Speaker:

Dr. Kitty Wang
Assistant Professor
Bauer College of Business
University of Houston

Abstract:

We use data from a large U.S.-based specialty retail brand and a similar control brand before and after an involuntary revelation of the focal brand’s political position to study if and how corporate political advocacy (CPA) affects sales. We find that, on average, total sales of the focal brand do not change significantly after the event relative to the control brand. However, sales increase in places where the local political preference aligns with the focal brand’s position and decrease in places where the local political preference misaligns with the focal brand’s position. The change in sales after the event ranges from –26.8% (–20.4%) to 69.7% (57.6%) with a mean of 3.73% (5.51%) for sales dollar amount (quantity) across locations. We also find that the change in the customer base rather than basket size drives the effect of CPA. In addition, changes in online sales drive the change in total sales, and there is no qualitative difference between the shift of purchase of conspicuous and inconspicuous products after the event. These data patterns suggest that consumers’ reactions to CPA are motivated by their intrinsic need to support political ideologies, rather than the need to signal their political ideologies to others.

Speaker:

Dr. Peter Zubcsek

Assistant Professor of Economics

Coller School of Management

Tel Aviv University

ABSTRACT

Scan and Go (SAG) is a form of retail self-checkout. Shoppers using SAG scan items as they shop and pay at checkout without having to rescan the cart contents. Many retailers are adopting SAG systems to simultaneously increase customer satisfaction and lower store labor costs. However, criminology research has linked SAG to increased shopper theft, and has suggested to offset inventory losses in ways that each increase store staff, reducing the savings from SAG. We propose to extend the scope of tools retailers can use to reduce SAG shoplifting. Based on the equity theory and price fairness literatures, we posit that shoppers who purchase more discounted items will perceive the store as having treated them more fairly, and will therefore steal less. We confirm our prediction on data from a supermarket chain that uses SAG, finding that discounts may generate indirect savings (by reducing theft) corresponding to a significant proportion of retailers’ operating margins. Our findings carry important implications for grocery retailers, whose profitability has been increasingly under pressure from various emerging forms of competition.

Marketing Seminar

Speaker:

Miss Jisu CAO
Ph.D. Candidate in Economics
Department of Economics
University of Southern California

Abstract:

The objective of this paper is to study consumer purchase timing and product returns for daily deal e-commerce where products are often sold in a short window of time (usually one to three days). Leveraging a unique proprietary data set from a leading Chinese daily deal website, we find two interesting patterns: (1) consumers generally buy earlier rather than later in sales events; and (2) product return rates are higher for consumers who purchase earlier. These empirical patterns may suggest a potential problem to daily deal merchants: a sales promotion to encourage consumers to buy earlier may actually increase consumer return probabilities and possibly hurt profits. To understand such tradeoffs, we develop an integrative model of consumer purchase timing and product return decisions. In a post-purchase stage, consumer knowledge of the product fit gets realized, and the consumer can return the product with some cost. In a purchase (order) stage, the consumer makes the purchase decision based on her expected utility considering the return probability. A forward-looking consumer solves an optimal stopping problem for a finite-horizon time period game to decide when to purchase in a sales event. Delaying purchase allows the consumer to see newly posted offers and have more time to consider her purchase. We estimate our structural model using a panel data of the purchase and return histories of 5,000 consumers of women’s clothing from January to June 2017. We find that the proposed model fits the data well and that competition significantly increases a consumer’s probability of buying later. In the counterfactual analysis, we adjust the product price over days of a sales event and compare the merchants’ profits under different pricing schedules. Our counterfactual results reveal important managerial insights and can help daily deal merchants select a pricing schedule to improve profit.

