Price Advertising Research Articles

Pricing Average Price Advertising Options When Underlying Spot Market Prices Are Discontinuous

Advertising options have been recently studied as a special type of guaranteed contracts in online advertising, which are an alternative sales mechanism to real-time auctions. An advertising option is a contract which gives its buyer a right but not obligation to enter into transactions to purchase page views or link clicks at one or multiple pre-specified prices in a specific future period. Different from typical guaranteed contracts, the option buyer pays a lower upfront fee but can have greater flexibility and more control of advertising. Many studies on advertising options so far have been restricted to the situations where the option payoff is determined by the underlying spot market price at a specific time point and the price evolution over time is assumed to be continuous. The former leads to a biased calculation of option payoff and the latter is invalid empirically for many online advertising slots. This paper addresses these two limitations by proposing a new advertising option pricing framework. First, the option payoff is calculated based on an average price over a specific future period. Therefore, the option becomes path-dependent. The average price is measured by the power mean, which contains several existing option payoff functions as its special cases. Second, jump-diffusion stochastic models are used to describe the movement of the underlying spot market price, which incorporate several important statistical properties including jumps and spikes, non-normality, and absence of autocorrelations. A general option pricing algorithm is obtained based on Monte Carlo simulation. In addition, an explicit pricing formula is derived for the case when the option payoff is based on the geometric mean. This pricing formula is also a generalized version of several other option pricing models discussed in related studies.

Extended Screening Costs Associated With Selecting Donors for Fecal Microbiota Transplantation for Treatment of Metabolic Syndrome-Associated Diseases

BackgroundKnowledge of the impact of the gut microbiome on conditions other than Clostridium difficile infection has been rapidly increasing, and the potential usefulness of fecal microbiota transplantation (FMT) in these indications is being explored. The need to exclude donors with an increased risk of these diseases has left uncertainties regarding the cost and feasibility of donor screening. The aim of this study was to compare our experience to other donor-screening programs and report the costs associated with establishing a donor-screening program, for the treatment of metabolic syndrome-related conditions.MethodsForty-six potential donors (PDs) had their medical histories and physical examinations undertaken by a physician. Blood, stool, and urine were screened for 31 viral, bacterial, fungal, and protozoan agents in addition to biochemical characteristics. The price of advertising, doctor’s visits and diagnostic tests were calculated to determine the cost of finding a donor.ResultsOf the PDs screened, 5 of 46 passed the history, examination, blood, stool, and urine tests. The most common reasons for exclusion included a body mass index >25 or the detection of Blastocystis hominis, Dientamoeba fragilis, or Helicobacter pylori. Four of five eligible donors had subsequent travel or illness that contraindicated donation, so only 1 of 46 PDs was suitable. The total cost for finding a single suitable donor was $15190 US dollars. This screening was performed in Canada, and costs in the United States would be substantially higher.ConclusionsNew potential therapeutic uses for FMT have created a demand for stricter exclusion criteria for donors. This study illustrates that screening many individuals to find a donor and the subsequent associated costs may make central processing and shipment a more reasonable alternative.

Firm Efficiency, Advertising and Profitability: Theory and Evidence

This paper presents a linear-city model where firms compete on price and levels of advertising, which affects the perceived utility of products. More cost efficient firms extend their advantage with more advertising, which leads to higher profits, if advertising is sufficiently effective. We test this relationship using a unique S&P sample. Our empirical results indicate a positive relationship between profits and levels of advertising for all model specifications.

Проблема востребованности психологических услуг у сотрудников органов внутренних дел и населения

The article is devoted to the problem of obtaining psychological services by employees of the ministry of internal Affairs bodies. Set out for the provision of psychological services as a freelance (independent) experts, pricing and features of advertising, stereotypes in choosing a psychologist. Currently, employees in a less degree than the civilian population ready to applying for a paid psychological services. The material emphasizes the special importance of the development and improvement of the Institute of psychologists of the bodies of internal Affairs.

“Minimum Advertised Price” policies and the dividing line between price and non-price restraints – An analysis under U.S. antitrust and EU competition law in view of recent UK decisions

Abstract “Minimum Advertised Price” (MAP) policies prohibit retailers from advertising prices below a certain amount fixed by their suppliers. Legally, they leave the final decision on resale pricing to the retailers. However, given that, especially in the context of online sales, the communication of discounts through advertising is one of the retailers’ “key incentives” for price competition, MAP policies raise specific issues as to where the dividing line between (unlawful) price and (lawful) non-price restraints in vertical agreements is drawn. In this respect, the following contribution analyses MAP policies both under U.S. antitrust and EU competition law. With regard to the latter, it will particularly focus on two recent UK decisions.

