nep-mkt New Economics Papers
on Marketing
Issue of 2014‒01‒24
eight papers chosen by
Joao Carlos Correia Leitao
Universidade da Beira Interior and Universidade de Lisboa

  1. The Recommendation Effect in the Hotelling Game - A New Result for an Old Model By Maximilian Conze; Michael Kramm
  2. Why Branded Firm may Benefit from Counterfeit Competition By Ding, Yucheng
  3. IKEA's International Expansion By Harapiak, Clayton
  4. Pharmaceutical regulation and health policy objectives By Birg, Laura
  5. From corporate market research to bank profit maximization By Albina N. Rasskazova
  6. Strategic timing of entry: Evidence from video games By Engelstätter, Benjamin; Ward, Michael R.
  7. Price framing By Huck, Steffen; Schmid, Julia; Wallace, Brian
  8. Born Global's Use Of Innovative Solutions To Create Sustainable Competitive Advantages As It Expands And Grows In Different International Markets Svante Andersson By Svante Andersson; Gabriel Awuah; Ingemar Wictor

  1. By: Maximilian Conze; Michael Kramm
    Abstract: Hotelling’s famous "Principle of Minimum Differentiation" suggests that two firms engaging in spatial competition will decide to locate at the same place. Interpreting spatial competition as modeling product differentiation, firms will thus offer products that are not differentiated and equally share the market demand. We extend (a fixed price version of) Hotelling’s model by introducing sequential consumer purchases and a second dimension of variation of the goods, quality. Consumers have differential information about the qualities of the goods and uninformed consumers observe the decision of their predecessors. With this extension a rationale for differentiating products emerges: Differentiation makes later consumers’ inference from earlier consumers’ purchases more informative, so that firms are confronted with two offsetting effects. On the one hand, differentiating one’s product decreases the likelihood that it is bought in earlier periods, but on the other hand, by making inference more valuable, it increases the likelihood that later consumers buy the differentiated good. We show that the second effect, the recommendation effect, can dominate, leading to an equilibrium with differentiated products. Our model thus introduces an aspect similar to the herding literature in that consumers might base their decisions on observable actions of others and thus potentially on "wrong" decisions.
    Keywords: Hotelling; herding; principle of minimum differentiation; consumer learning
    JEL: L13 L15 D83
    Date: 2013–12
  2. By: Ding, Yucheng
    Abstract: A durable good monopolist sells its branded product over two periods. In period 2, when there is entry of a counterfeiter, the branded firm may charge a high price to signal its quality. Counterfeit competition thus enables the branded firm to commit to high future price in period 2, alleviating the classic time-inconsistency problem under durable good monopoly. This can increase the branded firm's profit by encouraging consumer purchase without delay, despite the revenue loss to the counterfeiter. Total welfare can also increase, because early purchase eliminates delay cost and consumers enjoy the good for both periods.
    Keywords: Counterfeits, Coase Conjecture, Quality Signaling
    JEL: D82 L11 L13
    Date: 2014–01–10
  3. By: Harapiak, Clayton
    Abstract: This case concerns a global retailing firm that is dealing with strategic management and marketing issues. Applying a scenario of international expansion, this case provides a thorough analysis of the current business environment for IKEA. Utilizing a variety of methods (e.g. SWOT, PESTLE, McKinsey Matrix) the overall objective is to provide students with the opportunity to apply their research skills and knowledge regarding a highly competitive industry to develop strategic marketing strategies. The case is oriented towards upper-level undergraduate or MBA marketing students and can be taught within a one to two-hour class with several hours of outside student preparation.
    Keywords: IKEA, Home Furnishings Industry, International Expansion
    JEL: M10
    Date: 2013–12–01
  4. By: Birg, Laura
    Abstract: This paper analyzes a maximum price system and a reference price system in a vertical differentiation model with a brand-name drug and a generic. In particular, both instruments are compared with respect to their performance in reducing public expenditure, limiting financial exposure of patients, improving access to pharmaceuticals, and stimulating competition. For identical regulatory prices, free pricing under the reference system tends to result in a higher price for the brand-name drug. For identical price reductions of the brand-name drug, the lower reimbursement amount under the reference price system results in lower health expenditure, but higher financial exposure of patients. Total welfare is higher under the maximum price system. --
