Gary M. Erickson

Image Variables in Multi-Attribute Product Evaluations: Country-of-Origin Effects

An empirical investigation is conducted to determine the effects of image variables on beliefs and attitudes in the multi-attribute model framework. Simultaneous equation regression is used to estimate a model linking a particular type of image variable, country of origin, to attitudes and beliefs obtained through a survey of evaluations of automobile alternatives. The results indicate that country of origin affects beliefs but not attitudes.

The Role of Price in Multi-attribute Product Evaluations

The potentially multifaceted role of price in product evaluations is investigated with an empirical analysis of surveyed beliefs, attitudes, and intentions regarding automobile brands. It is found that price beliefs both influence and are influenced by beliefs about a brands quality, thereby contributing to the attribution definition process. However, price is not a significant determinant of overall attitude. It is also found that price becomes a negative factor when behavioral intentions are involved, lending support to an economic interpretation of price.

The Financial Rewards of New Product Introductions in the Personal Computer Industry

Based on data from firms in the personal computer industry, we study the effect of new product introductions on three key drivers of firm value: profit rate, profit-rate persistence, and firm size as reflected in asset growth. Consistent with our theoretical development, we find that new product introductions influence profit rate and size; however, we find no effect on profit-rate persistence. Interestingly, we also find that the effect of new product introductions on profit rate stems from a reduction in selling and general administrative expenditure intensity rather than through an increase in gross operating return. Notably, firms decrease their advertising intensity in the wake of a new product introduction. Firm profitability in this industry apparently benefits from new product introductions because new products need less marketing support than older products.

Dynamic models of advertising competition

Preface. 1. Advertising and Competition. 2. Analytical Models and Strategy Concepts. 3. Analysis of a Lanchester Duopoly. 4. Analysis of a Vidale-Wolfe Duopoly. 5. Analysis of a Diffusion Duopoly. 6. Analysis of a Lanchester Triopoly. 7. Analysis of a Vidale-Wolfe Triopoly. 8. Analysis of a Diffusion Triopoly. 9. Summary and Final Considerations. References. Author Index. Subject Index.

Differential game models of advertising competition

Abstract Differential game methodology combines two attractive features that are critical to the study of advertising competition: dynamics and multi-competitor decision making. A focused review of two decades of differential game modeling of advertising competition indicates that insights gained to date, while valuable, are of a limited nature, and research in the area needs to extend beyond present limits. Four recent studies are offered as examples of possible directions to follow in continued research.

A differential game model of the marketing-operations interface

In the development of their dynamic strategies, the marketing and operations functions within a firm have differing objectives, and conflict between the two functions is common. The strategic interdependence involving marketing and operations decisions is modeled as a noncooperative differential game. Demand is assumed to be a function of price and advertising goodwill, and marketing controls price and advertising to maximize its discounted stream of revenue net of advertising costs. Backlogging is allowed, and operations controls production to minimize its discounted stream of production and backlog costs. A feedback Nash equilibrium is derived for the game, which allows a solution of the system of differential equations for goodwill and backlog, and is analyzed to study the nature of the dynamic strategies for price, advertising, and production.

Using Ridge Regression to Estimate Directly Lagged Effects in Marketing

Abstract A prediction criterion for ridge regression is developed and used for estimating lagged effect patterns by means of the direct lag model. As examples, the Lydia Pinkham monthly and annual data are analyzed, showing that lag patterns can be obtained that are in agreement across time intervals.

Transfer pricing in a dynamic marketing-operations interface

A transfer price mechanism is proposed to coordinate the strategies of the marketing and operations functional areas operating in a dynamic interface environment in a decentralized firm. Marketing and operations are strategic decision-makers in a differential game, in which marketing has price and advertising and operations has production as control variables, and advertising goodwill and production backlog are state variables. A constant transfer price is entered into the objective functionals for marketing and operations, and subgame perfect feedback strategies are derived for price, advertising, and production as functions of the state variables. The feedback strategies allow a solution for the dynamic system involving goodwill and backlog, and the total payoff to the firm, the sum of the payoffs to marketing and operations, is determined as a function of the transfer price. Finally, for certain parameter conditions an interior maximum of the payoff function is achieved, and the optimal transfer price is identified.

Advertising Competition in a Dynamic Oligopoly with Multiple Brands

A model is developed that allows the derivation of feedback Nash equilibrium advertising strategies for oligopolistic competitors. The model is an extension of a modified Vidale-Wolfe model that incorporates multiple brands per competitor. The resulting expressions of feedback advertising strategies are combined with those for sales dynamics in an empirical model that is applied to the carbonated soft drink market, which involves three primary competitors and five primary brands. The research provides the following contributions: A modification of the Vidale-Wolfe model is extended to allow dynamic analysis of an oligopoly in which the competitors each offer multiple brands. The model extension permits the derivation of a feedback Nash equilibrium. The determination of a feedback Nash equilibrium enhances empirical analysis by allowing an expanded empirical model that includes the explicit modeling of endogenous advertising along with demand relationships.

The Financial Rewards of New Product Introductions

There is little question that new product innovation is a cornerstone to firm success. Particularly in technologically dynamic markets like personal computers, new products are central to long-term financial performance. However, exactly how new product introductions influence firm value is less clear. Based on data from firms in the personal computer industry, we study the effect of new product introductions on three key drivers of firm value: profit rate, profit rate persistence, and firm size as reflected in asset growth. We find that new product introductions influence profit rate and size, but not persistence. Interestingly, the effect of new product introductions on profit rate appears to stem from a reduction in selling and general administrative expenditure intensity rather than through an increase in gross operating return. Firm profitability apparently benefits from new product introduction because new products need less marketing support than older products.