Product Ranking on Online Platforms

On online platforms, consumers face an abundance of options that are displayed in the form of a position ranking. Only products placed in the first few positions are readily accessible to the consumer, and she needs to exert effort to access more options. For such platforms, we develop a two-stage sequential search model where, in the first stage, the consumer sequentially screens positions to observe the preference weight of the products placed in them and forms a consideration set. In the second stage, she observes the additional idiosyncratic utility that she can derive from each product and chooses the highest-utility product within her consideration set. For this model, we first characterize the optimal sequential search policy of a welfare-maximizing consumer. We then study how platforms with different objectives should rank products. We focus on two objectives: (i) maximizing the platform’s market share and (ii) maximizing the consumer’s welfare. Somewhat surprisingly, we show that ranking products in decreasing order of their preference weights does not necessarily maximize market share or consumer welfare. Such a ranking may shorten the consumer’s consideration set due to the externality effect of high-positioned products on low-positioned ones, leading to insufficient screening. We then show that both problems—maximizing market share and maximizing consumer welfare—are NP-complete. We develop novel near-optimal polynomial-time ranking algorithms for each objective. Further, we show that, even though ranking products in decreasing order of their preference weights is suboptimal, such a ranking enjoys strong performance guarantees for both objectives. We complement our theoretical developments with numerical studies using synthetic data, in which we show (1) that heuristic versions of our algorithms that do not rely on model primitives perform well and (2) that our model can be effectively estimated using a maximum likelihood estimator. This paper was accepted by Gabriel Weintraub, revenue management and market analytics.

How Do Recommender Systems Lead to Consumer Purchases? A Causal Mediation Analysis of a Field Experiment

The findings underscore the important role of consumers’ consideration sets in mediating the positive effects of recommender systems on consumer purchases. Practical strategies can be developed to facilitate the formation of the consideration sets. For example, to reduce consumers’ search costs and cognitive efforts, online retailers can display the recommended products in a descending order according to the predicted closeness of consumers’ preferences. Online retailers can further indicate the predicted closeness scores of consumers’ preferences for the recommended products. Given such a placement arrangement, consumers can quickly screen the recommended products and add the most relevant alternatives to their consideration sets, which should facilitate consumers’ shopping process and increase the shopping satisfaction. The findings also suggest that a larger consideration set due to the use of recommender systems could induce consumers to buy. Yet, it is difficult for consumers to manage many alternatives when the consideration set is very large. To facilitate consumers’ shopping process, online retailers need to consider strategies and tools that help consumers manage the alternatives in the consideration set in a better-organized manner and facilitate the comparison across the alternatives.

Nash blocks

A product set of pure strategies is a Nash block if it contains all best replies to the Nash equilibria of the game in which the players are restricted to the strategies in the block. This defines an intermediate block property, between curb (Basu and Weibull, Econ Lett 36(2):141–146, 10.1016/0165-1765(91)90179-O, http://www.sciencedirect.com/science/article/pii/016517659190179O, 1991) and coarse tenability (Myerson and Weibull (2015) Econometrica 83(3):943–976, 10.3982/ECTA11048). While the new concept is defined without reference to the consideration-set framework that defines tenability, the framework can be used to characterize Nash blocks in terms of potential conventions when large populations of individuals recurrently interact. Although weaker than curb, Nash blocks nevertheless maintain several robustness properties of curb sets. For example, every Nash block contains an essential component and is robust against payoff perturbations.

High BMI Predicts Attention to Less Healthy Product Sets: Can a Prompt Lead to Consideration of Healthier Sets of Products?

While the food environment has been implicated in diet-related health disparities, individuals’ ability to shape the food environment by limiting attention to a subset of products has not been studied. We examine the relationship between BMI category and consideration set—the products the individual considers before making a final choice—in an online hypothetical shopping experiment. Specifically, we focus on the healthiness of the consideration set the individual selected. Secondly, we examined the interaction of a health prompt (versus a no-prompt control) with BMI category on the healthiness of the consideration set. We used linear probability models to document the relationship between weight status and consideration set, between prompt and consideration set, and the effect of the interaction between prompt and weight status on consideration set. We found that (1) obese individuals are 10% less likely to shop from a consideration set that includes the healthy options, (2) viewing the prompt increased the probability of choosing a healthy consideration set by 9%, and (3) exposure to the prompt affected individuals in different BMI categories equally. While obese individuals are more likely to ignore healthier product options, a health-focused prompt increases consideration of healthy options across all BMI categories.

Theory of Formation of Edge’s Surface Roughness Finished by Radial Polymer-Abrasive Brushes

Formation of roughness during treatment by polymer-abrasive brushes occurred as a result of interaction of cutting micro-relief with processed surface. The cutting micro-relief of abrasive instrument is described in the form of random process with normal distributional law. When calculation of roughness, the depths of penetration of cutting lugs in processed material as well as regularity of changing of radial radius of rounding of peaks of cutting lugs from modes of treatment are taken into consideration. Set are relations of roughness of processed edge from modes of treatment (deformations of instrument, cutting velocities, feeding) as well as from constituent cutting force. It is proved that usage of polymer-abrasive brushes for rounding of edges faces all requirements of aviation industry on roughness of processed edges.

