Instead of purchasing individual content, streaming adopters rent access to libraries from which they can consume content at no additional cost. In this paper, we study how the adoption of music ...streaming affects listening behavior. Using a unique panel data set of individual consumers’ listening histories across many digital music platforms, adoption of streaming leads to very large increases in the quantity and diversity of consumption in the first months after adoption. Although the effects attenuate over time, even after half a year, adopters play substantially more, and more diverse, music. Relative to music ownership, where experimentation is expensive, adoption of streaming increases new music discovery. While repeat listening to new music decreases, users’ best discoveries have higher play rates. We discuss the implications for consumers and producers of music.
Data and the online appendix are available at
https://doi.org/10.1287/mksc.2017.1051
.
Abstract This paper proposes a model of the distribution channel to study the decisions of manufacturers, retailers and consumers. The model is used to study how retail distribution affects ...manufacturing and consumers. As the cost of distribution falls, the retail sector increases assortment size and allows a larger mass of manufacturers to enter, allowing consumers to buy more variety. Entry primitives in manufacturing and retailing determine vertical pricing power. The equilibrium of the model predicts that the national retail sector is a fraction of the total economy that depends on the demand for variety. It is not affected by, e.g., consumer transportation cost or income. Data support this prediction.
We estimate the effect of information and expertise on consumers’ willingness to pay for national brands in physically homogeneous product categories. In a detailed case study of headache remedies, ...we find that more informed or expert consumers are less likely to pay extra to buy national brands, with pharmacists choosing them over store brands only 9 percent of the time, compared to 26 percent of the time for the average consumer. In a similar case study of pantry staples such as salt and sugar, we show that chefs devote 12 percentage points less of their purchases to national brands than demographically similar nonchefs. We extend our analysis to cover 50 retail health categories and 241 food and drink categories. The results suggest that misinformation and related consumer mistakes explain a sizable share of the brand premium for health products, and a much smaller share for most food and drink products. We tie our estimates together using a stylized model of demand and pricing.
We describe online consumers’ search behavior for differentiated durable goods using a data set that captures a detailed level of consumer search and attribute information for digital cameras. ...Consumers search extensively, engaging in 14 searches on average prior to purchase. Individual level search is confined to a small part of the attribute space. Early search is highly predictive of the characteristics of the camera eventually purchased. Search paths through the attribute space are state dependent and display “lock-in” as the search unfolds. Finally, the first-time discovery of the chosen alternative usually takes place toward the end of the search sequence. We discuss these and other findings in the context of optimal search strategies and discuss the prospects for consumer learning during search.
Data, as supplemental material, are available at
http://dx.doi.org/10.1287/mksc.2016.0977
.
Online Demand Under Limited Consumer Search Kim, Jun B.; Albuquerque, Paulo; Bronnenberg, Bart J.
Marketing science (Providence, R.I.),
11/2010, Letnik:
29, Številka:
6
Journal Article
Recenzirano
Using aggregate product search data from Amazon.com, we jointly estimate consumer information search and online demand for consumer durable goods. To estimate the demand and search primitives, we ...introduce an optimal sequential search process into a model of choice and treat the observed market-level product search data as aggregations of individual-level optimal search sequences. The model builds on the dynamic programming framework by Weitzman Weitzman, M. L. 1979. Optimal search for the best alternative.
Econometrica
47
(3) 641-654 and combines it with a choice model. It can accommodate highly complex demand patterns at the market level. At the individual level, the model has a number of attractive properties in estimation, including closed-form expressions for the probability distribution of alternative sets of searched goods and breaking the curse of dimensionality. Using numerical experiments, we verify the model's ability to identify the heterogeneous consumer tastes and search costs from product search data. Empirically, the model is applied to the online market for camcorders and is used to answer manufacturer questions about market structure and competition and to address policy-maker issues about the effect of selectively lowered search costs on consumer surplus outcomes. We demonstrate that the demand estimates from our search model predict the actual product sales ranks. We find that consumer search for camcorders at Amazon.com is typically limited to 10-15 choice options and that this affects estimates of own and cross elasticities. In a policy simulation, we also find that the vast majority of the households benefit from Amazon.com's product recommendations via lower search costs.
We study the long-run evolution of brand preferences, using new data on consumers' life histories and purchases of consumer packaged goods. Variation in where consumers have lived in the past allows ...us to isolate the causal effect of past experiences on current purchases, holding constant contemporaneous supply-side factors. We show that brand preferences form endogenously, are highly persistent, and explain 40 percent of geographic variation in market shares. Counterfactuals suggest that brand preferences create large entry barriers and durable advantages for incumbent firms and can explain the persistence of early-mover advantage over long periods.
Consumers commonly face purchasing costs, for example, travel or wait time, that are fixed to quantity but increase with variety. This article investigates the impact of such costs on the demand and ...supply of variety. Purchasing costs limit demand for variety like prices limit demand for quantity. When demand for variety is low, manufacturers generally invest substantially in lowering purchasing costs, to attract consumers. In the monopolistic competition free-entry equilibrium, providing convenience increases the demand for variety, but its costs reduce supply. The desirability of nonprice competition in convenience and its implications for variety and market concentration are discussed.
We develop a probit choice model under optimal sequential search and apply it to the study of aggregate demand of consumer durable goods. In our joint model of search and choice, we derive an ...expression for the probability of choice that obeys the full set of restrictions imposed by optimal sequential search. Estimation of our partially analytic model avoids the computation of high-dimensional integrations in the evaluation of choice probabilities, which is of particular benefit when search sets are large. We demonstrate the advantages of our approach in data experiments and apply the model to aggregate search and choice data from the camcorder product category at Amazon.com. We show that the joint use of search and choice data provides better performance in terms of inferences and predictions than using search data alone and leads to realistic estimates of consumer substitution patterns.
Data, as supplemental material, are available at
https://doi.org/10.1287/mnsc.2016.2545
.
This paper was accepted by Pradeep Chintagunta, marketing
.
Costly product consideration reduces consumer demand for variety and intensifies competition at the extensive margin.
Individual demand for consumer packaged goods shows discrete jumps between zero ...and large quantities, under a marginal change in price. Ruling out multiple alternative explanations, this paper provides evidence from microdata in the yogurt category that these jumps are caused by consumer fixed purchasing costs per product. We formulate and estimate a model in which (1) such fixed costs limit the number of different products considered and (2) consumers use prices to screen a product in and out of their consideration set. Our structural estimation finds that the consumer incurs fixed costs of $0.81 to consider a product. These costs are increased by 280% if she has not purchased the product for a year and are decreased by 59% when the product is featured in the store; the dependence of fixed costs on information shifters suggests that these costs are incurred because of consideration. Consideration being scarce at the shelf, firms compete fiercely for customers: We simulate counterfactual markups in a world full of feature advertising and find that firms enjoy higher equilibrium markups because the provision of information softens competition for consideration.
Data and the online appendix are available at
https://doi.org/10.1287/mksc.2018.1108
.
PDF
