Maxim Sinitsyn

Coordination of Price Promotions in Complementary Categories

In this paper, I investigate the outcome of a price competition between two firms, each producing two complementary products. Specifically, I study each firms decision to coordinate price promotions of its products. Consumers are divided into loyals, who purchase both products from their preferred firm, and heterogeneous switchers, who choose between four possible bundles or buy a product in a single category. The switchers are willing to pay some price premium in order to purchase two complementary products that share the same brand name and are produced by the same firm, because they believe that these products are a better match than two complementary products with different brand names. I find that each firm predominantly promotes its complementary products together. This finding is correlationally supported by data in the shampoo and conditioner and in the cake mix and cake frosting categories. This paper was accepted by Pradeep Chintagunta, marketing.

Where Does the Bucket Leak? Sending Money to the Poor Via the Community Development Block Grant Program

Since the inception of the Community Development Block Grant (CDBG) program in 1975, cities and large urban counties have been entitled to funding based on a formula designed to approximate community need. As with any such federally funded and locally administered program, there is a tension between federal and local control. At the federal level, one of CDBGs main goals is to benefit low- and moderate-income (LMI) people and places. While a substantial literature assesses how well CDBG funds are targeted to needy recipient jurisdictions, evidence on how funds are distributed within recipient jurisdictions is much more limited. In this article, we examine the distribution of CDBG funds relative to the share of LMI people at the council-district and neighborhood levels in Chicago, Illinois, and Los Angeles, California, for 1998 – 2004. In Los Angeles, we find that relatively poorer council districts receive more than they would were funds distributed following the share of LMI people. In contrast, Chicagos relatively poorer council districts receive lower funding than predicted by their share of the LMI population. This difference across council districts within the cities is partially explained by the greater sensitivity of allocations in Chicago to the location of high-income households. Despite these disparities, policy answers are not obvious; any policy that aims to enhance CDBGs reach to LMI people must contend with the erosion of broad-based political support that this would engender.

Managing Price Promotions Within a Product Line

In this paper, I investigate the question of how a firm producing substitutes should coordinate price promotions of these products. I model price competition between two firms, each producing two products that are horizontally differentiated with respect to some characteristic. Consumers are divided into loyals, who always purchase their preferred product, and switchers, who have heterogeneous preferences for the four products. If consumers substitute easily between the products produced by one firm, the firms promote one product at a time to avoid cannibalization. If consumers mainly substitute between the products with the same characteristic, the firms often employ joint promotions with at least one product at a deep discount. If, at the same time, consumers easily substitute to the products in other categories, the firms use joint promotions less often and avoid simultaneous deep discounts.Data, as supplemental material, are available at http://dx.doi.org/10.1287/mksc.2015.0938 .

Pricing with Prescheduled Sales

In this paper, I introduce a framework of price promotions by firms that preschedule their sale dates. I set up a dynamic model of demand accumulation in which high- and low-valuation consumers enter the market every period. The high-valuation consumers buy immediately and leave the market; the low-valuation consumers accumulate while waiting for the sale price. The firms schedule the dates of their promotions in advance. I find that often they use mixed strategies, choosing the future promotion period according to a probability distribution function. If the firms can cancel their prescheduled sales, typically they can wait longer until holding sales by shifting the probability distribution towards later periods. Scheduling promotions in advance increases the firms’ profits in comparison to the case when the promotion decision is made in the period when the promotion is offered. Data and the online appendix are available at https://doi.org/10.1287/mksc.2017.1052.

Choosing the Quality of the Fit between Complementary Products

In this paper, I examine how firms should position their complementary products. I assume that there are two competing firms, each producing two complementary products. Each firm decides whether to employ strategies that enhance the quality of the fit (the degree of complementarity) between its pair of complementary products before competing in prices. The consumers have heterogeneous tastes for the four possible bundles. They are willing to pay a price premium in order to purchase a bundle from the same firm if this firm chose to make such bundle more attractive. I find that increasing the degree of complementarity between a firms complementary products intensifies price competition and often leads to smaller profits. Only when complementarity-enhancing strategies significantly increase the demand for a firms matching bundle, does the firm benefit from employing them. The highest profits for both firms are obtained when both firms do not employ complementarity-enhancing strategies. Deteriorating the quality of the fit between ones own and a rivals complementary products is never profitable.