Abstract

http://ssrn.com/abstract=2215403
 


 



Boiling the Frog Optimally: An Experiment on Survivor Curve Shapes and Internet Revenue


Christina Aperjis


Hewlett-Packard Company - Social Computing Lab

Ciril Bosch-Rosa


Technische Universität Berlin

Daniel Friedman


University of California, Santa Cruz - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute)

Bernardo A. Huberman


Hewlett-Packard Laboratories

May 19, 2014


Abstract:     
When should a necessary inconvenience be introduced gradually, and when should it be imposed all at once? The question is crucial to web content providers, who in order to generate revenue must sooner or later introduce advertisements, subscription fees, or other inconveniences. Assuming that eventually people fully adapt to changes, the answer depends only on the shape of the survivor curve S(x), which represents the fraction of a user population willing to tolerate inconveniences of size x (Aperjis and Huberman 2011).

We report a new laboratory experiment that, for the first time, estimates the shape of survivor curves in several different settings. We engage laboratory subjects in a series of six desirable activities, e.g., playing a video game, viewing a chosen video clip, or earning money by answering questions. For each activity we introduce a chosen level x 2 [xmin; xmax] of a particular inconvenience, and each subject chooses whether to tolerate the inconvenience or to switch to a bland activity for the remaining time.

Our key finding is that, in general, the survivor curve is log-convex. Theory suggests therefore that introducing inconveniences all at once will generally be more profitable for web content providers.

Number of Pages in PDF File: 25

Keywords: Internet monetization, online advertising, pricing, reference points, adaptation, laboratory experiment

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Date posted: February 22, 2013 ; Last revised: May 20, 2014

Suggested Citation

Aperjis, Christina and Bosch-Rosa, Ciril and Friedman, Daniel and Huberman, Bernardo A., Boiling the Frog Optimally: An Experiment on Survivor Curve Shapes and Internet Revenue (May 19, 2014). Available at SSRN: http://ssrn.com/abstract=2215403 or http://dx.doi.org/10.2139/ssrn.2215403

Contact Information

Christina Aperjis
Hewlett-Packard Company - Social Computing Lab ( email )
1501 Page Mill Road
Palo Alto, CA 9434
United States
Ciril Bosch-Rosa
Technische Universität Berlin ( email )
Straße des 17. Juni 135,
Fakultat VII, Sekretariat H52
Berlin, 10623
Germany
Daniel Friedman
University of California, Santa Cruz - Department of Economics ( email )
Social Sciences I
Santa Cruz, CA 95064
United States
831-459-4981 (Phone)
831-459-5900 (Fax)
CESifo (Center for Economic Studies and Ifo Institute)
Poschinger Str. 5
Munich, DE-81679
Germany
Bernardo A. Huberman (Contact Author)
Hewlett-Packard Laboratories ( email )
1501 Page Mill Road
Palo Alto, CA 94301
United States
650-857-5318 (Phone)
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