Necati Tereyağoğlu

For products developed through a collaboration of specialized groups, success requires craft and engineering ingenuity from designers who focus on specific attributes, coupled with synchronized coordination between various design groups. Although shared work experience in the team—or familiarity—can improve coordination, it can deter creativity. We empirically study the impact of team familiarity on market performance of products by focusing on product development in the video game industry by coupling a granular database of development credits with sales data for video games. Although familiarity among coordinators has a positive effect on performance, familiarity among designers has a negative effect. Further, the positive (negative) effect of familiarity among coordinators (designers) is present even if familiarity is built through roles other than coordination (design). Overall, team familiarity is associated with a decrease in the product's market performance. Our results suggest that infusing fluidity in design roles and maintaining stability in coordination roles could improve the performance of new products.

Although variable pricing enables sports teams to respond to changing demand across games, reports point to somewhat limited implementation. In this paper, we study the implications of a switch to variable pricing on the primary and resale ticket markets using quasi-experimental data from the National Football League. Applying a difference-in-differences technique with propensity score weighting, we first show that the adoption of variable pricing increases primary market ticket sales by 1.59% per game. We then explore the mechanism behind this positive impact. We find that lower prices for the less attractive games are well received by customers, and customers do not have an unfavorable response to higher prices for the more attractive games. Our analysis of the customers’ activities in the resale market shows that the minimum resale market prices increase for the more attractive games following the switch to variable pricing. This analysis provides evidence for the increase in the option value created by the resale market and explains the positive response to higher prices for the more attractive games. Finally, we investigate when variable pricing is likely to be the most effective. We find that variable pricing has greater success in team hometowns with lower income levels and higher income diversity, and creating more game tiers in variable pricing leads to higher sales.This paper was accepted by Gabriel Weintraub, revenue management and market analytics.Supplemental Material: The data files and online appendix are available at https://doi.org/10.1287/mnsc.2022.4588 .

Problem definition: We study the economic rationale for certified pre-owned (CPO) programs and characterize the mechanism through which they influence secondary markets to create value for durable goods firms and consumers. Academic/practical relevance: Our study on understanding the market impact of CPO programs is highly relevant for industry given their prevalence in practice. Our work also contributes to the adverse selection literature in the context of the “lemons problem” by uncovering the mechanism underpinning CPO programs and how they improve market efficiency. Methodology: We use a game-theoretic durable goods model that captures CPO program features to identify how CPO programs improve market efficiency. We further investigate how CPO program size, as determined by program qualification criteria, plays a role in improving market efficiency. Results: We show that the mechanism underpinning CPO programs consists of two mutually reinforcing effects: a more effective segmentation of used product buyers through high- and low-quality product differentiation and a higher trade-in discount to used product owners. The former effect generates a higher revenue, which, in turn, allows for a higher trade-in discount. This translates to more high-quality products being traded in, more new products being purchased, and more used products being sold in the secondary market (i.e., increased market efficiency). We also show that these two effects are strengthened as the CPO program size increases. Finally, we test hypotheses deriving from our theoretical results in the context of the U.S. automotive industry. Our empirical findings are consistent with the conclusions of our theoretical work. Managerial implications: Durable goods firms can proactively manage their CPO programs by appropriately setting trade-in discounts and managing price discrimination between CPO and non-CPO products. CPO program qualification criteria can be used to alter CPO program size and, hence, the level of market efficiency improvement induced by these choices. Supplemental Material: The online appendix is available at https://doi.org/10.1287/msom.2022.1176 .

Problem definition: Inspired by variations in warranty length specifications in the U.S. automotive industry, we study how a durable good producer’s product warranty length choice relates to its product reliability. We introduce a producer’s secondary market interference (e.g., buyback of used products) as a possible driver for such variations observed in practice. Methodology/results: Using an analytical model of a monopolist finitely durable good producer, we first study the interaction between product reliability and the producer’s warranty length choice in the presence of secondary market interference. This analysis suggests that a durable good producer’s warranty length offering is U-shaped in its product reliability. That is, only producers with sufficiently low or high product reliability benefit from offering longer product warranties. Otherwise, a short warranty offering is preferred. We show that this result is driven by a producer’s strategic use of secondary market interference. We then test the predictions from these results in the automotive industry. An exploratory analysis of U.S. automotive industry data also suggests a U-shaped association between warranty offerings and product reliability, and points to the theoretically predicted dependency between producers’ secondary market interference and warranty length. Managerial implications: Producers with sufficiently high product reliability will benefit from longer warranties, as longer warranty coverage has marginal impact on their new product demand cannibalization by used products and warranty fulfillment costs. In contrast, producers with sufficiently low product reliability can use secondary market interference to jointly avoid the cannibalization from used products and high warranty fulfilment costs associated with long warranties for low reliability products. Producers with moderate product reliability, on the other hand, cannot leverage secondary market interference as effectively, and benefit more from shorter warranty offerings.

