The supply and demand effects of review platforms

Review platforms such as Yelp and TripAdvisor aggregate crowd-sourced information about users' experiences with products and services. We analyze their impact on the hotel industry using a panel of hotel prices, sales and reviews from five US states over a 10-year period from 2005--2014. Both hotel demand and prices are positively correlated with their average ratings on TripAdvisor, Expedia and Hotels.com, and such correlations have grown over our sample period from a statistical zero in the base year to a substantial level today: a hotel rated one star higher on all the platforms on average has 25% higher demand, and charges 9% more. We argue that the price increases are due to a combination of revenue management and re-pricing: increased demand from higher ratings shifts hotels along an upward sloping supply curve, and also causes small but significant changes in the supply curve itself. A natural experiment in our data that caused abrupt changes in the ratings of some hotels but not others, suggests that these associations are causal. Building on this causal interpretation, we estimate heterogenous treatment effects, showing that the impact of review platforms on hotels varies by organization form and hotel class. Specifically, we show that independent hotels that had little outside reputation prior to the entry of review platforms stand to gain more than chains.Published versio

The impact of Digital Platforms on Business Models: an empirical investigation on innovative start-ups

Digital platforms have the ability to connect people, organizations and resources with the aim of facilitating the core interactions between businesses and consumers as well as assuring a greater efficiency for the business management. New business concepts, such as innovative start-ups, are therefore created based on innovation, scalability and the relationships within the community around them. The purpose of this work is to deeply understand the evolution of business models brought by innovative and dynamic companies operating through online platforms. In order to achieve the objectives set, an exploratory multiple-case study was designed based on in-depth structured interviews. The aim was to conduct a mixed analysis, in order to rely both on qualitative and quantitative data. The structured interview protocol was therefore designed to collect and then analyse data concerning the company profile and managers’ perspectives on the phenomenon of interest. The interview protocol was submitted in advance and then face-to-face interviews were carried out with the following professional figures: Chief Executive Officer (CEO), General Manager, Chief Technology Officer (CTO), Marketing Manager and Developers. Collected data were analysed and processed through the Canvas Business Model in order to clearly outline similarities and differences among the sample. Results can be considered under two viewpoints. On the one hand, this work provides a detailed overview of the companies interviewed, according to the dimensions of: reference market dynamics, type and number of customers, scalability. On the other one, they allow to identify some success patterns regarding key activities, key resources, channel mix strategy, costs management, value proposition, customer segmentation, key partners and the way to obtain revenues. Results from the multiple-case study with 15 Italian start-ups provide interesting insights by comparing the innovative business models developed and highlighting key differences and similarities. verall, the start-ups analyzed, operating in several sectors, showed great growth prospects and the possibility to create value for their customers through innovative products and services offered through digital platforms

Network industries in the new economy

In this paper we discuss two propositions: the supply and demand of knowledge, and network externalities. We outline the characteristics that distinguish knowledge- intensive industries from the general run of manufacturing and service businesses. Knowledge intensity and knowledge specialisation has developed as markets and globalisation have grown, leading to progressive incentives to outsource and for industries to deconstruct. The outcome has been more intensive competition. The paper looks at what is potentially the most powerful economic mechanism: positive feedback, alternatively known as demand-side increasing returns, network effects, or network externalities. We present alternative demand curves that incorporate positive feedback and discuss their potential economic and strategic consequences. We argue that knowledge supply and demand, and the dynamics of network externalities create new situations for our traditional industrial economy such that new types of economies of scale are emerging and "winner takes all" strategies are having more influence. This is the first of a pair of papers. A second paper will take the argument further and look at the nature of firms' strategies in the new world, arguing that technology standards, technical platforms, consumer networks, and supply chain strategies are making a significant contribution to relevant strategies within the new economy

The rise of the sharing economy: estimating the impact of Airbnb on the hotel industry

