nep-mkt New Economics Papers
on Marketing
Issue of 2018‒07‒16
four papers chosen by
Marco Novarese
Università del Piemonte Orientale

  1. Advertising as a Reminder: Evidence from the Dutch State Lottery By Chen He; Tobias J. Klein
  2. Selling Strategic Information in Digital Competitive Markets By David Bounie; Antoine Dubus; Patrick Waelbroeck
  3. Targeted Advertising in the Information Economy: A Complementary Approach By Lynne Pepall; Dan Richards
  4. Clipping Coupons: Redemption of Offers with Forward-Looking Consumers By Joseph Kissan; Oksana Loginova

  1. By: Chen He; Tobias J. Klein
    Abstract: We use high frequency data on TV and radio advertising together with data on online sales for lottery tickets to measure the short run effects of advertising. We find them to be strong and to last for up to about 4 hours. They are the bigger the less time there is until the draw. We develop the argument that this finding is consistent with the idea that advertisements remind consumers to buy a ticket and that consumers value this. Then, we point out that in terms of timing the interests of the firm and the consumers are aligned: consumers wish to be reminded in a way that makes them most likely to consider buying a lottery ticket. We present direct evidence that this does not only affect the timing of purchases, but leads to market expansion. Then, we develop a tractable dynamic structural model of consumer behavior, estimate the parameters of this model and simulate the effects of a number of counterfactual dynamic advertising strategies. We find that relative to the actual schedule it would be valued by the consumers and profitable for the firm to spread advertising less over time and move it to the last days before the draw.
    Keywords: dynamic demand, limited attention, reminder advertising, adoption model
    JEL: M37 D12 D83
    Date: 2018
  2. By: David Bounie; Antoine Dubus; Patrick Waelbroeck
    Abstract: This paper investigates the strategies of a data broker in selling information to one or to two competing firms that can price-discriminate consumers. The data broker can strategically choose any segment of the consumer demand (information structure) to sell to firms that implement third-degree price-discrimination. We show that the equilibrium profits of the data broker are maximized when (1) information identifies the consumers with the highest willingness to pay; (2) consumers with a low willingness to pay remain unidentified; (3) the data broker sells two symmetrical information structures. The data broker therefore strategically sells partial information on consumers in order to soften competition between firms. Extending the baseline model, we prove that these results hold under first-degree price-discrimination.
    Keywords: data broker, information structure, price-discrimination
    JEL: D40 D80 L50 D43
    Date: 2018
  3. By: Lynne Pepall; Dan Richards
    Abstract: We investigate market outcomes when firms have extensive information on consumer preferences and can use it in their pricing and advertising strategies. Advertising is considered, as in Becker and Murphy (1993), to be complementary product that consumers value. Consumer data enables the firm to customize and target its advertising to specific consumers. We show that such targeted advertising softens price competition and encourages greater initial entry, leading to a prisoners’ dilemma. Because of the value of advertising to consumers, targeted advertising raises consumer surplus and total welfare, but has an ambiguous effect on producer surplus.
    Date: 2018
  4. By: Joseph Kissan (School of Business, University of Kansas); Oksana Loginova (Department of Economics, University of Missouri)
    Abstract: Consumer redemption behavior pertaining to coupons, gift certificates, product sampling, rebates, and the like, has been the focus of much scholarly inquiry and the extant literature has documented two noteworthy empirical regularities - a bump in redemptions close to offer expiry and greater redemption with shorter redemption windows. In the extant work, these phenomena have been explained by invoking myopic consumers. Against this backdrop, we ask a simple question: can these phenomena survive if we assume rational, forward-looking consumers? Accordingly, we develop a model consisting exclusively of forward-looking consumers and incorporate two constructs highlighted in the literature - forgetting and stochastic redemption costs. We derive consumers' period-by-period redemption rule and subsequently illustrate the emergence of the two aforementioned empirical regularities.
    Keywords: consumer redemption behavior, forward-looking consumers, forgetting, stochastic costs
    JEL: D11 D81 D91
    Date: 2018–06–22

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.
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.