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on Marketing |
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Issue of 2011‒11‒07
six papers chosen by Joao Carlos Correia Leitao University of Beira Interior and Technical University of Lisbon |
| By: | James Rutt (Faculty of Economics, University of Cambridge) |
| Abstract: | The Internet has drastically altered the nature of competition in the news industry. This article develops a model of price and quality competition between firms in the online news industry. In equilibrium, firms randomise in their pricing strategies and this generates the cross- sectional mixture of advertiser and subscription funded models we observe. The model also plausibly explains why pricing strategies differ across content areas. Finally, an important part of my explanation is that aggregators, such as Google and Digg.com, allow consumers to search amongst articles and direct consumers towards high quality articles. The model's results have implications for the ongoing public debate about the effects of aggregators on the news industry; although aggregators may harm firms, consumers may benefit. |
| Keywords: | Internet, Newspapers, Aggregators, Paywalls |
| JEL: | L11 L13 L82 |
| Date: | 2011–09 |
| URL: | http://d.repec.org/n?u=RePEc:net:wpaper:1119&r=mkt |
| By: | Reimer, Kerstin; Albers, Sönke |
| Abstract: | Predicting online customer repeat purchase behavior by accounting for the marketing-mix plays an important role in a variety of empirical studies regarding individual customer relationship management. A number of sophisticated models have been developed for different forecasting purposes based on a – mostly linear – combination of purchase history, so called Recency-Frequency-Monetary Value (RFM)-variables and marketing variables. However, these studies focus on a high predictive validity rather than ensuring that their proposed models capture the original effects of marketing activities. Thus, they ignore an explicit relationship between the purchase history and marketing which leads to biased estimates in case these variables are correlated. This study develops a modeling framework for the prediction of repeat purchases that adequately combines purchase history data and marketing-mix information in order to determine the original impact of marketing. More specifically, we postulate that RFM already captures the effects of past marketing activities and the original marketing impact is represented by temporal changes from the purchase process. Our analysis highlights and confirms the importance of adequately modeling the relationship between RFM and marketing. In addition, the results show superiority of the proposed model compared to a model with a linear combination of RFM and marketing variables. -- |
| Keywords: | Repeat Purchase Forecasting Models,Marketing Actions,Generalized Bass Model,Media Downloads |
| JEL: | M3 C4 |
| Date: | 2011–10–25 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:esprep:50730&r=mkt |
| By: | Joachim Kaldasch |
| Abstract: | The model presented here derives the product life cycle of durable goods. It is based on the idea that the purchase process consists of first purchase and repurchase. First purchase is determined by the market penetration process (diffusion process), while repurchase is the sum of replacement and multiple purchase. The key property of durables goods is to have a mean lifetime in the order of several years. Therefore replacement purchase creates periodic variations of the unit sales (Juglar cycles) having its origin in the initial diffusion process. The theory suggests that there exists two diffusion processes. The first can be described by Bass diffusion and is related to the information spreading process within the social network of potential consumers. The other diffusion process comes into play, when the price of the durable is such, that only those consumers with a sufficient personal income can afford the good. We have to distinguish between a monopoly market and a polypoly/oligopoly market. In the first case periodic variations of the total sales occur caused by the initial Bass diffusion, even when the price is constant. In the latter case the mutual competition between the brands leads with time to a decrease of the mean price. This change is associated with an effective increase of the market volume, which can be interpreted as a diffusion process. Based on an evolutionary approach, it can be shown that the mean price decreases exponentially and the corresponding diffusion process is governed by Gompertz equation (Gompertz diffusion). Most remarkable is that Gibrat's rule of proportionate growth is a direct consequence of the competition between the brands. The model allows a derivation of the lognormal size distribution of product sales and the logistic replacement of durables in competition. A comparison with empirical data suggests that the theory describes the main trend of the product life cycle superimposed by short term events like the introduction of new models. -- |
