Ramesh Sankaranarayanan

Incorporating contextual information in recommender systems using a multidimensional approach

The article presents a multidimensional (MD) approach to recommender systems that can provide recommendations based on additional contextual information besides the typical information on users and items used in most of the current recommender systems. This approach supports multiple dimensions, profiling information, and hierarchical aggregation of recommendations. The article also presents a multidimensional rating estimation method capable of selecting two-dimensional segments of ratings pertinent to the recommendation context and applying standard collaborative filtering or other traditional two-dimensional rating estimation techniques to these segments. A comparison of the multidimensional and two-dimensional rating estimation approaches is made, and the tradeoffs between the two are studied. Moreover, the article introduces a combined rating estimation method, which identifies the situations where the MD approach outperforms the standard two-dimensional approach and uses the MD approach in those situations and the standard two-dimensional approach elsewhere. Finally, the article presents a pilot empirical study of the combined approach, using a multidimensional movie recommender system that was developed for implementing this approach and testing its performance.

Blog, Blogger, and the Firm: Can Negative Employee Posts Lead to Positive Outcomes?

Consumer-generated media, particularly blogs, can help companies increase the visibility of their products without spending millions of dollars in advertising. Although a number of companies realize the potential of blogs and encourage their employees to blog, a good chunk of them are skeptical about losing control over this new media. Companies fear that employees may write negative things about them and that this may bring significant reputation loss. Overall, companies show mixed response toward negative posts on employee blogs---some companies show complete aversion; others allow some negative posts. Such mixed reactions toward negative posts motivated us to probe for any positive aspects of negative posts. In particular, we investigate the relationship between negative posts and readership of an employee blog. In contrast to the popular perception, our results reveal a potential positive aspect of negative posts. Our analysis suggests that negative posts act as catalyst and can exponentially increase the readership of employee blogs, suggesting that companies should permit employees to make negative posts. Because employees typically write few negative posts and largely write positive posts, the increase in readership of employee blogs generally should be enough to offset the negative effect of few negative posts. Therefore, not restraining negative posts to increase readership should be a good strategy. This raises a logical question: what should a firms policy be regarding employee blogging? For exposition, we suggest an analytical framework using our empirical model.

Competitive Behavior-Based Price Discrimination for Software Upgrades

The introduction of product upgrades in a competitive environment is commonly observed in the software industry. When introducing a new product, a software vendor may employ behavior-based price discrimination (BBPD) by offering a discount over its market price to entice existing customers of the competitor. This type of pricing is referred to as competitive upgrade discount pricing and is possible because the vendor can use proof of purchase of a competitors product as credible evidence to offer the discount. At the same time, the competitor may offer a discount to its own previous customers in order to induce them to buy its upgrade. We formulate a game-theoretic model involving an incumbent and entrant where both firms can offer discounts to existing customers of the incumbent. Although several equilibrium possibilities exist, we establish that an equilibrium with competitive upgrade discount pricing is observed only for a unique market structure and a corresponding unique set of prices. In this equilibrium, instead of leveraging its first mover advantage, the incumbent cedes market share to the entrant. Furthermore, the profits of both the incumbent and the entrant reduce with switching costs. This implies that the use of BBPD has product design implications because firms may influence the switching costs between their products by making appropriate compatibility decisions. In addition, lower switching costs result in reduced consumer surplus. Hence, a social planner may want to increase switching costs. The resulting policy implications are different from those prevalent in other industries such as mobile telecommunications where the regulators reduced switching costs by enforcing number portability.

To theme or not to theme: Can theme strength be the music industry's killer app?

Music bundling has been the mainstay of the music industry for decades. Record companies and producers have selected bundles of songs and sold them as albums, their most important revenue source. Digitization and piracy of music have threatened this standard business model with consumers increasingly purchasing music a la carte. In this study, we analyze a strategy for designing successful albums through using new concepts of themed bundling. Thematic bundling can lower consumer search costs and dampen the incentive to pirate music, and can potentially be a win-win strategy for both consumers and music companies. Unlike prior work in economics on bundling which typically seeks to determine the optimal price, bundle size and composition, we focus on a restricted bundling problem, since the price of the bundled product (i.e. an album) is generally set over a narrow range as is the number of items (i.e. songs) in the bundle. Our key results and insights are derived using analytic modeling and extended through numerical analysis. In addition, our key findings are supported by our empirical analysis of music album chart performance.

