Net Neutrality,Broadband Market Coverage,and Innovation at the Edge*

Net neutrality (NN) is a widely debated policy issue that has the potential to alter the dynamics of accessing online content. The focal point of the debate lies in whether broadband service providers (BSPs) should be allowed to charge content providers for the preferential delivery of their digital content. This decision will affect broadband market coverage for end consumers as well as the issues of long‐term competition and innovation in the market of digital content. Our research aims to analyze and address these issues. We propose a game theoretical model with three players—the BSP, the content providers, and the consumers—where the BSP, in its capacity as a gatekeeper between the content providers and the consumers, is modeled as a two‐sided market platform. We find that while abandoning the principle of NN might sometimes result in increased consumer surplus and broadband market coverage, it can also hinder the ability of startups to compete against established rivals and thus reduce innovation at the edge. The results should be of great interest to policymakers as they debate on this very crucial issue.     

Broadband Network Management and the Net Neutrality Debate

The debate of net neutrality and the potential regulation of net neutrality may fundamentally change the dynamics of data consumption and transmission through the Internet. The existing literature on economics of net neutrality focuses only on the supply side of the market, that is, a broadband service provider (BSP) may charge content providers for priority delivery of their content to consumers. In this article, we explore a complete spectrum of broadband network management options based on both the supply and demand sides of the market. We find that although the BSP always prefers the non‐neutral network management options, it does not always discriminate both sides of the market. From the social planner's perspective, we find that some network management options maximize the social welfare under certain market conditions while other options reduce the social welfare. Using the terminology from a recent Federal Communications Commission report and order, we categorize the social welfare maximizing options as “reasonable network management” and the social welfare reducing options as “unreasonable discrimination.” We also identify conditions under which the BSP's network management choices deviate from the social optimum. These conditions help establish the criteria under which the social planner might wish to regulate the BSP's actions.     

Strategic Network Orchestration in Emerging Markets: China's Catch‐up in the High‐Speed Train Industry

Transitioning from catch‐up in production to catch‐up in innovation capabilities is essential to emerging market firms (EMFs) achieving internationalization and a competitive advantage. While some EMFs are now positioned among the world's most advanced firms, many struggle to become independent innovators. Thus, understanding how EMFs can develop internal absorptive capacity and progress towards catching up in innovation capabilities remains important. Our study seizes this research opportunity and develops a network‐based explanation of catch‐up, which complements existing technological and organizational explanations. Specifically, we address the question of ‘How does the orchestration of collaborative networks enable EMFs to catch up in production and innovation capabilities?’ by describing an important yet under‐researched process of strategic network orchestration and showcasing the dynamic interdependencies between network orchestration and organizational learning. Our study provides a detailed account of Chinese high‐speed train (HST) development from 1990 to 2020 and opens the possibility for future research on network orchestration in emerging market contexts. This provides EMF managers with a set of actionable network orchestration mechanisms that can be used when designing and purposefully managing their strategic nets of domestic and foreign partners.     

Dynamic Impacts of a Catastrophic Production Event: The Foot‐and‐Mouth Disease Case

In foot‐and‐mouth disease (FMD) free countries, the occurrence of an FMD outbreak is a rare event with potentially large economic losses. We explore the dynamic effects of an FMD outbreak on market variables and economic surplus taking into account the largely neglected issue of farm bankruptcy. Simulations are performed on a stylized agricultural economy, which is a net exporter before the outbreak. We find complex dynamic market effects when the farm credit market suffers from information imperfections leading to farm closure. Welfare effects are also dramatically altered. Domestic consumers may lose in the long run from an FMD outbreak because domestic supply contracts. On the other hand, farmers able to resist this event may ultimately gain. Our analysis also shows that these effects are not monotone, making any efficient policy response to this catastrophic event quite challenging.     

