nep-mkt New Economics Papers
on Marketing
Issue of 2016‒10‒23
23 papers chosen by
João Carlos Correia Leitão
Universidade da Beira Interior

  1. Ordered Consumer Search By Armstrong, Mark
  2. Vertical differentiation and collusion: pruning or proliferation? By Jean Gabszewicz, Jean; Marini, Marco A.; Tarola, Ornella
  3. Behavior-based price discrimination and customer information sharing By Romain De Nijs
  4. Estimating the Heterogeneous Welfare Effects of Choice Architecture: An Application to the Medicare Prescription Drug Insurance Market By Jonathan D. Ketcham; Nicolai V. Kuminoff; Christopher A. Powers
  5. Evaluation of best price clauses in hotel booking By Hunold, Matthias; Laitenberger, Ulrich; Schlütter, Frank
  6. Consumption taxes and taste heterogeneity By Stéphane Gauthier; Fanny Henriet
  7. Retail Channel Management in Consumer Search Markets By Garcia, Daniel; Janssen, Maarten
  8. The Tragedy of the Last Mile: Congestion Externalities in Broadband Networks By Jacob Malone; Aviv Nevo; Jonathan Williams
  9. When Discounts Raise Costs: The Effect of Copay Coupons on Generic Utilization By Leemore Dafny; Christopher Ody; Matthew Schmitt
  10. Marketing territorial et branding territorial : une revue de littérature systématique By Renaud Vuignier
  11. Place marketing and place branding: A systematic (and tentatively exhaustive) literature review By Renaud Vuignier
  12. Minimum Payments and Debt Paydown in Consumer Credit Cards By Benjamin J. Keys; Jialan Wang
  13. Incomplete Disclosure: Evidence of Signaling and Countersignaling By Benjamin B. Bederson; Ginger Zhe Jin; Phillip Leslie; Alexander J. Quinn; Ben Zou
  14. The Impact of Curation Algorithms on Social Network Content Quality and Structure By Ron Berman; Zsolt Katona
  15. Calorie Overestimation Bias and Fast Food Products: The Effects of Calorie Labels on Perceived Healthiness and Intent to Purchase By Simon Hedlin
  16. Home price expectations and behavior: evidence from a randomized information experiment By Armona, Luis; Fuster, Andreas; Zafar, Basit
  17. Cost-Sharing and Drug Pricing Strategies : Introducing Tiered Co-Payments in Reference Price Markets By Herr, Annika; Suppliet, Moritz
  18. Moving the Needle on Health Insurance Coverage: Evaluation of the Cities Expanding Health Access for Children and Families Project By Michaella Morzuch; Sheila Hoag
  19. “Crowdfunding” et diasporas : l’apparition des plateformes modifie-t-elle la structure du marché et les stratégies des acteurs du financement diasporique ? By Cécile Fonrouge
  20. Multi-period competitive cheap talk with very biased experts By Eric Schmidbauer
  21. Moving the Needle on Health Insurance Coverage: The Cities Expanding Health Access for Children and Families Project (Issue Brief) By Michaella Morzuch; Sheila Hoag
  22. What Makes a Price Fair? An Experimental Analysis of Market Experience and Endogenous Fairness Views By Holger Herz; Dmitry Taubinsky
  23. Entry into complementary good markets with network effects By Gaston Llanes; Andrea Mantovani; Francisco Ruiz-Aliseda

  1. By: Armstrong, Mark
    Abstract: The paper discusses situations in which consumers search through their options in a deliberate order, in contrast to more familiar models with random search. Topics include: the existence of ordered search equilibria with symmetric sellers (all consumers first inspect the seller they anticipate sets the lowest price, and a seller which is inspected first by consumers will set the lowest price); the use of price and non-price advertising to direct search; the impact of consumers starting a new search at their previous supplier; and the incentive a seller can have to raise its own search cost. I also show how ordered search can be reformulated as a simpler discrete choice problem without search frictions or dynamic decision making.
