/pdf/the-theory-of-industrial-organization-19bejph0ej.pdf

The Theory of Industrial Organization

The Long Tail: How Technology is turning mass markets into millions of niches. (p. 15). This passage from The Long Tail, pretty much sums it all up. The Long Tail by Chris Anderson is a good and worthwhile read for information scientists, computer scientists, ecommerce researchers, and others interested in all areas of Web research. The central premise of the book is that the combination of (1) the Pareto or Zipf distribution (i.e., power law probability distribution) that is characteristic of Web traffic and (2) the direct access to consumers via Web technology has opened up new business opportunities in the ''long tail''. Producers and advertisers no longer have to target ''the big hits'' at the head of the distribution. Instead, they can target the small, niche communities or even individuals in the tail of the distribution. The long tail is has been studied by Web researchers and has been noted in term usage on search engines, access times to servers, and popularity of Web sites. Andersen points out that the long tail also applies to products sold on the Web. He recounts that a sizeable percentage of Amazon sales come from books that only sell a few copies, a large number of songs from Rhapsody get downloaded only once in a month, and a significant number of movies from Netflix only get ordered occasionally. However, since the storage is in digital form for the songs and music (and Amazon out sources the storage of books) there is little additional inventory cost of these items. This phenomenon across all Web companies has led to a broadening of participation by both producers and consumers that would not have happened without the Web. The idea of the long tail is well known, of course. What Anderson has done is present it in an interesting manner and in a Web ecommerce setting. He applies it to Web businesses and then relates the multitude of other factors ongoing that permit the actual implementation of the long tail effect. Anderson also expands on prior work on the long tail by introducing an element of time, given the distribution a three dimensional effect. All in all, it is a nifty idea. The book is comprised of 14 chapters, plus an Introduction. Chapter 1 presents an overview of what the long tail is. Chapter 2 discusses the ''head'', which is the top of the tail where the …

The Long Tail: Why the Future of Business is Selling Less of More

Digital marketing: A framework, review and research agenda

Research in closed-loop supply chains (CLSCs) has grown rapidly over the last 10 years. The authors offer a critical review of influential CLSC research that takes a business economics perspective. Much of the research was inspired by practice-driven thoughtpieces, and this helped to keep research focused on relevant issues. However, CLSC research has several assumptions, such as perfect substitution between new and remanufactured products that risk becoming institutionalized. There is a strong need to carefully examine current industrial practice so that research remains focused on relevant problems. Deeper understanding of consumer perceptions of remanufactured products, product diffusion, and valuation of returned products are needed for the field to continue to add insights into developing sustainable economies.

Production and Operations Management

In an experiment on Airbnb, we find that applications from guests with distinctively African-American names are 16% less likely to be accepted relative to identical guests with distinctively White names. Discrimination occurs among landlords of all sizes, including small landlords sharing the property and larger landlords with multiple properties. It is most pronounced among hosts who have never had an African-American guest, suggesting only a subset of hosts discriminate. While rental markets have achieved significant reductions in discrimination in recent decades, our results suggest that Airbnb’s current design choices facilitate discrimination and raise the possibility of erasing some of these civil rights gains.

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Racial Discrimination in the Sharing Economy: Evidence from a Field Experiment

The last decade has seen the emergence of the sharing economy as well as the rise of a diverse array of research on this topic both inside and outside the marketing discipline. However, the sharing...

Marketing in the Sharing Economy

While millions of products are sold on its retail platform, Amazon.com itself stocks and sells only a very small fraction of them. Most of these products are sold by third-party sellers who pay Amazon a fee for each unit sold. Empirical evidence clearly suggests that Amazon tends to sell high-demand products and leave long-tail products for independent sellers to offer. We investigate how a platform owner such as Amazon, facing ex ante demand uncertainty, may strategically learn from these sellers' early sales which of the “mid-tail” products are worthwhile for its direct selling and which are best left for others to sell. The platform owner's “cherry-picking” of the successful products, however, gives an independent seller the incentive to mask any high demand by lowering his sales with a reduced service level unobserved by the platform owner.

