This article studies the impact of in-store "surprise" coupons (e.g., electronic shelf coupons, peel-off coupons) on consumers' total basket of purchases. A conceptual model is developed that (1) predicts that the use of a surprise coupon will increase the size of the shopping basket and the number of unplanned purchases made on the shopping trip and (2) predicts the type of these unplanned purchases. The authors present the results of an in-store experiment and analysis of the Stanford Market Basket Data to test these predictions.

We consider a group of frequently purchased consumer brands which are partial substitutes and examine two situations; the first where the group of brands is managed by a retailer, and second where the brands compete in an oligopoly. We assume that demand is a function of actual prices and reference prices, and develop optimal dynamic pricing policies for each situation. In addition to researchers studying pricing strategy, our results may interest retailers choosing between hi-lo pricing and an everyday low price, and manufacturers assessing whether to follow Procter & Gamble's lead and replace a policy of funding consumer price reductions through trade deals with a constant wholesale price. A reference price is an anchoring level formed by customers based on the pricing environment. The literature suggests that demand for a brand depends not only on the brand price, but also whether the brand price is greater than the reference price (a perceived loss) or is less than it (a perceived gain). The responses to gains and losses are asymmetric. Broadly speaking, we find that when enough consumers weigh gains more than losses, the optimal pricing policy is cyclical. Likewise, when they weigh losses more than gains, a constant price is optimal. Thus, we provide a rationale for dynamic pricing which is quite distinct from the three explanations previously offered: (1) decreasing unit variable costs due to learning effects, (2) the transfer of inventory to consumers who face lower inventory holding costs than do retailers, and (3) competitive effects. Our explanations apply even when the other explanations do not, i.e., in mature product categories where learning effects are minimal, when retailer inventories are minimized through the use of just-in-time policies and when competitive effects do not exist, as in a monopoly. Greenleaf (1995) has shown numerically that in the presence of reference price effects, the optimal pricing policy for a monopolist can be cyclical. We first analytically extend Greenleaf's result to a monopolist with a constant cost of goods, facing a homogeneous market where all customers either weigh gains more than losses or vice versa. Using this building block we examine a monopolist retailer managing multiple brands. We assume that demand is a linear function of prices of multiple brands, and together with an expression which reflects the reference price effect. Further, we assume that the retailer maximizes average profit per period. Next, we analyze a duopoly and extend the results to an oligopoly. We assume that the manufacturers are able to set the retail prices, as in an integrated channel. Here, we retain the same demand function as for the retailer and derive Markov Perfect Nash equilibria. We use two alternative processes of reference price formation: the exponential smoothed (ES) past price process which is frequently used in the literature, and for the multi-brand situations, the recently proposed reference brand (RB) process (Hardie, Johnson, and Fader 1993). In the latter, the refere...

The software industry practice of announcing new products well in advance of actual market availability has led to allegations that firms are intentionally engaging in vaporware. The possible predatory and anticompetitive implications of this behavior recently surfaced in the antitrust case United States v. Microsoft Corporation. Taking the perspective that a new product announcement is a strategic signal among firms, the authors consider the possibility that intentional vaporware is a way to dissuade competitors from developing similar new products. An examination of empirical data for the software industry suggests that some firms use vaporware in a strategic manner. The authors then formulate and analyze the preannouncement and introduction timing decisions in a game-theoretic model of two competing firms. They find that vaporware can be a way for a dominant firm to signal its product development costs and that intentional vaporware can deter entry. The authors also show that there is a curvilinear relationship between development costs and announcement accuracy; that is, firms with high or very low product development costs make accurate product announcements, whereas firms with intermediate product development costs intentionally engage in vaporware. Empirical support for these theoretical results is also found in the software industry data. Finally, the authors discuss the beneficial and harmful consequences of vaporware and the associated implications.

A prevailing view is that increased media weight for frequently purchased brands in mature product categories usually does not lead to increases in sales. However, the role of advertising executional cues and viewer responses on media weight-induced sales has not yet been examined. The authors find that whether weight helps or has no sales impact depends on the creative characteristics of the advertisements and the responses they evoke in viewers. Study 1 showed that real-world advertisements for frequently purchased brands in mature categories were likely to create greater media weight-induced sales when they used affectively based executional cues. Study 2 found that greater media weight was related to the sales impact of advertisements that evoked positive feelings and failed to evoke negative feelings in viewers. The authors develop hypotheses related to these results within the context of prior work on consumer persuasion (including the elaboration likelihood model), memory processes, and advertising wearout.

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