In the consumer market, demand for a product is ultimately determined by the collective purchase decisions of consumers. Understanding the drivers and implications of consumer purchase behavior is often of pivotal import
ance for firms. This dissertation considers several operational models that incorporate consumer behavior. We study how operational decisions, such as pricing, advertising spending, and product variety, can be used as levers to manage consumer demand in order to boost firm profitability. First, we develop game theoretical models to analyze the effec
tiveness of advertising-related corporate social responsibility (CSR) practices in discouraging the consumption of unhealthy foods. Childhood obesity is one of the major concerns around the world often attributed to children’s increased calorie consumption and lack of physical activity. As part of their CSR programs, several major food manufacturers have
adopted advertising initiatives that limit the advertising of unhealthy food categories to children, based on the belief that less advertising would lead to less consumption in those food categories. However, food manufacturers usually distribute products to consumers through retailers, whose advertising is not bound by those initiative programs. This essay studies a Stackelberg competition in a supply chain where a manufacturer sells a single unhealthy food product to customer
s through a single retailer. We show that the effectiveness of advertising initiatives is critically dependent
on the spillover effect and sensitivities of manufacturer advertising and retailer advertising, as well as on the power distribution between the manufacturer and the retailer in the supply chain. Put simply, an advertising initia
tive is usually more effective if the advertising level of the supply chain leader is restricted. Interestingly, we show that sales of an unhealthy food product can increase as an advertising initiative becomes more stringent.
Second, we investigate whether and how a firm’s optimal pricing and product variety decisions change with strategic, forward-looking consumer behavior. We consider a monopolist that sells vertically differentiated product
s. The monopolist decides on prices over time to maximize his profit from selling two products. Consumers
weigh the expected payoffs of purchasing different products at different times, and decide when and where to purchase in order to maximize their in dividual surpluses. Our results show that, other than cost structure, strategic consumer behavior also plays an important role in determining the product variety. We conduct numerical experiments to illustrate our results and generate insights in to the role of strategic customer behavior. Not surprisingly, we see that strategic customer behavior decreases the firm’s profits. Interestingly, we show that sometimes firms strategically
commit to static pricing policies, and systematically vary their product portfolio over time. Our work differs from much of the existing work on product variety by explicitly modelling consumer purchase decisions over time, and by illustrating that
a static product portfolio is not necessarily sub-optimal and can lead to a significant profit increase.
In the consumer market, demand for a product is ultimately determined by the collective purchase decisions of consumers. Understanding the drivers and implications of consumer purchase behavior is often of pivotal importance for firms. This dissertation considers several operational models that incorporate consumer behavior. We study how operational decisions, such as pricing, advertising spending, and product variety, can be used as levers to manage consumer demand in order to boost firm profitability. First, we develop game theoretical models to analyze the effectiveness of advertising-related corporate social responsibility (CSR) practices in discouraging the consumption of unhealthy foods. Childhood obesity is one of the major concerns around the world often attributed to children’s increased calorie consumption and lack of physical activity. As part of their CSR programs, several major food manufacturers haveadopted advertising initiatives that limit the advertising of unhealthy food categories to children, based on the belief that less advertising would lead to less consumption in those food categories. However, food manufacturers usually distribute products to consumers through retailers, whose advertising is not bound by those initiative programs. This essay studies a Stackelberg competition in a supply chain where a manufacturer sells a single unhealthy food product to customers through a single retailer. We show that the effectiveness of advertising initiatives is critically dependenton the spillover effect and sensitivities of manufacturer advertising and retailer advertising, as well as on the power distribution between the manufacturer and the retailer in the supply chain. Put simply, an advertising initiative is usually more effective if the advertising level of the supply chain leader is restricted. Interestingly, we show that sales of an unhealthy food product can increase as an advertising initiative becomes more stringent.Second, we investigate whether and how a firm’s optimal pricing and product variety decisions change with strategic, forward-looking consumer behavior. We consider a monopolist that sells vertically differentiated products. The monopolist decides on prices over time to maximize his profit from selling two products. Consumersweigh the expected payoffs of purchasing different products at different times, and decide when and where to purchase in order to maximize their in dividual surpluses. Our results show that, other than cost structure, strategic consumer behavior also plays an important role in determining the product variety. We conduct numerical experiments to illustrate our results and generate insights in to the role of strategic customer behavior. Not surprisingly, we see that strategic customer behavior decreases the firm’s profits. Interestingly, we show that sometimes firms strategically ยอมรับในนโยบายการกำหนดราคาคงที่ และระบบแตกต่างกันของผลิตภัณฑ์ภายใต้ช่วงเวลา งานของเราแตกต่างจากงานที่มีอยู่ในผลิตภัณฑ์ต่าง ๆ มากมาย โดยแบบจำลองการตัดสินใจซื้อของผู้บริโภคช่วงเวลาอย่างชัดเจน และแสดงที่ผลงานผลิตภัณฑ์คงไม่จำเป็นต้องย่อยเหมาะสม และสามารถนำไปสู่การเพิ่มขึ้นของกำไรอย่างมีนัยสำคัญ
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