I Don’t “Recall”: The Decision to Delay Innovation Launch to Avoid Costly Product Failure

Innovations embody novel features or cutting-edge components aimed at delivering desired customer benefits. Oftentimes, however, we observe the need to recall new products shortly after their introduction. Indeed, a firm may rush an innovation to market in an attempt to pre-empt rivals and capture early demand, yet in so doing forgo rigorous testing, thus subjecting itself to the risk of a product recall. To shed light on this phenomenon, we construct a dynamic game-theoretic model in which firms plan to launch their innovations. Each firm must decide whether to conduct time-consuming quality assurance testing, which ensures no defects or safety problems but delays the launch. If the innovation is released without such testing and a recall occurs, the firm incurs pecuniary costs and faces future reputation damage in marketing the recalled innovation. We investigate the strategic forces behind firms’ testing and launch-timing decisions in this context. The analysis uncovers a novel mechanism, linked to the possibility of a rival going bankrupt, that causes firms to become more inclined to rush to market and take on the risk of product failure even as the negative consequences of a recall increase. The results further demonstrate how firms’ desire to forgo testing exhibits an inverse-U pattern as consumers become more heterogeneous and how competitive forces may induce both firms to forgo testing, although the resulting profits are lower than had they both committed to conduct testing. The framework is extended to examine how product recall considerations affect firms’ research and development (R&D) investments. Although, in general, post-innovation product failure discourages R&D effort, we identify conditions under which an increase in the recall probability stimulates firms to innovate. Several model extensions are presented, and managerial implications are discussed

Optimal Three-Part Tariff Plans

Service providers, such as cell phone carriers, often offer three-part tariff plans that consist of three levers: A fixed fee, an allowance of free units, and a price per unit above the allowance. In previous studies the optimal three-part tariff contract was characterized using the standard first-order conditions approach. Because this optimization problem is nonsmooth, however, it could only be solved in a few simple cases. In this study we employ a different methodology that is based on obtaining a global bound for the firm profit, and then showing that this bound is attained by the optimal plan. This approach allows us to explicitly calculate the optimal three-part tariff plan under quite general conditions, where consumers are rational, they have a general utility function, they experience psychological costs when they exceed the number of free units, they have deterministic or stochastic consumption rates, they are homogeneous or heterogeneous, and the firm costs are fixed or depend on the usage level

Optimizing service failure and damage control

Should a provider deliver a reliable service or should it allow for occasional service failures? This paper derives conditions under which randomizing service quality can benefit the provider and society. In addition to cost considerations, heterogeneity in customer damages from service failures allows the provider to generate profit from selling damage prevention services or offering compensation to high-damage customers. This strategy is viable even when reputation counts and markets are competitive

Pharmacological And Genetic Reversal Of Age-Dependent Cognitive Deficits Attributable To Decreased Presenilin Function

Alzheimer\u27s disease (AD) is the leading cause of cognitive loss and neurodegeneration in the developed world. Although its genetic and environmental causes are not generally known, familial forms of the disease (FAD) are attributable to mutations in a single copy of the Presenilin (PS) and amyloid precursor protein genes. The dominant inheritance pattern of FAD indicates that it may be attributable to gain or change of function mutations. Studies of FAD-linked forms of presenilin (psn) in model organisms, however, indicate that they are loss of function, leading to the possibility that a reduction in PS activity might contribute to FAD and that proper psn levels are important for maintaining normal cognition throughout life. To explore this issue further, we have tested the effect of reducing psn activity during aging in Drosophila melanogaster males. We have found that flies in which the dosage of psn function is reduced by 50% display age-onset impairments in learning and memory. Treatment with metabotropic glutamate receptor (mGluR) antagonists or lithium during the aging process prevented the onset of these deficits, and treatment of aged flies reversed the age-dependent deficits. Genetic reduction of Drosophila metabotropic glutamate receptor (DmGluRA), the inositol trisphosphate receptor (InsP(3)R), or inositol polyphosphate 1-phosphatase also prevented these age-onset cognitive deficits. These findings suggest that reduced psn activity may contribute to the age-onset cognitive loss observed with FAD. They also indicate that enhanced mGluR signaling and calcium release regulated by InsP(3)R as underlying causes of the age-dependent cognitive phenotypes observed when psn activity is reduced

Beyond posted prices: the past, present and future of participative pricing mechanisms

Driven by the low transaction costs and interactive nature of the internet, customer participation in the price-setting process has increased. These changes were first brought about by the rise of online auctions in the early 2000s, followed by the emergence of newer participative mechanisms. Today, platforms such as eBay have popularized online auctions on a global scale, Priceline has made headlines with its name-your-own-price (NYOP) business model, and Humble Bundle has enabled independent musicians and game developers to market their works through pay-what-you-want (PWYW) pricing. Advertising exchanges conduct several hundred million individual auctions per day to sell online advertising slots. These are just a few examples of participative pricing in transactions among consumers or businesses. In parallel, academic research on participative pricing has blossomed in recent years, with an overarching concern over the profitability and other marketing implications these mechanisms have on sellers and buyers. The present paper contributes to this literature in three ways. First, we propose a definition of participative pricing mechanisms, as well as a useful taxonomy. Second, we discuss the current understanding by synthesizing conceptual and empirical academic literature. Third, we outline promising research questions with a key focus on the related behavioral aspects of buyers and sellers

Field Investigations of Lactate-Stimulated Bioreduction of Cr(VI) at Hanford 100H

The overall objective of this paper is to carry out field investigations to assess the potential for immobilizing and detoxifying chromium-contaminated groundwater using lactate-stimulated bioreduction of Cr(VI) to Cr(III) at the Hanford 100H site

PDE-4 inhibition rescues aberrant synaptic plasticity in Drosophila and mouse models of fragile X syndrome.

Fragile X syndrome (FXS) is the leading cause of both intellectual disability and autism resulting from a single gene mutation. Previously, we characterized cognitive impairments and brain structural defects in a Drosophila model of FXS and demonstrated that these impairments were rescued by treatment with metabotropic glutamate receptor (mGluR) antagonists or lithium. A well-documented biochemical defect observed in fly and mouse FXS models and FXS patients is low cAMP levels. cAMP levels can be regulated by mGluR signaling. Herein, we demonstrate PDE-4 inhibition as a therapeutic strategy to ameliorate memory impairments and brain structural defects in the Drosophila model of fragile X. Furthermore, we examine the effects of PDE-4 inhibition by pharmacologic treatment in the fragile X mouse model. We demonstrate that acute inhibition of PDE-4 by pharmacologic treatment in hippocampal slices rescues the enhanced mGluR-dependent LTD phenotype observed in FXS mice. Additionally, we find that chronic treatment of FXS model mice, in adulthood, also restores the level of mGluR-dependent LTD to that observed in wild-type animals. Translating the findings of successful pharmacologic intervention from the Drosophila model into the mouse model of FXS is an important advance, in that this identifies and validates PDE-4 inhibition as potential therapeutic intervention for the treatment of individuals afflicted with FXS