Sellers Benefit Research Articles

The effect of online platform maturity on the efficiency of offline industry

The role of platform as an information mediator has been becoming more vital by satisfying buyers’ needs for a reasonable purchase and sellers’ need for more exposure to buyers within the copious information flood. For the platform service provider, increasing the network externality is important to induce both sides while platforms can cause sellers to invest more and create severe competition among sellers, which take a toll on sellers’ surplus. Therefore, this study investigates whether platforms yield benefits for sellers as the platform matures, securing the network externality. Thus, this study divides the seller side industry into 3 periods based on the level of platform maturation. The efficiency in each period is measured using stochastic frontier analysis and efficiencies of each period are compared using meta-frontier analysis. The results show the overall industry efficiency improves with securing the network externality as the platform matures. However, if the individual firm is resistant to innovation, the firm’s efficiency might not be far behind compared to the firm which led the innovation.

Costly search with adverse selection: solicitation curse versus acceleration blessing

We analyze a dynamic trading model of adverse selection where a seller can increase the frequency of strategic price quotes. A low‐quality seller benefits more from trade and, therefore, searches more intensively than a high‐quality seller. This makes a seller's contact carry negative information but a seller's availability become a stronger indicator of high quality. In the stationary environment, the two effects exactly offset each other, and reducing search costs is weakly beneficial to the seller. In the nonstationary environment, the relative strengths of the two effects vary over time, and reducing search costs can be detrimental to the seller.

Online Shopping and Platform Design with Ex Ante Registration Requirements

We study platform design in online markets in which buying involves a (nonmonetary) cost for consumers caused by privacy and security concerns. Firms decide whether to require registration at their website before consumers learn relevant product information. We derive conditions under which a monopoly seller benefits from ex ante registration requirements and demonstrate that the profitability of registration requirements is increased when taking into account the prospect of future purchases or an informational value of consumer registration to the firm. Moreover, we consider the effectiveness of discounts (store credit) as a means to influence the consumers’ registration decision. Finally, we confirm the profitability of ex ante registration requirements in the presence of price competition. The online appendix is available at https://doi.org/10.1287/mnsc.2016.2595 . This paper was accepted by J. Miguel Villas-Boas, marketing.

Mobile social media marketing: a partial least squares structural equation modelling approach

The revolution of mobile technologies has brought various innovations to humankind. Mobile social media marketing (m-SMM) is an emerging innovation in marketing communication channel with benefits for sellers. Therefore, the study determines to recognise the elements contributing to the adoption of m-SMM. The study adapted combined models such as unified theory of acceptance and use of technology (UTAUT), uses and gratification (U&G), diffusion of innovation (DOI) and extended the framework with training and support (TS). The data were derived from 213 Malaysian sellers through self-administered questionnaire and analysed using partial least squares structural equation modelling (PLS-SEM) approach. Results proved to be significant on all constructs tested on behavioural intention (BI) except performance expectancy (PE), effort expectancy (EE) and entertainment (ET). The findings could be useful for scholars, researchers and mobile marketers in the area of m-SMM.

Mobile social media marketing: a partial least squares structural equation modelling approach

The revolution of mobile technologies has brought various innovations to humankind. Mobile social media marketing (m-SMM) is an emerging innovation in marketing communication channel with benefits for sellers. Therefore, the study determines to recognise the elements contributing to the adoption of m-SMM. The study adapted combined models such as unified theory of acceptance and use of technology (UTAUT), uses and gratification (U&G), diffusion of innovation (DOI) and extended the framework with training and support (TS). The data were derived from 213 Malaysian sellers through self-administered questionnaire and analysed using partial least squares structural equation modelling (PLS-SEM) approach. Results proved to be significant on all constructs tested on behavioural intention (BI) except performance expectancy (PE), effort expectancy (EE) and entertainment (ET). The findings could be useful for scholars, researchers and mobile marketers in the area of m-SMM.

