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Service Shutdowns and Compensation: Cash Refunds or Vouchers?
No full textThis paper compares compensation policies from the perspective of providers and policy makers in an environment with the risk of exogenous service shutdowns. Providers tend to push for vouchers as a means of compensation, whereas customers demand cash refunds or generous vouchers. Regulators, at the same time, insist that customers must be granted the right to be reimbursed in money. To address the debate, this paper develops an analytical model to explore how cash refunds and vouchers can be used for recovery from service failures. First, we show that if the regulator does not require offering cash-back as an option, the optimal voucher policy consists of a service replacement with a zero bonus, whereas a positive bonus is optimal if the cash-back option is mandatory. Second, we find that the voucher-only policy can be more profitable and efficient than the hybrid policy that offers customers a choice between cash-back and voucher. Third, we show that the voucher policy leads to the longest survival time under shutdown, followed by the selling as-is policy and then the hybrid policy, whereas the cash-back policy leads to the shortest survival time. Overall, our results show that the expected profit and survival time are two important dimensions for providers to consider when facing the risk of shutdowns, whereas policy makers want to focus on pre-shutdown efficiency, bankruptcy risk, and post-shutdown customer dissatisfaction
Manifesto Shareholder Duacy and Efficient Governance for the XXIst Century Responsible Firm
No full textAt the heart of every firm’s creation, life, and dissolution resides the nature of its governance. Environmental, social, and technological challenges question modern capitalism. What we observe today is an epistemic rupture. This is not simply a new pendulum’s swing in the history of shareholder-management relationships as it has been the case since the 1930s. In reality, we observe a new world emerging that requires adaptation in both corporate governance and competition game. As believers in the union of law, economics, and management disciplines to think anew firm governance, we unite and compose a manifesto to determine who is legitimate to set the principles and purpose pursuant to which firms will be run, how firms will best arbitrate between multiple trade-offs, how they will report their performance, and in which regulatory competition environment they will complete. We define three pillars (shareholder duacy, firm success, and fair value shaing) and deduce five principles for a renewed corporate governance of the XXIst century firm which aim to achieve a fruitful deliberation process among the three governing bodies:1] Shareholders set a purpose-based course, Board of Directors follow and implement it,2] A trustful relationship linking board of directors and management,3] New sharing rules between a firm and its stakeholders,4] Redefining total value generation and performance, and5] A new workable approach to competition
Impact Measurement Tools and Social Value Creation: A Strategic Perspective
No full textRecent research in management has examined how organizations, public or private, can generate positive externalities and minimize negative effects to society and the environment. The purpose of this chapter is to discuss the conceptual bases of the operationalization of social value, with particular emphasis on the merits and limitations of the diverse impact measurement tools that have been used in practice. We start by identifying four channels through which impact measurement connects with social value creation: signaling an impact purpose or orientation, creating management tools to monitor the performance of the target populations, assessing causality, and computing welfare gains across various types of interventions and activities. We then argue that tools related to each channel differ according to three central attributes: precision in the assessment of causal impact, comparability across projects, and measurement cost. We posit that it is difficult to combine high precision, high comparability, and low cost. For instance, tools that seek to monetize social outcomes may increase comparability, but they may also reduce precision in cases where there is no concurrent causal assessment of impact. We then suggest potential research areas to advance the analysis of impact measurement and its connection with management practice, including the need to achieve higher transparency and avoid misleading claims of positive impact, the role of organizational capabilities, the use of measurement techniques in tandem with other complementary organizational practices (such as outcome-based contracts), and dynamic effects arising as organizations progressively learn from their adoption of multiple measurement tools
Chronically Lonely Consumers Avoid Rather than Seek Out Interpersonal Touch-Related Services Because of Lack of Interpersonal Trust and Comfort with Interpersonal Touch
No full textChronic loneliness is a serious social problem that appears to be on the rise, and more so after the global COVID-19 pandemic. Some firms have introduced consumer services aimed at fostering social connection, particularly ones that promote interpersonal touch. Such strategies are presumably based on the intuitive notion that consumers may be attracted to services that provide interpersonal touch, because human touch has been shown to have a number of therapeutic benefits. Based on predictions derived from the evolutionary theory of loneliness, across four studies, we show that the opposite is true. Chronic loneliness is negatively correlated with comfort with interpersonal touch, which in turn translates into reduced rather than increased usage and preference for interpersonal touch-related services and service encounters. We further show that these effects are mediated by the negative effect of chronic loneliness on interpersonal trust, and are attenuated for those who adopt active coping strategies for loneliness, and when interpersonal trust is boosted. These findings suggest that marketers should re-consider their assumptions that lonely consumers will be attracted to services that promote interpersonal touch as a means of social reconnection, unless interpersonal trust can be clearly established
Splitting games over finite sets
No full textThis paper studies zero-sum splitting games with finite sets of posterior beliefs. Players dynamically choose a pair {p t , q t } t of martingales of posteriors in order to control a terminal payoff u(p ∞ , q ∞). We introduce the notion of "Mertens-Zamir transform" of a real-valued matrix and use it to approximate the solution of the Mertens-Zamir system in the unidimensional continuous case. Then, we consider the general case of splitting games with arbitrary contraints and finite sets of posterior beliefs: we show that the value exists by constructing non Markovian ε-optimal strategies and we characterize it as the unique concave-convex function satisfying two new conditions
Decision under Uncertainty
No full textInternational audienceA series of famous examples casts doubt on the standard, Bayesian account of belief and decision in situations of considerable uncertainty. They have spawned a significant literature in economics, and to a lesser extent philosophy. This chapter some of this literature, with an emphasis on the normative issue of rational decision.[Pre-print version: please see the book for the final version, and cite it.
