nep-mkt New Economics Papers
on Marketing
Issue of 2017‒12‒11
nine papers chosen by
João Carlos Correia Leitão
Universidade da Beira Interior

  1. The Consumer Co-operatives in the Face of Large Retail Sector in Italy: a Case Study By Alberto Ianes; Andrea Leonardi
  2. Self-Control in the Retailing Industry: Inducing Rejection of Loyalty Schemes By Foschi, Matteo
  3. The Effects of a Day Off from Retail Price Competition: Evidence on Consumer Behavior and Firm Performance in Gasoline Retailing By Foros, Øystein; Nguyen-Ones, Mai; Steen, Frode
  4. Determinants of Online Word-of-Mouth: Evidence from Durable Goods Market By Sharapudinov, S.; Zezerova, V.; Storchevoy, M.
  5. The Value of Online Scarcity Signals By Courty, Pascal; Ozel, Sinan
  6. The Investor in Structured Retail Products: Marketing Driven or Gambling Oriented? By Margaria Abreu; Victor Mendes
  7. Cooperative Wineries and Wine Marketing in Spain By Francisco J. Medina-Albaladejo; Jordi Planas
  8. Fairness to dairy cows or fairness to farmers: What counts more in the preferences of conventional milk buyers for ethical attributes of milk? By Markova-Nenova, Nonka; Wätzold, Frank
  9. Price-Linked Subsidies and Health Insurance Markups By Sonia Jaffe; Mark Shepard

