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Tapping into the pulse of the market : essays on marketing implications of information flows

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dc.contributor.advisor Erik Brynjolfsson. en_US
dc.contributor.author Zhang, Xiaoquan (Xiaoquan Michael) en_US
dc.contributor.other Sloan School of Management. en_US
dc.date.accessioned 2007-04-20T15:57:20Z
dc.date.available 2007-04-20T15:57:20Z
dc.date.copyright 2006 en_US
dc.date.issued 2006 en_US
dc.identifier.uri http://hdl.handle.net/1721.1/37255
dc.description Thesis (Ph. D.)--Massachusetts Institute of Technology, Sloan School of Management, 2006. en_US
dc.description Includes bibliographical references (p. 113-115). en_US
dc.description.abstract 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 dissertation studies the marketing implications of these information flows. Broad as the research question is, my dissertation focuses 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. en_US
dc.description.abstract (cont.) 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 tries to solve this dilemma by decoupling the price of digital goods from the payments to innovators while maintaining budget balance and incentive compatibility. Specifically, by selling digital goods via large bundles the marginal price for consuming an additional good can be made zero for most consumers. Thus efficiency is enhanced. Meanwhile, we show how statistical sampling can be combined with tiered coupons to reveal the individual demands for each of the component goods in such a bundle. This makes it possible to provide accurate payments to creators which spurs further innovation. In our analysis of the proposed mechanism, we find that it can operate with an efficiency loss of less than 0.1. 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. en_US
dc.description.abstract (cont.) 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 (1925) in a different context. I empirically test the validity of the theory. With an empirical framework based on maximum likelihood estimation of latent Markov state switching, I show that Edgeworth price cycles exist in this market. I further examine, on the individual bidder level, how strategic these bidders are. My results suggest that some bidders in this market adjust their bids according to Edgeworth predictions, while others not. Finally, I discuss the important implications of finding such cycles. Essay 3: The Lord of the Ratings. Third-party reviews play an important role in many contexts in which tangible attributes are insufficient to enable consumers 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 first show evidence to suggest that the generally accepted result of "professional critics as predictors of movie performance" may no longer be true. en_US
dc.description.abstract (cont.) Then, with a simple diffusion model, I establish an econometrics framework to control for the interaction between the unobservable quality of movies and the word-of-mouth diffusion process, and thereby estimate the residual impact of online amateur reviews on demand. The results indicate the significant influence of the valence measure (ratings) of online reviews, but their volume measure (propensity to write reviews) is not significant once I control for quality. Furthermore, the analysis suggests that the variance measure (disagreement) of reviews does not play a significant role in the early weeks after a movie's opening. The estimated influence of the valence measure implies that a one-point increase in the valence can be associated with a 4-10% increase in box office revenues. en_US
dc.description.statementofresponsibility by Xiaoquan (Michael) Zhang. en_US
dc.format.extent 115 p. en_US
dc.language.iso eng en_US
dc.publisher Massachusetts Institute of Technology en_US
dc.rights M.I.T. theses are protected by copyright. They may be viewed from this source for any purpose, but reproduction or distribution in any format is prohibited without written permission. See provided URL for inquiries about permission. en_US
dc.rights.uri http://dspace.mit.edu/handle/1721.1/7582
dc.subject Sloan School of Management. en_US
dc.title Tapping into the pulse of the market : essays on marketing implications of information flows en_US
dc.type Thesis en_US
dc.description.degree Ph.D. en_US
dc.contributor.department Sloan School of Management. en_US
dc.identifier.oclc 85836962 en_US


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