nep-mkt New Economics Papers
on Marketing
Issue of 2015‒04‒11
seven papers chosen by
João Carlos Correia Leitão
Universidade da Beira Interior

  1. A Game Theoretic Framework for Competing/Cooperating Retailers under price and advertising dependent demand By Dridi, Dhouha; Ben Youssef, Slim
  2. Health Insurance and Competition in Health Care Markets By Gilad Sorek
  3. Model of building relationships with customers via the use of mobile devices By Agnieszka Bojanowska
  4. The Value of Payment Instruments: Estimating Willingness to Pay and Consumer Surplus By Tai Lam; Crystal Ossolinski
  5. Loss Aversion and the Uniform Pricing Puzzle for Vertically Differentiated Products By Courty, Pascal; Nasiry, Javad
  6. Consumer preference and willingness to pay for fish farmed in treated wastewater in Ghana By Gebrezgabher, Solomie A.; Amewu, Sena; Amoah, Philip
  7. Bundled procurement By Chen, Yongmin; Li, Jianpei

  1. By: Dridi, Dhouha; Ben Youssef, Slim
    Abstract: In this paper, we develop a game theoretic model for cooperative advertising in a supply chain consisting of a monopolistic manufacturer selling its product to the consumer only through competing duopolistic retailers. We consider a new form of the demand function which is an additive form. The demand is influenced by both retail price and advertising expenditures. To identify optimal advertising and pricing decisions, we discuss three possible games (two non cooperative games including Stackelberg-Cournot and Stackelberg-Collusion, and one cooperative game) and then we compare the various decision variables and the profits for all cases and also with similar results of the existing literature to develop some important insights.
    Keywords: game theory, supply chain, pricing, advertising, cooperative advertising, retail competition, retail cooperation, cooperation.
    JEL: C7 M3
    Date: 2015–03–29
  2. By: Gilad Sorek
    Abstract: I study duopolistic market for differentiated medical products. Medical providers decide whether to sell on the spot market to sick consumers or to sell through competitive insurance market to healthy consumers. While shopping for insurance consumers know only the distribution of possible medical needs they may have if they get sick. Only when getting sick their actual medical need reveals and diagnosed. Hence consumers on the insurance market have lower taste differentiation than the sick consumers who are shopping on the spot market. I find that in equilibrium providers sell only on the insurance market, even though this intensifies competition because of lower taste differentiation. Competition between providers under insurance sales brings premiums low enough to motivate consumers buying insurance for both products. Insurance sales generate efficient horizontal product differentiation, lower prices, and efficiently higher quality.
    Keywords: Insurance; Non-linear Pricing; Option Demand; Differentiation
    JEL: I11 I13 L1
    Date: 2015–04
  3. By: Agnieszka Bojanowska (Lublin University of Technology)
    Abstract: In this paper was shown how is possible to build relationship with customers by using mobile devices. There was discussed the various tools and the benefits arising from their use. The author shows examples of the use of mobile devices in building strong and profitable relationships with customers. It was also shown marketing opportunities, that result from the use mobile devices by growing group of customers. This paper is based on practical and theoretical knowledge and experience form Poland and another countries.
    Keywords: customer, customer relationship management, mobile devices, apps, Smartphone
    JEL: M31
    Date: 2015–04
  4. By: Tai Lam (Reserve Bank of Australia); Crystal Ossolinski (Reserve Bank of Australia)
    Abstract: This paper draws on a survey of consumers' willingness to pay surcharges to use debit cards and credit cards, rather than cash. Just as the price a consumer is willing to pay for a good or service is indicative of the value he/she places on that item, the willingness to pay a surcharge to use a payment method reflects that method's value to that customer, relative to any alternatives. We find a wide dispersion in the willingness to pay for the use of cards. Around 60 per cent of consumers are unwilling to pay a 0.1 per cent surcharge, which suggests that for these individuals, the net benefits of cards are very small or that cash is actually preferred. At the other end of the distribution, some individuals (around 5 per cent) are willing to pay more than a 4 per cent surcharge, indicating they place a substantial value on paying using cards. On average, consumers have a higher willingness to pay for the use of credit cards than debit cards. This difference can be viewed as the additional value placed on the non-payment functions – rewards and the interest-free period – of credit cards. We estimate that on average credit card holders place a value of 0.6 basis points on every 1 basis point of effective rewards rebate. Based on the survey