Optimizing service failure and damage control

Should a provider deliver a reliable service or should it allow for occasional service failures? This paper derives conditions under which randomizing service quality can benefit the provider and society. In addition to cost considerations, heterogeneity in customer damages from service failures allows the provider to generate profit from selling damage prevention services or offering compensation to high-damage customers. This strategy is viable even when reputation counts and markets are competitive.     

When does the majority become a majority? Empirical analysis of the time at which main market adopters purchase the bulk of our sales

The idea of a dual-market structure in the early stages of a product's life cycle has become one of the most widely accepted ideas among new product marketing practitioners in the past decade. Concepts such as “Early Market/Main Market” and “Visionaries/Pragmatists” have entered the lexicon of high-tech executives to express the notion that the market for new products is composed of early and main markets with a discontinuity in the diffusion process in between them. Moreover, these concepts have been at least partially tested and verified in the marketing academic literature in the past few years.We extend this branch of research by investigating the timing issues in dual-market cases. We define Change-of-Dominance Time (CD-Time) as the number of years it takes main market adopters to outnumber early market adopters. We empirically investigate this timing issue on a comprehensive data set of new product sales in the consumer electronics industry. We find that regarding explanatory determinants of CD-Time, external influence, such as advertising, to the early market is the most important explanatory variable.We examine the relationship between CD-Time and other early product life cycle phenomena: Takeoff, Saddle, and Rogers' size of adopter categories. We found relatively high correlations between these phenomena and CD-Time.The answer to the question “When does the majority become a majority?” is indeed “at 16%”! In a dual-market setting, the average time at which the main market outnumbers the early market is when 16% of the market has already adopted the product. In terms of time, in 75% of the cases the majority becomes a majority in 5 to 10 years.     

Demarketing as a differentiation strategy

Demarketing discourages consumers from buying. This paper shows that demarketing can be a profitable alternative when differentiation through product improvements is not cost effective. The impact of differentiating demarketing on profit, market share, consumers, and total welfare is investigated.This research began while Hess was visiting MIT's Sloan School of Management and was finished while visiting University of Haifa; he thanks both for their support.     

Distribution of tastes and skills and the provision of local public goods

This paper introduces into the Tiebout model individuals with different skills. It is shown that the production techniques, the distribution of tastes and skills and intercommunity trade will affect the pattern of communities. In the suggested model competition with local public goods is Pareto optimal: communities will not be composed of identical people. The optimal solution requires that every community will tax everybody according to his marginal social cost. A Pareto efficient redistribution policy can be carried out only by a central government using lump-sum taxes. A federal income tax will affect community patterns and therefore is inefficient.     

Clubs as a case of competitive industry with goods of variable quality

The paper provides a new proof for the optimality of market provision for Buchanan's club goods where club goods are treated as goods of variable quality. This approach extends the theory of clubs, and introduces congestion to the analysis of competitive equilibrium with goods of variable quality.     

Talk of the Network: A Complex Systems Look at the Underlying Process of Word-of-Mouth

Though word-of-mouth (w-o-m) communications is a pervasive and intriguing phenomenon, little is known on its underlying process of personal communications. Moreover as marketers are getting more interested in harnessing the power of w-o-m, for e-business and other net related activities, the effects of the different communications types on macro level marketing is becoming critical. In particular we are interested in the breakdown of the personal communication between closer and stronger communications that are within an individual's own personal group (strong ties) and weaker and less personal communications that an individual makes with a wide set of other acquaintances and colleagues (weak ties).We use a technique borrowed from Complex Systems Analysis called stochastic cellular automata in order to generate data and analyze the results so that answers to our main research issues could be ascertained. The following summarizes the impact of strong and weak ties on the speed of acceptance of a new product:The influence of weak ties is at least as strong as the influence of strong ties. Despite the relative inferiority of the weak tie parameter in the model's assumptions, their effect approximates or exceeds that of strong ties, in all stages of the product life cycle.External marketing efforts (e.g., advertising) are effective. However, beyond a relatively early stage of the growth cycle of the new product, their efficacy quickly diminishes and strong and weak ties become the main forces propelling growth. The results clearly indicate that information dissemination is dominated by both weak and strong w-o-m, rather than by advertising.The effect of strong ties diminishes as personal network size decreases. Market attributes were also found to mediate the effects of weak and strong ties. When personal networks are small, weak ties were found to have a stronger impact on information dissemination than strong ties.     

Essential aggregation procedures on restricted domains of preferences

The restricted domains of individuals' preferences that permit the construction of Arrow social welfare functions and nonmanipulable voting procedures in which each of n voters has some power are characterized. In this context a domain is the Cartesian product of n sets of strict preference orderings. Variants of this result are obtained under the additional requirement of neutrality and in the case when alternatives are vectors whose ith components affect only the ith voter. Kalai and Muller's analogous result (J. Econ. Theory16 (1977), 457–469) concerning nondictatorial procedures is discussed and proved as a corollary to the main theorem.     

Quantities,qualities and multiple public services in the Tiebout model

This paper introduces a new, more realistic characterization of local public services. This characterization fits education, parks, and streets, none of which are a pure Samuelsonian good. It is shown that Tiebout's hypothesis holds for this new type of services, provided correct user charges are adopted. Introducing several local services considerably affects the results. The paper emphasizes the difference in tastes with regard to quality as opposed to quantity. Earlier literature is shown to apply to the role of quality and ignores the role of quantity. The effect of the latter makes mixed communities more efficient than segregated ones. It is shown that efficient allocation with mixed communities is an equilibrium in a costless mobility, Tiebout-type setting.