I n our paper about optimal reverse pricing mechanisms [Spann M, Zeithammer R, Häubl G (2010) Opt... more I n our paper about optimal reverse pricing mechanisms [Spann M, Zeithammer R, Häubl G (2010) Optimal reverse-pricing mechanisms. Marketing Sci. 29(6):1058-1070] (hereafter, ORPM), some of the mathematical derivations implicitly assume that the name-your-own-price seller interprets the outside-market posted price p differently than the buyers. This note shows that all of the qualitative results in ORPM continue to hold under the more natural assumption of common knowledge that p is the upper bound of wholesale cost. Interestingly, the proofs and algebraic expressions are often simpler than those in ORPM.
Pay What You Want (PWYW) can be an attractive marketing strategy to price discriminate between fa... more Pay What You Want (PWYW) can be an attractive marketing strategy to price discriminate between fairminded and selfish customers, to fully penetrate a market without giving away the product for free, and to undercut competitors that use posted prices. We report on laboratory experiments that identify causal factors determining the willingness of buyers to pay voluntarily under PWYW. Furthermore, to see how competition affects the viability of PWYW, we implement markets in which a PWYW seller competes with a traditional seller. Finally, we endogenize the market structure and let sellers choose their pricing strategy. The experimental results show that outcome-based social preferences and strategic considerations to keep the seller in the market can explain why and how much buyers pay voluntarily to a PWYW seller. We find that PWYW can be viable on a monopolistic market, but it is less successful as a competitive strategy because it does not drive traditional posted-price sellers out of the market. Instead, the existence of a posted-price competitor reduces buyers' payments and prevents the PWYW seller from fully penetrating the market. When given the choice, most sellers opt for setting a posted price rather than a PWYW pricing strategy. We discuss the implications of these results for the use of PWYW as a marketing strategy.
We analyze how Facebook use and students’ social network positions within it relate to their acad... more We analyze how Facebook use and students’ social network positions within it relate to their academic performance. We use a unique data set obtained from a survey of students’ perceptions, actual Facebook connections to measure social network positions, and objective grades provided by the university registrar to measure academic performance. We find that Facebook activities during class relate negatively to academic performance, that students located in densely connected subnetworks earn better grades, and that in contrast to female students, male students benefit from a general use of Facebook, particularly if they are highly connected.
We analyze how Facebook use and students’ social network positions within it relate to their acad... more We analyze how Facebook use and students’ social network positions within it relate to their academic performance. We use a unique data set obtained from a survey of students’ perceptions, actual Facebook connections to measure social network positions, and objective grades provided by the university registrar to measure academic performance. We find that Facebook activities during class relate negatively to academic performance, that students located in densely connected subnetworks earn better grades, and that in contrast to female students, male students benefit from a general use of Facebook, particularly if they are highly connected.
Business and Information Systems Engineering the international journal of Wirtschaftsinformatik
In the context of the wide-spread digitization of businesses and society at large, the logic inhe... more In the context of the wide-spread digitization of businesses and society at large, the logic inherent in a business model has become critical for business success and, hence, a focus for academic inquiry. The business model concept is identified as the missing link between business strategy, processes, and Information Technology (IT). The BISE community offers distinct and unique competencies that can be harnessed for significant research contributions to this field. Three distinct streams are delineated, namely, business models in IT industries, IT enabled or digital business models, and IT support for developing and managing business models.
ABSTRACT The increasing diffusion of smartphones in the mass market enables more and more consume... more ABSTRACT The increasing diffusion of smartphones in the mass market enables more and more consumers to use the mobile internet. In addition, there is a continuing integration of location-based services (LBS) which provide context-aware information to consumers. This leads to a convergence of online and offline worlds. The usage of LBS delivers additional and more relevant information to consumers (e.g., about alternative offers). Particularly during the search process, information about product characteristics, prices or geographic distances to offers are of importance. These types of information are provided by barcode-scanning and product information apps. This dissertation consists of three independent research studies. Stephan Daurer investigates the role of such smartphone apps and LBS in general in consumer search on the mobile internet using various samples and multiple research methods.