Peer-to-peer markets, collectively known as the sharing economy, have emerged as alternative suppliers of goods and services traditionally provided by long-established industries. We explore the economic impact of the sharing economy on incumbent firms by studying the case of Airbnb, a prominent platform for short-term accommodations. We analyze Airbnb's entry into the state of Texas, and quantify its impact on the Texas hotel industry over the subsequent decade. We estimate that in Austin, where Airbnb supply is highest, the causal impact on hotel revenue is in the 8-10% range; moreover, the impact is non-uniform, with lower-priced hotels and those hotels not catering to business travelers being the most affected. The impact manifests itself primarily through less aggressive hotel room pricing, an impact that benefits all consumers, not just participants in the sharing economy. The price response is especially pronounced during periods of peak demand, such as SXSW, and is due to a differentiating feature of peer-to-peer platforms -- enabling instantaneous supply to scale to meet demand.Accepted manuscrip

Market leadership through technology – Backward compatibility in the U.S. Handheld Video Game Industry

The introduction of a new product generation forces incumbents in network industries to rebuild their installed base to maintain an advantage over potential entrants. We study if backward compatibility moderates this process of rebuilding an installed base. Using a structural model of the U.S. market for handheld game consoles, we show that backward compatibility lets incumbents transfer network effects from the old generation to the new to some extent but that it also reduces supply of new software. We examine the tradeoff between technological progress and backward compatibility and find that backward compatibility matters less if there is a large technological leap between two generations. We subsequently use our results to assess the role of backward compatibility as a strategy to sustain market leadership

Inefficiencies in Digital Advertising Markets

Digital advertising markets are growing and attracting increased scrutiny. This article explores four market inefficiencies that remain poorly understood: ad effect measurement, frictions between and within advertising channel members, ad blocking, and ad fraud. Although these topics are not unique to digital advertising, each manifests in unique ways in markets for digital ads. The authors identify relevant findings in the academic literature, recent developments in practice, and promising topics for future research

Adding evidence to the debate: quantifying Airbnb's disruptive impact on ten key hotel markets

Airbnb's entry into the lodging landscape has dramatically increased the available supply of rooms for accommodating prospective visitors at a destination. In a competitive market, an increase in supply while keeping demand relatively constant would decrease prices and revenues. While Airbnb is expected to negatively impact the hotel industry, the effects of Airbnb on the performance of the hotel industry have not been extensively quantified. Also, existing studies on Airbnb's economic impacts are limited in their inferential, temporal, and/or geographical scope. In view of this gap in the literature, the present study examines the effects of Airbnb supply on key hotel performance metrics: room revenues (RevPAR), average daily rates (ADR), and occupancy rates (OCC) in ten major U.S. hotel markets for the period between July 2008 and June 2017. The results demonstrate that an increasing Airbnb supply negatively impacts all three performance metrics within the hotel industry. Moreover, while previous research has demonstrated a negative impact on lower-end hotels, our findings provide evidence of Airbnb's growing impact on the mainstream market across hotel class segments, signaling a high level of consistency with the tenets of the theory of disruptive innovation. The magnitude of these effects is not only statistically but also economically significant. Theoretical and practical implications are discussed.Accepted manuscrip

Backward Compatibility to Sustain Market Dominance – Evidence from the US Handheld Video Game Industry

The introduction of a new product generation forces incumbents in network industries to rebuild their installed base to maintain an advantage over potential entrants. We study if backward compatibility can help moderate this process of rebuilding an installed base. Using a structural model of the US market for handheld game consoles, we show that backward compatibility lets incumbents transfer network effects from the old generation to the new to some extent but that it also reduces supply of new software. We also find that backward compatibility matters most shortly after the introduction of a new generation. Finally, we examine the tradeoff between technological progress and backward compatibility and find that backward compatibility matters less if there is a large technological leap between two generations. We subsequently use our results to assess the role of backward compatibility as a strategy to sustain a dominant market position

The Future of Retail Operations

Retailing consists of all the activities associated with the selling of goods to the final consumer. In this article, we review the research on retail operations published in Manufacturing & Service Operations Research (M&SOM) since 1999. We then discuss the current retail landscape and the new research directions it offers, in which M&SOM can play a prominent role