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Author: Andy Wei-Rong Chen
Publisher:
ISBN:
Category :
Languages : en
Pages : 65
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Book Description
The two essays explore two topics in marketing - consumer purchase behavior and competitive firm strategies. The first essay examines consumer stockpiling behavior in the retail gasoline market and aims to shed light on what factors affect consumer stockpiling. Past research on consumer stockpiling behavior such as Hendel and Nevo (2006) finds evidence of inter-temporal substitution by consumers that implies stockpiling behavior. However, they do not observe actual inventory or consumption and have to rely on simplifying assumptions about these quantities. I collect a novel data set of gasoline purchase history of consumers with actual inventory and consumption to test several hypotheses that relate consumer stockpiling to price, duration between purchases, and consumption. First, I find that consumers holding more inventory are more price sensitive. Higher inventory increases the impact of price on purchase decisions and those with higher inventory can afford to do more price search before making a purchase. I also find that all else equal, consumers will reduce consumption following a purchase made during high prices; that consumers with lower inventory have a higher probability of purchasing; and that duration from previous purchase is shorter for purchases made during low prices and longer during high prices. The second essay examines competition in a dynamic setting between Wal-Mart and Target in the context of location choices and expansion strategies. Studying this topic sheds light on how an industry evolves and how the market structure is shaped by decisions such as when to enter and exit and where to locate new stores as well as the driving force behind different expansion strategies. One of the early papers by Bresnahan and Reiss (1991) study entry of retail and professional services into isolated markets in a one-shot game. In their model, firms are allowed to enter once and open one store. Collard-Wexler (2014) estimates a model of investment and entry in the ready-mix concrete industry. Again, each firm is assumed to own a single plant in the model. In my paper, I build a structural model in which firms can open multiple stores over a period of time. This setting is closer to reality as competition between firms lasts over many periods with firms making regular entry decisions and often opening multiple stores in the same market. I estimate how entry decisions are affected by competitor's presence and market characteristics and learn about the evolution of market structure and expansion strategies of the firms. The firms are forward-looking and engage in Markov perfect equilibrium (MPE) strategies. The results show that firm profits are affected asymmetrically by the competitor's presence. First, Wal-Mart is the dominant firm with higher profits regardless of Target's presence. On the other hand, Target's profits depend a lot on Wal-Mart's presence. It must have more stores than Wal-Mart (called store advantage) to profit. I also find asymmetry in the expansion strategies of the two firms. Wal-Mart tends to explore new and smaller markets by being the first and often the only firm to enter, while Target tends to focus on major markets with high population and GDP and strives to maintain store advantage over Wal-Mart by matching or outdoing Wal-Mart's decision to open new stores.
Author: Andy Wei-Rong Chen
Publisher:
ISBN:
Category :
Languages : en
Pages : 65
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Book Description
The two essays explore two topics in marketing - consumer purchase behavior and competitive firm strategies. The first essay examines consumer stockpiling behavior in the retail gasoline market and aims to shed light on what factors affect consumer stockpiling. Past research on consumer stockpiling behavior such as Hendel and Nevo (2006) finds evidence of inter-temporal substitution by consumers that implies stockpiling behavior. However, they do not observe actual inventory or consumption and have to rely on simplifying assumptions about these quantities. I collect a novel data set of gasoline purchase history of consumers with actual inventory and consumption to test several hypotheses that relate consumer stockpiling to price, duration between purchases, and consumption. First, I find that consumers holding more inventory are more price sensitive. Higher inventory increases the impact of price on purchase decisions and those with higher inventory can afford to do more price search before making a purchase. I also find that all else equal, consumers will reduce consumption following a purchase made during high prices; that consumers with lower inventory have a higher probability of purchasing; and that duration from previous purchase is shorter for purchases made during low prices and longer during high prices. The second essay examines competition in a dynamic setting between Wal-Mart and Target in the context of location choices and expansion strategies. Studying this topic sheds light on how an industry evolves and how the market structure is shaped by decisions such as when to enter and exit and where to locate new stores as well as the driving force behind different expansion strategies. One of the early papers by Bresnahan and Reiss (1991) study entry of retail and professional services into isolated markets in a one-shot game. In their model, firms are allowed to enter once and open one store. Collard-Wexler (2014) estimates a model of investment and entry in the ready-mix concrete industry. Again, each firm is assumed to own a single plant in the model. In my paper, I build a structural model in which firms can open multiple stores over a period of time. This setting is closer to reality as competition between firms lasts over many periods with firms making regular entry decisions and often opening multiple stores in the same market. I estimate how entry decisions are affected by competitor's presence and market characteristics and learn about the evolution of market structure and expansion strategies of the firms. The firms are forward-looking and engage in Markov perfect equilibrium (MPE) strategies. The results show that firm profits are affected asymmetrically by the competitor's presence. First, Wal-Mart is the dominant firm with higher profits regardless of Target's presence. On the other hand, Target's profits depend a lot on Wal-Mart's presence. It must have more stores than Wal-Mart (called store advantage) to profit. I also find asymmetry in the expansion strategies of the two firms. Wal-Mart tends to explore new and smaller markets by being the first and often the only firm to enter, while Target tends to focus on major markets with high population and GDP and strives to maintain store advantage over Wal-Mart by matching or outdoing Wal-Mart's decision to open new stores.
