ORCID Profile
0000-0003-0393-010X
Current Organisation
Hong Kong University of Science and Technology
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Publisher: ACM
Date: 07-07-2023
Publisher: Elsevier BV
Date: 2015
DOI: 10.2139/SSRN.2609412
Publisher: Institute for Operations Research and the Management Sciences (INFORMS)
Date: 07-2017
Abstract: This paper examines firms’ product policies when they sell an add-on (e.g., Internet service) in addition to a base product (e.g., hotel rooms) under vertical differentiation (e.g., four- versus three-star hotels). I show that the role of an add-on differs higher-quality firms prefer to sell it as optional to discriminate consumers, and lower-quality firms trade off discrimination and differentiation, trying to lure consumers from higher-quality rivals with a lower-price add-on. Equilibrium policies of lower-quality firms are more sensitive to the cost-to-value ratio of an add-on. If the ratio is sufficiently small, then they sell it to all consumers, potentially explaining why lower-end hotels are more likely than higher-end ones to offer free Internet service. Contrary to consensus in the literature, optional add-ons can intensify price competition over consumers who trade off a higher-quality base product versus a lower-quality base including an add-on. Hence, higher-quality firms are incentivized to commit to bundling, while lower-quality firms prefer to commit to not selling it. Add-ons can further reduce lower-quality firms’ profits if consumers cannot observe the prices, because holding up consumers ex post encourages them to switch to higher-quality rivals, which then become better off. Therefore, lower-quality firms are incentivized to advertise add-on prices, and higher-quality firms are not. The online appendix is available at 0.1287/mksc.2017.1028 .
Publisher: SAGE Publications
Date: 10-2015
DOI: 10.1509/JMR.13.0415
Abstract: The authors identify customers, termed “Harbingers of failure,” who systematically purchase new products that flop. Their early adoption of a new product is a strong signal that a product will fail—the more they buy, the less likely the product will succeed. Firms can identify these customers through past purchases of either new products that failed or existing products that few other customers purchase. The authors discuss how these insights can be readily incorporated into the new product development process. The findings challenge the conventional wisdom that positive customer feedback is always a signal of future success.
Publisher: Institute for Operations Research and the Management Sciences (INFORMS)
Date: 2015
Abstract: There is substantial academic interest in modeling consumer experiential learning. However, (approximately) optimal solutions to forward-looking experiential learning problems are complex, limiting their behavioral plausibility and empirical feasibility. We propose that consumers use cognitively simple heuristic strategies. We explore one viable heuristic—index strategies—and demonstrate that they are intuitive, tractable, and plausible. Index strategies are much simpler for consumers to use but provide close-to-optimal utility. They also avoid exponential growth in computational complexity, enabling researchers to study learning models in more complex situations. Well-defined index strategies depend on a structural property called indexability. We prove the indexability of a canonical forward-looking experiential learning model in which consumers learn brand quality while facing random utility shocks. Following an index strategy, consumers develop an index for each brand separately and choose the brand with the highest index. Using synthetic data, we demonstrate that an index strategy achieves nearly optimal utility at substantially lower computational costs. Using IRI data for diapers, we find that an index strategy performs as well as an approximately optimal solution and better than myopic learning. We extend the analysis to incorporate risk aversion, other cognitively simple heuristics, heterogeneous foresight, and an alternative specification of brands.
Publisher: Institute for Operations Research and the Management Sciences (INFORMS)
Date: 08-2020
Abstract: Many products have similar or common attributes and are thus correlated. We show that, when these attributes are uncertain for consumers, a complementarity effect can arise among competing products in the sense that the lower price of one product may increase the demands for the others. This effect occurs when consumers sequentially search for information about both common and idiosyncratic product attributes before purchase. We characterize the optimal search strategy for the correlated search problem, provide the conditions for the existence of the complementarity effect, and show that the effect is robust under a wide range of alternative assumptions. We further explore the implications of the effect for pricing. When firms compete in price, although product correlation may weaken differentiation between the firms, the complementarity effect owing to correlated search may raise equilibrium price and profit. This paper was accepted by Matthew Shum, marketing.
Publisher: Institute for Operations Research and the Management Sciences (INFORMS)
Date: 03-2020
Abstract: A theory of two-sided markets where media platforms can price discriminate among both advertisers and consumers.
Location: United States of America
No related grants have been discovered for Song Lin.