nep-mkt New Economics Papers
on Marketing
Issue of 2015‒06‒13
sixteen papers chosen by
João Carlos Correia Leitão
Universidade da Beira Interior

  1. You Are What You Consume By Ahmed, Jubayer
  2. Behavioral Consumers in Industrial Organization By Michael D. Grubb
  3. Informative Advertising with Discretionary Search By Gardete, Pedro M.; Guo, Liang
  4. Реклама в мобильных приложениях By Sobolevsky, Alexandr
  5. Failing to Choose the Best Price: Theory, Evidence, and Policy By Michael D. Grubb
  6. The Effects of Publicity on Demand: The Case of Anti-cholesterol Drugs By Andrew Ching; Robert Clark; Ignatius Horstmann; Hyunwoo Lim
  7. The determinants of equity transmission between the new and used car markets: A hedonic analysis By Kihm, Alex; Vance, Colin
  8. Décomposition et analyse d’un flux de savoir : le cas du savoir transmis par les prestataires aux managers marketing lors de leurs interactions de travail By Moraux, Hélène; Volle, Pierre
  9. The influence of market transparency and price confidence on price fairness By Sandra Rothenberger; Kurt KM Matzler
  10. VCG Payments for Portfolio Allocations in Online Advertising By James Li; Eric Bax; Nilanjan Roy; Andrea Leistra
  11. How do consumers choose health insurance? An experiment on heterogeneity in attribute tastes and risk preferences By Kairies-Schwarz, Nadja; Kokot, Johanna; Vomhof, Markus; Wessling, Jens
  12. Should Brand Firms Always Take Pioneering Position? By Cong Pan
  13. Prices, Profits, and Preference Dependence By Chen, Yongmin; Riordan, Michael
  14. Overconfident Consumers in the Marketplace By Michael D. Grubb
  15. Beyond a neoclassical consumer analysis in food choices By Gervasio Antonelli; Gian Italo Bischi; Fabio Tramontana; Elena Viganò
  16. Portfolio Allocation for Sellers in Online Advertising By Ragavendran Gopalakrishnan; Eric Bax; Krishna Prasad Chitrapura; Sachin Garg

  1. By: Ahmed, Jubayer
    Abstract: The main objective of this study is to analyze the impact of individual’s self-concept in consumption pattern. Consumers intentionally or unintentionally consume different products and services during their lifetime and their consumption pattern or preferences are closely associated with their sense of self. Similarly, consumers tend to avoid commodities or services that contradict with their self-image. A number of empirical studies have been analyzed further to investigate the influence of self- concept on brand or product selection.
    Keywords: Consumer, Brand, Product, Self-concept and image
    JEL: M31 M37
    Date: 2015–05
  2. By: Michael D. Grubb (Boston College)
    Abstract: This paper succinctly overviews three primary branches of the industrial organization literature with behavioral consumers. The literature is organized according to whether consumers: (1) have non-standard preferences, (2) are overconfident or otherwise biased such that they systematically misweight different dimensions of price and other product attributes, or (3) fail to choose the best price due to suboptimal search, confusion comparing prices, or excessive inertia. The importance of consumer heterogeneity and equilibrium effects are also highlighted along with recent empirical work.
    Keywords: behavioral industrial organization; bounded rationality; loss aversion; present bias; overconfidence; search; obfuscation; switching; inertia
    JEL: D41 D42 D43 D81 D82 D83 L11 L12 L13 L15
    Date: 2015–05–12
  3. By: Gardete, Pedro M. (Stanford University); Guo, Liang (Chinese University of Hong Kong)
    Abstract: We consider a model of strategic information transmission where a firm can communicate its quality to consumers through informative advertising. Our main result is that informative advertising claims can be credible even when the firm faces consumers with exante homogeneous preferences. A fundamental assumption of our model is that whether the product is available for purchase is independent of consumers' information acquisition efforts (i.e., search is discretionary). This assumption, in conjunction with the pricing problem of the firm, provides incentives for truth-telling. When quality is common knowledge, increases in quality lead to a higher market price. However, firm profit and consumer welfare are non-monotonic in product quality. The firm may be worse off with a better product because of increased consumer search and resulting preference heterogeneity. Consumers may also become worse off with a higher quality product when the option value of searching is low because in this case the firm raises price quickly in order to target consumers who do not search. Finally, when product quality is unknown but credible information is available, consumers become worse off with the probability of facing a high type firm because this firm is able to extract value from trade most effectively.
