Manag. Sci.Pub Date : 2023-09-28DOI: 10.1287/mnsc.2023.00930
Sungsik Park, Woochoel Shin, Jinhong Xie
{"title":"Disclosure in Incentivized Reviews: Does It Protect Consumers?","authors":"Sungsik Park, Woochoel Shin, Jinhong Xie","doi":"10.1287/mnsc.2023.00930","DOIUrl":"https://doi.org/10.1287/mnsc.2023.00930","url":null,"abstract":"The well-documented rating inflation of incentivized reviews (IRs) can mislead consumers into choosing a product that they would otherwise not buy. To protect consumers from this undesirable influence, the U.S. Federal Trade Commission recommends that reviewers conspicuously disclose any material connection they may have with sellers. In theory, such disclosures safeguard consumers by motivating reviewers to be truthful and inducing consumers to discount inflated IR ratings. Our research finds, however, that IR disclosure accomplishes neither. Specifically, our empirical analysis of consumer reviews on Amazon reveals that, even with disclosure, (1) rating inflation of IRs remains, and (2) this inflation boosts sales at consumers’ expense. Finally, we propose an alternative approach to eliminate rating inflation of IRs and empirically demonstrate its effectiveness. These findings have important implications for consumers, firms, and ongoing policy discussions around IRs. This paper was accepted by Duncan Simester, marketing. Funding: S. Park gratefully acknowledges financial support from the Darla Moore School of Business Research Grant Program at the University of South Carolina. W. Shin gratefully acknowledges financial support from the Brian R. Gamache Endowed Professorship at the University of Florida. J. Xie gratefully acknowledges financial support from the JCPenney Endowed Professorship at the University of Florida. Supplemental Material: The online appendix and data are available at https://doi.org/10.1287/mnsc.2023.00930 .","PeriodicalId":18208,"journal":{"name":"Manag. Sci.","volume":"9 1","pages":"7009-7021"},"PeriodicalIF":0.0,"publicationDate":"2023-09-28","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"139334913","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Manag. Sci.Pub Date : 2023-09-27DOI: 10.1287/mnsc.2022.04139
Mark A. Chen, Shuting Sophia Hu, Joanna Wang, Qinxi Wu
{"title":"Can Blockchain Technology Help Overcome Contractual Incompleteness? Evidence from State Laws","authors":"Mark A. Chen, Shuting Sophia Hu, Joanna Wang, Qinxi Wu","doi":"10.1287/mnsc.2022.04139","DOIUrl":"https://doi.org/10.1287/mnsc.2022.04139","url":null,"abstract":"Real-world contractual agreements between firms are often incomplete, leading to suboptimal investment and loss of value in supply chain relationships. To what extent can blockchain technology help alleviate problems arising from contractual incompleteness? We examine this issue by exploiting a quasi-natural experiment based on the staggered adoption of U.S. state laws that increased firms’ in-state ability to develop, adopt, and use blockchain technology. We find that, after exposure to a pro-blockchain law, firms with greater asset specificity exhibit more positive changes to Tobin’s Q, research and development, and blockchain-related innovation. Also, such firms appear to rely less on vertical integration, form more strategic alliances, and shift their emphasis to less geographically proximate customers. Overall, our results suggest that blockchain technology can help firms remedy constraints and inefficiencies arising from contractual incompleteness. This paper has been accepted by Lin William Cong, Special Issue of Management Science: Blockchains and crypto economics. Supplemental Material: The data files and online appendix are available at https://doi.org/10.1287/mnsc.2022.04139 .","PeriodicalId":18208,"journal":{"name":"Manag. Sci.","volume":"45 1","pages":"6540-6567"},"PeriodicalIF":0.0,"publicationDate":"2023-09-27","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"139335574","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Manag. Sci.Pub Date : 2023-09-26DOI: 10.1287/mnsc.2023.4917
Kirill Shakhnov, Luana Zaccaria