CEO Incentives and Customer‐Supplier Relations

This study explores how suppliers adjust their relation‐specific investments (RSI) in response to the different risk‐taking incentives provided by the customer firm to its CEO, during normal and transition periods. We investigate this relation using 17,553 customer–supplier transactions over the 1993–2013 period. We find strong evidence consistent with the risk‐taking argument. Specifically, we find that an increase in the risk‐taking incentives of customer CEOs leads to a decline in suppliers’ RSI in normal periods, but an increase in RSI during transition periods. We employ the FAS‐123R mandate to show that an exogenous reduction in customer CEO's incentive pay increases suppliers’ RSI. We reaffirm the effect with the passage of the Sarbanes–Oxley Act as a secondary quasi‐natural experiment. Finally, we examine several scenarios that either amplify or attenuate the observed relation, based on factors such as financial constraints, distress, growth opportunities, industry competition, and other firm characteristics. Our study contributes to the literature that examines the interplay between corporate policy and product market relationships.     

考虑消费者环保意识与政府补贴的企业绿色技术创新决策研究

在绿色经济时代，绿色技术创新已经成为越来越多企业获取竞争优势的途径。本文基于消费者需求偏好，在不同的政府补贴情形下，构建了包含绿色产品与普通产品生产企业的双寡头竞争模型和斯塔克博格模型，分析了企业绿色技术创新驱动因素和行动时机。研究表明：消费者环保意识有助于提升绿色产品市场份额和企业利润，而绿色产品的单位成本增加会降低其市场份额和企业利润，且绿色产品的单位成本与普通产品企业的利润呈倒U型关系；政府对绿色产品的补贴，可以促进企业绿色技术创新。补贴消费者与补贴企业两种方式下产品的市场份额和社会总福利相同，考虑到补贴的执行成本，补贴消费者更优；绿色产品生产企业作为追随者时，绿色产品的市场占有率最高，社会总福利也最高，因此，后发行动策略是企业绿色技术创新的占优行动策略。     

Push or Pull? Design of Content Delivery Systems

Advances in information technology, especially the expansion of cellular and WiFi networks, are dramatically changing how people consume digital content. These changes in user access behavior present a challenge of delivering content to a diversified consumer base. This article addresses this challenge by identifying the key factors for the design of content delivery systems (gross value of content, delivery delay, sensitivity to delivery delay, accessing cost, and processing cost) and explicitly modeling their interactions. We investigate two content delivery systems—push and pull systems, and solve for the content provider's optimal push frequency decision and consumers’ push versus pull decisions. We show that the content provider's selection of push frequency plays a critical role determining the segmentation of the consumer market into the push group and the pull group. Our findings suggest that firms should set a relatively high push frequency to cater to high‐type consumers, which leads to two consumer groups with low‐type consumers belonging to the pull group and high‐type consumers belonging to the push group.     

Strategic Motive for Introducing Internet Channels in a Supply Chain

Rapid advances of information technology in recent years have enabled both the manufacturers and the retailers to operate their own Internet channels. In this study, we investigate the interaction between the capabilities of introducing the Internet channels, the pricing strategies, and the channel structure. We classify consumers into two segments: grocery shoppers attach a higher utility from purchasing through the physical channel, whereas a priori Internet shoppers prefer purchasing online. We find that when the Internet shoppers are either highly profitable or fairly unimportant, the manufacturer prefers to facilitate the channel separation either through his own Internet channel or the retailer's. In the intermediate region, however, the manufacturer encroaches the grocery shoppers and steals the demand from the retailer's physical channel. With horizontal competition between retailers, a priori symmetric retailers may adopt different channel strategies as a stable market equilibrium. The manufacturer may willingly give up his Internet channel and leverage on the retailer competition. When the manufacturer sells through an online e‐tailer, Internet shoppers may be induced to purchase through the physical channel. This reverse encroachment strategy emerges because selling through the e‐tailer leads to a more severe double marginalization problem.     

Quality of Service Based Pricing Schemes for Content Sharing in Peer‐to‐Peer Networks

In this paper, we study quality‐of‐service (QoS) based pricing schemes that serve as incentive mechanisms to induce sharing behaviors in Peer‐to‐Peer (P2P) networks. We incorporate operational QoS metrics into users’ utility functions and demonstrate how they affect individual users’ content sharing decisions. Using a game‐theoretic model, our study reveals how organizations respond to the changes of operational QoS metrics in their design of pricing schemes for various business objectives at different stages of network evolution. Our results show that a higher upload capacity can foster rational sharing to start when the network is small; however, it also discourages sharing behaviors when the network becomes large. In order to induce a socially optimal behavior, a pricing scheme will not charge users for requesting content while compensating them for sharing content. Such compensation is found to increase faster with the network size when the network is large. In order to maximize the profit of a monopolistic provider, however, a pricing scheme will charge content requests with a positive price while providing less compensation to sharing users compared to the socially optimal scheme. When the network size is small, such compensation can be even negative, which implies that a monopolistic provider discourages content sharing when the network is small, but encourages it when the network becomes larger. In addition, we find that more information about peer upload capacity discourages peers to share.     

