Byungjoon Yoo

A Model of Neutral B2B Intermediaries

Business-to-business (B2B) electronic commerce has become an important issue in the debate about electronic commerce. How should the intermediary charge suppliers and buyers to maximize profits from such a marketplace? We analyze a monopolistic B2B marketplace owned by an independent intermediary. The marketplace exhibits two-sided network effects where the value of the marketplace to buyers is dependent on the number of suppliers, and the value to suppliers is dependent on the number of buyers and suppliers. When these two-sided network effects exist, we find that the optimal price for buyers and the fraction of buyers in the electronic market are dependent on the switching cost and the strength of the network effect of both types: buyers and suppliers. The same is true for the optimal price for suppliers and the fraction of suppliers in the electronic market. In other words, the parameters that define the buyers also affect the optimal price for suppliers and the fraction of suppliers in the electronic market, and vice versa. Our results also point to some counterintuitive optimal pricing strategies that depend on the nature of the industry served by the marketplace.

Electronic B2B Marketplaces with Different Ownership Structures

This paper analyzes electronic marketplaces with different ownership structures: biased marketplaces and neutral marketplaces. Biased marketplaces can be either buyer-owned or supplier-owned, whereas neutral marketplaces are owned by independent third parties. We develop a single-period model, with fulfilled expectations equilibrium. The buyers experience positive network effects that are a function of the number of suppliers and the suppliers receive similar positive network effects depending on the number of buyers. We develop a general model with atomistic buyers and suppliers. We find that biased marketplaces set prices to induce greater participation (demand) from both buyers and suppliers compared to a neutral marketplace. This counterintuitive result can be understood in the context of the positive cross-network effects experienced by buyers and suppliers and the added benefit to the owner of a biased marketplace from participating in the marketplace. Biased marketplaces also provide greater social welfare compared to neutral marketplaces.

The Impact of Information in Electronic Auctions: An Analysis of Buy-It-Now Auctions

Our study on the Buy-it-now (BIN) option at electronic auctions examines the impact of information in making electronic transactions more efficient. We show that the BIN price itself works as valuable information, which can improve the performance of auctions even though the option may discourage bidders from participating in auctions because of the possibility of losing the auction when a competing bidder executes the option. With auction data, we empirically show that, even when the BIN option is not executed, the performance of auctions with the BIN option is better than that of auctions without the option. This shows that the BIN price helps bidders get a better estimate of the final auction price, while the negative discouraging impact is not so significant. We suggest that market makers should try their best to provide more information with devices like BIN and to minimize the negative side effects of more information.

Sell by bundle or unit?: Pure bundling versus mixed bundling of information goods

Pure bundling and mixed bundling are two popular pricing strategies for information goods. Pure bundling offers only the product bundle, whereas mixed bundling offers both the bundle and the individual components of the bundle. This paper extends prior research on bundling, which usually assumes consumer heterogeneity along a single attribute of the consumer. However, an individual consumers demand function can be expressed as the interaction of the intercept and the slope of the demand function. We allow for consumer heterogeneity along both these dimensions. The initial willingness-to-pay (IWTP) of a consumer captures the consumers willingness to pay for the first unit of the product while the appetite (APP) of a consumer captures the quantity consumed when the product is free. We find that these two dimensions of heterogeneity have opposing effects. APP heterogeneity encourages the adoption of mixed bundling while IWTP heterogeneity moderates the relationship between APP heterogeneity and the preference for mixed bundling in favor of pure bundling. Our results also help explain why sellers tend to change pricing schemes over time.

The Effect of Culture and Product Categories on the Level of Use of Buy-It-Now (BIN) Auctions by Sellers

While previous studies on buy-it-now (BIN) auctions focus on the impact of BIN format on economic performances, our study focuses on factors that affect the level of use of BIN auctions by sellers. We propose a conceptual model where culture and product categories are two important factors on the level of use of BIN auctions. Our empirical investigation shows that the level of use of BIN auctions can be explained by the Hofstede Cultural Dimensions. While power distance brings a positive impact, uncertainty avoidance and individualism bring negative impacts on the level of use of BIN auctions by sellers of different countries. Our result also shows that the level of use of BIN auctions by sellers increases with the ease of judging product quality. Our results provide valuable insights for marketplace operators to refine their business strategies and market mechanisms for expanding their businesses to overseas markets.

Does popularity decide rankings or do rankings decide popularity? An investigation of ranking mechanism design

We analyze the music charts of an online digital music distributor that displays real time and weekly rankings on its website, and study how ranking policy should be set to maximize the value of its online music ranking service. The existing mechanism considers only streaming and download volumes, while the new ranking mechanism reflects more accurate preferences for popularity, pricing policy, and the slot effect based on the exponential decay of attention. The new ranking model is designed to verify correlations with two kinds of service volumes for popularity, pricing policy, and the slot effect. Slot mechanism design is analyzed in an heuristic way. Our analysis shows that music content sellers maximize benefits by assigning their own music items to the highest-ranking slot, which provides visibility. Also sellers can strategically design the slot size to influence the popularity of music items. Music content buyers gain indirect benefits by getting segmented ranking slots and reducing search costs. Empirical analysis illustrates the features of the online music industry and validates hypotheses constructed around the new ranking model. The results show that the new ranking mechanism is more effective.