    Keywords: advertising; consumer search; directed search; discrete choice; obfuscation; oligopoly; ordered search; sequential search
    JEL: D21 D43 D83 L11 L15 M37
    Date: 2016–10
  2. By: Jean Gabszewicz, Jean; Marini, Marco A.; Tarola, Ornella
    Abstract: In this paper, we tackle the dilemma of pruning versus proliferation in a vertically differentiated oligopoly under the assumption that some firms collude and control both the range of variants for sale and their corresponding prices, likewise a multi-product firm. We analyse whether pruning emerges and, if so, a fighting brand is marketed. We find that it is always more profitable for colluding firms to adopt a pricing strategy such that some variants are withdrawn from the market. Under pruning, these firms commercialize a fighting brand only when facing competitors in a low-end market.
    Keywords: Vertically Differentiated Markets, Cannibalization, Market Pruning, Price Collusion.
    JEL: D4 D42 D43 L1 L12 L13 L4 L41
    Date: 2016–10–15
  3. By: Romain De Nijs (Ecole Polytechnique [Palaiseau] - Ecole Polytechnique, PSE - Paris-Jourdan Sciences Economiques - CNRS - Centre National de la Recherche Scientifique - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENS Paris - École normale supérieure - Paris - École des Ponts ParisTech (ENPC))
    Abstract: This article investigates the incentives and the effects of information sharing among rival firms about the identities of their past customers in a two-period model with behaviorbased price discrimination (BBPD). An unilateral information exchange between the two periods takes place in a subgame-perfect equilibrium. This exchange increases the ability of the industry to price discriminate consumers according to their profiles and boosts the profitability of BBPD at the expense of consumers.
    Keywords: Price discrimination,Dynamic pricing,Privacy,Information sharing
    Date: 2015–10–28
  4. By: Jonathan D. Ketcham; Nicolai V. Kuminoff; Christopher A. Powers
    Abstract: We develop a structural model for bounding welfare effects of policies that alter the design of differentiated product markets when some consumers may be misinformed about product characteristics and inertia in consumer behavior reflects a mixture of latent preferences, information costs, switching costs and psychological biases. We use the model to analyze three proposals to redesign markets for Medicare prescription drug insurance: (1) reducing the number of plans, (2) providing personalized information, and (3) defaulting consumers to cheap plans. First we combine administrative and survey data to determine which consumers make informed enrollment decisions. Then we analyze the welfare effects of each proposal, using revealed preferences of informed consumers to proxy for concealed preferences of misinformed consumers. Results suggest that each policy produces large gains and losses for some consumers, but the menu reduction would unambiguously harm most consumers whereas personalized information would unambiguously benefit most consumers.
    JEL: D02 D61 D81 I11
    Date: 2016–10
  5. By: Hunold, Matthias; Laitenberger, Ulrich; Schlütter, Frank
    Abstract: We analyze the best price clauses (BPCs) of online travel agents (OTAs) using meta-search price data of more than 45,000 hotels in different countries. Although OTAs apparently have not changed their standard commission rates following the partial ban of BPCs in Europe, we find that BPCs do influence the pricing and availability of hotel rooms across online sales channels. In particular, the abolition of's narrow BPC is associated with the hotels' direct channel being the price leader more often. Moreover, hotels make rooms more often available at when it does not use the narrow BPC.
    Keywords: best price clauses,hotel booking,MFN,OTA,vertical restraints
    JEL: D40 L42 L81
    Date: 2016
  6. By: Stéphane Gauthier (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics); Fanny Henriet (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics)
    Abstract: We study optimal commodity taxes in the presence of non-linear income taxes when agents differ in skills and tastes for consumption. We show that commodity taxes are partly determined by a many-person Ramsey rule when there is taste heterogeneity within income classes. The usual role of consumption taxes in relaxing incentive constraints explains the remaining part of these taxes when there is taste heterogeneity between income classes. We quantify the importance of these two components on Canadian microdata using a new method to identify empirically the binding incentive constraints. Incentives matter but tax exemptions are mostly justified by Ramsey considerations.
