Sreya Kolay
Assistant Professor in Marketing




CONTACT: 

Email: skolay@uci.edu;  
   
Cell Phone: (585) 414 9544

Office: SB2 328
Paul Merage School of Business
University of California, Irvine

Sreya Kolay's research interest is in analytical modeling of marketing problems using game theory and economic analysis to examine firms’ marketing decisions relating to pricing, promotion, product design, and channel management under various market conditions. Her research has examined the profitability and implications of the use of various pricing mechanisms (for example, all-units discounts, price-quantity bundles, two-part tariffs, quantity discounts, reverse-fixed payments, tie-in contracts) in  the context of distribution channel management and customer heterogeneity. She has also explored other issues in channel management like delegation of services as well as firms' pricing decisions over time. She has published in top marketing and industrial organization journals such as Management Science, Quantitative Marketing and Economics, International Journal of Research in Marketing, Journal of Industrial Economics and Journal of Economics and Management Strategy. 




Education


    PhD in Economics, University of Rochester 

        Dissertation Title: Essays on Pricing Strategies of a Monopolist Firm

        Advisor: Greg Shaffer, Professor of Marketing, William E. Simon Graduate School of Business,               University of Rochester


    MA in Economics, University of Rochester 


    MS in Quantitative Economics, with distinction, Indian Statistical Institute 


    BS in Economics, with honors, Presidency College, Calcutta, India 

 

 

Professional Positions

 

    Assistant Professor, Paul Merage School of Business, UC Irvine (July 2008- present)

    Associate, The Brattle Group (a consultancy firm) (August 2004 - March 2008)

 

Research Interests

 

Game Theory, Pricing & Promotion Strategies, Distribution Channel management, Product line design, Durable Good pricing, Product bundling

 

Professional Memberships

 

INFORMS

American Marketing Association

Social Science Research Network (SSRN)

 

Awards and Honors


    CORCLR Research Award, University of California, Irvine (2009 & 2014)

    Summer Research Grant, University of Rochester (2000)

    MS Fellowship, Indian Statistical Institute, Calcutta (1999)

    B. Sc. Merit Scholarship, University of Calcutta (1997)



RESEARCH

Publications

 

Journal Articles, Peer-Reviewed

 

1.      Kolay, S. (2018). Tie-in Contracts with Downstream Competition, Quantitative Marketing and Economics, forthcoming.


This paper analyzes the product tying strategies of a firm which is a monopolist in the market for one of its products (the primary product) but faces competition from a more efficient rival in the market for another product (the secondary product), where both these competing firms must sell their products through retailers serving both markets. Such tying contracts have frequently been accused of being used for anti-competitive purposes. Specifically, the concern is that a firm that is dominant in a primary product market can utilize such contracts to force buyers to purchase the secondary product from it, thereby driving a more efficient rival out of the secondary market. Most notably in the late 1990s, Microsoft came under considerable fire for tying its browser Internet Explorer to its dominant Windows operating system when it sold its products to PC manufacturers allegedly for the purpose of driving out its rival Netscape Navigator. Recently, Google has been the subject of concern among antitrust authorities with regard to the tying of its applications like Google Play, Google Search, Google Maps and YouTube with its dominant Android operating system for mobile phones.

 

This paper examines whether and when the firm finds it optimal to use tie-in contracts to exclude its rival in the secondary market. It shows that the profitability of this tying strategy hinges on the nature of retail competition at the downstream level, as well as the degree to which each of the two upstream firms can credibly commit to the prices they initially announce before retailers’ choices are made.



2. Kolay, S., Tyagi, R.K. (2018). Consumer Heterogeneity and Surplus under Two-Part Pricing, B.E. Journal of Theoretical Economics, forthcoming.