Using Contingent Markdown with Reservation to Profit from Strategic Consumer Behavior

We examine a contingent price markdown (CM) mechanism with guaranteed reservation under which a retailer sells multiple units to forward‐looking consumers who arrive over time according to a Poisson process. During the early part of the selling season, each arriving consumer can either purchase a unit by paying the regular price or reserve a unit at the discount price. Reserved units can only be claimed later when the number of guaranteed reservations meets a pre‐specified threshold, or at the end of the selling season, whichever comes first. Immediately after the number of guaranteed reservations meets the pre‐specified threshold, the retailer will reduce its selling price to the discount price so that all subsequent arriving consumers can take immediate possession by paying the low price. We study the consumer purchasing behavior in equilibrium when the retailer adopts such a selling mechanism, and compare the performance of our mechanism against two benchmarks: fixed price (FP) and pre‐announced discount (PD). Through an extensive numerical analysis, we identify market conditions under which CM dominates both FP and PD in terms of the retailer's revenue and consumer's surplus. Finally, through a fluid approximation to the stochastic model, we simplify the computation of the equilibrium strategy and the optimal revenues, and verify that the key insights obtained from the stochastic model still hold.     

Advance Selling in the Presence of Speculators and Forward‐Looking Consumers

This article examines the pricing policy of a monopolist seller who may sell in advance of consumption in a market that comprises of myopic consumers, forward‐looking consumers, and speculators. The latter group has no consumption value for the goods and is in the market with the sole objective of making a profit by reselling the purchased goods shortly after. Consumers, although homogeneous in terms of their valuations, are different with respect to their perspectives. We show that in an “upward” market where the expected valuation increases over time, the optimal pricing policy is an ex ante “static” one where the seller “prices into the future” and prices the myopic consumers out of the advance market. However, in a “downward” market where the expected valuation decreases over time, the seller adopts a dynamic pricing strategy except for the case when higher initial sales can trigger more demand subsequently and when the downward trend is not too high. In this case, the seller prefers an ex ante “static” pricing strategy and deliberately prices lower initially to sell to speculators. We identify the conditions under which the seller benefits from the existence of speculators in the market. Moreover, although the presence of entry costs is ineffective as an entry deterrence, we determine the conditions under which exit costs can rein in speculative purchase.     

A Transaction‐Efficiency Analysis of an Internet Retailing Supply Chain in the Music CD Industry*

The emergence of the Internet may have fundamentally altered the mechanisms underlying information exchanges between sellers and end consumers. However, little attention has been given to the impact these mechanisms have on the efficiency of supply chain operations. This paper begins to address this deficiency in the literature by evaluating supply chain transaction efficiency effects from Internet purchases by consumers. It develops and empirically tests a theoretical framework examining the role Internet purchases have in establishing transaction‐efficiency levels in product exchanges involving sellers, placed at different supply chain echelons, and consumers. The theoretical framework integrates the transaction‐cost and internet economics, inter‐organizational information systems, and supply chain management literatures. Empirical testing, via structural equation modeling, is based on archival data in the Internet music CD market. The results show that Internet‐mediated purchases by consumers allow for greater transaction efficiencies when inventory ownership is postponed farther upstream in the supply chain and supply chain echelons are disintermediated. The results also indicate that channel structure configuration, defined by the supply chains' Internet retailing echelon, moderates these transaction efficiency effects.     

