nep-mkt New Economics Papers
on Marketing
Issue of 2015‒03‒22
sixteen papers chosen by
João Carlos Correia Leitão
Universidade da Beira Interior

  1. Local advertising externalities and cooperation in one manufacturer-two retailers channel By Dridi, Dhouha; Ben Youssef, Slim
  2. Consumer Search and Prices in the Automobile Market By Moraga-González, José-Luis; Sándor, Zsolt; Wildenbeest, Matthijs
  3. Information and Online Reviews By O. Loginova; A. Mantovani
  4. Behaviour Based Price Discrimination with Cross-Group Externalities By Elias Carroni
  5. The Coexistence of PDO and Brand Labels: The Case of the Ready-sliced Parma Ham By Arfini, Filippo; Pazzona, Marina
  6. Consumer Attitudes, Knowledge and Behavior in the Russian Market of Food By Meixner, Oliver; Haas, Rainer; Perevoshchikova, Yana; Canavari, Maurizio
  7. Sustainability as Sales Argument in the Fruit Juice Industry? An Analysis of On-Product Communication By Klink, Jeanette; Hecht, Stefanie; Langen, Nina; Hartmann, Monika
  8. Online Shopping and Platform Design with Ex Ante Registration Requirements By Florian Morath; Johannes Münster
  9. Can a Platform Make Profit with Consumers' Mobility? A Two-Sided Monopoly Model with Random Endogenous Side-Switching By Pierre ANDREOLETTI; Pierre GAZE; Maxime MENUET
  10. Local advertising externalities and cooperation in one manufacturer-two retailers channel with exogenous marginal profits By Dridi, Dhouha; Ben Youssef, Slim
  11. Does Consumer Time Preference Affect Label Use? By Cavaliere, Alessia; De Marchi, Elisa; Banterle, Alessandro
  12. Responsible Business and Sustainable Food – A Regional and International Network Model with Linkage between Science and Business By Terlau, Wiltrud; Hirsch, Darya
  13. Design Thinking and Food Innovation By Olsen, Nina Veflen
  14. Can Differentiated Production Planning and Control enable both Responsiveness and Efficiency in Food Production? By Romsdal, Anita; Strandhagen, Jan Ola; Dreyer, Heidi Carin
  15. Is zero the best price? Optimal pricing of mobile applications By Buck, Christoph; Graf, Julia
  16. Advertising and Aggregate Consumption: A Bayesian DSGE Assessment By Benedetto Molinari; Francesco Turino

  1. By: Dridi, Dhouha; Ben Youssef, Slim
    Abstract: In this paper, we consider a static model for advertising strategies and pricing decisions in supply chain with one monopolistic manufacturer and two duopolistic retailers. We assume an additive form of the consumer demand which is influenced by retail price and advertising. The manufacturer sets the wholesale price, invests in advertising (at national level) and offers cooperative advertising to boost the advertising expenditures of their retailers. The retailers set the retail price and invest in advertising (at local level). By means of game theory, we discuss three different relationships between the supply chain members: two non cooperative games including the Stackelberg – Cournot and the Stackelberg – Collusion and one cooperative game. The comparison between the three models reveals that the advertising, the pricing, the consumer demand and the profits are affected by various relationships. Furthermore, under the cooperation situation, we propose a channel coordination mechanism through a manufacturer’s participation rate in retailers’ local advertising cost and wholesale price by using utility function.
    Keywords: Game theory, supply chain, cooperative advertising, pricing, retail competition, retail coalition, coordination mechanism.
    JEL: C7 D6 M3
    Date: 2015–03–08
  2. By: Moraga-González, José-Luis; Sándor, Zsolt; Wildenbeest, Matthijs
    Abstract: In many markets consumers have imperfect information about the utility they derive from the products that are on offer and need to visit stores to find the product that is the most preferred. This paper develops a discrete-choice model of demand with optimal consumer search. Consumers first choose which products to search; then, once they learn the utility they get from the searched products, they choose which product to buy, if any. The set of products searched is endogenous and consumer specific. Therefore imperfect substitutability across products does not only arise from variation in their characteristics but also from variation in the costs of searching them. We apply the model to the automobile industry. Our search cost estimate is highly significant and indicates that consumers conduct a limited amount of search. Estimates of own- and cross-price elasticities are lower and markups are higher than if we assume consumers have full information.
