Shivendu Shivendu - Academia.edu (original) (raw)

Papers by Shivendu Shivendu

SSRN Electronic Journal, 2010

The efficacy of boards of directors as a critical governance institution has attracted increasing... more The efficacy of boards of directors as a critical governance institution has attracted increasing scrutiny in the wake of the recent financial meltdown. CEO compensation which consequentially determines overall management compensation in a firm, is a key governance decision entrusted with the board. A relevant, though unexplored question would be whether shareholders are better served by making the compensation decision themselves. In this paper, in a game theoretic set up, we analyze shareholder payoffs under the traditional delegated- governance structure wherein shareholders set the compensation of the board, but delegate the management compensation decision to the board, and contrast such delegated- governance with an alternate owner-governance structure wherein shareholders determine the compensation contracts for both the board and management. Under unobservable effort, we consider both deterministic and stochastic firm performance, jointly determined by the effort of the board and management. We find that shareholders are never worse off under owner-governance, though management wages as well as effort are higher under certain conditions. Within a deterministic setting, board wages as well as effort are equal or higher with centralized governance. Under extreme stochastic effects, which might describe boom or bust environments, it does not pay to incentivize the board or management to expend effort. In a stochastic environment where output is determined primarily by board effort, it does not pay to incentivize management for effort. Our analysis suggests a possible explanation for the puzzling observation of rising managerial compensation, often not in congruence with firm performance, as the board faces no penalty for misaligned managerial wages under delegated-governance. We show that owner-governance generally eliminates non-aligned incentive structures.

With the advent of Groupon.com in 2008, daily deal platforms have seen phenomenal growth. Surpris... more With the advent of Groupon.com in 2008, daily deal platforms have seen phenomenal growth. Surprisingly there is very sparse analytical research that has studied the economics of the daily deal platforms that they connect merchants to consumers. We develop a stylized two-period Stackelberg leader-follower game-theoretic model to analyze the strategic interaction between heterogeneous merchants and a daily-deal website. The monopolist daily deal website is revenue maximize. Merchants take into consideration the sampling, advertising and cannibalization effects when they decide participation and discount strategy on the daily-deal website. Our result shows the merchants offer higher discount rates on the daily deal website and less known merchants benefit more from offering deals on the daily deal website. Some of the merchants never offer a deal on the platform even if offering a deal on the platform is free.

SSRN Electronic Journal, 2011

In our model, market consists of two types of consumers who receive some common utility from the ... more In our model, market consists of two types of consumers who receive some common utility from the basic functionality of the information good but have heterogeneous valuation for other value enhancing functionalities. We show that in absence of piracy, versioning is optimal when the proportion of high valuation consumers is neither too large nor too small. In the presence of piracy, when the cost of piracy is too low for the lower valuation consumers, the information good provider offers only high quality product. Presence of network effect makes versioning strategy less likely to be optimal for the provider.

SSRN Electronic Journal, 2012

Versioning literature recommends that a software firm should always sell only one version of a pr... more Versioning literature recommends that a software firm should always sell only one version of a product with the highest quality unless other factors such as piracy, network externality, or concave cost of producing quality are present. However, software firms universally adopt versioning strategies that are invariant across different market settings. To bridge the gap between theory and practice, this research proposes a vertical differentiated consumer utility model that captures consumer heterogeneity in taste for functionality and preferred level of functionality. While consumers experience disutility if the level of functionality is lower than their preferred level, they do not derive any additional utility if the level of functionality is higher than their preferred level. To that extent, under-provisioning of functionality is costly. This article shows that in a monopolistic market, versioning strategy is always optimal compared with strategies to sell one version to all consumers or only to high type users. Counterintuitively, an increase in the high (low) type users' preferred level of functionality negatively (positively) impacts high type users' surplus. As the preferred level of functionality of high type users increases, functionality level of the high version increases, and the impact on functionality level of the low version depends on the proportion of high type users in the market. On the other hand, as the preferred level of functionality of low type users increases, functionality level of high version remains the same and the impact on functionality level of low version is ambiguous.

