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Consumers often do not have complete information about the choices they face and therefore have to spend time and effort in acquiring information. Since information acquisition is costly, consumers trade-off the value of better information against its cost, and make their final product choices based on imperfect information. We model this decision using the rational inattention approach and describe the rationally inattentive consumer’s choice behavior when she faces alternatives with different information costs. To this end, we introduce an information cost function that distinguishes between direct and implied information. We then analytically characterize the optimal choice probabilities. We find that non-uniform information costs can have a strong impact on product choice, which gets particularly conspicuous when the product alternatives are otherwise very similar. There are significant implications on how a seller should provide information about its products and how changes to the product set impacts consumer choice. For example, non-uniform information costs can lead to situations where it is disadvantageous for the seller to provide easier access to information for a particular product, and to situations where the addition of an inferior (never chosen) product increases the market share of another existing product (i.e., failure of regularity). We also provide an algorithm to compute the optimal choice probabilities and discuss how our framework can be empirically estimated from suitable choice data.

© 2019, INFORMS

We study the optimal inventory policy of a firm selling an item whose price is affected by an exogenous stochastic price process which consequently affects customer arrivals. This case is typical for retailers that operate in different currencies, or trade products consisting of commodities or components whose prices are subject to market fluctuations. We assume that there is a stochastic input price process for the inventory item which determines purchase and selling prices according to a general selling price function. We also assume that unit demands arrive according to a doubly-stochastic Poisson process which is modulated by the stochastic input price process. We analyze optimal ordering decisions for both backorder and lost-sale cases. We show that under certain conditions a price-dependent base stock policy is optimal. The models are then extended to a price-modulated compound Poisson demand case. We present a numerical study on the sensitivity of the optimal profits to various parameters of the operational setting and stochastic price process such as price volatility, customer sensitivity to price changes etc. In another numerical setup, we compare the model with a corresponding discrete-time benchmark model that ignores within period price fluctuations and present the optimality gap when using the benchmark model as an approximation.

With permission of Elsevier

Although the topic of aging at work is receiving increasing research attention, it remains unclear if aging employees are less innovative at work and what consequences this relation entails. We integrate the literature on aging with research on innovation to gain a better understanding of whether—and if so, when—employees’ aging harms their professional outcomes via decreased innovative behavior. Multi-source, time-lag data on 305 project managers provides support for the idea that age does not always go hand in hand with low innovative behavior and, subsequently, low professional outcomes. Rather, inter-departmental collaboration works as a social buffer for these negative effects. Specifically, aging employees with low inter-departmental collaboration are less innovative and subsequently less successful. In contrast, the “age handicap” vanishes when aging employees collaborate with other members in their organizations. Our results highlight the importance for organizations to foster collaboration among their members, either formally or informally.

© 2019 Wiley Periodicals, Inc.

When organizations crowdsource ideas, they ultimately select only a small share of the submitted ideas for implementation. Organizations generally provide no feedback on ideas they do not select. Contributors whose ideas are not selected for implementation tend to forego submitting ideas in the future. We suggest that organizations can increase contributors’ willingness to submit ideas in the future by giving a thus far understudied form of feedback: rejections. Drawing on social network theory, we develop the overarching argument that rejections lead contributors to bond with the organization, increasing their willingness to continue to interact with the organization. While it may be counterintuitive to associate rejections with bonding, we hypothesize that rejections indicate to contributors that the organization is interested both in receiving their ideas and in developing a relationship with them. This effect, we argue, is particularly pronounced when rejections provide newcomers with explanations that suggest to them that they and the organization are a good match. To test our theory, we examine the crowdsourcing efforts of 70, 159 organizations that receive ideas from 1,336,154 contributors. Using large-scale content analysis, we examine differences in how rejections are written in order to disentangle the mechanisms through which rejections affect contributors’ willingness to continue to interact with an organization. We find that getting a rejection has a positive effect on a newcomer’s willingness to submit idea in the future. The effect is stronger if the rejection includes an explanation, and is particularly pronounced if the explanation accompanying the rejection matches the original idea in terms of linguistic style.

With permission of the Academy of Management

Maintenance service plans (MSPs) are contracts for the provision of maintenance by a service provider to an equipment operator. These plans can have different payment structures and risk allocations, which induce various types of incentives for agents in the service chain. How do such structures affect service performance and service chain value? We provide an empirical answer to this question by using a unique panel data covering the sales and service records of more than 700 diagnostic body scanners. We exploit the presence of a standard warranty period and employ a matching approach to isolate the incentive effects of MSPs from the confounding effects of endogenous contract selection. We find that moving the equipment operator from a basic, pay-per-service plan to a fixed-fee, full-protection plan not only reduces reliability but also increases equipment service costs. Furthermore, that increase is driven by both the operator and the service provider. Our results indicate that incentive effects arising from MSPs leads to losses in service chain value, and we provide the first evidence that a basic pay-per-service plan—under which risk of equipment failure is borne by the operator—can improve performance and reduce costs.

Copyright © 2019, INFORMS