    Keywords: automobiles; consumer search; demand and supply; differentiated products
    JEL: C14 D83 L13
    Date: 2015–03
  3. By: O. Loginova; A. Mantovani
    Abstract: Online review aggregators, such as TripAdvisor, HotelClub and OpenTable help consumers identify the products and services that best match their preferences. The goal of this study is to understand the impact of online review aggregators on firms and consumers. We adopt Salop’s circular city model in which consumers initially do not know the locations of the firms in the product space. The firms decide whether or not to be listed on an online review aggregator’s website and choose their prices. When a firm resorts to the aggregator, its location and price become observable to the consumers who visit the website. We consider two different scenarios, depending on the possibility for online firms to offer discounts to the consumers who book online. We show that in equilibrium not all firms will go online – some will remain offline. Online firms attract more customers than their offline counterparts due to reduced mismatch costs, but face a tougher price competition. Comparing the equilibrium prices, profits and the number of firms that go online across the scenarios, we derive interesting conclusions from the private and the social standpoints.
    JEL: C72 D43 D61 L11 L13 M31
    Date: 2015–03
  4. By: Elias Carroni (CERPE, University of Namur)
    Abstract: This article studies the effects of Behaviour-Based Price Discrimination (BBPD) in a horizontally and vertically differentiated duopoly. In a two-period model, firms are allowed to condition their pricing policies on the past purchase behaviour of consumers. The paper shows two different types of equilibria depending on the strength of vertical differentiation. If the difference in quality is small enough, both firms steal each other’s con- sumers and suffer a situation in which prices and profits are lower and the consumer surplus increases. When quality differentials are instead substantial, asymmetric behaviours arise: the high-quality firm sells its product to few consumers at a high price in the first period and then becomes aggressive in the second one. As a consequence, customers only move from the low-quality to the high-quality firm. If consumers are myopic, the ODS scenario is detrimental for them and beneficial for firms in relation to uniform pricing. If instead consumers are forward-looking, they and the low-quality firm are better off and the high-quality firm is worse off when BBPD is viable.
    Keywords: Competitive BBPD, Vertical Differentiation, Switching
    JEL: L1 D4
    Date: 2015–01
  5. By: Arfini, Filippo; Pazzona, Marina
    Abstract: The general purpose of the paper is to investigate consumer's attitude towards high quality agri-food products. The research analyses PDO labelled products packaged by law in the production area. Within the same area, the Producers' Group imposes the use of the Consortium label as a quality sign. As consequence, collective labels as well are find on a product packaging, by virtue of the fact that not only they graphically and symbolically represent quality, but they also inform customers about the properties of a specific PDO good. Moreover, on the same package other labels (industrial and private ones) are displayed on the same package. At this purpose, the research analysis of the customers' perception of such particular labels combination focusing the case of the ready-sliced Parma ham. The analysis gives the opportunity of evaluating, from an economic perspective, aspects related to the use of multi-labelling strategy.
