Multi-Device Consumption of Digital Goods: Optimal Product Line Design with Bundling

2023 | Journal of Management Information Systems | Citations: 0

Authors: Bhargava, Hemant K.

Abstract: A contemporary business challenge for bundling theory is the distribution of dig ... Expand

Abstract: A contemporary business challenge for bundling theory is the distribution of digital content such as media, entertainment, software, and other information goods. Consumers can use a number of devices to interact with software, online services, music, video, news, and other forms of digital content. For instance, Netflix videos and Kindle ebooks, initially accessed only on television sets and computers, respectively, are now also consumed on smartphones and tablets. Print products are now distributed and consumed both in print and digitally. Firms offer product line designs that include prices for single device access as also bundle discounts for multi-device access, so that consumers can choose a device or even multiple devices. This paper provides guidelines regarding such multi-device product line design and pricing. A starting point is to note that there are many ways to practice bundling, from offering prices for single-device consumption as well as a bundle discount (mixed bundling), to forcing multi-device prices (pure bundling), and designs in between (partial bundling). Picking the best design, and associated prices, is a complex problem due to how single-device demand functions relate to multi-device demand. Recognizing that some dual-device purchases can occur even when there is no bundle discount, the paper develops intuition around the net gain or loss incurred from giving a bundle discount to entice single-device access buyers to dual sales. One surprising finding is that inducing dual sales through bundle discounts can be profitable even when intent to consume multiple times is quite weak, because in this case dual sales would not occur organically. Less surprisingly, such inducement is also profitable when multi-consumption intent is strong, and least attractive when the intent is moderate. When one of the devices is an emerging one or has weak own demand in the short term, then it can be useful to offer a partial bundle, tying sales for the stronger device into a bundle comprising access to both devices. When device valuations are such that consumers generally agree on the rank-ordering of the devices (e.g., if a location-based app offers greater value on a smartphone than on a tablet), then it is best to employ some type of bundling, unless the intent for multi-device consumption is proportionally lower among low-value consumers than for high-value consumers. Collapse

Topics: video game information good price management business model vertical differentiation

Methods: mathematical model theoretical contribution

Platform Refund Insurance or Being Cast Out: Quantifying the Signaling Effect of Refund Options in the Online Service Marketplace

2023 | Information Systems Research | Citations: 0

Authors: Zheng, Jinyang; Wang, Youwei; Tan, Yong

Abstract: This study examines whether and how an online service marketplace can leverage r ... Expand

Abstract: This study examines whether and how an online service marketplace can leverage refund options endorsed by different parties (i.e., the platform or sellers) to address the “lemons” problem that is caused by the intangibility, variability, and unreturnable nature of the services sought. Through developing a signaling mechanism and a corresponding demand estimation model, we show that both platform refund insurance and a seller-guaranteed refund increase service demand, with platform refund insurance as the more effective option and hence having a more effective signaling mechanism. A reduced-form analysis suggests that sellers with a better reputation or less popularity might benefit less from refund options. An investigation on further use of the more effective refund option, a “having platform refund insurance or being cast out” policy (i.e., retaining platform refund-insured sellers but expelling uninsured ones), using counterfactual simulations and supply-side single interrupted time series designs, reveals the effectiveness of this policy in filtering out low-quality sellers, shown as an improved quality of sellers on the platform due to the change in sellers (i.e., new sellers’ replacing those who were expelled) both immediately after the policy and in the (near) equilibrium, yet a cost (i.e., a loss in demand and consumer welfare) for the platform in the (near) equilibrium due to the changes in characteristics (e.g., price) of sellers. This cost, however, is lower than the benefit from the improved quality of the sellers, so that the platform’s overall performance improves. The study also quantifies the consumer welfare of the online service marketplace and provides practical insight for consumers, sellers, and online service marketplace operators. History: Juan Feng, Senior Editor; Beibei Li, Associate Editor. Funding: This work was supported by the National Natural Science Foundation of China [Grants 71972047, 71831005, and 91746302]. Supplemental Material: The online supplement is available at https://doi.org/10.1287/isre.2022.1162. Collapse

