nep-mkt New Economics Papers
on Marketing
Issue of 2016‒03‒29
eleven papers chosen by
João Carlos Correia Leitão
Universidade da Beira Interior

  1. The advertising-financed business model in two-sided media markets By Anderson, Simon; Jullien, Bruno
  2. Impact of social interactions on demand curves for innovative products By Katarzyna Maciejowska; Arkadiusz Jedrzejewski; Anna Kowalska-Pyzalska; Rafal Weron
  3. How Exporters Grow By Doireann Fitzgerald; Stefanie Haller; Yaniv Yedid-Levi
  4. How does consumer knowledge affect environmentally sustainable choices? Evidence from a cross-country latent class analysis of food labels By Peschel, Anne; Grebitus, Carola; Steiner, Bodo; Veeman, Michele
  5. Signals sell: Designing a product line when consumers have social image concerns By Friedrichsen, Jana
  6. Relative Price Dispersion: Evidence and Theory By Kaplan, Greg; Menzio, Guido; Rudanko, Leena; Trachter, Nicholas
  7. A Theory of Bidding Dynamics and Deadlines in Online Retail By Dominic Coey; Bradley Larsen; Brennan Platt
  8. Intention to Participate in Cause Related Marketing: Influence of Cause By Kureshi, Sonal; Thomas, Sujo
  10. The Nuisance of Slow Moving Products in Electronic Commerce By Grzegorz, Chodak
  11. Cause-Related Marketing of Products with a Negative Externality By Gilles Grolleau; Lisette Ibanez; Nathalie Lavoie

  1. By: Anderson, Simon; Jullien, Bruno
    Abstract: This chapter focuses on the economic mechanisms at work in recent models of advertising finance in media markets developed around the concept of two-sided markets. The objective is to highlight new and original insights from this approach, and to clarify the conceptual aspects. The chapter first develops a canonical model of two-sided markets for advertising, where platforms deliver content to consumers and resell their "attention" to advertisers. A key distinction is drawn between free media and pay media, where the former result from the combination of valuable consumer attention and low ad nuisance cost. The first part discusses various conceptual issues such as equilibrium concepts and the nature of inefficiencies in advertising markets, and concrete issues such as congestion and second-degree discrimination. The second part is devoted to recent contributions on issues arising when consumers patronize multiple platforms. In this case, platforms can only charge incremental values to advertisers which reduces their market power and affects their price strategies and advertising levels. The last part discusses the implications of the two-sided nature of the media markets for the choice of content and diversity.
    Keywords: Two-sided markets, ad-financed business model, single-homing consumers, competitive bottlenecks, multi-homing consumers, media see-saws, advertising congestion, genre choice, equilibrium platform variety.
    Date: 2016–03
  2. By: Katarzyna Maciejowska; Arkadiusz Jedrzejewski; Anna Kowalska-Pyzalska; Rafal Weron
    Abstract: Empirical studies suggest that word-of-mouth (WOM) strongly influences the innovation diffusion process and is responsible for the 'S' shape of the adoption curve. However, it is not clear how WOM affects demand curves for innovative products and strategic decisions of producers. Using an agent-based model of innovation diffusion, which links consumer opinions with reservation prices, we show that a relatively strong WOM effect can lead to the creation of two separated price-quantity regimes, with a nonlinear transition between them. A small shift of the product's market price can result in a drastic change of the demanded quantity and, hence, the revenues of a firm. Using Monte Carlo simulations and mean-field treatment we demonstrate that WOM may have ambiguous consequences and should be taken into account when designing marketing strategies.
    Keywords: Word-of-mouth; Innovation diffusion; Agent-based model; Demand curve; Marketing strategy
    JEL: C63 O33 Q55
    Date: 2016–03–10
  3. By: Doireann Fitzgerald; Stefanie Haller; Yaniv Yedid-Levi
    Abstract: We show that after firms enter new export markets, there are striking dynamics of quantities, but no dynamics of prices, controlling for both costs and selection. This points to an important role for demand in the growth of successful exporters, and to a nonprice mechanism through which quantity demanded grows. A model where firms engage in costly investment in customer base through marketing and advertising, and learn about their idiosyncratic demand, can qualitatively match these facts, along with a declining exit hazard. We structurally estimate the model and find that costs of adjusting customer base are key to explaining how exporters grow.