{"title":"Utility Tokens, Network Effects, and Pricing Power","authors":"Kirill Shakhnov, Luana Zaccaria","doi":"10.1287/mnsc.2023.4917","DOIUrl":"https://doi.org/10.1287/mnsc.2023.4917","url":null,"abstract":"We examine digital product markets in which consumers are heterogeneous in their propensity to actively interact with other users and valuations increase with the share of active users (e.g., social network platforms). We propose a model in which entrepreneurs can issue digital claims (tokens) to promise exclusive access to benefits that specifically enhance the utility of active users. This allows entrepreneurs to extract consumer surplus through price discrimination. Because there is an incentive to renege on the “exclusivity” promise ex post and expand the network of active users, the credibility of this commitment resides in a costly technology (blockchain) that embeds automatic contracts in the tokens sold and limits entrepreneurial discretion. We show that the profitability of token-based sales increases with entrepreneurial ability and the intensity of network effects. This paper was accepted by Will Cong, Special Issue of Management Science: Blockchains and crypto economics. Supplemental Material: The internet appendix and data are available at https://doi.org/10.1287/mnsc.2023.4917 .","PeriodicalId":18208,"journal":{"name":"Manag. Sci.","volume":"162 1","pages":"6625-6640"},"PeriodicalIF":0.0,"publicationDate":"2023-09-26","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"139335990","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Manag. Sci.Pub Date : 2023-09-12DOI: 10.1287/mnsc.2021.02076
Jingxing Gan, Gerry Tsoukalas, Serguei Netessine
{"title":"Decentralized Platforms: Governance, Tokenomics, and ICO Design","authors":"Jingxing Gan, Gerry Tsoukalas, Serguei Netessine","doi":"10.1287/mnsc.2021.02076","DOIUrl":"https://doi.org/10.1287/mnsc.2021.02076","url":null,"abstract":"Traditional two-sided platforms (e.g., Amazon, Uber) rely primarily on commission contracts to generate revenues and fuel growth, whereas their decentralized counterparts (e.g., Uniswap, Filecoin) often forego these in favor of token retention. What economics underpin this choice? We show that with properly designed initial coin offerings (ICOs), both mechanisms can independently alleviate market failures at the initial fundraising stage and incentivize long-term platform building. However, they achieve this in different ways. Although commission contracts often lead to higher profits for founders, token retention leads to higher service levels, benefiting the users and service providers. In essence, token retention surrenders a fraction of earnings to better align with the tenets of decentralized governance. Combining both mechanisms can add value, but only in relatively limited cases. These findings offer guidance and a possible rationale for why platforms may want to favor one mechanism over the other or use both. This paper was accepted by Will Cong, Special Issue of Management Science: Blockchains and crypto economics. Funding: This work is funded by the Mack Institute at the Wharton School, University of Pennsylvania. Supplemental Material: The online appendix is available at https://doi.org/10.1287/mnsc.2021.02076 .","PeriodicalId":18208,"journal":{"name":"Manag. Sci.","volume":"884 1","pages":"6667-6683"},"PeriodicalIF":0.0,"publicationDate":"2023-09-12","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"139340810","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Manag. Sci.Pub Date : 2023-09-11DOI: 10.1287/mnsc.2021.02802
Andreas Park
{"title":"The Conceptual Flaws of Decentralized Automated Market Making","authors":"Andreas Park","doi":"10.1287/mnsc.2021.02802","DOIUrl":"https://doi.org/10.1287/mnsc.2021.02802","url":null,"abstract":"Decentralized exchanges (DEXs) are an essential component of the nascent decentralized finance (DeFi) ecosystem. The most common DEXs are so-called automated market makers (AMMs): smart contracts that pool liquidity and process trades as atomic swaps of tokens. AMMs price transactions with a deterministic liquidity invariance rule that only uses the AMM’s token deposits as inputs and that has no precedent in traditional finance. Yet, in the context of transparent and open blockchain operations, any liquidity invariance pricing function allows so-called sandwich attacks (akin to front running) that increase the cost of trading and threaten the long-term viability of the DeFi ecosystem. Invariance pricing is also not regret free. Linear pricing rules have similar problems except for uniform pricing, which has regret-free prices and limits sandwich attack profits but which invites excessive order splitting. Comparing trading costs using a model of liquidity provision, constant product pricing is often cheaper except when the variance of the underlying asset is small or when the order is large. This paper was accepted by Will Cong, special issue of Management Science: Blockchains and crypto economics. Funding: A. Park received financial support from the Global Risk Institute and the Social Sciences and Humanities Research Council of Canada [Grant 435-2017-0647]. Supplemental Material: The data files are available at https://doi.org/10.1287/mnsc.2021.02802 .","PeriodicalId":18208,"journal":{"name":"Manag. Sci.","volume":"11 1","pages":"6731-6751"},"PeriodicalIF":0.0,"publicationDate":"2023-09-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"139341268","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Manag. Sci.Pub Date : 2023-02-07DOI: 10.2139/ssrn.4239246
