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Subject(s)
Management sciences, decision sciences and quantitative methods; Product and operations management; Technology, R&D management
Keyword(s)
Data, machine learning, data product, pricing, incentives, contracting
This paper explores how firms that lack expertise in machine learning (ML) can leverage the so-called AI Flywheel effect. This effect designates a virtuous cycle by which, as an ML product is adopted and new user data are fed back to the algorithm, the product improves, enabling further adoptions. However, managing this feedback loop is difficult, especially when the algorithm is contracted out. Indeed, the additional data that the AI Flywheel effect generates may change the provider's incentives to improve the algorithm over time. We formalize this problem in a simple two-period moral hazard framework that captures the main dynamics among ML, data acquisition, pricing, and contracting. We find that the firm's decisions crucially depend on how the amount of data on which the machine is trained interacts with the provider's effort. If this effort has a more (less) significant impact on accuracy for larger volumes of data, the firm underprices (overprices) the product. Interestingly, these distortions sometimes improve social welfare, which accounts for the customer surplus and profits of both the firm and provider. Further, the interaction between incentive issues and the positive externalities of the AI Flywheel effect has important implications for the firm's data collection strategy. In particular, the firm can boost its profit by increasing the product's capacity to acquire usage data only up to a certain level. If the product collects too much data per user, the firm's profit may actually decrease, i.e., more data is not necessarily better.
© 2021, INFORMS
Subject(s)
Economics, politics and business environment
Keyword(s)
Reverse privatization, solid waste collection, mixed oligopoly, state-owned enterprises, competition law enforcement, logit regression
JEL Code(s)
L33, L44, L88, H44, K21
After earlier waves of privatization, local governments have increasingly taken back control of local service provisions in some sectors and countries and instead started providing those services themselves (reverse privatization). Using a unique panel dataset on the mode of service provision for solid waste collection for German municipalities that cover the years 2003, 2009, and 2015, we investigate the motives for reverse privatization. Our results show that -- in deciding whether to insource or not -- municipalities react to the cost advantages of private suppliers as well as to the competitive environment and municipal activity: There is more switching to insourcing in concentrated markets and in markets with horizontally or vertically related public services. Local interest groups influence this decision as well.
© 2021 Springer
Subject(s)
Human resources management/organizational behavior; Technology, R&D management
Keyword(s)
Citizen science, crowd science, human-machine integration, open innovation in science
Research projects that actively involve ‘crowds’ or non-professional ‘citizen scientists’ are attracting growing attention. Such projects promise to increase scientific productivity while also connecting science with the general public. We make three contributions. First, we argue that the largely separate literatures on ‘Crowd Science’ and ‘Citizen Science’ investigate strongly overlapping sets of projects but take different disciplinary lenses. Closer integration can enrich research on Crowd and Citizen Science (CS). Second, we propose a framework to profile projects with respect to four types of crowd contributions: activities, knowledge, resources, and decisions. This framework also accommodates machines and algorithms, which increasingly complement or replace professional and non-professional researchers as a third actor. Finally, we outline a research agenda anchored on important underlying organisational challenges of CS projects. This agenda can advance our understanding of Crowd and Citizen Science, yield practical recommendations for project design, and contribute to the broader organisational literature.
Journal Article
Production and Operations Management
Işık Biçer, Florian Lücker, Tamer Boyaci
Subject(s)
Management sciences, decision sciences and quantitative methods; Product and operations management
Keyword(s)
Product proliferation, lead-time reduction, process redesign, delayed differentiation
Product proliferation occurs in supply chains when manufacturers respond to diverse market needs by trying to produce a range of products from a limited variety of raw materials. In such a setting, manufacturers can establish market responsiveness and/or cost efficiency in alternative ways. Delaying the point of the proliferation helps manufacturers improve their responsiveness by postponing the ordering decisions of the final products until there is partial or full resolution of the demand uncertainty. This strategy can be implemented in two different ways: (1) redesigning the operations so that the point of proliferation is swapped with a downstream operation or (2) reducing the lead times. To establish cost efficiency, manufacturers can systematically reduce their operational costs or postpone the high-cost operations. We consider a multi-echelon and multi-product newsvendor problem with demand forecast evolution to analyze the value of each operational lever of the responsiveness and the efficiency. We use a generalized forecast-evolution model to characterize the demand-updating process, and develop a dynamic optimization model to determine the optimal order quantities at different echelons. Using anonymized data of Kordsa Inc., a global manufacturer of advanced composites and reinforcement materials, we show that our model outperforms a theoretical benchmark of the repetitive newsvendor model. We demonstrate that reducing the lead time of a downstream operation is more beneficial to manufacturers than reducing the lead time of an upstream operation by the same amount, whereas reducing the upstream operational costs is more favorable than reducing the downstream operational costs. We also indicate that delaying the proliferation may cause a loss of profit, even if it can be achieved with no additional costs. Finally, a decision typology is developed, which shows effective operational strategies depending on product/market characteristics and process flexibility.
Journal Article
The Economic Journal
David Ronayne, Greg Taylor
Subject(s)
Economics, politics and business environment
JEL Code(s)
D43, D83, L11, M3
We study strategic interactions in markets where firms sell to consumers both directly and via a competitive channel (CC), such as a price comparison website or marketplace, where multiple sellers’ offers are visible at once. We ask how a CC’s size influences market outcomes. A bigger CC means more consumers compare prices, increasing within-channel competition. However, such seemingly pro-competitive developments can raise prices and reduce consumer surplus by weakening between-channel competition. We also use the model to study relevant active policy issues including price clauses, integrated ownership structures, and access to consumers’ purchase data.