The use of two-part pricing .where a seller charges the buyer either a fixed fee alone, a per-unit price alone, or both together is ubiquitous across a large number of industries, for example, entertainment parks, health clubs, online grocery stores and membership discount retailers such as shopping clubs. In most of these cases, the buyers have to sign the pricing contract with the seller under uncertainty about their future consumption need. In the marketing literature, recent empirical and experimental work on consumer choice has shown that in these settings, consumers are heterogeneous in how correctly they estimate their consumption needs and hence in their beliefs about their demands. While some consumers are unbiased or correct in their beliefs about how   much they would need, some may be positively biased and expect a demand higher than what they would actually have, while others may be negatively biased and expect a demand lower than what they would actually have. In this paper, we focus on this particular type of consumer heterogeneity and examine a seller’s optimal two-part pricing and the impact on consumer surplus across heterogeneous segments. We provide interesting findings on the level of consumer welfare of each of the different consumer types as functions of the other coexisting types in the market. We also examine how the optimal pricing plans and the resultant consumer surplus across segments vary with differing levels of consumer uncertainty and bias.



3.      Kolay, S., Tyagi, R.K. (2018). Product Similarity and Cross-Price Elasticity, Review of Industrial Organization, 52(1), 85  100.


Cross-price elasticity is one of the most commonly used constructs in theoretical and empirical work in the areas of pricing and market structure. A higher cross-price elasticity between two products is taken to mean that they are more substitutable, and is often suggested as an indication that products are more similar to each other in characteristics space. This paper theoretically investigates the relationship between the similarity between two products and the cross-price elasticities between them.


This paper develops a model of spatial competition between two products that differ along both vertical and horizontal product attributes, and shows circumstances where making the two products more similar on a horizontal product attribute can monotonically increase, monotonically decrease or even change non-monotonically a product’s cross price elasticity.



4.      Kolay, S. (2015). Manufacturer-provided Services vs. Retailer-provided Services: Effect on Product Quality, Channel Profits and Consumer Welfare. International Journal of Research in Marketing, 32(2), 124 – 154.


Demand-enhancing services and activities such as advertising, help desks, toll-free technical support hotlines, or delivery and installation services are routinely offered to consumers by manufacturers or retailers or both. This paper develops a game theoretic model to examine how the identity of the channel member (manufacturer or retailer) providing the demand-enhancing services can have a different impact on the manufacturer’s product quality decisions and resultant channel and consumer welfare.

 

The paper shows that when a manufacturer wishing to sell its product line through a retailer provides demand-enhancing services to consumers, then it chooses higher product quality levels and channel member profits and consumer welfare are higher. However, when the retailer selling the manufacturer’s product line is the one who provides the demand-enhancing services, then the manufacturer may choose a lower product quality level and retailer profit and consumer welfare may be lower. These results therefore indicate that a manufacturer should not simply look at cost savings arising from shifting service responsibilities from itself to the retailer. Similarly, a retailer should not expect to always benefit from situations where it has secured the ability to choose its own desired levels of services to be provided to consumers.

 

  

5.      Kolay, S. (2015). When can a Durable Goods Seller Price Discriminate Intertemporally?  Review of Marketing Science, 13(1), 41 – 58.


The vast literature on durable good pricing assumes a continuum of small insignificant consumers. The prevailing wisdom in that literature is that the seller is unable to perfectly price discriminate between consumers of different types.  Any attempt to charge a high enough price is defeated by each consumer rationally expecting a drop in prices in the future and opting not to purchase the good at the moment.

This paper extends this literature to commonly observed settings where consumers are small in number and large (e.g., firms). The paper characterizes conditions on the heterogeneity in consumer reservation prices and relative sizes of the different consumer segments that lead the optimal pricing strategy to  be (i) perfect price discrimination where the seller sells to all the consumers at their respective reservation prices; or (ii) an absence of price discrimination where the seller sells the product to all consumers at the lowest reservation price; or (iii) intermediate scenarios where the seller may sell to a subset of consumers at their reservation prices and others at a lower price.

 

 

6.      Kolay, S., Shaffer, G. (2013). Contract Design with a Dominant Retailer and a Competitive Fringe. Management Science, 59(9), 2111-2116.