Event study methodology is a powerful procedure to quantify the impact of events and managerial d... more Event study methodology is a powerful procedure to quantify the impact of events and managerial decisions such as new product announcements on the value of a publicly traded company. However, for many events, appropriate financial data may not be available, either because suitable securities are not traded on financial markets or confounding effects limit the insights from financial data. In such instances, prediction markets could potentially provide the necessary data for an event study. Prediction markets are electronic markets where participants can trade stocks whose prices reflect the outcome of future events, e.g. election outcomes, sports results, new product sales or internal project deadlines. One key distinction between different prediction market applications is whether they require real money investments or play-money investment with non-monetary incentives for traders. Thus, the goal of this paper is to compare prediction markets' ability to conduct event studies with respect to these two different incentive schemes. We empirically test the applicability of event study methodology in real-money vs. play-money prediction markets with two data sets. We show that event studies with prediction markets deliver robust and valid results with both incentive schemes.
An attractive feature of Prediction Markets (PMs) is that they provide economic incentives for in... more An attractive feature of Prediction Markets (PMs) is that they provide economic incentives for informants to share unique information. It is unclear whether PMs are appropriate for applications with few knowledgeable informants as is the case for most institutional forecasting tasks. Hence, we compare the performance of small PMs with traditional judgment-based forecasting approaches. Our results show that forecasts from small PMs outperform traditional approaches in settings of high information-heterogeneity (i.e., where the amount of unique information possessed by informants is relatively high) and are no worse in settings of low information-heterogeneity.
New restaurants often do not manage to succeed within a reasonable amount of time. Exotic restaur... more New restaurants often do not manage to succeed within a reasonable amount of time. Exotic restaurants especially face the problem that price promotions may not attract new customers because prospective customers might associate very low prices for unfamiliar food with a high functional risk. This paper describes how Pay-What-You-Want (PWYW), a new pricing mechanism, was successfully implemented at Kish, a moderately priced Persian restaurant in downtown Frankfurt. After the initial testing phase, which had the characteristics of a promotional offer, the restaurant decided to permanently offer its buffet lunch under PWYW conditions. We report the long-term effects of this decision as well as a simulation demonstrating that profitability is mainly based on "trading up" the continuous inflow of new customers to the more profitable dining offer where prices are fixed.
Preference markets address the need for scalable, fast, and engaging market research in new produ... more Preference markets address the need for scalable, fast, and engaging market research in new product development. The Web 2.0 paradigm, in which users contribute numerous ideas that may lead to new products, requires new methods of screening those ideas for their marketability, and preference markets offer just such a mechanism. For faster new product development decisions, a flexible prioritization methodology is implemented for product features and concepts, one that scales up in the number of testable alternatives, limited only by the number of participants. New product preferences for concepts, attributes, and attribute levels are measured by trading stocks whose prices are based upon share of choice of new products and features. A conceptual model of scalable preference markets is developed and tested experimentally. Benefits of the methodology are found to include speed (less than one hour per trading experiment), scalability (question capacity grows linearly in the number of traders), flexibility (features and concepts can be tested simultaneously), and respondent enthusiasm for the method. Ã The authors thank
Certain companies have high capacity cost and rather moderate production cost. These companies us... more Certain companies have high capacity cost and rather moderate production cost. These companies usually assume that deciding about their capacity is quite critical. Frequently, however, they are able to adjust the demand for their products to the available capacity by setting appropriate prices, that is higher (lower) than current prices in the presence of under-capacity (over-capacity). We argue that appropriate prices can reduce the adverse eects of non-optimal capacities. We analyze the sensitivity of pro®t in such a situation for a company in a monopolistic market, selling a nonstorable product and facing¯uctuating but interdependent demand across two time periods which allows to pro®tably dierentiate prices. Therefore, we state optimality conditions for prices in situations of variable and given capacities and describe a procedure to determine them. The main suggestion of this analysis is that, within the bounds of the normative models and speci®c parameters examined, optimal prices can substantially reduce the adverse eects of capacity deviating from its optimum. In this way, pro®t is rather insensitive to deviations of capacity from its optimum. The implications of this ®nding are discussed for a number of situations. Ó
Newly launched products in the consumer goods and services markets show high failure rates. To re... more Newly launched products in the consumer goods and services markets show high failure rates. To reduce the failure rates, companies can integrate innovative and knowledgeable customers, the so-called lead users, into the new product development process. However, the detection of such lead users is difficult, especially in consumer product markets with very large customer bases. A new and potentially valuable approach toward the identification of lead users involves the use of virtual stock markets, which have been proposed and applied for political and business forecasting but not for the identification of experts such as lead users. The basic concept of virtual stock markets is bringing a group of participants together via the Internet and allowing them to trade shares of virtual stocks. These stocks represent a bet on the outcome of future market situations, and their value depends on the realization of these market situations. In this process, a virtual stock market elicits and aggregates the assessments of its participants concerning future market developments. Virtual stock markets might also serve as a feasible instrument to filter out lead users, primarily for the following two reasons. First, a self-selection effect might occur because sophisticated consumers with a higher involvement in the product of interest decide to participate in virtual stock markets. Second, a performance effect is likely to arise because well-performing participants in virtual stock markets show a better understanding of the market than their (already self-selected) fellow participants. So far, only limited information exists about these two effects and their relation to lead user characteristics. The goal of this paper is to analyze the feasibility of virtual stock markets for the identification of lead users. The results of this empirical study show that virtual stock markets can be an effective instrument to identify lead users in consumer products markets. Furthermore, the results show that not all lead users perform well in virtual stock markets. Hence, virtual stock markets allow identifying lead users with superior abilities to forecast market success.
