Effects of Consumers' Context-Dependent Preferences on Product Bundling PDF Download
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Author: Qianbo Yin
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Languages : en
Pages : 0
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Book Description
Bundling can change consumers' choice set and affect their purchase decision. It is well-documented that consumers' preferences depend on the bundling context. In this paper, we investigate the effects of consumers' context-dependent preferences (CDPs) on the firm's optimal bundling strategy in various competitive situations. We consider a market where a monopolist firm in product category A also sells a product in product category B. We analyze three scenarios in category B: (1) an independent firm selling a higher-quality product, (2) two independent firms selling the higher-quality product, and (3) the monopolist in category A is also a monopolist in category B. We find that CDPs can indeed change the firm's optimal bundling strategy. When the firm has a competitive disadvantage in category B, CDPs encourage the firm to offer the bundle (by either pure bundling or mixed bundling). Furthermore, if the category B market is so competitive that the firm possesses negligible market power, mixed bundling can be strictly more effective at increasing the firm's profit than pure bundling since mixed bundling can better take advantage of CDPs. In contrast, if the firm has monopoly power in both categories, CDPs discourage the introduction of the bundle, and pure-component selling is optimal.
Author: Qianbo Yin
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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Book Description
Bundling can change consumers' choice set and affect their purchase decision. It is well-documented that consumers' preferences depend on the bundling context. In this paper, we investigate the effects of consumers' context-dependent preferences (CDPs) on the firm's optimal bundling strategy in various competitive situations. We consider a market where a monopolist firm in product category A also sells a product in product category B. We analyze three scenarios in category B: (1) an independent firm selling a higher-quality product, (2) two independent firms selling the higher-quality product, and (3) the monopolist in category A is also a monopolist in category B. We find that CDPs can indeed change the firm's optimal bundling strategy. When the firm has a competitive disadvantage in category B, CDPs encourage the firm to offer the bundle (by either pure bundling or mixed bundling). Furthermore, if the category B market is so competitive that the firm possesses negligible market power, mixed bundling can be strictly more effective at increasing the firm's profit than pure bundling since mixed bundling can better take advantage of CDPs. In contrast, if the firm has monopoly power in both categories, CDPs discourage the introduction of the bundle, and pure-component selling is optimal.
Author: Dan Hamilton Rice
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Category :
Languages : en
Pages :
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ABSTRACT: How does context affect consumers' reaction to product bundles? This research demonstrates that consumers are sensitive to both distributional and compositional information in the contextual set. I show that the evaluations of particular product bundles vary depending on how other products are bundled together, even when the set of contextual products is held constant. These context effects change how the target bundles are perceived, producing systematic reversals in bundle preference. I argue that these effects are due to effortful comparisons between bundles. Consistent with this account, I find that increasing the difficulty of bundle comparisons moderates the process by which consumers use bundle context. When cognitive load is high or contextual comparisons involve both bundles and single products, consumers use a heuristic in which the best product is substituted for the entire bundle.
Author: Robert P. Rooderkerk
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Languages : en
Pages : 0
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The behavioral literature provides ample evidence that consumer preferences are partly driven by the context provided by the set of alternatives. Three important context effects are the compromise, attraction, and similarity effect. As these context effects affect choices in a systematic and predictable way, it should be possible to incorporate them in a choice model. However, the literature does not offer such a choice model. This study fills this gap by proposing a discrete-choice model that decomposes a product's utility into a context-free partworth utility and a context-dependent component capturing all three context effects. Model estimation results on choice-based conjoint data concerning digital cameras provide convincing statistical evidence for context effects. The estimated context effects are consistent with the predictions from the behavioral literature, and accounting for context effects leads to better predictions both in and out-of-sample. To illustrate the benefit from incorporating context effects in a choice model, the authors illustrate how firms could utilize the context sensitivity of consumers to design more profitable product lines.
Author: Erika Knutsson
Publisher:
ISBN: 9789174593006
Category :
Languages : en
Pages : 221
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Author: Miloš Duško Graonic
Publisher:
ISBN:
Category :
Languages : en
Pages : 352
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Author: Timothy Derdenger
Publisher:
ISBN:
Category :
Languages : en
Pages : 48
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Book Description
Several key questions in bundling have not been empirically examined: Do consumers value bundles over and beyond their component products, indicating synergy? Is mixed bundling more effective than pure bundling or pure components? Does correlation in consumer valuations make bundling more or less effective? Does bundling serve as a complement or substitute to network effects? To address these questions, we develop a consumer-choice model from micro-foundations to capture the essentials of our setting, i.e. the handheld video game console market. In doing so, we provide a framework to understand the dynamic, long-term impacts of bundling on demand. We find that hardware sales diminish in the absence of bundling, and consumers who had previously purchased bundles may not always purchase pure consoles, even though consoles may be cheaper than bundles. The type of bundling chosen is critical to extracting value from consumers, with pure bundling performing significantly worse than both mixed bundling and pure components. We find that consumers perceive a negative synergy between the components of a bundle. Modeling the dynamic nature of durable good purchases also helps us uncover a finding that contradicts prior static models: positive correlation between products enables bundling to be more effective than negative correlation.
Author: Deny Bélisle
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Author: Peter E. Rossi
Publisher: John Wiley & Sons
ISBN: 0470863684
Category : Mathematics
Languages : en
Pages : 368
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Book Description
The past decade has seen a dramatic increase in the use of Bayesian methods in marketing due, in part, to computational and modelling breakthroughs, making its implementation ideal for many marketing problems. Bayesian analyses can now be conducted over a wide range of marketing problems, from new product introduction to pricing, and with a wide variety of different data sources. Bayesian Statistics and Marketing describes the basic advantages of the Bayesian approach, detailing the nature of the computational revolution. Examples contained include household and consumer panel data on product purchases and survey data, demand models based on micro-economic theory and random effect models used to pool data among respondents. The book also discusses the theory and practical use of MCMC methods. Written by the leading experts in the field, this unique book: Presents a unified treatment of Bayesian methods in marketing, with common notation and algorithms for estimating the models. Provides a self-contained introduction to Bayesian methods. Includes case studies drawn from the authors’ recent research to illustrate how Bayesian methods can be extended to apply to many important marketing problems. Is accompanied by an R package, bayesm, which implements all of the models and methods in the book and includes many datasets. In addition the book’s website hosts datasets and R code for the case studies. Bayesian Statistics and Marketing provides a platform for researchers in marketing to analyse their data with state-of-the-art methods and develop new models of consumer behaviour. It provides a unified reference for cutting-edge marketing researchers, as well as an invaluable guide to this growing area for both graduate students and professors, alike.
Author:
Publisher:
ISBN:
Category : Marketing
Languages : en
Pages : 136
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Book Description
Author: Ralph Fuerderer
Publisher: Springer Science & Business Media
ISBN: 3662091194
Category : Business & Economics
Languages : en
Pages : 221
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Book Description
Scientific knowledge and practical advice are combined in this book. Leading scientists present their latest research results in the area of product and price bundling, with respect to optimization as well as to behavioral bundling approaches. In addition the reader will learn how to implement bundling strategies and how to set up a bundling concept. He will find a thorough explanation of the value that bundling has for improving a company`s profit and sales.