The 2007 Workshop on the Economics of …, 2007

Online personalization services belong to a class of economic goods with "no-freedisposal" (NFD) ... more Online personalization services belong to a class of economic goods with "no-freedisposal" (NFD) property, where due to privacy concerns more services is not always preferred to less. Therefore, even if these services are offered for free, online vendors find only a subset of services being used and thus acquire a reduced amount of preference and usage information. Vendors have invested in sophisticated technologies such as browser-embedded toolbars to have greater control in designing mechanisms for consumers' usage of these services. This paper analyzes a monopolist's optimal contract designs for personalization services under information asymmetry in a market where consumers are heterogeneous in their concern for privacy. Our analyses reveal several interesting results some of which are counter to those observed in other information goods market with zero marginal cost. Not surprisingly, under full information the vendor strictly prefers a variable to fixed contract as he can discriminate in the former and finds that under certain condition providing coupons or incentives with usage to be profit improving. However when considering services-only contracts under asymmetry, a fixed contract is optimal under certain conditions and surprisingly for some markets, a consumer-welfare maximizing contract emerges to be superior for the monopolist. An interesting aspect of the fixed contract is that when the vendor engages in couponing he continues to serve the same proportion of consumers as in the services-only case, even if consumer welfare, producer surplus and social welfare are all higher with incentives. We show that a purely usage-based contract is suboptimal even when marginal costs are zero, as the monotonicity constraints on incentives become binding. As a result we develop a bunched solution that is weakly superior to all other contracts; interestingly our results shows that an optimal truth revealing contract requires more incentives need to be paid to consumers that value personalization over privacy than the intuitive view that couponing is effective as a tool to bring in privacy-seekers to participate in the market.

With the advent of Groupon.com in 2008, daily deal platforms have seen phenomenal growth. But sur... more With the advent of Groupon.com in 2008, daily deal platforms have seen phenomenal growth. But surprisingly there is very sparse analytical research that has studied the economics of daily deal platforms which are two-sided in the sense that they connect merchants on the one side to consumers on the other side. We develop a stylized two-period game-theoretic model to analyze the strategic interaction between heterogeneous merchants and consumers. In our conceptualization, a monopolist daily deal platform is revenue maximizer who not only takes into consideration the cross-side network effect leading to chicken-and-egg problem, but also sampling and advertizing effect due to the presence of the platform. Keeping in view the realworld market conditions, we do not impose the restriction that the two-sides can interact only through the platform and allow the two-sides to transact outside the platform too. We model the strategic interaction between the daily deal website (platform) and me...

D igital goods lend themselves to versioning but also suffer from piracy losses. This paper devel... more D igital goods lend themselves to versioning but also suffer from piracy losses. This paper develops a pricing model for digital experience goods in a segmented market and explores the optimality of sampling as a piracy-mitigating strategy. Consumers are aware of the true fit of an experience good to their tastes only after consumption, and as piracy offers an additional (albeit illegal) consumption opportunity, traditional segmentation findings from economics and sampling recommendations from marketing, need to be revisited. We develop a two-stage model of piracy for a market where consumers are heterogeneous in their marginal valuation for quality and their moral costs. In our model, some consumers pirate the product in the first stage allowing them to update their fit-perception that may result in re-evaluation of their buying/pirating decision in the second stage. We recommend distinct pricing and sampling strategies for underestimated and overestimated products and suggest that any potential benefits of piracy can be internalized through product sampling. Two counterintuitive results stand out. First, piracy losses are more severe for products that do not live up to their hype rather than for those that have been undervalued in the market, thus requiring a greater deterrence investment for the former, and second, unlike physical goods where sampling is always beneficial for underestimated products, sampling for digital goods is optimal only under narrowly defined circumstances due to the price boundaries created by both piracy and segmentation.

is in the field of electronic markets, digital goods pricing, and economics of information securi... more is in the field of electronic markets, digital goods pricing, and economics of information security and privacy. His research on piracy has been widely published in leading journals and conferences. His work on information privacy in online transactions received the Best Paper Award at INFORMS-CIST 2003. Professor Chellappa works closely with the music industry on topics related to forecasting, piracy, supply-chain management, and iTunes/digital sales. He currently teaches in the MBA and Ph.D. programs at Emory and he recently designed and taught a course on IT and medicine

MIS Quarterly

Many IT outsourcing arrangements include the purchase of the client’s IT assets by the vendor. As... more Many IT outsourcing arrangements include the purchase of the client’s IT assets by the vendor. Asset transfer benefits the client who can recapture some value through the sale and may even negotiate a lower price because the vendor may be more efficient in using these assets. On the other hand, asset transfer creates lock-in for the client and limits future contractual options. To study these tradeoffs, we develop a game-theoretic framework wherein asset transfer creates a one-sided switching cost to the client, and vendors have private information both on their intrinsic capabilities, either high or low, and on the level of quality-improving effort they exert. The quality of IT services depends on the vendor’s capability and quality-improving effort. In a two-period model, we show that when quality is verifiable, the client uses asset transfer as a device to design efficient screening contracts, so that a high capability vendor is selected. On the other hand, when quality is non-verifiable, the client mitigates contractual inefficiency by voluntarily locking into a long-term relationship with the vendor and may transfer assets at a lower than efficient level, even to a high-capability vendor. Our results show that asset transfer can play a strategic role in outsourcing relationships, not just an operational one.

