nep-mkt New Economics Papers
on Marketing
Issue of 2017‒05‒21
eight papers chosen by
João Carlos Correia Leitão
Universidade da Beira Interior

  1. Interpreting the impact of explanatory variables in compositional models By Morais, Joanna; Thomas-Agnan, Christine; Simioni, Michel
  2. Multiproduct retailing and buyer power: The effects of product delisting on consumer shopping behavior By Jorge Florez-Acosta; Daniel Herrera-Araujo
  3. Using compositional and Dirichlet models for market-share regression By Morais, Joanna; Thomas-Agnan, Christine; Simioni, Michel
  4. Does marketing widen borders? Cross-country price dispersion in the European car market By Dvir, Eyal; Strasser, Georg
  5. Mining Media Topics Perceived as Social Problems by Online Audiences: Use of a Data Mining Approach in Sociology By Oleg S. Nagornyy; Olessia Y. Koltsova
  6. Economies of Density in E-Commerce: A Study of Amazon’s Fulfillment Center Network By Jean-François Houde; Peter Newberry; Katja Seim
  7. Information, Switching Costs, and Consumer Choice: Evidence from Two Randomized Field Experiments in Swedish Primary Health Care By Anell, Anders; Dietrichson, Jens; Ellegård, Lina Maria; Kjellsson, Gustav
  8. Capital as Power in the Creative Industries: A Case Study of Freelance Creative Work in the Netherlands By Pitts, Frederick Harry

  1. By: Morais, Joanna; Thomas-Agnan, Christine; Simioni, Michel
    Abstract: Regression models have been developed for the case where the dependent variable is a vector of shares. Some of them, from the marketing literature, are easy to interpret but they are quite simple and can only be complexified at the expense of a very large number of parameters to estimate. Other models, from the mathematical literature, are called compositional regression models and are based on the simplicial geometry (a vector of shares is called a composition, shares are components, and a composition lies in the simplex). These models are transformation models: they use a log-ratio transformation of shares. They are very flexible in terms of explanatory variables and complexity (component-specific and cross-effect parameters), but their interpretation is not straightforward, due to the fact that shares add up to one. This paper combines both literatures in order to obtain a performing market-share model allowing to get relevant and appropriate interpretations, which can be used for decision making in practical cases. For example, we are interested in modeling the impact of media investments on automobile manufacturers sales. In order to take into account the competition, we model the brands market-shares as a function of (relative) media investments. We furthermore focus on compositional models where some explanatory variables are also compositional. Two specifications are possible: in Model A, a unique coefficient is associated to each compositional explanatory variable, whereas in Model B a compositional explanatory variable is associated to component-specific and cross-effect coefficients. Model A and Model B are estimated for our application in the B segment of the French automobile market, from 2003 to 2015. In order to enhance the interpretability of these models, we present different types of impact assessment measures (marginal effects, elasticities and odds ratios) and we show that elasticities are particularly useful to isolate the impact of an explanatory variable on a particular share. We show that elasticities can be equivalently computed from the transformed model and from the model in the simplex and that they are linked to directional C-derivatives of simplex-valued function of a simplex variable. Direct and cross effects of media investments are computed for both models. Model B shows interesting non-symmetric synergies between brands, and Renault seems to be the most elastic brand to its own media investments. In order to determine if component-specific and cross-effect parameters are needed to improve the quality of the model (Model B) or if a global parameter is reasonable (Model A), we compare the goodness-of-fit of the two models using (out-of-sample) quality measures adapted for share data.