    Date: 2015–01
  4. By: Sobolevsky, Alexandr
    Abstract: The article analyzes the new method of mobile advertising. Advertising in mobile applications - a subspecies of mobile marketing, where advertising is distributed using mobile phones and smartphones. Ad placement is going on inside of applications and games for smartphones. It has a high potential due to the large number of mobile phone users (over 6.5 billion in 2013).
    Keywords: mobile applications, advertising, banner, smartphone users, advertisers, audience, developer.
    JEL: M0 M31 M37
    Date: 2015–06–10
  5. By: Michael D. Grubb (Boston College)
    Abstract: Both the "law of one price" and Bertrand's (1883) prediction of marginal cost pricing for homogeneous goods rest on the assumption that consumers will choose the best price. In practice, consumers often fail to choose the best price because they search too little, become confused comparing prices, and then show excessive inertia through too little switching away from past choices or default options. This is particularly true when price is a vector rather than a scalar, and consumers have limited experience in the relevant market. All three mistakes may contribute to positive markups that fail to diminish as the number of competing sellers increases. Firms may have an incentive to exacerbate these problems by obfuscating prices, thereby using complexity to make price comparisons diffcult and soften competition. Possible regulatory interventions include simplifying the choice environment, for instance by restricting price to be a scalar, advising consumers of their expected costs under each option, or choosing on behalf of consumers.
    Keywords: behavioral industrial organization; bounded rationality; search; obfuscation; switching; inertia
    JEL: D43 D83 L11 L13 L15
    Date: 2015–05–18
  6. By: Andrew Ching; Robert Clark; Ignatius Horstmann; Hyunwoo Lim
    Abstract: Over the past ten years there has been increased recognition of the importance of publicity as a means of generating product awareness. Despite this, previous research has seldom investigated the impact of publicity on demand. We contribute to the literature by (i) proposing a new method for the interpretation of publicity data, one that maps the information in news articles (or broadcasts) to a multi-dimensional attribute space; (ii) investigating how different types of publicity affect demand; and (iii) investigating how different types of publicity interact with firms? own marketing communication efforts. We study these issues for statins. We find that publicity plays an important role both for expanding the market for statins and for determining which statins patients/physicians choose. We also find evidence that publicity can serve as either a substitute or a complement for traditional marketing channels depending on the complexity of the information type. We argue that the interaction results are driven by the relative strengths of the corroborative and rational inattention functions in publicity. These results suggest that managers should be aware of the interactions between publicity and traditional marketing channels in order to better determine how to allocate their marketing expenditures.
    Keywords: publicity, informative detailing and advertising, information complements and substitutes, corroborative evidence, rational inattention, demand, prescription drugs
    JEL: D12 I11 L65 M30 M31
    Date: 2015–06
  7. By: Kihm, Alex; Vance, Colin
    Abstract: Drawing on a data set containing 371,082 observations on new and used cars from 2008, this study employs a hedonic model to estimate the determinants of prices in the primary and secondary car markets in Germany. We are specifically interested in identifying those vehicle attributes that are responsible for retaining the car's value in the used car market. Beyond parameterizing the influence of technical features and brand name on the retail price, our model simultaneously generates a corresponding set of parameter estimates for the used car price, thereby allowing us to formally compare their magnitudes across the two markets. This comparison reveals that fuel consumption, in particular, is an important determinant of the price, one whose impact is higher in magnitude in the used car market than in the new car market. Large heterogeneity in how cars hold their investment value is also seen to depend on body type and brand/model name.
