Personalized pricing and advertising: Who are the winners?

This paper investigates who wins and who loses when firms depart from a mass advertising/uniform pricing strategy (benchmark model) to a targeted advertising/price discrimination one. Considering a duopoly market in which firms simultaneously compete in prices and advertising decisions, we examine the competitive and welfare effects of personalized pricing with targeted advertising by comparing equilibrium outcomes under customized advertising/ pricing decisions to the results arising under mass advertising and uniform pricing. We show that, when both firms compete in both market segments, all segment consumers are expected to pay higher average prices under the personalized advertising/pricing strategy. We also show that, in the context of our simultaneous game, targeted advertising with price discrimination might boost firms’ profits in comparison to the case of mass advertising and uniform prices. The overall welfare effects of the personalized strategy are ambiguous. However, even when the personalized strategy boosts overall welfare, consumers might all be worse-off. Thus the paper gives support to concerns that have been raised regarding the firms’ ability to adopt personalized strategies to boost profits at the expense of consumers.     

How to price the unbundled local loop in the transition from copper to fiber access networks?

In many countries worldwide access networks are in the transition from copper to fiber access. During the transition phase copper and fiber networks are operated in parallel. All regulators facing this situation of technological change have to decide how to price unbundled access to the copper loop in this transition phase. Should they keep the usual forward looking long-run incremental cost standard charge, or should they move to some different approach? The authors propose to price copper access based on the modern equivalent asset (MEA) of fiber access. Since fiber access is superior to copper access, the cost of fiber access (as a basis for pricing copper access) should, however, be corrected by the performance delta between copper and fiber access.     

Which are the drivers of fixed to mobile telephone access substitution? An empirical study of the Spanish residential market

Using household panel data for the period 2004 to 2009, the percentage of households that engage in fixed to mobile access substitution in Spain is quantified. This turns out to be small: on average 0.35% per quarter (range: 0.02% to 0.79%). Then the drivers of households to substitute are analysed, finding out that the availability of Internet and mobile services previous to the substitution decision and the socio-demographic characteristics of households, such as age, play a more prominent and significant role in explaining fixed to mobile access substitution when compared to other aspects such as the degree and types of expenditure on fixed services.     

Are pricing policies an impediment to the success of customer solutions?

In an era of declining pricing power and increased global competition, customized solutions appear to be an effective way to build competitive advantages without the debilitating effects of price competition. Solutions involve provision of an integrated combination of goods and services that are designed to meet a business customer's specific needs. Premium prices and higher margins can be extracted by solution providers, who now have considerable incentives to design and market innovative solutions for their customers. We examine the applicability of various pricing frameworks and pricing practices in the context of two industries — business process outsourcing and power generation equipments. Our interviews suggest that firms predominantly use traditional pricing strategies; new strategies for solution pricing are only emerging; and, successful firms are currently using hybrid pricing models. We find that the solutions that we observed among practitioners are not what theory would suggest as true solutions but what would be described by theory as bundled products. We also find that solutions are in the eye of the beholder, i.e., if customers can de-bundle offerings, they are not true solutions. We extend our findings to academic theory and to the practice of developing and pricing solutions.     

Is better access to mobile networks associated with increased mobile money adoption? Evidence from the micro-data of six developing countries

In several developing countries in Sub-Saharan Africa, accessibility to digital financial services is increasing because of the development of mobile money services. People previously excluded from the financial system have started to have access to financial services such as receiving and sending remittances, saving, and borrowing. This study examines the effect of network accessibility on the use of mobile money in six developing countries (Bangladesh, Kenya, Nigeria, Pakistan, Tanzania, and Uganda) using GPS information on each household and mobile phone network coverage maps. We find that among these six countries, network accessibility is associated with the use of mobile money in a robust way only in Pakistan and Tanzania. In those two countries, when a household location becomes 10 km closer to the center of the area with multiple mobile networks, the probability of using mobile money increases by 10 percent. In the other countries, we did not find a robust relationship between the use of mobile money and network accessibility. This suggests that increasing network accessibility may not be an efficient method for increasing mobile money adoption in certain countries. The fact that mobile money use rates differ between Tanzania and Pakistan also suggests that the effect of mobile networks is unrelated to the overall level of mobile money adoption.     

