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The Promise of Strategic Customer Behavior: On the Value of Click Tracking

Forthcoming, Production and Operations Management

14 Pages Posted: 16 Jun 2010 Last revised: 2 Jul 2014

Tingliang Huang

Carroll School of Management, Boston College; University College London

Jan A. Van Mieghem

Northwestern University - Kellogg School of Management

Date Written: May 2, 2012

Abstract

Click tracking is gaining in popularity and the practice of web analytics is growing fast. Whether strategic customers are willing to visit a website when they know their clicks may be tracked is an important yet complex problem which depends on various factors. Using a newsvendor framework, we examine this problem by focusing on the operational factor: how product availability induces strategic customers to voluntarily provide advance demand information. We find that a strong Nash equilibrium exists where every customer is willing to click, and customer incentives to click are robust to noise. Hence, we demonstrate the promise of strategic customer behavior in the context of click tracking, contrary to the conventional wisdom that it is typically a peril for the firm. Notably, click tracking is typically advantageous to both the firm and its customers, compared with other strategies such as advance selling, quantity commitment, availability guarantees, and quick response. Lastly, we extend to two settings by including marketing decisions: price-sensitive demand and markdown pricing, and discuss how operations and marketing decisions interact in influencing the value of click tracking.

Keywords: Advance demand information (ADI), strategic consumer behavior, newsvendor, click tracking technology, game theory, strong Nash equilibrium

JEL Classification: C70

Suggested Citation

Huang, Tingliang and Van Mieghem, Jan A., The Promise of Strategic Customer Behavior: On the Value of Click Tracking (May 2, 2012). Forthcoming, Production and Operations Management. Available at SSRN: https://ssrn.com/abstract=1625602 or http://dx.doi.org/10.2139/ssrn.1625602

Tingliang Huang (Contact Author)

Carroll School of Management, Boston College ( email )

140 Commonwealth Avenue
Chestnut Hill, MA 02467

University College London ( email )

140 Commonwealth Avenue
Chestnut Hill, MA 02467

Jan Albert Van Mieghem

Northwestern University - Kellogg School of Management ( email )

2001 Sheridan Road
Evanston, IL 60208
United States

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