    Keywords: Elasticity, odds ratio, marginal effect, compositional model, compositional differential calculus, market-shares, media investments impact
    JEL: C10 C25 C35 C46 D12 M31
    Date: 2017–05
  2. By: Jorge Florez-Acosta (Universidad del Rosario - Universidad del Rosario); Daniel Herrera-Araujo (PSE - Paris-Jourdan Sciences Economiques - ENS Paris - École normale supérieure - Paris - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics)
    Abstract: This paper empirically examines the effects of product delisting on consumer shopping behavior in a context of grocery retailing by large multiproduct supermarket chains. A product is said to be delisted when a supermarket stops supplying it while it continuous being sold by competing stores. We develop a model of demand in which consumers can purchase multiple products in the same period. Consumers have heterogeneous shopping patterns: some find it optimal to concentrate purchases at a single store while others prefer sourcing several separate supermarkets. We account for this heterogeneity by introducing shopping costs, which are transaction costs of dealing with suppliers. Using scanner data on grocery purchases by French households in 2005, we estimate the parameters of the model and retrieve the distribution of shopping costs. We find a total shopping cost per store sourced of 1.79 e on average. When we simulate the delisting of a product by one supermarket, we find that customers’ probability of sourcing that store decreases while the probability of sourcing competing stores increases. The reduction in demand is considerably larger when consumers have strong feelings of loyalty for the delisted brand. This suggests that retailers may be hurting themselves, and not only manufacturers, when they delist a product. However, when customers are loyal to the store, such effects are lower, suggesting that inducing store loyalty in customers (through strong private labels and loyalty programs, for example) appears to have an effect on vertical negotiations and, in particular, it enables powerful retailers to impose vertical restraints on manufacturers.
    Keywords: Grocery retailing, supermarket chains, buyer power, vertical,restraints, product delisting, shopping costs, one-and multistop shopping,Simulated Maximum likelihood, D12, L13, L22, L81
    Date: 2017–02
  3. By: Morais, Joanna; Thomas-Agnan, Christine; Simioni, Michel
    Abstract: When the aim is to model market-shares as a function of explanatory variables, the marketing literature proposes some regression models which can be qualified as attraction models. They are generally derived from an aggregated version of the multinomial logit model widely used in econometrics for discrete choice modeling. But aggregated multinomial logit models (MNL) and the so-called market-share models or generalized multiplicative competitive interaction models (GMCI) present some limitations: in their simpler version they do not specify brand-specific and cross-effect parameters. Introducing all possible cross effects is not possible in the MNL and would imply a very large number of parameters in the case of the GMCI. In this paper, we consider alternative models which are the Dirichlet covariate model (DIR) and the compositional model (CODA). DIR allows to introduce brand-specific parameters and CODA allows additionally to consider cross-effect parameters. We show that these last two models can be written in a similar fashion, called attraction form, as the MNL and the GMCI models. As market-share models are usually interpreted in terms of elasticities, we also use this notion to interpret the DIR and CODA models. We compare the main properties of the models in order to explain why CODA and DIR models can outperform traditional market-share models. The benefits of highlighting these relationships is on one hand to propose new models to the marketing literature and on the other hand to improve the interpretation of the CODA and DIR models using the elasticities of the econometrics literature. Finally, an application to the automobile market is presented where we model brands market-shares as a function of media investments, controlling for the brands average price and a scrapping incentive dummy variable. We compare the goodness-of-fit of the various models in terms of quality measures adapted to shares.
    Keywords: Multinomial logit; Market-shares models; Compositional data analysis; Dirichlet regression.
    JEL: C10 C25 C35 C46 D12 M31
    Date: 2017–05
  4. By: Dvir, Eyal; Strasser, Georg
    Abstract: We study cross-country price differences in the European market for new passenger cars based on detailed pricing and technical data. Car prices in Europe converged until the year 2003, but not thereafter. Within the EU 15 countries the price range of the median model in 2004 was close to 20 percent. We document a source of international price differentiation, which is not related to distribution and border costs, but instead systematically linked to product features. Price dispersion increases with the market segment and varies significantly across models. Marketing appears to position identical goods differently in each country, for example by feature bundles tailored to local consumer preferences. Both the convergence before the actual reduction of barriers to arbitrage and the systematic international price differentiation by product feature point to active pricing-to-market strategies that treat countries as marketing regions. JEL Classification: F15, F31, L11, L62, D22
    Keywords: arbitrage, European car market, international price dispersion, law of one price, market segmentation
    Date: 2017–05
  5. By: Oleg S. Nagornyy (National Research University Higher School of Economics); Olessia Y. Koltsova (National Research University Higher School of Economics)
