nep-mkt New Economics Papers
on Marketing
Issue of 2014‒11‒12
four papers chosen by
João Carlos Correia Leitão
Universidade da Beira Interior

  1. Either or Both Competition: A "Two-sided" Theory of Advertising with Overlapping Viewerships By Attila Ambrus; Emilio Calvano; Markus Reisinger
  2. Choosing whether to compete: Price and format competition with consumer confusion By Paolo Crosetto; Alexia Gaudeul
  3. The Economics of Internet Media By Peitz, Martin; Reisinger, Markus
  4. Search Costs, Information Exchange and Sales Concentration in the Digital Music Industry By Nestor Duch-Brown; Bertin Martens

  1. By: Attila Ambrus (Duke University); Emilio Calvano (CSEF, Università di Napoli Federico II); Markus Reisinger (Otto Beisheim School of Management)
    Abstract: In media markets, consumers spread their attention to several outlets, increasingly so as consumption migrates online. The traditional framework for studying competition among media outlets rules out this behavior by assumption. We propose a new model that allows consumers to choose multiple outlets and use it to study the effect of strategic interaction on advertising levels, and the impact of entry and mergers. We show that novel forces come into play, which reflect the outlets' incentives to control the composition of the customer base in addition to its size. We link consumer preferences and advertising technologies to market outcomes. The model can explain a number of empirical regularities that are difficult to reconcile with existing models.
    Keywords: Media Competition, Two-Sided Markets, Multi-Homing, Viewer Composition, Viewer, Preference Correlation
    JEL: D43 L13 L82 M37
    Date: 2014–10–18
  2. By: Paolo Crosetto (GAEL, Universite de Grenoble); Alexia Gaudeul (DFG RTG 1411, EIC, Friedrich-Schiller-Universität Jena)
    Abstract: We run a market experiment where firms can choose not only their price but also whether to present comparable offers. They are faced with artificial demand from consumers who make mistakes when assessing the net value of products on the market. If some offers are comparable however, some consumers favor the best of the comparable offers vs. non-comparable offers. We vary the number of such consumers as well as the strength of their preferences for the best of the comparable offers. In treatments where firms observe the past decisions of their competitors, firms learn not to present comparable offers especially when many consumers prefer comparable offers. This occurs after initial periods with strong competition and leads to lower welfare for all consumers. In treatments where firms cannot monitor the competition, firms end up having to present comparable offers, which leads to an improvement in welfare for all consumers.
    Keywords: asymmetric dominance, attraction effect, collusion, competition, confusopoly, experiment, framing, industrial organization, obfuscation, oligopoly, price comparison, shrouding, spurious complexity, standardization, transparency
    JEL: C92 D18 D43 L13 L15
    Date: 2014–11–04
  3. By: Peitz, Martin; Reisinger, Markus
    Abstract: We survey the economics literature on media as it applies to the Internet. The Internet is an important driver behind media convergence and connects information and communication technologies. While new Internet media share some properties with traditional media, several novel features have appeared: On the content side, aggregation by third parties that have no editorial policy and user-generated content have become increasingly important. On the advertiser side, fine-tuned tailoring and targeting of ads based on individual user characteristics are common features on many Internet media and social networks. On the user side, we observe increased possibilities of time-shifting, multi-homing, and active search. These changes have gone hand-in-hand with new players entering media markets, including search engines and Internet service providers. Some of these players face novel strategic considerations, such as how to present search results. In response to these changes, an emerging economics literature focuses on the allocative and welfare implications of this new media landscape. This paper is an attempt to organize these contributions and provide a selective account of novel economic mechanisms that shape market outcomes of Internet media. A large body of work has focused on the advertising part of the industry, while some studies also look at content provision and the interaction between the two.
    Keywords: Internet , media economics , digital media , targeting , news aggregation , search advertising , display advertising , two-sided markets
    JEL: L82 L86 M37 L13 D21 D22
    Date: 2014
  4. By: Nestor Duch-Brown (European Commission - JRC - IPTS); Bertin Martens (European Commission - JRC - IPTS)
    Abstract: It is often assumed that consumers benefit from the internet because it offers a “long tail” with more variety of products to choose from. However, search costs may block the long tail effect and result in the dominance of superstars. This paper examines the variety hypothesis in the entire online market for digital music downloads in 17 countries over the period 2006-2011. First, we show that the entire distribution of legal music downloads is heavily skewed. Second, we hypothesise that a wide range of online information channels (sales and discovery platforms) play a role in this market. We find that the reduction of search costs implied by the generalisation of online information tools transforms demand as a result of changes in the dispersion of preferences. Ubiquitous and very popular discovery channels such as Facebook and iTunes tend to push consumers towards the superstars by shifting the demand curve but also towards the long-tail since they also generate rotations that promote niches. Conssequently, both the superstar and the long tail effects emerge even in mature digital markets.
    Keywords: digital markets, search costs, information, sales concentration, online markets
    JEL: C46 D12 L82
    Date: 2014–11

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