Moderating Factors of Immediate, Dynamic, and Long-Run Cross-Price Effects

43 Pages Posted: 6 Aug 2008

See all articles by Csilla Horvath

Csilla Horvath

Radboud University Nijmegen

Csilla Horváth

Radboud University Nijmegen

D. Fok

Econometric Institute - Erasmus University Rotterdam; Erasmus Research Institute of Management (ERIM); Tinbergen Institute Rotterdam

Date Written: 23 2008 7,

Abstract

In this article the authors describe their comprehensive analysis of moderating factors of cross-brand effects of price changes and contribute to the literature in five major ways. (1) They consider an extensive set of potential variables influencing cross-brand effects of price changes. (2) They examine moderators for the immediate as well as the dynamic cross-price effect. (3) They decompose price into regular and promotional price and study both cross-price effects separately. (4) They compare their findings with previous literature on the moderating factors of own-price effects to understand which factors influence own-price elasticity through affecting brand switching. (5) The authors use an advanced Bayesian estimation technique. The results show evidence of the neighborhood price effect and suggest that it is conditional on whether the promoted brand is priced above or below its competitor. The promoted brand's activities turn out to play a much more important role in determining the cross-price promotional effects than its competitor's similar activities. The authors outline conditions when cross-brand post-promotion dips tend to occur. Finally, they argue that the brand choice portion of the overall own-brand effect of a promotion depends on the brand's marketing strategy and on category-specific characteristics.

Keywords: cross-price elasticity, asymmetry, dynamic effects, hierarchical Bayes

JEL Classification: C44, M31, M

Suggested Citation

Horvath, Csilla and Horváth, Csilla and Fok, Dennis, Moderating Factors of Immediate, Dynamic, and Long-Run Cross-Price Effects (23 2008 7,). ERIM Report Series Reference No. ERS-2008-042-MKT. Available at SSRN: https://ssrn.com/abstract=1206704

Csilla Horvath (Contact Author)

Radboud University Nijmegen ( email )

Postbus 9108
Nijmegen, 6500 HK
Netherlands

Csilla Horváth

Radboud University Nijmegen

Postbus 9108
Nijmegen, 6500 HK
Netherlands

Dennis Fok

Econometric Institute - Erasmus University Rotterdam ( email )

P.O. Box 1738
3000 DR Rotterdam
Netherlands

Erasmus Research Institute of Management (ERIM) ( email )

P.O. Box 1738
3000 DR Rotterdam
Netherlands
+31 10 408 1333 (Phone)
+31 10 408 9162 (Fax)

Tinbergen Institute Rotterdam ( email )

P.O. Box 1738
3000 DR Rotterdam
Netherlands

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