Transparency of outside options in bargaining

We study the effect of the transparency of outside options in bilateral bargaining. A seller posts prices to screen a buyer over time, and the buyer may receive an outside option at a random time. We consider two information regimes: one in which the arrival of the outside option is public and one in which the arrival is private. A public arrival of the outside option works as a commitment device that forces the buyer to opt out immediately. This effect leads to a generically unique equilibrium in which the Coase conjecture holds. In contrast, a private arrival of the outside option may lead to additional delay and equilibrium multiplicity. The Coase conjecture fails in some equilibria. The buyer's preference about transparency is time-inconsistent: she prefers to commit to making arrivals public, but she is unwilling to disclose her outside option after the arrival. Moreover, the seller benefits from having the buyer privately observe her outside option.

Bayesian social learning with consumer reviews

We study a market of heterogeneous customers who rationally learn the mean quality of an offered product by observing the reviews of customers who purchased the product earlier in time. The seller, who is equally uniformed about the quality, prices dynamically to maximize her revenue. We find that social learning is successful|agents eventually learning the mean quality of the product. This result holds for an information structure when the sequence of past re- views and prices is observed, and, under some assumptions, even when only aggregate reviews are observed. The latter result hinges on the observation that earlier reviews are more inuential than later one. In addition, we find that under general conditions the seller benefits from social learning ex ante|before knowing the quality of her product. Finally, we draw conclusions on the sellers pricing problem when accounting for social learning. Under some assumptions, we find that lowering the price speeds social learning, in contrast with earlier results on social learning from privately observed signals.

Competitive Shopbots-Mediated Markets

This article considers markets mediated by autonomous self-interested comparison-shopping agents. As in today’s markets, the agents do not charge buyers for their services but rather benefit from payments obtained from sellers upon the execution of a transaction. The agents aim at maximizing their expected benefit, taking into consideration the cost incurred by the search and competition dynamics that arise in the multi-agent setting. This article provides a comprehensive analysis of such models, based on search theory principles. The analysis results in a characterization of the buyers’ and agents’ search strategies in equilibrium. The main result of this article is that the use of self-interested comparison-shopping agents can result in a beneficial equilibrium, where both buyers and sellers benefit, in comparison to the case where buyers control the comparison-shopping agent, and the comparison-shopping agents necessarily do not lose. This, despite the fact that the service is offered for free to buyers and its cost is essentially covered by sellers. The analysis generalizes to any setting where buyers can use self-interested agents capable of effectively performing the search (e.g., evaluating opportunities) on their behalf.

Advance Selling in the Presence of Speculators and Forward‐Looking Consumers

This article examines the pricing policy of a monopolist seller who may sell in advance of consumption in a market that comprises of myopic consumers, forward‐looking consumers, and speculators. The latter group has no consumption value for the goods and is in the market with the sole objective of making a profit by reselling the purchased goods shortly after. Consumers, although homogeneous in terms of their valuations, are different with respect to their perspectives. We show that in an “upward” market where the expected valuation increases over time, the optimal pricing policy is an ex ante “static” one where the seller “prices into the future” and prices the myopic consumers out of the advance market. However, in a “downward” market where the expected valuation decreases over time, the seller adopts a dynamic pricing strategy except for the case when higher initial sales can trigger more demand subsequently and when the downward trend is not too high. In this case, the seller prefers an ex ante “static” pricing strategy and deliberately prices lower initially to sell to speculators. We identify the conditions under which the seller benefits from the existence of speculators in the market. Moreover, although the presence of entry costs is ineffective as an entry deterrence, we determine the conditions under which exit costs can rein in speculative purchase.

DO REAL ESTATE BROKERS ADD VALUE WHEN LISTING SERVICES ARE UNBUNDLED?

This paper measures the effects of real estate brokerage services provided to sellers, other than MLS listings, on the terms and timing of home sales. It is not obvious that sellers benefit from those services. On the one hand, brokers offer potentially useful knowledge and expertise. On the other hand, because the relationship between the homeowner and the broker resembles a classical principal‐agent problem, the broker may not deploy services in ways that promote the seller's interests. Yet as long as valuable MLS listings are bundled with brokerage services, homeowners may use brokers even if the agency costs exceed the benefits of brokers' knowledge and expertise. Thus, quantification of the net value of brokerage services other than MLS listings bears directly on the recent policy debate over the desirability unbundling of MLS listings. We estimate the effect of a seller's decision to use a broker on list prices, selling prices, and speed of sale for a real estate market with an unusual and critical characteristic: it has a single open‐access listing service that is used by essentially all sellers, regardless of whether they employ brokers. Our central finding is that, when listings are not tied to brokerage services, a seller's use of a broker reduces the selling price of the typical home by 5.9% to 7.7%, which indicates that agency costs exceed the advantages of brokers' knowledge and expertise by a wide margin. (JEL D12, R31, L85)

