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on Marketing |
| By: | Guillem Roig |
| Abstract: | In many markets, firms produce and sell complementary components that form a product system. This paper studies the effects of compatibility in product advertisement and entry decisions in a differentiated product market. While advertising enhances the ability of consumers to mix and match components closer to their preferences, more advertising does not always generate larger welfare. In my model, an incumbent uses advertising to increase the prospects of market competition with the objective to deter potential entry. However, under some parameters, entry deterrence does not occur when products are made compatible. With compatible products, the incumbent either obtains large benefits from accommodation or equilibria when all consumers are aware of the existence of the available products emerge. In this latter case, the amount of advertising cannot be further expanded to protect the incumbent’s monopolistic position. As a result, policies in favor of compatibility may encourage entry and generate larger levels of advertisement. |
| Keywords: | Product compatibility; Informative advertising; Entry deterrence; Market structure |
| JEL: | D21 D43 L13 L15 |
| Date: | 2017–10–11 |
| URL: | http://d.repec.org/n?u=RePEc:col:000092:015773&r=mkt |
| By: | Guillem Roig |
| Abstract: | In many markets, firms produce and sell complementary components that form a product system. This paper studies the effects of compatibility in product advertisement and entry decisions in a differentiated product market. While advertising enhances the ability of consumers to mix and match components closer to their preferences, more advertising does not always generate larger welfare. In my model, an incumbent uses advertising to increase the prospects of market competition with the objective to deter potential entry. However, under some parameters, entry deterrence does not occur when products are made compatible. With compatible products, the incumbent either obtains large benefits from accommodation or equilibria when all consumers are aware of the existence of the available products emerge. In this latter case, the amount of advertising cannot be further expanded to protect the incumbent’s monopolistic position. As a result, policies in favor of compatibility may encourage entry and generate larger levels of advertisement. |
| Keywords: | Product compatibility; Informative advertising; Entry deterrence; Market structure |
| JEL: | D21 D43 L13 L15 |
| Date: | 2017–10–11 |
| URL: | http://d.repec.org/n?u=RePEc:col:000092:015774&r=mkt |
| By: | Kotiranta, Annu; Seppälä, Timo; Tahvanainen, Antti-Jussi; Hemminki, Markus; Mattila, Juri; Sadeoja, Samuli; Tähtinen, Tea |
| Abstract: | The majority of digital platform research has focused on consumer-centric platforms. Driven by the vast growth potential of direct consumer market access, industrial communities locked behind the conventional gatekeepers in their respective value chains have lately started to tinker with their own platform creation initiatives. Aided by fifteen food industry actors, we identify two critical managerial prerequisites for and design a six-step roadmap towards a participatory infrastructure platform – a platform that allows platform participants to share proprietary data and – by exploiting the data – to create new artifacts in consumer-centric marketplaces. Beyond product innovations, sharing data also enables new optimization layers for operational efficiencies and increased productivity on the industry level. In exploring the participants’ commitment and willingness to shift towards such a platform model, we found three operational data types that the companies would readily be willing to share: 1) transportation data, 2) warehousing data, and 3) demand/supply data managed with decentralized governance models. In the short term, each data type could provide the foundation for the establishment of a specific type of an operational platform: a transportation platform, a warehousing platform, or a market platform. The latter would provide the long-sought direct access to consumer markets. Building on these models, we identify another three strategic avenues for long-term joint development: 1) algorithmic development and evolution of the platform, 2) cross-industry interoperability of the platform, and 3) interoperability with competing platforms. Laying out a roadmap of evolving platform models towards a consumer-driven business ecosystem, we contribute to the empirical literature on industrial platform creation. |
| Keywords: | Platform, e-commerce, multi-sided markets, food industry |
| JEL: | L6 L66 L8 L81 L86 |
| Date: | 2017–10–02 |
| URL: | http://d.repec.org/n?u=RePEc:rif:report:74&r=mkt |
| By: | Adrian Hillenbrand (Max Planck Institute for Research on Collective Goods); Svenja Hippel (Max Planck Institute for Research on Collective Goods) |
| Abstract: | Online platforms provide search tools that help consumers to get betterfitting product offers. But this technology makes consumer search behavior also easily traceable for the platform and allows for real-time price discrimination. Consumers face a trade-off: Search intensely and receive better fits at potentially higher prices or restrict search behavior – be strategically inattentive – and receive a worse fit, but maybe a better deal. We study the strategic buyer-seller interaction in such a situation theoretically as well as experimentally. The search technology we use in the laboratory leads by construction to better-fitting products, but we indeed find that only sellers profit from the buyers’ use of the offered search tools. |
| Keywords: | strategic inattention, price discrimination, information transmission, consumer choice, experiment |
| JEL: | D11 D42 D82 D83 L11 |
| Date: | 2017–10 |
| URL: | http://d.repec.org/n?u=RePEc:mpg:wpaper:2017_21&r=mkt |
| By: | Greene, Claire (Federal Reserve Bank of Boston); Schuh, Scott (Federal Reserve Bank of Boston); Stavins, Joanna (Federal Reserve Bank of Boston) |