  1. By: Alberto Ianes; Andrea Leonardi
    Abstract: Over the 1950s and 1960s, most European consumer cooperative movements experimented with new strategies with a view to facing the emerging large and organized food distribution chains. The strategies varied significantly depending on the national contexts. According to Espen Ekberg’s classification, we can identify three main models: the federal model, the hybrid model, and the centralized model. Based on this classification, Italy developed a federal model, where regional or inter-regional cooperatives centralize their purchases in a nation-wide body named Coop Italia pursuing common marketing strategies, and sell, among other products, also products distinguished by the Coop brand. The Trentino coop movement, while remaining well- connected with the national network, has continued to experiment with extremely interesting local initiatives. Differently from the other Italian provinces that are distinguished by a sole coop provincial entity, this model relies on a variety of small cooperatives, which are rooted in local territories and succeed in developing trust relations with the local population.
    Date: 2016
  2. By: Foschi, Matteo (European University Institute)
    Abstract: When consumers register with loyalty schemes, or open a `customer account', offered by large retailers, they allow retailers to study their purchasing behaviour over time. Via personalised offers and discounts, retailers can then use this information to price discriminate. I study the effect on consumer welfare of this discrimination, assuming several different levels of informativeness within the schemes. When schemes are uninformative about consumer preferences they are certain to hurt consumer surplus. When they are fully or partially informative, an increase in aggregate consumer surplus can take place under some conditions. Pareto Improvements are never possible. The model studies groceries and online industries where temptation and self-control are an issue.
    Keywords: Individual Pricing ; Consumer Tracking ; Price Discrimination ; Impulse Purchasing, Self-Control ; Loyalty Schemes ; Hard Evidence. JEL Classification numbers: D21 ; D42 ; D43 ; D82 ; D86 ; L11 ; L81
    Date: 2017
  3. By: Foros, Øystein; Nguyen-Ones, Mai; Steen, Frode
    Abstract: First, we analyze how regular days off from competition and a time-dependent price pattern affect firm performance. Second, we examine the effects on firms' profitability from consumers' changing search- and timing behavior. We use microdata from gasoline retailing in Norway. Since 2004, firms have practiced an industry-wide day off from competition, starting on Mondays at noon, by increasing prices to a common level given by the recommended prices (decided and published in advance). In turn, a foreseeable low-price window is open before every restoration. During the data period, we observe an additional weekly restoration on Thursdays at noon. The additional day off from competition increases firm performance. As expected, a conventional price search of where to buy reduces firms' profitability. In contrast, consumers who are aware of the cycle and spend effort on when to buy have a positive impact on firms' profitability. If consumers spend effort on when to buy, they attempt to tank during low price windows. By its very nature, this shrink consumers' ability to compare prices at several outlets. Consequently, more attention to when to buy may soften price competition.
    Keywords: firm performance; Gasoline markets; Pricing cycles
    JEL: D22 L25 L42 L81
    Date: 2017–12
  4. By: Sharapudinov, S.; Zezerova, V.; Storchevoy, M.
    Abstract: Online reviews became one of the most effective tools that influence consumer behavior and level of sales. In this paper we consider determinants of online review rating. The study is based on more than three thousand online reviews from Russian consumers of durable goods (electronics and home appliances). It was found that there is a significant difference in the level of influence between new and old reviews. Moreover, the higher the total numbers of reviews available, the higher the number of reviews taken into account by a particular consumer. Another finding is that both average online rank and price of a product are positively correlated with variance of reviews on that product. Based on the differences in the effectiveness of information transmission about quality of products, products were divided into two categories: "experience" products and "search" products. At the last stage, we provide an econometric model that allows to explain not only dynamic but also the direction of consumers’ rank of a product.
    Keywords: word-of-mouth marketing, online word-of-mouth, online reviews, search and experience products, user behavior,
    Date: 2017
  5. By: Courty, Pascal; Ozel, Sinan
    Abstract: Online retailers use scarcity cues to increase sales. Many fear that these pressure tactics are meant to manipulate behavioral biases by creating a sense of urgency. At the same time, scarcity cues could also convey valuable information. We measure the value of the scarcity messages posted by Expedia to a Bayesian rational consumer. A signal reveals information on the number of seats available at the posted price. Consumers can use this information to optimally time when they purchase a ticket. The maximum increase in expected utility for a naive consumer, who does not use publicly available information, is 8 percent. For a sophisticated consumer, the increase is between 4-7 percent. Scarcity signals have a negligible impact on seller revenue and consumption.
    Keywords: Airline Ticket.; Online Recommendations; Persuasion; price discrimination; Scarcity
    JEL: L1
    Date: 2017–12
  6. By: Margaria Abreu; Victor Mendes
    Abstract: Structured retail products (SRP) are one of the most visible faces of financial innovation and are becoming increasingly popular amongst retail investors. However, there is strong consensus that retail investors’ preference for structured products is difficult to explain using the standard rational theory, those products being in general sold at a significant premium. Studying the actual trading behavior of individual investors we provide evidence consistent with the view that SRP likely offer value to some informed investors compared to other products, that product complexity is a way to complete markets and that SRP allow investors to access segments otherwise not available to them. Nonetheless, our results also suggest that the increasing popularity of SRP is deeply related to investors’ behavioral biases, particularly overconfidence and gambling. Moreover, results also show that SRP trading activity cannot be dissociated from aggressive marketing practices. Key Words: structured retail products; behavioral finance; overconfidence; gambling; marketing
    JEL: G02 G11 G12
    Date: 2017–11
  7. By: Francisco J. Medina-Albaladejo (Universitat de València, València, Spain); Jordi Planas (Universitat de Barcelona, Barcelona, Spain)
    Abstract: Cooperative wineries emerged with a double objective: on the one hand, the common production ofwine, to reduce production costs and at the same time to increase the quality of the product; on the other hand, the common sale of wine, with a reduction of intermediaries and an improvement of the position of winegrowers in the marketing process. Both objectives had to lead to a higher remuneration for the product and, consequently, for producers’ income. In the wine sector producers were mainly small family farmers who faced a context of tendential fall in wine prices and, consequently, a decrease in their income. If the advantages of winemaking in common seem obvious, success in the second objective seems more doubtful. In this article we want to analyze the marketing of wine in Spain through the cooperative wineries: What was their role in the wine trade? What types of sales did they adopt and why? How did they adapt to changes in the wine consumption patterns?
    Keywords: Cooperative Wineries, Wine Trade, Twentieth Century, Spain
    JEL: L66 N84 Q13
    Date: 2017–12
  8. By: Markova-Nenova, Nonka; Wätzold, Frank
    Abstract: We investigate the willingness-to-pay (WTP) of German conventional milk buyers for ethical attributes of milk production through a choice experiment. Respondents have the highest WTP for animal welfare – free-stall plus summer pasture – followed by biodiversity conservation, support for small, below-average-income farms, and regional milk production. Respondents also have a positive WTP to support all farms but only in combination with regional production. We further find a positive WTP to support small farms in combination with tethering. This implies animal-welfare concerns are somewhat counterbalanced by fairness aspects. Our insights may support developing labels for ethical aspects of milk production.
    Keywords: dairy production, ethical attributes, fairness, choice modelling, latent class model, biodiversity, grassland
    JEL: Q13 Q18 Q5 Q51 Q57
    Date: 2017–12–01
  9. By: Sonia Jaffe (Becker Friedman Institute For Research in Economics); Mark Shepard (Harvard University)
    Abstract: Subsidies in many health insurance programs depend on prices set by competing insurers – as prices rise, so do subsidies. We study the economics of these “price-linked” subsidies compared to “fixed” subsidies set independently of market prices. We show that price-linked subsidies weaken competition, leading to higher markups and raising costs for the government or consumers. However, price-linked subsidies have advantages when insurance costs are uncertain and optimal subsidies increase as costs rise. We evaluate this tradeoff empirically using a model estimated with administrative data from Massachusetts’ health insurance exchange. Relative to fixed subsidies, price-linking increases prices by up to 6% in a market with four competitors, and about twice as much when we simulate markets with two insurers. For levels of cost uncertainty reasonable in a mature market, we find that the losses from higher markups outweigh the benefits of price-linking.
    Keywords: health insurance, health care pricing
    JEL: I11 I13 L11
    Date: 2017–11

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