Assortment Optimization with Multi-Item Basket Purchase under the Multivariate MNL Model
No full textAssortment selection is one of the most important decisions faced by retailers. Most existing papers in the literature assume that customers select at most one item out of the offered assortment. While this is valid in some cases, it contradicts practical observations in many shopping experiences, both in online and brick-and-mortar retail, where customers may buy a basket of products instead of a single item. In this paper we incorporate customers' multi-item purchase behavior into the assortment optimization problem. We consider both uncapacitated and capacitated assortment problems under the so-called Multivariate MNL (MVMNL) model, which is one of the most popular multivariate choice models used in the marketing and empirical literature. We first show that the traditional revenue-ordered assortment may not be optimal. Nonetheless, we show that under some mild conditions, a certain variant of this property holds (in the uncapacitated assortment problem) under the MVMNL model---that is, the optimal assortment consists of revenue-ordered local assortments in each group. Finding the optimal assortment is still computationally expensive as the revenue thresholds for different groups cannot be computed separately. We show that the optimization problem under MVMNL is NP-complete even in the setting where there is no interaction among the product categories. Motivated by this result, we develop FPTAS for several variants of (capacitated and uncapacitated) assortment problems under MVMNL. Our analysis reveals that disregarding customers' multi-item purchase behavior in assortment decisions can indeed have a significant negative impact on a retailer’s profitability, demonstrating its practical importance in retail. In particular, we show that our proposed algorithm can improve a retailer's expected total revenues (compared to some benchmark policies that do not properly take into account the impact of customer's multi-item choice behavior in assortment decisions) by around 5-7% for the uncapacitated problems, and around 10-54% for the capacitated problems, both of which are quite significant
Implementation Under Limited Commitment
No full textWe investigate conditions under which a government facing a large set of small private agents can implement its desired outcome when it has only a limited commitment ability to policy actions. We show that, in static contexts, more commitment ability always improves equilibrium outcomes and, in some widely used macro models, an arbitrarily small commitment ability suffices to implement a unique outcome. This contrasts with repeated settings where reputation forces make necessary a more substantial commit- ment ability to obtain a unique outcome and, paradoxically, more commitment ability may lead to worse outcomes and/or to a wider set of equilibria. We derive implications for models of bailouts, inflation bias, and capital taxation
Modeling attitudes towards uncertainty across attributes, sources and time
No full textThis document presents a summary of my research since my PhD Defense in March 2014. My work mainly consists in empirical investigations of preferences in decisions involving uncertainty and/or time. Most empirical studies on preferences under uncertainty focus on a restricted context where probabilities are known and outcomes are immediately-received monetary outcomes. My research extends the scope of decision contexts by exploring the impact of the type of consequence (the attribute), the source of uncertainty, and the timing of resolution of uncertainty and/or reception of outcomes on attitudes towards uncertainty. The document summarizes my main papers contributing to this research direction. It then presents a critical discussion of this work and proposes directions for future research
How Do Recommender Systems Lead to Consumer Purchases? A Causal Mediation Analysis of a Field Experiment
No full textHow do recommender systems induce consumers to buy? Extant research neglects to examine the causal paths through which the use of recommender systems leads to consumer purchases. In this study, we conduct a randomized controlled field experiment on the website of an online book retailer and explore the causal paths by employing the recently developed causal mediation approach. Not surprisingly, the results show that the presence of personalized recommendations increases consumers’ propensity to buy by 12.4% and basket value by 1.7%. More importantly, we find that these positive economic effects are largely mediated through affecting the consumers’ consideration sets. Specifically, the presence of personalized recommendations increases both the size of consumers’ consideration set (breadth) and how they involve with each alternative in consideration (depth). It is the two changes that go on to increase consumers’ propensity to buy and basket value. Furthermore, we find that the proportion of the total effects mediated through the breadth of consideration set is much larger and more significant than that mediated through the depth