Woochoel Shin


Brian R. Gamache Professor and Associate Professor of Marketing,

Warrington College of Business, University of Florida

Education

PHD (Business Administration - Marketing), Duke University, 2010

BA (Business Administration), BS (Statistics), Seoul National University, 2002

Research Interests

Online Advertising, Media Platforms, Online Consumer Reviews; Competitive Product and Pricing Strategies

Publications

“Pricing Strategy of Competing Media Platforms”  (with Wilfred Amaldoss and Jinzhao Du), Marketing Science, 43(3),469-496, 2024. [pdf] [Online Appendix]

Media platforms generate revenue by bringing consumers and advertisers together. Though advertisers like to promote their services and products to consumers, consumers dislike advertisements to varying levels. Given heterogeneity in consumers' dislike for ads, platforms could adopt either a uniform pricing strategy or a tiered pricing strategy for consumers. In this paper, we examine competing media platforms' equilibrium pricing strategies in the presence of cross-side externalities between consumers and advertisers and their endogenous homing decisions. We find that symmetric platforms may adopt asymmetric pricing strategies in an attempt to focus on different sides of the market and soften inter-platform competition if the incremental value that consumers derive from multi-homing is large. However, they pursue only symmetric pricing strategies if this value is small. Counter to the intuition based on one-sided markets, our analysis shows that tiered pricing strategies need not improve the profits of platforms competing in a media market. In fact, when the incremental value that consumers derive from multi-homing is large, competing platforms may earn lower profits from tiered pricing and yet pursue it (Prisoner's dilemma). In contrast to standard results on tiered prices, we find that high-type consumers may not pay as much as their full willingness-to-pay for ad avoidance, implying that the incentive-compatibility constraint of high-type consumers may not be binding. Finally, we extend the model to allow for heterogeneous advertisers, vary the decision sequence, permit platforms to compete on ad capacity (rather than ad price), entertain an alternative formulation of transportation cost, and consider correlated advertising reach.  


“Disclosure in Incentivized Reviews: Does It Protect Consumers?”  (with Sungsik Park and Jinhong Xie), Management Science, 69(11), 6417-7150. [pdf] [Online Appendix] [Replication Files]

The well-documented rating inflation of incentivized reviews (IRs) can mislead consumers into choosing a product that they would otherwise not buy. To protect consumers from this undesirable influence, the U.S. Federal Trade Commission recommends that reviewers conspicuously disclose any material connection they may have with sellers. In theory, such disclosures safeguard consumers by motivating reviewers to be truthful and inducing consumers to discount inflated IR ratings. Our research finds, however, that IR disclosure accomplishes neither. Specifically, our empirical analysis of consumer reviews on Amazon reveals that, even with disclosure, (1) rating inflation of IRs remains, and (2) this inflation boosts sales at consumers’ expense. Finally, we propose an alternative approach to eliminate rating inflation of IRs and empirically demonstrate its effectiveness. These findings have important implications for consumers, firms, and on-going policy discussions around IRs.


“A Theory of Irrelevant Advertising: An Agency-Induced Targeting Inefficiency” (with Jiwoong Shin), Management Science, 69(8), 4481-4497. [pdf] [Online Appendix]

The ad targeting technology has enabled a highly personalized delivery of online ads. Behind this development is the belief that better targeting will lead to more relevant ads. This paper challenges this lay belief by showing that irrelevant advertising can arise not necessarily from technological imperfection but also from the incentive problem embedded in the ad agency-advertisers relationship. We first demonstrate that the ad agency serving multiple advertisers may strategically allocate an ad impression to a lesser-matched, sometimes totally irrelevant, niche advertiser because future impressions can match better with the mainstream advertiser. We further find that, without a contractual obligation to serve both advertisers, the agency may not deliver completely irrelevant ads to consumers. However, another type of inefficiency can arise where the agency may not send any ad to potentially interested consumers who have a strictly positive match probability with advertisers. These inefficiencies arise due to contractual restrictions, either contractual obligations or budget constraints, when the agency serves multiple advertisers. As such, we endogenize the advertisers' contractual requirement choices and show how the contractual obligation(s) can arise in equilibrium. Finally, we show that irrelevant ads will not disappear simply because more impressions are available in the market. Our analysis suggests that as the number of impressions increases, the irrelevant ads can persist, but the probability of receiving irrelevant ads decreases.