Social Dollars in Online Communities: The Effect of Product, User, and Network Characteristics

Online communities have experienced burgeoning popularity over the last decade and have become a key platform for users to share information and interests, and to engage in social interactions. Drawing on the social contagion literature, the authors examine the effect of online social connections on users’ product purchases in an online community. They assess how product, user, and network characteristics influence the social contagion effect in users’ spending behavior. The authors use a unique large-scale data set from a popular massively multiplayer online role-playing game community—consisting of users’ detailed gaming activities, their social connections, and their in-game purchases of functional and hedonic products—to examine the impact of gamers’ social networks on their purchase behavior. The analysis, based on a double-hurdle model that captures gamers’ decisions of playing and spending levels, reveals evidence of “social dollars,” whereby social interaction between gamers in the community increases their in-game product purchases. Interestingly, the results indicate that social influence varies across different types of products. Specifically, the effect of a focal users network ties on his or her spending on hedonic products is greater than the effect of network ties on the focal users spending on functional products. Furthermore, the authors find that user experience negatively moderates social contagion for functional products, whereas it positively moderates contagion for hedonic products. In addition, dense networks enhance contagion over functional product purchases, whereas they mitigate the social influence effect over hedonic product purchases. The authors perform a series of tests and robustness checks to rule out the effect of confounding factors. They supplement their econometric analyses with dynamic matching techniques and estimate average treatment effects. The results of the study have implications for both theory and practice and help provide insights on how managers can monetize social networks and use social information to increase user engagement in online communities.

Which group do you want to travel with? A study of rating differences among groups in online travel reviews

Abstract In this paper, we empirically investigate the effects of different traveling groups’ experiences on travelers’ satisfaction rating for hotels in which they stay. We analyze the rating data of 322 hotels located in New York City from Booking.com, a popular travel website, by using our web crawler. As a result, we find that satisfaction of traveler groups declines in order of couples, friends, family, solo, and business. Couple groups express the highest satisfaction with the hotel they choose while business groups show the lowest satisfaction. By conducting text analysis of 125,076 reviews, we find that such differences in satisfaction stem from travelers’ preferences regarding features.

An analysis of popularity information effects

Analyzing empirically the effects of the popularity information on sales.Presenting the results from controlled field experiments in an online store on Tmall.Identifying causality using difference-in-differences and propensity score matching.Presenting the hit list effects varying over subgroups of price and category. Popularity information is identified as one of the important factors for businesses in the online marketplace and is normally expected to strengthen sales performance. At the same time, the effects of popularity information are found to vary across product types. In this study, we attempt to identify the effects of popularity information on product sales through an analysis of the subgroups of category and price. Two sequential field experiments in an online apparel store on Alibabas Tmall, the most dominant online brand marketplace in China, are conducted to capture the causal effects of the popularity information on sales. After observing the possible existence of popularity information effects through a pilot test of 17 products, we conduct the main experiment with 290 products, recording the daily sales for each by posting selected products on the hit list. The difference-in-differences method and propensity score matching are used to analyze the effects. The results show that once the products are displayed on the hit list, product sales increase by an average of 1.3units per day. One subgroup of the niche product category is found to be influenced more significantly by hit list information than are other subgroups in the broad appeal category. Furthermore, after the hit list information is presented, more units of mid-price products are likely to be sold than units of products with high and low prices.

Will Insta-Business be the Electronic Contemporary Bazaar?: An Exploratory Analysis on Electronic Commerce in Kuwait

Electronic Commerce is shaping many of our daily tasks and, with the introduction to new aspects of social interaction on the net, a new phenomenon is emerging in the arena of e-commerce known as social commerce. Within this new trend in social commerce, Instagram, a simple yet powerful app, is now playing a new role in combining both the advantage of social networks with its design features and capabilities. In this paper we examine how a simple yet powerful picture-based social network app like Instagram is shaping the electronic commerce arena globally, using Kuwait as an example. Instagram has become a major part of most Kuwaiti individual lives, for in Kuwait Instagram is currently an hourly stop instead of a daily one. Instagram transformed from being a voyeuristic tool to becoming a handy shopping outlet. Everything from exotic pets to home car washing and detailing service can be found on Instagram, whose usage in Kuwait is now ubiquitous: from the old widower selling home-cooked traditional dishes to multimillion real estate investment companies. In this paper we explore the factors and barriers that helped Instagram become a social commerce outlet for many users in Kuwait and around the world.