Paper Info
Title
Liking and Following and the Newsvendor: Operations and Marketing Policies Under Social Influence.
Abstract
We consider a monopolistic firm selling two substitutable products to a stream of sequential arrivals whose purchase decisions can be influenced by earlier purchases. Before demand realizes, the firm faces a newsvendor problem for the two products with economies of scale in production for each. When consumers are responsive to others' decisions, social influence amplifies demand uncertainty, leading to a lower profit for the firm. We propose three solutions for the firm to better cope with or even benefit from social influence: influencer recruitment and a reduced product assortment either before demand realization (ex ante) or under production postponement (ex post). First, the firm can offer promotional incentives to recruit consumers as influencers. We reveal an operational benefit of influencer marketing that a very small fraction of such influencers is sufficient to diminish sales' unpredictability. Second, as the potential substitutability between products increases due to social influence, the firm may leverage the increased substitutability and enjoy lower cost in production by reducing product assortment before demand realization. Last, under production postponement, the firm can take advantage of the way that social influence results in demand herding and reduce product varieties by reacting to preorder information.
Year
DOI
Venue
2016
10.1287/mnsc.2015.2160
MANAGEMENT SCIENCE
Keywords
Field
DocType
social influence,newsvendor,positive network externality,influencer marketing,production postponement,product assortment
Postponement,Marketing strategy,Newsvendor model,Economics,Incentive,Microeconomics,Herding,Monopolistic competition,Economies of scale,Marketing,Influencer marketing
Journal
Volume
Issue
ISSN
62
3
0025-1909
Citations 
PageRank 
References 
3
0.41
11
Authors
3
Name
Order
Citations
PageRank
Ming Hu110812.04
Joseph M. Milner2797.36
Jiahua Wu330.41