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Publications

An analytical framework for retailer price and advertising decisions for products with temperature-sensitive demandJournal articleRégis Chenavaz, Octavio Escobar et Xavier Rousset, Applied Economics, Volume 51, Issue 52, pp. 5683-5693, 2019

The demand for weather-sensitive products, such as beverages, ice creams, or chocolate varies with changes in temperature. Yet, retailers lack a framework to adapt the marketing mix elements, such as price and advertising, in line with such changes. We provide a theoretical framework to fill this gap by developing an analytical model to derive the optimal marketing mix when product demand depends on temperature. The model prescribes how price and advertising for different demand characteristics should be set following a temperature change. Integrating the temperature element in the marketing mix offers an original profit-enhancing strategy.

Convenience pricing in online retailing: Evidence from Amazon.comJournal articleRégis Chenavaz, Joeffrey Drouard, Octavio R. Escobar et Bruno Karoubi, Economic Modelling, Volume 70, pp. 127-139, 2018

To expedite payments, firms use convenience pricing strategies. A price is considered convenient if it can be paid with few coins. Convenient prices are well understood in offline retailing, but not online. This article fills the gap, examining an original panel dataset more than 2.5 million observations of book prices from Amazon.com. We provide empirical evidence supporting two claims. First in a static setup, more convenient prices are more likely to be set. Second in a dynamic setup, more convenient prices are more rigid. Emphasizing the role of convenience, this work sheds new light on price setting in online retailing.

Dynamic pricing for inventories with reference price effectsJournal articleRégis Chenavaz et Corina Paraschiv, Economics - The Open-Access, Open-Assessment E-Journal, Volume 12, Issue 2018-64, pp. 1-16, 2018

This article presents a dynamic pricing model of a retailer selling an inventory, accounting for consumer behavior. The authors propose an optimal control model, maximizing the intertemporal profit with consumers sensitive to the selling price and to a reference price. The optimal dynamic pricing policy is solved with Pontryagin's maximum principle with a structural (general) demand function. The authors obtain an original pricing rule, which explicitly accounts for the impact of price and inventory on future profits. The dynamics of price do not have to imitate the dynamics of the reference price. Instead, the dynamics of price are tied to opposing effects linked to this reference price. The authors also discuss managerial implications with regards to behavioral pricing policies.

Dynamic quality policies with reference quality effectsJournal articleRégis Chenavaz, Applied Economics, Volume 49, Issue 32, pp. 3156-3162, 2017

Dynamic pricing policies with reference-price demand have been intensely analysed. Less studied are dynamic quality policies with reference-quality demand. This article studies the dynamic quality policy of a firm whose consumers use a reference point in their decision-making, in line with the principles of behavioural economics. More specifically, I consider reference quality formation in an optimal control setting. By solving on the basis of Pontryagin’s maximum principle, I obtain analytical solutions to the optimal quality policy. The managerial implications of quality reference for dynamic quality policy are discussed.

Better Product Quality May Lead to Lower Product PriceJournal articleRégis Chenavaz, The B.E. Journal of Theoretical Economics, Volume 17, Issue 1, pp. 1-22, 2017

This article analyzes the conditions under which better product quality implies higher or lower product price. In an optimal control framework, I make the following assumptions: The firm sets the dynamic pricing and product innovation policies; product innovation raises quality, which drives production cost, and consumers are sensitive to price and quality. I derive a rule of price-quality relationship that stresses the influence of quality on price through the effects of cost (positive), sales (negative), and markup (positive). This article shows that, while maximizing profit and despite a quality and cost increases, the firm may decrease product prices because of the possibility of generating more sales as a result of combining better quality with lower price. This sales effect solves the puzzle of a negative price-quality relationship. More generally, the sales effect mitigates the ability of price to convey information about quality.

