Expectations, Network Effects and Platform Pricing
| Authors: | Andrei Hagiu and Hanna Hałaburda |
|---|---|
| Published: | January 17, 2012 |
| Paper Release Date: | December 2011 |
| Feature: | Working Papers |
In markets with network effects, the value that users gain from platforms depends on the number of other users of the same type who join the same platform (direct network effects) or the number of users of a different type that join (cross-group network effects). Examples include social networks like Facebook or Google+, payment systems like PayPal or Visa, videogame systems like PlayStation 3 and Xbox 360, smartphone platforms like Apple's iPhone or Google's Android, etc. Users typically rely on the media, market reports, or word of mouth to form expectations about the total number of other users that join a given platform. However, most of the time these users are unable to calculate the effect of platforms' prices on adoption by other users. In other words, they do not take price into account when forming expectations. To analyze platform profits, Andrei Hagiu and Hanna Hałaburda model different degrees of user sophistication in forming price expectations in markets with network effects. They show that firms have different preferences regarding the average sophistication of their user base depending on market structure.
When to Sell Your Idea: Theory and Evidence from the Movie Industry
| Author: | Hong Luo |
|---|---|
| Published: | January 9, 2012 |
| Paper Release Date: | November 2011 |
| Feature: | Working Papers |
How completely should an innovator develop his idea before selling it? HBS assistant professor Hong Luo addresses this question in a theoretical framework that links the sales stage to the innovator's "observable quality." She uses the context of Hollywood movie script writing-looking at whether it's better to pitch the mere idea for a film or to write the entire screenplay and then try to sell it "on spec."
Published in 2011
HBS Cases: Making Lincoln Center Cool Again
| Published: | November 10, 2011 |
|---|---|
| Feature: | HBS Cases |
| Forum: | open for comment; 2 Comments posted |
When Reynold Levy took over as president of New York's Lincoln Center for the Performing Arts, he faced challenges ranging from crumbling buildings to an aging customer base. How could the venerable institution get its high notes back?
HBS Cases: Lady Gaga
| Published: | September 26, 2011 |
|---|---|
| Feature: | HBS Cases |
| Forum: | open for comment; 28 Comments posted |
What goes into creating the world's largest pop star? Before her fame hit, Lady Gaga's manager faced decisions that could have derailed the performer's career. A new case by Associate Professor Anita Elberse examines the strategic marketing choices that instead created a global brand.
Improving Fairness in Flight Delays
| Published: | August 31, 2011 |
|---|---|
| Feature: | Research & Ideas |
| Forum: | open for comment; 5 Comments posted |
Airlines and the FAA don't like flight delays any more than passengers, but what's to be done? Assistant Professor Douglas Fearing and colleagues propose a "fairness" system that could save travelers time and service providers millions of dollars annually.
Fame, Faith, and Social Activism: Business Lessons from Bono
| Published: | June 20, 2011 |
|---|---|
| Feature: | Lessons from the Classroom |
| Forum: | open for comment; 20 Comments posted |
Many executives struggle to balance work, family, and community, but for rock star Bono the effort is spread across the globe. In the HBS case "Bono and U2," professor Nancy F. Koehn discusses key business lessons to be learned from the famous band.
Casino Payoff: Hands-Off Management Works Best
| Published: | May 2, 2011 |
|---|---|
| Feature: | Research & Ideas |
| Forum: | open for comment; 11 Comments posted |
Micromanagers beware: Research of casino hosts by Harvard Business School's Dennis Campbell and Francisco de Asís Martinez-Jerez and Rice's Marc Epstein makes the case that hands-off management can work to improve employee learning and decision making.
Terror at the Taj
| Published: | January 24, 2011 |
|---|---|
| Feature: | HBS Cases |
| Forum: | open for comment; 28 Comments posted |
Under terrorist attack, employees of the Taj Mahal Palace and Tower bravely stayed at their posts to help guests. A new multimedia case by Harvard Business School professor Rohit Deshpandé looks at the hotel's customer-centered culture and value system.
