My thesis defense is finally scheduled. Here is the announcement:
Name: Xiaoquan (Michael) Zhang
Date: May 1, 2006
Time: 2pm- 4pm
Location: E53-301 (Hermann Building – where Dewey Library located)
Title: Tapping into the Pulse of the Market: Essays on Marketing Implications of Information Flows
Erik Brynjolfsson, George and Sandi Schussel Professor of Management, Chair
John D.C. Little, Institute Professor
Chrysanthos (Chris) Dellarocas, Assistant Professor of Information Systems
As the Internet continues to penetrate consumer households, online marketing is getting increasingly important for firms. By adapting to online strategies, firms are blessed (or doomed) with a plethora of new business models. The information flows created in the process poses both opportunities and challenges for marketers. On one hand, information flows captured online are usually easier to be stored and processed, thus empowering firms to be better informed about the consumers or the market itself. On the other hand, how to use the information flows to make the correct managerial decisions is still a challenging task for managers and academics alike. My thesis studies the marketing implications of these information flows. Broad as the research question is, I focus on specific market settings. I adopt both analytical and empirical methodologies to study information flows in these markets. Overall, this dissertation concludes that information flows can engender new market mechanisms, can provide valuable information of unobservable market forces, and can be created to improve social welfare.
Essay 1: Innovation Incentives for Information Goods
Digital goods can be reproduced costlessly. Thus a price of zero would be economically-efficient for consumers. However, zero revenues would eliminate the economic incentives for creating such goods in the first place. We develop a novel mechanism which solves this dilemma by decoupling the price of digital goods from the payments to innovators while maintaining budget balance and incentive compatibility. It is not surprising to find that innovation incentives in our mechanism are improved relative to the zero-price approach often favored by content consumers. However, it is surprising to find that the incentives are also substantially better than those provided by the traditional system based on excludability and monopoly pricing which is often favored by content owners.
Essay 2: Edgeworth Cycles in Keyword Auctions
Search engines make a profit by auctioning off advertisement positions through keyword auctions. I examine the strategies taken by the advertisers. A game theoretical model suggests that the equilibrium bids should follow a cyclical pattern— "escalating" phases interconnected by "collapsing" phases — similar to a pattern of "Edgeworth Cycles" that was suggested by Edgeworth in a different context. I empirically test the validity of the theory.
Essay 3: The Lord of the Ratings
Third party reviews play an important role in many contexts where tangible attributes may not be enough to evaluate products or services. In this paper, I examine the impact of professional and amateur reviews on the box office performance of movies. I establish an econometrics framework to control for the interaction between unobservable quality of movies and the word-of-mouth diffusion process. The framework allows me to estimate the residual impact of online amateur reviews on the demand. The results show significant influence of the valence measure (star ratings) of online reviews. Interestingly, the volume measure (propensity to write) is not significant once quality is controlled, and the analysis suggests that the variance measure (disagreement) does not play a big role in the early weeks. The estimated influence of the valence measure implies that a one point increase in the valence measure can be associated with 4%-10% increase in the box office revenues.