Author: Bin Li
Publisher:
ISBN:
Category : Electronic dissertations
Languages : en
Pages :
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Book Description
With the increasing popularity of the online channel, both consumers and firms are engaging in more and more multi-channel activities. On the one hand, consumers can integrate information from searches on both online and offline channels, and then decide on the best channel to buy from. On the other hand, firms need to consider consumer behavior in different channels in their strategy design. As a result, cross-channel interactions between consumer behavior and firm strategy can be within the same channel or across different channels. While the within-channel interaction has been studied extensively in the previous literature, there is much less research on the cross-channel interaction. In my dissertation, I add to the understanding of consumer behavior and firm strategy in the multi-channel environment by empirically analyzing their cross-channel interactions. This dissertation consists of three separate but related essays. The first answers the question: How does consumer behavior affect optimal product portfolio strategies in online versus offline channels? I develop an empirical model to simultaneously identify the cannibalization effect (within a brand) and the competition effect (between different brands) in different retail channels. I further examine how these effects are affected by consumer preferences. The second essay answers the question: How does a firm’s offline strategy affect consumer online behavior? I use a natural experiment to examine how the awareness and convenience effects from opening new retail stores affect the online search. The final essay answers the question: How does online banking affect entry/exit of offline bank branches? I develop and estimate a dynamic entry/exit model examining the relationship between technological advances and market structure evolution. My counterfactual analysis shows that the asymmetric reduction in operating costs is the most significant factor driving recent changes in the U.S. banking industry, followed by increased entry costs and increased deposits for large banks due to greater online presence. My findings provide important implications for firms engaging in multi-channel activities.
Author: Aleksandr Yankelevich
Publisher:
ISBN:
Category : Electronic dissertations
Languages : en
Pages : 116
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Book Description
Essay 1: "Price-Matching in a Sequential Search Duopoly" While substantial research has tried to determine if price-matching guarantees are anti-competitive, most previous studies have overlooked the effect that these policies have on consumer search behavior. This essay examines how price-matching guarantees affect consumer behavior and prices in a model of sequential price search. By endogenizing consumers' acquisition of price information, I find that price-matching may raise prices in three new ways. First, price-matching diminishes firms' incentives to lower prices to attract consumers who have no cost of search. Second, for consumers with positive search costs, price-matching lowers the marginal benefit of search, inducing them to accept higher prices. Finally, higher prices may come about because price-matching can lead to asymmetric equilibria where one firm runs fewer sales and both firms tend to offer smaller discounts than in a symmetric equilibrium. These price increasing effects grow in proportion to the number of consumers who make use of price-matching guarantees as well as in the amount of asymmetry that prevails in equilibrium. Essay 2: "Asymmetric Sequential Search" (with Carmen Astorne-Figari) Rival firms often find themselves catering to a very different mix of customers from that of their competitors. This can lead to variations in pricing behavior even when other factors, such as product quality and the cost of production, are held constant across firms. In this essay, we use a model of sequential consumer price search to explore how asymmetries in the demand structures across firms impact firm pricing. In our model, a fraction of consumers must pay a cost to search for prices beyond their local firm and firms serve different fractions of local consumers. The price distribution of a firm with more local consumers first order stochastically dominates that of a firm with fewer local consumers and places positive probability on its upper bound. This means that a firm with more local consumers has a higher average price and runs sales less frequently. The frequency of sales diminishes in the number of local consumers, but price dispersion persists even if all consumers are local to a single firm. Moreover, as the fraction of consumers who search without cost increases, firms tend to offer bigger discounts, while the likelihood of a sale may fall. Essay 3: "Energizer: The Bunny or the Battery? Advertising as a Way to Publicize Either the Brand or the Good" (with Carmen Astorne-Figari) Experimental studies and surveys of consumers suggest that an important role of advertising is to convince consumers that they want the product and to buy it from the brand advertising it. However, because of competitive clutter, an advertisement that induces a consumer to enter the market may lead her to purchase from a competing brand. Thus, we can characterize two effects of advertising: (i) an effect that benefits the individual firm by promoting binding between the brand and the advertised good and (ii) a "public good" quality that benefits all producers of the good by inducing additional consumers to enter the market. We analyze these two effects to study the relationship between advertising and market size, price, firm profit and consumer welfare.
