Assessing Value in Product Networks

49 Pages Posted: 24 Nov 2011

See all articles by Eyal Carmi

Eyal Carmi

Tel Aviv University - Faculty of Management; New York University - Stern School of Business

Gal Oestreicher-Singer

Tel Aviv University - Coller School of Management

Barak Libai

Tel Aviv University - Faculty of Management

Ohad Yassin

Tel Aviv University

Multiple version iconThere are 2 versions of this paper

Date Written: October 2011

Abstract

Traditionally, the value of a product has been assessed according to the direct revenues the product creates. However, products do not exist in isolation but rather influence one another's sales. Such influence is especially evident in eCommerce environments, where products are often presented as a collection of webpages linked by recommendation hyperlinks, creating a largescale product network. Here we present the first attempt to use a systematic approach to estimate products' true value to a firm in such a product network. Our approach, which is in the spirit of the PageRank algorithm, uses easily available data from large-scale electronic commerce sites and separates a product’s value into its own intrinsic value, the value it receives from the network, and the value it contributes to the network. We apply this approach to data collected from Amazon.com and from BarnesAndNoble.com. Focusing on one domain of interest, we find that if products are evaluated according to their direct revenue alone, without taking their network value into account, the true value of the "long tail" of electronic commerce may be underestimated, whereas that of bestsellers might be overestimated.

Keywords: product value, cross-selling, electronic commerce, recommendation networks, social networks, long tail

JEL Classification: D4

Suggested Citation

Carmi, Eyal and Oestreicher-Singer, Gal and Libai, Barak and Yassin, Ohad, Assessing Value in Product Networks (October 2011). NET Institute Working Paper No. 11-29. Available at SSRN: https://ssrn.com/abstract=1958055 or http://dx.doi.org/10.2139/ssrn.1958055

Eyal Carmi (Contact Author)

Tel Aviv University - Faculty of Management ( email )

P.O. Box 39010
Ramat Aviv Tel Aviv 69972, 69978
Israel

HOME PAGE: http://www.math.tau.ac.il/~carmieya/

New York University - Stern School of Business ( email )

44 West Fourth Street
New York, NY 10012
United States

HOME PAGE: http://pages.stern.nyu.edu/~ecarmi/

Gal Oestreicher-Singer

Tel Aviv University - Coller School of Management ( email )

Tel Aviv
Israel

Barak Libai

Tel Aviv University - Faculty of Management ( email )

P.O. Box 39010
Ramat Aviv, Tel Aviv, 69978
Israel
972-3-6409565 (Phone)

Ohad Yassin

Tel Aviv University ( email )

Ramat Aviv
Tel-Aviv, 6997801
Israel

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