Topics: consumer surplus IS economics electronic market service quality smart watch

Methods: simulation longitudinal research robustness check descriptive statistic time series analysis

Theories: lemon market theory signaling theory

Competitive Poaching in Search Advertising: Two Randomized Field Experiments

2022 | Information Systems Research | Citations: 0

Authors: Bhattacharya, Siddharth; Gong, Jing; Wattal, Sunil

Abstract: Keyword searches with brand names occur very commonly on search engines, enablin ... Expand

Abstract: Keyword searches with brand names occur very commonly on search engines, enabling firms to infer not only when consumers are searching for them but also when consumers are searching for their competitors. This enables firms to generate traffic from search advertising by bidding not only on their own keywords but also on competitors’ keywords. The strategy of bidding on competitors’ keywords, known as competitive poaching, presents unique opportunities for academic research. In this research, we examine the factors that influence the effectiveness of competitive poaching, specifically the role of different ad copies and the type of competitor (poached brand) from which a brand is poaching. We also examine how the presence of sponsored ads from the poached brand affects competitive poaching. We collected data from two randomized field experiments, one with a business school in the Northeastern United States and the other one with a leading automobile dealership company, where these firms bid on keywords of competing brands and randomly display different types of ad copies in the sponsored search listings. We find that, when poaching on keywords of high-quality brands, ad copies that feature vertical differentiation are more effective than the control ad copies, which do not convey any differentiation or prescriptive messages. We also find that when poaching from low-quality brands, ad copies featuring horizontal differentiation perform better than the control ad copies. Finally, we show that the presence of the poached brand’s own ad has a positive association with the ad effectiveness of the poaching brand when that poached brand is high quality and a negative association when the poached brand is low quality. The academic and managerial contributions are also discussed. Collapse

Topics: search engine search engine marketing vertical differentiation horizontal differentiation Google+

Methods: field experiment chi squared test experiment randomized field experiment Poisson regression

Disintermediation and Its Mitigation in Online Two-sided Platforms: Evidence from Airbnb

2022 | International Conference on Information Systems | Citations: 0

Authors: Lin, Jinan; Nian, Tingting; Foutz, Natasha

Abstract: Disintermediation, where providers and customers transact bypassing an intermed ... Expand

Abstract: Disintermediation, where providers and customers transact bypassing an intermediary, has challenged the business model and dwindled profits of the multi-billion-dollar platform economy. Despite the platforms' efforts to mitigate disintermediation, little is known regarding the extent of disintermediation or efficacy of the mitigation policies, largely due to unobservability of disintermediation. We tackle these challenges by designing a geo-analytic methodology to identify and quantify disintermediation by matching online Airbnb booking and offline granular mobile location data. We further leverage DID with matching samples to causally examine the efficacy of four Airbnb policies; and finally propose a cost-and-benefit conceptual framework to interpret the findings and guide platform designs of mitigation policies. We find, for instance, a 5.4% of disintermediation in Austin, TX over Summer 2019; and Instant Bookable reduces disintermediation by 9%, with a stronger effect among the hosts without preference for long-term lease, with more repeated guests, and more hosting experience. Collapse

Topics: Airbnb geographic information system big data sharing platform Vrbo

Methods: experimental group geographic analytics propensity score matching robustness check topic model

Theories: transaction cost economics

Online information privacy and price: A theoretical model and empirical tests

2022 | Information & Management | Citations: 3

Authors: Wu, Zhiyan; Luo, Jifeng

Abstract: Information privacy has become an increasingly critical concern for many individ ... Expand

Abstract: Information privacy has become an increasingly critical concern for many individuals, especially in the context of the increased collection, analysis, and visualization of personal information. Despite the importance of privacy in online transactions, most studies investigated the effects of privacy concerns on stated intentions. This study theoretically analyzes and empirically evaluates the link between privacy and price. In the proposed model, consumers are differentiated not only by their preferences for privacy but also by search costs. For simplicity, stores in the proposed model differ in terms of the price charged and the privacy protection level offered. As derived from the theoretical model and empirical validation, better privacy protection does not necessarily lead to the highest price, though it does allow stores to charge a premium price. Moreover, the price premium is higher if more consumers remain uninformed, indicating that uninformed consumers exert negative impacts on informed consumers. Collapse

