Tapping into the pulse of the market : essays on marketing implications of information flows

Thesis (Ph. D.)--Massachusetts Institute of Technology, Sloan School of Management, 2006.Includes bibliographical references (p. 113-115).As the Internet continues to penetrate consumer households, online marketing is getting increasingly important for firms. By adapting to online strategies, firms are blessed (or doomed) with a plethora of new business models. The information flows created in the process poses both opportunities and challenges for marketers. On one hand, information flows captured online are usually easier to be stored and processed, thus empowering firms to be better informed about the consumers or the market itself. On the other hand, how to use the information flows to make the correct managerial decisions is still a challenging task for managers and academics alike. My dissertation studies the marketing implications of these information flows. Broad as the research question is, my dissertation focuses on specific market settings. I adopt both analytical and empirical methodologies to study information flows in these markets. Overall, this dissertation concludes that information flows can engender new market mechanisms, can provide valuable information of unobservable market forces, and can be created to improve social welfare. Essay 1: Innovation Incentives for Information Goods. Digital goods can be reproduced costlessly.(cont.) Thus a price of zero would be economically-efficient for consumers. However, zero revenues would eliminate the economic incentives for creating such goods in the first place. We develop a novel mechanism which tries to solve this dilemma by decoupling the price of digital goods from the payments to innovators while maintaining budget balance and incentive compatibility. Specifically, by selling digital goods via large bundles the marginal price for consuming an additional good can be made zero for most consumers. Thus efficiency is enhanced. Meanwhile, we show how statistical sampling can be combined with tiered coupons to reveal the individual demands for each of the component goods in such a bundle. This makes it possible to provide accurate payments to creators which spurs further innovation. In our analysis of the proposed mechanism, we find that it can operate with an efficiency loss of less than 0.1. Essay 2: Edgeworth Cycles in Keyword Auctions. Search engines make a profit by auctioning off advertisement positions through keyword auctions. I examine the strategies taken by the advertisers.(cont.) A game theoretical model suggests that the equilibrium bids should follow a cyclical pattern- "escalating" phases interconnected by "collapsing" phases - similar to a pattern of "Edgeworth Cycles" that was suggested by Edgeworth (1925) in a different context. I empirically test the validity of the theory. With an empirical framework based on maximum likelihood estimation of latent Markov state switching, I show that Edgeworth price cycles exist in this market. I further examine, on the individual bidder level, how strategic these bidders are. My results suggest that some bidders in this market adjust their bids according to Edgeworth predictions, while others not. Finally, I discuss the important implications of finding such cycles. Essay 3: The Lord of the Ratings. Third-party reviews play an important role in many contexts in which tangible attributes are insufficient to enable consumers to evaluate products or services. In this paper, I examine the impact of professional and amateur reviews on the box office performance of movies. I first show evidence to suggest that the generally accepted result of "professional critics as predictors of movie performance" may no longer be true.(cont.) Then, with a simple diffusion model, I establish an econometrics framework to control for the interaction between the unobservable quality of movies and the word-of-mouth diffusion process, and thereby estimate the residual impact of online amateur reviews on demand. The results indicate the significant influence of the valence measure (ratings) of online reviews, but their volume measure (propensity to write reviews) is not significant once I control for quality. Furthermore, the analysis suggests that the variance measure (disagreement) of reviews does not play a significant role in the early weeks after a movie's opening. The estimated influence of the valence measure implies that a one-point increase in the valence can be associated with a 4-10% increase in box office revenues.by Xiaoquan (Michael) Zhang.Ph.D

Innovation Incentives for Information Goods

This version published in "Innovation Incentives for Information Goods," Innovation Policy and the Economy eds. Adam B. Jaffe, Josh Lerner and Scott Stern, 2007 vol. 7. Previous version in published as “Slicing the Gordian Knot: A Novel Mechanism for Providing Innovation Incentives for Digital Goods” in Proceedings of the International Conference on Information Systems, December, 2004.Innovations can often be targeted to be more valuable for some consumers than others. This is especially true for digital information goods. We show that the traditional price system not only results in significant deadweight loss, but also provides incorrect incentives to the creators of these innovations. In contrast, we propose and analyze a profit-maximizing mechanism for bundles of digital goods which is more efficient and more accurately provides innovation incentives for information goods. Our “statistical couponing mechanism” does not rely on the universal excludability of information goods, which creates substantial deadweight loss, but instead estimates social value created from new goods and innovations by offering coupons to a relatively small sample of representative consumers. We find that the statistical couponing mechanism can operate with less than 0.1% of the deadweight loss of the traditional price-based system, while more accurately aligning incentives with social value.The MIT Center for Digital Business, the National Bureau of Economic Research and that National Science Foundation (IIS-0085725) provided generous research funding

How Do Social Media Shape the Information Environment in the Financial Market?

