nep-mkt New Economics Papers
on Marketing
Issue of 2018‒10‒15
six papers chosen by
Marco Novarese
Università del Piemonte Orientale

  1. Discriminating Against Captive Customers By Armstrong, Mark; Vickers, John
  2. Analysis of Consumer Perception of Product Attributes in Pet Food: Implications for Marketing and Brand Strategy By Hobbs, Lonnie; Shanoyan, Aleksan
  3. Complex Interactions and Strategic Pricing of Brand-Level Nut Products in the United States: A Graph Theoretic Approach By Cheng, Guo; Dharmasena, Senarath
  4. Economic and Demographic Factors Affecting the Propensity to Consume Specialty Eggs in the United States By Branch, Maggie; Dharmasena, Senarath
  5. Customer Discrimination in the Fast Food Market? Experimental Evidence from a Swedish University Campus By Ahmed, Ali; Hammarstedt, Mats
  6. Consumer Credit Card Choice: Costs, Benefits and Behavioural Biases By Mary-Alice Doyle

  1. By: Armstrong, Mark; Vickers, John
    Abstract: We analyze a market where some consumers only consider buying from a specific seller while other consumers choose the best deal from several sellers. When sellers are able to discriminate against their captive customers, we show that discrimination harms consumers in aggregate relative to the situation with uniform pricing when sellers are approximately symmetric, while the practice tends to benefit consumers in sufficiently asymmetric markets.
    Keywords: Price discrimination; captive customers; consideration sets
    JEL: D43 D8 L13
    Date: 2018–10
  2. By: Hobbs, Lonnie; Shanoyan, Aleksan
    Keywords: Food and Agricultural Marketing, Agribusiness Economics and Management, Behavioral & Institutional Economics
    Date: 2018–06–20
  3. By: Cheng, Guo; Dharmasena, Senarath
    Abstract: Nuts such as almonds, pecans, walnuts, and pistachios are available in the U.S. market in different forms and brands. There are well-known national brands as well as not-so well-known private label and store brands. Nut producing firms compete for market share and strategically price, brand, advertise and position products in the market. Conventional brand-level analysis of such markets is achieved through calculation of market power and price cost margins assuming the presence of pure strategy Bertrand-Nash Equilibrium in prices. This is supported by a set of prior assumptions with regards to the structure of the market and oftentimes these are too restrictive, because pricing decisions are made in a complex multivariate situation with numerous interactions between variables that determine the prices and prices themselves. In this study, using 2015 Nielsen scanner data for nut products, complex causal relationships among brand level prices are estimated using cutting-edge machine learning algorithms. Also within this method, the concept of Markov Blankets is used to identify specific brands that are immediately important for a given brand. Several national brands were identified as a direct cause of the price of store brands. Even though store brands were associated with the highest market share, they had no influence on any other brands’ pricing decision and strategy.
    Keywords: Agribusiness, Industrial Organization, Marketing
    Date: 2018–01–16
  4. By: Branch, Maggie; Dharmasena, Senarath
    Abstract: In recent years, the United States has seen an increase in the popularity of specialty eggs as a good source of healthy fats and proteins. This is due to an increased focus on healthy eating habits and the positive perception of natural and organic foods. In order to capitalize on this new trend, producers must strategize their marketing efforts to sell most directly to the appropriate target market. Using 2015 Nielsen Homescan database and probit regression model analysis, we were able to determine the estimated likelihoods of purchasing specialty eggs on several different household demographics. Also, we were able to determine the same information for consumers of eggs in general, for consumers of regular eggs, and for the consumers of both regular and specialty eggs. By using the information from this data, we are able to develop a consumer profile for consumers of specialty eggs that can be used by producers and their marketing team to determine the allocation of their respective resources. Results found that the average consumers of specialty eggs are young couples with a high income, an increasing income, a high education, and no children. The best areas in which to sell specialty eggs were found to be areas in the Pacific region of the United States that have high part time employment and small household sizes.
    Keywords: Consumer/Household Economics, Demand and Price Analysis, Food Consumption/Nutrition/Food Safety, Marketing
    Date: 2018–01–16
  5. By: Ahmed, Ali (Department of Management and Engineering); Hammarstedt, Mats (Linnaeus University Centre for Discrimination and Integration Studies)
    Abstract: This paper studies customer discrimination against fictive male and female food truck owners with Arabic names on a Swedish University campus using a web-based experiment. Students at a Swedish university campus were asked to participate in a market survey and state if they think it is a good idea to have a food truck establishment on the campus. Further, they were also asked about their own beliefs, and their beliefs about others’ willingness to pay for a baguette and a kebab sold by the food truck on the campus. Four names—one male Swede, one female Swede, one male Arab, and one female Arab—were randomly assigned to the food truck. We found no evidence of customer discrimination against food truck owners with Arabic names. In fact, the respondents were slightly more positive to a food truck establishment run by an Arabic male than by a Swedish male. We conclude that our results are representative in an environment with relatively young and highly educated customers and that customer discrimination may vary across different markets. More research in this area is needed.
    Keywords: Customer discrimination; Self-employment; Immigrants; Sweden
    JEL: J15 J16 J79
    Date: 2018–09–14
  6. By: Mary-Alice Doyle (Reserve Bank of Australia)
    Abstract: The credit card market offers consumers a wide range of options when choosing a card. While many factors may influence this choice, this paper focuses on the main financial costs and benefits of holding a credit card. I summarise these costs and benefits as the net monetary benefit associated with a card. Theory might suggest that a rational consumer will choose a card that maximises their net monetary benefit. But in reality, consumers' decisions may be systematically biased, leading them to select higher-cost credit cards when lower-cost alternatives are available. To test this possibility, I first estimate the net monetary cost or benefit that individuals in a nationally representative survey obtain from their credit card. I then use these estimates to examine whether principles from behavioural economics – such as optimism bias, bounded rationality and present bias – can help to explain consumers' choice of credit card. I find that approximately 40 per cent of Australian credit card holders receive a positive net monetary benefit from their card (that is, they receive benefits from rewards points and their interest-free period that outweigh annual fees and interest payments). Generally these are higher-wealth and higher-income consumers. Of the remaining 60 per cent, around half break even, while half incur a net cost. Moreover, most cardholders, including those who receive a net benefit, appear not to choose cards that best suit their use patterns – for instance, I estimate that consumers who use their card to borrow and pay interest could reduce their annual costs by around $250 by choosing a more appropriate card. Behavioural explanations are consistent with some, but not all, of the patterns observed. Consumers appear to be subject to optimism bias, underestimating how much they will borrow on their card, and a subset of consumers tend to hold inflated estimates of the net monetary benefits that they receive from their card. In contrast, consumers do not appear to be present biased in responding to temporary sign-up offers. Finally, I find that around half of the respondents who made a net loss held high-cost cards, but had not considered switching to a lower-cost card; indicative evidence of cognitive, as well as practical, barriers to switching cards.
    Keywords: bounded rationality; switching behaviour; optimism bias; optimal credit card choice; present bias; retail payments
    JEL: D12 D30 D90 E42
    Date: 2018–10

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