    Keywords: taste heterogeneity, commodity taxes, income taxation, empirical tests for asymmetric information, social weights
    Date: 2016–01–07
  7. By: Garcia, Daniel; Janssen, Maarten
    Abstract: We study how a monopoly manufacturer optimally manages her contractual relations with retailers in markets with consumer search. By choosing wholesale prices, the manufacturer affects the degree of competition between retailers and the incentives of consumers to search. We show that depending on whether or not the manufacturer can commit to her price decisions and on the search cost, the manufacturer may be substantially better off choosing her wholesale prices not independent of each other, consciously allowing for asymmetric contracts. Thus, our analysis may shed light on when we may expect sales across different retailers to be positively or negatively correlated. Our model may be able to generate loss leaders at the wholesale level and show the rationale for creating ”premium resellers”.
    Keywords: Consumer Search, Retailing, Pricing
    JEL: D43 L13 M30
    Date: 2016–10–09
  8. By: Jacob Malone (University of Georgia, Department of Economics); Aviv Nevo (University of Pennsylvania, Department of Economics); Jonathan Williams (University of North Carolina - Chapel Hill, Department of Economics)
    Abstract: We exibly estimate demand for residential broadband accounting for congestion externalities that arise among consumers due to limited network capacity, as well as dynamics arising from nonlinear pricing. Our high frequency data permits insight into temporal patterns in usage across the day that are impacted by network congestion, and how usage responds to efforts to mitigate congestion. To estimate demand, we build a dynamic model of consumer choice and rely on variation in the timing of network upgrades and nonlinear pricing to identify the model. Using the model estimates, we calculate the welfare changes associated with different economic and technological solutions for reducing congestion, including peak-use pricing, throttling connectivity speeds, and local-cache technologies.
    Keywords: demand; broadband; congestion; peak-use pricing
    JEL: L11 L13 L96
    Date: 2016–09
  9. By: Leemore Dafny; Christopher Ody; Matthew Schmitt
    Abstract: Branded pharmaceutical manufacturers frequently offer "copay coupons'" that insulate consumers from cost-sharing, thereby undermining insurers' ability to influence drug utilization. We study the impact of copay coupons on branded drugs first facing generic entry between 2007 and 2010. To overcome endogeneity concerns, we exploit cross-state and cross-consumer variation in coupon legality. We find that coupons increase branded sales by 60+ percent, entirely by reducing the sales of bioequivalent generics. During the five years following generic entry, we estimate that coupons increase total spending by $30 to $120 million per drug, or $700 million to $2.7 billion for our sample alone.
    JEL: I11 L40 L65
    Date: 2016–10
  10. By: Renaud Vuignier (UNIL - Université de Lausanne)
    Abstract: Le présent article offre un aperçu systématique et complet de la littérature scientifique dédiée au domaine d’étude du marketing territorial et du branding territorial. 1172 contributions publiées entre 1976 et 2016 dans 98 revues différentes y sont analysées à l’aide d’un classement méticuleux dans des catégories et sous-catégories en fonction de l’approche disciplinaire, de la méthode utilisée et de la perspective adoptée. Cette revue de la littérature permet ainsi une vue d’ensemble détaillée de l’état de l’art et fait part des diverses tendances et évolutions concernant ce domaine d’étude en émergence.
    Keywords: revue de littérature, branding, territoire,Marketing territorial
    Date: 2016–04–30
  11. By: Renaud Vuignier (UNIL - Université de Lausanne)
    Abstract: This paper presents a systematic and complete overview of the scientific literature in the field of place marketing and place branding research. A total of 1172 articles published between 1976 and 2016 in 98 different journals were analyzed and meticulously classified into categories and subcategories according to disciplinary approach, method used and perspective adopted. This literature review thus provides a detailed overview of the state of the art and reveals various trends and developments in this emerging field of study. Among other things, it demonstrates that the field suffers from a lack of conceptual clarity, diverging definitions and a weak theoretical foundation, which means it addresses a very broad range of research topics. In addition, the field lacks empirical evidence and explanatory articles, meaning that the numerous hypotheses concerning the effects of place marketing activities on attractiveness remain unsubstantiated. The review also underscores the literature’s lack of interest in the political and institutional contexts of places, although this information is crucial in terms of public management. Moreover, this work notes that the rhetoric of consultants is given pride of place, with the publication of numerous prescriptive articles focused on sharing best practices. Finally, this study notes the existence of a significant number of critical articles.