The Learning Effects of Monitoring
| Authors: | Dennis Campbell, Marc Epstein, and Francisco de Asis Martinez-Jerez |
|---|---|
| Published: | January 4, 2011 |
| Paper Release Date: | November 2010 |
| Feature: | Working Papers |
It's a challenge that all good managers face: How do you strike the right balance between encouraging autonomy among your employees and mitigating the risk that they'll make bad decisions? Using both field and quantitative data from the MGM-Mirage Group, this paper discusses how management controls affect the learning rates of lower-level employees. Research, focusing on hotel casino hosts, was conducted by Dennis Campbell and Francisco de Asís Martinez-Jerez of Harvard Business School and Marc Epstein of Rice University.
Published in 2010
When Does a Platform Create Value by Limiting Choice?
| Authors: | Ramon Casadesus-Masanell and Hanna W. Halaburda |
|---|---|
| Published: | October 26, 2010 |
| Paper Release Date: | September, 2010 (Revised January, 2011) |
| Feature: | Working Papers |
Platforms such as video games and smartphones need to attract users, and the best way to do so is to offer more and more applications. Is there ever a point where a platform should limit the variety available? Researchers Ramon Casadesus-Masanell and Hanna Halaburda observe that in many situations users enjoy consuming applications together. When such consumption complementarities are present, users may benefit if the platform limits choice. With fewer applications to choose from, it is easier for users to take full advantage from shared consumption.
HBS Cases: iPads, Kindles, and the Close of a Chapter in Book Publishing
| Q&A with: | Peter Olson |
|---|---|
| Published: | April 5, 2010 |
| Feature: | Research & Ideas |
Book publishing is changing before our very eyes, even if the industry itself is fighting the transition with every comma it can muster. Harvard Business School professor Peter Olson, former CEO of Random House, wonders if books themselves may be in jeopardy.
Published in 2009
File-Sharing and Copyright
| Authors: | Felix Oberholzer-Gee and Koleman Strumpf |
|---|---|
| Published: | July 1, 2009 |
| Paper Release Date: | May 2009 |
| Feature: | Working Papers |
The researchers argue that file-sharing technology has not undermined the incentives of artists and entertainment companies to create, market, and distribute new works. The advent of new technology has allowed consumers to copy music, books, video games, and other protected works on an unprecedented scale at minimal cost. Such technology has considerably weakened copyright protection, first of music and software and increasingly of movies, video games, and books. While policy discussion surrounding file-sharing has largely focused on the legality of the new technology and the question of whether declining sales in music are due to file-sharing, the debate has been overly narrow. Copyright protection exists to encourage innovation and the creation of new works—in other words, to promote social welfare. This essay analyzes the landscape and identifies areas for more research.
It Is Okay for Artists to Make Money…No, Really, It's Okay
| Authors: | Robert D. Austin and Lee Devin |
|---|---|
| Published: | June 3, 2009 |
| Paper Release Date: | May 2009 |
| Feature: | Working Papers |
When art and commerce are mentioned in the same sentence, many people become bad tempered or think something needs fixing. This paper argues that more artists ought to make more money more often. HBS professor Robert Austin and theater dramaturg Lee Devin identify and undermine three fallacies about art and commerce, and suggest that it is necessary to carry on a more careful and less emotional conversation about the tensions between art and business and to overcome a general aversion to business common among artists and their patrons. They also stress the need to develop better theories about how art and commerce can achieve integration helpful to both.
Published in 2008
Long-Tail Economics? Give Me Blockbusters!
| Published: | September 10, 2008 |
|---|---|
| Feature: | Research & Ideas |
Although the Long Tail theory might argue otherwise, HBS marketing professor John Quelch believes in the power of blockbusters to excite consumers, motivate salespeople, and attract top talent.