Marketing Seminar

Speaker:

Mr. Wei MIAO
Ph.D. Candidate in Quantitative Marketing
NUS Business School
National University of Singapore

Abstract:

The ride-hailing industry is a critical pillar of modern transportation infrastructure and generates massive amounts of revenue each year. Due to spatial mismatch and search friction, the conventional taxi business model, which is based on street hailing, leads to substantial matching inefficiency. With the advent of geolocation-based mobile apps, ride-hailing firms can now effectively bridge demand and supply via digitalized matching technology and benefit from more flexibility in setting their pricing menus. In this paper, we analyze an exogenous event that the largest taxi operator in Singapore added an origin-destination-based flat fare option to its existing metered fare option. We empirically examine the effect of flat fare pricing vis-à-vis metered pricing on the outcome of this two-sided marketplace. Specifically, we model taxi drivers’ location choices as a dynamic spatial oligopoly game in which vacant drivers decide where to search for passengers, given the search behaviors of their competitors, in the presence of trip uncertainties. We leverage the large number of agents in the taxi industry and solve for the Oblivious Equilibrium (Weintraub, Benkard, and Van Roy 2008), in which each taxi driver’s policy function is based on their beliefs about the transition of average industry states. We then plug supply estimates into the demand system and recover demand parameters with a parametric aggregate-level matching function that accounts for matching inefficiency on street hail trips. We find that drivers are risk-averse on flat fare trips, especially during peak hours when trip uncertainty is higher, and riders’ risk aversion on metered trips also confers a risk premium on the flat fare pricing option. Finally, we run two counterfactual experiments to quantify the economic value of risk aversion for both riders and drivers, and evaluate the benefit of a booking system that enables flat fares. Our findings have important managerial implications for the rapidly expanding ride-hailing industry.

Marketing Seminar

Speaker:

Miss Zhenqi LIU
Ph.D. Candidate in Economics
Department of Economics
University of Pennsylvania

Abstract:

This paper studies the role of market structure in regulatory enforcement through a unique empirical example: censorship via content removal by three live-streaming platforms in China. Adopting an event study approach, this paper shows that platforms of different sizes censor a different number of keywords with notably different delays and their traffic declines after censorship. This paper then develops a model where the platform’s profit depends on its own censorship action as well as that of its competitors, induced by the switching behavior of users with heterogeneous preferences for censorship. By complying with the government’s censorship request, platforms may lose users who prefer to evade censorship by switching out. By not censoring, platforms incur a cost imposed by the government that is positively correlated with their sizes, but it also allows them to attract new users from their competitors that do censor. The model predicts that when the political pressure is sufficiently high and platforms are of similar size, they are less likely to censor as the number of competitors increases. If platforms are highly asymmetric in size, small platforms have strong incentives to differentiate themselves from their big competitors by not censoring, while big platforms find it costly not to censor. When the market becomes more concentrated, the behavior of big platforms dominates and as a result, users experience more censorship.

From Free to Paid: Testing Monetization Strategies for a Free Non-advertising-based Service

Speaker:

Mr. Jingcun CAO
Ph.D. Candidate in Marketing
Kelley School of Business
Indiana University

ABSTRACT

The mobile app market has expanded rapidly in the last decade. However, mobile app firms of non-advertising-based services face a significant challenge when trying to monetize their free services, due to low purchase conversion rates and high churn rates. In practice, these developers usually adopt one of two monetization strategies: (1) a soft-landing strategy, with limited free service provided to current users when it starts to charge, or (2) a hard-landing strategy in which all free services are terminated and only paid users retain access to the service. Which of these strategies may provide the best economic outcome for the developers is not clear. Developers are also uncertain about whether to add exclusive secondary offerings (unrelated to the core benefits) to the app for paid users. Existing theoretical and empirical literatures, however, do not offer guidance on the above choices. In this study, we employ a series of large-scale randomized field experiments to test the causal effects of providing limited free services to users and offering exclusive secondary offerings to those who pay when they convert to paid subscriptions. We also examine the interaction effects of these offers. Results suggest app users are more willing to pay in the hard-landing condition than in the soft-landing case regardless of whether free content or free time is offered. Additionally, exclusive secondary offerings hurt the conversion rate. Further, a positive interaction effect exists between providing limited free services and offering exclusive secondary offerings. Our research provides important theoretical implications to marketing researchers, and actionable managerial implications to mobile-app managers on monetization strategies and customer relationship management for non-advertising-based apps.