The Antitrust Implications of Minimum Advertised Pricing: The Case of the U.S. Music Industry

In May 2003, without admitting wrongdoing, music distributors and retailers settled with private plaintiffs and the Attorneys General of 43 States a civil suit regarding a conspiracy to inflate or support prices of prerecorded music products through an industry-wide strengthening of the music distributors Minimum Advertised Price (MAP) policies. The settlement leaves as an open question the proper economic and legal standard (rule of reason versus per se) to be adopted in such cases.MAP had both horizontal and vertical implications and may have facilitated a horizontal conspiracy between the music distributors. The MAP policies were alleged to be equivalent in effect to Retail Price Maintenance (RPM). The Federal Trade Commission (FTC) claimed that prices increased by approximately $2 per CD and that consumers paid an extra $480 million. The effectiveness of the MAP program in raising prices was due to the all-encompassing nature of the advertising restrictions, the industry-wide implementation of MAP programs, the payment and significance of the advertising subsidy, and the severe penalties imposed for a MAP violation. This paper illuminates the antitrust implications of MAP policies through consideration of related practices in the United States market for music CDs. When viewed from this vantage point, MAP appears to be as pernicious as RPM.

Firm efficiency, advertising and profitability: Theory and evidence

Abstract This paper presents a linear-city model where firms compete on price and levels of advertising, which affects the perceived utility of products. More cost efficient firms extend their advantage with more advertising, which leads to higher profits, if advertising is sufficiently effective. We test this relationship using a unique S&P sample. Our empirical results indicate a positive relationship between profits and levels of advertising for all model specifications.

Cost Per Incremental Action: Efficient Pricing of Advertising

Advertisers seek to maximize profits by investing in advertising. We propose a “cost-per-incremental-action” (CPIA) pricing model which incorporates the causal contribution of advertising in order to achieve the advertisers' objectives such as profit maximization. CPIA pricing aligns marketplace incentives among all participants to help advertisers achieve their objectives via ad effectiveness and, by doing so, eliminates the adverse behaviors resulting from the misaligned incentives of commonly used pricing models. CPIA pricing can be implemented by adapting cost-per-action (CPA) bidding by either the ad platform or advertiser's bidding agent. We discuss CPIA pricing in the context of several examples, including recent empirical studies measuring the causal effects of advertising within the context of existing pricing models.

The Impact of Market Competition on Search Advertising

Although search advertising has gained popularity in recent years, research on the content of search advertising is scarce. This study develops a conceptual framework to understand how market competition affects what a firm advertises in its search ads. Search advertisements from two industries (i.e., hotel and car industries) are used to test hypotheses developed from the conceptual framework. The findings indicate that in a highly competitive market (1) firms engage in more price advertising in their search ads and (2) intermediaries are more likely to increase price advertising in their search ads than brand suppliers. More interestingly, competition from intermediaries and brand suppliers has different effects on the content of search advertising by intermediaries and brand suppliers. These findings enhance the understanding of firms' behaviors in determining their search advertising content based on the intensity of market competition.

Price Advertising by Manufacturers and Dealers

The central prediction of the current paper is that manufacturer price advertising may be a less effective tool for influencing demand than retailer price advertising. We manipulate the source of a price advertisement in an experiment run on a sample of pickup truck owners. Manufacturer price advertising leads to lower indicators of potential demand than dealer price advertising, even among consumers who are experienced with the brand. An econometric analysis of pickup truck sales, price, and advertising data shows that this effect is large enough to detect in market data. Manufacturer and dealer price advertising both increase the demand intercept and the responsiveness of demand to price, but the effects of dealer price advertising are larger. Although dealer price advertising is more effective than manufacturer price advertising, manufacturer price advertising may still be useful to reduce channel conflict. This paper was accepted by Pradeep Chintagunta, marketing.