    Keywords: public management,branding,marketing,place,public marketing,brand
    Date: 2016
  12. By: Benjamin J. Keys; Jialan Wang
    Abstract: Using a dataset covering one quarter of the U.S. general-purpose credit card market, we document that 29% of accounts regularly make payments at or near the minimum payment. We exploit changes in issuers' minimum payment formulas to distinguish between liquidity constraints and anchoring as explanations for the prevalence of near-minimum payments. Nine to twenty percent of all accounts respond more to the formula changes than expected based on liquidity constraints alone, representing a lower bound on the role of anchoring. Disclosures implemented by the CARD Act, an example of one potential policy solution to anchoring, resulted in fewer than 1% of accounts adopting an alternative suggested payment. Based on back-of-envelope calculations, the disclosures led to $62 million in interest savings per year, but would have saved over $2 billion per year if all anchoring consumers had adopted the new suggested payment. Our results show that anchoring to a salient contractual term has a significant impact on household debt.
    JEL: D14 G02 G21 G28
    Date: 2016–10
  13. By: Benjamin B. Bederson; Ginger Zhe Jin; Phillip Leslie; Alexander J. Quinn; Ben Zou
    Abstract: In 2011, Maricopa County, Arizona adopted voluntary restaurant hygiene grade cards (A, B, C, D). Using inspections results between 2007 and 2013, we show that only 58% of the subsequent inspections led to online grade posting. Although the disclosure rate in general declines with inspection outcome, higher-quality A restaurants are less likely to disclose than lower-quality As. After examining potential explanations, we believe the observed pattern is best explained by a mixture of signaling and countersignaling: the better A restaurants use nondisclosure as a countersignal, while worse As and better Bs use disclosure to stand out from the other restaurants.
    JEL: D82 H75 I18 L15 L81
    Date: 2016–10
  14. By: Ron Berman (Marketing Department, The Wharton School, University of Pennsylvania, 3730 Walnut St., Philadelphia, PA 19103, USA); Zsolt Katona (Marketing Department, Haas School of Business, University of California, Berkeley, 2220 Piedmont Ave., Berkeley, CA 94720, USA)
    Abstract: Curation algorithms are selection and ranking algorithms on social media that help consumers experience better content. These algorithms have been blamed in the past few years for the creation of “filter bubbles” and other phenomena in social media. We analyze a platform with producers and consumers of content to understand the impact of curation algorithms on the amount of friends each consumer has and the quality of content created by each producer. Our model takes into account both vertical and horizontal differentiation and analyzes three different types of algorithms. We find that without algorithmic curation, the number of friends a consumer has and the quality of cotent on the platform are strategic complements. When algorithmic curation is introduced, the resulting process makes consumers less selective in their choice of whom to follow. In equilibrium, producers of content receive lower payoffs because they enter into a prisoner’s dilema like contest. The quality of content on the platform may increase if the marginal cost of producing this quality is high enough but not too high. Both of these effects may result theoretically in more diverse content consumed by consumers, but in equilibrium we find that a few of the algorithms may reduce the horizontal distance of matched content, which may result in a filter bubble. We identify an algorithm that focuses on filtering low quality items that results in higher quality of content as well as higher diversity under specific conditions.
    Keywords: Social Media; Filtering; Ranking; Filter Bubble; Algorithmic Curation; Game Theory
    JEL: D85 D83 M31 L82 L86
    Date: 2016–09
  15. By: Simon Hedlin
    Abstract: In 2014, the United States Food and Drug Administration announced that chain restaurants with 20 or more locations would be required to put calorie labels on the menu. The merits of the policy depend in large part on three empirical issues: 1) if calorie labels help correct calorie under- or overestimation biases; 2) if the labels lead to changes in consumer behavior, which may improve physical health; and 3) if they have an impact on psychological health. This paper presents data from an online experiment (N = 1,323) in which participants were randomly presented with pictures of food and drink items from major fast-food companies either with or without calorie labels. The following findings are reported. First, there was calorie overestimation bias among participants, and the respondents thought, on average, that products contained more calories than was actually the case. Second, calorie labels both made participants perceive the products as healthier, and made them more likely to intend to purchase said items. Third, calorie labels did not have any discernible effects either on the expected utility from consuming the products, or on the participants? experienced well-being. Thus, while calorie labels did not appear to have any negative effects on psychological health, they did seem to correct a calorie overestimation bias, which may inadvertently improve the perceived healthiness of foods and beverages high in calories, and could also potentially lead consumers to buy more, rather than fewer, such products.