Dynamic pricing with reference price dependenceJournal articleRégis Chenavaz, Economics - The Open-Access, Open-Assessment E-Journal, Volume 10, Issue 2016-22, pp. 1-17, 2016

A firm that accounts for consumer behavior sets the selling price of a product considering the reference price of consumers. In the literature, a reference price is usually modeled as depending on past selling prices. That is, past selling prices implicitly constrain the current selling price of a product. In this article, the author explicitly measures this constraint with an optimal control framework. He works on the structural properties of a general demand function, which depends on both selling and reference prices. Analytical results prove the following claims. Adjusting reference prices effects increase the price elasticity of demand, the demand function becoming flatter. Thus, the reference price effect weakens the market power of the firm. Also, the reference price effect constitutes a main driver of the dynamics of the selling price. But contrary to intuition, selling price dynamics does not systematically imitate reference price dynamics.

Consumers’ perceived risk and hold and use of payment instrumentsJournal articleBruno Karoubi, Régis Chenavaz et Corina Paraschiv, Applied Economics, Volume 48, Issue 14, pp. 1317-1329, 2016

Consumer decisions regarding retail payment instruments entail private and social costs. Due to these social costs, policymakers are increasingly trying to understand the determinants of consumer payment choices as documented by the European Central Bank?s regular publications. This article contributes to this understanding by investigating the role of perceived risk. Based on an original survey of French consumers, we measure the effects of perceived risk on the decisions to hold and use the main retail payment instruments: cash, card and cheque. We point to the sequential dependence of the decisions to hold and use a payment instrument, and study jointly both decisions. The bivariate analysis based on risk factors shows that unavailability risk and time risk have the greatest transverse influence on holding and using payment instruments. Our results, robust to controlling for consumer characteristics, confirm their propensity for a quick-to-use and constantly available payment instrument. We discuss the relevance of our results for policy making purposes.

Population distribution, effective area and economic growthJournal articleRégis Chenavaz et Octavio Escobar, Applied Economics, Volume 47, Issue 53, pp. 5776-5790, 2015

The usual measure for the factor land is the total area. But total area is a flawed measure because land is of unequal quality. To account for land quality, we use an alternative measure called effective area . Effective area is based on spatial population distribution which captures both natural conditions and human activity. Theoretically, effective area explains economic growth better than total area that biases the measure of total factor productivity (TFP) growth. Empirically on the basis of 40 years of panel data for the United States, an increase of 10% in effective area is associated with an economic growth of 5%, and the omission of effective area undervalues the growth of TFP by 8.1%.

Does Crime Influence the Payment Decisions of Consumers?Journal articleBruno Karoubi et Régis Chenavaz, Journal of Applied Business Research (JABR), Volume 31, Issue 5, pp. 1709-1718, 2015

The impact of crime on economic activity has been widely studied. The economic analysis of crime on payment instrument, however, is still lacking. In this paper, we analyze the impact of crime on the use of cash and card payment with an original database of a representative sample of French consumers. We provide empirical evidence that violent and financial crimes have opposite effects on cash withdrawn and cash payment: On the one side, violent crime increases the amount of cash withdrawn and increases the probability of a cash payment. On the other side, financial crime decreases the amount of cash withdrawn and increases the probability of a credit or debit card payment. The probability of mugging is higher when withdrawing cash and automated teller machines (ATMs) deliver only notes. The increase in the amount of cash withdrawn comes from the reduction of the number of cash withdrawals together with the non-linearity of cash withdrawals at ATMs. The increase in the proportion of card owners when financial crime is high is a result of adverse selection: a financial fraudster is more aware of the insurance provided with payment cards, and therefore he places a greater value on having a payment card.

Prices for cash and cash for prices? Theory and evidence on convenient pricingJournal articleBruno Karoubi et Régis Chenavaz, Applied Economics, Volume 47, Issue 38, pp. 4102-4115, 2015

A transaction between a seller and a buyer incurs a payment cost. The payment cost is borne by the seller, depending on the payment instrument the buyer chooses, cash or card. Card payment is more costly than cash payment, so the seller prefers that the buyer pays cash. In this article, we study the strategy of the seller setting a convenient price, which simplifies transactions and pushes the buyer to pay cash. The theoretical analysis, which models both the seller and the buyer in a game setting, derives two propositions: (1) the seller is more likely to set a more convenient price and (2) the buyer is more likely to pay cash a more convenient price. The empirical analysis supports both propositions. Thus, sellers adopt a convenience pricing strategy - prices for cash - and this strategy pushes buyers to pay cash - cash for prices.