    Keywords: retail prices,used car prices,hedonic model,Germany
    JEL: M31 R41
    Date: 2014
  8. By: Moraux, Hélène; Volle, Pierre
    Abstract: Alors que le champ de recherche sur le transfert de savoir inter-organisationnel s’est considérablement développé ces dernières années, la littérature ne s’intéresse pas suffisamment au contenu du flux de savoir transmis d’une organisation à l’autre. En effet, les façons de décrire le flux de savoir que l’on retrouve dans cette littérature (et dans les travaux qui mobilisent la notion de « savoir » en général) sont assez classiques et sont surtout basées sur les propriétés du savoir. A titre d’exemple, on oppose souvent le savoir tacite et le savoir explicite. Cependant, catégoriser de façon fine et précise la nature du savoir échangé est un préalable incontournable pour mieux appréhender son transfert inter-organisationnel (Easterby-Smith, Lyles et Tsang, 2008). A ces fins, nous proposons ici une nouvelle façon d’analyser et de décomposer le flux de savoir circulant. En raison du contexte dans lequel évoluent aujourd’hui les organisations marketing, l’apprentissage des managers marketing au contact de leurs prestataires est choisi comme terrain de recherche. En effet, pour faire face aux évolutions constantes, les managers marketing s’appuient notamment sur leurs prestataires et profitent de leurs interactions de travail pour apprendre et développer leur savoir (Moraux, 2014 ; Moraux et Volle, 2014). En étudiant le cas du flux de savoir transmis par les prestataires aux managers marketing, cette recherche se donne alors pour objectif d’analyser le flux de savoir circulant en mobilisant la notion d’ « actifs ». Elle propose plus précisément de décomposer le flux de savoir transmis en un flux de ressources, de capacités, et de compétences utiles aux managers. Pour cela, une étude exploratoire qualitative est conduite. En s’appuyant sur le discours de managers marketing et de prestataires variés, elle cherche à décrire de façon émergente les actifs qui peuvent être transmis au cours des interactions de travail. Au final, cette recherche présente plusieurs contributions théoriques. (1) En étudiant le cas du savoir transmis par les prestataires aux managers marketing, elle propose une décomposition originale et nouvelle du flux de savoir transmis. (2) Elle mobilise le concept d’ « actifs » afin de décomposer le flux de savoir transmis, tout en appliquant ce concept à un nouveau niveau d’analyse, actuellement peu exploité. Des outils (grille d’analyse, typologie) sont alors proposés afin d’analyser les actifs transmis à ce niveau d’analyse. (3) Elle contribue à mieux différencier les concepts de « capacité » et de « compétence ». Enfin, sur un plan managérial, la recherche montre que les managers marketing peuvent profiter des interactions de travail avec leurs prestataires pour apprendre et capter un savoir marketing riche et varié. De plus, elle met en exergue le fait que les managers marketing peuvent renforcer des compétences managériales pourtant spécifiques au métier de marketeur et à la fonction marketing au contact des prestataires.
    Keywords: Apprentissage inter-organisationnel; Transfert de savoir inter-organisationnel; Ressources et compétences; Savoir marketing; Actifs marketing;
    JEL: D83 M1 M31
    Date: 2015–06
  9. By: Sandra Rothenberger; Kurt KM Matzler
    Abstract: This study examines two central aspects in the formation of price fairness judgments: clarity of price information and confidence in price. Fairness judgments are cognitive processes that require a certain amount of information processing. Thus, information on prices should play a role in the outcome of fairness judgments. The more and clearer information consumers have about a vendor’s price information, the higher their confidence level is in the superiority of the offer. This price confidence, in turn, leads to more favorable evaluations of price fairness and thus results in greater satisfaction with prices in general. The study tests the relationships using a survey of 1,093 customers of a major European airline.
