Two Essays on Management of Multiple Delivery Channels in the Digital Era

Date of Award

Spring 5-15-2015

Author's School

Graduate School of Arts and Sciences

Author's Department

Business Administration

Additional Affiliations

Olin Business School

Degree Name

Doctor of Philosophy (PhD)

Degree Type

Dissertation

Abstract

With the evolution of technology, business today is transformed by new channels for delivering products or services either within the firm or through partnerships outside the firm. Increasing number of firms set up multiple channels to deliver the same products or services in a more efficient and economical way. My dissertation studies the influence of technology-driven changes in delivery channels on customers and firms. In particular, I examine how the introduction of new channels delivering the same products or services affect customers' purchasing behavior, firms' strategies, and short-term and long-term profitability.

The first essay examines a channel structure where a company sells the same products through both an online retail platform and its own online store. I focus on the long-term benefit of the partnership to the company in terms of helping migrate customers from the online retail platform to the online store. For this purpose, I use customer purchase data to estimate a simultaneous model of customers' channel choice and expenditure decisions. I model customers' consideration sets as being determined by their awareness of the company's own store. I find that the company has greatly benefited from the partnership with the retail platform. It gains many new customers from the partner retail platform and many of these newly obtained customers migrate to the company's own online store in later periods. I use counterfactuals to show how the company can manipulate product assortments to improve its long-term profit and create a "win-win" situation for both the retail platform and itself. I also demonstrate how the value of the partnership with retail platforms depends on the customer awareness and the intrinsic attractiveness of the company's store.

The second essay empirically investigates how technology innovation in the cable TV industry affects households' movie consumption and firms' profit. During the study period, the cable company starts to offer video-on-demand (VOD) programming in addition to older pay-per-view (PPV) technology to its subscribers in selected geographical regions. The new movie delivery technology allows households to select programs from a long list of movies at their preferred time. I study how such technology improvement influences households' viewing preferences for regular movies and for adult movies. The latter genre is the main source of profit for the company. I model households' decisions of movie consumption and service subscription, assuming that they are forward-looking in decision-making and heterogeneous in preferences for the two types of movies. Based on the model estimation results, I show that VOD helps the cable company to attract new subscribers and increase household movie consumption. The primary source of consumption increase, however, comes from regular movies that are lower priced and have lower profit margin for the cable company. New subscribers are also attracted by the improved experience of watching regular movies. For both existing and new subscribers, the benefit for watching adult movies from VOD is not different from PPV. Combining the estimation results and the data on movie prices and margins, I compute the new equilibrium division of revenue between the cable company and upstream movie studios after VOD has been widely adopted.

Language

English (en)

Chair and Committee

Tat Chan

Committee Members

Baojun Jiang, Chakravarthi Narasimhan, Yulia Nevskaya, Nan Yang

Comments

Permanent URL: https://doi.org/10.7936/K7HM56MJ

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