We analyze this strategic interaction between a platform owner and an independent seller using a game-theoretic model with two types of sellers---one with high demand and one with low demand. We show that it may not always be optimal for the platform owner to identify the seller's demand. Interestingly, the platform owner may be worse off by retaining its option to sell the independent seller's product, whereas both types of sellers may benefit from the platform owner's threat of entry. The platform owner's entry option may reduce consumer surplus in the early period, although it increases consumer surplus in the later period. We also investigate how consumer reviews influence the market outcome.

/pdf/firm-strategies-in-the-mid-tail-of-platform-based-retailing-2vuxjmi61v.pdf

Firm Strategies in the “Mid Tail” of Platform-Based Retailing

Recent technological advances in online and mobile communications have enabled collaborative consumption or product sharing among consumers on a massive scale. Collaborative consumption has emerged as a major trend as the global economic recession and social concerns about consumption sustainability lead consumers and society as a whole to explore more efficient use of resources and products. We develop an analytical framework to examine the strategic and economic impact of product sharing among consumers. A consumer who purchased a firm's product can derive different usage values across different usage periods. In a period with low self-use value, the consumer may generate some income by renting out her purchased product through a third-party sharing platform as long as the rental fee net of transaction costs exceeds her own self-use value. Our analysis shows that transaction costs in the sharing market have a nonmonotonic effect on the firm's profits, consumer surplus, and social welfare. We find that when the firm strategically chooses its retail price, consumers' sharing of products with high marginal costs is a win-win situation for the firm and the consumers, whereas their sharing of products with low marginal costs can be a lose-lose situation. Furthermore, in the presence of the sharing market, the firm will find it optimal to strategically increase its quality, leading to higher profits but lower consumer surplus.

This paper was accepted by J. Miguel Villas-Boas, marketing.

Collaborative Consumption: Strategic and Economic Implications of Product Sharing

This paper studies information sharing in a distribution channel where the manufacturer possesses better demand-forecast information than the downstream retailer. We examine three information-sharing formats: no information sharing (i.e., the manufacturer ex ante commits to not sharing its forecast), voluntary information sharing (i.e., the manufacturer makes the sharing decision ex post after receiving the forecast), and mandatory information sharing (i.e., the manufacturer is mandated to share its forecast). We characterize the equilibrium outcomes under the three sharing formats and investigate the firms’ preferences regarding these formats. It is shown that when the retailer is risk-neutral, both firms are indifferent between voluntary and mandatory sharing. Among the three formats, ex ante, the retailer prefers the no-sharing format whereas the manufacturer prefers the mandatory-sharing format. In addition, we find that a more accurate forecast benefits both firms under voluntary- and mandatory-shari...

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To Share or Not to Share: Demand Forecast Sharing in a Distribution Channel

In recent years, mobile communication technologies and online sharing platforms have made collaborative consumption among consumers a major trend in the economy. Consumers buy many products but end up not fully utilizing them. A product owner's self-use values can differ over time, and in a period of low self-use value, the owner may rent out her product in a product-sharing market. This study develops an analytical framework to study how consumer-to-consumer product sharing affects the distribution channel, where the manufacturer has to build its production capacity beforehand and the retailer sells the product to forward-looking consumers. Our analysis reveals that there exists a threshold for the capacity cost coefficient, above which product sharing will increase the manufacturer's optimal capacity and below which it will reduce the manufacturer's optimal capacity. We find that the sharing market tends to increase the retailer's share of the gross profit margin in the channel. Furthermore, the existence of the sharing market tends to benefit the firms when capacity is relatively costly to build, but it is more likely to increase the retailer's profit than the manufacturer's profit, that is, product sharing can sometimes benefit the downstream retailer at the expense of the upstream manufacturer.

Baojun Jiang

Papers

Marketing in the Sharing Economy

Firm Strategies in the “Mid Tail” of Platform-Based Retailing

Collaborative Consumption: Strategic and Economic Implications of Product Sharing

To Share or Not to Share: Demand Forecast Sharing in a Distribution Channel

Effects of Consumer-to-Consumer Product Sharing on Distribution Channel