nep-mkt New Economics Papers
on Marketing
Issue of 2014‒07‒21
nine papers chosen by
Joao Carlos Correia Leitao
Universidade da Beira Interior and Universidade de Lisboa

  1. Targeted advertising, platform competition and privacy By Henk Kox; Bas Straathof; Gijsbert Zwart
  2. Do Pharmacists Buy Bayer? Informed Shoppers and the Brand Premium By Bart J. Bronnenberg; Jean-Pierre Dubé; Matthew Gentzkow; Jesse M. Shapiro
  3. Inverted-U aggregate investment curves in a dynamic game of advertising By L. Lambertini; G. Zaccour
  4. Consumers’ Preferences for “Bicycle Poultry” in Benin: Implications for the Design of Breeding Schemes By Epiphane Sodjinou; Arne Henningsen; Delphin O. Koudande; Gauthier Biaou; Guy Apollinaire Mensah
  5. Patent Expiration and Competition: A dynamic limit price model By Anastasios Papanastasiou
  6. U.S. consumer demand for cash in the era of low interest rates and electronic payments By Briglevics, Tamas; Schuh, Scott
  7. Does living close to a vineyard increase the willingness-to-pay for organic and local wine? By Jean-Sauveur Ay; Raja Chakir; Stephan Marette
  8. The role of implicit costs and product quality in determining the customer costs of using personal current accounts By John Ashton; Andros Gregoriou