    Keywords: PDO, labels, consumer willingness to pay, Quality perception, Agribusiness, Food Consumption/Nutrition/Food Safety, Food Security and Poverty,
    Date: 2014–10
  6. By: Meixner, Oliver; Haas, Rainer; Perevoshchikova, Yana; Canavari, Maurizio
    Abstract: In the last decades the market for organic food was well developed in Western European Countries and com-parable markets like the US or Canada. While these markets more or less approach market saturation, other markets still have huge potentials and are of special interest for exporting companies. In this paper we analyze demands, knowledge and expectations in the emerging market Russia. It is well documented that the Russian market for organic food has much higher growth rates compared to Western markets. According to the USDA, the market rose from about 640 million Rubel in 2004 to about 7.4 billion Rubel in 2011 (about 155 Mio €). This dramatic boost in sales might also be due to a significant change in Russians’ consumer behavior. Howev-er, some challenges have to be considered when entering the Russian market with premium products (organic food is usually sold at comparable high prices in Russia). (1) There is a huge number of low-income consumers who are not able to pay for premium products. (2) Up to now, there are no official organic labels available in Russia. Therefore, it is likely that the Russian population has a lack of knowledge on what organic food is and which requirements are connected to the organic production process. Considering these restrictions, it was interesting to analyze important factors for the food choice on the one hand and the knowledge of Russian consumers about organic food on the other. This contribution will present results for one specific product (organic potatoes) which can be considered to be a typical alternative to low priced, conventional products. A conjoint analysis was conducted in Saint Petersburg investigating the importance of buying attributes con-nected to organic potatoes (n = 300); obviously, the results are not representative for the whole Russian mar-ket. But the results impressively show how different consumers’ attitudes are compared to Western markets and how low the average knowledge about this product category still is. The findings deliver valuable infor-mation for all members within the supply chain who want to enter a market with high growth rates but also with obvious shortcomings.
    Keywords: Russian Federation, organic food, organic labels, food choice, consumer perception, conjoint analy-sis, Agribusiness, Food Consumption/Nutrition/Food Safety,
    Date: 2014–10
  7. By: Klink, Jeanette; Hecht, Stefanie; Langen, Nina; Hartmann, Monika
    Abstract: Purpose/Value – The objective of this paper is to determine (1) the extent to which sustainability serves as a sales argument and (2) which areas of sustainability are communicated in the fruit juice industry. This seems promising against the background that there are several ethical challenges the fruit juice chain is increasingly confronted with and consumers demand for sustainable products is also rising. Design/Methodology – A market investigation at the Point-of Sale (POS) was conducted in July 2013. On-product communication of all fruit juice products (direct fruit juices, fruit juices from concentrate, fruit nectars and smoothies) from five retailers (two full-range retailers, two discounters, one organic store) was analyzed. The data was evaluated using content analysis. Results/Findings – Overall, 562 fruit juices were examined. Results reveal that nearly one quarter of the prod-ucts has labels signaling sustainable aspects. However, most of those products were found in the organic food retailer and are organic juices. Only a small number of products consider other areas of sustainability, such as social concerns or regional production. Discussion/Conclusion – Communicating sustainability aspects of fruit juice production via on-package labels is scarce in conventional retail stores. In view of the ethical challenges present in the fruit juice chain and dis-cussed in the paper, the increasing demand of consumers for sustainable products and the high competition in the sector, communicating different sustainability aspects can be an opportunity for fruit juice producers and retailers to differentiate their products on the highly saturated fruit juice market.
    Keywords: Sustainability, Content analysis, On-product-communication, Fruit juice industry, Agribusiness, Consumer/Household Economics, Food Consumption/Nutrition/Food Safety,
    Date: 2014–10
  8. By: Florian Morath; Johannes Münster
    Abstract: We study platform design in online markets in which buying involves a (non-monetary) cost for consumers caused by privacy and security concerns. Firms decide whether to require registration at their website before consumers learn the price and all relevant product information. We show that a monopoly seller requires ex ante registration in equilibrium if and only if the consumersÂ’registration cost is sufficiently low. This result extends to the case of price competition. We also show that discounts (store credit) can increase the share of consumers who register and hence a firm's profit even though discounts affect the equilibrium price.
    Keywords: E-commerce, Privacy concerns, Security concerns, Registration cost, Platform design, Price competition, Information
    JEL: D42 D43 D82 D83 L81
    Date: 2014–12
  9. By: Pierre ANDREOLETTI; Pierre GAZE; Maxime MENUET
    Date: 2015
  10. By: Dridi, Dhouha; Ben Youssef, Slim
    Abstract: Game theory is a relevant and powerful tool for analyzing strategic interactions in a supply chain in which the decision of each player affect the payoff of other players. In order to relax the classical two supply chain members’ situation to a three supply chain members’ situation and to integrate the problem of competition at retail level, we consider a supply chain consisting of a monopolistic manufacturer and two duopolistic retailers. The latter two are geographically related. Our paper examines the optimal decisions on advertising (local, national and cooperative advertising) in a centralized and a decentralized supply chain using Stackelberg – Cournot game, Stackelberg - Collusion game and Cooperative games, and we investigate the impact of the existing of competition at retail level, the retailer coalition and the cooperation between all supply chain members’ on the channel members’ optimal decisions, on the sales volume and on the profits. Applying the equilibrium analysis and using numerical example, comparing results indicates that all advertising, the sales volume of each member and the total profit in the centralized decision-making are larger than those in the decentralized decision-making. Retailer coalition harms themselves (in terms of profit) despite the increasing of sales, but is beneficial to the manufacturer. We identify also the feasible solutions of the best cooperative advertising scheme that members are interesting in cooperation.