    Keywords: pharmaceutical regulation,reference price,maximum price,price cap,health,policy objectives
    JEL: I18 L50 H51
    Date: 2013
  5. By: Albina N. Rasskazova (National Research University Higher School of Economics)
    Abstract: The purpose of this article is to study the target segment of the corporate bank market in order to reveal the demand for financial products and to incorporate this demand into solving the problem of bank profit maximization. Instrumental guidelines for conducting market research that allow to study the aspects of the problem specifically dealing with the efficiency of a bank’s cooperation with corporate customers has been developed as a technique for studying target corporate market customers. A target retail trade market sector and a client base of corporate customers including 430 trade network operators functioning in the northwest region of Russia were chosen as objects of research. The article defines the retail market demand potential for bank products, analyses the prospective viability of providing additional bank products to retail market customers, and identifies the corporate customer’s informational portrait. On the basis of obtained results, the problem of maximizing the bank’s extra profit from serving trade network operators. The research is confined to the client base of one major Russian bank operating in the northwest region of Russia; it will be useful to adapt the material of this article to studying target sectorial markets nationwide. The results of market research were used to assess the economic potential (estimated optimal profit) of the commercial bank’s cooperation with trade network operators. This article constitutes the groundwork for organizing effective bank marketing that guarantees a congruity of the bank’s resources and capabilities with the demands and requirements of the market in which it operates.
    Keywords: customer orientation, effectiveness, financial services, market research, bank marketing, process planning
    JEL: M31
    Date: 2014
  6. By: Engelstätter, Benjamin; Ward, Michael R.
    Abstract: This paper investigates how video game publishers' choice of game release date is affected by the expected level of competition within the game's product niche. We identify game niches by genre, age-appropriateness, a four week window cohort, publisher and console system. Our analysis is based on two different video game data sets, one based on industry sales data and the other featuring extensive consumer usage information. We show that consumer substitution across games is stronger within most of the dimensions describing product niches. Sales volumes decay quickly after the opening weekend, so at any point in time, a niche willtypically be served by few current titles. Thus, publishers have incentives to avoid releasing during periods of fierce intra-niche competition. We show that games are more likely to be released so as to avoid weeks when their niche is relatively well served. --
    Keywords: Product Entry,Non-Price Competition,Niche,Strategy,Submarkets,Entertainment Goods,Video Games
    JEL: D43 L13 L96
    Date: 2013
  7. By: Huck, Steffen; Schmid, Julia; Wallace, Brian
    Abstract: We present a laboratory experiment on the impact of price framing on consumer decision making. Consumer subjects face a search market where two sellers offer a homogenous good. We examine six different price frames with linear per-unit pricing (that is displayed as such) serving as a benchmark. We find that all frames deviating from the benchmark have some negative impact on consumer decision making. The most striking result concerns drip pricing (where prices are decomposed into three elements and dripped in during the purchasing process). While leaving the actual decision problem unchanged, drip pricing wipes out 25% of consumer surplus. -- Anhand eines Laborexperiments überprüfen wir den Einfluss verschiedener 'price frames' auf das Entscheidungsverhalten von Konsumenten. Die Konsumenten entscheiden über den Kauf von gleichartigen Gütern, die von zwei Verkäufern auf einem Suchmarkt angeboten werden. Es werden sechs verschiedene Arten, die Preise der Güter zu präsentieren, untersucht, wobei der lineare Stückpreis als Benchmark dient. Es zeigt sich, dass alle Preisrahmungen, die von dem Benchmark abweichen, einen negativen Einfluss auf das Entscheidungsverhalten haben. Das augenfälligste Resultat ist der Effekt des sogenannten drip pricing. Hier ist der Endpreis in drei Bestandteile geteilt, die während des Kaufprozesses nach und nach offenbart werden. Obwohl das eigentliche Entscheidungsproblem unverändert bleibt, sinkt die Konsumentenrente unter 'drip pricing' um 25%.
    JEL: C72 C92 D21 D43
    Date: 2013
  8. By: Svante Andersson (Halmstad University); Gabriel Awuah (Halmstad University); Ingemar Wictor (Halmstad University)
    Date: 2014–01

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