nep-mkt New Economics Papers
on Marketing
Issue of 2018‒02‒26
eighteen papers chosen by
João Carlos Correia Leitão
Universidade da Beira Interior

  1. Measuring the Return to Online Advertising: Estimation and Inference of Endogenous Treatment Effects By Shakeeb Khan; Denis Nekipelov; Justin Rao
  2. Consumers' attitudes on carbon footprint labelling: Results of the SUSDIET project By Feucht, Yvonne; Zander, Katrin
  3. Follow The Money: Online Piracy and Self-Regulation in the Advertising Industry By Michail Batikas; Jörg Claussen; Christian Peukert
  4. Bait and Ditch: Consumer Naiveté and Salesforce Incentives By Herweg, Fabian; Rosato, Antonio
  5. Using Online Prices for Measuring Real Consumption Across Countries By Alberto Cavallo; W. Erwin Diewert; Robert C. Feenstra; Robert Inklaar; Marcel P. Timmer
  6. Artificial Intelligence and Consumer Privacy By Ginger Zhe Jin
  7. Platform Price Parity Clauses with Direct Sales By BjØrn Olav Johansen; Thibaud Vergé
  8. Legal Advertising and Frivolous Lawsuits. By Yannick Gabuthy; Eve-Angéline Lambert
  9. Does E-Cigarette Advertising Encourage Adult Smokers to Quit? By Dhaval M. Dave; Daniel Dench; Michael Grossman; Donald S. Kenkel; Henry Saffer
  10. On the merger paradox and asymmetric product differentiation By Tsuyoshi Toshimitsu; Tetsuya Nakajima
  11. Sharing is not caring: Backward integration of consumers By Spindler, Christian; Woll, Oliver; Schober, Dominik
  12. Inside the engine room of digital platforms: Reviews, ratings, and recommendations By Paul Belleflamme; Martin Peitz
  13. Targeted Price Controls on Supermarket Products By Diego Aparicio; Alberto Cavallo
  14. Inside the Engine Room of Digital Platforms: Reviews, Ratings, and Recommendations By Paul Belleflamme; Martin Peitz
  15. Media, fake news, and debunking By Ngo Van Long; Martin Richardson; Frank Stahler
  16. Integrability and Generalized Separability By Fally, Thibault
  17. Sustainable Reimbursements: Towards a Unified Framework for Pricing Drugs with Significant Uncertainties By Sylvain Chassang; Valentina Mantua; Erik Snowberg; Entela Xoxi; Luca Pani
  18. The Implicit Price for Fair Trade Coffee: Does Social Capital Matter? By Moritz Bosbach; Ornella Wanda Maietta

  1. By: Shakeeb Khan (Boston College); Denis Nekipelov (University of Virginia); Justin Rao (Microsoft Research)
    Abstract: In this paper we aim to conduct inference on the “lift” effect generated by an online advertisement display: specifically we want to analyze if the presence of the brand ad among the advertisements on the page increases the overall number of consumer clicks on that page. A distinctive feature of online advertising is that the ad displays are highly targeted- the advertising platform evaluates the (unconditional) probability of each consumer clicking on a given ad which leads to a higher probability of displaying the ads that have a higher a priori estimated probability of click. As a result, inferring the causal effect of the ad display on the page clicks by a given consumer from typical observational data is difficult. To address this we use the large scale of our dataset and propose a multi-step estimator that focuses on the tails of the consumer distribution to estimate the true causal effect of an ad display. This “identification at infinity” (Chamberlain (1986)) approach alleviates the need for independent experimental randomization but results in nonstandard asymptotics. To validate our estimates, we use a set of large scale randomized controlled experiments that Microsoft has run on its advertising platform. Our dataset has a large number of observations and a large number of variables and we employ LASSO to perform variable selection. Our non-experimental estimates turn out to be quite close to the results of the randomized controlled trials.
    Keywords: Endogenous treatment effects, randomized control trials, online advertising, lift effect
    JEL: C14 C31 C90 M37
    Date: 2018–02–01
  2. By: Feucht, Yvonne; Zander, Katrin
    Abstract: The purchase of products labelled with Carbon footprints is one option for consumers to act climate-friendly and consumers frequently state that they are interested in this kind of labels. But even though various carbon footprint labelling schemes exist throughout Europe, their market relevance is low. In this context, the present research investigates preferences for climate-friendly food and identifies barriers for climate friendly food choices in the European market. Using a mixed methods approach combining an online survey (choice experiments and a questionnaire) with qualitative face-to-face interviews, the preferences and willingness to pay for different carbon labels and a climate-friendly claim were explored in six European countries. While the online survey mainly aimed at eliciting consumer preferences for different ways of communicating climate-friendliness, the face-to-face interviews which were based on the results of the online survey, deepened and broadened the quantitative results. Thereby, consumers' perceptions of climate-friendly food and their information needs with respect to climate-friendly food are elicited. Our results show that the presence of a carbon label on a product increases the purchase probability and that consumers are willing to pay a (small) price premium for a carbon label in all countries under investigation (France, Germany, Italy, Norway, Spain, Germany, UK). However, the contribution of a carbon label to a more climate-friendly consumption will be limited. Main reasons are the lack of knowledge of climate friendly actions, reluctance to change consumption habits (e.g. meat and dairy consumption), time preference and uncertainty regarding the relevance of climate change. Consumers appear to be frequently overstrained with respect to climate-friendly buying decisions. Policy makers and retailers are challenged to set appropriate structures to support climate-friendly consumption.