“The Fateful First Consumer Review” (with Sungsik Park and Jinhong Xie), Marketing Science, 40(3), 480-507, 2021. [pdf] [Online Appendix] [Replication Files]

This paper uncovers the striking power of a product’s first consumer review.  Our analytical model suggests that two key metrics of online consumer reviews, valence and volume, are not independent, but instead evolve interdependently. This interdependence forms a mechanism to transfer a (dis)advantage from a product’s first review to both a long-lasting (dis)advantage in future word-of-mouth (WOM) valence and an increasing (dis)advantage in future WOM volume.  As a result, a single consumer review can significantly influence the fate of a given product. These theoretical predictions, while seemingly unlikely, are supported by our empirical investigations. For example, more than thirty percent of vacuum cleaner models offered by both amazon.com and bestbuy.com receive first reviews of opposite valence on the two platforms. Those with a negative first review subsequently suffer a loss in both valence and volume vis-a-vis their counterparts with a positive first review, even after 36 months. More strikingly, the first-review effect on WOM volume increases over time. Our findings reveal a crucial weakness in the user-generated information mechanism. As a consumption-based information source, it creates an information-availability bias such that, when a product receives a negative first review, it not only suffers low initial sales, but also loses the opportunity to correct the possible negative bias via subsequent reviews. These findings have substantial implications for online sellers, ecommerce platform providers, and consumers.


“Media Platforms’ Content Provision Strategy and Source of Profits” (with Wilfred Amaldoss and Jinzhao Du), Marketing Science, 40(3), 527-547, 2021. [pdf] [Online Appendix]

Some media platforms earn their profits from both consumers and advertisers (e.g., Spotify, Hulu) whereas others earn their profits from either advertisers only (e.g., Jango, Tubitv) or consumers only (e.g., Tidal, Netflix). Thus media platforms adopt divergent strategies depending on how they allocate the limited space or bandwidth between content and advertising. In this paper, we examine media platforms' content provision strategy and its implications for the profits of media platforms as well as content suppliers, taking into account the cross-side effects of a multi-sided media market and the nature of competition in the content supplier market. To facilitate the analysis, we propose a model where media platforms interact with three sides:  content suppliers, consumers, and advertisers. First, our analysis of a perfectly competitive content market shows that though consumers' desire for content  raises the willingness to pay, it can hurt platforms' profits.  Second, counter to our intuition, platforms' profits can increase with the cost of procuring content. Third, advertisers' desire for consumers reduces a monopoly content supplier's profits under a paid-content-with-ads strategy.  Fourth, a monopoly content supplier cannot extract all the profits from competing platforms. Furthermore, competing content suppliers may even charge a higher price than that of a monopoly content supplier. Finally, we highlight how the nature of competition in the content market shapes platforms' choice of a no-ad strategy.


“Multi-Tier Store Brands and Channel Profits,” (with Wilfred Amaldoss), Journal of Marketing Research, 52(6), 754-767, 2015. [pdf] [Online Appendix]

Multi-tier store brands are growing in significance in retail outlets. In this paper, we theoretically examine the rationale for the existence of multi-tier store brands, their optimal quality levels, and their implications for consumer welfare and channel profits. We show that despite manufacturer's efforts to deter the entry of store brands by providing side payments and/or introducing additional national brands, the retailer will offer multi-tier store brands in equilibrium. Furthermore, the quality levels of store brands and national brands are interlaced, with the top-quality position being taken by a store brand unless national brands outnumber store brands. Even though the proliferation of store brands reduces product differentiation, it does not decrease consumer welfare or channel profits. However, store brands hurt the manufacturer's profits and make two-part tariff ineffective in improving channel coordination. Nonetheless, the retailer can enhance channel coordination by procuring the store brand from the national brand manufacturer. We extend our model in several directions to capture additional features of retail markets and assess the robustness of our findings.

