nep-mkt New Economics Papers
on Marketing
Issue of 2018‒01‒08
seven papers chosen by
João Carlos Correia Leitão
Universidade da Beira Interior

  1. How well does consumer-based brand equity align with sales-based brand equity and marketing mix response? By Datta, Hannes; Ailawadi, Kusum L.; van Heerde, H.J.
  2. Advertising’s Long-Term Impact on Brand Price Elasticity Across Brands and Categories By Vanhuele, Marc; Ataman, Berk; Pauwels, Koen; Srinivasan, Shuba
  3. Salience and Online Sales: The Role of Brand Image Concerns By Markus Dertwinkel-Kalt; Mats Köster
  4. Multiproduct Intermediaries and Optimal Product Range By Rhodes, Andrew; Watanabe, Makoto; Zhou, Jidong
  5. Dynamic competition in deceptive markets By JOHNEN, Johannes
  6. Inverse Reinforcement Learning for Marketing By Igor Halperin
  7. Exploring the effect of monetary incentives on user behavior in Online Sharing Platforms By Lu, Yixin; Ou, Carol; Angelopoulos, Spyros

  1. By: Datta, Hannes (Tilburg University, School of Economics and Management); Ailawadi, Kusum L.; van Heerde, H.J. (Tilburg University, School of Economics and Management)
    Abstract: Brand equity is the differential preference and response to marketing effort that a product obtains because of its brand identification. Brand equity can be measured based on either consumer perceptions or on sales. Consumer-based brand equity (CBBE) measures what consumers think and feel about the brand, whereas sales-based brand equity (SBBE) is the brand intercept in a choice or market share model. This paper studies the extent to which CBBE manifests itself in SBBE and marketing mix response using ten years of IRI scanner and Brand Asset Valuator (BAV) data for 290 brands spanning 25 packaged good categories. It uncovers a fairly strong positive association of SBBE with three dimensions of CBBE – Relevance, Esteem, and Knowledge – but a slight negative correspondence with the fourth dimension, Energized Differentiation. It also reveals new insights on the category characteristics that moderate the CBBE-SBBE relationship, and documents a more nuanced association of the CBBE dimensions with response to the major marketing mix variables than heretofore assumed. Implications are discussed for academic researchers who predict and test the impact of brand equity, for market researchers who measure it, and for marketers who want to translate their brand equity into marketplace success.
    Date: 2017
  2. By: Vanhuele, Marc; Ataman, Berk; Pauwels, Koen; Srinivasan, Shuba
    Abstract: Advertising often aims at creating and reinforcing brand differentiation, which should translate into reduced price competition. Currently unknown are the boundary conditions for long-term advertising benefits, the route through which advertising effects materialize, and the role of competitive advertising in the category. The authors develop a Hierarchical Dynamic Linear Model that links own and others’ advertising in the category to brand price elasticity directly and indirectly through their impact on own and competitive mindset metrics. The model accommodates dynamic dependencies in mindset metrics, controls for endogeneity in marketing, captures competitive reactions and performance feedback in marketing, and explains cross-sectional variation as a function of brand and category characteristics. Model estimation on seven years of data for 350 brands in 39 categories shows that both own and all competitive advertising in the category lower price sensitivity for the average brand, both directly and through advertising awareness. The attenuation of price sensitivity is more pronounced for niche brands in complex and more expensive categories, with higher concentration and purchase frequency. A financial simulation based on the estimates shows that while the price elasticity effect is positive and substantial for high-price brands, it hurts the advertising returns for low-price brands.
    Keywords: advertising; price elasticity; mindset metrics; long-term effects; dynamic linear models; and empirical generalization
    JEL: M31 M37
    Date: 2016–05–22
  3. By: Markus Dertwinkel-Kalt; Mats Köster
    Abstract: We provide a novel intuition for the observation that many brand manufacturers have restricted their retailers’ ability to resell brand products online. Our approach builds on models of salience according to which price disparities across distribution channels guide a consumer’s attention toward prices and lower her appreciation for quality. Thus, absent vertical restraints, one out of two distortions - a quality or a participation distortion - can arise in equilibrium. The quality distortion occurs if the manufacturer provides either an inefficiently low quality under price salience or an inefficiently high quality in order to prevent price salience. The participation distortion arises as offline sales might be entirely abandoned in order to prevent prices from becoming salient. Both distortions are ruled out if vertical restraints are imposed. As opposed to the current EU legislation that considers a range of vertical restraints as being hardcore restrictions of competition per se, we show that these constraints can be socially desirable if salience effects are taken into account.