GOALS AND OBJECTIVES OF MODERN OPERATIONAL AND INVESTIGATIVE ACTIVITIES: PROBLEMS OF LEGISLATIVE REGULATION

Статья посвящена рассмотрению проблем соотношения закрепленных Федеральным законом от 12 августа 1995 г. № 144-ФЗ «Об оперативно-розыскной деятельности» целей и задач с рассматриваемой деятельностью различных правоохранительных органов. Проведя сравнительный анализ мнений авторитетных ученых оперативно-розыскной науки, авторы приходят к выводу о том, что цели и задачи современной оперативно-розыскной деятельности уже достаточно давно выходят за рамки борьбы с преступностью. Указанный тезис находит свое подтверждение и в изложенном в статье анализе федерального законодательства России, осуществляющего регулирование рассматриваемого направления деятельности. В рамках проведенного исследования авторы обращают внимание на имеющиеся коллизии между общими и частными задачами оперативно-розыскной деятельности, закрепленными нормативными правовыми актами федерального уровня, а также на отсутствие у законодателя единой позиции по употреблению в правовых нормах словосочетаний «оперативно-розыскной» и «оперативно-разыскной». Авторы приходят к выводу о необходимости внесения изменений в оперативно-розыскной закон в целях устранения имеющихся противоречий в законодательном регулировании оперативно-розыскной деятельности. Предложенная авторами норма оперативно-розыскного закона обладает оригинальностью и учитывает интересы всех органов, осуществляющих оперативно-розыскную деятельность The article is devoted to the consideration of the problems of the relationship between the objectives and tasks established by Federal Law No. 144-ФЗ of 12 August 1995 «On Operational and Investigative Activities» and the activities of the various law enforcement agencies under consideration. Having conducted a comparative analysis of the opinions of authoritative scientists of operational and investigative science, the authors conclude that the goals and tasks of modern operational and investigative activities have long gone beyond the fight against crime. This thesis is also confirmed in the analysis of the federal legislation of the Russian Federation, which carries out legislative regulation of the area of activity under consideration, set out in the article. In the framework of the study, the authors draw attention to the existing conflicts between the general and private tasks of operational-search activities, established by the normative legal acts of the federal level, as well as to the absence of a unified position of the legislator on the use in legal norms of the phrases «operational and investigative» and «operational-search». The authors conclude that it is necessary to amend the investigation law in order to eliminate existing contradictions in the legislative regulation of investigation activities. The norm of operational and search law proposed by the authors has originality and takes into account the interests of all bodies carrying out operational and investigative activities.

What Do Consumers Consider Before They Choose? Identification from Asymmetric Demand Responses

Consideration set models generalize discrete-choice models by relaxing the assumption that consumers consider all available options. Determining which options were considered has previously required either survey data or restrictions on how attributes impact consideration or utility. We provide an alternative route. In full-consideration models, choice probabilities satisfy a symmetry property analogous to Slutsky symmetry in continuous-choice models. This symmetry breaks down in consideration set models when changes in characteristics perturb consideration. We show that consideration probabilities are constructively identified from the resulting asymmetries. We validate our approach in a lab experiment where consideration sets are known and then apply our framework to study a “smart default” policy in Medicare Part D, wherein consumers are automatically reassigned to lower-cost prescription drug plans with the option of opting out. Full-consideration models imply such a policy will be ineffective because consumers will opt out to avoid switching costs. Allowing for inattention, we find that defaulting all consumers to lower-cost options produces negligible welfare benefits on average, but defaulting only consumers who would save at least $300 produces large benefits.

The Threshold Effects on Consumer Choice and Pricing Decisions

Problem definition: This paper investigates the threshold effects on the consideration set formation for consumers and the associated pricing decisions for firms. Academic/practical relevance: In the class of random utility maximization choice models, consumers choose the alternative with the largest utility after resolving utility uncertainties for all options. However, in practice, consumers may not inspect all available alternatives due to bounded rationality or search cost. Methodology: This paper incorporates bounded rationality into consumer choice behavior: in the first stage, a representative consumer forms her consideration set by removing alternatives whose nominal utility is lower than the largest by a threshold; in the second stage, she examines all alternatives in her consideration set and chooses the one with the highest realized utility. Results: For the Gumbel-distributed random utilities, we derive the two-stage threshold multinomial logit model with a consideration set. For the pricing problem, we show the quasi-same-markup/same-utility policy is optimal: high-cost products charge the prices such that their profit markups are the same, and low-cost products charge prices such that their nominal utilities are the same. For the price competition, there may exist zero, one, two, or infinite Nash equilibria, depending on the magnitude of the threshold effects. Managerial implications: Our analysis shows that the consideration set and bounded rationality play an important role in consumer choice behavior, so they should be taken into account in firms’ decision making.

Choosing Among Alternative Brands: Revisiting the Way Involvement Drives Consumer Selectivity

This study provides original theoretical and practical insights on the role of involvement in consumer decision making by demonstrating its negative effect on the relative size of the consideration set. Two experimental studies were conducted to test the relations between these constructs. The moderating effect of the nature of a product category and of the decision-making context was also examined. The results suggest that high involvement makes consumers more selective when evaluating the brands, they consider for purchase. This points towards different marketing practices in order to enhance brand attitudes or strengthen brand awareness accordingly.