Channel coordination has been a major focus of the literature on vertical contracting in distribution channels. This paper examines the channel coordination problem in a market characterized by a dominant retailer and a fringe of price–taking smaller retailers. This is an important market structure to consider because of the increasing attention given to dominant retailers, such as Wal-Mart, in both the popular media and in policy circles. In this market setting, this paper shows that under some general conditions, quantity discounts and two-part tariffs offered by manufacturer to retailers are equivalent as mechanisms for channel coordination. The results imply that a manufacturer’s choice of contract design may simply turn on which one is easier to implement.

 

 

7.      Kahana, N., Gotlibovski, C., Kolay, S., Shaffer, G. (2008). Bundling and Menus of Two-Part Tariffs: Comment. Journal of Industrial Economics, LVI(4), 1-11.


This paper is an extension of Paper #8 which examined a seller’s choice between a menu of two-part tariffs and price-quantity bundles when serving both high-end and low-end consumers. Paper #1 showed that bundling, although strictly more profitable than two-part tariffs, may not necessarily lead to higher consumer surplus. This paper extends that analysis to allow the seller to choose whether to sell to both high- and low-end consumers or to just one consumer segment. While the previous results from paper #1 regarding the relative profitability of bundling compared to two-part tariffs are preserved, this paper shows that bundling becomes more attractive from consumer welfare perspective compared to two-part tariffs when one introduces this flexibility in the seller’s choice of consumer segments to serve.

  

    8.     Kolay, S., Shaffer, G., Ordover, J. (2004). All-units Discounts in Retail Contracts. Journal of                   Economics and Management Strategy, 13(3), 429-459.

This paper explains the prevalence of a particular kind of pricing mechanism – all-units discounts – in retail contracts. All-units discounts refer to discounts that lower a retailer’s wholesale price on every unit purchased when the retailer’s purchases equal or exceed some quantity threshold. These discounts pose a challenge to economic theory and concern to regulators because it is difficult to understand why a manufacturer ever would charge less for a larger order if its intentions were benign. In fact, these contracts have raised numerous concerns at the European Commission for being potentially anticompetitive.

 

This paper demonstrates that all-units discounts may profitably arise absent any anticompetitive motive. Specifically, it shows that by using all-units discounts in its retail contract, a manufacturer can eliminate the well-known double marginalization problem and align retailer incentives so as to maximize channel profit. Further, it shows that in an uncertain environment where the retailer possesses better information regarding the nature of market demand compared to the manufacturer, a menu of all-units discounts performs better than a benchmark menu of two-part tariffs in limiting retailer opportunism, and therefore yields higher profit for the manufacturer.   However, with regards to total social welfare, it finds that the optimal menu of all-units discounts may perform better or worse relative to the optimal menu of two-part tariffs depending on demand parameters.

 


9.      Kolay, S., Shaffer, G. (2003). Bundling and Menus of Two-Part Tariffs. Journal of Industrial             Economics, 51, 383-404.


    There are various pricing schemes that firms use to price discriminate across heterogeneous consumers but             whose valuations are private and unobservable to the firms. Examples commonly seen include a menu of two-       part tariffs (e.g., a menu of rate plans for cell phone where one option has high monthly fixed fee but a lower         per-minute fee and the other option has low monthly fixed fee but a higher per-minute fee). This pricing                 scheme lets consumers select any quantity they prefer to consume, given the pricing scheme they choose.               Another common pricing scheme is a menu of price-quantity bundles (e.g., different package sizes, each                 consisting of a fixed quantity for a package and a price per package). This pricing scheme lets consumers select     a quantity only from among these bundles. This paper compares these two pricing schemes, and shows that            bundling yields higher profit than two-part tariffs, absent cost considerations. However, social welfare may be        higher or lower with bundling.


    Papers Under Advanced Stages of Review and Completed Working Paper

   
    10. Kolay, S., Shaffer, G.  Reverse-Fixed Payments in Distribution Channels with a Dominant                       Retailer, revise and resubmit, Marketing Science.