    JEL: E2 F1 L1
    Date: 2016–01
  4. By: Peschel, Anne; Grebitus, Carola; Steiner, Bodo; Veeman, Michele
    Abstract: This paper examines consumers' knowledge and lifestyle profiles and preferences regarding two environmentally labelled food staples, potatoes and ground beef. Data from online choice experiments conducted in Canada and Germany are analyzed through latent class choice modelling to identify the influence of consumer knowledge (subjective and objective knowledge as well as usage experience) on environmentally sustainable choices. We find that irrespective of product or country under investigation, high subjective and objective knowledge levels drive environmentally sustainable food choices. Subjective knowledge was found to be more important in this context. Usage experience had relatively little impact on environmentally sustainable choices. Our results suggest that about 20 % of consumers in both countries are ready to adopt footprint labels in their food choices. Another 10 - 20% could be targeted by enhancing subjective knowledge, for example through targeted marketing campaigns.
    Keywords: carbon footprint; food; latent class analysis; objective knowledge; subjective knowledge; water footprint
    JEL: D12 M31 Q51
    Date: 2016–02–27
  5. By: Friedrichsen, Jana
    Abstract: One important function of consumption is for consumers to show off their taste, virtue or wealth. While empirical observations suggest that producers take this into account, existing research has concentrated on analyzing the demand side. This paper investigates how a monopolist optimally designs its product line when consumers differ both in their taste for quality and their desire for a positive social image. The monopolist distorts qualities and prices to allocate images to consumers. It generically pools consumers with different tastes because high-taste consumers lend a positive image to the product of their choice and thereby increase the product's value to others. Often, average quality is lower than in a market without image concerns and there is underprovision as compared to the welfare-maximizing allocation. Although average quality is higher in a competitive market, welfare typically is not.
    Keywords: image motivation,conspicuous consumption,two-dimensional screening,mechanism design
    JEL: D21 D82 L15
    Date: 2016
  6. By: Kaplan, Greg (Princeton University and NBER); Menzio, Guido (University of Pennsylvania and NBER); Rudanko, Leena (Federal Reserve Bank of Philadelphia); Trachter, Nicholas (Federal Reserve Bank of Richmond)
    Abstract: We use a large dataset on retail pricing to document that a sizable portion of the cross-sectional variation in the price at which the same good trades in the same period and in the same market is due to the fact that stores that are, on average, equally expensive set persistently different prices for the same good. We refer to this phenomenon as relative price dispersion. We argue that relative price dispersion stems from sellers’ attempts to discriminate between high-valuation buyers who need to make all of their purchases in the same store and low-valuation buyers who are willing to purchase different items from different stores. We calibrate our theory and show that it is not only consistent with the extent and sources of dispersion in the price that different sellers charge for the same good, but also with the extent and sources of dispersion in the prices that different households pay for the same basket of goods and with the relationship between prices paid and the number of stores visited by different households.
    JEL: D40 D83 E31 L11
    Date: 2016–01–15
  7. By: Dominic Coey; Bradley Larsen; Brennan Platt
    Abstract: We present an equilibrium search model that parsimoniously rationalizes the use of auctions as a sales mechanism for new-in-box goods--a frequent occurrence in online retail markets--and analyze whether the existence of these auctions is welfare enhancing relative to a market consisting only of posted prices. Buyers have a deadline by which the good must be purchased, and sellers choose between auctions and posted-price mechanisms. As the deadline approaches, buyers increase their bids and are more likely to buy through posted-price listings. The model predicts equilibrium price dispersion even for new, homogeneous goods. Using data on one million auction and posted-price listings for new-in-box items on, we find robust evidence consistent with our model. As predicted, bidders increase their bids from one auction to the next, equilibrium price dispersion exists, and auctions and posted-price listings coexist. Fitting the model to the data, we find that retail auctions increase total welfare by 1.8% of the average retail price if listing fees exactly cover platform costs, but reduce welfare by 2.3% if listing fees are pure profit
    JEL: C73 D44 D83
    Date: 2016–02
  8. By: Kureshi, Sonal; Thomas, Sujo
    Abstract: The most widely accepted definition for CRM is provided by Varadarajan and Menon (1988) and it defines CRM as “a process of formulating and implementing marketing activities that are characterized by an offer from the firm to contribute a specified amount to a designated cause when customers engage in revenue-providing exchanges that satisfy organizational and individual objectives”. Several organizations in India like Dabur, Marico, P&G and ITC have implemented this form of social marketing practice. In the view of the growing significance of CRM in countries like India which have been facing numerous social challenges, it becomes crucial to understand what factors lead to effective implementation of CRM. This study will provide insights into both type and scope of cause and their bearing upon consumer CRM participation intention. Consumer data was collected using a structured questionnaire from the western region of India. Reponses pertaining to two aspects about the cause of the initiative, ‘type of cause’ and ‘scope of cause’ were collected. Results showed that consumer’s interest in participation were found to differ significantly across both type of cause and scope of cause.
