JIN GYO KIM, Massachusetts Institute of Technology (MIT)
Email: kimjg@mit.edu
ULRICH MENZEFRICKE, University of Toronto - Joseph L. Rotman School of Management
Email: menzefricke@rotman.utoronto.ca
FRED FEINBERG, University of Michigan at Ann Arbor - Marketing
Email: feinf@umich.edu

The finite normal mixture model has emerged as a dominant methodology for assessing heterogeneity in choice models. Although it extends the classic mixture models by allowing within component variablility, it requires that a relatively large number of models be separately estimated and fairly difficult test procedures to determine the "correct" number of mixing components. We present a very general formulation, based on Dirichlet Process Piror, which yields the number and composition of mixing components a posteriori, obviating the need for post hoc test procedures and is capable of approximating any target heterogeneity distribution. Adapting Stephens' (2000) algorithm allows the determination of "substantively" different clusters, as well as a way to sidestep problems arising from label-switching and overlapping mixtures. These methods are illustrated both on simulated data and A.C. Nielsen scanner panel data for liquid detergents. We find that the large number of mixing components required to adequately represent the heterogeneity distribution can be reduced in practice to a far smaller number of segments of managerial relevance.

PREYAS S. DESAI, Duke University - Fuqua School of Business
Email: desai@duke.edu
PADDY V. PADMANABHAN, INSEAD - Marketing
Email: paddy.padmanabhan@insead.edu

The marketing literature on product warranty and extended warranty has largely focused on their role as segmentation instruments in risk-averse consumer markets. Preserving this insurance rationale, we highlight the role of extended warranty in channel coordination.

We derive explicit demand functions for the durable good and extended warranty from a traditional model of consumer utility. This derivation explicitly captures the complementary goods flavor of extended warranty. We then investigate the impact of different distributional arrangements commonly observed in the marketplace for market outcomes and manufacturer profitability. We show that two key forces drive the results - the complementary goods effect and the double marginalization effect. Different channel arrangements for marketing of extended warranty cause these effects occur at different levels within a distribution channel and these are shown to have significant implications for the optimal warranty policy.

VASILIS THEOHARAKIS, ALBA Graduate Business School, Aston University - Marketing Group
Email: vtheohar@alba.edu.gr
DEMETRIOS VAKRATSAS, McGill University - Faculty of Management
Email: vakratsa@management.mcgill.ca
VERONICA WONG, Aston Business School, Aston University
Email: v.w.y.wong@aston.ac.uk

The role of information in high-technology markets is critical (Dutta, Narasimhan and Rajiv 1999; Farrell and Saloner 1986; Weiss and Heide 1993). In these markets, the volatility and volume of information present managers and researchers with the considerable challenge of monitoring such information and examining how potential customers may respond to it. This article examines the effects of the type and volume of information on the market share of different technological standards in the Local Area Networks (LAN) industry. We identify three different types of information: technological, availability and adoption. Our empirical application suggests that all three types of information have significant effects on the market share of a technological standard, but their direction and magnitude differ. More specifically, technology-related information is negatively related to market share as it demonstrates that the underlying technology is immature and still evolving. Both availability and adoption-related information have a positive effect on market share, but the former is larger than the latter. We conclude that high-tech firms should emphasize the dissemination of information, especially availability-related, as part of their promotional strategy for a new technology. Otherwise, they may risk missing an opportunity to achieve a higher share and establish their market presence.