Price Advertising by Manufacturers and Dealers: Online Appendix

This document contains supporting materials for the following article: Advertising by Manufacturers and by Linli Xu, Kenneth C. Wilbur, S. Siddarth, and Jorge M. Silva-Risso.The paper Price Advertising by Manufacturers and Dealers to which these Appendices apply is available at the following URL: http://ssrn.com/abstract=1756845

Re-examining the evidence for a total ban on alcohol advertising in South Africa

In early 2013, the minister of health announced that a draft bill, the Control of Alcoholic Beverages Bill, was ready to be presented to parliament (Wolhuter, 2013). This bill, which calls for a total ban on alcohol advertising in South Africa, has sparked massive public debate and backlash from the alcohol and advertising industries. As a counter-attack, the alcohol industry has intensified its advertising of alcohol products and commissioned a study on the projected economic impact of a total ban on alcohol advertising (Econometrix, 2013). The resulting report estimated that approximately 12,000 jobs would be lost as a consequence of tightening regulations around alcohol advertising and calls into question the evidence of an association between alcohol advertising and alcohol consumption, including among young people. The report also suggested that interventions aimed at addressing alcohol use among high-risk individuals and population subgroups would be more effective than broad population-based measures such as increasing price and banning advertising (Econometrix, 2013).

Correcting Audience Externalities in Television Advertising

When a television advertisement causes viewers to switch channels, it reduces the audience available to subsequent advertisers. This audience loss is not reflected in the advertisement price, resulting in an audience externality. The present article analyzes the television network's problem of how to select, order, and price advertisements in a break of endogenous length in order to correct audience externalities. It proposes the Audience Value Maximization Algorithm (AVMA), which considers many possible advertisement orderings within a dynamic programming framework with a strategy-proof pricing mechanism. Two data sets are used to estimate heterogeneity in viewer-switching probabilities and advertiser willingness-to-pay parameters in order to evaluate the algorithm's performance. A series of simulations shows that AVMA typically maximizes audience value to advertisers, increases network revenue relative to several alternatives, and runs quickly enough to implement.

Would you believe it? A detailed investigation of believability in comparative price advertising

The construct of believability has been shown to be a key variable in consumers' evaluations of comparative price offers. This paper provides a detailed investigation of believability in the context of such offers. In particular, it investigates the impact of the presence of, level of, and type of advertised reference prices (ARPs) on believability across a range of product contexts. An experimental methodology is adopted for the study. Findings show that the presence of an ARP does not enhance believability but that the presence of a time limit does. Believability is also shown to vary inversely with the level of ARP but is not related to semantic cues, such as list prices, contained within the offer. The study provides evidence that the product context of the offer impacts on believability. Two interaction effects are also identified. The paper contributes to the extant literature by providing new insights into how consumers' believability is influenced by how a comparative price offer is presented. Such insights will be of interest to academics interested in pricing, practitioners seeking to ensure that their promotions have maximum impact, and policymakers hoping to ensure that consumers are not misled by dishonest comparative price advertising.

Effects of discount framing in comparative price advertising

PurposeThe objective of this paper is to examine the framing effects of discount presentation format in comparative price advertising in a low‐price and a high‐price product context. In particular, the authors study whether identical discounts presented in percentage and absolute terms result in different consumer perceptions of transaction value and purchase intention. Although price promotions have been the subject of previous research, a closer examination of the potential moderating influence of discount size in both contexts is warranted.Design/methodology/approachTwo separate experiments were designed to isolate the effects of the manner in which discounts are numerically expressed and the size of the discount on consumers' perceptions of a retail price promotion in a low‐price and a high‐price product context.FindingsThe effects of discount framing in comparative price promotions are found to be influenced by discount size in the case of the low‐product context but not the high‐price one.Research limitations/implicationsIt is recommended that the study be replicated for other types of low‐price and high‐price products to confirm the generalisability of the results for each product context.Practical implicationsRetail managers' choice of discount presentation format for both low‐ and high‐price product contexts, and in the case of the former the additional manipulation of discount size, have an impact on the ability of comparative price promotions to accelerate purchases. Meanwhile policy makers should continue to assign significant time and resources to investigating concerns about misleading price comparison based promotions.Originality/valueThe paper provides original insights into the importance of considering the joint effects of discount presentation format and discount size on consumers' perceptual and behavioural responses to retail price promotions, unlike previous research, which has examined these framing effects separately.

