Empirical studies in operations management and pricing with customers
Abstract/Contents
- Abstract
- This dissertation studies problems in operations management that arise in settings characterized by rich interactions with customers, especially online. We first study the pricing and inventory strategies of a retailer whose customers can monitor its offered prices over time through an online channel, where they incur heterogeneous costs to monitor. We then study the growth and customer loyalty of online services in the app economy from an operational perspective. We describe each of these settings and empirical inquiries in turn. Online retail reduces the costs of obtaining information about a product's price and availability and of flexibly timing a purchase. Consequently, consumers can strategically time their purchases, weighing the costs of monitoring and the risk of inventory depletion against prospectively lower prices. At the same time, firms can observe and exploit their customers' monitoring behavior. Using a dataset tracking customers of a North American specialty retail brand, we present empirical evidence that monitoring products online is associated with successfully obtaining discounts. We develop a structural model of consumers' dynamic monitoring to find substantial heterogeneity, with consumers' opportunity costs for an online visit ranging from $2 to $25 in inverse relation to their price elasticities. Our estimation results have important implications for retail operations. The randomized markdown policy benefits retailers by combining price commitment with the exploitation of heterogeneity in consumers' monitoring costs. We estimate that the retailer's profit under randomized markdowns is 81\% higher than from subgame-perfect, state-contingent pricing, because the retailer need not limit its inventory to credibly limit markdowns, which permits its jointly optimal inventory stock to expand by 133%. The welfare gain from these larger inventories splits nearly equally into retailer profit and consumer surplus. We also study targeting customers with price promotions using their online histories and the implications of reducing consumers' monitoring costs. Meanwhile, the burgeoning app economy increasingly drives growth in today's service sector. In our second study, we construct a dataset encompassing apps' daily, weekly, and monthly usership time series and show how its nested-echelon structure allows researchers to reliably infer how and when an app's customers adopt, use, and leave its services. Thereby gaining novel visibility into these services' customer flows, we study how firms should prioritize the acquisition of customers and market share via viral effects against cultivating customer loyalty. Contrary to common wisdom in the app economy, our findings reinforce the central role and effects of customer loyalty, as theorized by the Service Profit Chain. While loyalty bolsters customers' retention and repeat business (i.e., usage), a natural experiment that suppressed viral customer acquisition across the Facebook platform demonstrates the power of a more subtle benefit: improved customer loyalty actually amplifies the rate of word-of-mouth acquisition. A potent experience curve that rewards firms' experience with loyal customers dismantles a classic trade-off between customer loyalty and market share in services.
Description
| Type of resource | text |
|---|---|
| Form | electronic; electronic resource; remote |
| Extent | 1 online resource. |
| Publication date | 2016 |
| Issuance | monographic |
| Language | English |
Creators/Contributors
| Associated with | Moon, Ken |
|---|---|
| Associated with | Stanford University, Graduate School of Business. |
| Primary advisor | Bimpikis, Kostas |
| Primary advisor | Mendelson, Haim |
| Thesis advisor | Bimpikis, Kostas |
| Thesis advisor | Mendelson, Haim |
| Thesis advisor | Nair, Harikesh S. (Harikesh Sasikumar), 1976- |
| Advisor | Nair, Harikesh S. (Harikesh Sasikumar), 1976- |
Subjects
| Genre | Theses |
|---|
Bibliographic information
| Statement of responsibility | Ken Moon. |
|---|---|
| Note | Submitted to the Graduate School of Business. |
| Thesis | Thesis (Ph.D.)--Stanford University, 2016. |
| Location | electronic resource |
Access conditions
- Copyright
- © 2016 by Kenneth Ho-yeon Moon
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