Fanning the flames? How media coverage of a price war affects retailers, consumers and investors
Loading...
Date
1/10/2015
Open Access Location
Authors
Journal Title
Journal ISSN
Volume Title
Publisher
American Marketing Association
Rights
Abstract
This article explores how media coverage of a price war affects customer, retailer, and investor reactions over time. Using data covering a Dutch supermarket price war (2003-2005), the authors find that price reductions, especially deep reductions, trigger media coverage of the price conflict. This sets off a chain of reactions. Press messages have a significant effect on market share and abnormal stock returns, beyond retailers' own price and advertising. Importantly, this study uncovers striking asymmetries regarding the kind of coverage to which stakeholders react: whereas consumers only respond to the tone of price-related press coverage, retailers and investors only react to its quantity. Next, media coverage feeds back into the retailers' pricing actions: more media coverage triggers new price cuts in addition to those dictated by competitive reactions. As such, media coverage triggers a deeper spiral of price cuts, intensifying the competitive price battle. However, as the price war progresses, media coverage becomes less frequent and less favorable, which decelerates the downward price spiral.
Description
Keywords
media coverage, price war, retailing, hierarchical Bayes, time series econometrics
Citation
JOURNAL OF MARKETING RESEARCH, 2015, 52 (5), pp. 674 - 693