Papers by Kannan Srinivasan
Management Science, Jun 1, 2005
With 12,500 members from nearly 90 countries, INFORMS is the largest international association of... more With 12,500 members from nearly 90 countries, INFORMS is the largest international association of operations research (O.R.) and analytics professionals and students. INFORMS provides unique networking and learning opportunities for individual professionals, and organizations of all types and sizes, to better understand and use O.R. and analytics tools and methods to transform strategic visions and achieve better outcomes. For more information on INFORMS, its publications, membership, or meetings visit
Carolina Digital Repository (University of North Carolina at Chapel Hill), 2003
Each copy of any part of a JSTOR transmission must contain the same copyright notice that appears... more Each copy of any part of a JSTOR transmission must contain the same copyright notice that appears on the screen or printed page of such transmission. JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range of content in a trusted digital archive. We use information technology and tools to increase productivity and facilitate new forms of scholarship. For more information about JSTOR, please contact
arXiv (Cornell University), Sep 7, 2022
Recent AI algorithms are black box models whose decisions are difficult to interpret. eXplainable... more Recent AI algorithms are black box models whose decisions are difficult to interpret. eXplainable AI (XAI) seeks to address lack of AI interpretability and trust by explaining to customers their AI decision, e.g., decision to reject a loan application. The common wisdom is that regulating AI by mandating fully transparent XAI leads to greater social welfare. This paper challenges this notion through a game theoretic model for a policy-maker who maximizes social welfare, firms in a duopoly competition that maximize profits, and heterogenous consumers. The results show that XAI regulation may be redundant. In fact, mandating fully transparent XAI may make firms and customers worse off. This reveals a trade-off between maximizing welfare and receiving explainable AI outputs. We also discuss managerial implications for policy-maker and firms.
The Internet gives incredible opportunities for companies to learn about their consumers. Most ma... more The Internet gives incredible opportunities for companies to learn about their consumers. Most managers view learning as actively asking questions directly to consumers and listening to their responses. Alternatively, managers can passively learn by observing the choices that consumers make. Passive learning techniques include user profiling, collaborative filtering, path analysis, and conjoint analysis. These techniques can be used to extract knowledge from online data sources like purchase transactions, clickstream data, and e-mail. Together active and passive learning can be used to create personalized environments for consumers. Such personalization gives higher value and causes customers to become more loyal and more profitable for businesses.
In 2012, consumers paid $32 billion in overdraft fees, representing the single largest source of ... more In 2012, consumers paid $32 billion in overdraft fees, representing the single largest source of revenue for banks from demand deposit accounts during this period. Owing to consumer attrition caused by overdraft fees and potential government regulations to reform these fees, financial institutions have become motivated to investigate their overdraft fee structures. Banks need to balance the revenue generated from overdraft fees with consumer dissatisfaction and potential churn caused by these fees. However, no empirical research has been conducted to explain consumer responses to overdraft fees or to evaluate alternative pricing and product strategies associated with these fees. In this research, we propose a dynamic structural model with consumer monitoring costs and dissatisfaction associated with overdraft fees. We find that consumers heavily discount the future and potentially overdraw because of impulsive spending. However, we also find that high monitoring costs hinder consume...
Marketing Science, 2019
We explain why dominant firms give away good-quality products for free when network externalities... more We explain why dominant firms give away good-quality products for free when network externalities are present.
Journal of Marketing Research, 2017
Using data on advertising and sales of an innovative piece of golf equipment and the performance ... more Using data on advertising and sales of an innovative piece of golf equipment and the performance of its celebrity endorsers, the authors build a discretechoice model that incorporates consumer awareness and preferences. They empirically investigate how celebrity endorsements affect consumer choices during new product introductions, the roles of planned advertising and unplanned media exposure, and how firms can strategically leverage the unplanned component. Model estimates reveal that wins in professional golf tournaments (which proxy for unplanned television exposure during weekly golf tournaments) affect awareness and that paid planned advertising impacts awareness and preferences. Focusing on Titleist equipment, counterfactual analysis demonstrates that the unplanned media exposure and planned advertising account for 22% and 24% of sales, respectively. The results also suggest that firms would benefit from coordinating the two. The planned portion should serve as a substitute for unplanned media exposure in the early stage and a complement as products age.
A Dynamic Model of Health Insurance Choices and Healthcare Consumption Decisions
Marketing Science, 2017
Chronic diseases, which account for 75% of healthcare expenditure, are of particular importance i... more Chronic diseases, which account for 75% of healthcare expenditure, are of particular importance in trying to understand the rapid growth of healthcare costs over the last few decades. Individuals suffering from chronic diseases can consume three types of services: secondary preventive care, which includes diagnostic tests; primary preventive care, which consists of drugs that help prevent the illness from getting worse; and curative care, which includes surgeries and expensive drugs that provide a quantum boost to the patient’s health. Although the majority of cases can be managed by preventive care, most consumers opt for more expensive curative care that leads to a substantial increase in overall costs. To examine these inefficiencies, we build a model of consumers’ annual medical insurance plan decisions and periodic consumption decisions and apply it to a panel data set. Our results indicate that there exists a sizable segment of consumers who purchase more comprehensive plans t...