Author: Patrick E. Murphy
Publisher: Routledge
ISBN: 1134091079
Category : Business & Economics
Languages : en
Pages : 353
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Book Description
Marketing is among the most powerful cultural forces at work in the contemporary world, affecting not merely consumer behaviour, but almost every aspect of human behaviour. While the potential for marketing both to promote and threaten societal well-being has been a perennial focus of inquiry, the current global intellectual and political climate has lent this topic extra gravitas. Through original research and scholarship from the influential Mendoza School of Business, this book looks at marketing’s ramifications far beyond simple economic exchange. It addresses four major topic areas: societal aspects of marketing and consumption; the social and ethical thought; sustainability; and public policy issues, in order to explore the wider relationship of marketing within the ethical and moral economy and its implications for the common good. By bringing together the wide-ranging and interdisciplinary contributions, it provides a uniquely comprehensive and challenging exploration of some of the most pressing themes for business and society today.
Author: Jagdish N. Sheth
Publisher: Marketing Classics Press
ISBN: 161311009X
Category : Business & Economics
Languages : en
Pages : 14
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Book Description
This edited book, discusses thorough and wide-ranging theories and models associated with differing aspects of buyer behavior from a team of marketing experts. Combines conceptual and theoretical basics of marketing discipline. Part 1 focuses on Armstrong's views on the ideological and practical strategy of conducting research to substantiate concepts and a network of concepts that comprises a theory. Part 2 centers on the encompassing models of buyer behavior. Part 3 assimilates the extensive models of innovative behavior and adoption process. Part 4 consists of papers which provide models of consumer classification and market segmentation. Part 5 includes a theoretical analysis of the changes which are likely to emerge in buyer behavior theory and research.This Classic Book was originally published in 1974 by Harper and Row.Dr. Jagdish (Jag) N. Sheth is the Charles H. Kellstadt Professor of Marketing in the Goizueta Business School at Emory University. Prior positions, include the University of Southern California; the University of Illinois; the faculty of Columbia University; and, the Massachusetts Institute of Technology. Dr. Sheth is well known for his scholarly contributions in consumer behavior, relationship marketing, competitive strategy and geopolitical analysis.
Author: Ngan Ngoc Chau
Publisher:
ISBN:
Category :
Languages : en
Pages : 184
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Book Description
When purchasing durable goods, consumers not only pay for current but also future consumption; consequently, forward looking behavior is an important consideration in durable goods markets. For example, anticipating that prices will go down in the future, consumers may delay the purchase today; such behavior has a significant impact on the firm's marketing strategies. This dissertation investigates the impact of durability on two marketing strategies: new product introductions and supply chain design. The first part of this dissertation (Chapter 3) examines a durable goods manufacturer's new product introduction strategy under different market environments where network effects and product compatibility are important. More specifically, this part explores the incentives of a firm to use either a replacement strategy or a skipping strategy--in the former, the firm commercializes the existing technology, while in the latter, it does not; in either case, an improved technology will be available in the future and the firm will introduce a new product at that time. Using a two-period analytical model with network effects, the analysis shows how the level of improvement in the new product, along with the type of compatibility between the products, interacts with network strength to determine the manufacturer's optimal strategy. Under gradual new product improvement, there is a strict preference for replacement. In contrast, under rapid new product improvement, that preference only holds in markets with relatively high levels of the network strength; at lower levels of the network strength, skipping is preferred; interestingly, for moderate values of the network strength, the level of product improvement affects the manufacturer's optimal choice differently under varying types of compatibility. The second part of this dissertation (Chapters 4 and 5) focuses on the supply chain design decisions of a durable goods manufacturer who is a sole supplier of an essential proprietary component for making the end product. Three different supply chain structures are considered. In the first, the manufacturer operates as a "component supplier" and sells the component to a downstream firm who then makes the end product. In the second structure, the manufacturer produces the end product using its component but does not make that component available to any other firms; here, the manufacturer operates as a "sole entrant". Finally, the manufacturer can operate as a "dual distributor" who not only makes the end product using its own component, but sells the component to a downstream firm who then competes against the manufacturer in the end product market. The extant literature on the optimal choice among the above supply chain structures has focused mainly on static settings in a framework of price competition. By contrast, researchers predominantly use quantity competition to examine durable goods markets in dynamic (i.e., multiple time period) settings. Moreover, the literature notes diversity in optimal firm behavior