Firm Growth and Reputation Effects in Online Retail Markets

Electronic commerce has become an important platform for business-to-consumer retailing. However, there is very little research of firm growth and dynamic effects of reputation in electronic markets. Using data from Pricegrabber, this paper studies firm growth in light of Gibrat’s Law and reputation effects in the short run and in the long run. Our key finding is that Gibrat’s Law holds in the short run, but small firms grow faster than large firms in the long run. We find also that sellers benefit from good reputations in the short run, but positive reputation effects are muted in the long run.

Price-Matching Guarantees with Endogenous Search: A Market Experiment Approach

Abstract Price-matching guarantees are commonly used by sellers as promises to match the lowest price for an item that a customer can find elsewhere. In this paper, we use a market experiment approach to examine buyer search as well as sellers’ pricing decisions in the presence versus absence of Price-Matching Guarantees. We use student subjects as well as real consumers in an interactive laboratory setting to trade with each other, acting as buyers and sellers. Our findings from two experiments indicate that when searchers’ demand is more elastic than non-searchers, PMGs can result in more intense price competition, even when sellers are symmetric. Price-Matching sellers benefit from converting more consumers into searchers who buy a larger quantity at a lower price. The lower (average) market prices also benefit buyers. These implications should be of great interest to researchers, practitioners, and public policymakers.

Percobaan Ekonomi untuk Mengkaji Pengaruh Informasi serta Jumlah Penjual dan Pembeli dalam Transaksi Pasar

Perfect competition (PPS) is the most ideal market structure because this market system is considered will ensure the realization of activities producing goods and services with very high efficiency compared to other market structures such as monopoly. Due to its benefits for sellers and buyers, economists often wish for the creation of perfect competition. In the pattern of transactions in everyday life, there are many market transactions commonly encountered, such as decentralized systems (DT), and Double Auction (DA). This paper presents the use of experimental methods to study the characteristics of both systems the transaction is in a "perfect competition” (5 sellers and 5 buyers' and market monopoly (with 1 seller and 5 buyers). Responses observed are Contract Price (CP), market efficiency, CP diversity coefficient on the price balance, buyer surplus and seller surplus. From the experimental results can be seen that the average Contract Price (CP) during 5 experimental periods that the value of CP at Perfect Competition Market is smaller than the monopoly market. From efficiency levels between transactions type it can be seen that the Double Auction type of transaction is more efficient than with the Decentralization type of transaction.

Implementing Electronic Invoicing in a Textile and Cleanliness Company – Impacts on Buyer-Seller Relationships

In this paper, we examine the effects of the implementation of electronic invoicing on buyer-seller relationships. We apply the framework by Cannon and Perreault (1999) to analyze the changes in the relationship connectors between the two parties. Drawing on qualitative interview data from a single case study, we find that the implementation of electronic invoicing has a strong impact on the information exchange component as well as on the operational linkages component. In addition, we find that both parties have made adaptations due to the implementation of electronic invoicing. It was also concluded that the switching costs have increased and the commitment improved between the seller and its customers. While the investments in electronic invoicing usually reduce costs for the buyers, the sellers benefit from the implementation of electronic invoicing in creating long-lasting relationships and even dependence between the two parties.

Rainbow Product Ranking for Upgrading E-Commerce

Online product ranking is complicated by conflicting attributes. The authors propose a Rainbow ranking system to solve this problem in e-commerce. This approach extends eBay's one-to-one shopping paradigm to a flexible one with many-to-many transactions. The system demonstrates a 50 to 70 percent transaction increase over skyline and eBay ranking methods. Buyers are allowed personalized selections of commodity products, whereas sellers benefit from both wholesale and retailing online. The Rainbow scheme thus creates a win-win situation for both buyers and sellers in widened e-commerce marketplaces.