    Date: 2016–01
  16. By: Armona, Luis (Stanford University); Fuster, Andreas (Federal Reserve Bank of New York); Zafar, Basit (Federal Reserve Bank of New York)
    Abstract: Home price expectations are believed to play an important role in housing dynamics, yet we have limited understanding of how they are formed and how they affect behavior. Using a unique “information experiment” embedded in an online survey, this paper investigates how consumers’ home price expectations respond to past home price growth and how they impact investment decisions. After eliciting respondents’ initial beliefs about past and future local home price changes, we present a random subset of the respondents with factual information about past (one- or five-year) changes and then re-elicit expectations. This unique “panel” data allows us to identify causal effects of the information and provides insights on the expectation formation process. We find that, on average, year-ahead home price expectations are revised in a way consistent with short-term momentum in home price growth, though respondents tend to underpredict the strength of momentum. Revisions of longer-term expectations show that respondents do not expect the empirically occurring mean reversion in home price growth. These results are consistent with recent behavioral models of housing cycles. Finally, we present robust evidence of home price expectations impacting (actual and intended) housing-related behaviors, both in the cross section and within-individual.
    Keywords: housing; expectation formation; information; updating
    JEL: D84 G11 R21
    Date: 2016–10–19
  17. By: Herr, Annika; Suppliet, Moritz (Tilburg University, Center For Economic Research)
    Abstract: Health insurances curb price insensitive behavior and moral hazard of insureds through different types of cost-sharing, such as tiered co-payments or reference pricing. This paper evaluates the effect of newly introduced price limits below which drugs are exempt from co-payments on the pricing strategies of drug manufacturers in reference price markets. We exploit quarterly data on all prescription drugs under reference pricing available in Germany from 2007 to 2010. To identify causal effects, we use instruments that proxy regulation intensity. A difference-in-differences approach exploits the fact that the exemption policy was introduced successively during this period. Our main results first show that the new policy led generic firms to decrease prices by 5 percent on average, while brand-name firms increase prices by 7 percent after the introduction. Second, sales increased for exempt products. Third, we find evidence that differentiated health insurance coverage (public versus private) explains the identifed market segmentation.
    Keywords: pharmaceutical prices; cost-sharing; co-payments; reference pricing; regulation; firm behavior; health insurance
    JEL: I1 L11
    Date: 2016
  18. By: Michaella Morzuch; Sheila Hoag
    Abstract: The Cities Expanding Health Access for Children and Families (CEHACF) project was designed to capitalize on both cities’ responsibility for protecting the health and well-being of their residents and municipal leaders’ platform for engaging residents. The project’s overarching goal was to empower municipal leaders in competitively selected cities to partner with community stakeholders to find uninsured children already eligible for, but not enrolled in, public coverage available through Medicaid and CHIP—and, potentially, their adult parents who were newly eligible for Medicaid or marketplace coverage through ACA rules—and enroll them. Beginning in January 2013, CEHACF engaged selected cities on children’s coverage issues through a three-stage, competitive grant-making process.
