Kristina Brecko
My research applies empirical industrial organization techniques to unique data contexts to analyze questions relevant to academics and firms. Substantively, I am interested in questions related to product strategy (e.g., pricing, advertising, entry) and sustainability marketing.
Curriculum VitaeThis paper sheds light on the unique role of sustainability in unregulated consumer packaged goods (CPG) markets: it is neither a pure public good, which firms lack incentive to provide without regulation, nor a significant private benefit to consumers largely produced by dominant market players. Instead, sustainability occupies a middle ground, offering strategic differentiation opportunities across brands. In the health and beauty care categories from 2013 to 2019, we find the growth in sustainable products driven only by fringe -- not historically dominant -- brands and the limited role of sustainability features in product pricing, both of which suggest firms' growing but modest incentives to invest in sustainability. Consistent with these patterns, our model estimates indicate that sustainability has a non-zero but marginal impact on consumer purchase decisions: while preference for sustainability is increasing, the average consumer still prioritizes non-sustainable attributes and favors sustainability features that are more easily offered by smaller brands. These preferences rationalize the observed strategic differentiation, where dominant brands face limited incentives to offer sustainable products while smaller brands use sustainable offerings to differentiate. Implications for brands and policymakers are discussed.
This paper considers harm reduction for conservation: promoting a product that attracts and reduces harm from an inframarginal consumer unmoved by calls for abstinence. We outline the economic trade-offs of calls for abstinence versus harm reduction and evaluate them in the context of residential water use, where lawn removal is favored by policymakers but is unappealing to heavy irrigators’ aesthetic preferences. Using sequential field experiments, we show that a smart irrigation controller that efficiently maintains stigmatized ornamental landscapes appeals to the heaviest irrigators and generates large and long-lasting individual and social benefits: cost recovery in six months and water savings covering another household’s basic needs. We find no evidence it cannibalizes abstinence (lawn removal). Our results underscore the importance of considering heterogeneous preferences when designing interventions aimed at fostering pro-social behaviors. Our conceptual and measurement framework enables evaluation of the harm reduction approach in other settings.
In many durable good contexts, firms have the opportunity to price discriminate on quality by charging higher prices for the latest functionality. In the software good market, on the other hand, we often do not observe price discrimination on the latest versions, despite new versions being introduced over time. I propose that the software firm's ability to price discriminate on latest functionality is restricted by two factors: (1) the extent to which consumers value the innovation from one version to the next and (2) the extent to which legacy software products are costly for the firm to maintain. To analyze this question, I use a unique dataset on individual consumer subscriptions to a Fortune 500 firm's software products. The firm releases new product versions each year, but allows consumers to adopt the latest functionality for free. Despite this policy, descriptive analysis reveals that consumers frequently choose not to upgrade, electing to renew legacy versions of the product instead. To distinguish between the different factors driving this pattern, I develop a dynamic model of consumer choice of different product versions, renewal opportunities and upgrades. This model allows me to separately account for version usage utility, non-monetary costs of purchasing and upgrading and the heterogeneity therein. The estimates of the model reveal that although the majority of the consumers value the new versions, the high value, price insensitive consumers do not, causing it to be unprofitable for the firm to price latest functionality at a premium. Using the estimates and the structure of the model, I further describe a counterfactual that allows me to quantify how much a firm must innovate in order to be able to price new functionality at a premium when legacy versions are costly. The final counterfactual allows me to calculate the minimum legacy version cost that would cause the firm to shift from releasing distinct intertemporal versions to maintaining one continuously upgraded version of the product.
Introduction to marketing for students in the full-time MBA program.
