Moderating Factors of Immediate, Dynamic, and Long-run Cross-Price Effects
AbstractIn this article the authors describe their comprehensive analysis of moderating factors of cross-brand effects of price changes and contribute to the literature in five major ways. (1) They consider an extensive set of potential variables influencing cross-brand effects of price changes. (2) They examine moderators for the immediate as well as the dynamic cross-price effect. (3) They decompose price into regular and promotional price and study both cross-price effects separately. (4) They compare their findings with previous literature on the moderating factors of own-price effects to understand which factors influence own-price elasticity through affecting brand switching. (5) The authors use an advanced Bayesian estimation technique. The results show evidence of the neighborhood price effect and suggest that it is conditional on whether the promoted brand is priced above or below its competitor. The promoted brand's activities turn out to play a much more important role in determining the cross-price promotional effects than its competitor's similar activities. The authors outline conditions when cross-brand post-promotion dips tend to occur. Finally, they argue that the brand choice portion of the overall own-brand effect of a promotion depends on the brand's marketing strategy and on category-specific characteristics.
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Bibliographic InfoPaper provided by Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam. in its series Research Paper with number ERS-2008-042-MKT.
Date of creation: 23 Jul 2008
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dynamic effects; asymmetry; hierarchical Bayes; cross-price elasticity;
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-08-14 (All new papers)
- NEP-COM-2008-08-14 (Industrial Competition)
- NEP-MKT-2008-08-14 (Marketing)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Fok, D. & HorvÃ¡th, C. & Paap, R. & Franses, Ph.H.B.F., 2004. "A hierarchical Bayes error correction model to explain dynamic effects," Econometric Institute Report EI 2004-27, Erasmus University Rotterdam, Econometric Institute.
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