On Assisting Domestic Industries under Bertrand Competition

In a homogeneous‐good duopoly game with a home and a foreign firm, which compete on prices, it has been shown that the optimal way to assist the domestic industry is by a production subsidy. The argument here is that the subsidy is used to keep potential competitive pressure on the foreign firm. This paper analyzes under which conditions this threat of entry of a subsidized home firm is credible. It is shown that in markets where the firms move before the government, a subsidy is not credible and dominated by a tariff in terms of welfare.     

Characterizations of distributions via linearity of regression of generalized order statistics

Let X (r, n, m, k), 1 r n, denote generalized order statistics based on an absolutely continuous distribution function F. We characterize all distribution functions F for which the following linearity of regression holds E(X(r+l,n,m,k) | X(r,n,m,k))=aX(r,n,m,k)+b.We show that only exponential, Pareto and power distributions satisfy this equation. Using this result one can obtain characterizations of exponential, Pareto and power distributions in terms of sequential order statistics, Pfeifers records and progressive type II censored order statistics. Received July 2001/Revised August 2002     

Augmenting the eye of the beholder: exploring the strategic potential of augmented reality to enhance online service experiences

Driven by the proliferation of augmented reality (AR) technologies, many firms are pursuing a strategy of service augmentation to enhance customers’ online service experiences. Drawing on situated cognition theory, the authors show that AR-based service augmentation enhances customer value perceptions by simultaneously providing simulated physical control and environmental embedding. The resulting authentic situated experience, manifested in a feeling of spatial presence, functions as a mediator and also predicts customer decision comfort. Furthermore, the effect of spatial presence on utilitarian value perceptions is greater for customers who are disposed toward verbal rather than visual information processing, and the positive effect on decision comfort is attenuated by customers’ privacy concerns.     

The Value of Customer Cocreated Knowledge during the Innovation Process

Customer cocreation during the innovation process has recently been suggested to be a major source for firms' competitive advantage. Hereby, customers actively engage in a firm's innovation process and take over innovation activities traditionally performed by a firm's employees. Despite its suggested importance, previous research has revealed contradictory findings regarding its impact, the nature of involved customers, and the channels of communication that enable cocreation. To provide a more fine‐grained picture, customer cocreated knowledge is first delineated into its key value dimensions of relevance, novelty, and costs, and then their impact on various innovation outcomes is investigated. Next, the study examines the antecedent role of customer determinants; that is, lead user characteristics and customer–firm closeness, on these knowledge value dimensions. Finally, we explore how these effects are moderated by the type of communication channel used. An empirical validation of the conceptual model is performed by means of survey data from 126 customer cocreation projects. The data analysis indicates that customer cocreation is most successful for the creation of highly relevant but moderately novel knowledge. Cocreation with customers who are closely related to the innovating firm results in more highly relevant knowledge at a low cost. Yet, cocreation with lead users produces novel and relevant knowledge. These effects are contingent on the richness and reach of the communication channels enabling cocreation. Overall, the findings shed light on opportunities and limitations of customer cocreation for innovation and reconcile determinants originating in relationship marketing and innovation management. At the same time, managers obtain recommendations for selecting customers and communication channels to enhance the success of their customer cocreation initiatives.     

A new fluctuation test for constant variances with applications to finance

We present a test to determine whether variances of time series are constant over time. The test statistic is a suitably standardized maximum of cumulative first and second moments. We apply the test to time series of various assets and find that the test performs well in applications. Moreover, we propose a portfolio strategy based on our test which hedges against potential financial crises and show that it works in practice.     

eCCIq: The quality of electronic customer-to-customer interaction

Electronic customer-to-customer interaction (eCCI) becomes crucial in innovative business models (e.g., Ebay, Facebook) that are either intentionally built on such eCCI occurring completely on purpose or for providers that are embedding web 2.0 and social media techniques in their service offering. To enable a more active application and purposeful management of eCCI, it is essential to conceptualize its quality (eCCIq) as a start. In doing so we identify seven factors that constitute the domain of eCCIq: ‘Content’, ‘Security’, ‘Hedonic’, ‘Quantity’, ‘Atmosphere’, ‘Convenience’ and ‘Social’. Construct development is based on existing literature on CCI and various closely-related constructs as well as on an empirical study assessing eCCIq in a qualitative and quantitative manner. Our results enable firms to more selectively influence and control eCCIq and provide the basis to conduct any further research on the impact of eCCI and its quality.