 

“Keyword Search Advertising and Limited Budgets,” Marketing Science, 34(6), 882-896, 2015. [pdf] [Online Appendix] 

In keyword search advertising, many advertisers operate on a limited budget. Yet how limited budgets affect keyword search advertising has not been extensively studied. This paper offers an analysis of the generalized second-price auction with budget constraints. We find that the budget constraint may induce advertisers to raise their bids to the highest possible amount for two different motivations: to accelerate the elimination of the budget-constrained competitor as well as to reduce their own advertising cost. Thus, in contrast to the current literature, our analysis shows that both budget-constrained and unconstrained advertisers could bid more than their own valuation. We further extend the model to consider dynamic bidding and budget-setting decisions.

 

“Keyword Search Advertising and First-Page Bid Estimates: A Strategic Analysis,” (with Wilfred Amaldoss and Preyas Desai), Management Science, 61(3), 507-519, 2015. [pdf] [Online Appendix]

In using the generalized second-price (GSP) auction to sell advertising slots, a search engine faces several challenges. Advertisers do not truthfully bid their valuations, and the valuations are uncertain. Furthermore, advertisers are budget constrained. In this paper we analyze a stylized model of the first-page bid estimate (FPBE) mechanism first developed by Google and demonstrate its advantages in dealing with these challenges. We show why and when the FPBE mechanism yields higher profits for the search engine compared with the traditional GSP auction and the GSP auction with advertiser-specific minimum bid. In the event that a high-valuation advertiser is budget constrained, the search engine can use the FPBE mechanism to alter the listing order with the intent of keeping the high-valuation advertiser in the auction for a longer time. The resulting increase in the search engine’s profits is not necessarily at the expense of the advertisers because the combined profits of the advertisers and the search engine increase.

 

“The Company that You Keep: When to Buy a Competitor’s Keyword,” (with Preyas Desai and Richard Staelin), Marketing Science, 33(4), 485-508, 2014. [pdf] 

In search advertising, brand names are often purchased as keywords by the brand owner or a competitor. We aim to understand the strategic benefits and costs of a firm buying its own brand name or a competitor's brand name as a keyword. We model the effect of search advertising to depend on the presence or absence of a competitor's advertisement on the same results page. We find that the quality difference between the brand owner and the competitor moderates the purchase decision of both firms. Interestingly, in some cases, a firm may buy its own brand name only to defend itself from the competitor's threat. It is also possible that the brand owner, by buying its own branded keyword, precludes the competitor from buying the same keyword. Our result also implies that the practice of bidding on the competitor's brand name creates a prisoner's dilemma, and thus both firms may be worse off, but the search engine captures the lost profits. We also discuss the difference in our results when the search is for a generic keyword instead of a branded keyword. Finally, we find some empirical support for our theory from the observation of actual purchase patterns on Google AdWords.

 

“Competing for Low-end Markets,” (with Wilfred Amaldoss), Marketing Science, 30(5), 776-788, 2011. [pdf] [Online Appendix]

Recent business research points to the fortune awaiting to be tapped in low-end markets. In this paper, we investigate how the size of the low-end market influences a firm's profits and the pioneering firm's quality choice. As low-valuation consumers increase in a market, on average, consumers' willingness to pay decreases. This may lead us to expect firms' profits to decrease as the size of the low-end market increases. Our analysis shows that, if the size of the low-end market is below a threshold, an increase in the size of the low-end market may actually dampen price competition and improve profits, as firms can then strategically choose their quality levels such that their products are more differentiated. Conventional wisdom also suggests that the pioneering firm will offer a higher-quality product and earn more profits compared with the later entrant. In contrast to this notion of quality advantage, our analysis identifies circumstances in which a pioneer can offer a lower-quality product and yet earn more profits. An experimental test lends support for some of our model's predictions. We further extend the model to consider markets with multiple firms, firms with multiple products, and consumers with limited purchasing power.

Working Papers

Teaching