nep-mkt New Economics Papers
on Marketing
Issue of 2016‒11‒20
eleven papers chosen by
João Carlos Correia Leitão
Universidade da Beira Interior

  1. De-targeting: advertising an assortment of products to loss-averse consumers By Karle, Heiko; Peitz, Martin
  2. Responding to consumers’ preference in African rice markets: experiences of Africa Rice Center By Anonymous
  3. Cost-Sharing and Drug Pricing Strategies : Introducing Tiered Co-Payments in Reference Price Markets By Herr, Annika; Suppliet, Moritz
  4. Consumer willingness to pay for rice fragrance: Evidence from Senegal By Diagne, Mandiaye; Demont, Matty; Ndour, Maimouna
  5. Identifying Price-Leadership Structures in Oligopoly By Paul W. Dobson; Sang-Hyun Kim; Hao Lan
  6. Platforms and network effects By Belleflamme, Paul; Peitz, Martin
  7. Payment behaviour: the role of socio-psychological factors By Carin van der Cruijsen; Frank van der Horst
  8. Sourcing Co-Created Products: Should your Suppliers Collaborate? By Dinah Cohen-Vernik; Oksana Loginova; Niladri B. Syam
  9. How exporters set prices: evidence from a large behavioural survey By Parker, Miles
  10. A Leverage Theory of Tying in Two-Sided Markets By CHOI, Jay Pil; JEON, Doh-Shin
  11. Global Kids Online: research synthesis 2015-2016 By Jasmina Byrne; Daniel Kardefelt-Winther; Sonia Livingstone; Mariya Stoilova