SSRN Electronic Journal, 2016
Online Word-of-Mouth has great impact on product sales. Although aggregate data suggests that cus... more Online Word-of-Mouth has great impact on product sales. Although aggregate data suggests that customers read review text rather than relying only on summary statistics, little is known about consumers' review reading behavior and its impact on conversion at the granular level. To fill this research gap, we analyze a comprehensive dataset that tracks individual-level search, review reading, as well as purchase behaviors and achieve two objectives. First, we describe consumers' review reading behaviors. In contrast to what has been found with aggregate data, individual level consumer journey data shows that around 70% of the time, consumers do not read reviews in their online journeys; they are less likely to read reviews for products that are inexpensive and have many reviews. Second, we quantify the causal impact of quantity and content information of reviews read on sales. The identification relies on the variation in the reviews seen by consumers due to newly added reviews. To extract content information, we apply Deep Learning natural language processing models and identify six dimensions of content in the reviews. We find that aesthetics and price content in the reviews significantly affect conversion. Counterfactual simulation suggests that re-ordering review content can have the same effect as a 1.6% price cut for boosting conversion.
Marketing Science, 2015
In this editorial accompanying the Special Section on Marketing Science in Emerging Markets (MSEM... more In this editorial accompanying the Special Section on Marketing Science in Emerging Markets (MSEM), we describe how research on emerging markets can contribute to richer theoretical and substantive understanding of markets and marketing. Such research can also aid in providing managerial guidance on how to operate in emerging markets. We conclude with a description of the selection and review process for the special section and an overview of the four papers being published.
SSRN Electronic Journal, 2015
We examine how competitive firms' pricing and persuasive advertising strategies as well as profit... more We examine how competitive firms' pricing and persuasive advertising strategies as well as profits are affected by changes in consumer preferences, unit production costs, and advertising efficiencies. We highlight three interesting findings from our analyses. First, when firms make endogenous advertising decisions in addition to pricing, a seemingly favorable exogenous shock to one firm alone may lead to a lower equilibrium profit for that firm and a higher profit for its competitor. Second, firms' advertising depends on the degree of product differentiation and firms' optimal advertising responses to an exogenous change are opposite-one firm increases advertising whereas the other reduces it. The firm receiving a favorable shock in product valuation is likely to complement it with additional advertising, especially when advertising is inefficient or expensive. Third, an exogenous shock may reduce the price dispersion in the industry even though it increases the separation between the firms' valuations or perceived qualities. Our results are robust to alternative game structures, heterogeneity in consumer response or exposure to advertising, nonlinearity of consumer taste preferences, and alternative functional forms for advertising costs.
Marketing Science, 2015
This series of discussions presents commentaries and a reply on Zhang et al. [Zhang Y, Bradlow ET... more This series of discussions presents commentaries and a reply on Zhang et al. [Zhang Y, Bradlow ET, Small DS (2015) Predicting customer value using clumpiness: From RFM to RFMC. Marketing Sci. 34(2):195–208].
SSRN Electronic Journal, 2011
Crowdsourcing initiatives are becoming a popular tool for new idea generation for firms. On crowd... more Crowdsourcing initiatives are becoming a popular tool for new idea generation for firms. On crowdsourced ideation initiatives, individuals contribute new product ideas and vote on other's ideas which they would like the firm to implement. The firm then decides which ideas to implement. Although such initiatives are widely adopted in many different industries, they face increasing criticism as the number of ideas generated often decline over time, and the implementation rates (percentage of posted ideas that are implemented by the firm) are quite low raising concerns about their success. We propose a dynamic structural model that illuminates the economic mechanisms shaping individual behavior and outcomes on such initiatives. Through counterfactuals, we identify the impact of several potential interventions on the success of such initiatives. We estimate the model using a rich dataset obtained from IdeaStorm.com, which is a crowdsourced ideation initiative affiliated with Dell. We find that, on Ideastorm.com, individuals tend to significantly underestimate the costs to the firm for implementing their ideas but overestimate the potential of their ideas in the initial stages of the crowdsourcing process. Therefore, the "idea market" is initially overcrowded with ideas that are less likely to be implemented. However, individuals learn about both their abilities to come up with high potential ideas as well as the cost structure of the firm from peer voting on their ideas and the firm's response to contributed ideas. We find that individuals learn rather quickly about their abilities to come up with high potential ideas, but the learning regarding the firm's cost structure is quite slow. Contributors of low potential ideas eventually become inactive, while the high potential idea contributors remain active. As a result, over time, the average potential of generated ideas increases, while the number of ideas contributed decreases. Hence, the decrease in the number of ideas generated represents market efficiency through self-selection rather than its failure. Through counterfactuals, we show that providing more precise cost signals to individuals can accelerate the filtering process. Increasing the total number of ideas to respond to and improving the response speed will lead to more idea contributions. However, failure to distinguish between high and low potential ideas and between high and low ability idea generators lead to the overall potential of the ideas generated to drop significantly.
