A tale of two Italian cities: brand-level milk demand and price competition

We apply the BLP random coefficient logit model demand model to fluid milk sales data from two north-south Italian cities: Turin and Naples. By virtue of their location and socioeconomic differences, these cities provide a natural experiment for contrasting consumer choices and retail market power related to milk physical and marketing characteristics. Results reveal that, regardless of location, consumers negatively value price increases, fat content and ultra-high temperature (UHT) treatment. However, location matters with respect to brand and type of milk purchased. While in Turin (the higher-income region) demand for the leading manufacturers’ brands is the most price inelastic, in Naples consumers have the lowest price elasticities in case of cheaper milk, often small manufacturer or private label brands. Unlike previous studies, we do not find price elasticities for private labels to be consistently lower (or markups to be higher) compared to manufacturer brands, indicating that private labels have reached maturity in these markets. Further, while demand for fresh milk is more price inelastic in Turin, it is more inelastic for UHT milk in Naples. Likewise, markups and Lerner indexes are higher for fresh milk in Turin and for UHT in Naples corresponding to the more inelastic demands under Bertrand price competition.     

How do advertised brands benefit from private labels? An application of rational expectations models

Private labels have traditionally been viewed as a threat to advertised brands. Contrary to traditional wisdom, this study uses a two-asset rational expectations model to show that advertised brands could benefit from private labels. While the manufacturer’s advertising creates product differentiation, the retailer’s synchronous pricing strategy further enhances the product differentiation and raises profits as well as the efficiency of price discounts for the advertised brand. In addition, the existence of private labels improves the advertising efficiency, especially for newly introduced brands. The economic role of private labels is not limited to taking a free ride on the manufacturer’s advertising efforts, and this role cannot be replaced by another advertised brand.     

Private labels, price rivalry, and public policy

The article examines (i) why low-quality private labels are introduced in some product categories and not in others, (ii) how the existence of a low-quality private label affects the pricing of a competing national brand, and (iii) how consumers’ surplus and welfare are affected by private labels. We find that the potential for private label introduction may—in return for national brand exclusivity in that particular retail store (exclusive dealing)—lead to price concessions from the producer of the national brand. If the national brand producer decides not to offer an exclusivity contract, a private label is introduced. In this case, private label introduction may lead to higher retail prices on national brands, which can be detrimental to consumer welfare as well as total welfare. We argue that our results have important implications for the interpretation of empirical results and the public policy towards national brands     

Demand for carbonated soft drinks: implications for obesity policy

This article examines consumer choices of Carbonated Soft Drinks (CSDs) and their implications for obesity policy. Demand in relation to product and consumer heterogeneity is estimated via a random coefficients logit model (Berry et al., 1995) applied to quarterly scanner data for 26 brands in 20 US cities, involving 40?000 consumers. Counterfactual experiments show that caloric taxes could be effective in decreasing caloric CSD consumption though having little impact on obesity incidence.     

Exposure order effects and advertising competition

This paper applies the theories of exposure order effects, developed in the psychology literature, to an industrial organization model to explore their role in advertising competition. There are two firms and infinitely many identical consumers. The firms produce a homogeneous product and distribute their brands through a common retailer. Consumers randomly arrive at the retailer and buy their most preferred brands. The order in which a consumer sees the advertising messages affects his brand preferences. Under the primacy effect the consumer prefers the brand he first saw advertised, under the recency—the last encountered brand. The equilibrium of the advertising game is characterized separately under the primacy and the recency effects. In the first setting all consumers are initially unaware of the product existence. The equilibrium advertising intensities, remarkably, do not depend on the type of exposure order effect. In the other two settings some consumers have already formed their brand preferences. The primacy and the recency effects give rise to different equilibrium outcomes.     

The effects of competitors on new product launch and market expansion in the hybrid car market

This paper evaluates the effect of competitors on automakers’ new product launch and market expansion decisions in the hybrid car market. Using data from the entire history in US hybrid car market from 2000 to 2014, this paper estimates a Poisson model with endogeneous switching to account for the initial launch and the following expansion decisions. The results indicate that the presence of competing brands’ hybrid vehicle models has a net positive effect on a brand’s initial launch and expansion decisions. This suggests that demand expansion and market learning from competitors’ hybrid model launch and consumer cultivation are very important for this relatively new technology. Further, I find that the impact of competitors varies over time, vehicle origins, and classes.     

