nep-mkt New Economics Papers
on Marketing
Issue of 2018‒06‒11
five papers chosen by
Marco Novarese
Università del Piemonte Orientale

  1. Consumer Search with and without Tracking By Marcel Preuss
  2. Price or Variety? An Evaluation of Mergers Effects in Grocery Retailing By Elena Argentesi; Paolo Buccirossi; Roberto Cervone; Tomaso Duso; Alessia Marrazzo
  3. Uncorking Expert Reviews with Social Media: A Case Study Served with Wine By Alex Albright; Peter Pedroni; Stephen Sheppard
  4. E-commerce in agriculture: The case of crop protection product purchases in a discrete choice experiment By Fecke, Wilm; Danne, Michael; Mußhoff, Oliver
  5. Competition over Cursed Consumers By Alessandro Ispano; Peter Schwardmann

  1. By: Marcel Preuss
    Abstract: In this paper, I develop a tractable framework with sequential consumer search to address the effect of tracking on market outcomes. Tracking search histories is informative about consumers’ valuations because different consumer types have different stopping probabilities. With tracking, the unique equilibrium price path is increasing whereas without tracking, an average uniform price prevails. Welfare effects largely depend on how tracking affects consumers’ search persistence. For intermediate search costs, tracking based price discrimination exacerbates the holdup problem and leads to inefficiently low search persistence. For high search costs instead, tracking prevents a market breakdown as low prices conditional on short search histories secure consumers a positive surplus from search. Tracking prevails endogenously when consumers can dynamically opt out from tracking. This holds since disclosing their search history is always individually rational for consumers, irrespective of the overall effect on consumer surplus.
    Keywords: consumer search, privacy, dynamic price discrimination
    JEL: D11 D18 D83 L13 L86
    Date: 2018–05
  2. By: Elena Argentesi; Paolo Buccirossi; Roberto Cervone; Tomaso Duso; Alessia Marrazzo
    Abstract: Assortment decisions are key strategic instruments for firms responding to local market conditions. We assess this claim by studying the effect of a national merger between two large Dutch supermarket chains on prices and on the depth as well as composition of assortment. We adopt a difference-in-differences strategy that exploits local variation in the merger’s effects, controlling for selection on observables when defining our control group through a matching procedure. We show that the local change in competitive conditions due to the merger did not affect individual products’ prices but it led the merging parties to reposition their assortment and increase average category prices. While the low-variety and low-price target’s stores reduced the depth of their assortment when in direct competition with the acquirer’s stores, the latter increased their product variety. By analyzing the effect of the merger on category prices, we find that the target most likely dropped high priced products, while the acquirer added more of them. Thus, the merging firms reposition their product offerings in order to avoid cannibalization and lessen local competition. Further, we show that other dimensions of heterogeneity, such as market concentration, whether a divestiture was imposed by the Dutch competition authority, and the re-branding strategy of the target stores, are important for explaining the post-merger dynamics. A simple theoretical model of local-market variety competition explains most of our findings.
    Keywords: variety, assortment, mergers, ex-post evaluation, retail sector, supermarkets, grocery
    JEL: L10 L41 L66 L81 D22 K21 C23
    Date: 2018
  3. By: Alex Albright (Harvard University); Peter Pedroni (Williams College); Stephen Sheppard (Williams College)
    Abstract: The growth of social media outlets in which individuals post opinions on publicly consumed goods provides an interesting and relatively unexplored area for examination of the role of crowd sourcing amateur opinions in areas traditionally relegated to experts. In this paper we use wine as an illustrative example to investigate the interaction between social media and expert reviews in the market for high end consumer goods. In particular, we exploit a novel data set constructed from the social media website CellarTracker, which is composed of the averaged individual reviews for 355 distinct wines on a quarterly basis from 2004 through 2017, and pair this with a similarly dimensioned panel of average auction prices for these wines as well as the reviews from three leading experts. We develop a signal extraction model to motivate the interaction between amateurs and experts in revealing a measure of the quality of the wine. The model is then used to motivate the adaptation of an empirical panel structural VAR approach based on Pedroni (2013) by embedding the expert reviews as an event analysis within the panel VAR, which is used to decompose information into components that signal the quality of the liquid in the bottle versus other aspects of the wine that are valued by the market. The approach also allows us to decompose the influence of the expert reviews into components associated with what we define as the quality of the wine versus the pure reputation effect of the expert. The results on expert reviews are consistent with the idea that experts can substantially impact prices through channels other than their signals of quality.
    Keywords: Luxury goods, differentiated goods, information asymmetry, social media, wine
    JEL: D83 L86 L15 L66
    Date: 2018–06
  4. By: Fecke, Wilm; Danne, Michael; Mußhoff, Oliver
    Abstract: The internet is playing an increasing role in the development of rural areas. For farmers in particular, reliable internet access creates opportunities concerning farm management decisions. Hence, the goal of this study was to investigate German farmers' willingness to buy inputs online. Primary data was collected by conducting a discrete choice experiment about the purchase of crop protection products. Selection decisions of 165 arable farmers were analyzed by a generalized multinomial logit model (GMNL) resulting in willingness to accept (WTA) space estimation. WTA estimates show that farmers are willing to switch to an online merchant if they are offered a significantly lower price. However, word-of-mouth-reputation and consultation offered via traditional media do not influence farmers' WTA for an online merchant. In contrast, delivery time significantly affects farmers' WTA for inputs purchased online. We also show that farmers' risk attitudes, prior online shopping experiences, and education are influential factors for the WTA for an online merchant. Surprisingly, age and farm size do not impact farmers' WTA. Since e-commerce has not been widely established in agriculture yet, these results are of great practical importance. The findings of this study give online merchants of agricultural inputs a first orientation for choosing appropriate marketing measures. Moreover, results are interesting for education policy.
    Keywords: Internet use,E-commerce,Input purchasing,Online merchants,German farmers
    Date: 2018
  5. By: Alessandro Ispano; Peter Schwardmann
    Abstract: We model firms’ quality disclosure and pricing in the presence of cursed consumers, who fail to be sufficiently skeptical about undisclosed quality. We show that neither competition nor the presence of sophisticated consumers necessarily protect cursed consumers from being exploited. Exploitation arises if markets are vertically differentiated, if there are few cursed consumers, and if average product quality is high. Three common policy measures aimed at consumer protection, i.e. mandatory disclosure, third party disclosure and consumer education may all increase exploitation and decrease welfare. Even where these policies improve overall welfare, they often lead to a reduction in consumer surplus.
    Keywords: naïve, cursed, disclosure, consumer protection, labeling, competition
    JEL: C72 D03 D82 D83
    Date: 2018

This nep-mkt issue is ©2018 by Marco Novarese. 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.
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