Strategic Product/Service Innovations of an Online Firm

We study the incentives that drive an online firm to make various types of innovations in a competitive environment. We develop and use a simplified price competition model between two retailers, one online and one offline. A given fraction of consumers, called the Internet penetration, comparison shop online, independent of their customer type, thereby creating two markets for the offline retailer, a captive market and a competitive market. The online product has the steeper of the two linear utility functions, which means that the customers who buy online in our model are high end. We focus on the competitive region in which both retailers are (strictly) profitable in the competitive market and consider innovations that increase high‐end appeal, low‐end appeal, and/or reduce unit cost. We find that the online firm has a strong incentive to invest in innovations that either reduce unit cost and/or, equivalently, increase the appeal to all consumers equally. Investments of this type are strategic complements: implementing one increases the value of another, so the value of two innovations of this type is more than the sum of the values of each individually. We identify a relative strength measure of the online firm such that, as its high‐end appeal increases and/or its unit cost decreases, we say that the online firm is stronger. This strength measure facilitates drawing an explicit dividing line between strong and weak online firms. If Internet penetration increases, the online firm's profits increase if and only if it is strong. If penetration increases over time, it is possible for a strong firm to turn weak and see its profits decrease and possibly disappear completely. A strong online firm has more opportunity to profit from low‐end innovations than does a weak one, while the opposite is true for high‐end innovations. Interestingly, some innovations may actually decrease the online firm's profits. We discuss the implications of our results for existing and future online innovations.     

考虑社交网络和互联网金融的金融市场超网络均衡研究

社交网络和互联网金融的广泛应用给金融市场发展带来机遇和挑战，金融市场呈现复杂多变、交叉融合的特征，传统的金融市场和监管理论难以适应金融市场发展和风险管理需要。本文从金融网络视角，针对互联网金融发展带来的区别于传统金融的信用风险和操作风险，引入信用惩罚函数和操作风险函数，考虑到加强社交网络关系可提高信息透明度、降低交易成本和交易风险，建立了由资金供给者、互联网金融中介、传统金融中介、资金需求者四种类型金融参与组成的、集成资金流动网络和社交关系网络的金融市场超网络模型，进行金融市场各参与主体的行为分析，建立包括净收益最大化、社交网络关系最大化和风险最小化为目标的多目标决策模型；运用变分不等式将约束条件放松为单边约束，研究包括上述金融市场的均衡条件；最后通过算例的MATLAB仿真验证模型有效性。研究结果表明，考虑与否社交网络关系水平，金融市场的均衡状态不同；社交网络关系水平对互联网金融中介和传统金融中介具有影响作用；为提高市场稳定性和有效性，降低金融风险，互联网金融和传统金融中介需要合作和协同发展。     

破解颠覆性技术创新的跨界网络治理路径——基于百度Apollo自动驾驶开放平台的案例研究

本文以百度Apollo自动驾驶开放平台为案例研究对象,研究了平台以跨界网络治理驱动颠覆性技术创新的演进过程及其内在机制,研究发现:(1)跨界平台网络是不同于单个企业的新型技术创新组织载体,可以通过技术网络丰富、市场网络丰富和两个网络价值共创的继起性演进在驱动颠覆性技术创新中发挥重要作用;(2)在跨界网络驱动颠覆性技术创新的不同时期,为解决技术与市场不确定性高以及网络参与者关系复杂等难题,平台可以通过网络治理路径的选择促进颠覆性创新的不同过程与结果,在技术网络丰富期,平台可以通过内容治理与关系治理促进技术的内容颠覆与结构颠覆;在市场网络丰富期,可以通过价值治理与关系治理促进市场的价值颠覆与结构颠覆;在技术网络与市场网络协同的价值共创期,可以通过"网络平台包络(内容治理)、跨界网络效应激发(关系治理)、异质性利润焦点获取(价值治理)"的综合治理促进技术与市场的颠覆可持续性;(3)平台治理中的内容治理与价值治理是跨界网络治理的"硬实力",而关系治理是跨界网络治理的"软实力",软硬实力的组合共同促进颠覆性技术的技术突破与市场突破。本文丰富了网络治理理论、颠覆性创新理论和平台理论,并对尝试借助平台推进新兴前沿技术突破、尤其是跨界推进颠覆性技术创新的实践行动具有管理启示。     

Online Manufacturer Referral to Heterogeneous Retailers

Since the development of the Internet, thousands of manufacturers have been referring consumers visiting their websites to some or all of their retailers. Through a model with one manufacturer and two heterogeneous retailers, we investigate whether it is an equilibrium for the manufacturer to refer consumers exclusively to a retailer or nonexclusively to both retailers. Our analysis indicates that nonexclusive referral is the manufacturer's equilibrium choice if the referral segment market size is sufficiently large; otherwise, exclusive referral is the equilibrium choice. In exclusive referral, the manufacturer would refer consumers to the more cost‐efficient and smaller retailer. In the presence of infomediary referral, it is less likely for both exclusive and nonexclusive referrals to be an equilibrium, as the infomediary referral segment grows. We also show our qualitative results are robust even if there were price discrimination among consumers, referral position disparity, local consumers, and asymmetric referral market sizes.     

