| The mission of SOM is to stimulate fundamental and applied research related to the firm in its economic, spatial, and demographic environment. While the firm is the central entity in SOM's research themes, it is of crucial importance in any analysis related to firms to understand the incentives and the behavior of all individual actors involved. In the end, it is the behavior of these individuals and their mutual interactions that define the more abstract concept of "firm behavior". The actors involved in firm behavior include owners, shareholders, managers, employees, and consumers. The interaction between consumer behavior and the behavior of firms is the central topic in this theme. The current research of the Department of Economics in this area includes: Eliciting consumer preferences, in particular by means of (conjoint) choice experiments (Wedel and others). Bounded consumer rationality (labeling effects of different income components, time inconsistent behavior) and social interactions (peer group and reference group effects) (Kooreman, Haan, and Schoonbeek) Optimal firm response to consumers and rivals (temporary price cuts, degree and channels of advertising) (Leeflang, Wittink, and others) Market structure and concentration (banking, internet access, tobacco, cars) (Leeflang, Haan Schoonbeek, Kooreman) The scope for improvement in a new theme is related to the lack of coherency between the current research activities. For example, microeconomic research on markets often assume perfectly rational consumers, while research in marketing and economic psychology provides ample evidence that this assumption is often not tenable. Another example is that marketing research often ignores the endogeneity of prices and other marketing aspects when analyzing their impact on consumer behavior. The purpose of this theme is to unify current research and to increase its coherency. From a methodological perspective, two types of approaches will be followed. The first one is the econometric approach. Empirical work in the areas described above requires the application of modern econometric techniques, such as nonparametric estimation and estimation by the method of simulated moments. One of the aspects of the research in this theme is endogenizing variables that are usually taken as exogenous. This strengthens the need for careful analysis of the identifiability of models and the application of Instrumental Variable techniques. The research will therefore heavily draw on and stimulate the expertise in econometrics available in the Department . A new methodological avenue to be explored is experimental research. The theme's research will exploit the expected forthcoming availability of a computer laboratory for experimental research. The new professor of consumer behavior is expected to have expertise in this field particularly. Since experimental economics will be a new facility Groningen, it is well suited for starting joint research projects. An experiment that is of interest to both marketing researchers and micro-economists is related to the role of peer groups and fashion (Veblen effects). These effects are often more important in explaining consumer behavior than the usual variables such as income, education and demographic characteristics. Without experimental facilities such effects are notoriously difficult to measure. |
