10 results found
Chen H, Hu M, Wu J, 2023, Intertemporal price discrimination via randomized promotions, Manufacturing and Service Operations Management, Vol: 25, Pages: 1176-1194, ISSN: 1523-4614
Problem definition: The undesirable but inevitable consequence of running promotions is that consumers can be trained to time their purchases strategically. In this paper, we study randomized promotions, where the firm randomly offers discounts over time, as an alternative strategy of intertemporal price discrimination. Methodology/results: We consider a base model where a monopolist sells a single product to a market with a constant stream of two market segments. The segments are heterogeneous in both their productvaluations and patience levels. The firm pre-commits to a price distribution, and in each period, a price is randomly drawn from the chosen distribution. We characterize the optimal price distribution as a randomized promotion policy and show that it serves as an intertemporal price discrimination mechanism such that high-valuation customers would make a purchase immediately at a regular price upon arrival and low-valuation customers would wait for a random promotion. Compared against the optimal cyclic pricing policy, which is optimal within the strategy space of all deterministic pricing policies, the optimal andomized pricing policy beats the optimal cyclic pricing policy if low-valuation customers are sufficiently patient and the absolute discrepancy between high and low customer valuations is large enough. We extend the model in three directions. First, we consider the case where a portion of customers are myopic, who would never wait. We show that the existence of myopic customers is detrimental to the firm’s profitability, and theexpected profit from an optimal randomized pricing policy decreases as the proportion of myopic customers in the population increases. Second, we consider Markovian pricing policies where prices are allowed to beintertemporally correlated in a Markovian fashion. This additional maneuver allows the firm to reap an even higher profit when low-valuation customers are sufficiently patient, by avoiding consecutive promoti
Du L, Hu M, Wu J, 2022, Contingent stimulus in crowdfunding, Production and Operations Management, Vol: 31, Pages: 3543-3558, ISSN: 1059-1478
Reward-based crowdfunding is a form of innovative financing that allows project creators to raise funds frompotential backers to start their ventures. A crowdfunding project is successfully funded if and only if thepredetermined funding goal is achieved within a given time. We study the optimal timing of contingentlyplacing a “fulcrum” in the random pledging process, with the potential of tilting it towards success, whichwould be a win-win-win for the creator, backers, and platform. Specifically, we consider a model wherebackers arrive sequentially at a crowdfunding project. Upon arrival, a backer makes her pledging decisionby taking into account the expected success of the project. We characterize the dynamics of the project’spledging process. We show that there exists a cascade effect on backers’ pledging, which is mainly driven bythe all-or-nothing nature of crowdfunding projects. According to our data collected from the most popularonline crowdfunding platform, Kickstarter, the majority of projects fail to achieve their goals. To addressthis issue, we propose three contingent stimulus policies, namely, seeding, feature upgrade, and limited-timeoffer. As a result of the cascade effect on backers’ pledging, the optimal timing to apply stimulus policieshas a cutoff-time structure. Lastly, we show that the benefit of contingent policies is greatest in the middleof crowdfunding campaigns. Testing with the dataset of Kickstarter, we obtain empirical evidence that theprojects’ success rates improve by 14.6% on average with updates in the middle of the campaign and whenthe pledging progress is lagging.
Du L, Hu M, Wu J, 2021, Sales effort management under all-or-nothing constraint, Management Science, Vol: 68, Pages: 5109-5126, ISSN: 0025-1909
We consider a sales effort management problem under an all-or-nothing constraint. The seller will receive no bonus/revenue if the sales volume fails to reach a predetermined sales target at the end of the sales horizon. Throughout the sales horizon, the sales process can be moderated by the seller through her costly effort. We show that the optimal sales rate is non-monotone with respect to the remaining time or the outstanding sales volume required to reach the target. Generally, it has a water shed structure that for any needed sales volume, there exists a cut off point on the remaining time above which the optimal sales rate decreases in the remaining time and below which it increases in the remaining time. We then study easy-to-compute heuristics that can be implemented efficiently. We start with a static heuristic derived from the deterministic analog of the stochastic problem. With an all-or-nothing constraint, we show that the performance of the static heuristic hinges on how the profit-maximizing rate fares against the target rate, which is defined as the sales target divided by the length of the sales horizon. When the profit-maximizing rate is higher than the target rate, the static heuristic adopting the optimal deterministic rate is asymptotically optimal with negligible loss. On the other hand, when the profit-maximizing rate is lower than the target rate, the performance loss of any asymptotically optimal static heuristic is of an order greater than the square root of the scale parameter. To address the poor performance of the static heuristic for the latter case, we propose a modified resolving heuristic and show that it is asymptotically optimal, and achieves a logarithmic performance loss.
