This paper considers the creation and consumption of content on user generated content platforms, e.g., reviews, articles, chat, videos, etc. On these platforms, users' expectations regarding the amount and timing of participation by others becomes germane to their own involvement levels. Accordingly, we develop a dynamic rational expectations equilibrium model of joint consumption and generation of information. We estimate the model on a novel data set from a large Internet forum site and offer recommendations regarding strategies of managing sponsored content and content quality. We find sponsoring content can be effective at creating a self-sustaining network, but once the network tips, sponsored content does little to increase usage.

No abstract

An Equilibrium Model of User Generated ContentThis paper considers the joint creation and consumption of content on user generated content platforms (e.g., reviews or articles, chat, videos, etc.). On these platforms, users' utilities depend upon the participation of others; hence, users' expectations regarding the participation of others on the site becomes germane to their own involvement levels. Yet these beliefs are often assumed to be fixed. Accordingly, we develop a dynamic rational expectations equilibrium model of joint consumption and generation of information. We estimate the model on a novel data set from a large Internet forum site and use the model to offer recommendations regarding site strategy. Results indicate that beliefs play a major role in UGC, ignoring these beliefs leads to erroneous inferences about consumer behavior, and that these beliefs have an important implications for the marketing strategy of UGC sites.We find that user and site generated content can be either strategic complements or substitutes depending on whether the competition for existing readers exceeds the potential to attract new ones. In our data, the competitive effect substantially dilutes the market expansion effect of site generated content. Likewise, past and current content can also be either strategic substitutes or complements. Results indicate more durable content increases overall site participation, suggesting that the site should invest in making past information easier to find (via better search or page design). Third, because content consumption and generation interact, it is unclear which factor dominates in network growth. We find that decreasing content consumption costs (perhaps by changing site design or via search tools) enhances site engagement more than decreasing content generating costs. Overall, enhancing content durability and reducing content consumption cost appear to be the most effective strategies for increasing site visitation.2

This paper develops a game-theoretic model that analyzes how a grocery store responds to the entry of a Walmart Supercenter using its store-format choice. By adopting a set of realistic assumptions, such as the cost advantage of Walmart and differentiated services of grocery stores, we find that the distance to a Walmart Supercenter is a key moderating factor in the store-format choice of grocery stores. Grocery stores would prefer to sell non-food items, but when sufficiently close to Walmart Supercenters they would specialise in food items, as consumers find it less costly to engage in two-stop shopping, making the gain from non-food items smaller. So an asymmetric equilibrium becomes feasible, wherein grocery stores carrying increasingly more non-food products and a new grocery store concept like Whole Foods and Wild Oats emphasising high-quality, organic foods can coexist. Our results yield important managerial implications. Under the specialisation strategy, the quality of its differentiated services should be sufficiently high, at least two to four times the disutility of two-stop shopping. Under the expansion strategy, grocery stores should engage in loss leadership, pricing non-food items below cost to lure large-basket consumers while earning higher margins from food items to compensate for the loss.

Background To control the surging prices of KF94 masks amid the Covid-19 pandemic in South Korea, the government mandated 80% of medical masks to be sold as “public masks” at a fixed price. The mask prices came down quickly, ensuring public health and suppressing the spread of the pandemic, and the sales of KF94 masks reverted to the free market system on July 12, 2020. This paper aims to evaluate the unintended consequence of public masks to mitigate any negative effects for future deployment. Methods The relationship between the offline and online prices of KF94 masks and the production quantity of medical masks was estimated using the data after July 12, 2020 (the “free market” period), and, given the regression results, counterfactual analyses were conducted to predict what the offline and online prices of KF94 masks would have been before July 12, 2020 (the “public masks” period) had the sales of medical masks reverted to the free market system a month earlier than July 12, 2020. Results The prolonged deployment of public masks distorted the ratio of offline and online prices of KF94 masks and kept the prices artificially high at its later stage. How much higher? The online price of privately sold KF94 masks would have been roughly thirty to forty percent lower and the offline price roughly three to four percent lower if public masks ended four weeks earlier. Conclusion The government intervention achieved its intended consequence of controlling the surging prices of KF94 masks at the early days of Covid-19, but the prolonged use of public masks had the unintended consequence of distorting market outcomes. The lesson? The government intervention should be kept brief, and the free market system should return as soon as the crisis subsides.