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Selected recent publications in the top management and economics journals

A Model of Product Portfolio Design: Guiding Consumer Search through Brand Positioning

( Ke, T. Tony | Shin, Jiwoong | YU, Jungju )

MARKETING SCIENCE2023-11

Abstract

We investigate a firm's optimal product portfolio design on a Hotelling line that can affect consumers' search decisions. Consumers form their perceptions of a brand from interactions with all products in the portfolio. We conceptualize the average location of the products as the brand position that represents the aggregate information about characteristics common to the product portfolio. Then, we propose a mechanism for why and how brand positioning induced by a firm's product portfolio design can deliver credible information that guides consumer search. We show that niche positioning naturally conveys more information than mainstream positioning. A mainstream brand has incentives to opportunistically dilute its brand by offering a wide range of products. Even in a monopolistic market, a niche brand positioning may arise as an equilibrium because it serves as a commitment device that prevents brand dilution.

THE COST OF FREE: THE EFFECTS OF “WAIT-FOR-FREE” PRICING SCHEMES ON THE MONETIZATION OF SERIALIZED DIGITAL CONTENT

( Choi, Angela Aerry | Rhee, Ki-Eun | Yoon, Chamna | Oh, Wonseok )

MIS QUARTERLY2023-09

Abstract

Leveraging a combination of analytical frameworks and empirical assessments, this study investigates the effects of wait-for-free (WFF) pricing schemes on the monetization of serialized, digital entertainment content, which has become increasingly pervasive on online platforms. WFF pricing is a strategy in which consumers are given the option to either wait a certain amount of time to acquire digital content at no cost or pay to consume it immediately. We evaluate the extent to which habit formation and present-biased preferences driven by the consumption of addictive stock affect individual consumers’ willingness to wait (or pay) for content, which, in turn, determines the efficacy of WFF pricing. We also examine the conditions under which consumers switch from waiting for free content to instantaneously purchasing content. Our findings indicate that WFF pricing increases the sales of serialized digital content, generating new demand from customers who would otherwise forgo participation in the market. In addition, the pricing design effectively generates sustained profits in the long run. We found that most consumers who initiate a purchase either upon initial market entry or upon switching continue to purchase as new episodes become available. Moreover, the results indicate that as a user accumulates free episodes of a specific series, given extended waiting periods, the likelihood of their conversion from a wait-for-free customer to an instant-purchase customer increases. In particular, WFF pricing effectively augments the willingness to pay of low-valuation consumers as habit formation builds up through time with the free consumption of serialized content. One free episode can elevate the likelihood of consumer purchase by up to 13%. However, as the number of free episodes consumed goes beyond a threshold, the likelihood of conversion decreases. We conclude with a discussion of managerial implications that can help content providers monetize their serialized digital content products.

Positive Demand Spillover of Popular App Adoption: Implications for Platform Owners' Management of Complements

( Lee, Mi Hyun | Han, Sang Pil | Park, Sungho | Oh, Wonseok )

INFORMATION SYSTEMS RESEARCH2023-09

Abstract

As platform owners interact with end users and complementors, their demand side characteristics and performance affect the overall value creation of ecosystems. This research investigated how the emergence of popular complements on a mobile communication platform impacts the usage of other complementary products by the platform's end users and how platform owners can benefit from such demand spillovers. We identified two different forms of demand spillovers (i.e., backward and forward) and conceptualized how each subsequently affects platform expansion. On the basis of individual user-level app usage data, we empirically demonstrated how the presence of a popular app alters the demand structure of a platform through changes in the usage of other apps operating within it. The findings reveal that popular app adoption by users increases the number of apps used and the duration of app usage, excluding the usage of popular apps, only within the platform offering a popular app. These results support the existence of positive spillovers from popular complement adoption on a platform. Such positive within-platform spillovers are derived from both backward spillovers onto existing apps adopted before popular app adoption and forward spillovers onto new apps to be adopted after the uptake of favored apps. These patterns suggest that positive spillovers of popular app adoption occur through both the increased retrieval of existing apps and reduced uncertainty about newly released apps. Furthermore, forward spillover is considerably stronger than backward spillover, implying that platform owners can reap benefits by coordinating the launch of new complements and the promotion of less-known counterparts to end users with the emergence of a popular app. These results shed light on how platform owners can manage their complements and create value beyond direct contributions from popular complements.

Large volatility matrix analysis using global and national factor models

( Choi, Sung Hoon | Kim, Donggyu )

JOURNAL OF ECONOMETRICS2023-08

Abstract

Several large volatility matrix inference procedures have been developed, based on the latent factor model. They often assumed that there are a few of common factors, which can account for volatility dynamics. However, several studies have demonstrated the presence of local factors. In particular, when analyzing the global stock market, we often observe that nation-specific factors explain their own country’s volatility dynamics. To account for this, we propose the Double Principal Orthogonal complEment Thresholding (Double-POET) method, based on multi-level factor models, and also establish its asymptotic properties. Furthermore, we demonstrate the drawback of using the regular principal orthogonal component thresholding (POET) when the local factor structure exists. We also describe the blessing of dimensionality using Double-POET for local covariance matrix estimation. Finally, we investigate the performance of the Double-POET estimator in an out-of-sample portfolio allocation study using international stocks from 20 financial markets.

Multidimensional Targeting and Consumer Response

( DESPOTAKIS, Stylianos | YU, Jungju )

MANAGEMENT SCIENCE2023-08

Abstract

Advancements in targeting technology have allowed firms to engage in more precise targeting based on several aspects of consumers' preferences. Exposed to more targeted ads, consumers are becoming increasingly aware of being targeted and respond accordingly. This paper provides a theoretical analysis of multidimensional targeting under which consumers can draw inferences about multiple components of their utility from the advertised product. We show that the firm can be worse off under multidimensional targeting than under single-dimensional targeting, in which the firm targets consumers based only on a single component of their utility. This is because, with multidimensional targeting, targeted consumers may face greater uncertainty about which specific dimension(s) they can expect to enjoy the advertised product. Therefore, they may be less willing to exert a costly effort of clicking the ad and purchasing the product. When this result holds, the firm may want to adopt a single-dimensional targeting strategy. However, we show that the firm cannot credibly commit to such a strategy once given access to multiple dimensions of customer data. Interestingly, a higher unit cost of advertising can mitigate the firm's commitment problem for utilizing customer data and, thus, increase the firm's profit. Moreover, the firm can sometimes lower the price to recover some of, but not entirely offset, the drawbacks of multidimensional targeting. We discuss the implications of our results regarding the current practice of targeted advertising and data privacy protection policies.

Contact : Joo, Sunhee ( shjoo2006@kaist.ac.kr )

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