nep-mkt New Economics Papers
on Marketing
Issue of 2016‒01‒03
five papers chosen by
João Carlos Correia Leitão
Universidade da Beira Interior

  1. Oligopolistic Competition with Choice-Overloaded Consumers By Gerasimou, Georgios; Papi, Mauro
  2. Markets and long-term contracts: The case of Russian gas supplies to Europe By Chi-Kong Chyong
  3. Constructing quality: Producer power, market organization, and the politics of high value-added markets By Carter, Elizabeth
  4. Transport efficiency, downstream R&D, and spillovers By Takauchi, Kazuhiro
  5. Aggregate demand function is not monotonic: the Loss of confidence effect By Mazurek, Jiri

  1. By: Gerasimou, Georgios; Papi, Mauro
    Abstract: A large body of experimental work has suggested the existence of a "choice overload" effect in consumer decision making: Faced with large menus of choice options, decision makers often defer or avoid choice. A suggested reason for the occurrence of this effect is that the agents attempt to avoid the cognitive effort that is associated with choosing from larger menus. Building on this explanation, we propose and analyse a model of duopolistic competition where firms compete in menu design in the presence of a consumer population with heterogeneous preferences and overload menu-size thresholds. The firms' strategic trade-off is between offering a large menu in order to match the preferences of as many consumers as possible, and offering a small menu in order to avoid losing choice-overloaded consumers to their rival. Assuming uniformly distributed preferences, we focus on symmetric pure-strategy equilibria under various assumptions on the overload distribution and product markups. We also propose and analyse a measure of consumer welfare that applies to this environment. Among other things, we provide conditions for "maximum-" and "minimum-variety equilibria" to be possible, whereby both firms either offer the entire set of available products or the same one product, respectively.
    Keywords: Choice overload; choice deferral; choice complexity; cognitive costs; oligopolistic competition
    JEL: D01 D03 D11 D18 D21 D60
    Date: 2015–12–18
  2. By: Chi-Kong Chyong
    Abstract: Abstract Different hydrocarbon producer sales strategies have widely divergent implications for the value of Gazprom’s gas exports to Europe. In particular, hydrocarbon producers have commonly pursued two alternative sales strategies: (i) pure commodity production (border sales) and (ii) integrated supply, trading and marketing (ISTM). The impact of these two strategies on Gazprom’s export profits are examined under three sets of scenarios: (a) the possible entry of low-cost producers, (b) oil price dynamics and (c) the future of LTCs (pricing and volume structure). We also analysed how Statoil shifted its sales strategy in light of structural changes in European gas markets and conclude that the company began employing an ISTM strategy when the market in North-west Europe became liquid. Thus, when a market is mature, with an increasing number of buyers, the best sales strategy for a large hydrocarbon producer should be based on flexibility and increasing its use of market trading to maximise the value of its commodity. We conclude that an optimal export strategy for Gazprom should involve both a substantial and increasing portion of uncommitted volumes that can be traded in markets (gas hubs) and, if needed, some form of bilateral forward contract with a minimum take-or-pay level to secure infrastructure finance.
    Keywords: Long-term contracts, vertical integration, market trading, gas, Gazprom, Statoil, gas pricing, equilibrium energy modelling
    JEL: L14 L13 Q47 Q48 Q41 P28 O13
    Date: 2015–12–21
  3. By: Carter, Elizabeth
    Abstract: Economists assume increased producer flexibility creates production advantages. So why do inefficient French quality wine producers dominate their flexible, efficient Italian counterparts? French AOC wine producers created "corporatist" producer organizations which served three purposes: encouraged increased product quality information across the supply chain; allowed for the emergence of a unique production style; and enabled producers to define their production methods as "quality" via state regulation. Italian DOC wine producers have fragmented political structures at both the regional and national levels, causing producers to rely more on the price mechanism and less on political structures to coordinate supply chain transactions. Market asymmetries persist across the supply chain, making it difficult for producers to guarantee quality and adversely shaping their potential production and brand strategies. Solving supply chain problems through representative political institutions yields superior economic outcomes than uncoordinated market transactions because the former corrects market power asymmetries.
    Abstract: Ökonomen gehen davon aus, dass Hersteller durch höhere Flexibilität Produktionsvorteile erlangen. Doch wie können dann die ineffizienten Produzenten französischer Qualitätsweine ihren flexiblen, effizienten Mitbewerbern aus Italien überlegen sein? Produzenten französischer AOC-Weine haben "korporatistische" Erzeugerorganisationen geschaffen, die drei Zwecken dienen: Sie ermöglichen einen besseren Informationsfluss zur Produktqualität innerhalb der gesamten Lieferkette; sie schaffen Möglichkeiten zur Herausbildung eines einzigartigen Herstellungsverfahrens; sie befähigen Produzenten, ihre Herstellungsverfahren mithilfe staatlicher Regelungen als qualitativ hochwertig zu definieren. Die Produzenten italienischer Qualitätsweine mit kontrollierter Herkunftsbezeichnung (DOC) hingegen sehen sich sowohl auf regionaler wie auch auf nationaler Ebene fragmentierten politischen Strukturen gegenüber. Daher sind sie darauf angewiesen, dass Transaktionen innerhalb der Lieferkette stärker durch den Preismechanismus als durch politische Strukturen koordiniert werden. Die entlang der gesamten Lieferkette fortbestehenden Marktasymmetrien erschweren es den Produzenten, Qualitätsgarantien abzugeben und wirken sich nachteilig auf deren Möglichkeiten zur Gestaltung von Produktions- und Markenstrategien aus. Es ist wirtschaftlich erfolgversprechender, Probleme in der Lieferkette mithilfe repräsentativer politischer Institutionen zu lösen als durch unkoordinierte Markttransaktionen, da erstere die im Markt bestehenden Machtasymmetrien korrigieren.
    Date: 2015
  4. By: Takauchi, Kazuhiro
    Abstract: This study examines the effects of higher transport efficiency on cost-reducing R&D investment and welfare in a two-way duopoly trade model with an imperfectly competitive transport sector. We show that, corresponding to the degree of the R&D spillover, higher transport efficiency can affect investment in a U-shaped fashion. We also show that higher transport efficiency can reduce total output and consumer surplus. By comparing the two cases of firm-specific carriers and duopoly carriers, we demonstrate that total output in the case of duopoly carriers is lower than that in the case of firm-specific carriers if the spillover is sufficiently large. Higher transport efficiency and competition in the transport sector may harm consumers.
    Keywords: Transport efficiency; Imperfectly competitive transport sector; Cost-reducing R&D; R&D spillover
    JEL: F12 L13
    Date: 2015–12–21
  5. By: Mazurek, Jiri
    Abstract: The aim of this article is to show that an aggregate demand function (curve) might not be monotonically decreasing as assumed in economic theory. When a price of a good decreases to some point, the amount demanded stops increasing due to the so called loss of confidence effect: a price too low causes consumers’ distrust. The existence of this effect was examined via questionnaire research among a small sample of respondents. The main result of this study is that the loss of confidence effect was found indeed, and applied to some 40% of respondents. However, a broader and more sophisticated research on the topic is needed. Results of this study have an impact on microeconomics theory as well on sellers’ behavior, as a lower price might not sell more than a higher price.
    Keywords: demand; demand curve; distrust; loss of confidence; price; quantity demanded
    JEL: D01
    Date: 2015–12–27

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