Many markets have historically been dominated by a small number of best-selling products. The Pareto principle, also known as the 80/20 rule, describes this common pattern sales concentration. However, information technology in general and Internet particular potential to substantially increase collective share niche products, thereby creating longer tail distribution sales. This paper investigates Internet's “long tail” phenomenon. By analyzing data collected from multichannel retailer, it...

Customer satisfaction incentive schemes are increasingly common in a variety of industries. We offer explanations as to how and when incenting employees on customer is profitable several recommendations for improving upon current practice. Faced with employee groups (including managers) who may have shorter time horizons than the firm, such systems enable firm use reaction monitor implicitly allocate effort between short long terms. These can be used encourage make tradeoffs that best...

The authors document that approximately 5% of product reviews on a large private label retailer's website are submitted by customers with no record ever purchasing the they reviewing. These significantly more negative than other reviews. They also less likely to contain expressions describing fit or feel items and linguistic cues associated deception. More 12,000 firm's best have written without confirmed transactions. On average, these each made 150 purchases from firm. This makes it...

ABSTRACT Using proprietary financial data on millions of households, we show that likely‐Republicans increased the equity share and market beta their portfolios following 2016 presidential election, while likely‐Democrats rebalanced into safe assets. We provide evidence this behavior was driven by investors interpreting public information based different models world. use detailed controls to rule out main nonbelief‐based channels such as income hedging needs, preferences, local economic...

In February 1995 Continental Airlines introduced an incentive scheme that promised monthly bonuses to all 35,000 hourly employees if the company achieved a firm‐wide performance goal. Conventional wisdom suggests free riding will render such schemes ineffective. We present evidence indicating raised employee despite apparent threat of riding. To explain why may have been effective we argue organization into autonomous work groups enabled induce mutual monitoring among within each group.

When a firm allows the return of previously purchased merchandise, it provides customers with an option that has measurable value. Whereas to merchandise leads increase in gross revenue, also creates additional costs. Selecting optimal policy requires balancing both demand and cost implications. In this paper, we develop structural model consumer's decision purchase item nests extant choice models as special case. The enables measure value consumers balance costs benefits different policies....

There is now an extensive theoretical literature investigating optimal inventory policies for retailers. Yet several recent reviews have recognized that these models are rarely applied in practice. One explanation the paucity of practical applications difficulty measuring how stockouts affect both current and future demand. In this paper, we report findings a large-scale field test measures short- long-run opportunity cost stockout. The confirm adverse impact stockout extends to other items...

The authors propose and test a new “polyhedral” choice-based conjoint analysis question-design method that adapts each respondent's choice sets on the basis of previous answers by respondent. Polyhedral “interior-point” algorithms design questions quickly reduce partworths are consistent with choices. To identify domains in which individual adaptation is promising (and it not), evaluate performance polyhedral methods Monte Carlo experiments. They vary magnitude (response accuracy),...

We use the results of three large-scale field experiments to investigate how depth a current price promotion affects future purchasing first-time and established customers. While most previous studies have focused on packaged goods sold in grocery stores, we consider durable through direct mail catalog. The findings reveal different effects for Deeper discounts period increased purchases by customers (a positive long-run effect) but reduced negative effect). Overall, show evidence several...

We propose and test new adaptive question design estimation algorithms for partial profile conjoint analysis. Polyhedral focuses questions to reduce a feasible set of parameters as rapidly possible. Analytic center uses centrality criterion based on consistency with respondents' answers. Both run no noticeable delay between questions. evaluate the proposed methods relative established benchmarks (random selection, D-efficient designs, analysis) (hierarchical Bayes). Monte Carlo simulations...

We consider a finite-state, finite-action, infinite-horizon, discounted reward Markov decision process and study the bias variance in value function estimates that result from empirical of model parameters. provide closed-form approximations for variance, which can then be used to derive confidence intervals around estimates. illustrate validate our findings using large database describing transaction mailing histories customers mail-order catalog firm.

Managers often state that they are reluctant to vary prices for fear of "antagonizing customers." However, there is no empirical evidence antagonizing customers through price adjustments reduces demand or profits. We use a 28-month randomized field experiment involving over 50,000 investigate how react if buy product and later observe the same retailer selling it less. find by making fewer subsequent purchases from firm. The effect largest among firm's most valuable customers: those whose...

Standard models of competition predict that firms will sell less when competitors target their customers with advertising. This is particularly true in mature markets many relatively undifferentiated products. However, the authors present findings from a large-scale randomized field experiment contrast sharply this prediction. The measures impact competitors' advertising on sales at private label apparel retailer. Surprisingly, for substantial segment customers, advertisements increased...

We investigate how firms can use the results of field experiments to optimize targeting promotions when prospecting for new customers. evaluate seven widely used machine-learning methods using a series two large-scale experiments. The first experiment generates common pool training data each methods. then validate optimized policies provided by method together with uniform benchmark in second experiment. findings not only compare performance methods, but also demonstrate well address...

This paper addresses the issue of retail price image by offering an explanation for how and when stores can use their advertised prices to signal other products in store. A model a two-product market is presented which advertise one product customers do not know before selecting store visit. In with full customer information, different marginal costs charge each product. When store's cost type, opportunity arises its type using prices. such model, additional equilibria exist. particular, may...

We take advantage of recent advances in optimization methods and computer hardware to identify globally optimal solutions product line design problems that are too large for complete enumeration. then use this guarantee global optimality benchmark the performance more practical heuristic methods. two sources data: (1) a conjoint study previously conducted real problem, (2) simulated various sizes. For both data sources, several consistently find or near-optimal solutions, including...

We analyze a large-scale field test conducted with mail-order catalog firm to investigate how customers react premium prices for larger sizes of women's apparel. find that who demand large unfavorably paying higher price than small sizes. Further investigation suggests these consumers perceive the is unfair. Overall, pricing led 6% 8% decrease in gross profits.

Deciding who should receive a mail-order catalog is among the most important decisions that mail-order-catalog firms must address. In practice, current approach to problem invariably myopic: send catalogs customers they think are likely order from catalog. doing so, overlook long-run implications of these decisions. For example, it may be profitable mail unlikely immediately if sending increases probability future order. We propose model allows optimize mailing by addressing dynamic their...

When a multichannel retailer opens its first retail store in state, the firm is obligated to collect sales taxes on all Internet and catalog orders shipped that state. This article assesses how opening affects demand. The authors analyze purchase behavior among customers who live far from but must now pay purchases. A comparable group of neighboring state serves as control. results show decrease significantly, are unaffected. Further investigation indicates difference these outcomes partly...

A leading explanation in the economic literature is that monetary policy has real effects on economy because firms incur a cost when changing prices. Using unique database of and retail price changes, we find variation menu costs results up to 13.3% fewer increases. We confirm these are allocative have persistent impact both prices unit sales. provide evidence channel operates only increases small magnitude, which consistent with theory provides first empirical boundary conditions.

To push a customer and market orientation deep into the organization, many firms have adopted systems by which internal customers evaluate suppliers. The supplier receives larger bonus for higher evaluation. authors examine two customer-internal incentive systems. In one system, provides evaluation implicitly selecting percentage of its that is based on outcomes (e.g., combination net sales satisfaction if these measures can be tied to incremental profits). supplier's reward chooses. second...