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In order to focus on the potential contribution of marketing MSA to economics, I have isolated the role of cross-elasticity in economic MSA. It provides a bridge, if you will, between the two disciplines.
Product substitutability is strategically linked to market definition, a foundation element of market structure analysis.The problem for economists and marketers is that a meaningful operational definition of market structure is elusive [See Horowitz, 1981; Belk, 1975.].Each discipline takes a different methodological approach toward solving this problem, and each has its own strengths and limitations.Broaddus, like other researchers, found no satisfactory solution to this problem. Horowitz provides one of the classic statements on this: Because economists from Adam Smith forward, have with confidence and enthusiasm, although not necessarily with shared views, written about markets, it is plausible that they would have quite a bit to contribute to the resolution of the market-definition problem. Today, it remains true that economics is better equipped to discuss markets (i.e., the market analytic) than to discover them. Product substitutability is linked to market definition, which, in turn, is integral to market structure. "The Perception of a Firm's Competitive Position." In Behavioral Models for Market Analysis.
Figure 1 also calls attention to the importance ofmarket structure to competitive economic behavior. "Predicting Purchase and Other Behaviors from General and Contextually Specific Intentions." Journal of Marketing Research 17 (February): 26-33.
In decision-making analysis, market structure has an important role through its impact on the decision-making environment.
The extent and characteristics of competition in the market affect choice behavior among the actors [Baumol, 1961; Yadav, 1995].
In economics, markets are classified according to the structure of the industry serving the market.
Industry structure is categorized on the basis of market structure variables which are believed to determine the extent and characteristics of competition.
Those variables which have received the most attention are number of buyers and sellers, extent of product substitutability, costs, ease of entry and exit, and the extent of mutual interdependence [Baumol, 1982; Colton, 1993].