Topics: privacy electronic commerce logistics management vertical differentiation website

Methods: experiment survey regression analysis method discrete choice experiment hierarchical linear modeling

Theories: lemon market theory

Examining the Effect of Self-selection Bias on Consumer Satisfaction: A Product Type Perspective

2022 | International Conference on Information Systems | Citations: 0

Authors: Xie, Yancong

Abstract: Prior studies have evidenced that consumers can self-select themselves in submi ... Expand

Abstract: Prior studies have evidenced that consumers can self-select themselves in submitting online reviews, thus introducing biases in the distribution of online review ratings. This kind of bias is termed self-selection bias. This research aims to explore the specific influences of self-selection bias on consumer satisfaction from a product type perspective. The adopted product classification system combines search and experience differentiation, as well as vertical and horizontal differentiation. An agent-based modeling approach is employed to systematically examine the combined effects of different types of self-selection bias and products. Based on experiment analysis, a novel theory is developed arguing that self-selection bias can have nuanced influences on consumer satisfaction with different kinds of products, by affecting the usefulness of online reviews in suggesting product quality information. Collapse

Topics: online review user-generated content product differentiation vertical differentiation word of mouth

Methods: agent based simulation experiment simulation pilot experiment theory development

Theories: expectation confirmation theory

DO YOU HAVE A ROOM FOR US IN YOUR IT? AN ECONOMIC ANALYSIS OF SHARED IT SERVICES AND IMPLICATIONS FOR IT INDUSTRIES

2021 | Management Information Systems Quarterly | Citations: 0

Authors: Chen, Min; Pang, Min-Seok; Kumar, Subodha

Abstract: We are witnessing an interesting and unique phenomenon in enterprise informatio ... Expand

Abstract: We are witnessing an interesting and unique phenomenon in enterprise information technology (IT) adoption and management in public-sector organizations: shared IT services. Instead of implementing separate IT services, governments come together to pool their IT resources into one single IT service. In this study, we develop a game-theoretic model to analyze the governments' decision to share IT services and understand how the introduction of shared services transforms the strategic interactions between the governments and the vendor. We study three common regimes used in the adoption of shared IT services: (1) a cost-sharing regime where costs are split proportionally, (2) a profit-center regime where one government charges a surplusmaximization price to the other, and (3) a coordination regime where governments coordinate their decisions to maximize aggregate surplus. Our analyses generate several intriguing findings. First, although charging a surplus-maximizing price seems to be a lucrative option, we find that a government does not always benefit by acting as a profit center. Second, the cost-sharing regime does not always incentivize the shared service adoption despite being often viewed as a fairer and more convenient arrangement. Third, we find that there can be significant under-utilization of shared services in the absence of proper coordination, in a sense that the governments may choose not to share their IT services even if doing so would increase their aggregate surplus. Finally, even though coordination promotes the adoption of shared IT services, it can sometimes be inefficient from the social welfare's perspective because the increase in governments' surplus can be outweighed by the decrease in the vendor's profit. We also present a range of extensions to our model to show that our main takeaways carry over when some model assumptions are relaxed. 1 "If we don't move to shared services, we have 190 agencies that are all trying to develop their own defenses against advanced protection and collection efforts….I don't think that is a wise approach. If we don't move to secure services and shared services, we will be behind the eight-ball for a very long time." Collapse

Topics: outsourcing economic surplus IS economics economies of scale insourcing

Methods: optimization model mathematical model economic model literature study

Theories: information systems theory game theory

Measuring Product Type and Purchase Uncertainty with Online Product Ratings: A Theoretical Model and Empirical Application

2021 | Information Systems Research | Citations: 7

Authors: Chen, Peiyu; Hitt, Lorin M.; Hong, Yili; Wu, Shinyi

Abstract: Building on the distinction between search and experience goods, as well as vert ... Expand

