nep-mkt New Economics Papers
on Marketing
Issue of 2020‒08‒31
two papers chosen by
Marco Novarese
Università del Piemonte Orientale

  1. Do Retailers Manipulate Prices to Favour Private Label over Brands? By Ratula Chakraborty
  2. When Do Consumers Talk? By Ishita Chakraborty; Joyee Deb; Aniko Oery

  1. By: Ratula Chakraborty (Centre for Competition Policy and Norwich Business School, University of East Anglia)
    Abstract: Retailers act as both customers and competitors for brand manufacturers when selling private label in direct competition with brands. This paper considers whether retailers exploit this double-agent position to practice switch marketing, manipulating elements of the retail marketing mix to encourage shoppers to switch from buying brands to private label. Such manipulation can be blatant in nature, such as comparative advertising, brand delisting trials, copycat packaging, and biased shelf allocation. However, the key interest in this paper concerns whether retailers use a more subtle means through strategic pricing to favour private label over brands. The paper reveals very different price treatments of brands and matching private label goods. However, the identified pricing patterns are more indicative of retailers manipulating prices for the sake of segmenting consumers rather than displacing brands.
    Keywords: brand, private label, retailer, pricing, marketing, manipulation
    JEL: K21 L13 L14 L40
    Date: 2018–10–01
  2. By: Ishita Chakraborty (Yale School of Management); Joyee Deb (Cowles Foundation, Yale University); Aniko Oery (Cowles Foundation, Yale University)
    Abstract: The propensity of consumers to engage in word-of-mouth (WOM) differs after good versus bad experiences, which can result in positive or negative selection of user-generated reviews. We show how the dispersion of consumer beliefs about quality (brand strength), informativeness of good and bad experiences, and price can affect selection of WOM in equilibrium. WOM is costly: Early adopters talk only if they can affect the receiver’s purchase. Under homogeneous beliefs, only negative WOM can arise. Under heterogeneous beliefs, the type of WOM depends on the informativeness of the experiences. We use data from to validate our predictions.
    Keywords: Costly communication, Recommendation engines, Review platforms, Word of mouth
    Date: 2020–08

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