  1. By: Karle, Heiko; Peitz, Martin
    Abstract: We consider product markets in which consumers are interested only in a specific product category and initially do not know which product category matches their tastes. Using sophisticated tracking technologies, an intermediary can make inferences about a consumer’s preferred product category and offer advertising firms the possibility to target their ads to match the consumer’s taste. Such targeting reduces overall advertising costs and, as a direct effect, increases industry profits. However, as we show in this paper, when consumers form reference prices and are loss averse, more precise targeting may intensify competition between firms. As a result, firms may earn higher profits from “de-targeted” advertising; i.e., when the intermediary deliberately informs about some products and their price quotes from outside a consumer’s preferred product category.
    Keywords: Targeted advertising , Informative advertising , Consumer loss aversion , Reference prices , Contextual inference , Consumer recognition , Behavioral industrial organization
    JEL: L13 D43 M3
    Date: 2016
  2. By: Anonymous
    Abstract: The main objective of this study is to decrypt Africa Rice Center (AfricaRice) research for development strategies implemented to respond to consumers preferences for rice in sub-Sahara Africa. To achieve this, the study adopted case studies evidences and experimental approaches 1) to provide insight on urban consumers’ preferences for rice (local and imported rice) in relation to their willingness to pay and 2) to illustrate with the key value addition strategies implemented by AfricaRice to response to consumers demand in term of quality and attractiveness of rice products in Africa. The results of the decryption show that rice varieties grown locally in many African countries have good organoleptic and nutritional attributes that meet urban consumers’ preference if properly processed and branded. The out-scaling of the improved GEM rice processing plants developed by AfricaRice is not only playing a significant role in the upgrading of the quality of locally produced rice, but it is also beginning to improve the urban consumers’ acceptability of locally produced rice.
    Keywords: Consumers’ preference, women-friendly parboiling technologies, branding and packaging, local rice, sub-Saharan Africa, Consumer/Household Economics, Marketing, Research and Development/Tech Change/Emerging Technologies,
    Date: 2016–09
  3. By: Herr, Annika; Suppliet, Moritz
    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
  4. By: Diagne, Mandiaye; Demont, Matty; Ndour, Maimouna
    Abstract: In response to increasing urban consumer demand for fragrant rice, rice breeders have developed local, fragrant rice varieties in Senegal. We assess the drivers of demand for rice fragrance by eliciting urban consumers’ willingness to upgrade non-fragrant to fragrant rice and willingness to pay (WTP) for domestic versus imported fragrant rice. We conducted experimental auctions with 120 urban consumers in Dakar and analyzed WTP for rice fragrance through a double hurdle model. The results indicate that variables such as ethnicity, household size, and awareness of fragrance and local fragrant rice significantly affect consumers’ willingness to upgrade non-fragrant to fragrant rice. Urban consumers with positive buying intentions towards domestic fragrant rice are very likely to buy it and pay price premiums of 64 FCFA/kg. However local fragrant rice is slightly discounted compared to imported fragrant Thai Hom Mali rice. Our findings suggest that there is an important market for domestic fragrant rice in Dakar and that local rice is competitive with imported rice on that urban market.
    Keywords: fragrant rice, experimental auction, willingness to pay, value chain, Senegal, Consumer/Household Economics, Demand and Price Analysis, Food Consumption/Nutrition/Food Safety,
    Date: 2016–09
  5. By: Paul W. Dobson (University of East Anglia); Sang-Hyun Kim (University of East Anglia); Hao Lan (University of East Anglia)
    Abstract: Oligopoly can give rise to complex patterns of price interaction and price adjustment. While firms in oligopolistic markets may divide into price leaders and price followers, it is not inconceivable that some may take on dual roles, being a leader to one group but a follower to a different group. Thus who leads and who is led can be complicated and hierarchical. To help disentangle such pricing relationships, this paper develops a method to empirically identify price-leadership structures in n-firm oligopolistic markets by generalizing the duopoly method proposed by Seaton and Waterson (2013). Applying the method to UK food retailing industry, our analysis finds that it has a three-tier structure in which the two largest players (Tesco and Asda), tend to price-lead other retailers, while the other two of the Big 4 major chains (Sainsbury and Morrisons) play both follower (to the top two) and leader (to the smaller, premium/convenience positioned supermarket chains).
    Keywords: Price leadership, oligopolistic markets, UK food retailing industry
    JEL: D43 L13 L41 L81
    Date: 2016–11
  6. By: Belleflamme, Paul; Peitz, Martin
    Abstract: In many markets, user benefits depend on participation and usage decisions of other users giving rise to network effects. Intermediaries manage these network effects and thus act as platforms that bring users together. This paper reviews key findings from the literature on network effects and two-sided platforms. It lays out the basic models of monopoly platforms and platform competition, and elaborates on some routes taken by recent research.
    Keywords: Network effects , digital platforms , two-sided markets , tipping , platform competition , intermediation , pricing , imperfect competition
    JEL: D43 L13 L86
    Date: 2016
  7. By: Carin van der Cruijsen; Frank van der Horst
    Abstract: This research examines the effects of socio-psychological factors on consumers' payment behaviour. Based on insights from the socio-psychological and payment literature we build a theoretical model of payment behaviour. We test this model empirically by focussing on the choice between cash and electronic payments, and by using the outcomes of two specially constructed surveys of a representative panel of Dutch consumers. We are significantly better able to explain payment behaviour than traditional payment models. Moreover, we provide useful insights for those who want to understand and steer payment behaviour. Consumers' payment attitudes depend on perceptions of attributes, such as safety and acceptance. Together with social norms, roles, emotions, and perceived control, these attitudes drive payment intentions. Although payment intentions are the key determinant of payment behaviour, payment habits also play an important role in explaining how consumers pay.
    Keywords: payment behaviour; attitude; intention; socio-psychological model; consumer survey; habit; social norms; personal norm; role; control; emotions
    JEL: D14 D11 D03 Z13
    Date: 2016–11
  8. By: Dinah Cohen-Vernik (Department of Marketing, Jones Graduate School of Business, Rice University); Oksana Loginova (Department of Economics, University of Missouri); Niladri B. Syam (Department of Marketing, Trulaske College of Business, University of Missouri)
    Abstract: We investigate the phenomenon of sourcing co-created products. Specifically, we study how a multi-product downstream firm should source from the upstream market, that is single-source versus multi-source, in a situation where the products are co-created with the suppliers. In business-to-business markets it is increasingly common for downstream firms to co-create the products with the help of their suppliers, and we contribute to the literature on sourcing strategies by incorporating product co-creation. We also model whether the downstream firm should establish a collaborative environment for it suppliers, and this is novel to the literature. Finally, we compare the sourcing strategies for co-created products with the case when the downstream firm makes a straight purchase. We find that the downstream firm may be worse off when the upstream suppliers collaborate, unless the cross-effect of its and its suppliers' investments is very large. Importantly, we derive this result for a completely general cost function. We have considered a very rich strategy space for the firm's sourcing strategy, which includes, (a) co-creation or straight purchase, (b) single-sourcing or multi-sourcing, and (c) collaboration or no collaboration in the case of multi-source co-creation. We find that for an additively separable cost function, the downstream firm's optimal strategy is multi-source co-creation without collaboration. An important economic force that our analysis has uncovered is that single-sourcing of co-created products completely destroys the downstream firm's incentives to invest in co-creation. This result too has been derived for a completely general cost function, and thus we also contribute to the economics literature on holdup, which has not considered co-created products. This economic force is instrumental in ensuring that multi-sourcing dominates single-sourcing. Finally, we find that the incentives of the downstream firm to multi-source are stronger for co-created products than for straight purchase of standard products. Since the downstream firm internalizes some of the production in the case of co-created products, reducing its dependence on suppliers, one might speculate that the incentives to multi-source may be less for co-created products. Counter-intuitively, we show that the incentives to multi-source are even stronger, and are driven by endogenous investments of the firms.
    Keywords: co-creation, sourcing strategy, collaboration, holdup, game theory
    JEL: C72 D4 L1 M31
    Date: 2016–11–08
  9. By: Parker, Miles
    Abstract: This paper uses a survey of 1281 New Zealand exporters to investigate the role of firm characteristics in setting export prices. Larger, and more productive firms, are more likely to differentiate prices across markets. Primary sector firms are more likely to price to market than firms in other sectors, even taking into account other firm characteristics. This contrasts sharply with the commonly-held view that the price of these products is determined on the international market. In a further contribution to the literature, we find that service sector firms can also price to market, at similar rates to manufacturers. JEL Classification: E30, F31, F41
    Keywords: export pricing, invoicing, pricing to market, survey
    Date: 2016–11
  10. By: CHOI, Jay Pil; JEON, Doh-Shin
    Abstract: Motivated by the recent antitrust investigations concerning Google, we develop a leverage theory of tying in two-sided markets. In a setting where the "one monopoly profit result" holds otherwise, we uncover a new channel through which tying allows a monopolistic firm in one market to credibly leverage its monopoly power to another competing market if the latter is two-sided. In the presence of the nonnegative price constraint, tying provides a mechanism to circumvent the constraint in the tied product market without inviting an aggressive response by the rival firm. We identify conditions under which tying in two-sided markets is promotable and explore its welfare implications. In addition, we show that our model can be applied more widely to any markets in which sales to consumers in one market can generate additional revenues that cannot be competed away due to non-negative price constraints.
    Keywords: Tying, Leverage of monopoly power, Two-sided markets, Zero pricing,, Non-negative pricing constraint
    JEL: D4 L1 L5
    Date: 2016–11
  11. By: Jasmina Byrne; Daniel Kardefelt-Winther; Sonia Livingstone; Mariya Stoilova
    JEL: L91 L96
    Date: 2016–11

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