    A common feature of contracts between manufacturers and retailers that has invited a lot of attention    from media as well as academics is the phenomenon of reverse-fixed payments (occasionally called        street money, slotting allowances, pay-to-stay fees, cooperative advertising money or placement              allowances). They refer to lump-sum payments made by the manufacturer to retailers. While several        rationales are provided to support the existence of this phenomenon ranging from competition                between brands fighting for attractive shelf space in stores to the exercise of bargaining power of large    retailers to the need for supporting retail promotions and other demand-enhancing services provided by    retailers, many observations from the retail industry contradict these theories. Specifically, large              retailers like Walmart, Costco, Whole Foods at which most manufacturers compete to have their            products displayed and who provide large amounts of demand-enhancing services, have traditionally      foregone these reverse-fixed payments. At the same time, smaller grocery stores (with lower                    bargaining power) have increasingly received reverse-fixed payments from the manufacturers. These      observations thus call for an alternative rationale for supporting the existence of reverse-fixed                  payments in retail contracts.

 

  This paper examines how reverse-fixed payments made by the manufacturer to a retailer may arise as a   part of channel coordinating contracts in an asymmetric retail market framework characterized by a         large retailer who provides a demand-enhancing service and a fringe of smaller passive retailers. We       show how these reverse-fixed payments are offered to the fringe of smaller retailers and may or may       not be offered to the larger retailer.


 

   11.   Kolay, S., Tyagi, R. K. Bundling of Events, revise and resubmit, Marketing Science.
   

    Event organizers often sell a series of events that occur sequentially over time, for example, concert series with     multiple performers, film festivals, and sports tournaments. Consumers may enjoy more than one event in the         series, and the events may differ in popularity with the audience. This paper explores the optimal pricing               strategy of such an event organizer. Specifically, it analyzes how the event organizer’s decision on whether to       sell events in a bundle and/or individually and how to price the bundle and individual events are influenced by     the following factors: (i) the order in which events occur i.e., the more popular event followed by the less               popular event or vice versa; (ii) the magnitude of difference in relative popularities of events;  (iii) whether the     seller can credibly commit upfront to the price of the future event, and (iv) whether there is uncertainty in the         consumers’ minds regarding their valuations for the event occurring in the future.



    12.  Kolay, S., Tyagi, R.K. On the Effects of Raised Rival's Costs, revise and resubmit, Review of                   Industrial Organization.


    It is commonly believed that if a firm’s cost increases, then its competing firm gains a strategic advantage and       improves its profitability. In particular, an increase in its costs forces a firm to raise its price or reduce its               output, yielding a competitive advantage to the competing firm. This paper shows that a firm may not benefit         from an increase in its competitor's costs if firms have control over the quality of their product offerings. In           particular, it characterizes conditions on consumer heterogeneity in valuation of product quality, consumer             outside options, and the nature of quality-production process under which a firm does not benefit from an            increase in its competitor’s costs.

 


    Working Papers and Work in Progress


    13.   Kolay, S. A Model of Cause-related Marketing.


    14.   Kolay, S., Tyagi, R.K. Downsizing vs Price Increase when cost increases.


    15.   Choi, J., Kolay, S. and Tyagi, R.K.  Fuel-surcharge contracts.


    16.   Gao, X., Kolay, S. Pricing contracts in the sharing economy.


    17.   Kolay, S. Milestone Payments in R&D contracts.


    18.   Kolay, S. Delegation of services in a distribution channel.

 


    Presentations Given

 

    INFORMS Annual Conference, Houston (October 2017)

 

    INFORMS Marketing Science Conference, University of Southern California, Los Angeles (June             2017)


    Assistant Professor Colloquia Series, Paul Merage School of Business, University of California,               Irvine (May 2017)


    Economic Sciences Institute Seminar, Chapman University (May 2017)


    INFORMS Annual Conference, Nashville (November 2016)


    Assistant Professor Colloquia Series, Paul Merage School of Business, University of California,               Irvine (May 2016)

 

     INFORMS Marketing Science Conference, Johns Hopkins University, Baltimore (June 2015)

    12th Annual Industrial Organization Conference, Invited Discussant, Northwestern University (April         2014)

    2013 Pricing and Retailing Conference, Babson College (August 2013)

    Assistant Professor Colloquia Series, Paul Merage School of Business, University of California,               Irvine     (May 2013)

    Midwest Economic Theory Conference, Michigan State University (April 2013).