Name-your-own-price is a pricing mechanism where the buyer instead of the seller determines the p... more Name-your-own-price is a pricing mechanism where the buyer instead of the seller determines the price, because the buyer makes a bid at a certain price, which the seller can either accept or reject. Based on consumers’ bidding behavior at a name-your-own-price seller, we develop and empirically test a model to simultaneously estimate individual willingness-to-pay (WTP) and frictional costs. Further, we compare analytically and empirically bidding behavior and profit implications of the single bid model to those of the repeated bidding model. Thereby, we derive closed form solutions for the optimal bids which describe the influence of willingness-to-pay and frictional costs on consumer's bidding behavior. In addition, we develop a procedure for estimating empirically willingness-to-pay and frictional costs for individual consumers. Finally, we discuss the findings and limitations as well as their implications for providers of name-your-own-price mechanisms.
I n our paper about optimal reverse pricing mechanisms [Spann M, Zeithammer R, Häubl G (2010) Opt... more I n our paper about optimal reverse pricing mechanisms [Spann M, Zeithammer R, Häubl G (2010) Optimal reverse-pricing mechanisms. Marketing Sci. 29(6):1058-1070] (hereafter, ORPM), some of the mathematical derivations implicitly assume that the name-your-own-price seller interprets the outside-market posted price p differently than the buyers. This note shows that all of the qualitative results in ORPM continue to hold under the more natural assumption of common knowledge that p is the upper bound of wholesale cost. Interestingly, the proofs and algebraic expressions are often simpler than those in ORPM.
Pay What You Want (PWYW) can be an attractive marketing strategy to price discriminate between fa... more Pay What You Want (PWYW) can be an attractive marketing strategy to price discriminate between fairminded and selfish customers, to fully penetrate a market without giving away the product for free, and to undercut competitors that use posted prices. We report on laboratory experiments that identify causal factors determining the willingness of buyers to pay voluntarily under PWYW. Furthermore, to see how competition affects the viability of PWYW, we implement markets in which a PWYW seller competes with a traditional seller. Finally, we endogenize the market structure and let sellers choose their pricing strategy. The experimental results show that outcome-based social preferences and strategic considerations to keep the seller in the market can explain why and how much buyers pay voluntarily to a PWYW seller. We find that PWYW can be viable on a monopolistic market, but it is less successful as a competitive strategy because it does not drive traditional posted-price sellers out of the market. Instead, the existence of a posted-price competitor reduces buyers' payments and prevents the PWYW seller from fully penetrating the market. When given the choice, most sellers opt for setting a posted price rather than a PWYW pricing strategy. We discuss the implications of these results for the use of PWYW as a marketing strategy.
We analyze how Facebook use and students’ social network positions within it relate to their acad... more We analyze how Facebook use and students’ social network positions within it relate to their academic performance. We use a unique data set obtained from a survey of students’ perceptions, actual Facebook connections to measure social network positions, and objective grades provided by the university registrar to measure academic performance. We find that Facebook activities during class relate negatively to academic performance, that students located in densely connected subnetworks earn better grades, and that in contrast to female students, male students benefit from a general use of Facebook, particularly if they are highly connected.
We analyze how Facebook use and students’ social network positions within it relate to their acad... more We analyze how Facebook use and students’ social network positions within it relate to their academic performance. We use a unique data set obtained from a survey of students’ perceptions, actual Facebook connections to measure social network positions, and objective grades provided by the university registrar to measure academic performance. We find that Facebook activities during class relate negatively to academic performance, that students located in densely connected subnetworks earn better grades, and that in contrast to female students, male students benefit from a general use of Facebook, particularly if they are highly connected.