Proceedings of the Annual Hawaii International Conference on System Sciences

Targeted display advertising for individual consumers has become pervasive on social media platfo... more Targeted display advertising for individual consumers has become pervasive on social media platform and other online websites (traditional platform). Yet, the effectiveness of targeted advertising across online platforms is not well understood. Moreover, such advertising effect may be different for different types of consumers, i.e. consumers in the early stage and those in the late stage, relative to the final purchase stage. This paper aims at assessing the effectiveness of targeted advertising across online platforms on consumers' final conversion (purchase). In addition, we measure the complementarity and substitutability of online platforms for targeted advertising for upper funnel (early-stage) consumers and lower funnel (latestage) consumers. We use machine learning techniques to form case-control designs analyzed employing regularized discrete choice models to select relevant features explaining the final conversion. The empirical analysis shows that (1) targeting across platforms is positively associated with the final conversion for the lower funnel consumers, but there is no measurable synergistic effect for the upper funnel consumers; (2) the main effect of targeting on social media is positively related to the final conversion for consumers in the upper funnel but has no significant impact for lower funnel consumers. We leverage upon these findings to discuss actionable managerial prescriptions.

International Journal of Corporate Governance

Healthcare costs in the US are rising at an alarming rate and medical liability claims are signif... more Healthcare costs in the US are rising at an alarming rate and medical liability claims are significant contributors. along with financial losses, medical malpractice compromises patient safety and provider reputation. Several federal and state initiatives like Meaningful Use work towards Health IT adoption and use. We investigate the impact of Health IT on nature and severity of malpractice claims reported in Florida from 2011-2016. We provide a novel method to estimate information failures in malpractice claims using machine learning. We found the relative risk of malpractice claims with high level of medical error get reduced by 87-89% with each successful attestation to MU-Stage 2 and by 52-62% for MU-Stage 1. The information failure in malpractice claims shows a reduction with MU-Stage 1 attestation but shows increase with MU-Stage 2. We provide evidence of direct positive value creation by Health IT for to Healthcare Providers and discuss its policy implications.

Outsourcing contract with IT asset transfer limits the options of the client firm in vendor selec... more Outsourcing contract with IT asset transfer limits the options of the client firm in vendor selection in future, and it is puzzling as why client self creates “switching costs” which limit her own contractual options. This paper attempts to unravel this puzzle through a game theoretic set up wherein the client faces vendors endowed with heterogeneous capabilities whose effort is unobservable and though IT services quality is observable; it is not verifiable and thus not contractible. Counter to intuition, we show that client uses asset transfer as a costly device to screen out vendors of low capability and voluntarily lock herself in a long-term relationship by enhancing the bargaining of the vendor ex-post. We extend the model to a multi-tasking vendor who also exerts asset-upgrading effort and show that screening power of IT asset transfer in enhanced when asset-improving effort has spill over effect on delivered IT services.

International Journal of Corporate Governance, 2020

Performance monitoring is often used by the principal to lower the rent paid to the agent due to ... more Performance monitoring is often used by the principal to lower the rent paid to the agent due to moral hazard. However, in global sourcing of IT services, we observe a phenomenon wherein vendors voluntarily provide costly monitoring systems which allow the client to obtain accurate and timely information on their own performance. It is puzzling as why do vendors themselves offer mechanisms that lower their own rent extraction opportunities? We develop a model of IT outsourcing wherein IT services quality is non-verifiable, vendors have private information about their capabilities and quality-improving effort is unobserved by the client. Given the strategic and long-term nature of IT services contract, identifying the high capability vendor and inducing him to exert optimal level of quality-improving effort is critically important for the client. We show that performance monitoring is used as a credible truth-revealing signaling device by vendors to obtain favorable contracts. By com...

Daily-deal business model is a type of performance-based advertising wherein a publisher provides... more Daily-deal business model is a type of performance-based advertising wherein a publisher provides advertising space to a merchant who pays a proportion of revenue generated on the website to the publisher. We develop a two-period model to capture the strategic interaction between a publisher and a merchant where consumers are heterogeneous in their willingness to pay for quality and awareness about a merchant’s product offering. In our Stackelberg game, publisher is the leader who decides the revenue sharing ratio and the merchant is the follower who responds by choosing appropriate discount rate of the deal offering and whether to offer a deal on the publisher’s website. Our analysis shows that s merchant may increase or decrease discount rate on the website depending on the trade-offs associated with four effects -advertising, sampling, cannibalization and revenue sharing. Surprisingly, the effect of a dailydeal publisher’s revenue sharing contract on a merchant’s participation st...