    Keywords: Game theory; Cooperative advertising; Supply chain coordination; Retail competition, retail coalition
    JEL: C7 M3
    Date: 2015–03–08
  11. By: Cavaliere, Alessia; De Marchi, Elisa; Banterle, Alessandro
    Abstract: Diet-related chronic diseases, such as overweight and obesity, are worrisome not only from a medical point of view, but also in terms of monetary expenditures, these health problems are strictly linked to sizeable sanitary costs (Chou et al., 2004; Yaniv et al., 2009; Cawley and Meyerhoefer, 2012; Ruhm, 2012). These costs are mainly due to the purchase of medical care (direct costs), and to the loss of productivity caused by hill-health (indirect costs) (Rosin, 2008). To challenge these problems and improve public health it is of particular importance to study the determinants of food consumption, and understand the best way to effectively address consumers toward healthy eating. To this purpose, one of the most investigated topics in the last decades has been the role of food-related information. Economists have found evidences that food information can exert a positive effect in increasing consumer nutrition knowledge and in promoting healthier consumption. Hence, policy makers have proposed different policy interventions to provide consumers with more, and more detailed, information. These information measures have included the diffusion of dietary guidelines, the promotion of nutritional education programs in the schools, and also specific campaigns to increase public awareness concerning fruit and vegetables consumption or the negative effects of some unhealthy food and drinks. In this context, another and maybe more direct way to provide consumers with food-related information is represented by on-package food labels, which currently constitute the principal tool through which consumers can easily acquire information about food products. The key role of food labels in making individuals able to do more conscious diet choices has been well established by the main findings of the economic literature (Drichoutis et al., 2006; Drichoutis et al., 2008a; Drichoutis et al., 2009; Norgaard and Brunso 2009; Barreiro-Hurlè et al., 2010). Therefore, given the importance of on-packaging information, the EU has recently introduced the EU Regulation No. 1169/2011, published in October 2011, in order to make labels even more effective and boost their utility for consumers. This new low has established some rules concerning mandatory information, nutritional facts and also the graphical standards allowed on food labels in all the EU. Nonetheless, consumers are not always willing to make use of the information reported on labels, and this makes of crucial importance to investigate and understand which factors can be able to discourage consumers in using labels.
    Keywords: Agribusiness, Food Consumption/Nutrition/Food Safety,
    Date: 2014–10
  12. By: Terlau, Wiltrud; Hirsch, Darya
    Abstract: Sustainability is a key issue in current research activities and programs. In this conjunction three major functions of research have been identified: Basic research, knowledge reservoirs, and knowledge transfer. With regard to a transmission to the private sector, knowledge transfer is the most important factor. In this process, universities of applied sciences can play an important part as they typically have a long-standing experience in linking science and business in their teaching and research. Another important agent in the process of knowledge transfer are networks and clusters. Their strength lies integrating the different competencies of its partners and using them to a mutual benefit. The International Centre for Sustainable Development (IZNE) – with a major focus on responsible business and sustainable food – takes the advantage of being part of a University of Applied Sciences (Bonn-Rhein-Sieg, BRSU), and being a member of several regional and international clusters and networks. These co-operations aim to establish and strengthen linkages between science and business, in particular by investigating research needs for business and business relevant research activities. Moreover, IZNE established and expanded regional and international co-operations of its own to get more transparency about regional and international value-added chains in the food sector and the issue of responsible business.