Internet users create social media that enable information to be transferred more efficiently. In this work we focus on a typical social media platform Wikipedia and examine how management’s voluntary disclosure reacts to information arrivals on Wikipedia. In doing so, we seek to answer the question of whether social media indeed improve the information environment for investors in the financial market. Our analysis is based on a unique dataset collected from the modification history of firm entries on Wikipedia, and thus we are able to identify information arrivals on Wikipedia. We find that information arrivals on Wikipedia affect the timing of management disclosure of bad news, and the effect is in sharp contrast to the way in which traditional media affect management disclosure. Further, we find consistent evidence that information arrivals on Wikipedia preempt the negative reaction of the market to bad news. In contrast, more news coverage in traditional media exacerbates the problem of optimistic analyst forecasts. Together these findings emphasize that social media have an identifiable effect on both the management side and the investor side in the financial market

Social-Role Identity Salience and User Participation in Social Networks

This paper studies the effect of social-role identity salience in social networks on user participation in an online community that facilitates user rating, reviewing and discussing of cultural products. Drawing on previous literature on social preference, we develop a model demonstrating how the salience of friendship identity changes equilibrium participation behaviour. Predictions are tested with a differences-in-differences model using data from an online social network community. Results show evidence of positive effect of salience of friendship identity on user participation

Economic downturn and volunteering: do economic crises affect content generation on Wikipedia?

In this paper, we address the impact of surging unemployment on online public good provision. Specifically, we ask how drastically increased unemployment affects voluntary contributions of content to the online encyclopedia Wikipedia. We put together a monthly country-level data set, which combines country specific economic outcomes with data on contributions to the online encyclopedia. As a source of exogenous variation in the economic state we use the fact that European countries were affected by the financial crisis in the US in September 2008 with different intensity. For European countries, we find that the economic downturn is associated with more viewership, which channels higher participation of volunteers in Wikipedia expressed in editing activity and content growth. We provide evidence for increased information search online or online learning as a potential channel of the change in public goods provision, which is a potentially important side effect of the economic downturn

Unemployment and digital public goods contribution

Economic crises often result in massive job loss. However, although reduced employment has been shown to have many negative consequences for the affected individuals, it may also push them into new activities, such as provision of service to their communities. In this paper, we show how individuals engage in socially useful activities after an increase in unemployment. Specifically we document increased online content generation at Wikipedia, the world's largest user generated knowledge repository. Leveraging German district-level and European country-level unemployment data we analyze the relationship between the economic crisis in 2008-2010 and contributions to Wikipedia. For both data sets we find increased socially valuable activity in the form of knowledge acquisition and contributions to Wikipedia. For German districts, we observe an increased rate of content generation on Wikipedia in districts that faced greater increases in unemployment. The effect of unemployment on content generation is even stronger at the European country level. Our findings suggest that public goods provision increases as a positive side effect of economic crises

Visual characterization of associative quasitrivial nondecreasing operations on finite chains

In this paper we provide visual characterization of associative quasitrivial nondecreasing operations on finite chains. We also provide a characterization of bisymmetric quasitrivial nondecreasing binary operations on finite chains. Finally, we estimate the number of functions belonging to the previous classes.Comment: 25 pages, 18 Figure

Genetic effects on gene expression across human tissues

Characterization of the molecular function of the human genome and its variation across individuals is essential for identifying the cellular mechanisms that underlie human genetic traits and diseases. The Genotype-Tissue Expression (GTEx) project aims to characterize variation in gene expression levels across individuals and diverse tissues of the human body, many of which are not easily accessible. Here we describe genetic effects on gene expression levels across 44 human tissues. We find that local genetic variation affects gene expression levels for the majority of genes, and we further identify inter-chromosomal genetic effects for 93 genes and 112 loci. On the basis of the identified genetic effects, we characterize patterns of tissue specificity, compare local and distal effects, and evaluate the functional properties of the genetic effects. We also demonstrate that multi-tissue, multi-individual data can be used to identify genes and pathways affected by human disease-associated variation, enabling a mechanistic interpretation of gene regulation and the genetic basis of diseas

Genetic effects on gene expression across human tissues

Characterization of the molecular function of the human genome and its variation across individuals is essential for identifying the cellular mechanisms that underlie human genetic traits and diseases. The Genotype-Tissue Expression (GTEx) project aims to characterize variation in gene expression levels across individuals and diverse tissues of the human body, many of which are not easily accessible. Here we describe genetic effects on gene expression levels across 44 human tissues. We find that local genetic variation affects gene expression levels for the majority of genes, and we further identify inter-chromosomal genetic effects for 93 genes and 112 loci. On the basis of the identified genetic effects, we characterize patterns of tissue specificity, compare local and distal effects, and evaluate the functional properties of the genetic effects. We also demonstrate that multi-tissue, multi-individual data can be used to identify genes and pathways affected by human disease-associated variation, enabling a mechanistic interpretation of gene regulation and the genetic basis of disease