    Keywords: carbon footprint labelling,consumer research,climate change,climate-friendly food,mixed methods,choice experiments,CO2-Labels,Verbraucherforschung,Klimawandel,Klimafreundliche Lebensmittel,Mixed methods,Kaufexperimente
    Date: 2017
  3. By: Michail Batikas; Jörg Claussen; Christian Peukert
    Abstract: In this paper, we study the effects of a self-regulatory effort, orchestrated by the European Commission, that aims to reduce advertising revenues for publishers of copyright infringing content. Historical data lets us follow how the third-party advertising and tracking services associated with a large number of piracy websites and a corresponding set of legitimate “placebo” websites change after the agreement to self-regulate went in place. We find that larger EU-based advertisers comply with the initiative and reduce their connections with piracy websites. We do not find reductions for other non-advertising services that track consumers, which has potentially important implications for the efficiency of targeted advertising.
    Keywords: piracy, copyright enforcement, online advertising, natural experiment
    JEL: K40 L50 L80
    Date: 2018
  4. By: Herweg, Fabian; Rosato, Antonio
    Abstract: We analyze a model of price competition between a transparent retailer and a deceptive one in a market where a fraction of consumers is naive. The transparent retailer is an independent shop managed by its owner. The deceptive retailer belongs to a chain and is operated by a manager. The retailers sell an identical base product, but the deceptive one also offers an add-on. Rational consumers never consider buying the add-on, yet naive ones can be talked into buying it. By offering its store manager a contract that pushes him to never sell the base good without the add-on, the chain can induce an equilibrium in which both retailers obtain more-than-competitive profits. The equilibrium features market segmentation with the deceptive retailer targeting only naive consumers whereas the transparent retailer serves only rational ones. Welfare is not monotone in the fraction of naive consumers in the market. Hence, policy interventions designed to de-bias naive consumers might backfire.
    Keywords: Add-On Pricing; Bait and Switch; Consumer Naiveté; Incentive Contracts.
    JEL: D03 D18 D21 L13 M52
    Date: 2018–01
  5. By: Alberto Cavallo; W. Erwin Diewert; Robert C. Feenstra; Robert Inklaar; Marcel P. Timmer
    Abstract: We show that online prices can be used to construct quarterly purchasing power parities (PPPs) with a closely-matched set of goods and identical methodologies in a variety of developed and developing countries. Our results are close to those reported by the International Comparisons Program (ICP) in 2011 and the OECD in 2014, and can be used to obtain more up-to-date estimates of real consumption across countries without the need for consumer price index extrapolations. We discuss advantages and limitations associated with the use of online prices for PPs, including issues of representativeness and limited coverage of product categories and countries.
    JEL: E3 E31 F0 F41 O47
    Date: 2018–02
  6. By: Ginger Zhe Jin
    Abstract: Thanks to big data, artificial intelligence (AI) has spurred exciting innovations. In the meantime, AI and big data are reshaping the risk in consumer privacy and data security. In this essay, I first define the nature of the problem and then present a few facts about the ongoing risk. The bulk of the essay describes how the U.S. market copes with the risk in current policy environment. It concludes with key challenges facing researchers and policy makers.
    JEL: D04 D18 D8 L15 L51
    Date: 2018–01
  7. By: BjØrn Olav Johansen (Department of Economics, University of Bergen); Thibaud Vergé (CREST; ENSAE; Université Paris-Saclay; Norwegian School of Economics)
    Abstract: We analyze the effects of price parity clauses in a setting where competing sellers distribute their products directly as well as through competing platforms. These clauses prevent a seller from offering its product at a lower price on other platforms or through its own direct sales channel. We show that when we account for the sellers? participation constraints, price parity clauses do not always lead to higher commissions and ?final prices. Instead, we fi?nd that they may simultaneously bene?fit all the actors (platforms, sellers and consumers), even in the absence of traditional efficiency arguments.
