Activities > Projects

In order to develop into more comprehensive research center, the Center for Marketing and Supply Chain Management has supported the following research studies:

Project Title

Social Communication and Durable Goods Pricing

Project Investigator(s) Prof. Liang Guo (Assistant Professor, Department of Marketing, HKUST)
Descriptions  
This study aims to investigate the impact of social communication on the pricing behavior of a monopoly firm selling a durable good. The analysis and results can expect to provide significant insights into durable goods pricing in markets characterized by abundant interpersonal information transmission. The investigation of the impact of social communication on firm profitability can also shed light on when a firm should facilitate or impede interpersonal communication among consumers through proactive word-of-mouth management (e.g., reward programs and online consumer review forums). The study intends to show that social communication can lead to ex-post dispersion in the consumers' expected valuations, influencing the firm's future price pattern and hence the consumers' incentive to postpone current purchases. This force can endogenously bring up the time inconsistency problem in durable goods pricing when consumers are homogenous in willingness to pay for product fit, hurting the firm's profitability while benefiting the consumers. In the alternative case with heterogeneous consumer willingness to pay for product fit, social communication can either exacerbate or soften the time inconsistency problem. As a result, whereas the main effect of social communication on the firm's equilibrium future payoff is unambiguously negative, its strategic impact on the parties' forward looking behaviors can be positive and dominant, which can improve the firm's equilibrium ex-ante profit while hurting consumer surplus and social welfare. The study will empirically investigate the impact of consumer characteristics on information acquisition through social communication, and social communication on consumer preferences.

 

Project Title

Modeling Competitive Marketing Breadth and New Product Diffusion

Project Investigator(s) Prof. Yi Xiang (Assistant Professor, Department of Marketing, HKUST)
Descriptions  

In a new market, firms face a variety of competition from both within the category (i.e., other incumbents) and without (i.e., new entrants). Their competitive activities affect the growth of the new market, while the inter-firm competition will also change as markets evolve. This project will empirically model the interaction between market evolution and firms' competitive marketing behavior.

On the effects of competition on market evolution, the influences of firms' competitive behavior on market growth will be investigated. While previous research has largely focused on the impact of entry-and-exit on new markets, this project studies the impact of competitive marketing mix with special attention to the breadth of marketing mix, i.e., the extent to which competitors concentrate their competitive reactions on one marketing mix variable versus using a full spectrum of marketing tools. Through the study, it conjectures that the intensity and breadth of marketing mix have different effects on market growth, depending on the nature of competition.

With regard to the impact of market evolution on competition, the main interest in previous research has been in measuring the relationship between the strength of competition and the strategic attractiveness of the markets, such as market potential and growth rate. Differing from the existing literature, the study postulates that customer responses and behaviors evolve as markets mature. By measuring the evolution of customer responses, its impact on firms' competitive marketing behavior can be investigated.

To capture the mutual impact of market growth and competitive activities, a varying parameter model, imbedded in a structural model with system of equations are built up.

 

Project Title

The Consumption of Uncertainty

Project Investigator(s) Prof. Yi Xiang (Assistant Professor, Department of Marketing, HKUST)
Descriptions  

The vast broadcasting media are in the business of entertaining consumers. We model the broadcast process as a sequence of information/signals that are received by individual consumers. Each signal represents an incident that is diagnostic for the forecast of the final result (e.g., a penalty in a soccer game). Consumers constantly update their estimates of the final results from these signals, and derive utility from these updates. The more contradictory the incoming signals to a consumer's current forecast, the more utility s/he can derive. We model the consumer utility as the sum of the uncertainty (frequency and magnitude of forecast changes) about the final results. Our model implies that the timing of the broadcast is crucial such that the more delayed the broadcast the less utility consumers derive. We will test our theory empirically in an experimental setting.

Built on the above theory, we will then examine how the accuracy of the signals influences consumers' estimation processes by comparing different sport games. For example, scores in a basketball game are much more accurate reflection of the current state the game, compared to the scores in a soccer match. The level of signal accuracy will then influence consumers' forecast for the rest of the game. To further explore consumer's information processing and utility from watching the games, we will compare different game rules, e.g., with set (tennis) or without set (football). Different rules may incur different forecasting procedures and then influence consumer's utility.

 

 
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