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Spring 2011 Seminars
Center for
Complexity in Business Seminar Speaker
Friday, March 18 ~ 1:30 p.m.
1505 Van Munching Hall |
Damon Ragusa
President and CEO
ThinkVine |
Complexity in Practice:
Utilizing an Agent-based Modeling Framework to
Defragment the Media Landscape |
Abstract:
Over the past 10 years, agent-based models have merely scratched the
service to becoming an accepted technique in approaching and solving
business problems. With some early success in the areas of distribution
and supply chain optimization, agent-based models have yet to catch on
as they have within other areas of scientific inquiry. By every
defensible definition, consumer markets are complex adaptive systems. So
why haven’t techniques from the complexity sciences become more
pervasive within the marketing sciences? Where do opportunities lie to
advance new approaches? ThinkVine CEO, Damon Ragusa, will answer these
questions as well as describe the success ThinkVine is having in
applying an agent-based modeling framework to help companies manage the
increasingly fragmented media world.
ThinkVine has been implementing approaches such as neural
networks, genetic algorithms and agent-based modeling systems for the
past 10 years into the marketing sciences. Damon will share experiences
from his 20+ year career in marketing science and describe how ThinkVine
has developed an innovative approach to look at marketing optimization
problems, how it has managed to sell a new approach into top companies
against well entrenched competitors and where it believes agent-based
systems will go into the future of marketing analytics. |
Department of
Marketing Seminar Speaker
Friday, March 18 ~ 10:30 a.m.
1335 Van Munching Hall |
Preyas Desai
Spencer R. Hassell Professor of Business Administration
Fuqua School of Business
Duke University |
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The Strategic Role of Exchange Programs |
| Abstract: Over
the last several years, a relatively new form of promotion is being
adopted by retailers: the
exchange program. In these programs, consumers turn in an old item and
get store credit or a gift card toward another purchase in the store. To
analyze the impact of exchange programs in a competitive setting, we
assume that two firms first decide its policy on whether or not to offer
an exchange program. If a firm does not offer an exchange program, it
simply chooses a
retail price for the new good. On the other hand, if it offers an
exchange program, it chooses not only the retail price for the new good but also the price
compensation for the exchange. In terms of consumers, based on their valuations of the old and new
goods, there are two types of consumers: low valuation and high valuation. Each consumer has
an old good that can potentially be used in an exchange program. Based on the prices,
consumers decide whether to purchase and, if it is offered, whether to participate in the
exchange program. In deciding whether to participate in the exchange program, consumers
evaluate the costs and benefits of turning in the old product and getting a new one. For the new
product, consumers consider the quality and the price. On the other hand, consistent with
behavioral decision theory, we assume that consumers view their old product as a part of their
endowment. As a result, consumers incur a loss that is equivalent to their mental book
value when they turn in their old product. Furthermore, even though consumers are compensated
for their old product, loss aversion suggests that, holding dollar amounts constant,
consumers feel a greater pain from relinquishing their good than the benefit of receiving payment
for the exchange. We find that whether the retailers offer an exchange program depends on the
proportion of low valuation consumers in the market and their valuations of the old and new
goods. The equilibrium outcome can be both offering or not offering exchange, neither
offering exchange as a Prisoners' Dilemma, and coordination equilibria. |
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