    Date: 2016–09–01
  8. By: Yannick Gabuthy; Eve-Angéline Lambert
    Abstract: Following a recent wave of deregulation, lawyers now use a large variety of media to advertise their services. A common argument against this increasing reliance on advertising is that it might stir-up frivolous lawsuits. In this article, we investigate the theoretical relevance of this argument by developing an asymmetric information game of litigation where the likelihood of accident and the number of lawsuits are endogenous. The main result shows that this stirring-up effect does not necessarily occur in equilibrium since the impact of advertising on meritless claims results from complex strategic effects arising in the litigation game. In the same way, the welfare analysis highlights that advertising may increase or decrease the social cost of accidents. These results imply that the recent trend toward liberalization of legal advertising should not necessarily be considered as a threat to the efficiency of the tort system.
    Keywords: Litigation, Advertising, Deterrence, Frivolous lawsuits.
    JEL: K13 K41 M37
    Date: 2018
  9. By: Dhaval M. Dave; Daniel Dench; Michael Grossman; Donald S. Kenkel; Henry Saffer
    Abstract: Only recently introduced into the U.S. market, e-cigarettes have been aggressively promoted, and use is increasing rapidly among both adults and youths. At the heart of the regulatory debate are fundamental questions regarding whether e-cigarettes will draw cigarette smokers away from a dangerous habit or lure new initiates into tobacco use. We provide some of the first causal evidence on whether e-cigarette advertising on television and in magazines (which comprise about 90% of total media spending on e-cigarettes) encourage adult smokers to quit. We find that the answer to this question is a yes for TV advertising but no for magazine advertising. Our results indicate that a policy to ban TV advertising of e-cigarettes would have reduced the number of smokers who quit in the recent past by approximately 3%, resulting in roughly 105,000 fewer quitters in that period. On the other hand, if the FDA were not considering regulations and mandates that would likely eliminate many e-cigarette producers during our sample period, e-cigarette ads might have reached the number of nicotine replacement therapy TV ads during that period. That would have increased the number of smokers who quit by around 10%, resulting in an additional 350,000 quitters.
    JEL: I18
    Date: 2018–02
  10. By: Tsuyoshi Toshimitsu (School of Economics, Kwansei Gakuin University); Tetsuya Nakajima (Faculty of Economics, Osaka City University)
    Abstract: Assuming asymmetric product differentiation, we reconsider the merger paradox in the cases of quantity-setting and price-setting games. We investigate whether emergence of the merger paradox depends on the degree of product differentiation of the outsider, irrespective of the mode of competition. In particular, being different from the result of Deneckere and Davidson (1985), we show that the merger paradox arises in the case of price-setting games if the degree of product differentiation of the outsider is sufficiently small.
    Keywords: merger paradox; quantity-setting game, price-setting game, asymmetric product differentiation
    JEL: D43 L12 L13 L41
    Date: 2018–02
  11. By: Spindler, Christian; Woll, Oliver; Schober, Dominik
    Abstract: A new type of player occurs in the sharing economy: a vertically integrated consumer who owns production facilities and has direct market access, often termed "active prosumer". The prosumer faces a trade-off between market transaction cost and substantial strategic potential to influence both market demand and supply by her decisions. We discuss optimal marketing and production decisions in light of this trade-off. An empirical application to the German-Austrian electricity market demonstrates substantial incentives for active market participation by recently added decentralized renewables production. Prosumers can achieve considerable profit increases by switching roles of net market supplier or customer.
    Keywords: Active Prosumer,Capacity Withholding,Self-Supply,Vertical Integration,Consumer Production,Market Participation Cost
    Date: 2018
  12. By: Paul Belleflamme; Martin Peitz
    Abstract: The rise and success of digital platforms (such as Airbnb, Amazon, Booking, Expedia, Ebay, and Uber) rely, to a large extent, on their ability to address two major issues. First, to effectively facilitate transactions, platforms need to resolve the problem of trust in the implicit or explicit promises made by the counterparties; they post reviews and ratings to pursue this objective. Second, as platforms operate in marketplaces where information is abundant, they may guide their users towards the transactions that these users may have an interest in; recommender systems are meant to play this role. In this article, we elaborate on review, rating, and recommender systems. In particular, we examine how these systems generate network effects on platforms.
    Keywords: Platforms, network effects, ratings, recommender systems, digital economics
    JEL: L15 L81 L86 D82 D85
    Date: 2018–02
  13. By: Diego Aparicio; Alberto Cavallo
    Abstract: We study the impact of targeted price controls for supermarket products in Argentina from 2007 to 2015. Using web-scraping, we collected daily prices for controlled and non-controlled goods and measured the differential effects on inflation, product availability, and price dispersion. We first show that, although price controls are imposed on goods with significant CPI weight, they have a temporary effect on aggregate inflation and no downward effect on other goods. Second, contrary to common beliefs, we find that controlled goods are consistently available for sale. Third, firms compensate for price controls by introducing new product varieties at higher prices. This behavior, which increases price dispersion within narrow categories, is consistent with a standard vertical differentiation model in the presence of price controls.
