Path Dependencies and the Long-Term Effects of Routinized Marketing Decisions

30 Pages Posted: 20 Jun 2008

See all articles by Paul Farris

Paul Farris

University of Virginia - Darden School of Business

Willem Verbeke

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE)

Peter Dickson

affiliation not provided to SSRN

Erjen van Nierop

Carnegie Mellon University - David A. Tepper School of Business; Erasmus Research Institute of Management (ERIM); Tinbergen Institute

Date Written: 18 2008 6,

Abstract

The purpose of this paper is to discuss a simulation of marketing budgeting rules that is based on a simplified version of the market share attraction model. The budgeting rules are roughly equivalent to those that may be used in practice. The simulation illustrates the concept of path dependence in dynamic marketing systems and shows how it might result from decision rules potentially applied by marketers and retailers. Path dependence results from positive feedback in dynamic systems that imparts momentum to market choices. Where the potential for path dependence exists, there are implications for defining and measuring long-term effects of marketing decisions in a way that is meaningful to managers and researchers. In the simulations presented we show that limited retails assortment may contribute to path dependence when firms use either percentage-of-revenue rules or "market learning" experiments to set budgets. While other budgeting procedures (e.g., matching competition) may stabilize market share, this stability in the share dimension comes at the cost of instability for budgets and profits.

Keywords: path dependencies, marketing decisions

JEL Classification: C44, M31, M

Suggested Citation

Farris, Paul and Verbeke, Willem and Dickson, Peter and van Nierop, Erjen, Path Dependencies and the Long-Term Effects of Routinized Marketing Decisions (18 2008 6,). ERIM Report Series Reference No. ERS-2008-035-MKT. Available at SSRN: https://ssrn.com/abstract=1148491

Paul Farris (Contact Author)

University of Virginia - Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States
434-924-0524 (Phone)

HOME PAGE: http://www.darden.virginia.edu/faculty/farris.htm

Willem Verbeke

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE) ( email )

P.O. Box 1738
3000 DR Rotterdam, NL 3062 PA
Netherlands

Peter Dickson

affiliation not provided to SSRN

Erjen Van Nierop

Carnegie Mellon University - David A. Tepper School of Business ( email )

5000 Forbes Avenue
Pittsburgh, PA 15213-3890
United States

Erasmus Research Institute of Management (ERIM)

P.O. Box 1738
3000 DR Rotterdam
Netherlands

Tinbergen Institute ( email )

P.O. Box 1738
3000 DR Rotterdam
Netherlands

Register to save articles to
your library

Register

Paper statistics

Downloads
61
Abstract Views
696
rank
351,557
PlumX Metrics