The Impact of Digital Convergence on Firms\u27 Strategies: Integrated vs. Separated Firms

Digital convergence which means the convergence of industry areas related to digital technologies is an important phenomenon in business, which will decide the fates of firms in the near future. The only firms which can create synergy effects from digital convergence are expected to be the winners in the fierce competition of digital convergence era. In our analysis, we examine the strategy of an integrated firm which has businesses in two different industry areas which are related to each other. By using a game theoretical model, we show how the integrated firm can win over two single separated firms which have business in only one industry area each by leveraging the two businesses the integrated firm has. In our welfare analysis, we also show that this convergence may be even beneficial to consumers, which seems counter-intuitive to social concerns about anti-competitive behaviors by integrated firms. Additionally, we compare product convergence to industry convergence, and suggest that firms be more careful for product convergence than industry convergence because product convergence cannot be as efficient as industry convergence in terms of combination of different product functions

Online Music Ranking Service: Ranking Mechanism Based on Popularity and Slot Effect

This paper analyzes music charts of an online music distributor. In music charts, the digital music provider displays a daily ranking of 1st ~ 100th and a weekly ranking of 1st ~ 1,000th songs on its website. And the ranking of each song is assigned based on streaming volumes and download volumes. This paper studies how the online music distributor should set its ranking policy to maximize the value of online music ranking service. Compared to the current ranking mechanism which is being used by music sites and only considers streaming and download volumes, a new ranking mechanism is proposed in this paper. A key improvement of the new ranking mechanism is to reflect a more accurate preference pertinent to popularity, pricing policy and slot effect based on exponential decay model for online users. A ranking model is built to verify correlations between two service volumes and popularity, pricing policy, and slot effect. An empirical analysis is followed to illustrate some of the general features of online music charts and to validate the assumptions used in the new ranking model. The results from the empirical work show that the new ranking mechanism proposed will be more effective than the former one in several aspects

An Intercountry Analysis on the Factors and Barriers to Internet Accessibility

The world of the Internet is shaping the future of many industries around the world, from the airline industry to the production of music. The Internet is changing how we communicate and exchange ideas and thoughts. Many countries are now eager to setup master plans and policies to develop their Internet infrastructure. This paper examines the essential factors that are affecting the development and usage of the Internet in the developed and the developing world and shed light on the need to view the development and usage of the Internet on a more holistic view than atomistic view. The results show that urbanization, electrical usage, and the usage of mobile cellular have a positive relationship with Internet usage. In case of the least developed countries, GNI per capita has a positive relation of Internet usage

The optimal number of versions: Why does Goldilocks pricing work for information goods?

The literature in general suggests that selling multiple versions is more profitable than selling only a single version. However, how many versions should be offered is not as clear. Classical pricing studies suggest providing as many versions as the number of customer types, whereas some studies in information systems suggest providing only one or two versions. In reality, firms typically provide more than one or two versions, such as three in the case of Goldilocks pricing. This study explains the discrepancies in these results and observations by showing that, although profit increases with more versions, the marginal benefit of an additional version decreases rapidly. Therefore, firms sell few versions even in the presence of very small versioning-related costs such as menu and cognitive costs. This study analyzes the effects of these costs, and shows that cognitive costs have more profound effects on versioning than menu costs. © 2008 M.E. Sharpe, Inc

Information effect in Social Commerce: A case of TicketMonster

Social Commerce sites are in vogue enough to be recognized as a new trend in online shopping arena. Social Commerce can be defined as the electronic commerce triggered by social media. It has been growing very rapidly with enormous discount rate, quality services and precise information. This research analyzes effects of posted numeric information on daily sales volumes. Hetrosckedasticity arises with the real transaction data that was acquired from TicketMonster which is one of the biggest Social Commerce sites in Korea. Therefore, GLS model was applied to have results that original price, discounted price, minimum quantity to have discounted price, and maximum units of sales are statistically significant. Minimum quantity of sales to meet the requirement to have discounted prices has threshold effect on the purchase of consumers like the ways they have group buying on the Internet. However, additional studies are required to identify if this correlated information can be results of reasonable estimates by the vendors and the intermediary or play a role of signal to attract sales. More research opportunities are addressed on services types, consumer groups and information richness

Economics of shareware: How do uncertainty and piracy affect shareware quality and brand premium?

Increased network speed has opened up new opportunities for developers to distribute their products as shareware through the Internet. This paper analyzes the interrelationships among key issues that are central to the software industry, including uncertainty, piracy, shareware quality and full version price. We show that customers\u27 aversion to uncertainty of software quality tends to increase shareware quality while piracy tends to decrease it. Counter-intuitively, the perceived quality of the full version software or the trust towards the software developer does not affect the full version price and the profit of the firm when piracy is prevalent. © 2007 Elsevier B.V. All rights reserved

Economics of shareware: How uncertainty and piracy affect shareware quality and brand premium

In the past, shareware has been mainly used to market small and simple software, the developers of which could not afford to distribute their products through a physical retail channel. Shareware was often distributed through complimentary floppy or CD disks attached to PC or games magazines. However, with increased network speed, it has become viable for digital files, even large ones, to be distributed over the Internet. The Internet channel has opened up new opportunities for developers, small or large, to distribute their products as shareware to reach consumers directly. Indeed, in recent years, we begin to see big firms, including Microsoft, Adobe, and Google, distributing their products as shareware. We find that shareware is an increasingly widespread marketing strategy for selling software products via the Web. Because the emergence of shareware has not been driven by economic concerns, there is limited analytical research on shareware. However, as shareware gains in popularity as a strategy to reduce consumers\u27 uncertainty about new software products, there is a need for deeper understanding of the economic implications of its use. This paper analyzes the interrelationships among key issues that are central to the software industry, including uncertainty, piracy, shareware quality, and full version price. We show that customers\u27 aversion to the uncertainty of software quality tends to increase shareware quality while piracy tends to decrease it. Counter intuitively, the perceived quality of the full version software or the trust toward the software developer does not affect the full version price and the profit of the firm when piracy is prevalent

Reserve Price Reporting Mechanisms for Negotiation Support Systems

Information and Communication Technologies (ICT) changed our everyday business drastically. Business routines have been transformed to online activities. New theories and models were developed for the brand new online environment. For online negotiations, however, the research on new mechanisms is not enough, especially for bilateral distributive negotiations. A reserve price reporting mechanism (RPR) together with its extended version (ERPR) is proposed in this paper. The key improvement of reserve price reporting mechanisms is to let the negotiators report their reserve price to a third-party system before they actually start the negotiation. Analytical models of these mechanisms are built to prove truth revelation condition and the reduction of total social welfare comparing with traditional direct bargaining (TDB). A prototype of this RPR system is developed and a lab experiment is conducted to test the performance of the three mechanisms. The results of the experiment support that the reserve price report mechanisms proposed are more efficient than the traditional one in several dimensions

Is the Leaderboard Information Useful to Investors? : The Leaderboard Effect in P2P Lending

P2P (Online Peer-to-Peer) lending provides an open marketplace where borrowers make requests for loans by lenders who subsequently decide whether to bid or not following an examination of the relevant information posted by borrowers. In this P2P lending context, the leaderboard, where popular loan requests are displayed at the web’s front page, provides information for lenders to use when evaluating the requests. We empirically examine the effects of leaderboard information regarding the most popular existing loan requests. Our results show that the leaderboard information works ex ante in attracting additional bids to get loan requests successfully financed. However, it does not work ex post in improving the performance so that it has less potential for default