Offensive and Defensive Marketing in Spatial Competition

While it is well-established that travel costs impact on customer preference toward local service providers, research about how this situation affects competitive marketing strategies remains sparse. This paper investigates, in a local market with two competing service providers, whether service providers should undertake defensive marketing, targeted at the nearest customers who typically prefer their offering for convenience and/or offensive marketing, directed to relatively remote customers who favor the rival as the closest alternative. We find that the service providers can exclusively undertake either defensive marketing or offensive marketing or combine the two in a full differentiated strategy at the equilibrium. We compare the outcomes of these three strategic options to identify the conditions under which they are worth implementing. Main findings suggest that service providers are better off undertaking offensive marketing alone when their rival’s retaliatory offensive capacity is weak and customers incur small travel costs. Otherwise, service providers may exclusively undertake defensive marketing or combine it with offensive marketing when travel costs become significant. Also, service providers should not invest in any marketing activity when they have no market power, like in the case of two adjacent outlets in a mall. Finally, the implications of these findings are discussed.MEC under projects ECO2014-52343-P and ECO2017-82227-P (AEI) and by Junta de Castilla y León under projects VA024P17 and VA105G18, co-financed by FEDER fund

Increasing Dominance - the Role of Advertising, Pricing and Product Design

Despite the empirical relevance of advertising strategies in concentrated markets, the economics literature is largely silent on the effect of persuasive advertising strategies on pricing, market structure and increasing (or decreasing) dominance. In a simple model of persuasive advertising and pricing with differentiated goods, we analyze the interdependencies between ex-ante asymmetries in consumer appeal, advertising and prices. Products with larger initial appeal to consumers will be advertised more heavily but priced at a higher level - that is, advertising and price discounts are strategic substitutes for products with asymmetric initial appeal. We find that the escalating effect of advertising dominates the moderating effect of pricing so that post-competition market shares are more asymmetric than pre-competition differences in consumer appeal. We further find that collusive advertising (but competitive pricing) generates the same market outcomes, and that network effects lead to even more extreme market outcomes, both directly and via the effect on advertising

A Survey on the Economics of Behaviour-Based Price Discrimination

Economists have long been interested in understanding the profit, consumer surplus and welfare effects of an ancient marketing strategy: Price Discrimination. While it is not new that firms try frequently to segment customers in order to price discriminate, what has dramatically changed, with recent advances in information technologies, is the quality of consumer-specific data now available in many markets and how this information has been used by firms for price discrimination purposes. Specifically, thanks to information technology it is nowadays increasingly feasible for sellers to segment customers on the basis of their purchasing histories and to price discriminate accordingly. This form of price discrimination has been named in the literature as Behaviour-Based Price Discrimination (BBPD). For a long time economists have been concerned in understanding the economic effects of price discrimination in monopolistic markets. However, because imperfect competition is undoubtedly the most common economic setting, recent research on the field has been concerned with the following issues. Firstly, how are profit, consumer surplus and welfare affected when firms practice some form of price discrimination in imperfectly competitive markets? Secondly, in which circumstances may competitive firms have an incentive to price discriminate or rather to avoid it? As we will see, conclusions regarding the profit and welfare effects of price discrimination are strongly dependent upon the form of price discrimination, which in turn depends upon the form of consumer heterogeneity and the different instruments available for price discrimination. Basically, the aim of this survey is to clarify the two aforementioned issues in imperfectly competitive markets.

The objectness of everyday life: disburdenment or engagement?

The article grew out of a conference paper, ‘The objectness of everyday life: engagement and disburdenment’, Material Geographies, UCL, September 2002. An expanded version of the paper was included in a special themed section of an issue of Geoforum. The paper intervenes into contemporary philosophical scholarship on the nature of use-value, usability, design and ethics. The article has been directly engaged with in an academic journal; Christensen, Carleton B. (2005) ‘The Material Basis of Everyday Rationality: transformation by design or education?’, Design Philosophy Papers No.4,)

Chamberlain on Product Differentiation, Market Structure and Competition: An essay

In the 1930s the imperfect competition - monopolistic competition debate took new approaches to the analysis of economic equilibrium with two main works which derived independently came published almost simultaneously in time: Mrs. Robinson’s Economics of Imperfect Competition [1933] and Chamberlin’s Theory of Monopolistic Competition [1933]. They face the competitive structure in completely different ways in aim, methodology and content. His work can be considered revolutionary in the sense that he consideres a market structure characterized by both competitive and monopoly elements and this is the “little” difference that made his work so important to the modern microeconomic theory with so important concepts such as product differentiation, the role of advertising and the randomness associated to the choice process: with Chamberlin, advertizing and product differentiation lead to new market structures, opening up field of industrial organization. Two dimensions are enormously relevant: product differentiation linked to selling costs (advertising, non-price competition, etc.) and numbers (includes oligopoly and competition linked to large numbers, even if demand curves not horizontal).oligopoly, monopolistic and imperfect competition, product and price differentiation, selling costs, advertising, demand curves.