Editorial — Behavioral and psychological aspects of b2b pricing

In this paper we define core research questions falling within the domain of behavioral and psychological aspects of B2B pricing. We then present the papers accepted for this special issue. Central research questions are, in our view, all those instances where decisions about price violate basic principles of rational choice. Decisions about price involve two main actors. First is the customer. We are interested in how customers' purchase decisions in B2B exhibit behavioral patterns that are inconsistent with rational choice models. Second is the manager. Managers set prices and in this process are equally susceptible to violating fundamental principles of rational choice. For this special issue we have been able to accept six papers. We welcome the debate that these papers are likely to start.     

Algorithmic Pricing What Implications for Competition Policy?

Review of Industrial Organization - Pricing decisions are increasingly in the “hands” of artificial algorithms. Scholars and competition authorities have voiced concerns that those...     

What does it take to make the most of supplier relationships?

The supply context of companies has changed substantially during the past two decades because of outsourcing, globalisation and digitalisation, and through growing concern for sustainability and public procurement. These changes, combined with recognition of the potential benefits to be derived from more extensive involvement with suppliers, have made the task of purchasing and supply management broader and more complex. This paper's aim is to examine how the evolving supply context affects the scope of purchasing and supply management and what the consequences for management are. We argue that effective use of supplier relationships involves three main issues – interacting in supplier relationships, dealing with supply network interdependences and handling dynamic changes in the supply context. Coping with these matters requires: (i) conceptual tools that support monitoring and sense-making of what is on-going at the supply side of the firm; (ii) the individual and organisational skills and capabilities required to develop workable solutions; and (iii) organisational arrangements to support the development of these solutions.     

Can open internet access be imposed upon European CATV networks?

Broadband over cable television networks has become a growing force on the retail market in the EU. Thus, a debate has always been raised whether cable television networks should also be subject to open internet access obligations as PSTN and fibre. This article aims to share its view from a legal perspective. In order to do so, it conducts a survey of the current regulatory measures on broadband over cable television networks within the 27 EU Member States, and then carries out an in-depth legal analysis on Member States that attempted to regulate broadband over cable television networks. The conclusion is that broadband over cable television networks is currently deregulated, and will probably remain so in the future.     

Change and transformation of networks and relationships — Fundamental aspects of business reality

The phenomenon of the international Industrial Marketing and Purchasing Group (IMP Group) is, that despite the fact that it is informal in character, it has been possible to build close and lasting relationships between many researchers from all continents who have been developing their research over the last 40 years.The research carried out in the beginning by the IMP Group was very phenomenon-driven in character. Researchers associated with the IMP Group were linked because they viewed companies as being a network of interdependent entities and this view was commonly described in literature as the IMP network approach. Change is a fundamental assumption embedded in the network approach. Changes occurring in networks are caused by interdependency, interactions and mutual adaptation.The issue of change and transformation is important not only due to the aforementioned nature of the IMP network approach, but also due to the need to take into consideration new phenomena appearing and/or gaining strength in the context of company networks, technological changes facilitating the development of direct relationships on the business to consumer market, the change in the behaviour of a range of market leaders, based upon vertical integration, a change in the position of entities, which to-date have been peripheral within the network (e.g. subcontractors), the development of technology and global communication networks influencing a firm's ties within the internationalisation process, ever-growing competition drives the need to look for the actual impact of the overall relationships of a company on its economic performance. Referring to these issues this article serves to announce the 32nd Annual IMP Conference that will be held in Poznań, Poland, this year where discussion will focus on change and transformation of networks and relationships.     

Competition in wholesale markets: Do MNOs compete to host MVNOs?

This paper extends previous research examining wholesale market shares of mobile network operators (MNOs). This study demonstrates that wholesale market concentration has decreased over time because of the increase of competition of MNOs for hosting mobile virtual network operators (MVNOs). However, differences in wholesale market shares between MNOs have not disappeared. We propose that those operators that are late entrants in a market and belong to an international group with a proactive attitude towards hosting virtual operators positively influences wholesale market shares of MNOs. The empirical analysis is based on a panel data from 2000 to 2010 corresponding to MNOs and virtual operators in five European countries with high development of the virtual mobile industry. By closely examining KPN we show how being an international mobile group specialising in the wholesale market across Europe has enabled it to exploit complementarities that exist between traditional and virtual businesses.     

