Measuring long-run marketing effects and their implications for long-run marketing decisions
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Measuring long-run marketing effects and their implications for long-run marketing decisions Bart J. Bronnenberg & Jean Pierre Dubé & Carl F. Mela & Paulo Albuquerque & Tulin Erdem & Brett Gordon & Dominique Hanssens & Guenter Hitsch & Han Hong & Baohong Sun
Published online: 23 September 2008 # Springer Science + Business Media, LLC 2008
Abstract This paper discusses the role of agents’ beliefs and their implications for the economic modeling of their behavior, in particular, their behavior over time. The paper also discusses the corresponding planning problems facing both firms and C. F. Mela (*) The Fuqua School of Business, Duke University, Durham, NC 27708, USA e-mail: [email protected] B. J. Bronnenberg CentER and Department of Economics and Business, Tilburg University, Warandelaan 2, 5037 AB Tilburg, The Netherlands J. P. Dubé : G. Hitsch Graduate School of Business, University of Chicago, 5807 South Woodlawn Avenue, Chicago, IL 60637, USA P. Albuquerque William E. Simon Graduate School of Business, University of Rochester, Rochester, NY 14627, USA T. Erdem Leonard N. Stern School of Business, New York University, 40 West 4th Street, Room 913, New York, NY 10012, USA B. Gordon Columbia Business School, Columbia University, 3022 Broadway, New York, NY 10027, USA D. Hanssens Anderson School of Management, University of California Los Angeles, 110 Westwood Plaza, Suite B417, Los Angeles, CA 90095, USA H. Hong Department of Economics, Stanford University, 579 Serra Mall, Stanford, CA 94305-6072, USA B. Sun Department of Marketing, Tepper School of Business, Carnegie Mellon University, 5000 Forbes Avenue, Pittsburgh, PA 15213, USA
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Market Lett (2008) 19:367–382
consumers in their current decision making. After a general discussion of the consumer and firm problem, we discuss recent examples of some of the emerging empirical literature on dynamic choice behavior in marketing. Keywords Long-run marketing . Durable goods . Choice dynamics
1 Introduction The empirical measurement of long-run (or “carry-over”) effects from marketing effort is a central topic in marketing. A long literature has sought to measure these carry-over effects empirically and to assess their relevance to marketing decision making. These efforts have led to several interesting stylized facts. For example, advertising and prices exhibit carry-over effects on future prices and sales (Assmus et al. 1984; Kalyanaram and Winer 1995, respectively). Similarly, the Bass (1969) diffusion model predicts a pattern of new product diffusion that has been replicated in many industries. Finally, market shares in many product categories are found to be mean and covariance-stationary over time, suggesting the emergence of a long-run equilibrium (Dekimpe and Hanssens 1995). In this discussion piece, we advance this literature on long-run effects by elaborating upon microeconomic theories to explain these dynamic phenomena. We also examine normative applications to recommend improved marketing policies based on structurally estimating models derived from th
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