  1. By: Henk Kox; Bas Straathof; Gijsbert Zwart
    Abstract: Targeted advertising can benefit consumers through lower prices for access to websites. Yet, if consumers dislike that websites collect their personal information, their welfare may go down. We study competition for consumers between websites that can show targeted advertisements. We find that more targeting increases competition and reduces the websites' profits, but yet in equilibrium websites choose maximum targeting as they cannot credibly commit to low targeting. A privacy protection policy can be beneficial for both consumers and websites. If consumers are heterogeneous in their concerns for privacy, a policy that allows choice between two levels of privacy will be better. Optimal privacy protection takes into account that the more intense competition on the high-targeting market segment also benefits consumers on the less competitive segment. Consumer surplus is maximized by allowing them a choice between a high targeting regime and a low targeting regime which affords more privacy.
    JEL: D43 L13 L82 M38
    Date: 2014–07
  2. By: Bart J. Bronnenberg; Jean-Pierre Dubé; Matthew Gentzkow; Jesse M. Shapiro
    Abstract: We estimate the effect of information on consumers' willingness to pay for national brands in physically homogeneous product categories. We measure consumer information using education, occupation, and a survey-based measure of product knowledge. In a detailed case study of headache remedies we find that more informed consumers are less likely to pay extra to buy national brands, with pharmacists choosing them over store brands only 9 percent of the time, compared to 26 percent of the time for the average consumer. In a similar case study of pantry staples such as salt and sugar, we show that chefs devote 12 percentage points less of their purchases to national brands than demographically similar non-chefs. We extend our analysis to cover 50 retail health categories and 241 food and drink categories and use the resulting estimates to fit a stylized model of demand and pricing. The model allows us to quantify the extent to which brand premia result from misinformation, and the way more accurate beliefs would change the division of surplus among manufacturers, retailers, and consumers.
    JEL: D12 D83 L66
    Date: 2014–07
  3. By: L. Lambertini; G. Zaccour
    Abstract: We revisit the relationship between market power and firms' investment incentives in a noncooperative differential oligopoly game in which firms sell differentiated goods and invest in advertising to increase the brand equity of their respective goods. The feedback equilibrium obtains under open-loop rules, and aggregate expenditure on goodwill takes an inverted-U shape under both Cournot and Bertrand behaviour, provided product differentiation is sufficiently high. Total industry expenditure is higher under Cournot competition.
    JEL: C73 L13 M37
    Date: 2014–07
  4. By: Epiphane Sodjinou (Institut National des Recherches Agricoles du Bénin); Arne Henningsen (Department of Food and Resource Economics, University of Copenhagen); Delphin O. Koudande (Institut National des Recherches Agricoles du Bénin); Gauthier Biaou (Faculté des Sciences Agronomiques, Université d’Abomey-Calavi, République du Bénin); Guy Apollinaire Mensah (Institut National des Recherches Agricoles du Bénin)
    Abstract: Village poultry, also termed "bicycle poultry," is produced in scavenging farming systems and is a chewy meat with a low fat content, and constitutes an important source of meat in many African countries. This study investigates consumers’ preferences regarding the physical traits of these birds (notably chickens, ducks and guinea fowl) in the Republic of Benin. For this purpose, we applied the hedonic price method on field data collected from retailers in four urban and five rural markets. We found that meatier drake and meatier guinea fowl with white plumage are preferred by consumers who are willing to pay a premium for these types of birds. The factors which significantly influence the price of chicken are the breed of the bird, the plumage color, the meatiness and the age of the bird. Consumers are willing to pay a price premium for meatier birds of traditional breeds with white plumage color and aged between six and twelve months. Thus, efforts to improve local breeds should stress these preferred traits.
    Keywords: Village poultry, consumer preferences, willingness to pay, breeding traits, the Republic of Benin
    JEL: D12 Q13 Q11
    Date: 2014–06
  5. By: Anastasios Papanastasiou
    Abstract: We develop a dynamic model to explore the optimal pricing strategy of a monopolist that faces potential market entry at a given point in time. By engaging in promotional activities, the dominant firm may increase future demand for the product, while by charging below a limit price it can prevent competition from entering the market. Our analysis suggests that the optimal path for price and advertisement depends on the price elasticity of demand and the duration of monopoly life. Relating our model to the market for pharmaceuticals, we establish conditions that would give rise to a Generics Competition Paradox (GCP) and discuss how these conditions are linked to the existing theories that attempt to explain the GCP.
    Keywords: Monopoly, generic competition, brand-name drugs, limit price, price elasticity of demand
    JEL: D21 D42 I11 L12 C61
    Date: 2014–05
  6. By: Briglevics, Tamas (Federal Reserve Bank of Boston); Schuh, Scott (Federal Reserve Bank of Boston)
    Abstract: U.S. consumers' demand for cash is estimated with new panel micro data for 2008-2010 using econometric methodology similar to Mulligan and Sala-i-Martin (2000); Attanasio, Guiso, and Jappelli (2002); and Lippi and Secchi (2009). We extend the Baumol-Tobin model to allow for credit card payments and revolving debt, as in Sastry (1970). With interest rates near zero, cash demand by consumers using credit cards for convenience (without revolving debt) has the same small, negative, interest elasticity as estimated in earlier periods and with broader money measures. However, cash demand by consumers using credit cards to borrow (with revolving debt) is interest inelastic. These findings may have aggregate implications for the welfare cost of inflation because then nontrivial share of consumers who revolve credit card debt are less likely to switch from cash to credit. In the 21st century, consumers get cash from bank and nonbank sources with heterogeneous transactions costs, so withdrawal location is essential to identify cash demand properly.
    Keywords: cash demand; Baumol-Tobin model; Survey of Consumer Payment Choice; SCPC
    JEL: E41 E42
    Date: 2013–12–01
  7. By: Jean-Sauveur Ay; Raja Chakir; Stephan Marette
    Abstract: This paper investigates how the residents of a French wine-producing region value the attributes of wine. We elicit the willingness-to-pay for organic/non-organic and local/nonlocal wines when providing different informations about the impacts of agricultural practices. Organic and local premiums are estimated using robust M-regressions with clustered standard errors. The analysis shows that there is a significant organic premium associated with local and non-local wines, increasing with information level and decreasing with distance between participants’ dwellings and vineyards. We also ran some policy simulations to compare the welfare effects of regulatory instruments aimed at internalizing the attributes valued by consumers in possession of information.
    Keywords: Organic premium, local premium, experimental economics, wine consumption
    JEL: Q15 C90 R32 L66
    Date: 2014–07–10
  8. By: John Ashton (Bangor University, UK); Andros Gregoriou (Brighton Business School)
    Abstract: This study examines the influence of offering an overdraft facility on the customer costs of using a personal current account (also termed checking accounts). This assessment informs the wider debate as to whether overdraft use is a significant factor in paying for current account use within ‘free banking’ systems. A UK data set of 222 current accounts, recorded monthly between 1995 and 2011 is used in combination with interest rates from 1,200 instant access deposit accounts offered contemporaneously by the same firms. We use a panel framework to undertake the econometric analysis encapsulating contemporaneous correlation amongst UK current accounts. Our results do not support predictions that cross-subsidies flow from overdraft users to other current account customers. Both the quality of current accounts and the implicit costs of current account use arising from low current account deposit interest rates are significant features of pricing within this market and influential in the determination of customer costs. It is proposed that future policy work needs to acknowledge the significant role of product quality and depositor inattention in the customer costs of current account use, as much as concerns with overdraft use.
    Date: 2014–05

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