Kristina Brecko
My research uses field experiments, structural model estimation, and other empirical methods to examine how consumer trade-offs shape firm product and pricing strategies and inform public policy. My recent projects examine the marketing and economics of harm reduction for conservation, brand differentiation in response to consumer demand for sustainability, and the role of retailer pricing strategy differentiation in shaping disparities in grocery access.
Curriculum VitaeIn this paper, we examine differentiation in grocery retail pricing strategies, focusing on their appeal to diverse consumer segments and their implications for the most constrained consumers. Our findings reveal that the grocery industry is highly fragmented, with distinct pricing strategies tailored to varying consumer needs and budget constraints, supported by concurrent investment strategies determining assortment and store location. We show that lower-income households predominantly shop at retailers offering lower and more stable prices, while higher-income households with greater budget flexibility gravitate toward retailers that provide quantity discounts and deeper intertemporal price promotions. These choices cannot be fully attributed to differences in assortment preferences or travel constraints; rather, they are shaped by binding budget constraints, as reflected in the savings consumers forgo when shopping at different retailers. Finally, we demonstrate that retailers' costly commitment to distinct pricing strategies creates healthful assortment trade-offs for the most budget constrained households and discuss implications for policy design.
This 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 extends the canonical harm reduction approach to a wider set of applications, including conservation. We develop an economic model to illustrate the trade-offs inherent to harm reduction, weighing the benefits of reducing harm against the risk of drawing those previously abstaining into consumption, and identify contexts where it is not applicable. Using sequential campaigns with embedded experimentation that enables measurement, we market a harm reduction solution in the context of water conservation. 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) or increases irrigation by conservation-prone individuals. Our conceptual and measurement framework provides a foundation for implementing and evaluating harm reduction well beyond the typical drug and public health contexts.
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.
