Price dispersion of a homogeneous product reflects market efficiency and has significant implications on sellers' pricing strategies. Two different perspectives, the supply and demand perspectives, can be adopted to examine this phenomenon. The former focuses on listing prices posted by sellers, and the latter uses transaction prices that consumers pay to obtain the product. However, no prior research has systematically compared both perspectives, and it is unclear whether different perspectives will generate different insights. Using a unique data set collected from an online market, we find that the dispersion of listing prices is three times higher than the dispersion of transaction prices. More interestingly, the drivers of price dispersion differ significantly between listing and transaction data. The dispersion of listing prices reflects sellers' perception of market environment and their pricing strategies, and it may not fully capture consumer behavior manifested through the variation of transaction prices. Our study indicates that the difference in perspectives taken on the online prices yields different results as to their dispersion. > >
Product sales via sponsored keyword advertising on search engines rely on an effective selection of keywords that describe the offerings. In this study, we consider both the direct sales of the advertised products and indirect sales (i.e., cross-selling) of other products, and examine how specific keywords and general keywords influence these two types of sales differently. We also examine how the cross-selling effects may vary across different types of products (main products and accessories). Our results suggest that the use of specific keywords leans toward improving the direct sales of advertised products, while the use of general keywords leans toward improving the indirect sales of other products. The contribution of keywords to indirect sales is influenced by product type. For main products, the use of specific keywords generates a higher marginal contribution to indirect sales than that of general keywords. For accessory products, the use of general keywords generates a higher marginal contribution to indirect sales than that of specific keywords. The key implication of this study is that sellers focusing on different types of sales (direct or indirect sales) or products (main or accessory products) should consider using different types of keywords in search engine advertising to drive sales.
Firms face significant risk when they adopt digital supply chain systems to transact and coordinate with their partners. Drawn upon modular systems theory, this study proposes that system modularity mitigates the risk of adopting digital supply chain systems and therefore motivates firms to digitize more of their supply chain operations. The study theorizes how the risk-mitigating effect of system modularity can be enhanced by the allocation of decision rights to the IT (information technology) unit. The main logic is that IT managers with more domain IT knowledge can better utilize their knowledge in decision making to achieve effective system modularity. We tested these theoretical propositions using a survey study of Chinese companies and found empirical support. We also found that the allocation of decision rights to the IT unit does not directly mitigate the perceived risk of digital supply chain systems, which highlights the role of decision allocation to the IT unit as a key moderator in risk mitigation. The study generates theoretical and practical implications on how IT governance and system modularity may jointly mitigate risk and foster supply chain digitization.
The interdependency of information security risks often induces firms to invest inefficiently in information technology security management. Cyberinsurance has been proposed as a promising solution to help firms optimize security spending. However, cyberinsurance is ineffective in addressing the investment inefficiency caused by risk interdependency. In this paper, we examine two alternative risk management approaches: risk pooling arrangements (RPAs) and managed security services (MSSs). We show that firms can use an RPA as a complement to cyberinsurance to address the overinvestment issue caused by negative externalities of security investments; however, the adoption of an RPA is not incentive-compatible for firms when the security investments generate positive externalities. We then show that the MSS provider serving multiple firms can internalize the externalities of security investments and mitigate the security investment inefficiency. As a result of risk interdependency, collective outsourcing arises as an equilibrium only when the total number of firms is small.
Advances in information technologies enable firms to collect detailed consumer data and target individual consumers with tailored ads. Consumer data are among the most valuable assets that firms own. An interesting phenomenon is that competing firms often trade their consumer data with each other. Based on a common-value all-pay auction framework, this paper studies the advertising competition between two firms that target the same consumer but are asymmetrically informed about the consumer value. We characterize firms' equilibrium competition strategies. The results show that better consumer information does not help the better-informed firm save the advertising expenditure but does enable it to reap a higher expected profit in competition. Sharing individual-level consumer data may soften the competition even though firms compete head-to-head for the same consumer. We also find that the better-informed firm may sell its data to its competitor but never voluntarily shares it with its competitor.