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Scott Fay

Bio: Scott Fay is an academic researcher from Syracuse University. The author has contributed to research in topics: Price discrimination & Probabilistic logic. The author has an hindex of 18, co-authored 40 publications receiving 2217 citations. Previous affiliations of Scott Fay include College of Business Administration & University of Michigan.

Papers
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Journal ArticleDOI
TL;DR: In this paper, the authors used the Panel Study of Income Dynamics (PSI) data to estimate a model of households' bankruptcy decisions and found support for the strategic model of bankruptcy, which predicts that households are more likely to file when their financial benefit from filing is higher.
Abstract: Personal bankruptcy filings have risen from 0.3 percent of households per year in 1984 to around 1.35 percent in 1998 and 1999, transforming bankruptcy from a rare occurrence to a routine event. Lenders lost about $39 billion in 1998 due to personal bankruptcy filings. But economists have little understanding of why households file for bankruptcy or why filings have increased so rapidly. Until very recently, studying the household bankruptcy decision was very difficult, because no household-level data set existed that included information on bankruptcy filings. In this paper, we use new data from the Panel Study of Income Dynamics, which includes information on bankruptcy filings, to estimate a model of households’ bankruptcy decisions. We find support for the strategic model of bankruptcy, which predicts that households are more likely to file when their financial benefit from filing is higher. Our model predicts that an increase of $1,000 in households’ financial benefit from bankruptcy would result in a 7-percent increase in the number of bankruptcy filings. Our model also predicts that if the 1997 National Bankruptcy Review Commission’s proposed changes in bankruptcy exemption levels were implemented, there would be a 16-percent increase in the number of bankruptcy filings each year. But if the $100,000 cap on homestead exemptions recently passed by the U.S. Senate were adopted, our model predicts that there would be only a negligible effect on the number of filings. We find little support for the nonstrategic model of bankruptcy which predicts that households file when adverse events occur which reduce their ability to repay. Finally, controlling for state and time fixed effects, our model shows that households are more likely to file for bankruptcy if they live in districts with higher aggregate filing rates.

475 citations

Journal ArticleDOI
TL;DR: This article examined the relationship between consumer posting behavior and marketing variables, such as product price and quality, and explored how these relationships evolve as the Internet and consumer review websites attract more universal acceptance.

373 citations

Journal ArticleDOI
TL;DR: This article examined the relationship between consumer posting behavior and marketing variables, such as product price and quality, and explored how these relationships evolve as the Internet and consumer review websites attract more universal acceptance.
Abstract: Social media provide an unparalleled platform for consumers to publicize their personal evaluations of purchased products and thus facilitate word-of-mouth communication. This paper examines relationships between consumer posting behavior and marketing variables - such as product price and quality - and explores how these relationships evolve as the Internet and consumer review websites attract more universal acceptance. Based on automobile-model data from several leading online consumer review sources that were collected in 2001 and 2008, this study demonstrates that the relationships between marketing variables and consumer online-posting behavior are different at the early and mature stages of Internet usage. For instance, in the early stage of consumer Internet usage, price is negatively correlated with the propensity to post a review. As consumer Internet usage becomes prevalent, however, the relationship between price and the number of online consumer reviews shifts to a U-shape. In contrast, in the early years, price has a U-shaped relationship with overall consumer rating, but this correlation between price and overall rating becomes less significant in the later period. Such differences at the two different stages of Internet usage can be driven by different groups of consumers with different motivations for online review posting.

297 citations

Journal ArticleDOI
TL;DR: In this article, the authors investigate the impact of shipping charges on order incidence and order size and show that consumers are very sensitive to shipping charges and that shipping fees influence order incidence, and that free shipping and free shipping for orders that exceed some size threshold are effective in generating additional sales.
Abstract: Shipping-fee schedules are an important but underresearched element of the marketing mix for direct marketers. This paper provides an empirical study on the impact of shipping and handling charges on consumer-purchasing behavior. Using a database from an online retailer that has experimented with a wide variety of shipping-fee schedules, we investigate the impact of shipping charges on order incidence and order size. We use an ordered probability model that is generalized to account for the effects of nonlinear and discontinuous shipping fees on purchasing decisions, and to accommodate heterogeneity in response parameters. Results show that consumers are very sensitive to shipping charges and that shipping fees influence order incidence and basket size. Promotions such as free shipping and free shipping for orders that exceed some size threshold are found to be very effective in generating additional sales. However, the lost revenues from shipping and the lack of response by several segments are substantial enough to render such promotions unprofitable to the retailer. Heterogeneity across consumers also suggests interesting opportunities for the retailer to customize the shipping and other marketing-mix promotion offerings.

169 citations

Journal ArticleDOI
TL;DR: It is shown that creating buyer uncertainty in product assignments is a new way for sellers to deal with their own market uncertainty and two such benefits are illustrated: offering probabilistic goods can reduce the seller's information disadvantage and lessen the negative effect of demand uncertainty on profit.
Abstract: This paper defines a unique type of products or services offering, termed "Probabilistic Goods," and analyzes a novel selling strategy, termed Probabilistic Selling (PS). A "probabilistic good" is not a concrete product or service but an offer involving a probability of getting any one of a set of multiple distinct items. Under the "probabilistic selling" strategy, a multi-item seller creates probabilistic goods using the existing distinct products or services and offers such probabilistic goods as additional purchase choices. The probabilistic selling strategy allows sellers to benefit from introducing a new type of buyer uncertainty, i.e., uncertainty in product assignments. First, introducing such uncertainty enables sellers to create a "virtual" product or service (i.e., probabilistic good), which opens up a creative way to segment a market. We find that the probabilistic selling strategy is a general marketing tool that has the potential to benefit sellers in many different industries. Second, this paper shows that creating buyer uncertainty in product assignments is a new way for sellers to deal with their own market uncertainty. We illustrate two such benefits: (a) offering probabilistic goods can reduce the seller's information disadvantage and lessen the negative effect of demand uncertainty on profit, and (b) offering probabilistic goods can solve the mismatch between capacity and demand and enhance efficiency. Emerging technology is creating exciting (previously unfeasible) opportunities to implement PS and to obtain these many advantages.

