nep-mkt New Economics Papers
on Marketing
Issue of 2013‒05‒22
five papers chosen by
Joao Carlos Correia Leitao
University of Beira Interior and Technical University of Lisbon

  1. Not All Price Endings Are Created Equal: Price Points and Asymmetric Price Rigidity By Avichai Snir; Daniel Levy; Alex Gotler; Haipeng (Allen) Chen
  2. Competition for attention in the information (overload) age By S. Anderson; André De Palma
  3. Comparative Advertising in Markets with Network Externalities By Maria Alipranti; Emmanuel Petrakis
  4. Reconsidérer la discrétisation des variables quantitatives : vers une nouvelle analyse de modération dans la recherche expérimentale By Romain Cadario; Béatrice Parguel
  5. Auctions Versus Negotiations: The Role of Price Discrimination By Chia-Hui Chen; Junichiro Ishida

  1. By: Avichai Snir; Daniel Levy; Alex Gotler; Haipeng (Allen) Chen
    Abstract: There is evidence that 9-ending prices are more common and more rigid than other prices. We use data from three sources: a laboratory experiment, a field study, and a large US supermarket chain, to study the cognitive underpinning and the ensuing asymmetry in rigidity associated with 9-ending prices. We find that consumers use 9-endings as a signal for low prices, and that this signal interferes with price information processing. Consequently, consumers are less likely to notice a bigger price when it ends with 9, or a price increase when the new price ends with 9, in comparison to a situation where the prices end with some other digit. We also find that retailers respond strategically to this consumer bias by setting 9-ending prices more often after price increases than after price decreases. 9-ending prices, therefore, usually increase only if the new prices are also 9- ending. Consequently, there is an asymmetry in the rigidity of 9-ending prices: they are more rigid than non 9-ending prices upward but not downward.
    Date: 2012–10
  2. By: S. 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, Department of Economics, Ecole Polytechnique - CNRS : UMR7176 - Polytechnique - X, CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne)
    Abstract: Limited consumer attention limits product market competition: prices are stochastically lower the more attention is paid. Ads compete to be the lowest price in a sector but compete for attention with ads from other sectors: equilibrium ad shares follow a CES form. When a sector gets more proÞtable, its advertising expands: others lose ad market share. The "information hump" shows highest ad levels for intermediate attention levels. The Information Age takes off when the number of viable sectors grows, but total ad volume reaches an upper limit. Overall, advertising is excessive, though the allocation across sectors is optimal.
    Keywords: economics of attention, information age, price dispersion, advertising distribution, consumer attention, information Þltering, size distribution of Þrms, CES, information congestion.
    Date: 2012
  3. By: Maria Alipranti (University of Crete); Emmanuel Petrakis (Department of Economics, University of Crete, Greece)
    Abstract: The present paper investigates the firms' incentives to invest in comparative advertising in a spatially differentiated duopoly market characterized by network externalities. We show that for a wide range of locations, determined by the interaction between the transportation cost, the network effects and the effectiveness of advertising, firms have incentives to invest in comparative advertising with their investment levels to be positively related to the transportation cost and negatively related to the network effects. Further, comparing the equilibrium results of our model with the benchmark case without advertising activities and the case without network externalities, we show that the firms' location distance increases in the presence of network externalities, while it decreases in the presence of comparative advertising.
    Keywords: Comparative Advertising, Network Effects, Location
    JEL: L13 D43 M37
    Date: 2012–08–29
  4. By: Romain Cadario (DRM - Dauphine Recherches en Management - CNRS : UMR7088 - Université Paris IX - Paris Dauphine); Béatrice Parguel (DRM - Dauphine Recherches en Management - CNRS : UMR7088 - Université Paris IX - Paris Dauphine)
    Abstract: Dans l'analyse de données expérimentales, les chercheurs en marketing discrétisent souvent les variables indépendantes de nature quantitative pour tester leur potentiel effet modérateur. A partir d'illustrations concrètes, cet article vise à convaincre des limites d'une telle pratique et à présenter les étapes d'une méthode de test plus appropriée.
    Keywords: Effet modérateur, discrétisation, median-split, analyse de projecteur, recherche expérimentale
    Date: 2012–12–31
  5. By: Chia-Hui Chen; Junichiro Ishida
    Abstract: Auctions are a popular and prevalent form of trading mechanism, despite the restriction that the seller cannot price-discriminate among potential buyers. To understand why this is the case, we consider an auction-like environment in which a seller with an indivisible object negotiates with two asymmetric buyers to determine who obtains the object and at what price. The trading process resembles the Dutch auction, except that the seller is allowed to offer different prices to different buyers. We show that when the seller can commit to a price path in advance, the optimal outcome can generally be implemented. When the seller lacks such commitment power, however, there instead exists an equilibrium in which the seller's expected payoff is driven down to the second-price auction level. Our analysis suggests that having the discretion to price discriminate is not necessarily beneficial for the seller, and even harmful under plausible conditions, which could explain the pervasive use of auctions in practice.
    Date: 2013–05

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