讲座题目： Consumer Satisfaction and Advertising Competition
主讲人：周翔 教授 (香港中文大学)
主持人：马利军 教授 管理科学系副主任
Two important factors that affect consumers purchase (and repurchase) decisions are usage experience and advertising. When firms' advertising outlays and consumer satisfaction interact with each other, two questions arise. First, how does consumer satisfaction affect firms' advertising competition, as well as the resulting market shares and profits? Second, how do different reactions of consumers to satisfaction/dissatisfaction affect the market equilibrium? We address these questions by considering a market with multiple competing firms, each of which sells one brand of a frequently purchased consumer good. Consumer utility of a brand is determined by her past usage experience and advertising spending (Ads) of the firms. In each period, consumers' usage experience, i.e., satisfied or not, on the brand they purchased in the last period is determined by satisfaction probability (SP). There are two types of consumers in the market: (brand) ``loyals" and (brand) `` switchers", who react to their past usage experience differently.
We characterize the long-term steady-state market equilibrium and obtain the equilibrium Ads of the firms in the symmetric market. We show that a higher SP results in a higher equilibrium Ads, which implies that a higher SP leads to a lower equilibrium profit of the firms because they equally share the market under the symmetric setting. More interestingly, as the proportion of the switchers increases, the equilibrium Ads is lower and thus the firms become more profitable. When the number of brands increases, the equilibrium Ads is first increasing and then decreasing because of the existence of the switchers; when there are only loyals, the equilibrium Ads is always decreasing in the number of brands. We then consider the asymmetric duopoly to investigate the impacts of asymmetry on the equilibrium outcomes. Finally, we extend our analysis to the case where consumers have a longer ``memory" of their past experience with the product. This is joint work with Liang Guo and Chaolin Yang.
Sean Zhou is a professor in the Department of Decision Sciences and Managerial Economics, CUHK Business School, the Chinese University of Hong Kong (CUHK). He is also the director of the Supply Chain Research Center under the Asian Institute of Supply Chain and Logistics in CUHK. He received his B.S. in Electrical Engineering from Zhejiang University, China and his M.S. and Ph.D. in Operations Research from North Carolina State University. His main research area is supply chain management with particular interests in inventory control, production planning, pricing, and game theoretic applications. He serves on the editorial board of IIE Transactions and OR Letters.