Competition in Consumer Shopping Experience

This paper analyzes the competitive role of retail shopping experience in markets with consumer search costs. We examine how a retailer's advantage in providing consumer shopping experience affects its equilibrium pricing and price advertising strategies. We find that if the consumer valuation of a shopping experience is sufficiently low, its effect on retailer strategy is similar to that of quality, and the retailer with the advantage in shopping experience then deploys higher levels of price advertising. On the other hand, when the shopping experience is valuable enough for consumers, it acts akin to price advertising in that it makes it optimal for the retailer with the advantage in shopping experience to eschew price advertising. The optimal competitive investments in consumer shopping experience can be higher than that of a monopoly. The profit impact of shopping experience for a retailer depends on the level of shopping experience: for low levels, the profit impact depends on the difference in the levels between the retailers, but for high enough levels, it depends only on whether the retailer's shopping experience level is higher than that of its competitor. In this case, even small differences in shopping experience levels can result in large differences in equilibrium profits.

Measuring regional inequality by internet car price advertisements: Evidence for Germany

We suggest to use car sale prices from internet advertisements for measuring economic inequality between and within German regions. Our estimates of regional income levels and Gini indices based on advertisements are highly positively correlated with the official figures.

A longitudinal and cross sectional study of the impact of usage‐based attributes on used product price advertisements

PurposeThe growing volume of consumer transactions in used products markets has given rise to strategic decisions made by sellers in the amount of information disclosed on usage‐based attributes – product attributes that quantify the degree by which a product has been used. This paper seeks to address this issue. Based on the phenomenon referred to as the dilution effect, it is proposed that sellers would have less desire to disclose usage‐based attribute information in product advertisements for older products. The effects of usage‐based attributes on asking prices of used products are also examined and profiled across time and contrasted across three countries: Britain, Canada, and the USA.Design/methodology/approachUsed product advertisements were obtained for 1995 (USA) and 2010 (USA, Canada, and Britain). The ratio of ad content dedicated to usage‐based attributes was then computed and profiled across various conditions, and variations were tested using statistical methods.FindingsThe results indicate that a dilution‐based strategy, whereby usage‐based product information is less likely to be disclosed for older products, was evident in 1995 as it was in 2010. Furthermore, cross‐country variations were observed in the use of this strategy.Research limitations/implicationsThe research presented can be expanded to cover other product categories where used products are exchanged and usage‐based attributes constitute a fundamental consumer consideration in such exchanges. The research can also be extended to cover a wider range of countries for analysis.Originality/valueThis paper extends traditional pricing theory to consider the effects of usage‐based attributes on used product prices and associated consumer communications. Given the growth in the volume of consumer transactions in used product markets, this line of inquiry is relevant not only from an academic perspective but can also inform public policy and potential regulatory measures.

A comparative investigation of consumers' attitudes toward marketing practices of hypermarket retailers in Thailand

PurposeThe purpose of this paper is to contribute to the understanding of hypermarket retailers' marketing efforts by exploring consumers' attitudes toward marketing practices (CATMPs) of three retailers (Tesco‐Lotus, Big C, and Carrefour) in Thailand.Design/methodology/approachA non‐probability convenience sampling procedure was employed. The data were collected from an intercept survey administered face to face. Three versions were tailored to each specific hypermarket retailer using similar questions related to consumers' attitudes toward different areas of marketing practices. The measures were adapted from the Index of Consumer Sentiment toward marketing and consumers' attitudes toward marketing.FindingsThe results showed that although Thai consumers displayed different attitudes toward retail services, positive advertising, and fair price, they expressed similar attitudes toward business provisions and product quality across samples. Main and interaction effects of a limited number of demographic variables were also identified.Research limitations/implicationsMultinational hypermarket retailers need to understand the similarities and differences related to areas of their marketing practices to be able to market effectively to Thai consumers. However, since the data were obtained from one city, the major limitation in the study is the generalizability of the findings.Originality/valueThis study is among the first to attempt to investigate CATMPs of multinational hypermarket retailers operating in Thailand.

Price Advertising by Multiple Channel Members

The central prediction of the current paper is that manufacturer price advertising may be a less effective tool for influencing demand than retailer price advertising. We manipulate the source of a price advertisement in an experiment run on a sample of pick-up truck owners. Manufacturer price advertising leads to lower indicators of potential demand than dealer price advertising, even among consumers who are experienced with the brand. An econometric analysis of pick-up truck sales, price and advertising data shows that this effect is large enough to detect in market data. Manufacturer and dealer price advertising both increase the demand intercept and the responsiveness of demand to price, but the effects of dealer price advertising are larger. Although dealer price advertising is more effective than manufacturer price advertising, manufacturer price advertising may still be useful to reduce channel conflict.The appendices for this paper are available at the following URL: http://ssrn.com/abstract=2488824