Data-Driven Operations Management
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Data-Driven Operations Management by Manqi Li A dissertation submitted in partial fulfillment of the requirements for the degree of Doctor of Philosophy (Business Administration) in The University of Michigan 2021 Doctoral Committee: Assistant Professor Shima Nassiri, Chair Assistant Professor Yan Huang Associate Professor Cong Shi Assistant Professor Joline Uichanco Associate Professor Brian Wu Manqi Li [email protected] ORCID iD: 0000-0002-5210-4368 ACKNOWLEDGEMENTS The journey of academic research is full of challenges. Along the way, there are lots of people that I want to acknowledge, without whom I can never come to where I am. First, I would like to acknowledge Dr. Amitabh Sinha for leading me to the world of academic research. He is not only my advisor in research but also my lifetime mentor. He is always supportive to all the decisions I made and all the paths I chose. Second, I would like to thank Professor Yan Huang for all the support throughout my Ph.D. She showed me a great example of how to become a researcher full of enthusiasm. She put a huge amount of effort in guiding me through the process of finishing a complete research project. Her profession, hardworking, and sense of responsibility will always inspire me in my future career. Third, I would like to thank Professor Shima Nassiri. During the difficult times, she gives me the hope and confidence to continue my academic journey. She always encourages me to explore new topics and try new methodologies, which is extremely important for me as an independent researcher. I would like to also thank my dissertation committee members Professor Cong Shi, Professor Joline Uichanco, and Professor Brian Wu, who give me great support toward the completion of my degree. Finally, I am grateful for my family and friends. Special thanks to my husband Xiang Liu and my daughter Andrea Liu. Xiang: thank you! I know I will always have you by my side. Andrea: You are such an angle and I can’t love you more! I would ii also like to thank my parents Liying Gu and Ruiliang Li: You are the best parents in the world! I would also like to thank my parents in law Chunsheng Liu and Yayun Li: thank you for all the support. I can not imagine my life without your help. Last but not least, thanks to my dogs Playdoh and Hunio: love you forever. iii TABLE OF CONTENTS ACKNOWLEDGEMENTS :::::::::::::::::::::::::: ii LIST OF TABLES :::::::::::::::::::::::::::::::: vii LIST OF FIGURES ::::::::::::::::::::::::::::::: x ABSTRACT ::::::::::::::::::::::::::::::::::: xiii CHAPTER I. Introduction .............................. 1 II. Data-Driven Promotion Planning for Paid Mobile Applications 5 2.1 Introduction . 5 2.2 Literature Review . 9 2.3 Data and Descriptive Analysis . 13 2.4 Empirical Model and Estimation . 18 2.4.1 Empirical Model . 18 2.4.2 Instrumental Variables . 21 2.4.3 Estimation Results . 27 2.4.4 Robustness Checks . 38 2.4.5 Heterogeneity . 60 2.5 Prediction Accuracy . 63 2.6 Promotion Planning Problem . 64 2.6.1 PPP Model Formulation . 64 2.7 Promotion Planning Result . 70 2.7.1 Window Size Sensitivity . 70 2.7.2 Performance Comparison among Alternative Policies 71 2.7.3 Significance of the Visibility Effect and Dynamic Promotion Effect . 75 2.8 Conclusion . 76 iv III. How Does Telemedicine Shape Physician’s Practice in Men- tal Health? ............................... 88 3.1 Introduction . 88 3.2 Literature Review . 91 3.3 Problem Setting . 94 3.3.1 Definitions . 94 3.3.2 Telemedicine Effects . 97 3.3.3 Dynamic Effects . 101 3.4 Data Description . 102 3.4.1 Data Sources and General Inclusion Criteria . 102 3.4.2 Identifying the Adopter and Non-Adopter Groups . 104 3.4.3 Variables Description . 109 3.5 Econometric Model . 110 3.5.1 Heterogeneous Adoption Time CIC Model in Athey and Imbens (2006) . 113 3.5.2 Controlling for Observable Covariates . 118 3.5.3 Effect Estimation . 119 3.6 Results . 121 3.6.1 Controlling for Observable Covariates: Regression Results . 121 3.6.2 Telemedicine Adoption and Spillover Effects . 122 3.6.3 Explanation of the Observations . 124 3.7 Additional Analysis and Robustness Checks . 129 3.7.1 New Patient Visits Vs. Established Patient Visits . 129 3.7.2 Linear Difference-in-Difference Model . 129 3.8 Conclusion . 131 IV. Search Page Personalization: A Consider-then-choose Model 134 4.1 Introduction . 134 4.2 Literature Review . 138 4.2.1 Consider-then-Choose Model . 138 4.2.2 Assortment Planning . 140 4.3 A Consider-then-Choose Model . 143 4.3.1 Consideration Set Formation (The “Consider” Stage) 144 4.3.2 Purchase Decision Given a Consideration Set (The “Choose” Stage) . 147 4.3.3 Estimation Strategy . 148 4.4 Assortment Personalization via Consideration Set Induction . 152 4.4.1 Max-Revenue Assortment Planning . 153 4.4.2 Optimal Consideration Set Induction Optimization 155 4.5 A Case Study . 