    Keywords: Price information clarity; Price confidence; Price fairness; Price satisfaction; Attitudes; Judgment formation
    JEL: M31
    Date: 2015–06–01
  10. By: James Li; Eric Bax; Nilanjan Roy; Andrea Leistra
    Abstract: Some online advertising offers pay only when an ad elicits a response. Randomness and uncertainty about response rates make showing those ads a risky investment for online publishers. Like financial investors, publishers can use portfolio allocation over multiple advertising offers to pursue revenue while controlling risk. Allocations over multiple offers do not have a distinct winner and runner-up, so the usual second-price mechanism does not apply. This paper develops a pricing mechanism for portfolio allocations. The mechanism is efficient, truthful, and rewards offers that reduce risk.
    Date: 2015–06
  11. By: Kairies-Schwarz, Nadja; Kokot, Johanna; Vomhof, Markus; Wessling, Jens
    Abstract: Recent health policy reforms try to increase consumer choice. We use a laboratory experiment to analyze consumers' tastes in typical contract attributes of health insurances and to investigate their relationship with individual risk preferences. First, subjects make consecutive insurance choices varying in the number and types of contracts offered. Then, we elicit individual risk preferences according to Cumulative Prospect Theory. Applying a latent class model to the choice data, reveals five classes of consumers with considerable heterogeneity in tastes for contract attributes. From this, we infer distinct behavioral strategies for each class. The majority of subjects use minimax strategies focusing on contract attributes rather than evaluating probabilities in order to maximize expected payoffs. Moreover, we show that using these strategies helps consumers to choose contracts, which are in line with their individual risk preferences. Our results reveal valuable insights for policy makers of how to achieve efficient consumer choice.
    Abstract: Jüngste Gesundheitsreformen versuchen, Wahlmöglichkeiten für Konsumenten zu verbessern. Wir verwenden ein Laborexperiment, um die Präferenzen von Konsumenten für typische Vertragsattribute von Krankenversicherungen zu analysieren und um ihre Beziehung zu individuellen Risikopräferenzen zu untersuchen. Zuerst treffen Teilnehmer aufeinanderfolgende Versicherungsentscheidungen, die in der Anzahl und der Art der angebotenen Verträge variieren. Anschließend erheben wir individuelle Risikopräferenzen im Sinne der kumulativen Prospect Theory. Ein auf die Entscheidungsdaten angewandtes Latent Class Modell kann fünf Klassen von Konsumenten mit einer beachtlichen Heterogenität in Präferenzen für Vertragsattribute identifizieren. Davon ausgehend leiten wir spezifische Verhaltensstrategien für jede Klasse ab. Die Mehrheit der Teilnehmer wendet Minimax-Strategien an und konzentriert sich auf Vertragsattribute, anstatt Wahrscheinlichkeiten zu bewerten um die erwartenden Auszahlungen zu maximieren. Ferner zeigen wir, dass die Anwendung dieser Strategien Konsumenten hilft, Verträge zu wählen, die mit ihren individuellen Risikopräferenzen übereinstimmen. Unsere Ergebnisse liefern wertvolle Einsichten für politische Entscheidungsträger, wie sie effiziente Wahlmöglichkeiten für Konsumenten erreichen können.
    Keywords: health insurance,risk preferences,heterogeneity,heuristics,laboratory experiment,cumulative prospect theory
    JEL: C91 I13 D81
    Date: 2014
  12. By: Cong Pan
    Abstract: This paper discusses brand firms' endogenous timing problem when facing nonbrand firms under quantity competition. We study a market comprising brand and nonbrand products. There exist heterogeneous consumer groups-one group buys only brand products while the other one cares little about the brand. These two consumer groups constitute the high-@and low-end markets respectively. The brand firms' moving order is endogenized, whereas the nonbrand firms are restricted to move in a later period. We show that if the low-end market is of an intermediate size, the leader-follower equilibrium outcome occurs, and the follower obtains second mover advantage which diminishes when the number of nonbrand firms increases. These results follow from the fact that each brand firm's best response function has an upward jump if the rival's output exceeds a particular level. Thus, the leader's profit function has a downward jump at some particular point while the follower's profit does not.