    Keywords: Medicaid, CHIP, ACA, Cities, Outreach, Enrollment
    JEL: I
  19. By: Cécile Fonrouge (IRG - Institut de Recherche en Gestion - UPEM - Université Paris-Est Marne-la-Vallée - UPEC UP12 - Université Paris-Est Créteil Val-de-Marne - Paris 12)
    Abstract: Crowdfunding is an emerging form of entrepreneurial finance. Financial flows from migrants and their descendants to their homeland are important. Does crowdfunding platforms disrupt this diaspora financial flow? By studying this new literature and interviewing keys fintechs entrepreneurs of French platforms, we propose a unique description: Diasporas typologies, investment motivations that are applied to Diaspora and trends on business models evolution for this new digital industry. The main results are about the equilibrium between emotional and rational motivations for the new generation of migration; the cohabitation of " crowd pull " and
    Keywords: Crowdfunding,finance participative,entrepreneuriat ethnique,migration,start-up sociales,modèles d’affaires,rupture
    Date: 2015–10–30
  20. By: Eric Schmidbauer (University of Central Florida, Orlando, FL)
    Abstract: Each of n experts communicates with a principal about the privately observed quality of the expert's own project via cheap talk, with new independently drawn projects available each period until the principal adopts one. Even when experts are very biased in that they only receive a positive payoff if their own project is selected, we show that informative equilibria may exist, characterize the set of stationary equilibria, and nd the Pareto dominant symmetric equilibrium. Experts face a tradeoff between inducing acceptance now versus waiting for a better project should the game continue. When the future is more highly valued experts send more informative messages, increasing the average quality of an adopted project and resulting in a Pareto improvement, while communication is harmed and payoffs can decline when there is more competition between experts.
    Keywords: cheap talk, multiple senders, competition
    JEL: D23 D74 D82
    Date: 2016–10
  21. By: Michaella Morzuch; Sheila Hoag
    Abstract: The Cities Expanding Health Access for Children and Families (CEHACF) project was designed to capitalize on both cities’ responsibility for protecting the health and well-being of their residents and municipal leaders’ platform for engaging residents. The project’s overarching goal was to empower municipal leaders in competitively selected cities to partner with community stakeholders to find uninsured children already eligible for, but not enrolled in, public coverage available through Medicaid and CHIP—and, potentially, their adult parents who were newly eligible for Medicaid or marketplace coverage through ACA rules—and enroll them. Beginning in January 2013, CEHACF engaged selected cities on children’s coverage issues through a three-stage, competitive grant-making process.
    Keywords: Medicaid, CHIP, ACA, Cities, Enrollment, Outreach
    JEL: I
  22. By: Holger Herz; Dmitry Taubinsky
    Abstract: People's fairness preferences are an important constraint for what constitutes an acceptable economic transaction, yet little is known about how these preferences are formed. In this paper, we provide clean evidence that previous transactions play an important role in shaping perceptions of fairness. Buyers used to high market prices, for example, are more likely to perceive high prices as fair than buyers used to low market prices. Similarly, employees used to high wages are more likely to perceive low wages as unfair. Our data further allows us to decompose this history dependence into the effects of pure observation vs. the experience of payoff-relevant outcomes. We propose two classes of models of path-dependent fairness preferences—either based on endogenous fairness reference points or based on shifts in salience—that can account for our data. Structural estimates of both types of models imply a substantial deviation from existing history-independent models of fairness. Our results have implications for price discrimination, labor markets, and dynamic pricing.
    JEL: C9 D0 J0 L1
    Date: 2016–10
  23. By: Gaston Llanes (Pontificia Universidad Catolica de Chile, Escuela de Administracion, Vicuna Mackenna 4860, Macul, Santiago, Chile); Andrea Mantovani (Department of Economics, University of Bologna, Strada Maggiore 45, 40125 Bologna, Italy); Francisco Ruiz-Aliseda (Pontificia Universidad Catolica de Chile, Escuela de Administracion, Vicuna Mackenna 4860, Macul, Santiago, Chile)
    Abstract: We examine whether an incumbent active in a market with strong network effects can be challenged by an entrant already active in the market of a complementary good. When only the entrant benefits from such a complementarity in the network market, we find that it can conquer such a market if and only if the degree of complementarity is large enough. In such cases, the entrant may use the network good as a loss-leader so as to expand the market of the complementary good. When the incumbent's network good is enhanced too by the existence of the complementary good, we study if the entrant is better or worse off. Finally, we argue that, even though pure bundling may be an effective entry strategy and it may be socially desirable, it may be harmful for the entrant to use it.
    Keywords: network effects; complementarities; bundling; incumbency advantage; entry
    JEL: L13 L14 L41
    Date: 2016–09

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