Quantitative Marketing and Economics, 2008
Recently fixed pricing and auctions have been brought together in a new pricing format that offer... more Recently fixed pricing and auctions have been brought together in a new pricing format that offers bidders the option of prematurely ending an auction at a fixed price. The growing popularity of auctions presents an interesting pricing decision for managers: whether to sell at a fixed price, in a regular auction, or through a buy-it-now auction. This paper studies eBay's buy-it-now auction and answers the following research questions: why is fixed price used at traditional auctions, will buy-it-now increase the seller's profit, how is an optimal price determined, and how is the buy-it-now decision influenced by key factors such as the customer's cost of participating in the auction, the seller's reserve price, and the number of potential customers. Our results show that when customers make endogenous participation decisions according to their participation costs, buy-it-now auctions can increase both customers' utility and sellers' profit. Endogenous participation has important implications for seller's pricing decisions such as price formats and levels. Depending on the level of the posted price, the resulting price format could be either fixed price, buy-it-now auction or pure auction. Therefore, the seller needs to be careful and take into account market conditions when posting a price at auctions. We empirically test the model assumptions and predictions using data collected from eBay.
Marketing Science, 2003
We offer an econometric framework that models consumer's consideration set formation as an ou... more We offer an econometric framework that models consumer's consideration set formation as an outcome of her costly information search behavior. Because frequently purchased products are characterized by frequent price promotions of varying depths of discounts, a consumer faces significant uncertainty about the prices of the brands. The consumers engage in a fixed-sample search strategy that results in their discovering the posted prices of a subset of the available brands. This subset is referred to as the consumer's “consideration set.” The proposed model is estimated using the scanner data set for liquid detergents. Our key empirical results are: (i) consumers zincur significant search costs to discover the posted prices of the brands; (ii) whereas in-store displays and feature ads do not influence consumers' quality perceptions of the brands, they significantly reduce search costs for observing the prices of the brands; (iii) per capita income of consumer's househol...
Invited Commentary—Empirical Analysis of Theory-Based Models in Marketing
Marketing Science, 2006
There has been rapidly growing interest in structural models, and the review paper by Chintagunta... more There has been rapidly growing interest in structural models, and the review paper by Chintagunta et al. (2006) is a timely contribution. The paper identifies the key issues and provides an excellent assessment. A contemporaneous paper by Erdem et al. (2005) also offers a critical examination on some of the issues. My comments are in three areas. First, I selectively revisit some of the key issues in the paper and, in doing so, I hope I shed additional insight on these issues. Second, I discuss some of the recent papers that build on established psychological consumer behaviors. Third, I offer a brief list of potentially significant substantive problems for which structural models will be insightful.
Marketing Science, 2009
In certain product categories, large discount retailers are known to offer shallower assortments ... more In certain product categories, large discount retailers are known to offer shallower assortments than traditional retailers. In this paper, we investigate the competitive incentives for such assortment decisions and the implications for manufacturers' distribution strategies. Our results show that if one retailer has the channel power to determine its assortment first, then it can strategically reduce its assortment by carrying only the popular variety while simultaneously inducing the rival retailer to carry both the specialty and popular varieties. The rival retailer then bears higher assortment costs, which leads to relaxed price competition for the commonly carried popular variety. We also show that when the manufacturer has relative channel power, it chooses alternatively to distribute both product varieties through both retailers. Our analysis suggests, therefore, that when a retailer becomes dominant in the distribution channel, it facilitates retail segmentation into dis...
Marketing Science, 2011
Commercial open source software (COSS) products—privately developed software based on publicly av... more Commercial open source software (COSS) products—privately developed software based on publicly available source code—represent a rapidly growing, multibillion-dollar market. A unique aspect of competition in the COSS market is that many open source licenses require firms to make certain enhancements public, creating an incentive for firms to free ride on the contributions of others. This practice raises a number of puzzling issues. First, why should a firm further develop a product if competitors can freely appropriate these contributions? Second, how does a market based on free riding produce high-quality products? Third, from a public policy perspective, does the mandatory sharing of enhancements raise or lower consumer surplus and industry profits? We develop a two-sided model of competition between COSS firms to address these issues. Our model consists of (1) two firms competing in a vertically differentiated market, in which product quality is a mix of public and private compon...
Marketing Science, 2010
This study explores the implications of rejecting the sealed-bid abstraction proposed by Zeithamm... more This study explores the implications of rejecting the sealed-bid abstraction proposed by Zeithammer and Adams [Zeithammer, R., C. Adams. 2010. The sealed-bid abstraction in online auctions. Marketing Sci. 29(6) 964–987]. Using a conditional order statistic model that relies on the joint distribution of the top two proxy bids of an auction, Zeithammer and Adams show that inexperienced bidders' reactive bidding is the main cause of the rejection of the sealed-bid abstraction. Their empirical study suggests that a large percentage of bidders reactively bid, and there is weak evolutionary pressure for bidders to converge to sealed bidding. We discuss theoretical implications of this rejection and the role of bidder experience, as well as inferences about bidder learning. Tracking an inexperienced bidder's bidding behavior over time, we show that bidders learn and their bidding strategy gravitates toward rational bidding. Potential biases in bidder experience measurement and bidd...
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Papers by Kannan Srinivasan