  9. By: Nurcan Turan (Anadolu University); Nuri Calik (Turgut Ozal University)
    Abstract: This survey intends to find out the consumers’ post-purchase behavior in terms of complaining, assertiveness, discontent and alienation. In May, 2014, a survey is applied to 537espondents selected via stratified sampling from Eskişehir, a city of Turkey with 700.000 inhabitants where 500 of the responses are found eligible... The respondents are required to answer 35 questions of which five are related to demographic characteristics of these respondents. The rest 30 are statements which are designed to reflect the behavior of these people. The study consists of five parts. The first part is an introduction where the scope and the purpose of the study are concisely stated. The second part relates to the theoretical background of the subject matter and the prior researches carried out so far. The third part deals with research methodology, basic premises and hypotheses attached to these premises. Research model and analyses take place in this section. Theoretical framework is built and a variable name is assigned to each of the question asked or proposition forwarded to the respondents of this survey. 30 statements or propositions given to the respondents are placed on a five-point Likert scale. The remaining five questions about demographic traits as age, gender, occupation, educational level and monthly income are placed either on a nominal or ratio scale with respect to the nature of the trait. Four research hypotheses are formulated in this section. The fourth part mainly deals with the results of the hypothesis tests and a factor analysis is applied to the data on hand. Here exploratory factor analysis reduces 30 variables to six basic components as: as: " Consumer discontent, ad disapproval, consumer alienation, consumer assertiveness and redress, propensity to complain, claim for apology or refund" Cronbach's Alpha for scale reliability is quite high (a = 0.788) and so is the sample adequacy ratio (KMO = 0.883) In addition non-parametric bivariate analysis in terms of Chi-Square is applied to test the hypotheses formulated in this respect. The fifth part is the conclusion where findings of this survey are listed.
    Keywords: Consumer discontent, ad disapproval, alienation, assertiveness, complaint, claims for refund.
    JEL: M31
  10. By: Grzegorz, Chodak
    Abstract: Article presents the important problem of products with low turnover in environment of electronic commerce. The key factors leading to the increasing number of slow moving stock keeping units (SKUs) in the context of online store are described. These issues are divided into two sets: general (not connected with online environment) and these which concern mainly online stores. The difficulty with identification of such SKUs is presented and proposition of inventory control shelf warmers indicator is shown. Afterwards the three-stage procedure for dealing with the occurrence of shelf warmers is described. The last part of the paper present the short conclusions.
    Keywords: Inventory Control, Online Store, Shelf Warmer, Slow Moving Products
    JEL: G31 L81
    Date: 2016–02–20
  11. By: Gilles Grolleau; Lisette Ibanez; Nathalie Lavoie
    Abstract: Firms increasingly develop partnerships with non-profit organizations (NPO) to support a cause and improve their corporate image. This type of Corporate Social Responsibility, called Cause-Related Marketing, commits firms to fund associations that encourage environmental protection, international development, and other causes by donating part of their profits. In this article, we argue that when cause-related marketing is applied to products with a negative externality, these a priori win-win arrangements can generate adverse and unexpected effects. We consider a vertical differentiation model integrating two assumptions. First, consumers may perceive the firm's contribution to be higher than the actual donation. Second, consumers who value highly socially responsible behavior may prefer not to consume rather than consuming products that aren’t socially responsible. In this set-up we identify several possible counter-productive effects such as the likelihood of increase of the externality and the crowding out of direct contributions. We also draw policy and managerial implications.
    Date: 2016–03

This nep-mkt issue is ©2016 by João Carlos Correia Leitão. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.