Competing in the presence of privacy concerns: a model of the market for customer information

Working papers seriesThere is 'no free disposal' (NFD) in the consumption of online personalization services, as this activity inherently involves sharing of personal and preference information that creates disutilities to the consumer. Not only are more services not necessarily better for the consumer, but these services are also provided for free as firms extract value from the usage of consumer information rather than from directly pricing the services. Further, the services themselves may be provided to a consumer as a fixed-length toolbar/deskbar (fixed-services strategy) or with the option of choosing a subset of the portfolio of services offered (variable-services strategy). This paper models a duopoly of firms that are heterogeneous in their marginal value for consumer information (MVI) and interact through a two-stage dynamic game, where the firms choose a fixed- or variable-services strategy in the first stage and their level of services of-fering in the second. After examining a series of subgame equilibria, we arrive at distinct subgame-perfect Nash equilibriua (SPNEs) that allows us to characterize competition between firms of different MVI endowments. Our findings suggest that while there is no SPNE in a duopoly of two small firms, when one firm is small and the large, there is a unique SPNE in pure strategies where both firms offer fixed-services such that they segment the market. As the differences in their valuations increase, the larger firm continues to offer fixed-services while smaller firm enjoys the option of offering variable services. A duopoly of large firms results always results in symmetric SPNE; both firms offer variable services as long as one firm has very large MVI and both offer fixed-services otherwise. Interestingly while the former is consumer welfare maximizing, the latter results in a third of the market (consisting of privacy seekers) not being served. Our results lead to important managerial and policy implications, as well as interesting extensions to the existing location models.preprin

Pricing strategy and technology choices: an empirical investigation of ‘Everyday Low Price’ in the domestic US Airline sector

The Conference program's website is located at http://www.krannert.purdue.edu/faculty/kkarthik/wise12/program.aspINTRODUCTION: There is a rich literature in economics on factors that govern airline prices. With approximately 50% of airline tickets sold online, there is now a renewed interest in investigating airline pricing particularly amongst Information Systems (IS) researchers. While market transparency created by online travel agents (OTAs) is a motivation enough to reexamine airline pricing, one missing piece calls for a thorough empirical investigation: In all extant studies (economics, marketing and IS), pricing by two major airli…postprin

Competing for Information: A Duopoly of Personalized Service Provision under Privacy Concerns

There is “no free disposal” (NFD) in the consumption of online personalization services, as this activity inherently involves sharing of personal and preference information that creates disutilities to the consumer. Not only are more services not necessarily better for the consumer, but these services are also provided for free as firms extract value from the usage of consumer information rather than from directly pricing the services. Firms may offer personalization through a “take-it or leave-it” approach (the fixed-services strategy) or allow consumers to choose a subset of the portfolio of services offered (the variable-services strategy). We model a duopoly of firms that are heterogeneous in their marginal value for consumer information (MVI) and interact through a two-stage dynamic game, where the firms choose a fixed- or variable-services strategy in the first stage and the corresponding level of services in the second. Our findings suggest that when the MVIs of competing firms are sufficiently different, there is a unique subgame-perfect Nash equilibrium (SPNE) in pure strategies where both firms offer fixed-services such that they segment the market. As the difference in their MVIs increase, the high MVI firm continues to offer fixed-services while the low MVI firm enjoys the option of offering variable services. A duopoly of high MVI firms results in both firms offering variable services as long as one firm has very large MVI, and both offering fixed-services otherwise. Interestingly, while the former is consumer welfare maximizing, the latter results in a third of the market (consisting of privacy seekers) not being served. Our results lead to important managerial and policy implications, as well as interesting extensions to extant location models.published_or_final_versio

Price formats as a source of price dispersion: A Study of online and ofline pices in the dmestic U.S. arline markets

Alarge body of research in economics, information systems, and marketing has sought to understand sources of price dispersion. Previous empirical work has mainly offered consumer- and/or product-based explanations for this phenomenon. In contrast, our research explores the key role played by vendors' price-format adoption in explaining price dispersion. We empirically analyze over a half-million online and offline prices offered by major U.S. airlines in the top 500 domestic markets. Our study shows that a vendor's price format remains an important source of price dispersion in both channels even after accounting for other factors known to impact dispersion in airline ticket prices. Importantly, this finding is true for both transacted and posted tickets. We document several other interesting empirical findings. First, the lower variance in the prices of "everyday low price" (EDLP) firms serves to reduce the market-level dispersion in prices when such firms are present. Moreover, the price variance of non-EDLP firms in these markets is also lower than in those markets in which EDLP competitors are absent. Second, we also find that dispersion in offered prices increases closer to the departure date, which is consistent with theoretical assertion that price dispersion increases with reservation prices. Finally, we continue to observe dispersion of online prices even after accounting for vendor strategy and other known sources of dispersion, suggesting that the prices are unlikely to converge even in the presence of sophisticated online search mechanisms.preprin