    Abstract: Media audiences that represent a significant part of a county’s public may hold opinions on media-generated definitions of social problems different from those of media professionals. The proliferation of user-generated content makes such opinions available, but simultaneously demands new automatic methods of analysis that media scholars still have to master. In this paper, we show how topics regarded as problematic by media consumers may be revealed and analyzed by social scientists with a combination of data mining methods. Our dataset consists of 33,877 news items and 258,121 comments from a sample of regional newspapers. With a number of new, but simple indices we find that issue salience in media texts and its popularity with audience diverge. We conclude that our approach can help communication scholars effectively detect both popular and negatively perceived topics as good proxies of social problems
    Keywords: social problem, online media, topic modeling, sentiment analysis, Russia
    JEL: Z
    Date: 2017
  6. By: Jean-François Houde; Peter Newberry; Katja Seim
    Abstract: We examine the economies of density associated with the expansion of Amazon’s distribution network from 2006 to 2018. We demonstrate that, in placing a fulfillment center in a new state, Amazon faces a trade-off between the revenue implications of exposing local customers to sales tax on their purchases and the cost savings from reducing the shipping distance to those customers. Using detailed data on online transactions, we estimate a model of demand for retail goods and show that consumers’ online shopping is sensitive to sales taxes. We then use the demand estimates and the spatial distribution of consumers relative to Amazon’s fulfillment centers to predict revenues and shipping distances under the observed fulfillment center roll-out and under counterfactual roll-outs over this time period. Using a moment inequalities approach, we infer the cost savings from being closer to customers that render the observed network roll-out optimal. We find that Amazon saves between $0.17 and $0.47 for every 100 mile reduction in the distance of shipping goods worth $30. In the context of its distribution network expansion, this estimate implies that Amazon has reduced its total shipping cost by over 50% and increased its profit margin by between 5 and 14% since 2006. Separately, we demonstrate that prices on Amazon have fallen by approximately 40% over the same period, suggesting that a significant share of the cost savings have been passed on to consumers.
    JEL: H71 L23 L81
    Date: 2017–04
  7. By: Anell, Anders (Department of Business Administration, Lund University); Dietrichson, Jens (The Danish National Centre for Social Research (SFI)); Ellegård, Lina Maria (Department of Economics, Lund University); Kjellsson, Gustav (Department of Economics, University of Gothenburg)
    Abstract: Consumers of services that are financed by a third party, such as publicly financed health care or firm-sponsored health plans, are often allowed to freely choose provider. The rationale is that consumer choice may improve the matching of consumers and providers and spur quality competition. Such improvements are contingent on consumers having access to comparative information about providers and acting on this information when making their choice. However, in the presence of information frictions and switching costs, consumers may have limited ability to find suitable providers. We use two large-scale randomized field experiments in primary health care to examine if the choice of provider is affected when consumers receive comparative information by postal mail and small costs associated with switching are reduced. The first experiment targeted a subset of the general population in the Swedish region Skåne, and the second targeted new residents in the region, who should have less prior information and lower switching costs. In both cases, the propensity to switch provider increased significantly after the intervention. The effects were larger for new residents than for the general population, and were driven by individuals living reasonably close to alternative providers.
    Keywords: Consumer choice; Information; Switching costs; Primary health care; Field experiments
    JEL: D83 I11 I18
    Date: 2017–05–17
  8. By: Pitts, Frederick Harry
    Abstract: Using Nitzan and Bichler’s understanding of the dissonant relationship between creativity and power and business and industry, this paper investigates the rhythms of freelance creative work. It reports findings from interviews conducted with freelancers working in the Dutch creative industries. The findings suggest that freelancers enjoy more responsibility and autonomy than formal employees. But this autonomy represents a risk that their clients must manage. Different client relationships, and the proximity they imply, produce different rhythms. The research explores freelancers’ experiences of these rhythms in graphic design, advertising and branding. The research begins from the premise that risk and responsibility are both assumed and apportioned as a function of relationships of power and discipline in the sphere of work. Freelancers are agents of the management of these two interrelated categories. They are subject to the competing rhythms implied by the relation between these two categories. With reference to these rhythms, the research draws upon Nitzan and Bichler’s theory of ‘capital as power’ as an analytical tool. Nitzan and Bichler develop a conceptualisation of the tension between ‘industry’ and ‘business’. This explains how the latter sabotages the creativity of the former. This produces a ‘dissonance’ between the two. This dissonance is the productive driving force of capital accumulation. Applying this to the relationship of risk and responsibility in freelance creative work, I explore how these differing rhythms manifest. The conflict between the freedom to be creative and the management of creativity is not a deficiency of creative production. Rather, it is its moving principle.
    Date: 2016

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