Online keyword based advertising: Impact of ad impressions on own-channel and cross-channel click-through rates

Keyword-based ads are becoming the dominant form of advertising online as they enable customization and tailoring of messages relevant to potential consumers. Two prominent channels within this sphere are the search channel and the content channel. We empirically examine the interaction between these two channels. Our results indicate significant cannibalization across the two channels as well as significant diminishing returns to impressions within each channel. This suggests that under certain conditions both channels may need to be used to optimize returns to advertising both for advertisers and service providers such as Google. Our game theoretic analysis which builds upon our empirical findings reveals that for intermediate budget values it is optimal to use both channels whereas for very low (very high) budget values it is optimal to use only the content (search) channel. Further as budget increases the advertiser should offer more for ads displayed on the search channel to optimally incentivize the service provider.

Platform-based information goods: The economics of exclusivity

This paper explores the role of exclusive contracting between vendors of platforms (such as video game consoles) and vendors of complements (such as video games). The main questions of interest are: When do we observe complement exclusivity, and what is the impact of exclusive contracting on prices, profits and efficiency? We answer these questions by developing a model of competition between platforms in an industry with indirect network effects, and deriving some insightful analytical and numerical results. While complement vendors have natural incentives to be available on all platforms, we establish conditions under which they can be contracted for exclusive supply on a single platform. Exclusivity eases competition in the platform market and can significantly help increase a platforms adoption. However, exclusivity choice presents a key trade-off for the complement vendor-a larger platform offers access to a larger market, but also more competition, as compared to a smaller platform. We find that exclusivity is more likely in the nascent and very mature stages of the platform market, whereas non-exclusivity is more likely in the intermediate stages. Interestingly, our numerical analysis suggests that a complement vendor might sometimes prefer being exclusive on the smaller platform, rather than the larger one.

Digital goods and markets: Emerging issues and challenges

This research commentary examines the changing landscape of digital goods, and discusses important emerging issues for IS researchers to explore. We begin with a discussion of the major technological milestones that have shaped digital goods industries such as music, movies, software, books, video games, and recently emerging digital goods. Our emphasis is on economic and legal issues, rather than on design science or sociological issues. We explore how research has been influenced by the major technological milestones and discuss the major findings of prior research. Based on this, we offer a roadmap for future researchers to explore the emergent changes in the digital goods arena, covering different aspects of digital goods industries such as risk management, value chain, legal aspects, transnational and cross-cultural issues.

Electronic Markets, Search Costs, and Firm Boundaries

We study how interorganizational systems (IOS) such as electronic markets and other enabling information technologies that facilitate broader interfirm transactions affect the extent of outsourcing in firms. We do so by modeling firms in a three-tier value chain consisting of buyers, intermediaries, and suppliers, who can interact using IOS that lower the procurement search costs associated with finding appropriate trading partners. In the context of complex business-to-business (B2B) search, we study how decreasing search costs affect a firms decision to insource or outsource the procurement function, depending on whether the search process is information intensive or communication intensive. Variation in search costs changes the transaction costs of interaction between firms, as well as the contracting costs associated with outsourcing, owing to changes in the costs of moral hazard for delegated search. We study these effects in a new model that integrates search theory into the principal-agent framework, and establish that the optimal outsourcing contract has a simple “all or nothing” performance-based structure under fairly general assumptions. Our model predicts that when B2B search is information intensive, IOS will facilitate an increase in outsourcing, market-based transactions, and a reduction in the vertical scope of extended enterprises. In contrast, when B2B search is primarily communication intensive, IOS will lead to tighter integration and an increase in the vertical scope of the extended enterprise. Our research suggests that the nature of the information technologies and of the business activities supported by IOS are crucial determinants of the organizational and industry changes they induce, and our results have important implications for a variety of industries in which both technological and agency issues will influence the eventual success of global IT-facilitated extended enterprise initiatives.