Selected Publications
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.
Gradual bargaining in decentralized asset markets
( Rocheteau, Guillaume | Hu, Tai-Wei | Lebeau, Lucie | In, Younghwan )REVIEW OF ECONOMIC DYNAMICS2021-10
Abstract
We introduce a new approach to bargaining, with strategic and axiomatic foundations, into models of decentralized asset markets. According to this approach, which encompasses the Nash (1950) solution as a special case, bilateral negotiations follow an agenda that partitions assets into bundles to be sold sequentially. We construct two alternating-offer games consistent with this approach and characterize their subgame perfect equilibria. We show the revenue of the asset owner is maximized when assets are sold one infinitesimal unit at a time. In a general equilibrium model with endogenous asset holdings, gradual bargaining reduces asset misallocation and prevents market breakdowns. ⓒ 2020 Elsevier Inc.
Targeted Advertising and Consumer Inference
( Shin, Jiwoong | YU, Jungju )MARKETING SCIENCE2021-09
Abstract
The mere fact that consumers are targeted by advertisements can affect their inference about the expected utility of a product. We build a micro-model where multiple firms compete through targeted advertising. Consumers make inferences from targeted advertising about their potential match values for the product category, as well as the advertising firm's unobserved quality. We show that in equilibrium, upon being targeted by a firm, consumers make optimistic inferences about the product category and the firm's quality. With such improved beliefs, a targeted consumer is more likely to engage in a costly search throughout the category. We find that the increase in consumer search creates an advertising spillover beyond the level of the mere awareness effects of advertising and that firms' equilibrium level of targeted advertising can be non-monotonic in targeting accuracy. Additionally, we show that sometimes, it can be optimal for firms to relinquish customer data and instead engage in non-targeted advertising. The results provide insights into the trade-offs between advertising reach and targeting accuracy.
Simple Mechanisms for Sequential Capacity Allocations
( Kim, Bosung | Kim, Sang Won | Iravani, Seyed M. R. | Park, Kun Soo )PRODUCTION AND OPERATIONS MANAGEMENT2021-09
Abstract
We consider a sequential capacity allocation problem of a firm to its retail branches that sell the firm's product. The orders of the retail branches to the headquarters arrive sequentially, and each allocation decision has to be made before the next order arrives. The objective of the headquarters is to maximize the overall firm profit, that is, the total profit of all the retail branches. Each retail branch makes ordering decision independently by using private information about its local market condition in order to maximize its own profit. Hence, they may strategically inflate their order quantities in their favor, potentially hurting the firm profit. We first discuss the importance of capacity rationing in maximizing the firm's profit by finding the first-best allocation outcome, the optimal solution without information asymmetry. Based on this, we design mechanisms that effectively overcome the information asymmetry. First, we design a simple threshold-type mechanism where truthful reporting is optimal and capacity rationing is implemented by limiting allocation beyond a pre-specified threshold. We show this mechanism is optimal within the class of mechanisms that do not allow any side payments. We also design a mechanism with side payments that is optimal among all possible mechanisms. In particular, we show that this payment-based mechanism achieves the first-best allocation, fully overcoming information asymmetry. Although optimal, it may not be practical because of the complexity in the side payment menu, so we also propose a simple variant of it with only a few parameters. Our extensive numerical study shows that our simple threshold-type and payment-based mechanisms achieve near-optimal performance.
Drinking Through Good Times and Bad: The Role of Consumer Differences
( Joo, Hailey Hayeon | Kim, Minki | Lee, Jungmin | Chintagunta, Pradeep )JOURNAL OF MARKETING RESEARCH2021-08
Abstract
The authors revisit the question of alcohol consumption and public health over business cycles by decomposing overall alcohol consumption into drinking frequency and intensity in relation to consumer heterogeneity. To study this question, they use consumer-level panel data on the reported consumption (not purchases) of beer, which is the most heavily consumed alcoholic beverage and accounts for the majority of binge drinking in the United States. Leveraging the panel nature of the data, the authors find a negative (positive) relationship between unemployment and drinking frequency (intensity). Total consumption, which is the product of drinking frequency and intensity, is procyclical. To uncover differences in behavior across consumers and to provide policy recommendations at a segment level, the authors present a structural model where consumers simultaneously choose the frequency and intensity of their alcohol consumption. They find differences across consumers in their behaviors, notably with respect to income and age. They conduct policy simulations to compare the effectiveness of alcohol-related policies to counter the adverse effects of recessions on the health of vulnerable groups such as low-income and elderly populations.