Determinants of price elasticities for private labels and national brands of cheese

An Almost Ideal Demand System model is developed and used to estimate price elasticities for US cheese sold at retail. Growing consumption of cheese coupled with fierce competition between private labels and national brands serves as motivating factors for this study. Per capita consumption of cheese grew by 75% during 1980–2004 and private labels captured a rising share of this growth. Private labels today account for 35% of market share; national brands, for the remaining 65%. Kraft accounts for 45% of national brands, but price increases for Kraft brands led to a sizeable price gap between its brands and private labels. This gap helped to stimulate growth of private labels. Marketing managers seek to capitalize on both growing cheese sales and price gaps for brands. Relevant information for marketing managers is consumer sensitivity to price changes. This study uses 69 weeks of scanner data, with consumers segmented by income levels to derive price elasticities for both lower-and higher-income consumers. Results show lower-income consumers to be more price sensitive. If large price gaps are maintained, the results suggest continued growth of private labels. Yet, meta-analyses for this study suggest that Kraft could lower the price gap and regain market share.     

Home Bias in US Beer Consumption

We apply the Berry, Levinsohn and Pakes market equilibrium model to data from 30 brands of beer sold in 12 US cities over 20 quarters (1988–1992) to estimate consumers' preference for beer characteristics as well as for their cultural regions of origin. Consumer heterogeneity is accounted for with respect to age and income. Overall, our data is comprised of 7200 beer brand observations and 13 920 hypothetical consumer observations. Empirical results indicate that there is, indeed, home bias with respect to foreign beers, although it varies with consumer age and income.     

On generic vs. brand promotion of farm products in foreign markets

Farm groups and their governments spend millions of dollars each year advertising agricultural products in international markets. Intuitively, country-of-origin or ‘brand’ advertising should be more profitable than generic advertising in that it enhances product differentiation and reduces free riding. However, unlike generic advertising, brand advertising decreases the demand for competing imports and lowers their prices when supplies are upward sloping. In addition to inviting retaliation, the decline in the prices of competing products erodes the price of the advertised product through second-round or ‘market feedback’ effects. In this study, we develop a generalized model for assessing the relative effectiveness of generic and brand promotion in the international market when products are differentiated by source origin and supplies are uncontrolled. Applying the model to US beef promotion in Japan, we find that when brand and generic advertising are equally efficient in the sense that they cause equivalent horizontal shifts in the group and product-specific demand curves, generic advertising is indeed more profitable for most of the relevant parameter space. Distributional analysis suggests that, with equal export supply elasticities, the gross benefits of generic advertising are distributed across exporters in proportion to the expenditure elasticities for the products in question.     

品牌进入次序优势的经济解释

作者利用品牌经济学理论和其“选择成本范式”的分析框架研究品牌进入次序的优势及其产生的原因。通过对一个简单模型的分析表明,“趋利避害”的消费者的选择行为将给第一个进入市场的品牌以持久的优势,原因在于该品牌降低了消费者选择行为的局限条件—选择成本,而后进入市场的品牌,由于转换成本的存在,将使其选择成本高于先进入市场的品牌,从而使其处于劣势的地位,因此后进入市场品牌的品类模仿成功的可能性大大降低。     

ARE CONSUMERS MORE LOYAL TO NATIONAL BRANDS THAN TO PRIVATE LABELS?

The evolution of private labels (PLs) can be understood in terms of a strategy adopted by the retail industry with the aim of competing with national brands (NBs). In the 1990s, this strategy led to the development of ‘me too’ products, which currently represent the largest share of store brand products. Since the early 2000s, retailers have widened the range of their store brands by introducing high‐quality products. The aim of this study was to estimate consumers’ attachment to ‘me‐too’ and niche PLs respectively, as compared to NBs. We captured the degree of maturity of these PLs through their price‐elasticities, computed for three staple goods offered by three mass retail companies. It was found that price sensitivity does not differ much between the ‘me‐too’ PLs and the corresponding NBs. This result confirms that ‘me‐too’ products are now considered reliable quality brands. However, in the high quality segment, consumers remain more sensitive to the price of PLs than to that of NBs, a characteristic which may relate to their recent introduction on the market.     

Brand loyalty and user skills

The paper develops the idea that brand loyalty is a rational thing for a consumer to have. The reason is that a consumer's experience with a brand creates user skills which make that brand more useful to the consumer than other brands, even though these, given the same experience, would be equally useful. In a brand switching model this implies that the consumer will switch brands only if there is an adequately large price differential and that the required price differential increases with user skills. The theory is related to standard search theory and it is shown that user skills and search costs have similar effects in the sense that either can support price dispersion in a market.     

The determinants of dealership structure: Empirical analysis of the Chinese auto market

This paper investigates the factors that affect manufacturers’ decisions to grant local monopoly to a dealer and the factors that determine the dealer’s status of sole dealership in the Chinese automobile market. Our empirical findings suggest that manufacturer decisions depend on dealers’ retail network: manufacturers are inclined to choose a sole dealer for their brands if that dealer also has retail outlets for substitute brands in the local market and to choose multiple dealers otherwise. These findings can be explained by the theory proposed by [Mathewson, G. F., Winter, R. A., 1994. Territorial restrictions in franchise contracts. Economic Inquiry 32 (2), 181–192.], who suggest that manufacturers transfer the exclusive right of resale from themselves to dealers only if dealers’ contribution is crucial to the vertical relationship. When dealers also have extensive retail channels for other brands, their retail efforts and experience become crucial to brand success, and thus manufacturers are more likely to offer them sole resale rights. Moreover, our empirical findings suggest that manufacturers also consider product quality and market conditions when making their decisions.     

