nep-mkt New Economics Papers
on Marketing
Issue of 2016‒07‒02
twelve papers chosen by
João Carlos Correia Leitão
Universidade da Beira Interior

  1. The effects of banning advertising in junk food markets By Dubois, Pierre; Griffith, Rachel; O'Connell, Martin
  2. Quantity Competition under Resale Price Maintenance when Most Favored Customers are Strategic By Aviv, Yossi; Bazhanov, Andrei; Levin, Yuri; Nediak, Mikhail
  3. Empirical Evidence on Conditional Pricing Practices By Bogdan Genchev; Julie Holland Mortimer
  4. in brief... Bargain hunters: calculating the benefits of consumer search By Fabio Pinna; Stephan Seiler
  5. A Structural Model of Advertising Signaling and Social Learning: The Case of the Motion Picture Industry By Haiyan Liu
  6. The Upside-down Economics of Regulated and Otherwise Rigid Prices By Casey B. Mulligan; Kevin K. Tsui
  7. The Emergence of a Market for Football Stars: Talent Development and Competitive Balance in European Football By Norbäck, Pehr-Johan; Olsson, Martin; Persson, Lars
  8. Do Credit Card Companies Screen for Behavioral Biases? By Hong Ru; Antoinette Schoar
  9. Price & Preference in U.S. Consumer Demand for Cotton By Hughes, Julia K.
  10. Disappointment looms around the corner: Visibility and local businesses' market power By Jeanne DALL'ORSO; Romain GAURIOT; Lionel PAGE
  11. Understanding Gasoline Price Dispersion By Demet Yilmazkuday; Hakan Yilmazkuday
  12. New Innovations in Payments By Marc Rysman; Scott Schuh

