nep-mkt New Economics Papers
on Marketing
Issue of 2013‒09‒24
five papers chosen by
Joao Carlos Correia Leitao
University of Beira Interior and Technical University of Lisbon

  1. Network Neutrality, Access to Content and Online Advertising By Anna D’Annunzio; Antonio Russo
  2. Competing for Consumer Inattention By de Clippel, Geoffroy; Eliaz, Kfir; Rozen, Kareen
  3. Voluntary Payments, Privacy and Social Pressure on the Internet: A Natural Field Experiment By Tobias Regner; Gerhard Riener
  4. The equivalence of bundling and advance sales By Alexei Alexandrov; Özlem Bedre-Defolie
  5. Labelling of agricultural and food products of mountain farming By Fabien Santini; Fatmir Guri; Sergio Gomez y Paloma

  1. By: Anna D’Annunzio; Antonio Russo
    Abstract: We investigate possible effects of network neutrality regulation on the distribution of content in the Internet. We model a two-sided market, where consumers and advertisers interact through Content Providers (CPs), and CPs and consumers through Internet Service Providers (ISPs). Multiple impressions of an ad on a consumer are partially wasteful. Thus, equilibrium ad rates decrease with the number of CPs consumers can browse. Under network neutrality, CPs can connect to any ISP for free, while in the unregulated regime they have to pay a (non-discriminatory) access fee set by the ISP.We show that universal distribution of content is always an equilibrium with net neutrality regulation. Instead, in the unregulated regime, ISPs can use access fees to rule out universal distribution when it is not profitable, i.e. when repeated impressions of an ad rapidly lose value and consumers care for content availability to a small extent. We also find that the unregulated regime is never superior to net neutrality from a welfare point of view. Consumer and advertiser surplus are weakly higher under net neutrality. ISPs are unambiguously better off in the unregulated regime, while CPs are unambiguously worse off.
    Keywords: Network neutrality, two-sided markets, Internet, advertising, fragmentation
    JEL: L1 D43 L13 L51
    Date: 2013–07
  2. By: de Clippel, Geoffroy; Eliaz, Kfir; Rozen, Kareen
    Abstract: Consumers purchase multiple types of goods and services, but may be able to examine only a limited number of markets for the best price. We propose a simple model which captures these features, conveying some new insights. A firm's price can deflect or draw attention to its market, and consequently, limited attention introduces a new dimension of competition across markets. We fully characterize the resulting equilibrium, and show that the presence of partially attentive consumers improves consumer welfare as a whole. When consumers are less attentive, they are more likely to miss the best offer in each market; but the enhanced cross-market competition decreases average price paid, as leading firms try to stay under the consumers' radar.
    Keywords: Limited attention
    JEL: C72 D43
    Date: 2013–07
  3. By: Tobias Regner (Max Planck Institute for Economics, Jena); Gerhard Riener (Duesseldorf Institute for Competition Economics (DICE))
    Abstract: The emergence of Pay-What-You-Want (PWYW) business models as a successful alternative to conventional uniform pricing brings up new questions related to the task of pricing. We investigate the eect of a reduction of privacy on consumers' purchase decisions (whether to buy, and if so how much to pay) in a natural experiment at an online music store with PWYW-like pricing. Our study extends the empirical evidence of the reduced anonymity eect, previously established for donation or public goods contexts, to a consumption environment. We nd that revealing the name of the customer led to slightly higher payments, while it drastically reduced the number of customers purchasing. Overall, the regime led to a revenue loss of 15%. The experiment suggests that even low levels of social pressure without face to face interaction on customers leads to a reduction of welfare.
    Keywords: Digital content, Voluntary Payments, PWYW, Public goods, Voluntary contributions, Social pressure, Internet, Privacy, Natural experiment
    JEL: D03 D49 H41 L82 L86 P14
    Date: 2013–09–09
  4. By: Alexei Alexandrov (Consumer Financial Protection Bureau Washington DC); Özlem Bedre-Defolie (ESMT)
    Abstract: We show that a monopolist's problem of optimal advance selling strategy can be mathematically transformed into a problem of optimal bundling strategy if four conditions hold: i. consumers and the firm agree on the probability of the states occurring, ii. the firm pre-commits to the spot prices to be charged in the advance selling stage, iii. consumers are risk-neutral, and iv. consumers and the firm do not have time preferences or when they do have time preferences, they discount future at the same rate. The result allows both researchers and practitioners to apply the insights from the well-developed vast literature on bundling to advance selling problems. In particular, we show that advance selling is more profitable than spot selling when consumer valuations across the states are independent or negatively dependent or positively dependent up to a point. We furthermore illustrate the effect of advance selling on the spot prices and consumer welfare: When the firm offers advance selling discounts, sets higher spot prices, so consumers who do not buy in advance are worse off due to the firm offering advance selling discounts. We extend our analysis to the cases of more than two states and competition only in one of the states. We also show how advance selling can be used as an entry deterrence strategy.
    Keywords: Advance selling, bundling, price discrimination
    JEL: L11 D42
    Date: 2013–09–11
  5. By: Fabien Santini (European Commission – JRC - IPTS); Fatmir Guri (European Commission – JRC - IPTS); Sergio Gomez y Paloma (European Commission – JRC - IPTS)
    Abstract: With a view to making the mountain products on the market more clearly identifiable and less misleading for consumers, the EU institutions legislated on a common definition of an optional quality term, 'mountain product', in the labelling of agricultural products. The term 'mountain product' should only be used for products for which the feed and the raw materials come essentially from mountain areas and for which the processing also takes place in mountain areas. The European Commission will adopt implementing acts setting derogations to the general principles of Regulation (EU) No 1151/2012 of the European Parliament and of the Council of 21 November 2012 on quality schemes for agricultural products and foodstuffs in order to take into account the specificities of the different sectors involved. In this context, the present report aims to (i) gather and analyse information on the supply chains for agricultural and food products in mountain areas; (ii) review the possible reasons why citizens, stakeholders and consumers need clarity regarding the provenance of mountain products; and (iii) assess past and present labelling practices for mountain products. Flexibility might be sought in the derogations to the rules governing the term 'mountain product' with regards to the exact place where feed is sourced, to the places where agricultural raw material produced in mountain areas are transformed in further processed goods, to the share of non-mountain ingredients within a mountain processed product that may be considered as acceptable. Means for a proper enforcement of the rules and to ensure coexistence between the new optional quality term 'mountain product' and other existing tools, such as trademarks and geographical indications, should be proposed. In absence of derogations, the applicability the optional quality term 'mountain products' would be impaired.
    Keywords: sustainable agriculture, rural development, CAP, food labelling, quality agricultural products, food supply chain, mountain farming
    JEL: Q13 Q18 R12
    Date: 2013–08

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