under the two types of (i.e., price and quantity) competition. Therefore, to transition from supply chain design in a static setting to a more dynamic one where consumers are forward-looking, this part utilizes Chapter 4 to analyze the manufacturer's choice using quantity competition in a static setting. This analysis (in Chapter 4) identifies precisely the shift in the manufacturer's choice of supply chain structure when moving from price competition to a quantity competition framework. With that analysis as a benchmark, the next chapter focuses on the manufacturer's choice in a dynamic setting. More specifically, Chapter 5 investigates the impact of durability on the optimality of the supply chain structures identified above. Using a two period setting, the analysis explores how the manufacturer's preference for different supply chain structures is modified. The findings reveal that, e.g., when durability is taken into account, the manufacturer's preference for the sole entrant role goes up, while the preference for the component supplier role goes down. Further, under certain conditions, the manufacturer may opt to be a dual distributor in the first period and then choose to become only a component supplier in the second period. The underlying rationale for such shifts in preference is directly linked to durability, which creates future competition and substantially reduces the manufacturer's profitability in the long run. Interestingly, this negative impact varies across different supply chain structures. Overall, this dissertation contributes to the current literature on durable goods and enhances our understanding of the impact of durability on the optimality of distinct marketing strategies, and provides insights that are valuable to both academics and managers.
Author: Koichi Yonezawa
Publisher:
ISBN:
Category : Consumer behavior
Languages : en
Pages : 191
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Book Description
It is well understood that decisions made under uncertainty differ from those made without risk in important and significant ways. Yet, there is very little research into how uncertainty manifests itself in the most ubiquitous of decision-making environments: Consumers' day-to-day decisions over where to shop, and what to buy for their daily grocery needs. Facing a choice between stores that either offer relatively stable "everyday low prices" (EDLP) or variable prices that reflect aggressive promotion strategies (HILO), consumers have to choose stores under price-uncertainty. I find that consumers' attitudes toward risk are critically important in determining store-choice, and that heterogeneity in risk attitudes explains the co-existence of EDLP and HILO stores - an equilibrium that was previously explained in somewhat unsatisfying ways. After choosing a store, consumers face another source of risk. While knowing the quality or taste of established brands, consumers have very little information about new products. Consequently, consumers tend to choose smaller package sizes for new products, which limits their exposure to the risk that the product does not meet their prior expectations. While the observation that consumers purchase small amounts of new products is not new, I show how this practice is fully consistent with optimal purchase decision-making by utility-maximizing consumers. I then use this insight to explain how manufacturers of consumer packaged goods (CPGs) respond to higher production costs. Because consumers base their purchase decisions in part on package size, manufacturers can use package size as a competitive tool in order to raise margins in the face of higher production costs. While others have argued that manufacturers reduce package sizes as a means of raising unit-prices (prices per unit of volume) in a hidden way, I show that the more important effect is a competitive one: Changes in package size can soften price competition, so manufacturers need not rely on fooling consumers in order to pass-through cost increases through changes in package size. The broader implications of consumer behavior under risk are dramatic. First, risk perceptions affect consumers' store choice and product choice patterns in ways that can be exploited by both retailers and manufacturers. Second, strategic considerations prevent manufacturers from manipulating package size in ways that seem designed to trick consumers. Third, many services are also offered as packages, and also involve uncertainty, so the effects identified here are likely to be pervasive throughout the consumer economy.
Author: Bhavya Mohan
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
This research examines the effects of firm transparency on consumer behavior. Three essays investigate how consumer behavior changes when firms are transparent about costs, wages, and promotional strategies. Essay one investigates when and why firms benefit from revealing confidential unit cost information to consumers. A natural field experiment conducted with an online retailer suggests that cost transparency can boost sales. Subsequent controlled lab experiments replicate this basic effect and provide evidence for why it occurs. Essay two examines whether consumer behavior is influenced by the disclosure of a firm's pay ratio - the ratio of the total compensation of the CEO to the average annual compensation of all other employees. Pilot field data and a series of experiments show that pay ratio disclosure affects the purchase intentions of a subset of consumers, via perceptions of wage fairness. Essay three examines how marketing offers that are framed as percentages can confuse consumers, due to highly non-linear impacts in terms of actual value. Three lab studies and one field experiment show that while even highly numerate consumers are prone to error, the transparent provision of rate information can help consumers evaluate offers more accurately.