    Keywords: salience, online sales, antitrust, vertical restraints, distribution channels
    JEL: D21 K21 L42
    Date: 2017
  4. By: Rhodes, Andrew; Watanabe, Makoto; Zhou, Jidong
    Abstract: This paper develops a framework for studying the optimal product range choice of a multiproduct intermediary when consumers demand multiple products. In the optimal product selection, the intermediary uses exclusively stocked high-value products to increase store tra¢ c, and at the same time earns pro?t mainly from non-exclusively stocked products which are relatively cheap to buy from upstream suppliers. By doing this the intermediary can earn strictly positive pro?t, including in situations where it does not improve e¢ ciency in selling products. A linkage between product selection and product demand features such as size and shape is established. It is also shown that relative to the social optimum, the intermediary tends to be too big and stock too many products exclusively.
    Keywords: intermediaries; product range; multiproduct demand; search; exclusive contracts
    JEL: D83 L42 L81
    Date: 2017–10
  5. By: JOHNEN, Johannes (CORE, Université catholique de Louvain)
    Abstract: In many deceptive markets, firms design contracts to exploit mistakes of naive consumers. These contracts also attract less profitable sophisticated consumers. I study such markets when firms compete repeatedly and gather usage data about their customers which is informative about the likelihood of a customer being sophisticated. I show in a benchmark model that firms do not benefit from private information in this setting when all consumers are rational. I find that in sharp contrast to a model with only rational consumers, this customer information mitigates competition and is of great value to its owner despite intense competition. I discuss several implications of the value of customer information on naiveté. Private information on customers’ sophistication induces profits that are bell-shaped in the share of naive consumers. Firms prefer an even mix of both customer types. I also show that if firms can educate (some) naives about hidden fees, competition is already mitigated when firms compete for customers with initially symmetric information. I analyze a policy that discloses customer information to all firms and thereby increases consumer surplus. I discuss how the UK governments’ midata program might induce crucial aspects of this policy, and illustrate the obustness of results through several extensions.
    Keywords: Consumer mistakes, deceptive products, shrouded attributes, big data, targeted pricing, consumer data, add-on pricing, price discrimination, industry dynamics
    JEL: C22 C58
    Date: 2017–12–20
  6. By: Igor Halperin
    Abstract: Learning customer preferences from an observed behaviour is an important topic in the marketing literature. Structural models typically model forward-looking customers or firms as utility-maximizing agents whose utility is estimated using methods of Stochastic Optimal Control. We suggest an alternative approach to study dynamic consumer demand, based on Inverse Reinforcement Learning (IRL). We develop a version of the Maximum Entropy IRL that leads to a highly tractable model formulation that amounts to low-dimensional convex optimization in the search for optimal model parameters. Using simulations of consumer demand, we show that observational noise for identical customers can be easily confused with an apparent consumer heterogeneity.
    Date: 2017–12
  7. By: Lu, Yixin; Ou, Carol (Tilburg University, School of Economics and Management); Angelopoulos, Spyros
    Abstract: We examine the impact of monetary incentives on user onboarding in online sharing platforms. Specifically, drawing upon the literature of monetary incentives, privacy, and consumer behavior, we conduct a randomized field experiment to explore users’ initial engagement and interaction with an online car-sharing platform. Our empirical analyses show that monetary incentives are no better than simple email reminders in encouraging users’ self- disclosure of private information nor their active engagement with the platform (i.e., actual booking via the platform). Our work sheds new light on the heated debate over the design and deployment of monetary incentives in digital platforms, and provides useful implications for both academia and the industry.
    Date: 2018

This nep-mkt issue is ©2018 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.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.