| Abstract: | The 2015 Survey of Consumer Payment Choice (SCPC) was implemented using a new longitudinal panel, the Understanding America Study (UAS), and results are not yet comparable to the 2008–2014 SCPC. In 2015, U.S. consumers made 68.9 payments per month. Debit cards remained the most popular payment instrument among U.S. consumers in 2015, accounting for 32.5 percent of their monthly payments, followed by cash (27.1 percent) and credit or charge cards (21.3 percent). For nonbills, consumers used cash and debit equally—about one-third of the time for each. For bills, consumers used payment cards for half of bill payments and electronic payments from bank accounts for one-quarter of bill payments. In 2015, U.S. consumers on average held $202 in cash (on person and stored on property, large values excluded). Use of new payment technologies was still relatively rare. Just over 1 percent of consumers had a Venmo account in 2015. About half a percent of U.S. consumers held bitcoin or other virtual currencies. |
| Keywords: | cash; checks; checking accounts; debit cards; credit cards; prepaid cards; electronic payments; payment preferences; unbanked; Survey of Consumer Payment Choice |
| JEL: | D12 D14 E42 |
| Date: | 2017–08–08 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedbdr:17-3&r=mkt |
| By: | Aaron Rosenbaum; Garth Baughman; Mark D. Manuszak; Kylie Stewart; Fumiko Hayashi; Joanna Stavins |
| Abstract: | The U.S. payments industry is in the process of developing ubiquitous, safe, faster electronic solutions for making a broad variety of business and personal payments. How this market for faster payments will evolve will be shaped by a range of economic forces, such as economies of scale and scope, network effects, switching costs, and product differentiation. Emerging technologies could alter these forces and lead to new organizational arrangements or market structures that are different from those in legacy payment markets to date. In light of this uncertainty, this paper examines three hypothetical market structures that may emerge: a dominant-operator environment, a multi-operator environment, and a decentralized environment. Each of these market structures has different implications for the public policy objectives of efficiency, safety, and ubiquity. The paper also considers tools to promote positive outcomes in each market structure. |
| Keywords: | Faster payments ; Market structure and competition ; Payment system improvement ; Public policy ; Retail payments |
| JEL: | D4 G2 L1 E42 |
| Date: | 2017–09–25 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgfe:2017-100&r=mkt |
| By: | Eibelshäuser, Steffen; Wilhelm, Sascha |
| Abstract: | We study price cycles in the German retail gasoline market. We extend existing models of Bertrand competition by product differentiation, firm size and business hours. With sufficiently low product differentiation, there exists a unique subgame perfect equilibrium featuring Edgeworth price cycles. We test the model's predictions using an extensive data set. Last, we evaluate policy interventions and show that restrictions on price setting or increased market transparency harm consumer welfare. |
| JEL: | D43 L11 L13 L81 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc17:168247&r=mkt |
| By: | Nobuhiko Terui; Shohei Hasegawa; Adam N. Smith; Greg M. Allenby |
| Abstract: | We develop a structural model of horizontal and temporal variety seeking using a dynamic factor model that relates attribute satiation to brand preferences. The factor model employs a threshold specification that triggers preference changes when customer satiation exceeds an admissible level but does not change otherwise. The factor model is developed for high dimensional switching data encountered when multiple brands are purchased across multiple time periods. The model is applied to two scanner-panel datasets where we find distinct shifts in consumer preferences over time where consumers are found to value variety much more than indicated by traditional models. Insights into brand preference are provided by a dynamic joint space map that displays brand positions and temporal changes in consumer preferences over time. |
| Date: | 2017–09–28 |
| URL: | http://d.repec.org/n?u=RePEc:toh:dssraa:70&r=mkt |
| By: | Baumann, Florian; Rasch, Alexander |
| Abstract: | We consider a situation of duopolistic competition in which one firm may (falsely) advertise high product quality. Consumers are heterogeneous. One group forms rational beliefs about quality, whereas some consumers are naive and fully trust any advertisement. We compare two scenarios in which either the competitor or a government agency can file an injunction suit. From a welfare perspective, we show that it may be optimal either to have the competitor or the government agency as plaintiff. |
| JEL: | K41 K42 L13 L15 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc17:168142&r=mkt |
| By: | Cirer-Costa, Joan Carles |
| Abstract: | In this paper, we show that the pricing of sun and beach vacations in its most common form – three star hotels situated on the Baleares islands – follows the same guidelines as many currently consumed goods and services. Mature foreign markets in which there are no clear leaders tend to show price dispersion due to promotions and discounts introduced arbitrarily by some bidders, as well as the reactions of competitors. There is a basic price in these markets, which for hotels is determined by the type of establishment, location, size, and facilities, and the level of saturation and degree of specialization of the destination in which it is integrated. Add to this basic price intangible factors: service quality and brand power – of the hotel and destination – and finally, promotions. |
| Keywords: | Tourist prices, online market, Balearic Islands. |
| JEL: | L11 L83 |
| Date: | 2017–10–07 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:81823&r=mkt |