Allowing joint bidding helps reduce potential mismatch between an e-tailer's costs and the consumer's bids on name-your-own-price websites like Priceline, according to the Management Insights feature in the current issue of Management Science, the flagship journal of the Institute for Operations Research and the Management Sciences (INFORMS).
Management Insights, a regular feature of the journal, is a digest of important research in business, management, operations research, and management science. It appears in every issue of the monthly journal.
"Joint Bidding in the Name-Your-Own-Price Channel: A Strategic Analysis" is by Wilfred Amaldoss of the Fuqua School of Business at Duke University and Sanjay Jain at the Mays Business School, Texas A&M University.
In their study, the authors examine joint bidding – for example a consumer bidding on all elements of a vacation (airplane travel, rental car, and hotel) as a package. They ask if it would be better for consumers if they could place joint bids for all these separate items at a name-your-own-price (NYOP) retailer like Priceline, and if it would be profitable for the e-tailer to allow such joint bids.
The authors considered two possible outcomes: consumers seeking savings could drive down prices when bidding on packages, giving them a bargain but costing the retailer. Alternately, consumers might hope that by bidding on a package, they could obtain all the items in the package and offer more.
The authors conclude that in many cases, joint bidding benefits both consumer and retailer. They find that consumers may indeed bid more for the very same products when asked to place a joint bid rather than a separate bid for each product.
Joint bidding, they determine, increases the probability of a transaction going through and improves both a firm's profits and consumer surplus (the benefit to consumers due to the difference between what they actually pay and what they were willing to pay). The authors conducted a simulated market experiment; the results support their hypothesis.
The current issue of Management Insights is available at http://mansci.journal.informs.org/cgi/reprint/54/10/iv. The full papers associated with the Insights are available to Management Science subscribers. Individual papers can be purchased at http://institutions.informs.org. Additional issues of Management Insights can be accessed at http://www.informs.org/site/ManSci/index.php?c=11&kat=Management+Insights.
The other Insights in the current issue are:
- Financial Reporting and Conflicting Managerial Incentives: The Case of Management Buyouts by Paul Fischer, Henock Louis
- Diversity in Resource Consumption Patterns and Robustness of Costing Systems to Errors by Eva Labro, Mario Vanhoucke
- Remanufacturing as a Marketing Strategy by Atalay Atasu, Miklos Sarvary, Luk N. Van Wassenhove
- The Make-or-Buy Decision in the Presence of a Rival: Strategic Outsourcing to a Common Supplier by Anil Arya, Brian Mittendorf, David E. M. Sappington
- Strategic Customer Behavior, Commitment, and Supply Chain Performance by Xuanming Su, Fuqiang Zhang
- Estimating the Influence of Fairness on Bargaining Behavior by Arnaud De Bruyn, Gary E. Bolton
- Strategic Inventories in Vertical Contracts by Krishnan Anand, Ravi Anupindi, Yehuda Bassok
- Inventory Management Under Market Size Dynamics by Tava Lennon Olsen, Rodney P. Parker
- Properties of the Social Discount Rate in a Benthamite Framework with Heterogeneous Degrees of Impatience by Diego Nocetti, Elyès Jouini, Clotilde Napp
- Are Store Brand Buyers Store Loyal? An Empirical Investigation by Karsten Hansen, Vishal Singh
INFORMS journals are strongly cited in Journal Citation Reports, an industry source. In the JCR subject category "operations research and management science," Management Science ranked in the top 10 along with two other INFORMS journals.
The special MBA issue published by Business Week includes Management Science and two other INFORMS journals in its list of 20 top academic journals that are used to evaluate business school programs. Financial Times includes Management Science and four other INFORMS journals in its list of academic journals used to evaluate MBA programs.
About INFORMS
The Institute for Operations Research and the Management Sciences (INFORMS®) is an international scientific society with 10,000 members, including Nobel Prize laureates, dedicated to applying scientific methods to help improve decision-making, management, and operations. Members of INFORMS work in business, government, and academia. They are represented in fields as diverse as airlines, health care, law enforcement, the military, financial engineering, and telecommunications. The INFORMS website is www.informs.org. More information about operations research is at www.scienceofbetter.org.
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