  1. By: Dubois, Pierre; Griffith, Rachel; O'Connell, Martin
    Abstract: There are growing calls to restrict advertising of junk foods. Whether such a move will improve diet quality will depend on how advertising shifts consumer demands and how firms respond. We study an important and typical junk food market -- the potato chips market. We exploit consumer level exposure to adverts to estimate demand, allowing advertising to potentially shift the weight consumers place on product healthiness, tilt demand curves, have dynamic effects and spillover effects across brands. We simulate the impact of a ban and show that the potential health benefits are partially offset by firms lowering prices and by consumer switching to other junk foods.
    Keywords: advertising; Demand estimation; dynamic oligopoly; welfare
    JEL: L13 M37
    Date: 2016–06
  2. By: Aviv, Yossi; Bazhanov, Andrei; Levin, Yuri; Nediak, Mikhail
    Abstract: Legal studies usually treat a policy of a manufacturer or retailer as socially harmful if it reduces product output and increases the price. We consider a two-period model where the first-period price is fixed by resale price maintenance (RPM) and resellers endogenously decide to use another "collusion suspect," meet-the-competition clause with a most-favored-customer clause (MFC), to counteract strategic customer behavior. As a result of MFC, second-period (reduced) price increases, and resellers' inventories decrease. However, customer surplus may increase and aggregate welfare increases in the majority of market situations. MFC can not only decrease the losses in welfare and resellers' profits due to strategic customers but, under reseller competition, may even lead to higher levels of these values than with myopic customers, i.e., to gains from increased strategic behavior. MFC may create "MFC-traps" for resellers, where one of possible market outcomes yields a gain from increased strategic behavior while another results in a reseller profit less than the worst profit in any stable outcome without MFC. With growing competition, benefits or losses from MFC can be higher than losses from strategic customer behavior.
    Keywords: most favored customer, strategic customer behavior, quantity competition, limited-lifetime product
    JEL: D9 L13 L41 L42
    Date: 2016–06–11
  3. By: Bogdan Genchev; Julie Holland Mortimer
    Abstract: Conditional pricing practices allow the terms of sale between a producer and a downstream distributor to vary based on the ability of the downstream firm to meet a set of conditions put forward by the producer. The conditions may require a downstream firm to accept minimum quantities or multiple products, to adhere to minimum market-share requirements, or even to deal exclusively with one producer. The form of payment from the producer to the downstream firm may take the form of a rebate, marketing support, or simply the willingness to supply inventory. The use of conditional pricing practices is widespread throughout many industries, and the variety of contractual forms used in these arrangements is nearly as extensive as the number of contracts. This paper reviews empirical evidence on these arrangements.
    JEL: K0 K2 K20 K21 L0 L4 L42
    Date: 2016–06
  4. By: Fabio Pinna; Stephan Seiler
    Abstract: To what extent can shoppers convert the time they spend looking for particular products into monetary savings? The authors use electronic tags to study the behaviour of 12,000 consumers in a large supermarket in Northern California.
    Keywords: consumer search, in-store marketing, path data
    Date: 2016–06
  5. By: Haiyan Liu (Department of Economics, University of South Florida)
    Abstract: This paper empirically studies how social learning among consumers shapes ?firms' ?optimal strategies of using advertising to signal product quality. I present an equilibrium model that describes both consumers? and fi?rms' ?learning and decision-making under quality uncertainty. My model allows me to distinguish between two roles of informative advertising ?reaching consumers and signaling product quality. I apply the model to the U.S. motion picture theatrical market where advertising and social learning are two main factors for a new movie?'s success. The structural estimates imply that movie studios? signaling advertising only helps to reduce consumers'? uncertainty by less than 10 percent. Word-of-mouth is a much more efficient learning channel for consumers, reducing their uncertainty by more than 90 percent. I also ?find that around 27 percent of advertising spending for movies in my sample is used for signaling product quality, while 73 percent is used for reaching consumers. Studios? tendency to advertise more during the pre-release rather than the post-release weeks is explained to a large extent by the signaling purpose.
    Keywords: Advertising, Signaling, Social Learning, Information, Motion Picture Industry
    JEL: D22 D82 D83 L15 L82 M37
    Date: 2016–02
  6. By: Casey B. Mulligan; Kevin K. Tsui
    Abstract: A version of the Becker-Lancaster characteristics model featuring quality-quantity tradeoffs reveals a number of surprising market behaviors that can result from price regulations that are imposed on competitive markets for products that have adjustable non-price attributes. Quality need not clear a competitive market in the same way that prices do, because quality can reduce the willingness to pay for quantity. Producers can benefit from price ceilings, at the expense of consumers. Price ceilings can result in quality-degradation “death spirals” that would not occur under quality regulation or excise taxation. The features of tastes and technology that lead to such outcomes are summarized with pairwise comparisons of (not necessarily constant) elasticities.
    JEL: K2 L15 L51
    Date: 2016–06
  7. By: Norbäck, Pehr-Johan (Research Institute of Industrial Economics (IFN)); Olsson, Martin (Research Institute of Industrial Economics (IFN)); Persson, Lars (Research Institute of Industrial Economics (IFN))
    Abstract: We analyze how the Bosman ruling affected the market for star players and talent development in the European football market. We develop a model with sports competition and endogenous ownership of star players in which we show how the stiffer bidding competition over star players after the Bosman ruling has spurred talent development foremost in EU nations lacking established top clubs. This has a positive impact on their national teams’ performance. However, the stiffer bidding competition has also lead to less competition in the Champions League, as non-established clubs prefer to sell their star players instead of challenging the top clubs. We provide empirical evidence consistent with these findings.
    Keywords: Sports industry; Star players; Champions League; Bosman ruling
    JEL: J44 L50 L83
    Date: 2016–05–31
  8. By: Hong Ru; Antoinette Schoar
    Abstract: We look at the supply side of the credit card market to analyze the pricing and marketing strategies of credit card offers. First, we show that card issuers target less-educated customers with more steeply back-loaded fees (e.g., lower introductory APRs but higher late and over-limit fees) compared offers made to educated customers. Second, issuers use rewards programs to screen for unobservable borrower types. Conditional on the same borrower type, cards with rewards, such as low introductory APR programs, also have more steeply backloaded fees. In contrast, cards with mileage programs, which are offered mainly to the most-educated consumers, rely much less on back-loaded fees. Finally, using shocks to the credit risk of customers via increases in state-level unemployment insurance, we show that card issuers rely more heavily on back-loaded and hidden fees when customers are less exposed to negative cash flow shocks. These findings are in line with the recent behavioral contract theory literature.
    JEL: G02 G1 G21 G23
    Date: 2016–06
  9. By: Hughes, Julia K.
    Keywords: Consumer/Household Economics, Crop Production/Industries,
    Date: 2016–02–26
  10. By: Jeanne DALL'ORSO; Romain GAURIOT; Lionel PAGE
    Abstract: We investigate how restaurants can use high visibility locations to charge higher prices or offer lower quality to customers who are imperfectly informed and face search costs. We use a large dataset of user reviews in 10 large cities in North America and Europe. We find that prime locations in terms of visibility such as touristic locations or street intersections are associated with substantial lower customer satisfaction. This result can be explained by economic models of search. Restaurants with greater visibility face a larger number of uninformed customers and have therefore less need to rely on quality or low price to attract customers.
    Keywords: Search, location, spatial analysis
    JEL: D40 D82 D83
    Date: 2016–06–07
  11. By: Demet Yilmazkuday (Department of Economics, Florida International University); Hakan Yilmazkuday (Department of Economics, Florida International University)
    Abstract: This paper models and estimates the gasoline price dispersion across time and space by using a unique data set at the gas-station level within the U.S.. Nationwide effects (measured by time Â…fixed effects or crude oil prices) explain up to about 51% of the gasoline price dispersion across stations. RefiÂ…nery-specific costs, which have been ignored in the literature due to using local data sets within the U.S., contribute up to another 33% to the price dispersion. While state taxes explain about 12% of the price dispersion, spatial factors such as local agglomeration externalities, land prices, distribution costs of gasoline explain up to about 4%. The contribution of brand-specifiÂ…c factors is relatively minor.
    Keywords: Gasoline Prices, Gas-Station Level Analysis, Nighttime Lights, Land Prices, the United States
    JEL: L11 L81 R32 R41
    Date: 2016–06
  12. By: Marc Rysman; Scott Schuh
    Abstract: We discuss prospects for innovation in consumer payment instruments. We discuss recent research into consumer payments and what can be learned about consumer behavior towards new payment options. We consider three new innovations in payments: mobile payments, faster payments and digital currencies. For each, we describe prospects and impediments to adoption.
    JEL: L1
    Date: 2016–06

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.
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