikaite (University of Groningen)
    Abstract: This paper studies the incentives to merge in a Bertrand competition model where firms sell differentiated products and consumers search for satisfactory deals. In the pre-merger symmetric equilibrium, the probability that a firm is the next one to be visited by a consumer is equal across firms not yet visited. However, in the short-run after a merger, because insiders raise their prices more than what the outsiders do, consumers start searching for good deals at the non-merging stores. Only when they do not find any product satisfactory enough, they continue searching at the merging stores. When search costs are sufficiently large, consumer traffic from the non-merging firms to the merged ones is so small that mergers become unprofitable. This new merger paradox,which is more likely the higher the number of non-merging firms, can be overcome in the mediumto long-run if the merging firms choose to stock their shelves with all the products of the constituent firms, which generates sizable search economies. Such demand-side economies can confer the merging firms a prominent position in the marketplace, in which case their price may even be lower than the price of the outsiders. In that case, consumers visit first the merged entity and the firms outside the merger lose out. Search cost economies may render a merger beneficial for consumers and so overall welfare may increase.
    Keywords: mergers, insiders, outsiders, short-run, long-run, consumer search, demand-side economies, economies of search, order of search, sequential search, prominence
    JEL: D40 D83 L13
    Date: 2012–02–21
  5. By: Bert de Bruijn (Erasmus University Rotterdam); Philip Hans Franses (Erasmus University Rotterdam)
    Abstract: A Forecast Support System (FSS), which generates sales forecasts, is a sophisticated business analytical tool that can help to improve targeted business decisions. Many companies use such a tool, although at the same time they may allow managers to quote their own forecasts. These sales forecasters (managers) can take the FSS output as their input, but they can also fully ignore the FSS out- comes. We propose a methodology that allows to evaluate the forecast accuracy of these managers, relative to the FSS, while taking aboard latent variation across managers' behavior. We show that the results, here for a large Germany-based pharmaceutical company, can in fact be used to manage the sales forecasters by giving clear-cut recommendations for improvement.
    Keywords: Forecast Support System; Sales forecasters; Forecast accuracy
    JEL: M11 M31
    Date: 2012–12–03
  6. By: Vincent van den Berg (VU University Amsterdam)
    Abstract: Consider a government that auctions a franchise for, e.g., an airport, telecommunication network, or utility. Consider an 'incumbent bidder' that owns a complement or substitute. With an auction on the transfer (i.e. payment) to the government, the incumbent is advantaged.If the government regulates the market with an auction on the price asked to consumers, it depends who is advantaged. With complements, the incumbent is advantaged: it can set a lower price on the new franchise, as this increases the profit of the other. With substitutes, the incumbent is disadvantaged. In many settings, the advantage bidder always wins.
    Keywords: Franchising, auctions, advantaged bidders, incumbent, private supply, regulatory auctions
    JEL: D43 L13 L51 R41 R42
    Date: 2012–11–02

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