Speaker:

Miss Weichen YAN
Ph.D. Candidate in Economics
Graduate School of Arts and Science
New York University

ABSTRACT

Setting the release date and advertising for a blockbuster movie are the most important decisions a studio makes in movie distribution. I propose a model which combines studios’ release date (entry) and advertising choices under incomplete information. Studios optimize by setting release dates followed by advertising budget, and have payoffs structurally determined and dependent on demand. I adopt an estimation method which accounts for advertising and choice set endogeneities, the latter leading to a selection bias if not corrected. Model estimates, in particular the effect of advertising, are significantly different from the traditional estimates. I show that ignoring advertising and/or choice set endogeneity significantly underestimates the impact of advertising on box office. In light of the recent Disney- Fox merger, I simulate how this event will impact the movie industry.

Speaker:

Mr. Woohyun CHOI
Ph.D. Candidate in Marketing
Graduate School of Business
Columbia University

ABSTRACT

We investigate the impact on the online advertising ecosystem of tracking consumers’ activities on the Internet. We also study the impact of regulations that, motivated by privacy concerns, endow consumers with the choice to have their online activity be tracked or not (e.g., the General Data Protection Regulation passed by the European Union in 2018). The consumers’ strategic decisions to (dis)allow advertisers from tracking their activities depend on two aspects of privacy: its intrinsic value (protect privacy for its own sake) and its instrumental value (compromise privacy if doing so indirectly leads to some utility-enhancing outcome). This opt-in decision impacts the precision of inferences by advertisers about how far down a consumer is in the “purchase funnel” for a product by virtue of ads shown previously. The structure of the purchase funnel creates an interdependence between the effectiveness of the sequence of ads shown, which in turn affects advertising strategies. For instance, we find that the intensity of advertising by advertisers is nonmonotonic in the effectiveness of ads. Consequently, consumers may opt-in to be tracked when ad effectiveness is intermediate. While privacy regulations generally increase consumer surplus, the implications for the ad network are mixed. Interestingly, the ad network’s prodddt may (i) be higher under endogenous tracking than under full tracking, and (ii) decrease as ads become more effective. We discuss managerial implications for advertisers as well as policy implications for regulators.

Marketing Seminar

Speaker:

Dr. Yunchuan (Frank) Liu
Associate Professor of Business Administration
College of Business
University of Illinois at Urbana-Champaign
 

Abstract:

We consider a firm consisting of two divisions, one responsible for designing and manufacturing new products and the other responsible for remanufacturing operations. The firm may either directly sell to the consumers both new and remanufactured products (direct selling) or sell through an independent retailer (indirect selling). Our paper demonstrates that an internally decentralized firm with separate manufacturing and remanufacturing divisions can benefit from indirect selling with higher firm profit, supply chain profit, total consumer demand than direct selling. Moreover, this structure also induces a remanufacturable product design. In contrast, an internally centralized firm in which the manufacturing and remanufacturing divisions are consolidated is intuitively better off by choosing direct selling than indirect selling. Furthermore, we show that, when the focal firm sells through an independent retailer, a decentralized binternal structure can result in higher supply chain profit than a centralized internal structure. We further investigate the case of dual dedicated channels and conclude that, while direct selling of remanufactured products and indirect selling of new products can better induce a remanufacturable product design and higher supply chain profit, it is not in the best interest of the firm in terms of total sales and firm profit.
 

Marketing Seminar

Speaker:

Dr. Yunchuan Liu
Associate Professor of Business Administration
College of Business
University of Illinois at Urbana-Champaign

Abstract:

We consider a firm consisting of two divisions, one responsible for designing and manufacturing new products and the other responsible for remanufacturing operations. The firm may either directly sell to the consumers both new and remanufactured products (direct selling) or sell through an independent retailer (indirect selling). Our paper demonstrates that an internally decentralized firm with separate manufacturing and remanufacturing divisions can benefit from indirect selling with higher firm profit, supply chain profit, total consumer demand than direct selling. Moreover, this structure also induces a remanufacturable product design. In contrast, an internally centralized firm in which the manufacturing and remanufacturing divisions are consolidated is intuitively better off by choosing direct selling than indirect selling. Furthermore, we show that, when the focal firm sells through an independent retailer, a decentralized internal structure can result in higher supply chain profit than a centralized internal structure. We further investigate the case of dual dedicated channels and conclude that, while direct selling of remanufactured products and indirect selling of new products can better induce a remanufacturable product design and higher supply chain profit, it is not in the best interest of the firm in terms of total sales and firm profit.