Designing a referral reward program in freemium: The role of network externalities

We develop a model to explore firms’ decisions on designing referral reward programs in freemium. We find two indices that firms could compare against value discrepancy to choose their strategy. The optimal price and referral reward rate are obtained. We find that the absence of network externality relating to product quality makes referral dysfunctional, and we conduct sensitivity analysis. This study contributes to theories that incorporate a referral reward program into the freemium model and provides practitioners with viable takeaways.     

Exploring the trade-off between generalization and empirical errors in a one-norm SVM

We propose a one-norm support vector machine (SVM) formulation as an alternative to the well-known formulation that uses parameter C in order to balance the two inherent objective functions of the problem. Our formulation is motivated by the ?-constraint approach that is used in bicriteria optimization and we propose expressing the objective of minimizing total empirical error as a constraint with a parametric right-hand-side. Using dual variables we show equivalence of this formulation to the one with the trade-off parameter. We propose an algorithm that enumerates the entire efficient frontier by systematically changing the right-hand-side parameter. We discuss the results of a detailed computational analysis that portrays the structure of the efficient frontier as well as the computational burden associated with finding it. Our results indicate that the computational effort for obtaining the efficient frontier grows linearly in problem size, and the benefit in terms of classifier performance is almost always substantial when compared to a single run of the corresponding SVM. In addition, both the run time and accuracy compare favorably to other methods that search part or all of the regularization path of SVM.     

On the role of heterogeneous and imperfect information in a laboratory financial market

In this paper, we analyze the behavior of a group of heterogeneously informed investors in an laboratory asset market. Our experimental setting is inspired by Huber et al. (On the benefit of information in markets with heterogeneously informed traders: an experimental study, 2004). However, instead of their system of cumulative and exogenously given information structure, we introduce an information market where the traders can buy an imperfect prediction of the future value of the dividend with a maximum anticipation of four periods. The accuracy of the prediction decreases with the chosen time horizon, whereas its price remains constant. Our results confirm a non-strictly monotonic increasing value of the information.     

Controlling for supplier switching in the presence of real options and asymmetric information

Applying a real option approach, this paper examines how asymmetric information alters key variables of a firm’s supplier switching process, such as the timing of contracting (hurried versus delayed contracting), transfer payments, set-up, switching, and abandonment decisions. In a symmetric information setting, delayed contracting is unambiguously beneficial. Abandoning the once established relation with the entrant supplier is never an issue. In contrast, under asymmetric information hurried contracting with potentially abandoning the relation can be beneficial. Consistent with adverse selection models, we find that under delayed contracting, in equilibrium, the firm switches less frequently to the entrant supplier (switching inertia). Surprisingly, we also find that under hurried contracting the firm switches more frequently to the entrant supplier (switching acceleration) and may abandon the relation. Finally, we study how these key variables of the supplier switching process change when also the incumbent supplier has private information (two-sided asymmetric information case).     

On structuring problems of job design met in the development and maintenance of information systems

In the development and maintenance of information systems data processing tasks are assigned either to a computer or to a man. In this paper we consider five decisions made during the development phase. These decisions have an influence on the contents of jobs: 1. distribution of work between man and computer, 2. construction of man-computer interface, 3. grouping tasks into jobs, 4. design of control part of new information system, 5. assignment of people to jobs.During the use of an information system both the person and his job will change. Here various combinations of changes in a person-job pair are classified and analyzed.This research has been supported by the Academy of Finland.