What determines the elasticity of industry demand?

This paper develops estimates of price elasticity of demand for a sample of U.S. food and tobacco manufacturing industries and tests a model explaining differences in interindustry elasticity. The empirical results are consistent with the hypothesis that demand elasticity is in part determined by the competitive behavior of firms in an industry. In particular, high advertising expenditures result in lower elasticities of demand. Other important variables influencing demand elasticity are industry concentration, the stage of production, the existence of protection from domestic and foreign entry, and the extent of new-product introduction in a particular market.     

What makes countries initiate WTO disputes on food-related issues?

This paper analyses relevant determinants for the probability to initiate a dispute on policy measures under the World Trade Organization (WTO) dispute settlement system. The empirical analysis differs from existing assessments by focusing on agro-food-related disputes and provides a more in-depth analysis of specific country and sectoral characteristics not considered in previous studies. Contrary to recent analyses of overall trade disputes, the results show that some determinants such as legal capacity and monetary means are not statistically significant. Own protectionist behaviour, endured protectionism, and the duration of WTO membership, however, could be identified as relevant determinants with the expected direction of impact.     

What will be the possible barriers to consumers’ adoption of smart home services?

Recently, smart home services have come to the forefront as part of the growing market for the “Internet of Things.” Since these smart home services were introduced, they have been expected to grow rapidly. However, contrary to optimistic expectations for future market growth, the smart home market has appeared to hit a roadblock and remains at an early market stage. This study attempts to identify the possible barriers that consumers perceive when they are introduced to smart home services. Based on the resistance theory and perceived risk model, we investigate the relationship between perceived risk and resistance to smart home services, using technological uncertainty and service intangibility as the antecedents of perceived risk. Dividing perceived risk into four dimensions—performance risk, financial risk, privacy risk, and psychological risk—the empirical results show that these four risk types are affected by technology uncertainty and service intangibility, and the perceived risks, except for financial risk, have positive effects on the resistance to smart home services. When the survey respondents are divided into two types, postponers and rejecters, the result of postponers is similar with that of total sample, except that privacy risk is unimportant to postponers, and the result of rejecter cannot satisfy the recommended model fit.     

Occupational Licensing in the EU: Protecting Consumers or Limiting Competition?

Occupational licensing regulations require workers in many different professions to obtain a special permit to work legally in their chosen field. Although professional associations argue that the only goal of professional licensing is to protect the public, occupational regulation may also reduce competition: for example, by reducing entry. This paper reviews the recent literature and policy developments on the subject, with a focus on the European Union.

     

Housing Tenure Transitions of Older Households: What is the Role of Child Proximity?

This study examines the role of proximity of children to their parents and recent moves of children within a proximate distance in housing tenure transitions of older households. This study is the first to investigate the interplay between health status of older households, moves of their children and a household's decision to make housing tenure transitions. In doing so, we rely on longitudinal household data from the Panel Study of Income Dynamics with residential location information at the census tract level. The results demonstrate that after controlling for the financial and demographic characteristics of children, living near children reduces the likelihood of making a housing tenure transition for older households, but that the impact of distance is not monotonic with respect to the degree of geographic distances. The results also demonstrate that if a child enters or moves closer to her or his parents’ home, it increases the probability that older households exit homeownership. Finally, we find no evidence that children's moves mitigate the likelihood that their older parents whose health deteriorates become renters.     

Is a Big Entrant a Threat to Incumbents? The Role of Demand Substitutability in Competition Among the Big and the Small

We establish a model of market competition between large and small firms and investigate the way in which demand substitutability affects how the entry of big firms impacts incumbents. We focus on the relative strength of two opposing effects of entry on large incumbent firms’ demand: the direct substitution effect among large firms (negative) and the indirect feedback effect through the change in small firms’ aggregated behavior (positive). If the substitutability between large and small firms is sufficiently high, the indirect effect dominates the direct effect and large incumbents’ equilibrium prices and profits increase. We show that welfare effects are ambiguous, which calls for careful assessment when regulating large firms’ entry.