Valletti T, Wu J, 2020, Consumer profiling with data requirements: structure and policy implications, Production and Operations Management, Vol: 29, Pages: 309-329, ISSN: 1059-1478
We consider a model where a monopolist can profile consumers in order to price discriminate among them, and consumers can take costly actions to protect their identities and make the profiling technology less effective. A novel aspect of the model consists in the profiling technology: the signal that the monopolist gets about a consumer’s willingness‐to‐pay can be made more accurate either by having more consumers revealing their identities, or by spending larger amounts of money (e.g., on third‐party complementary data or data analytics capabilities). We show that both consumer surplus and social welfare are convex in the ability of consumers to conceal their identities. The interest of this result stems from the fact that consumers’ concealing cost can be interpreted as a policy tool: a stricter privacy law would make the concealing cost lower, and vice‐versa. Consequently, a policymaker who promotes total welfare should either make data protection very easy or very costly. The right direction of data regulations depends on data requirements. In particular, a higher (lower) data requirement is an instance when more (less) consumers are needed to achieve the same signal precision. We show that a strict data privacy law is preferable under a high data requirement so that firms are less likely to invest in profiling inefficiently, whereas there is less concern with little or no data regulations under a low data requirement. We also discuss when greater data protection may be beneficial to the firm.
Hu M, Shi M, Wu J, 2019, Online Group Buying and Crowdfunding: Two cases of All-or-Nothing Mechanisms, Sharing Economy - Making Supply Meet Demand, Editors: Hu, Publisher: Springer, ISBN: 9783030018634
Hu M, Milner J, Wu J, 2016, Liking and following and the newsvendor: Operations and marketing policies under social influence, Management Science, Vol: 62, Pages: 867-879, ISSN: 0025-1909
We consider a monopolistic firm selling two substitutable products to a stream of sequential arrivals whose purchase decisions can be influenced by earlier purchases. Before demand realizes, the firm faces a newsvendor problem for the two products with economies of scale in production for each. When consumers are responsive to others’ decisions, social influence amplifies demand uncertainty, leading to a lower profit for the firm. We propose three solutions for the firm to better cope with or even benefit from social influence: influencer recruitment and a reduced product assortment either before demand realization (ex ante) or under production postponement (ex post). First, the firm can offer promotional incentives to recruit consumers as influencers. We reveal an operational benefit of influencer marketing that a very small fraction of such influencers is sufficient to diminish sales’ unpredictability. Second, as the potential substitutability between products increases due to social influence, the firm may leverage the increased substitutability and enjoy lower cost in production by reducing product assortment before demand realization. Last, under production postponement, the firm can take advantage of the way that social influence results in demand herding and reduce product varieties by reacting to preorder information.
Wu J, Shi M, Hu M, 2015, Threshold effects in online group buying, Management Science, Vol: 61, Pages: 2025-2040, ISSN: 1526-5501
This paper studies two types of threshold-induced effects: a surge of new sign-ups around the time when the thresholds of group-buying deals are reached, and a stronger positive relation between the number of new sign-ups and the cumulative number of sign-ups before the thresholds are reached than afterward. This empirical study uses a data set that records the intertemporal cumulative number of sign-ups for group-buying deals in 86 city markets covered by Groupon, during a period of 71 days when Groupon predominantly used “a deal a day” format for each local market and posted the number of sign-ups in real time. We find that the first type of threshold effect is significant in all product categories and in all markets. The second type of threshold effect varies across product categories and markets. Our results underscore the importance of considering product and market characteristics in threshold design decisions for online group buying.
Hu M, Shi M, Wu J, 2013, Simultaneous vs. Sequential Group-Buying Mechanisms, MANAGEMENT SCIENCE, Vol: 59, Pages: 2805-2822, ISSN: 0025-1909
Wu J, Li B, 2009, Keep Cache Replacement Simple in Peer-Assisted VoD Systems, IEEE INFOCOM Conference 2009, Publisher: IEEE, Pages: 2591-2595, ISSN: 0743-166X
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