Business and Information Systems Engineering the international journal of Wirtschaftsinformatik
In the context of the wide-spread digitization of businesses and society at large, the logic inhe... more In the context of the wide-spread digitization of businesses and society at large, the logic inherent in a business model has become critical for business success and, hence, a focus for academic inquiry. The business model concept is identified as the missing link between business strategy, processes, and Information Technology (IT). The BISE community offers distinct and unique competencies that can be harnessed for significant research contributions to this field. Three distinct streams are delineated, namely, business models in IT industries, IT enabled or digital business models, and IT support for developing and managing business models.
ABSTRACT The increasing diffusion of smartphones in the mass market enables more and more consume... more ABSTRACT The increasing diffusion of smartphones in the mass market enables more and more consumers to use the mobile internet. In addition, there is a continuing integration of location-based services (LBS) which provide context-aware information to consumers. This leads to a convergence of online and offline worlds. The usage of LBS delivers additional and more relevant information to consumers (e.g., about alternative offers). Particularly during the search process, information about product characteristics, prices or geographic distances to offers are of importance. These types of information are provided by barcode-scanning and product information apps. This dissertation consists of three independent research studies. Stephan Daurer investigates the role of such smartphone apps and LBS in general in consumer search on the mobile internet using various samples and multiple research methods.
Event study methodology is a powerful procedure to quantify the impact of events and managerial d... more Event study methodology is a powerful procedure to quantify the impact of events and managerial decisions such as new product announcements on the value of a publicly traded company. However, for many events, appropriate financial data may not be available, either because suitable securities are not traded on financial markets or confounding effects limit the insights from financial data. In such instances, prediction markets could potentially provide the necessary data for an event study. Prediction markets are electronic markets where participants can trade stocks whose prices reflect the outcome of future events, e.g. election outcomes, sports results, new product sales or internal project deadlines. One key distinction between different prediction market applications is whether they require real money investments or play-money investment with non-monetary incentives for traders. Thus, the goal of this paper is to compare prediction markets' ability to conduct event studies with respect to these two different incentive schemes. We empirically test the applicability of event study methodology in real-money vs. play-money prediction markets with two data sets. We show that event studies with prediction markets deliver robust and valid results with both incentive schemes.
An attractive feature of Prediction Markets (PMs) is that they provide economic incentives for in... more An attractive feature of Prediction Markets (PMs) is that they provide economic incentives for informants to share unique information. It is unclear whether PMs are appropriate for applications with few knowledgeable informants as is the case for most institutional forecasting tasks. Hence, we compare the performance of small PMs with traditional judgment-based forecasting approaches. Our results show that forecasts from small PMs outperform traditional approaches in settings of high information-heterogeneity (i.e., where the amount of unique information possessed by informants is relatively high) and are no worse in settings of low information-heterogeneity.
New restaurants often do not manage to succeed within a reasonable amount of time. Exotic restaur... more New restaurants often do not manage to succeed within a reasonable amount of time. Exotic restaurants especially face the problem that price promotions may not attract new customers because prospective customers might associate very low prices for unfamiliar food with a high functional risk. This paper describes how Pay-What-You-Want (PWYW), a new pricing mechanism, was successfully implemented at Kish, a moderately priced Persian restaurant in downtown Frankfurt. After the initial testing phase, which had the characteristics of a promotional offer, the restaurant decided to permanently offer its buffet lunch under PWYW conditions. We report the long-term effects of this decision as well as a simulation demonstrating that profitability is mainly based on "trading up" the continuous inflow of new customers to the more profitable dining offer where prices are fixed.
