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Selected recent publications in the top management and economics journals

Dynamic Pricing with Point Redemption

( Chung, Hakjin | Ahn, Hyun-Soo | Chun, So Yeon )

M&SOM-MANUFACTURING & SERVICE OPERATIONS MANAGEMENT2022-07

Abstract

Many sellers allow consumers to pay with reward points instead of cash or credit card. While the revenue implications of cash purchases are transparent, the implication of reward sales is not trivial, when a firm that issues points is not a seller. In this case, a seller receives a compensation from the point issuer when a consumer purchases the good with points. We examine how reward sales influence a seller's pricing and inventory decisions. We consider a consumer who can choose to pay with cash or points based on reservation price, point balance, and the perceived value of a point. Then, we incorporate this into a pricing model where a seller earns revenues from both cash and reward sales. In contrast to an intuition that reward sales will increase sales and revenue, we show that the effect of reward sales on the seller's price is non-trivial as the seller could either add a premium or discount depending on the inventory level, time, and the reimbursement rate. Furthermore, such price adjustments can attenuate the optimal mark-up or mark-down level, and reduce the price fluctuation caused by inventory level and remaining time. We investigate settings where the seller has different operational controls over reward sales and find that allowing reward sales is still better even when the revenue from the reward sales is smaller than the cash sales. We also find that a seller with an ability to control availability (i.e., allow a reward sale or not) can achieve a revenue similar to the revenue of a seller with an ability to change point requirements and price.

Home-Tutoring Services Assisted with Technology: Investigating the Role of Artificial Intelligence Using a Randomized Field Experiment

( Kim, Jun Hyung | Kim, Minki | Kwak, Do Won | Lee, Sol )

JOURNAL OF MARKETING RESEARCH2022-02

Abstract

Despite a rising interest in artificial intelligence (AI) technology, research in services marketing has not evaluated its role in helping firms learn about customers' needs and increasing the adaptability of service employees. Therefore, the authors develop a conceptual framework and investigate whether and to what extent providing AI assistance to service employees improves service outcomes. The randomized controlled trial in the context of tutoring services shows that helping service employees (tutors) adapt to students' learning needs by providing AI-generated diagnoses significantly improves service outcomes measured by academic performance. However, the authors find that some tutors may not utilize AI assistance (i.e., AI aversion), and factors associated with unforeseen barriers to usage (i.e., technology overload) can moderate its impact on outcomes. Interestingly, tutors who significantly contribute to the firm's revenue relied heavily on AI assistance but unexpectedly benefited little from AI in improving service outcomes. Given the wide applicability of AI assistance in a variety of services marketing contexts, the authors suggest that firms should consider the potential difficulties employees face in using the technology rather than encourage them to use it as it is.

Dynamic resource redeployment in global semiconductor firms

( Chang, Sea-Jin | Matsumoto, Yoichi )

STRATEGIC MANAGEMENT JOURNAL2022-02

Abstract

This study explores how firms decide in which businesses to further invest and from which businesses to withdraw resources by examining the detailed product portfolios of firms in the global semiconductor industry. Results show that resource redeployment within incumbent businesses is more prevalent than via new entry or complete exit, since the former is more flexible and easily reversible than the latter. This study further finds that, while underutilized resources may drive resource redeployment, resource shortage by a newly entered or expanding incumbent business may also siphon resources away from other incumbent businesses, leading to their exit or temporary retrenchment. Fabless firms with resource that are more fungible, scalable, and decomposable vis-a-vis integrated device manufacturers show a more flexible and gradual pattern of resource redeployment. Managerial summary In fast-moving environments, firms should quickly redeploy resources to more promising business areas. We find fabless firms with more fungible, scale free, and decomposable resources engage in more active resource redeployment than integrated device manufacturers with specialized fabs and equipment, like Intel or Samsung. Redeployment among the latter requires a well-planned, synchronized approach so as to avoid idle resources. As such, in order to take advantage of dynamic resource redeployment, managers should begin by assessing the characteristics of firm resources along these dimensions. Managers may also consider business model transformation to separate their activities by specializing in areas in which they can best utilize their resources and capabilities, like fabless firms and foundries in the semiconductor industry.

Frontiers: Virus Shook the Streaming Star: Estimating the COVID-19 Impact on Music Consumption

( Sim, Jaeung | Cho, Daegon | Hwang, Youngdeok | Telang, Rahul )

MARKETING SCIENCE2022-01

Abstract

Many have speculated that the recent outbreak of COVID-19 has led to a surge in the use of online streaming services. However, this assumption has not been closely examined for music streaming services, the consumption patterns of which can be different from video streaming services. To provide insights into this question, we analyze Spotify’s streaming data for weekly top 200 songs for two years in 60 countries between June 2018 and May 2020, along with varying lockdown policies and detailed daily mobility information from Google. Empirical evidence shows that the COVID-19 outbreak significantly reduced music streaming consumption in many countries. We also find that countries with larger mobility decreases saw more notable downturns in streaming during the pandemic. Further, we reveal that the mobility effect was attributable to the complementarity of music consumption to other activities and likely to be transient rather than irreversible. Alternative mechanisms, such as unobservable Spotify-specific factors, a demand shift from top-selling songs to niche music, and supply-side effects, did not explain the decline in music consumption.

Reviewing Before Reading? An Empirical Investigation of Book-Consumption Patterns and Their Effects on Reviews and Sales

( Lee, Heeseung Andrew | Choi, Angela Aerry | Sun, Tianshu | Oh, Wonseok )

INFORMATION SYSTEMS RESEARCH2021-12

Abstract

Over the past decades, research on online book reviews has inundated academic circles with numerous theoretical reflections and empirical manifestations aimed at explaining the effects of such resources on business performance. Yet, these studies succumbed to the conventional pitfall of assuming that consumers write reviews only after they fully read the book that they purchased. A recent industry report revealed that although many individuals initiate book reading, only a few finish them. With these considerations in mind, we investigated how consumers' book-consumption patterns affect their review behaviors and how reviews generated from incomplete consumption influence subsequent sales. We used expectation confirmation theory (ECT) as a theoretical foundation to elaborate on the review behaviors of consumers at various stages of their e-book consumption. On the basis of ECT, we argue that customers can submit reviews not necessarily after full consumption, but at any point during this trajectory, and even when consumption has yet to take place. Consumption patterns were traced and captured from records of reading activities on e-book devices and apps. Our results indicate that a considerable number of consumers provide positive reviews even before initiating reading or after progressing up to an extremely early section of a book. In addition, the relationship between review valence and completion rate can be characterized as a U-shaped pattern, given that reviews arising from negative disconfirmations occur more frequently than those emerging out of positive disconfirmations. The findings also uncover that customers occupying the extreme ends of the completion continuum provide less extreme review ratings. The effect of completion rate on review length is significantly positive. Our text-analysis results suggest that reviews based on sufficient consumption contain more useful insights than do those grounded in incomplete consumption. Moreover, review comments formed after incomplete consumption adversely affect subsequent sales. Finally, we discuss a number of our findings' implications and provide actionable recommendations that can aid platforms in their efforts to refine their online-review systems and policies in pursuit of enhanced credibility in peer evaluation.

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

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