    Date: 2015–06
  13. By: Chen, Yongmin; Riordan, Michael
    Abstract: We develop a new approach to discrete choice demand for differentiated products, using copulas to separate the marginal distribution of consumer values for product varieties from their dependence relationship, and apply it to the issue of how preference dependence affects market outcomes in symmetric multiproduct industries. We show that greater dependence lowers prices and profits under certain conditions, suggesting that preference dependence is a distinct indicator of product differentiation. We also find new sufficient conditions for the symmetric multiproduct monopoly and the symmetric single-product oligopoly prices to be above or below the single-product monopoly price.
    Keywords: Product differentiation, discrete choice, copula, multiproduct industries.
    JEL: D4 L1
    Date: 2014–12
  14. By: Michael D. Grubb (Boston College)
    Keywords: overconfidence; overoptimism; overprecision; bias; naiveté; three-part tariff; present bias; self-control; prospective memory; inattention; pass-through; nudge; contract; behavioral industrial organization
    JEL: D41 D42 D43 D81 D82 D83 L11 L12 L13 L15
    Date: 2015–03–15
  15. By: Gervasio Antonelli (Department of Economics, Society & Politics, Università di Urbino "Carlo Bo"); Gian Italo Bischi (Department of Economics, Society & Politics, Università di Urbino "Carlo Bo"); Fabio Tramontana (Department of Economics and Management,University of Pavia); Elena Viganò (Department of Economics, Society & Politics, Università di Urbino "Carlo Bo")
    Abstract: The concept of postmodern consumer plays a central role within the debate started in the early 80s concerning the economic, social and cultural transformation in developed countries in the years following the end of the Second World War; a change that was interpreted as evolving from a modern towards a postmodern society. According to this literature, postmodern conditions have a significant impact on the consumer, especially at the level of his/her psychological characteristics. Within this new framework the consumer is viewed as a subject who is more interested in the symbolic or cultural value of products and services rather than the value of their function and utility. At the same time, consumers are represented as active players within the market, where they exercise their freedom to move in search of signs symbols and experiences through which they can communicate their identity. The figure of the postmodern consumer is difficult to interpret within the framework of standard neoclassical theories on consumers. At the same time, it highlights the shortcomings of this theoretical approach in studying the behaviour of postmodern consumers. These shortcomings are likely to be more relevant when considering the consumers of food products, given the strong nexus between consumption and the well being of consumers, along with the symbolic and cultural value that food products encompass. The main goal of this paper consists in providing an interdisciplinary overview of postmodern consumers of food products, through the analysis of scientific contributions, mainly in the areas of behavioural economics, sociology and psychology.
    Date: 2014
  16. By: Ragavendran Gopalakrishnan; Eric Bax; Krishna Prasad Chitrapura; Sachin Garg
    Abstract: In markets for online advertising, some advertisers pay only when users respond to ads. So publishers estimate ad response rates and multiply by advertiser bids to estimate expected revenue for showing ads. Since these estimates may be inaccurate, the publisher risks not selecting the ad for each ad call that would maximize revenue. The variance of revenue can be decomposed into two components -- variance due to `uncertainty' because the true response rate is unknown, and variance due to `randomness' because realized response statistics fluctuate around the true response rate. Over a sequence of many ad calls, the variance due to randomness nearly vanishes due to the law of large numbers. However, the variance due to uncertainty doesn't diminish. We introduce a technique for ad selection that augments existing estimation and explore-exploit methods. The technique uses methods from portfolio optimization to produce a distribution over ads rather than selecting the single ad that maximizes estimated expected revenue. Over a sequence of similar ad calls, ads are selected according to the distribution. This approach decreases the effects of uncertainty and increases revenue.
    Date: 2015–06

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