Essays on Social Promotions and E-commerce

Chapter one examines the effects of bundling social incentives with promotions. When/nusing these “social promotions,” a firm must decide whether or not to require customers to/nshare the promotion on social media with friends. On the one hand, this requirement may make/nit easier for the firm to get the word out. On the other hand, this requirement may inconvenience/ncustomers and lower their propensity to purchase. To conduct valid inference on this trade-off/nbetween the costs and benefits, I devise novel empirical strategies that flexibly accommodate/nthe amount of information available to a firm. Through a field experiment on a Chinese online/ngrocery site, randomized both at the city and individual level, I find that social promotions/ncan serve as an effective growth strategy. The social obligation can benefit a firm through two/nchannels. First, the customers who do share add additional value through both new customer/nacquisition and existing customer retention. Second, the firm does not lose profit from the/ncustomers who choose not to purchase the promoted products when forced to share (but would/notherwise purchase the promoted products without mandatory sharing); they contribute instead/nby purchasing other substitutes from the same site. Furthermore, different types of customers/nrespond to the social incentive differently and I present results on customer heterogeneity./nChapter two expands on the targeting question in social promotions. This paper examines/nhow a firm should target a social incentive on top of a standard promotion, i.e. also requiring/nthe customer to share the promotion with friends on social media to qualify for the discounts./nA major challenge in this targeting question is that the targeting decision on a focal customer/nalso affects how many leads will be generated. Therefore, tackling this targeting question/nrequires a different framework compared with that of standard targeting. This paper compare/na few targeting schemes, including a post-experiment strategy based on an “effective” profit/nidea and two contextual bandits that balance exploration and exploitation real time, namely/nLinUCB and LinTS.We find that in our offline simulations, the two contextual bandits perform/nsimilarly and better than post-experiment targeting. Targeting the social incentive to certain/ntype of customers can significantly increase firm profitability./nChapter three discusses an empirical case study on bundle design and pricing. Unlike what/nconventional bundle pricing theory suggests, we find that on the largest Chinese e-commerce/nplatform Taobao.com, a bundle tends to cost more than purchasing each bundle item from the/nsame online market separately. These bundle premiums are prevalent in multiple product categories,/nsuch as digital cameras, iPads, cell-phones, and video game consoles. Conservatively/nspeaking, in the digital single-lens reflex cameras market, “premiumed bundles” account for/n30% of the market share. Furthermore, the magnitude of the premium is also beyond that of rational/nexpectation. For example, for Canon 700D bundles, the average premium is 17 USD, or/n4% the base good price. These bundle premiums can have significant implications for consumer/nwelfare and platform design. This paper systematically documents these empirical regularities.

Advisor: Iyer, Ganesh
Tadelis, Steve