    Keywords: Applied and Practice-Oriented Research, Business Sector, Value-Added Chain, Sustainability, Food Safety and Security, Food Process Quality, Spatial Proximity, Agribusiness,
    Date: 2014–10
  13. By: Olsen, Nina Veflen
    Abstract: This paper presents a new approach for food innovation—a Design Thinking approach that challenges the strong product orientation that still exists in the food industry. Consumer researchers widely believe that innovation in the food sector can be much more user oriented. Fork to Farm projects try to maximize value creation for the end user, but; unfortunately; many of these projects appeals to an undifferentiated mass market. The food industry needs to understand individual consumers and the context in which they live to be able to deliver successful new food solutions. The aim of this paper is to discuss and exemplify how Design Thinking can contribute to innovation in the food industry. After introducing the Design Thinking approach and describing an innovation project conducted within the seafood industry in Norway, four specific aspects of Design Thinking: a) Begin at the beginning, b) Take a human-centered approach, c) Try early and often, and d) Seek outside help, are discussed in more detail. I conclude that Design Thinking is a faster and cheaper way to include the voice of the consumer into the process —a learning approach that needs to be further discussed, improved and tested out within the food domain.
    Keywords: Agribusiness, Food Consumption/Nutrition/Food Safety,
    Date: 2014–10
  14. By: Romsdal, Anita; Strandhagen, Jan Ola; Dreyer, Heidi Carin
    Abstract: This paper addresses the complex production planning and control (PPC) challenges in food supply chains. The study illustrates how food producers' traditional make-to-stock (MTS) approach is not well suited to meet the trends of increasing product variety, higher demand uncertainty, increasing sales of fresh food products and more demanding customers. The paper proposes a framework for differentiated PPC that combines MTS with make-to-order (MTO). The framework matches products with the most appropriate PPC approaches and buffering techniques depending on market and product characteristics. The core idea is to achieve more volume flexibility in the production system by exploiting favourable product and market characteristics (high demand predictability, long customer order lead time allowances and low product perishability). A case study is used to demonstrate how the framework can enable food producers to achieve efficiency in production, inventory and PPC processes – and simultaneously be responsive to market requirements.
    Keywords: food production, planning and control, responsiveness, case study, Agribusiness, Production Economics,
    Date: 2014–10
  15. By: Buck, Christoph; Graf, Julia
    Abstract: [Introduction ...] This leads us to our major research question: How to optimally set prices of mobile applications depending on their utility-classification? Each of the following chapters sequentially contributes to the answer of this question. Chapter 2 focuses on the managerial relevance of pricing and the specific characteristics of mobile applications. In chapter 3, we develop a model for mobile application pricing and derive advises for profit-maximizing mobile application pricing. The article closes with a discussion and conclusion in chapter 4.
    Keywords: Optimal Pricing,Mobile Applications,Apps,Price
    Date: 2015
  16. By: Benedetto Molinari (Universidad Pablo de Olavide); Francesco Turino (Universitat d'Alacant)
    Abstract: Aggregate data reveal that advertising in the U.S. absorbs approximately 2% of GDP and has a well defined pattern over the business cycle, being strongly procyclical and highly volatile. Because the purpose of brand advertising is to foster sales, we ask whether such spending has an appreciable effect on the pattern of aggregate consumption and, through this avenue, on economic activity. This question is addressed by developing a dynamic general equilibrium model in which households' preferences for differentiated goods depend on the intensity of brand advertising, which is endogenously determined by profit-maximizing firms. Once the model is estimated to match the U.S. economy, it argues that the presence of advertising in the long run raises aggregate consumption and hours worked, eventually fostering economic activity. We also find that advertising has a relevant impact on fluctuations in consumption, investment and markup over the business cycle. All of the abovementioned effects are proven to epend crucially on the degree of competitiveness of advertising at the firm level.
    Keywords: Residual Wage Inequality, Wage Polarization, Price and Composition Effects, Routinization hypothesis, Skill Biased Technical Change, Occupational Tasks, Job Polarization.
    JEL: E32 D11 J22 M37
    Date: 2015–03

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