Subject(s)
Entrepreneurship; Technology, R&D management
Keyword(s)
Autonomy, teams, ideas, entrepreneurial performance, natural field experiment
Scholars have suggested that autonomy can lead to better entrepreneurial team performance. Yet, there are different types of autonomy and they come at a cost. We shed light on whether two fundamental organizational design choices—granting teams autonomy to (1) choose project ideas to work on and (2) choose team members to work with—affect performance. We run a natural field experiment involving 939 students in a lean startup entrepreneurship course over 11 weeks. The aim is to disentangle the separate and joint effects of granting autonomy over choosing teams and choosing ideas compared to a baseline treatment with pre-assigned ideas and team members. We find that teams with autonomy over choosing either ideas or team members outperform teams in the baseline treatment as measured by pitch deck performance. The effect of choosing ideas is significantly stronger than the effect of choosing teams. However, the performance gains vanish for teams that are granted full autonomy over choosing both ideas and teams. This suggests the two forms of autonomy are substitutes. Causal mediation analysis reveals that the main effects of choosing ideas or teams can be partly explained by a better match of ideas with team members’ interests and prior network contacts among team members, respectively. While homophily and lack of team diversity cannot explain the performance drop among teams with full autonomy, our results suggest that self-selected teams fall prey to overconfidence and complacency too early to fully exploit the potential of their chosen idea. We discuss the implications of these findings for research on organizational design, autonomy, and innovation.
© 2021, INFORMS
Journal Article
Journal of Management
Martin Schweinsberg, Stefan Thau, Madan M. Pillutla (2021)
Subject(s)
Human resources management/organizational behavior
Keyword(s)
impasses, negotiations, agreements, conflict resolution, bargaining
Although impasses are frequently experienced by negotiators, are featured in newspaper articles, and are reflected in online searches, and can be costly, negotiation scholarship does not appear to consider them seriously as phenomenon worth explaining. A review of negotiation tasks to study impasses reveals that they bias negotiators towards agreement. We systematically organize past findings on impasses and integrate them in the impasse type, cause, and resolution model (ITCR model). Our fundamental assumption is that a positive bargaining zone does not imply symmetric preferences for an agreement. One or both negotiators may prefer an impasse over an agreement despite a positive bargaining zone. We argue that it is beneficial for management research to distinguish between three impasse types: if both negotiators perceive benefit from an impasse, they are wanted; if one negotiator perceives benefits from an impasse, they are forced; and if both do not perceive benefits from the impasse, they are unwanted. We review structural (e.g., bargaining zone, communication channels), interpersonal (e.g., tough tactics, emotions) and intrapersonal (e.g., biases, available information, and framing) factors as the likely antecedents of the three impasse types. We also examine evidence which suggests that wanted impasses can be resolved by changing the negotiation structure for both parties, forced impasses can be resolved through persuasion, and unwanted impasses can be overcome by debiasing both parties. Finally, we review current methodological guidance and provide updated recommendations on how scholars should deal with impasses in both study designs and data analyses.
With permission of SAGE Publishing
Journal Article
Journal of Applied Psychology
Julija N. Mell, Eric Quintane, Giles Hirst, Andrew Carnegie
Subject(s)
Human resources management/organizational behavior
Keyword(s)
Boundary spanning, supervisor undermining, territoriality, advice seeking

JEL Code(s)
M12
Journal Article
Manufacturing and Service Operations Management
Subject(s)
Management sciences, decision sciences and quantitative methods
Keyword(s)
Service operations, rational inattention, strategic customers, rational queueing, information costs, system throughput, social welfare
Problem description: Classical models of queueing systems with rational and strategic customers assume queues to be either fully visible or invisible while service parameters are known with certainty. In practice, however, people only have “partial information” on the service environment in the sense that they are not able to fully discern prevalent uncertainties. This is because assessing possible delays and rewards is costly as it requires time, attention, and cognitive capacity which are all limited. On the other hand, people are also adaptive and endogenously respond to information frictions. Methodology: We develop an equilibrium model for a single-server queueing system with customers having limited attention. Following the theory of rational inattention, we assume that customers optimize their learning strategies by deciding the type and amount of information to acquire and act accordingly while internalizing the associated costs. Results: We establish the existence and uniqueness of a customer equilibrium and delineate the impact of service characteristics and information costs. We numerically show that when customers allocate their attention to learn uncertain queue length, limited attention of customers improves throughput in a congested system that customers value reasonably highly, while it can be detrimental for less popular services that customers deem rather unrewarding. This is also reflected in social welfare if the firm's profit margin is high enough, although customer welfare always suffers from information costs. Managerial implications: Our results shed light on optimal information provision and physical design strategies of service firms and social planners by identifying service settings where they should be most cautious for customers' limited attention. Academic/practical relevance: We propose a microfounded framework for strategic customer behavior in queues that links beliefs, rewards, and information costs. It offers a holistic perspective on the impact of information prevalence (and information frictions) on operational performance and can be extended to analyze richer customer behavior and complex queue structures, rendering it a valuable tool for service design.
© 2021 INFORMS
Subject(s)
Finance, accounting and corporate governance
Keyword(s)
Mandatory disclosure, voluntary disclosure, information spillovers, crowding-out
JEL Code(s)
M41, M48, G38
We predict and find that regulated firms’ mandatory disclosures crowd out unregulated firms’ voluntary disclosures. Consistent with information spillovers from regulated to unregulated firms, we document that unregulated firms reduce their own disclosures in the presence of regulated firms’ disclosures. We further find that unregulated firms reduce their disclosures more the greater the strength of the regulatory information spillovers. Our findings suggest that a substitutive relationship between regulated and unregulated firms’ disclosures attenuates the effect of disclosure regulation on the market-wide information environment.