E. dehaan, T. D. Kok, Dawn Matsumoto, E. Rodriguez-Vazquez
{"title":"How Resilient Are Firms' Financial Reporting Processes?","authors":"E. dehaan, T. D. Kok, Dawn Matsumoto, E. Rodriguez-Vazquez","doi":"10.2139/ssrn.4239246","DOIUrl":"https://doi.org/10.2139/ssrn.4239246","url":null,"abstract":"The timely flow of financial information is critical for efficient capital market functioning, yet we have little understanding of firms’ and auditors’ collective abilities to maintain timely financial reporting when under duress. We use COVID as a stress test case to examine whether reporting systems can withstand systemic increases in complex economic events and coordination challenges. Despite COVID-related challenges persisting through 2020 and beyond, we document surprisingly modest average delays in financial reports during COVID and only in Q1-2020. Reporting timeliness reverts to pre-COVID levels no later than Q2-2020. We find no evidence of meaningful declines in actual reporting quality during COVID, but we do find some evidence consistent with declines in perceived reporting quality. Overall, our findings indicate that current financial reporting processes are remarkably robust and provide insights about financial reporting more broadly. In particular, given that nearly all firms were able to weather the unprecedented disruptions caused by COVID, our findings imply that most material reporting delays observed outside of COVID are likely a result of either a firm’s strategic choices or exceptionally fragile reporting processes. This paper was accepted by Ranjani Krishnan, accounting. Supplemental Material: The data and online appendix are available at https://doi.org/10.1287/mnsc.2023.4670 .","PeriodicalId":18208,"journal":{"name":"Manag. Sci.","volume":"59 1","pages":"2536-2545"},"PeriodicalIF":0.0,"publicationDate":"2023-02-07","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"81346007","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Manag. Sci.Pub Date : 2023-01-01DOI: 10.1287/mnsc.2022.4372
Bouke Klein Teeselink, M. V. Assem, D. Dolder
{"title":"Does Losing Lead to Winning? An Empirical Analysis for Four Sports","authors":"Bouke Klein Teeselink, M. V. Assem, D. Dolder","doi":"10.1287/mnsc.2022.4372","DOIUrl":"https://doi.org/10.1287/mnsc.2022.4372","url":null,"abstract":"","PeriodicalId":18208,"journal":{"name":"Manag. Sci.","volume":"6 1","pages":"513-532"},"PeriodicalIF":0.0,"publicationDate":"2023-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"77006772","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Manag. Sci.Pub Date : 2023-01-01DOI: 10.1287/mnsc.2022.4352
D. Bertsimas, Shimrit Shtern, Bradley Sturt
{"title":"A Data-Driven Approach to Multistage Stochastic Linear Optimization","authors":"D. Bertsimas, Shimrit Shtern, Bradley Sturt","doi":"10.1287/mnsc.2022.4352","DOIUrl":"https://doi.org/10.1287/mnsc.2022.4352","url":null,"abstract":"We propose a new data-driven approach for addressing multi-stage stochastic linear optimization problems with unknown distributions. The approach consists of solving a robust optimization problem that is constructed from sample paths of the underlying stochastic process. As more sample paths are obtained, we prove that the optimal cost of the robust problem converges to that of the underlying stochastic problem. To the best of our knowledge, this is the first data-driven approach for multi-stage stochastic linear optimization which is asymptotically optimal when uncertainty is arbitrarily correlated across time. Finally, we develop approximation algorithms for the proposed approach by extending techniques from the robust optimization literature, and demonstrate their practical value through numerical experiments on stylized data-driven inventory management problems.","PeriodicalId":18208,"journal":{"name":"Manag. Sci.","volume":"516 1","pages":"51-74"},"PeriodicalIF":0.0,"publicationDate":"2023-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"77123727","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Manag. Sci.Pub Date : 2023-01-01DOI: 10.1287/mnsc.2022.4319
T. Balyuk
{"title":"FinTech Lending and Bank Credit Access for Consumers","authors":"T. Balyuk","doi":"10.1287/mnsc.2022.4319","DOIUrl":"https://doi.org/10.1287/mnsc.2022.4319","url":null,"abstract":"","PeriodicalId":18208,"journal":{"name":"Manag. Sci.","volume":"21 1","pages":"555-575"},"PeriodicalIF":0.0,"publicationDate":"2023-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"74292009","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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