Abstract: Building on the distinction between search and experience goods, as well as vertical and horizontal differentiation, we propose a set of theory-grounded, data-driven measures that allow us to measure not only product type (search vs. experience, horizontal vs. vertical differentiation) but also sources of uncertainty and to what extent consumer reviews help resolve uncertainty. The proposed measures have two advantages over prior methods: (1) unlike prior categorization schemes that classified goods as either search or experience goods, our measure is continuous, allowing us to rank-order the degree of search versus experience and horizontal versus vertical differentiation among products or categories. (2) Our approach is easier to implement than prior methods, because it relies solely on consumer ratings information (as opposed to expert judgment) and can be employed at multiple levels (attributes, products, or product categories). We illustrate empirical applications of our proposed measures using product rating data from Amazon.com. Our data-driven measures reveal the relative importance of fit in driving product utility and the importance of search for determining fit for each product category at Amazon. Our results also show that, while ratings based on verified purchasers are informative of objective product values, the current Amazon review system appears to have limited ability to resolve fit uncertainty. Our method and findings could facilitate further research on product review systems and enable quantitative measurement of product positioning to support marketing strategy for retailers and manufacturers, covering an expanded group of products. Collapse

Topics: experience good horizontal differentiation product differentiation online review marketing management

Methods: longitudinal research Amazon review descriptive statistic product review time series analysis

Recommendations and Cross-selling: Pricing Strategies when Personalizing Firms Cross-sell

2021 | Journal of Management Information Systems | Citations: 0

Authors: Ghoshal, Abhijeet; Mookerjee, Vijay S.; Sarkar, Sumit

Abstract: Recommender systems enable firms to target customers with products and services ... Expand

Abstract: Recommender systems enable firms to target customers with products and services that better match their needs, as well as cross-sell products and services. Considering these factors in markets with monopoly and duopoly, we investigate (i) How do pricing strategies differ when firms cross-sell versus when they do not cross-sell, and (ii) How do these pricing strategies change when a firm improves its recommender system? We find that cross-selling can enable a monopolist to subsidize its price for the focal products, while maximizing its profit. In a duopoly, the price set by the firm with the inferior system (low-type firm) is always lower when the firms cross-sell than when the firms do not cross-sell; however, that does not necessarily hold for the high-type firm. When the high-type firm improves its recommender system, the low-type firm may decrease its price when firms cross-sell, which does not happen when firms do not cross-sell. Collapse

Topics: recommender system duopoly price management IS effectiveness usability

Methods: experiment literature study

Altruism or Shrewd Business? Implications of Technology Openness on Innovations and Competition

2020 | Management Information Systems Quarterly | Citations: 0

Authors: He Huang; Parker, Geoffrey; Yinliang (Ricky) Tan; Hongyan Xu

Abstract: In today’s highly competitive business environment, a growing number of high-tec ... Expand

Abstract: In today’s highly competitive business environment, a growing number of high-tech firms are opening their technologies. We explore the rationale behind this unusual sharing behavior in order to understand whether it is altruism or a shrewd business move. We construct an analytical model where competing firms can choose technology openness, prototype release, or technology closedness as the technology openness strategy and make subsequent innovations on the adopted technology. In contrast to literature focusing on the demand side, our study reveals a novel explanation by shedding light on two effects of supply side. First, openness generates an information effect through which it reveals technology information to the competitor. Second, openness might also lead to an access effect in which the competitor might become a “copycat” by exerting a learning effort. Our analysis suggests that a firm’s openness decision depends upon the trade-off between both effects, and the interplay is moderated by the learning costs. We find that sharing technology can alleviate costly innovation competition under certain conditions. More importantly, our results reveal that openness does not necessarily translate to higher innovation and greater consumer surplus as conventional wisdom suggests. We also illustrate the robustness of the basic rationale and enrich our findings through several extended models. Collapse

Topics: innovation management consumer surplus IS economics IS value network effect

Methods: design artifact mathematical model literature study conceptual modelling design science