Getting Down to the Business of Creativity
| Published: | May 14, 2008 |
|---|---|
| Feature: | Research & Ideas |
Business leaders must manage and support creativity just as they would any other asset. Harvard Business School professors Teresa Amabile, Mary Tripsas, and Mukti Khaire discuss where creativity comes from, how entrepreneurs use it, and why innovation is often a team sport. From the HBS Alumni Bulletin.
Published in 2007
Dynamics of Platform Competition: Exploring the Role of Installed Base, Platform Quality and Consumer Expectations
| Authors: | Feng Zhu and Marco Iansiti |
|---|---|
| Published: | December 4, 2007 |
| Paper Release Date: | November 2007 |
| Feature: | Working Papers |
What factors drive platform success, long-run market structure, and market efficiency? Conventional wisdom suggests that for a new platform to be successful, either it must make its technology compatible with the incumbent, or its technical advantage must offer so much value to consumers that it exceeds the combination of functionality, installed base, and complementary goods value offered by the incumbent. Zhu and Iansiti develop a dynamic model to examine the evolution of platform-based markets. They find that a huge quality advantage may not be necessary for an entrant to be successful. Using data from the video game industry, they find support for their theoretical predications.
Exclusivity and Control
| Authors: | Andrei Hagiu and Robin S. Lee |
|---|---|
| Published: | August 31, 2007 |
| Paper Release Date: | August 2007 |
| Feature: | Working Papers |
Music, television shows, movies, Internet and mobile content, computer software, and other forms of media often require a consumer to join a platform in order to access or utilize the media. This affiliation may take the form of a subscription to a distribution channel or purchase of a hardware device. One of the primary means of differentiation and competition between platforms for consumer adoption is the acquisition of premium or quality content. However, whether or not certain content is exclusive to one platform or is present on multiple platforms varies significantly from industry to industry. One can even view Apple's exclusive U.S. provision of the iPhone to AT&T as even more variation in the degree of exclusivity across industries. Why is it that some forms of content are available only on one platform, while others are distributed through several or all platforms available—that is, they "multihome"? This paper analyzes industry propensity for exclusivity and presents a model of platform competition. The key driving force is the nature of the relationship between the content and the platforms: outright sale (all control rights, particularly over content pricing, are transferred from the content provider to the platform) or affiliation (the content provider maintains control rights over pricing).
Understanding the 'Want' vs. 'Should' Decision
| Q&A with: | Todd Rogers and Katy Milkman |
|---|---|
| Published: | July 16, 2007 |
| Feature: | Research & Ideas |
Pizza or salad? Consumers use different approaches to buying things they want (pizza) versus items they should buy (salad). In their research on online grocery-buying habits and DVD rentals, Harvard Business School's Katy Milkman and Todd Rogers, along with Professor Max Bazerman, provide insights on the want-should conflict and the implications for managers in areas such as demand forecasting, consumer spending habits, and effective store layout.
Film Rentals and Procrastination: A Study of Intertemporal Reversals in Preferences and Intrapersonal Conflict
| Author: | Katy Milkman, Todd Rogers, Max H. Bazerman |
|---|---|
| Published: | June 28, 2007 |
| Paper Release Date: | June 2007 |
| Feature: | Working Papers |
Throughout our lives, we face many choices between activities we know we should do and those we want to do. Examples of such choices include whether or not to visit the gym, to smoke, to order a greasy pizza or a healthy salad for lunch, and to watch an action-packed blockbuster or a history documentary on Saturday night. Using data on consumption decisions over time from an Australian online DVD rental company, this paper investigates how and why individuals make systematically different decisions when their choices will take effect in the present versus the future.
Published in 2006
Will the "Long Tail" Work for Hollywood?
| Published: | October 23, 2006 |
|---|---|
| Feature: | Research & Ideas |
The "long-tail phenomenon" is well documented: Amazon.com makes significant profits selling many low-volume books. But can the long tail work for video sales as well? A new working paper by professors Anita Elberse and Felix Oberholzer-Gee suggests that it may not bring the same benefits to Hollywood.