    2013 UC/USC Annual Marketing Seminar, Paul Merage School of Business, University of California,     Irvine (April 2013)

    Assistant Professor Colloquia Series, Paul Merage School of Business, University of California,               Irvine     (May 2011)

    INFORMS Marketing Science Conference, University of Cologne, Germany (June 2010)

    Assistant Professor Colloquia Series, Paul Merage School of Business, University of California,               Irvine     (May 2010)

    2010 UC/USC Annual Marketing Seminar, University of California, Riverside (April 2010)

    Assistant Professor Colloquia Series, Paul Merage School of Business, University of California,               Irvine     (June 2009)

    INFORMS Marketing Science Conference, University of Michigan, Ann Arbor (June 2009)

    Third Workshop on Game Theory in Marketing, GERAD & HEC Montreal (May 2009)

    Midwest Mathematical Economics and Theory Conference, Ohio State University (October 2008)

    Marketing Area Colloquium, Paul Merage School of Business, University of California, Irvine                   (October 2007)

    Marketing Area Workshop, Rutgers Business School (October 2007)

    Second Workshop on Game Theory in Marketing, GERAD & HEC Montreal (June 2007)

    Associate Recruitment Seminar, The Brattle Group (February 2004)

    Economic Theory Workshop, Department of Economics, University of Rochester (October 2003)

 

 

Professional Service


    Referee for Management Science, Marketing Science, RAND Journal of Economics, Journal of Public     Economics, Manufacturing & Service Operations Management, Production and Operations                     Management, Omega, International Journal of Research in Marketing, International Journal of               Industrial Organization, Quantitative Marketing and Economics, Journal of Economics and                     Management Strategy, Review of Industrial Organization, Information Systems Research, Journal of       Industrial Economics, Bulletin of Economic Research, Managerial and Decision Economics,                   Telecommunications Policy.

 

 

Professional Development


    Workshop, "Faculty Teaching Academy," UCI Teaching, Learning & Technology Center, Irvine, CA.     (September 10, 2008 - September 11, 2008)

 



 

TEACHING

 Teaching Interests


    Marketing Strategy, Pricing, Marketing Research, Distribution Channels, Retailing, Analytical                 Modeling in Marketing

 

 

Membership of Doctoral Committee


    Co-Chair, Yeong Seon Kang, 2009 – 2012 (Paul Merage School of Business, UCI)

    Co-Chair, Ji-Hung Choi, 2011 – 2015 (Paul Merage School of Business, UCI)

 

 

Membership of Dissertation Proposal Committee

 

    Xiaoyi (Sylvia) Gao, 2017 (Paul Merage School of Business, UCI)

    Duygu Akdevelioglu, 2015 (Paul Merage School of Business, UCI)

    Federico Bumbaca, 2015 (Paul Merage School of Business, UCI)

    Marshall Brendan Urias, 2015 (Economics Department, School of Social Sciences, UCI)

    Steven Brownlee, 2015 (Economics Department, School of Social Sciences, UCI)

    Alexander Burtea, 2016, (Chemistry Department, School of Physical Sciences, UCI)

    Sanjana Goswami, 2016 (Economics Department, School of Social Sciences, UCI)



Courses Taught


    Introduction to Marketing (Undergraduate): Fall 2008, Spring 2009, Fall 2009, Winter 2010, Fall             2011, Winter 2011, Spring 2012, Spring 2013, Spring 2015, Spring 2016, Winter 2017, Spring 2017


    Marketing Research (Undergraduate): Spring 2009


    Pricing Strategy (Undergraduate): Winter 2010, Winter 2011, Spring 2012, Spring 2013, Spring 2015,     Spring 2016, Winter 2017.


    Seminar in Theoretical Modeling in Marketing (Ph.D): Winter 2010, Winter 2013, Winter 2015

 

    Basics of Modeling in Marketing (Ph.D.): Winter 2016

 



SERVICE


Department Service


    Member, Ph.D. Committee (2008 - 2011)

    Member, Undergraduate Committee (2012 – current)

    Chair, Undergraduate Committee (Spring 2017).

 


University Service


    Member, Council on Educational Policy (2012 – 2013)