data and information on the costs to merchants of accepting payment methods, we can predict the mix of cash, debit card and credit card payments chosen by consumers under different levels of surcharging and explore the implications for the efficiency of the payments system. In particular, the consumer surplus in a scenario where merchants do not surcharge and the costs of all payment methods are built into retail prices can be compared with that where merchants surcharge based on payment costs and retail prices are correspondingly lower. Our findings suggest that cost-based surcharging leads to some consumers switching to less costly payment methods, resulting in greater efficiency of the payment system and an increase in consumer surplus of 13 basis points per transaction.
    Keywords: discrete choice experiment; consumer payment choice; consumer surplus; retail payment systems
    JEL: C83 D12 D61 E42
    Date: 2015–03
  5. By: Courty, Pascal; Nasiry, Javad
    Abstract: The uniform pricing puzzle for vertically differentiated products states that a monopolist sells high and low quality products at the same price despite the fact that quality is perfectly observable and that there are no significant costs of adjusting prices. The puzzle is relevant for movies, books, music, and mobile apps, among others. We show that the puzzle can be resolved by accounting for consumer loss aversion in monetary and consumption utilities and by assuming that consumers face a random utility shock. The novelty of our approach is that the reference transaction is endogenously set as part of a `personal equilibrium' and includes only past purchases of products of the same quality.
    Keywords: expectations-based loss aversion; personal equilibrium; uniform pricing puzzle; vertically differentiated products
    JEL: D03 D21 L1 L2
    Date: 2015–04
  6. By: Gebrezgabher, Solomie A.; Amewu, Sena; Amoah, Philip
    Abstract: The reuse of treated wastewater for aquaculture has been practiced in several countries and has a potential to create a viable fish farming business in low income countries. However, wastewater aquaculture practices which satisfy health and hygiene guidelines and standards will not be viable if consumers are unwilling to purchase fish reared in treated wastewater. In this study we investigate consumers’ preference and willingness to pay for fish farmed in treated wastewater in Ghana. A consumer survey was conducted in Kumasi. We utilize a dichotomous-choice contingent valuation methodology to estimate willingness to pay for fresh Tilapia and smoked Catfish farmed in treated wastewater and analyze factors that affect consumer choice. Consumers in the survey ranked price, size and quality of fish measured by taste and freshness as the most important product attributes influencing their decision prior to purchasing fish. Source of fish is among the least important product attributes influencing consumers’ decision. Results indicate that surveyed consumers generally accept fish reared in treated wastewater if lower prices are offered. Socioeconomic factors such as household income, education and family size significantly determine consumers’ willingness to pay. Furthermore, results indicate that households with children are more likely to pay for smoked Catfish compared to fresh Tilapia indicating that postharvest processing of fish might be perceived as safer and thus increases consumers’ willingness to pay for smoked Catfish. The results of this study provide better understanding of fish consumers’ buying behavior and their perceptions of and attitude towards fish reared in treated wastewater. Moreover, results can contribute to identifying key product attributes that need to be targeted for improvement if sales of fish farmed in treated wastewater is to be achieved.
    Keywords: Wastewater aquaculture, farmed fish, dichotomous choice, willingness to pay, Health Economics and Policy, International Development, Land Economics/Use,
    Date: 2015–07
  7. By: Chen, Yongmin; Li, Jianpei
    Abstract: When procuring multiple products from competing firms, a buyer may choose separate purchase, pure bundling, or mixed bundling. We show that pure bundling will generate higher buyer surplus than both separate purchase and mixed bundling, provided that trade for each good is likely to be efficient. Pure bundling is superior because it intensifies the competition between firms by reducing their cost asymmetry. Mixed bundling is inferior because it allows firms to coordinate to the high prices associated with separate purchase. (Pure) bundling is more likely to be selected as a procurement strategy when: (i) the products' values are higher relative to their possible costs, (ii) costs for different goods are more negatively or less positively dependent, or (iii) the cost distribution of each product is more dispersed.
    Keywords: procurement, bundled procurement, separate purchase, bundling, mixed bundling
    JEL: D21 D44 L24
    Date: 2015–04–02

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