    JEL: D22 E31
    Date: 2018–02
  14. By: Paul Belleflamme (Aix-Marseille Univ., CNRS, EHESS, Centrale Marseille, AMSE; KEDGE Business School; and CESifo); Martin Peitz (Department of Economics and MaCCI, University of Mannheim; CEPR; CESifo; and ZEW)
    Abstract: The rise and success of digital platforms (such as Airbnb, Amazon, Booking, Expedia, Ebay, and Uber) rely, to a large extent, on their ability to address two major issues. First, to effectively facilitate transactions, platforms need to resolve the problem of trust in the implicit or explicit promises made by the counterparties; they post reviews and ratings to pursue this objective. Second, as platforms operate in marketplaces where information is abundant, they may guide their users towards the transactions that these users may have an interest in; recommender systems are meant to play this role. In this article, we elaborate on review, rating, and recommender systems. In particular, we examine how these systems generate network effects on platforms.
    Keywords: platforms, network effects, ratings, recommender systems, digital economics
    JEL: D43 L13 L86
    Date: 2018–02
  15. By: Ngo Van Long; Martin Richardson; Frank Stahler
    Abstract: We construct a Hotelling-type model of two media providers, each of whom can issue fake and/or real news and each of whom can invest in the debunking of their rival's fake news. The model assumes that consumers have an innate preference for one provider or the other and value real news. However, that valuation varies according to their bias favoring one provider or the other. We demonstrate a unique subgame perfect Nash equilibrium in which only one firm issues fake news and we show, in this setting, that increased polarization of consumers - represented by a wider distribution - increases the prevalence of both fake news and debunking expenditures and is welfare reducing. We also show, interalia, that a stronger preference by consumers for their preferred provider lowers both fake news and debunking. Finally, we compare monopoly and duopoly market structures in terms of "fake news" provision and show that a public news provider can be welfare improving.
    Keywords: fake news, media, debunking
    JEL: D21 L15 L82
    Date: 2018–02
  16. By: Fally, Thibault
    Abstract: This paper examines demand systems where the demand for a good depends only on its own price, consumer income, and a single aggregator synthesizing information on all other prices. As indicated by Gorman (1972), symmetry of the Slutsky substitution terms implies that such demand can take only one of two simple forms. Conversely, here we show that only weak conditions ensure that such demand systems are integrable, i.e. can be derived from the maximization of a utility function. This paper further studies useful properties, special cases and applications of such demand systems.
    Keywords: integrability; Non-homothetic preferences.; Recoverability; Separable demand; Single aggregator
    JEL: D11 D40 L13
    Date: 2018–01
  17. By: Sylvain Chassang; Valentina Mantua; Erik Snowberg; Entela Xoxi; Luca Pani
    Abstract: Recent political events have thrust the bulk negotiation of drug prices by Medicare and Medicaid back into the spotlight. Yet, even if politically feasible, there is no clear framework for negotiating prices of new drugs with uncertain target populations—for example, due to imprecise estimates or off-label use—or uncertain clinical effects—for example, due to heterogeneous patient response. We create such a framework using two-price programs developed in the economics of procurement literature. This framework delivers new payment strategies, and unifying them with theoretical advances in pharmaceutical reimbursement like capitation and value-based pricing. Two-price programs substantially reduce uncertainty for both payers and pharmaceutical companies, while still creating financial incentives for those companies that innovate and create value for patients.
    JEL: H51 I11 I18
    Date: 2018
  18. By: Moritz Bosbach (Università di Napoli Federico II); Ornella Wanda Maietta (Università di Napoli Federico II and CSEF)
    Abstract: This study aims to ascertain whether the implicit price paid for Fair Trade coffee in regular supermarkets is influenced by the stock of social capital in the territory where consumers live. A hedonic regression set-up is adopted, based on Italian scanner data taken at NUTS3 level. Regressors include attributes described on the label, which contain separate certifications for Fair Trade and organic/eco-label status, plus various indicators of social capital and their interactions with the Fair Trade and organic/eco-label attributes. The consumers’ implicit price paid for the Fair Trade attribute is significantly and positively affected by a social capital proxy, which is the percentage of co-op members over total employment.
    Keywords: ethical consumption; hedonic regression; scanner data
    JEL: C50 D12 L66 Z13
    Date: 2018–02–17

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