167 citations


Cited by
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01 Jan 1997
TL;DR: In this paper, the authors examine the implications of electronic shopping for consumers, retailers, and manufacturers, assuming that near-term technological developments will offer consumers unparalleled opportunities to locate and compare product offerings.
Abstract: The authors examine the implications of electronic shopping for consumers, retailers, and manufacturers. They assume that near-term technological developments will offer consumers unparalleled opportunities to locate and compare product offerings. They examine these advantages as a function of typical consumer goals and the types of products and services being sought and offer conclusions regarding consumer incentives and disincentives to purchase through interactive home shopping vis-à-vis traditional retail formats. The authors discuss implications for industry structure as they pertain to competition among retailers, competition among manufacturers, and retailer-manufacturer relationships.

2,077 citations

Posted Content
TL;DR: It is argued that online consumer review can serve as a new element in the marketing communications mix and work as free “sales assistants” to help consumers identify the products that best match their idiosyncratic usage conditions.
Abstract: Online consumer product review is an emerging market phenomenon that is playing an increasingly important role in consumers' purchase decisions. This paper examines a fundamental issue concerning online consumer review, i.e., the functions such reviews have for an online marketer. We argue that online consumer reviews, a type of product information created by users based on personal usage experience, can serve as a new element of marketing communications mix and work as free sales assistants to help consumers identify the products that best match their idiosyncratic usage conditions. For many products, this marketing function is impossible or very costly for traditional marketing communications to achieve. However, this new communication mode does not come without cost because it eliminates a seller's control over the content of product information accessible to consumers, and because consumer reviews may not be fully informative.We examine four specific strategic issues: (1) when an online seller should provide consumer reviews to its customers, (2) how a seller's decision to supply consumer reviews interacts with its product assortment strategy, (3) how the seller's strategy regarding the supply of consumer reviews interacts with its traditional marketing communication strategy, and (4) what timing is best for the seller to offer consumer review information for a product.Our results show that supplying online consumer reviews can benefit or hurt an online seller depending on product characteristics, the informativeness of the review, the seller's product assortment strategy, the seller's product value for the partially matched consumers, and consumer heterogeneity in product consumption expertise. We also show that the seller's decision to provide consumer reviews will increase its incentive to offer more complete product information to consumers through its traditional marketing communications. Finally, we discover that offering consumer review information too early leads to a lower profit.An empirical study based on data from online sellers in different product categories provides some preliminary support for our theory.

1,396 citations

Journal ArticleDOI
TL;DR: In this article, a realistically calibrated life cycle model of consumption and portfolio choice with non-tradable labor income and borrowing constraints is proposed, and the optimal share invested in equities is roughly decreasing over life.
Abstract: This article solves a realistically calibrated life cycle model of consumption and portfolio choice with non-tradable labor income and borrowing constraints. Since labor income substitutes for riskless asset holdings, the optimal share invested in equities is roughly decreasing over life. We compute a measure of the importance of human capital for investment behavior. We find that ignoring labor income generates large utility costs, while the cost of ignoring only its risk is an order of magnitude smaller, except when we allow for a disastrous labor income shock. Moreover, we study the implications of introducing endogenous borrowing constraints in this incomplete-markets setting. Copyright 2005, Oxford University Press.

1,324 citations

Journal ArticleDOI
TL;DR: In this article, a normative model for online consumer product reviews is developed to address several important strategic issues related to consumer reviews, such as when and how the seller should adjust its own marketing communication strategy in response to online consumer reviews.
Abstract: As a new type of word-of-mouth information, online consumer product review is an emerging market phenomenon that is playing an increasingly important role in consumers' purchase decisions. This paper argues that online consumer review, a type of product information created by users based on personal usage experience, can serve as a new element in the marketing communications mix and work as free “sales assistants” to help consumers identify the products that best match their idiosyncratic usage conditions. This paper develops a normative model to address several important strategic issues related to consumer reviews. First, we show when and how the seller should adjust its own marketing communication strategy in response to consumer reviews. Our results reveal that if the review information is sufficiently informative, the two types of product information, i.e., the seller-created product attribute information and buyer-created review information, will interact with each other. For example, when the product cost is low and/or there are sufficient expert (more sophisticated) product users, the two types of information are complements, and the seller's best response is to increase the amount of product attribute information conveyed via its marketing communications after the reviews become available. However, when the product cost is high and there are sufficient novice (less sophisticated) product users, the two types of information are substitutes, and the seller's best response is to reduce the amount of product attribute information it offers, even if it is cost-free to provide such information. We also derive precise conditions under which the seller can increase its profit by adopting a proactive strategy, i.e., adjusting its marketing strategies even before consumer reviews become available. Second, we identify product/market conditions under which the seller benefits from facilitating such buyer-created information (e.g., by allowing consumers to post user-based product reviews on the seller's website). Finally, we illustrate the importance of the timing of the introduction of consumer reviews available as a strategic variable and show that delaying the availability of consumer reviews for a given product can be beneficial if the number of expert (more sophisticated) product users is relatively large and cost of the product is low.

1,247 citations

Journal ArticleDOI
TL;DR: In this article, the role of macro factors in the retail environment and how they can shape customer experiences and behaviors are identified which should result in higher customer satisfaction, more frequent shopping visits, larger wallet shares, and higher profits.

861 citations