Traditional analyses of firms that compete in multiple markets examine settings in which firms sell directly to consumers. However, in many industries, firms sell their products through intermediaries. Importantly, these firms usually have common intermediaries, and the degree of this overlap varies across markets and over time. We empirically study the effect of the asymmetry of distribution channel relationship overlap across markets on retail prices. An increase in distribution channel relationship asymmetry can provide firms with an enhanced ability to punish rivals through shared distribution relationships in addition to shared markets. This increased ability to punish can then soften competition (increase prices), that is, the mutual forbearance mechanism. However, an increase in distribution channel relationship asymmetry can also make it difficult for firms to pursue similar goals with their rivals, and thus weakening the potential for tacit coordination. This can then intensify competition (reduce prices), that is, the goal congruence mechanism. Due to these opposing mechanisms, the net impact of distribution channel relationship asymmetry on competitive intensity is not clear. Using extensive scanner panel data for multiple product categories, on average, we find that an increase in distribution channel relationship asymmetry results in higher retail prices. Consistent with the mutual forbearance mechanism, this effect becomes more positive (or less negative) when (i) the manufacturer size or the number of retail stores in the focal market increases or (ii) when the manufacturer is a public (vs. private) firm. Conversely, the effect becomes less positive when the strategic similarity among manufacturers increases, in line with the goal congruence mechanism.

Firms in several industries, such as medicine, apparel, and publishing, must jointly determine the price and production quantity of their products well in advance of the selling season. Normative prescriptions to solve this problem have generally ignored behavioral aspects of decision making while behavioral research has paid limited attention to interdependent, multidimensional decisions. We experimentally examine subjects’ performance when they jointly determine price and quantities. We find that subjects systematically deviate from the theoretically optimal price and quantity levels. Contrary to expectation, decomposing the price and quantity decisions does not improve subjects’ decisions. In a series of follow-up experiments, we isolate the effects of (a) interdependence between decisions and (b) demand uncertainty. We show that decisions improve by making subjects more aware of interdependence and by reducing the uncertainty. However, reducing complexity through partial automation of the interdependent dimensions does not improve the decisions made by subjects. We also find that subjects anchor on cost for price decisions and on mean demand potential for quantity decisions, thereby explaining the consistent underpricing and overordering behavior across experiments. This paper was accepted by Vishal Gaur, operations management.

We study the prevalence of multiattribute loss aversion and reference effects in a revenue management setting based on data of individual-level purchases over a series of concert performances. The reference dependence that drives consumer choice is not only based on the price but also on observed sales (as a fraction of the seating capacity) during their past visits. We find that consumers suffer from loss aversion on both prices and seats sold: consumers incur significant utility loss when prices are above their references or when the actual seat sales are lower than their references. We suggest pricing policies that can address consumer decisions driven by such reference dependence and loss aversion. This paper was accepted by Vishal Gaur, operations management.

We examine the value of price commitment in a non‐profit organization using individual‐level purchases over a series of concert performances. To decide on a pricing policy, the performing arts organization must be able to accurately measure when each ticket will be sold and what type of audience will purchase the tickets for each performance. We use a competing hazards framework to model the timing of ticket purchases when customer segments differ in their valuations and arrival times. We show that the customer purchase likelihoods change based on the prices observed earlier in the season. Hence, price commitment can aid in improving sales, revenues, and customer visits. In particular, we show that price commitment to a decreasing monotone discount policy can improve the revenues in the range 2.1%–6.7% per concert.

Consumers often purchase goods that are “hard to find” to conspicuously display their exclusivity and social status. Firms that produce such conspicuously consumed goods such as designer apparel, fashion goods, jewelry, etc., often face challenges in making optimal pricing and production decisions. Such firms are confronted with precipitous trade-off between high sales volume and high margins, because of the highly uncertain market demand, strategic consumer behavior, and the display of conspicuous consumption. In this paper, we propose a model that addresses pricing and production decisions for a firm, using the rational expectations framework. We show that, in equilibrium, firms may offer high availability of goods despite the presence of conspicuous consumption. We show that scarcity strategies are harder to adopt as demand variability increases, and we provide conditions under which scarcity strategies could be successfully adopted to improve profits. Finally, to credibly commit to scarcity strategy, we show that firms can adopt sourcing strategies, such as sourcing from an expensive production location/supplier or using expensive raw materials. This paper was accepted by Preyas Desai and Pradeep Chintagunta, marketing.