Strategic implementation of 'everyday low price' in electronic markets: a study of airline pricing on the internet

Working papers seriesAn Everyday Low Price (EDLP) strategy is a product-portfolio level pricing strategy by which a firm attempts to convey to consumers that prices across its product portfolio are consistently low. Empirically, the EDLP strategy is operationalized along two dimensions; the “everyday” component, which relates to the consistency in product prices over time, and the “low price” component, which implies that the prices set are on average lower than other prices available in the market. There may, however, be specific categories or markets in which even EDLP firms may prefer to eschew their consistency and low price goals. The U.S. domestic airline industry has two airlines that adopt the EDLP format while most others employ a promotional (HILO) pricing strategy, thus providing a rich context to investigate how the EDLP price-image strategy is implemented. We use a web crawler to gather information on over 270,000 ticket prices offered by the major airlines in 472 markets, and use a hierarchical linear model to analyze how these two dimensions of price vary with ticket categories and market conditions – defined in economics literature by advance purchase periods, weekend restrictions, airlines’ competitiveness, market distance, and hub operations. We find that the EDLP airlines emphasize the everyday dimension of their pricing much more than the low price dimension. Thus while their prices are systematically more consistent than their HILO competitors, their price levels show that they practice the same form of price discrimination with advance-purchase periods as their HILO competitors. Interestingly, while most airlines charge higher prices for tickets without weekend restriction, which are typically targeted towards business travelers, EDLP firms charge lower prices for these tickets. Further investigation at a category level reveals that these lower business fares are distinct features of short-haul markets where EDLP firms are known to enjoy certain cost advantages due to smaller equipment sizes of their flights. From the “everyday” point of view, we see that while there are no differences in the consistency of prices of EDLP tickets based on advance purchase periods, prices of business-focused EDLP tickets are distinctly more consistent than those of leisure-oriented tickets. Curiously, even in markets where EDLP firms are monopolists, they do not appear to be exercising their monopoly power; on the other hand, HILO firms distinctly employ discriminatory pricing in their monopoly markets. Perhaps this is a reflection of EDLP firms pursuing a limit-pricing/barrier-to-entry strategy. Our research shows that the practice of EDLP in online markets involves strategic variations in how price image is communicated.preprin

Leveraging analytics to produce compelling and profitable film content

Producing compelling film content profitably is a top priority to the long-term prosperity of the film industry. Advances in digital technologies, increasing availabilities of granular big data, rapid diffusion of analytic techniques, and intensified competition from user generated content and original content produced by Subscription Video on Demand (SVOD) platforms have created unparalleled needs and opportunities for film producers to leverage analytics in content production. Built upon the theories of value creation and film production, this article proposes a conceptual framework of key analytic techniques that film producers may engage throughout the production process, such as script analytics, talent analytics, and audience analytics. The article further synthesizes the state-of-the-art research on and applications of these analytics, discuss the prospect of leveraging analytics in film production, and suggest fruitful avenues for future research with important managerial implications

E-commerce ethics and its impact on buyer repurchase intentions and loyalty: an empirical study of small and medium Egyptian businesses

The theoretical understanding of e-commerce has received much attention over the years; however, relatively little focus has been directed towards e-commerce ethics, especially the SMEs B2B e-commerce aspect. Therefore, the purpose of this paper is to develop and empirically test a framework that explains the impact of SMEs B2B e-commerce ethics on buyer repurchase intentions and loyalty. Using SEM to analyse the data collected from a sample of SME e-commerce firms in Egypt, the results indicate that buyers’ perceptions of supplier ethics construct is composed of six dimensions (security, non-deception, fulfilment/reliability, service recovery, shared value, and communication) and strongly predictive of online buyer repurchase intentions and loyalty. Furthermore, our results also show that reliability/fulfilment and non-deception are the most effective relationship-building dimensions. In addition, relationship quality has a positive effect on buyer repurchase intentions and loyalty. The results offer important implications for B2B e-commerce and are likely to stimulate further research in the area of relationship marketing

Concern for information privacy in South Africa: An empirical study using the OIPCI

Please follow the DOI link at the top of the record to access the published version of this article online on the website of the journal.The information privacy concern of consumers concerning the processing of their personal information by online organizations (websites) is investigated in this study by means of a quantitative approach. An overview of existing concerns about information privacy instruments are presented based on a literature review. The Online Information Privacy Concern Instrument (OIPCI) is used to study consumers’ expectations and experience regarding information privacy principles in order to identify their concerns about information privacy. The study was conducted in South Africa with a demographical representative sample of 1000 participants. Gaps were identified where consumers experienced that online organizations were not meeting their privacy expectations. This indicated that the regulatory requirements (in this case, the Protection of Personal Information Act (POPI) are perceived as not being met. The results indicate that while consumers in South Africa have a high expectation for privacy, it is not met in practice. Corrective action and interventions are required from a government and online organization perspective.Women in Research Grant of UNISA.School of Computin