Optimal criteria for selecting price discrimination metrics when buyers have log-normally distributed willingness-to-pay

Huang, Ke-Wei

doi:10.1007/s11129-009-9069-9

Cited by 5 publications

(1 citation statement)

References 34 publications

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“…The ADW is the casino's best estimate of the average revenue the casino can earn from the customer per day of his visit, after controlling for luck. 12 We have access to the ADW for all customers in the data, but not the proprietary algorithm that generated the ADW. In addition, we also have access to the cutoff of ADW on the basis of which customers are sorted into tiers.…”

Section: Targeted Promotions Emailed By a Casinomentioning

confidence: 99%

Identifying Causal Marketing Mix Effects Using a Regression Discontinuity Design

2011

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We discuss how regression discontinuity designs arise naturally in settings where firms target marketing activity at consumers, and illustrate how this aspect may be exploited for econometric inference of causal effects of marketing effort. Our main insight is to use commonly observed discontinuities and kinks in the heuristics by which firms target such marketing activity to consumers for nonparametric identification. Such kinks, along with continuity restrictions that are typically satisfied in Marketing and Industrial Organization applications, are sufficient for identification of local treatment effects. We review the theory of Regression Discontinuity estimation in the context of targeting, and explore its applicability to several Marketing settings. We discuss identifiability of causal marketing effects using the design and show that consideration of an underlying model of strategic consumer behavior reveals how identification hinges on model features such as the specification and value of structural parameters as well as belief structures. We emphasize the role of selection for identification. We present two empirical applications: the first, to measuring the effect of casino e-mail promotions targeted to customers based on ranges of their expected profitability; and the second, to measuring the effect of direct mail targeted by a B2C company to zip-codes based on cutoffs of expected response. In both cases, we illustrate that exploiting the regression discontinuity design reveals negative effects of the marketing campaigns that would not have been uncovered using other approaches. Our results are nonparametric, easy to compute, and control for the endogeneity induced by the targeting rule.

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Section: Targeted Promotions Emailed By a Casinomentioning

confidence: 99%

Identifying Causal Marketing Mix Effects Using a Regression Discontinuity Design

2011

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Pricing Data Services: Pricing by Minutes, by Gigs, or by Megabytes per Second?

Chen

Huang

2016

Information Systems Research

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Motivated by the pervasive discrepancy among the pricing schemes of data services, this paper investigates the selection of pricing metrics (variables) and the corresponding pricing plans. We construct a stylized model in which a monopoly data services seller faces heterogeneous consumers whose utilities depend on the usage and the connection speed. We examine three options for the seller to conduct the second-degree (indirect) price discrimination: by minutes, by gigabytes (Gigs), and by megabytes per second (Mbps). We show that the after-sales self-selection behaviors have a significant impact on the seller’s profitability, and it leads to a first-order influence on the pricing metric selection. We prove that either pricing by Gigs or Mbps can be optimal. Pricing by Gigs can dominate pricing by Mbps even if the consumer’s utility is more sensitive in changes in the connection speed. We also find that when incorporating the bandwidth costs or congestion costs, pricing by Mbps becomes more attractive as it allows the seller to directly control the congestion effect. These findings may help practitioners to develop their own pricing plans and pricing metrics selection.

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Estimating Willingness to Pay with Exaggeration Bias-Corrected Contingent Valuation Method

Park

MacLachlan

2008

Marketing Science

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Estimates of the prices customers are willing to pay for new products or services using responses from survey questionnaires are notoriously biased on the high side. An approach to obtaining more realistic estimates is suggested here, called the exaggeration bias-corrected contingent valuation method (EBC-CVM). The method is an alternative to conventional contingent valuation methods (CVMs) that have been used in economics and, to a lesser extent, in marketing. Two experiments and one field study are presented to demonstrate the effectiveness of the method. In each case, the proposed method outperformed conventional CVMs in comparison with real choices or more realistic price estimates.willingness to pay, contingent valuation method, exaggeration bias, new product pricing

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Optimal criteria for selecting price discrimination metrics when buyers have log-normally distributed willingness-to-pay

Abstract: Price discrimination, Pricing research, Promotion, Segmentation, Probit regression, Contingent valuation model, M21, M31, L11,

Cited by 5 publications

References 34 publications

Identifying Causal Marketing Mix Effects Using a Regression Discontinuity Design

Identifying Causal Marketing Mix Effects Using a Regression Discontinuity Design

Pricing Data Services: Pricing by Minutes, by Gigs, or by Megabytes per Second?

Estimating Willingness to Pay with Exaggeration Bias-Corrected Contingent Valuation Method

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