167 4.5.1 Data Description . 167 4.5.2 Estimation Result and Discussion . 168 v 4.5.3 Comparison of OCSIO Heuristic and OCSIO . 171 4.5.4 Revenue Increase using the OCSIO Heuristic . 172 4.5.5 Performance of OCSIO Given Imperfect Taste Infor- mation . 173 4.6 Conclusion . 174 V. Future Work .............................. 177 BIBLIOGRAPHY :::::::::::::::::::::::::::::::: 180 APPENDICES :::::::::::::::::::::::::::::::::: 192 A.1 Procedure Codes Included in the Study . 193 A.2 Data Generating Process . 195 vi LIST OF TABLES Table 2.1 Summary Statistics . 14 2.2 Price Tiers in iOS App Store . 14 2.3 Summary Statistics of Promotion Depth and Promotion Length . 16 2.4 Variable Description . 21 2.5 Main Model Full Result . 28 2.6 Regression Results of Ranking Function (Equation (2.3)) . 29 2.7 2SLS and 3SLS Estimation Results of Demand Function . 30 2.8 2SLS and 3SLS Estimation Results of Ranking Function . 31 2.9 Regression Results of Alternative Demand Specifications . 33 2.10 Estimation Results of Main Model with Different Missing Data Im- putation Methods . 39 2.11 Estimatin Results of the Demand Function with Different Sample Cutoff Values . 40 2.12 Estimation Results of Demand Function under Alternative Specifi- cations of Promotion effect . 41 2.14 Estimation Results of Demand Function with App Age Dummies (by Month) . 42 2.13 Estimation Results of Demand Function with ds Dummy Variables . 45 2.15 Estimation Results of Demand Function with More Lagged Ranks . 46 vii 2.16 Estimation Results of Demand Function with Lagged Download . 47 2.17 In-sample and Out-of-sample MSE . 47 promotion · 2.18 Estimation Results of Demand Function with log(avg_rit ) post dit ................................... 48 2.19 Regression Results for Cumulative Number of Ratings . 49 2.20 Estimation Results of Demand Function with Fitted Rating Counts 50 2.21 Main Model vs. Choice Model: Out-of-Sample Mean Squared Error for Each Cross-validation Round . 53 2.22 Effect of Number of Other Apps on Promotion . 54 2.23 Estimation Results of Demand Function for Top 100 Apps . 55 2.24 Main Model vs. Choice Model: Out-of-Sample Mean Squared Error for Each Cross-validation Round . 55 2.25 Summary Statistics of Data for Network Effect Test . 57 2.26 Estimation Results of Demand Function with Visibility Effect and/or Network Effect . 58 2.27 Estimation Results of Demand Function with Past 10 Days’ Cumu- lative Download . 59 2.28 Effect of Short vs Long Promotions . 81 2.29 Estimation Results of Demand Function by App Rating . 82 2.30 Estimation Results of Demand Function by Original Price . 82 2.31 Estimation Results of Demand Function – Apps with vs without Freemium Version . 83 2.32 Estimation Results of Demand Function with Interaction Effect be- tween Promotion and Rank Prior to Promotion . 84 2.33 Estimation Results of Demand Function with Interaction Effect be- tween Promotion and log(hit) ..................... 85 viii 2.34 Estimation Results of Demand Function with Interaction Effect be- tween Promotion and log(uit) ..................... 86 2.35 Prediction Accuracy . 86 2.36 Performance Comparison with Real App Data . 86 2.37 Total Revenue of Different Pricing Policies Relative to Revenue under Constant Price Policy . 87 3.1 Claim-level summary statistics . 104 3.2 Physicians’ characteristics comparison between the adopters and non- adopters (before matching) . 107 3.3 Physicians’ characteristics comparison between the adopters and matched non-adopters . 108 3.4 Summary of visit-, patient-, and physician-related variables . 111 3.5 RVI Summary Statistics . 112 3.6 Linear regression result of controlling for observable characteristics . 122 3.7 CIC model estimation results over the entire horizon . 123 3.8 Telemedicine Adoption Effect on New Patient Visits V.S. Established Patient Visits . 129 3.9 Linear DID Model Result . 131 4.1 Table of notations . 144 4.2 Summary Statistics . 169 4.3 Estimation Result . 170 4.4 Revenue Increase Under Imperfect Taste Information ........ 174 ix LIST OF FIGURES Figure 2.1 Histogram of No. Promotions . 15 2.2 Distributions of Promotion Depth and Promotion Length . 15 2.3 Relationship between Sales Rank and Download Volume and Sample Apps: Left Panel: Log(Sales Rank) vs. Log(Download Volume); Middle and Right Panels: Sample App Promotions . 17 2.4 Evidence of Promotion Effects in Data: Left Panel: Coefficients of Days-on(after)-Promotion Dummies; Right Panel: Cumulative Rev- enue Over Time: Apps with and without Promotions . 18 2.5 Number of promotions against number of apps published by its de- veloper, average app rating and app fixed effect . 24 2.6 Promotion depth against rating, download, rank, and app fixed effect 25 2.7 Daily rank improvement against the number of days being on promotion 27 2.8 Immediate and Total Effect of a 25-Day Promotion (Promotion Depth = 0.5) .