A Study of Online Auction Sellers’ Intention to Switch Platform: The Case of Yahoo!Kimo Versus Ruten_eBay*

The study of consumers’ switching from one service provider to another has a long tradition in economics, information systems, and marketing. The emergence of electronic commerce presents new challenges in understanding consumers’ switching intentions in the context of e‐commerce in general and online auctions in particular. With the abundance of literature on online auctions, there is a surprising lack of research on auction sellers’ intentions to switch from one online auction platform to another. Using the competition between Yahoo!Kimo and Ruten_eBay, two leading auction platforms in Taiwan, as the backdrop, we developed a research model and collected empirical data based on this real case to study what factors influence auction sellers to switch to a competing service provider. We find that the higher the procedural switching costs, financial switching costs, relational switching costs, site design quality, or interaction quality, the lower the intention of an auction seller to switch to a competing auction service provider. A higher perceived transaction fee, however, leads to a higher switching intention.     

A Genetic Algorithm for the Weight Setting Problem in OSPF Routing

With the growth of the Internet, Internet Service Providers (ISPs) try to meet the increasing traffic demand with new technology and improved utilization of existing resources. Routing of data packets can affect network utilization. Packets are sent along network paths from source to destination following a protocol. Open Shortest Path First (OSPF) is the most commonly used intra-domain Internet routing protocol (IRP). Traffic flow is routed along shortest paths, splitting flow at nodes with several outgoing links on a shortest path to the destination IP address. Link weights are assigned by the network operator. A path length is the sum of the weights of the links in the path. The OSPF weight setting (OSPFWS) problem seeks a set of weights that optimizes network performance. We study the problem of optimizing OSPF weights, given a set of projected demands, with the objective of minimizing network congestion. The weight assignment problem is NP-hard. We present a genetic algorithm (GA) to solve the OSPFWS problem. We compare our results with the best known and commonly used heuristics for OSPF weight setting, as well as with a lower bound of the optimal multi-commodity flow routing, which is a linear programming relaxation of the OSPFWS problem. Computational experiments are made on the AT&T Worldnet backbone with projected demands, and on twelve instances of synthetic networks.     

基于顾客消费信息的网络定价分析与仿真

本文通过仿真的方法研究了两种不同的定价策略对消费者网络消费需求的影响。在网络供应市场上,我们建立一个价格竞争的伯川德双垄断模型:一个网络提供商对其提供的网络服务采用固定定价,另一网络提供商采用两部分定价策略——固定链接费加使用费。基于中国社会调查事务(SSIC)的调查数据,我们采用随机数生成的方法来产生每一位消费者的消费额与消费时间,通过建立消费者效用模型来仿真在两种不同定价策略下消费者的消费选择,比较了不同价格策略对网络提供商收入、消费者行为及社会总福利的影响。     

A Mobile Platform's In‐App Advertising Contract Under Agency Pricing for App Sales

Unlike advertising in traditional media, a mobile platform's in‐app advertising market exhibits two unique features—split structure of the mobile platform with a platform owner and an app developer jointly provisioning in‐app advertising, and agency pricing for app sales. We develop a two‐sided market model to analyze the role of these two unique features in determining the platform owner's optimal advertising revenue‐sharing contract. Our results reveal an interesting N‐shaped dynamic regarding the platform owner's optimal choice of her ad revenue share with respect to the overall advertisers’ valuation of in‐app ads. We identify a between‐agent subsidization strategy for the platform owner, where she finds it optimal to subsidize the developer via the advertising channel, leading to greater profits for both of them. We find that the advertising revenue‐sharing contract under agency pricing for app sales leads to a higher app price than would be offered by the integrated platform found in traditional advertising. However, the ad price is coordinated under the platform owner's optimal choice of ad revenue share when she obtains revenue from both the advertising and app sales channels, leading to an alignment of her interest with the app developer's on ad level.