Preference markets address the need for scalable, fast, and engaging market research in new produ... more Preference markets address the need for scalable, fast, and engaging market research in new product development. The Web 2.0 paradigm, in which users contribute numerous ideas that may lead to new products, requires new methods of screening those ideas for their marketability, and preference markets offer just such a mechanism. For faster new product development decisions, a flexible prioritization methodology is implemented for product features and concepts, one that scales up in the number of testable alternatives, limited only by the number of participants. New product preferences for concepts, attributes, and attribute levels are measured by trading stocks whose prices are based upon share of choice of new products and features. A conceptual model of scalable preference markets is developed and tested experimentally. Benefits of the methodology are found to include speed (less than one hour per trading experiment), scalability (question capacity grows linearly in the number of traders), flexibility (features and concepts can be tested simultaneously), and respondent enthusiasm for the method. Ã The authors thank
Certain companies have high capacity cost and rather moderate production cost. These companies us... more Certain companies have high capacity cost and rather moderate production cost. These companies usually assume that deciding about their capacity is quite critical. Frequently, however, they are able to adjust the demand for their products to the available capacity by setting appropriate prices, that is higher (lower) than current prices in the presence of under-capacity (over-capacity). We argue that appropriate prices can reduce the adverse eects of non-optimal capacities. We analyze the sensitivity of pro®t in such a situation for a company in a monopolistic market, selling a nonstorable product and facing¯uctuating but interdependent demand across two time periods which allows to pro®tably dierentiate prices. Therefore, we state optimality conditions for prices in situations of variable and given capacities and describe a procedure to determine them. The main suggestion of this analysis is that, within the bounds of the normative models and speci®c parameters examined, optimal prices can substantially reduce the adverse eects of capacity deviating from its optimum. In this way, pro®t is rather insensitive to deviations of capacity from its optimum. The implications of this ®nding are discussed for a number of situations. Ó
Newly launched products in the consumer goods and services markets show high failure rates. To re... more Newly launched products in the consumer goods and services markets show high failure rates. To reduce the failure rates, companies can integrate innovative and knowledgeable customers, the so-called lead users, into the new product development process. However, the detection of such lead users is difficult, especially in consumer product markets with very large customer bases. A new and potentially valuable approach toward the identification of lead users involves the use of virtual stock markets, which have been proposed and applied for political and business forecasting but not for the identification of experts such as lead users. The basic concept of virtual stock markets is bringing a group of participants together via the Internet and allowing them to trade shares of virtual stocks. These stocks represent a bet on the outcome of future market situations, and their value depends on the realization of these market situations. In this process, a virtual stock market elicits and aggregates the assessments of its participants concerning future market developments. Virtual stock markets might also serve as a feasible instrument to filter out lead users, primarily for the following two reasons. First, a self-selection effect might occur because sophisticated consumers with a higher involvement in the product of interest decide to participate in virtual stock markets. Second, a performance effect is likely to arise because well-performing participants in virtual stock markets show a better understanding of the market than their (already self-selected) fellow participants. So far, only limited information exists about these two effects and their relation to lead user characteristics. The goal of this paper is to analyze the feasibility of virtual stock markets for the identification of lead users. The results of this empirical study show that virtual stock markets can be an effective instrument to identify lead users in consumer products markets. Furthermore, the results show that not all lead users perform well in virtual stock markets. Hence, virtual stock markets allow identifying lead users with superior abilities to forecast market success.
Name-your-own-price is a pricing mechanism where the buyer instead of the seller determines the p... more Name-your-own-price is a pricing mechanism where the buyer instead of the seller determines the price, because the buyer makes a bid at a certain price, which the seller can either accept or reject. Based on consumers’ bidding behavior at a name-your-own-price seller, we develop and empirically test a model to simultaneously estimate individual willingness-to-pay (WTP) and frictional costs. Further, we compare analytically and empirically bidding behavior and profit implications of the single bid model to those of the repeated bidding model. Thereby, we derive closed form solutions for the optimal bids which describe the influence of willingness-to-pay and frictional costs on consumer's bidding behavior. In addition, we develop a procedure for estimating empirically willingness-to-pay and frictional costs for individual consumers. Finally, we discuss the findings and limitations as well as their implications for providers of name-your-own-price mechanisms.
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Papers by Martin Spann
perceptions, actual Facebook connections to measure social network positions, and objective grades provided by the university registrar to measure academic performance.
We find that Facebook activities during class relate negatively to academic performance, that students located in densely connected subnetworks earn better grades, and that in contrast to female students, male students benefit from a general use of Facebook, particularly if they are highly connected.
perceptions, actual Facebook connections to measure social network positions, and objective grades provided by the university registrar to measure academic performance.
We find that Facebook activities during class relate negatively to academic performance, that students located in densely connected subnetworks earn better grades, and that in contrast to female students, male students benefit from a general use of Facebook, particularly if they are highly connected.
perceptions, actual Facebook connections to measure social network positions, and objective grades provided by the university registrar to measure academic performance.
We find that Facebook activities during class relate negatively to academic performance, that students located in densely connected subnetworks earn better grades, and that in contrast to female students, male students benefit from a general use of Facebook, particularly if they are highly connected.
perceptions, actual Facebook connections to measure social network positions, and objective grades provided by the university registrar to measure academic performance.
We find that Facebook activities during class relate negatively to academic performance, that students located in densely connected subnetworks earn better grades, and that in contrast to female students, male students benefit from a general use of Facebook, particularly if they are highly connected.