The effects of uncertainty about the timing of deals on consumer behavior

I examine the effects of uncertainty about the timing of de aIs (i.e. temporary price cuts or sales) on consumer behavior in a dynamic inventory model of consumer choice. I derive implications for purchase behavior and test them empirically, using two years of scanner data for soft drinks. I fmd that loyal consumers' decisions, both about the allocation of their purchases over time and the quantity to be purchased in a particular deal, are affected by the uncertainty about the timing of the deal for the product. Loyal consumers buy a higher fraction of their overall purchases during de ais as the uncertainty decreases. This effect increases with an increase in the product' s share of a given consumer' s purchase in the same category or if the consumer stockpiles (i.e., is a shopper). During a particular deal, loyal shoppers increase the quantity they purchase the more time that has passed since the previous de aI, and the higher the uncertainty about the deals' timing. For the non-Ioyal consumers these effects are not significant. These results hold for products that are frequently purchased, like soft-drinks and yogurt, but do not hold for less frequentIy purchased products, such as laundry detergents. The fmdings suggest that manufacturers and retailers should incorporate the effects of deals' timing on consumers' purchase' decisions when deriving optimal pricing strategies.

Bias and size effects of price-comparison search engines : theory and experimental evidence

We analyze the impact on consumer prices of the size and bias of price comparison search engines. In the context of a model related to Burdett and Judd (1983) and Varian (1980), we develop and test experimentally several theoretical predictions. The experimental results confirm the model’s predictions regarding the impact of the number of firms, and the type of bias of the search engine, but reject the model’s predictions regarding changes in the size of the index. The explanatory power of an econometric model for the price distributions is significantly improved when variables accounting for risk attitudes are introduced.

Asymetric price adjustment and loss aversion

Ajuste assimétrico de preço é observado em diversos mercados, notavelmente varejo de gasolina: um aumento de custo é passado para os consumidores mais rápido do que uma redução. Eu desenvolvo um modelo de busca dos consumidores que gera essa predição sob aversão à perda. Uma fração dos consumidores ignora os preços no mercado e pode adquirir informação a um custo, o que permite que as firmas tenham lucro com dispersão de preços. Ajuste assimétrico de preço emerge se os consumidores são aversos a perdas em relação a um preço de referência. Custos mais altos tornam os consumidores mais dispostos a procurar, mas também diminui as chances de encontrar preços baixos, gerando uma relação custo-preço convexa.

The price of threat: the role of identity-safe marketplaces in predicting intergroup price sensitivity

In field experiments with subjects living either inside or outside Brazilian slums (n=955), we show that consumers living in slums are less price sensitive, in opposition with recent price sensitivity research. Comparing slum and non-slum dwellers, we found that negatively stereotyped consumers (e.g. slum dwellers) were more likely to pay higher amounts for friendlier customer service when facing social identity threats (SITs) in marketplaces such as banks. The mechanism which makes them less price sensitive is related to the perception of how other people evaluate their social groups, and we argue that they pay more because they are seeking identity-safe commercial relationships. This work, besides extending the literature in SITs, presents a perspective for the exchange between economics and psychology on price sensitivity, showing that consumers living in slums are willing to pay more to avoid possibly social identity threating experiences.

Effect of price and in-store promotion on sales: a study of distinct regions in an emerging market

Increasing competition caused by globalization, high growth of some emerging markets and stagnation of developed economies motivate Consumer Packaged Goods (CPGs) manufacturers to drive their attention to emerging markets. These companies are expected to adapt their marketing activities to the particularities of these markets in order to succeed. In a country classified as emerging market, regions are not alike and some contrasts can be identified. In addition, divergences of marketing variables effect can also be observed in the different retail formats. The retail formats in emerging markets can be segregated in chain self-service and traditional full-service. Thus, understanding the effectiveness of marketing mix not only in country aggregated level data can be an important contribution. Inasmuch as companies aim to generate profits from emerging markets, price is an important marketing variable in the process of creating competitive advantage. Along with price, promotional variables such as in-store displays and price cut are often viewed as temporary incentives to increase short-term sales. Managers defend the usage of promotions as being the most reliable and fastest manner to increase sales and then short-term profits. However, some authors alert about sales promotions disadvantages; mainly in the long-term. This study investigates the effect of price and in-store promotions on sales volume in different regions within an emerging market. The database used is at SKU level for juice, being segregated in the Brazilian northeast and southeast regions and corresponding to the period from January 2011 to January 2013. The methodological approach is descriptive quantitative involving validation tests, application of multivariate and temporal series analysis method. The Vector-Autoregressive (VAR) model was used to perform the analysis. Results suggest similar price sensitivity in the northeast and southeast region and greater in-store promotion sensitivity in the northeast. Price reductions show negative results in the long-term (persistent sales in six months) and in-store promotion, positive results. In-store promotion shows no significant influence on sales in chain self-service stores while price demonstrates no relevant impact on sales in traditional full-service stores. Hence, this study contributes to the business environment for companies wishing to manage price and sales promotions for consumer brands in regions with different features within an emerging market. As a theoretical contribution, this study fills an academic gap providing a dedicated price and sales promotion study to contrast regions in an emerging market.