恶俗广告——广告塑造品牌过程中的主要问题剖析

广告为很多品牌的塑造立下了汗马功劳,但广告在塑造品牌的实际运作中存在很多方面的问题,恶俗广告就是其中最典型的。恶俗广告在无形中将产品的品牌形象打入了万丈深渊。企业在品牌的塑造中,广告应审时度势,以优秀的广告为品牌树立良好的形象。     

Advertising and US alcoholic beverage demand: system-wide estimates

The effects of advertising on consumption of alcoholic beverages in the US are analysed. The goal is to obtain evidence on the importance of advertising at the level of beverage demand(beer, wine, spirits) and for total consumption of alcohol (per capita gallons of ethanol). A three-equation conditional demand system is estimated that includes own- and cros-beverage advertising as explanatory variables. Four models of the differential demand system are estimated, including the Rotterdam, AID, CBS, and NBR models, using annual US data for the period 1964-90 on beverage consumption, prices, expednitures, and real advertising. Estimates are obtained of the complete matrix of own- and cross-elascities for each beverage’ price and advertising. At the beverage level, the results indicate a positive butr very small effect of advertising on beverage consumption, with most of the impact due to wine advertising and non due to beer advertising. There is no efect of advertising in the composite demand function for alcohol. Hence, the results from system-wide modelling suggest that alcohol advertising serves to reallocate brand sales, with no effect on total ethanol consumption and very small effects on beverage consumption.     

Cournot duopoly and environmental R&D under regulator’s precommitment to an emissions tax

This study examines the environmental R&D (E-R&D) of Cournot duopolists with end-of-pipe technology under a regulator’s precommitment to an emissions tax. Under technological spillover effect, the government invariably prefers E-R&D cartelization to E-R&D competition. Highly contrary to earlier studies, consumer surplus is not necessarily maximized by environmental research joint venture cartelization, although this offers private and social incentives.     

奢侈品的品牌延伸评价:广告类型、契合度的影响

近年来,奢侈品消费在中国增长迅速,中国市场已成为奢侈品消费的重要市场。品牌延伸是奢侈品牌拓展市场的重要战略,但这方面的学术研究却相对单薄。本文以奢侈品牌为研究对象,通过实证研究探讨了在不同广告类型下,延伸契合度对消费者延伸评价的影响。研究发现,对于奢侈品牌,延伸契合度与广告宣传类别对消费者的延伸评价都存在显著影响,且两者之间存在交互作用。具体而言,奢侈品进行品牌延伸时,与母品牌契合度高的延伸产品更能获得消费者较高的评价;与宣传延伸品的产品特征相比,宣传延伸品的品牌形象更能提高延伸吸引力与购买欲望。此外,在低延伸契合度下,宣传延伸品的品牌形象产生的这种积极影响更为显著。     

品牌标识的隐性设计线索对消费者品牌创造性感知的影响

从品牌标识的隐性设计线索特征视角切入,基于图底反转原理和溢出效用,本文研究旨在探究品牌标识的隐性设计线索对消费者品牌创造性感知的作用机理。三个实验研究结果表明：品牌标识的隐性设计线索比显性设计线索更能够增加消费者品牌创造性感知,且此效用成立的条件为：消费者自主发现隐性设计线索。同时,消费者的感知有趣性中介了此效用。此外,产品视觉审美集中度正向强化了品牌标识的隐性设计线索对品牌创造性感知的影响作用。     

Consumer misperception of eco-labels,green market structure and welfare

Eco-labels are essential for informing consumers about products’ environmental characteristics. However, the many different labels consumers encounter can be confusing, which makes assessing environmental quality associated with each label difficult. How does consumer misperception of competing eco-labels affect market structure and welfare? This article provides theoretical insight into this issue by using a double-differentiation model in which three products compete: an unlabeled product and two distinctly eco-labeled products, one with a medium and one with a high level of environmental quality. The study investigates the effects of consumers’ imperfect information when they perceive all eco-labels as a sign of the same high environmental quality and consider each label as a unique product. This misperception can weaken the firm that provides the greenest product, though paradoxically this situation is not always detrimental to social welfare. However, depending on the certifying organizations, consumer misperception can induce firms to use a greenwashing strategy and encourage nongovernmental organizations and regulators to introduce less stringent standards.