Service innovation: Converting Pareto loss into revenue

Consumers' choices depend on the net value they get after taking into account both monetary and non-monetary costs incurred from the purchase. This paper looks at the need to revise the understanding of value relating to price, that is replacing consumer surplus with net value and incorporating price and non-price outlays into the expected outlay to gain a better understanding of buyers' choices and the role of price within that choice. The term Pareto loss was coined to describe the situation where neither the buyer nor the seller benefits from the non-monetary costs incurred by the buyer. The ability to identify Pareto losses in a firm's service enables the firm to innovate, resulting in its ability to increase price, increase demand or improve customer satisfaction. Furthermore, technology has given rise to new distribution channels for selling, thus different Pareto losses exist for different channels and converting such Pareto losses would give rise to many permutations in pricing.

The Value of Information in Auctions with Default Risk

After the close of an auction, the winning bidder may find that he is unable to carry out his bid offer. This paper seeks to determine what measures the seller should take to maximize his share of the surplus when bidders are privately informed about their risk of default. Special attention is paid to the effect of imposing a default penalty, the value of gathering information about each bidder's default risk, and the role of commitment. It is shown that the value of gathering information is negligible when the seller has commitment power and negative when the seller lacks commitment power. When the seller is informed about each bidder's risk, the seller benefits from the ability to commit. However, when the seller is uninformed, he is able to capture nearly all the surplus independent of whether or not he has commitment power.

Imperfect Signals and Product Safety Disclosure: A Shepherd's Dilemma

We study dynamic markets where product safety is unobserved by consumers. Perfect, but costly, audits and an exogenous noisy signal can provide information regarding seller type. Without the noisy signal, sellers do not disclose product safety without auditing. If audits are too expensive, a pooling equilibrium can result in consumption of unsafe goods. Even a noisy quality signal perfectly identifies unsafe goods by giving sellers incentives to disclose type without audits. Introducing a signal helps buyers, but its effect on sellers is ambiguous. Even if sellers benefit, they always suffer from increases in precision.

Electronic Marketplaces and Price Transparency: Strategy, Information Technology, and Success

Electronic marketplaces (EMPs) are widely assumed to increase price transparency and hence lower product prices. Results of empirical studies have been mixed, with several studies showing that product prices have not decreased and others showing that prices have increased in some cases. One explanation is that sellers prefer not to join EMPs with high price transparency, leading highly price transparent EMPs to fail. Therefore, in order to be successful, EMPs might be expected to avoid high price transparency. But that strategy creates a catch-22 for EMPs on the buy side: Why would buyers want to join EMPs in the absence of price transparency and the benefit of lower prices? We argue that successful EMPs must provide compensatory benefits for sellers in the case of high price transparency and for buyers in the case of low price transparency. To understand how EMPs could succeed, regardless of price transparency, we examined the relationships among EMP strategy, price transparency, and performance by analyzing all 19 EMPs that compete by selling a broad range of standard electronics components. We found that all EMPs pursuing a low cost strategy had high price transparency and performed poorly. All EMPs that performed well pursued strategies of differentiation, but, interestingly, not all successful EMPs avoided price transparency: Some EMPs succeeded despite enabling high price transparency. We therefore examined two differentiated EMPs in greater depth-one with high price transparency, the other with low price transparency-to show how they achieved strategic alignment of activities and resources and provided compensatory benefits for their customers.

Transactions vs. Relationships: What Should the Company Emphasize?

The relevance of transactional and relational marketing variables in relational exchanges is now well established in the marketing literature. However, the knowledge about their relative effectiveness and their optimal mix over time remains very sparse. An analytical model is proposed to help determine optimal decision rules for transactional and relational marketing efforts. Some of the main results are as follows: (a) If the seller benefits from the interaction between the transactional marketing effort and buyer’s commitment, then the seller’s optimal decision rules change over time and depend on the level of the partners’commitment. (b) Otherwise, the seller’s optimal decision rules for the two types of marketing are constant over time. (c) The seller should allocate more resources to relational marketing at the beginning of a relational exchange and, later on, should allocate more resources to transactional marketing.