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on Marketing |
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Issue of 2013‒07‒20
five papers chosen by Joao Carlos Correia Leitao University of Beira Interior and Technical University of Lisbon |
| By: | Thomas J. Miceli (University of Connecticut); Kathleen Segerson (University of Connecticut); Suo Wang (University of Connecticut) |
| Abstract: | This paper examines products liability when consumers have private information about their susceptibilities to product-related harm. In this case, it is efficient for consumers to self-select in their purchases, with those especially prone to harm refraining from purchase. Achieving this outcome requires consumers to bear their own harm, given that producers cannot observe consumer types. When consumers also misperceive risk, the problem becomes more complicated because accurate signaling of risk requires that firms bear liability. A trade-off therefore emerges between imposing liability on firms versus consumers. This paper characterizes the choice among liability rules in the presence of this trade-off. |
| Keywords: | Products liability, negligence, strict liability, consumer misperceptions |
| JEL: | K13 L15 |
| Date: | 2013–07 |
| URL: | http://d.repec.org/n?u=RePEc:uct:uconnp:2013-15&r=mkt |
| By: | Michael Luca (Harvard Business School, Negotiation, Organizations & Markets Unit); Georgios Zervas (Boston University) |
| Abstract: | Review sites have become increasingly important sources of information for consumers. Because these reviews affect sales, businesses have the incentive to game the system by leaving positive reviews for themselves, or negative reviews for their competitors. Such review fraud undermines the trustworthiness of consumer reviews, and constitutes a major risk factor for review sites. In this paper, we investigate review fraud on the popular consumer review site Yelp. We construct a novel data set to analyze this problem, combining restaurant reviews with Yelp's algorithmic indicator of fake reviews. Using this imperfect indicator as a proxy, we develop an empirical methodology to identify the points in the life-cycle of a business during which review fraud is most prevalent. We find that a restaurant's changing reputation affects its decision to engage in review fraud. Specifically, a restaurant is more likely to seek a positive fake review when its reputation is weak, i.e., when it has few reviews, or it has recently received bad reviews. Consistent with theory, we find that chains are less likely than independent restaurants to engage in review fraud. We then turn our attention to negative review fraud, and find that increased competition by similar restaurants the driving force behind it. |
| Date: | 2013–07 |
| URL: | http://d.repec.org/n?u=RePEc:hbs:wpaper:14-006&r=mkt |
| By: | Trishita Bhattacharjee (Indira Gandhi Institute of Development Research); Rupayan Pal (Indira Gandhi Institute of Development ResearchInstitute of Economic Growth) |
| Abstract: | This paper examines the possibility of emergence of incentive equilibrium in the case of monopoly, without relying on agency theory based arguments. It shows that, when there is network effect of consumption, it is optimal for a monopolist to offer sales-oriented incentive scheme to her manager. The extent of sales-orientation of the optimal incentive scheme is higher in the case of stronger network effect. It also shows that both the monopolist and consumers are better off under managerial delegation than in case of no delegation, unlike as in the case of usual oligopoly without network effect. |
| Keywords: | Incentive equilibrium, Managerial delegation, Monopoly, Network effects |
| JEL: | D42 L20 L12 |
| Date: | 2013–05 |
| URL: | http://d.repec.org/n?u=RePEc:ind:igiwpp:2013-009&r=mkt |
| By: | Peter Chacha, Edwin Muchapondwa, Anthony Wambugu and Daniel Abala |
| Abstract: | This study analyses the factors influencing pricing of National Park visits in Kenya. A two step regression procedure is used to develop a pricing mechanism for Lake Nakuru National Park (LNNP). In the first stage, count data models are applied to estimate the Trip generating function to LNNP and in the second, the results from count data models are used to simulate visitation as price varied through an increase in the gate fee to LNNP. The simulated data is used to estimate the demand curves for LNNP. The finding shows that the current price set-up at LNNP of Ksh. 7,050 for international tourists and Ksh. 1,000 for domestic tourists is in fact cost recovery. However, there is greater scope to raise more revenue from an increase in entry fees. The study proposes price increase for international visits from the current Ksh. 7,050 (US$75) to Ksh.20,000 (US$230) in the medium term. This will yield a total revenue estimated at Ksh. 2,823 million (US$33 million) without major decline in visitation days. With regard to domestic visitors, the Kenya Wildlife Service (KWS) can increase the price from the current Ksh. 1,000 (US$11.8) to Ksh. 2,000 (US$ 22) over the same horizon. This price increase will yield revenue equivalent to Ksh. 288 million (US$ 3.4 million) but also lead to a decline in visitation levels from domestic group by 30 percent. |
| Keywords: | Pricing, protected areas, international and domestic visits, travel costs |
| JEL: | C24 C25 I31 Q26 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:rza:wpaper:357&r=mkt |
| By: | Trishita Bhattacharjee (Indira Gandhi Institute of Development Research); Rupayan Pal (Indira Gandhi Institute of Development Research) |
| Abstract: | This paper examines the implications of network externalities on equilibrium outcomes in a differentiated products duopoly under strategic managerial delegation through relative performance based incentive contracts. It shows that Miller and Pazgal (2001)'s equivalence result does not go through in the presence of network externalities. Instead, Singh and Vives (1984)'s rankings of equilibrium outcomes under Cournot and Bertrand hold true under relative performance based delegation contracts as well, if there are network externalities. However, when firms can choose whether to compete in price or in quantity, there are two pure strategy Nash equilibria and one mixed strategy Nash equilibrium. Interestingly, in pure strategy Nash equilibria asymmetric competition occurs, where a firm competes in price and its rival firm competes in quantity. Further, the mixed strategy Nash equilibrium probability of a firm to compete in terms of price increases with the strength of network effects and is always greater than the probability to compete in terms of price. |
| Keywords: | Symmetric competition, Price competition, Network externalities, Quantity competition, Relative performance contract, Strategic delegation |
| JEL: | D43 L22 L13 D21 |
| Date: | 2013–05 |
| URL: | http://d.repec.org/n?u=RePEc:ind:igiwpp:2013-010&r=mkt |