| Keywords: | Consumer Durables,Product Life Cycle,Product Diffusion,Bass Diffusion,Gompertz Diffusion,Replicator Dynamics,Logistic Growth,Evolutionary Economics,Monopoly,Gibrat's Rule,Juglar Cycles |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:esprep:50530&r=mkt |
| By: | Ting Zhu (Booth School of Business, University of Chicago); Hongju Liu (University of Connecticut, School of Business); Pradeep Chintagunta (Booth School of Business, University of Chicago) |
| Abstract: | Since the Apple iPhone’s first launch in 2007 with an exclusive arrangement with AT&T, it has garnered overwhelmingly positive responses from consumers and from the media. With its success, exclusive contracts between handset makers and wireless carriers have come under increasing scrutiny by regulators and lawmakers. Such practices have been criticized by regulators, by the media, and by “locked-out” consumers, due to the fact that a consumer has to subscribe to a particular service provider if he or she strongly prefers one handset to others. In this paper, we empirically examine the impact of handset exclusivity arrangements on consumer welfare. First we study consumers’ purchase decisions in mobile services that include the choice of a handset and of a service provider. We do so by combining survey data on consumers’ purchase decisions with supplemented data on prices and features of common handsets. Next, assuming a Stackelberg leader-follower relationship between the handset manufacturers and the service providers, and using our demand estimates, we recover the marginal costs for the players in the market. We then simulate what would have happened in the counterfactual scenario when the iPhone is available from all carriers. Our results suggest that, if we take into account price adjustments from handset manufacturers and service providers in response to the change in market structure, consumer welfare will increase by $326 million without the exclusive arrangement. We view our analysis as a starting point to a more complete characterization of consumer behavior and the complex relationships among players in this industry. |
| Keywords: | Exclusive Arrangement, Distribution Channels, Wireless Service |
| Date: | 2011–09 |
| URL: | http://d.repec.org/n?u=RePEc:net:wpaper:1135&r=mkt |
| By: | Gal OEstreicher-Singer (Tel Aviv University); Barak Libai (Interdisciplinary Center) |
| Abstract: | Traditionally, the value of a product has been assessed according to the direct revenues the product creates. However, products do not exist in isolation but rather influence one another's sales. Such influence is especially evident in eCommerce environments, where products are often presented as a collection of webpages linked by recommendation hyperlinks, creating a large-scale product network. Here we present the first attempt to use a systematic approach to estimate products' true value to a firm in such a product network. Our approach, which is in the spirit of the PageRank algorithm, uses easily available data from large-scale electronic commerce sites and separates a product’s value into its own intrinsic value, the value it receives from the network, and the value it contributes to the network. We apply this approach to data collected from Amazon.com and from BarnesAndNoble.com. Focusing on one domain of interest, we find that if products are evaluated according to their direct revenue alone, without taking their network value into account, the true value of the "long tail" of electronic commerce may be underestimated, whereas that of bestsellers might be overestimated. |
| Keywords: | networks, product networks, electronic commerce, ecommerce, recommender systems, long tail |
| JEL: | D4 |
| Date: | 2011–09 |
| URL: | http://d.repec.org/n?u=RePEc:net:wpaper:1129&r=mkt |
| By: | Yao Luo (Department of Economics, Penn State University) |
| Abstract: | This paper proposes to incorporate product customization in the Maskin and Riley (1984) nonlinear pricing model in order to capture major features of mobile service data. In particular, consumers are characterized by a two-dimensional type. One dimension is observed by the provider and integrates product customization, while the other is a standard parameter of adverse selection, which is unobserved by the provider and makes it necessary for the provider to discriminate among consumers with different tastes through nonlinear pricing. We then propose a novel method to aggregate the multiple-dimensional voice consumption into one-dimensional index. We show that the model structure is identified under the following conditions: The marginal utility function is multiplicatively separable in consumers' tastes, and consumers' observed and unobserved heterogeneity are independent. Empirical results show that both dimensions of heterogeneity are important. Due to asymmetric information, 50% of the "second-best" social welfare is left "on the table" in order to screen heterogeneous consumers. Moreover, if costly product customization does not affect subscribers' utility, 20% of subscribers would not be served. |
| Keywords: | Nonlinear Pricing, Product Customization, Mobile Service |
| JEL: | L11 L12 L25 L96 |
| Date: | 2011–09 |
| URL: | http://d.repec.org/n?u=RePEc:net:wpaper:1128&r=mkt |