Search for: All records

Pesticide overuse has been an increasing concern in China. Digital technology, such as smartphone access, is considered an effective way to promote proper use of pesticides. Using the Chinese Extended Family Database (2015, 2017, and 2019), this study empirically examines the impact of smartphone access on pesticide use intensity among Chinese farmers. The results show a “double-edged sword” effect of smartphone access on pesticide use intensity. In rural areas with a low level of digital economy, greater smartphone access led to higher pesticide use intensity. In rural areas with a high digital economy level, smartphone access reduced pesticide use intensity. The study results show that reducing pesticide use intensity through digital technology is not a linear process but a complicated one that involves social and engineering integration, including an increase in access to smartphones, development of a regional digital economy, reconstruction of agricultural extension systems, and enhancement of the capacity of digital technology. 

Price discrimination strategies, which offer different prices to customers based on differences in their valuations, have become common practice. Although it allows sellers to increase their profits, it also raises several concerns in terms of fairness (e.g., by charging higher prices (or denying access) to protected minorities in case they have higher (or lower) valuations than the general population). This topic has received extensive attention from media, industry, and regulatory agencies. In this paper, we consider the problem of setting prices for different groups under fairness constraints. We first propose four definitions: fairness in price, demand, consumer surplus, and no-purchase valuation. We prove that satisfying more than one of these fairness constraints is impossible even under simple settings. We then analyze the pricing strategy of a profit-maximizing seller and the impact of imposing fairness on the seller’s profit, consumer surplus, and social welfare. Under a linear demand model, we find that imposing a small amount of price fairness increases social welfare, whereas too much price fairness may result in a lower welfare relative to imposing no fairness. On the other hand, imposing fairness in demand or consumer surplus always decreases social welfare. Finally, no-purchase valuation fairness always increases social welfare. We observe similar patterns under several extensions and for other common demand models numerically. Our results and insights provide a first step in understanding the impact of imposing fairness in the context of discriminatory pricing. This paper was accepted by Jayashankar Swaminathan, operations management. Funding: A. N. Elmachtoub was supported by the Division of Civil, Mechanical and Manufacturing Innovation [Grants 1763000 and 1944428]. Supplemental Material: The data files and online appendix are available at https://doi.org/10.1287/mnsc.2022.4317 . 

In the online video game industry, a significant portion of the revenue is generated from microtransactions, where a small amount of real-world currency is exchanged for virtual items to be used in the game. One popular way to conduct microtransactions is via a loot box, which is a random allocation of virtual items whose contents are not revealed until after purchase. In this work, we consider how to optimally price and design loot boxes from the perspective of a revenue-maximizing video game company and analyze customer surplus under such selling strategies. Our paper provides the first formal treatment of loot boxes, with the aim to provide customers, companies, and regulatory bodies with insights into this popular selling strategy. We consider two types of loot boxes: a traditional one where customers can receive (unwanted) duplicates and a unique one where customers are guaranteed to never receive duplicates. We show that as the number of virtual items grows large, the unique box strategy is asymptotically optimal among all possible strategies, whereas the traditional box strategy only garners 36.7% of the optimal revenue. On the other hand, the unique box strategy leaves almost zero customer surplus, whereas the traditional box strategy leaves positive surplus. Further, when designing traditional and unique loot boxes, we show it is asymptotically optimal to allocate the items uniformly, even when the item valuation distributions are heterogeneous. We also show that, when the seller purposely misrepresents the allocation probabilities, their revenue may increase significantly, and thus, strict regulation is needed. Finally, we show that, even if the seller allows customers to salvage unwanted items, then the customer surplus can only increase by at most 1.4%. This paper was accepted by Victor Martinez-de-Albeniz, operations management.