Author: Polykarpos Pavlidis
Publisher:
ISBN:
Category : Consumer behavior
Languages : en
Pages : 254
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Book Description
"Marketing strategies that firms adopt are based on consumers' response in the marketplace when they face and interact with these strategies. This dissertation examines the tendency of consumers to repeat their last purchase choices and the implications of this type of behavior on pricing related strategies of consumer packaged goods brand manufacturers. The first essay is a theory based empirical investigation about the commonly observed practice of brands offering temporary price promotions. There have been many theories that attempt to explain the popularity of price promotions as a marketing tool but with very few exceptions they are disconnected from choice dynamics. We examine the empirical support of a recent theory that connects price promotions with demand state dependence. In our investigation we measure how much each brand benefits from the consumers' tendency to repeat purchase and we examine the connection between this measure (AMEL) and the brands' price promotional frequencies. Our extensive sample includes all major brands from twenty product categories of frequently purchased goods and twenty stores in two separate geographical markets. Our empirical model accounts explicitly for the dependence of price promotions on demand response and vice versa. In summary, we find significant and robust evidence that brands which gainmore from consumers' repeat purchase behavior are offered on promotion formore weeks on average. We also demonstrate the value of our proposed estimation algorithm over simpler, two-step, approaches. In the second essay we examine consumers' state dependence not only to specific choice alternatives but also to parent brands that cover multiple sub-brands. Using a structural, forward looking, pricing model for multiproduct firms, we explore the implications of parent brand state dependence on equilibrium prices and firm profitability through counterfactual experiments. Empirically, we examine household level choice data from the category of yogurt and estimate state dependence to both the parent brand and the sub-brand level. We find evidence of parent brand state dependence for the category of yogurt. Its impact on the market equilibrium is to push prices downwards, because firms invest in future demand, and increase profitability of multiproduct firms, because per period demand increases"--Leaves iv-v.
Author: Yi-Chun Ho
Publisher:
ISBN:
Category :
Languages : en
Pages : 114
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Book Description
Companies have for decades built up their business around the traditional brick-and-mortar channel. The rise of the Internet and the surging popularity of online shopping have offered rapid growth in e-commerce and embodied the emerging click-and-mortar (e.g. Target.com) or solely online business model (e.g. Amazon.com). As the focus of market moves away from brick-and-mortar to e-commerce, companies have sought to adapt best digital marketing strategies to obtain competitive advantage over their rivals. Meanwhile, the prevalence of user-generated content has given consumers unprecedented power to influence the market performance of various products and services. Such transformation has created many opportunities and challenges for modern e-businesses. It has opened several new pages for IS literature as well. In my dissertation, I intend to study the impact of digital marketing on firms' pricing strategy as well as on consumers' intrinsic behaviors in the post-Internet era. In the first study, I examine a novel hybrid pricing model, featuring both online advertising and digital promotion. Endogenizing product prices as a decision variable, I explicitly consider the implementation costs and the distribution effectiveness associated with the underlying mechanism. From consumers' perspective, cashback shopping provides an attractive saving opportunity as the prices they pay are perceived lower. Surprisingly, under some conditions the "low" post-cashback price is actually "high", relative to the level in the absence of cashback mechanism. As a consequence, the introduction of cashback may reduce consumer surplus and social welfare. In the second essay, I investigate a fundamental question: Under what conditions are consumers more likely to post product ratings voluntarily? Unlike existing literature, I follow an established theory and propose a novel approach, decomposing consumer satisfaction into product quality and quality disconfirmation. I find that the discrepancy between a consumer's expected and realized product quality has a significant impact on her propensity to share product experience. Such intension to contribute is subject to the crowding-out effect, meaning that the underlying propensity declines as more peer consumers have already shared their opinions. Furthermore, the more credible a consumer perceives the online review system, the less prone she would be to interact with the system. A series of simulations are designed to further understand: (1) the association between product evaluation and lurking behavior, (2) the evolution pattern of product ratings, and (3) the effect of review manipulation on subsequent rating activities. In sum, these investigations provide a better understanding of how information systems and IT-enabled marketing methods reshape merchants' competitive strategy and consumers' decision-making processes. I briefly introduce the background, motivate the research questions of my interest, and summarize the main findings of this dissertation in the first chapter. In the following two chapters, I review related literature and highlight the contribution of my work from both academic and managerial perspectives for each of two studies. Then, I discuss model development and setting, describe research design and methodologies, and summarize main findings and implications of those two studies.
