Simone Marinesi

My research interests are centered around new business models that have arisen in recent years thanks to the development of Web 2.0 applications: these allow an unprecedented level of interaction between internet users and websites, and the most innovative firms have exploited these opportunities to engage with their customers, actively involving them in decisions that only a few years ago were exclusive to the corporate world. Interesting questions are therefore: how are new technologies changing existing business processes? What are the benefits associated with these changes? And how should the new processes be designed in order to reap the highest benefits? Answering these questions from an operational perspective is the focus of my current research.

Simone Marinesi, The Dark Side of Crowdfunding.

Abstract: We model rewardbased crowdfunding, where a cash constrained entrepreneur attempts to raise funds from potential customers in the attempt to development a product, promising them a unit of that product once it becomes available. After establishing the basic tradeoff between crowdfunding and traditional bank funding, we study how two characteristic features of the contemporary crowdfunding environment, namely the opaqueness of products' true performance (performance opacity) and the uncertain legal framework (moral hazard), affect crowdfunding profitability, and the truthfulness of the entrepreneur's incampaign performance claims. We find that each feature, in isolation, hampers crowdfunding profits, and performance opacity impedes truthful reporting. We also find that the joint presence of these features further exacerbate profit loss in crowdfunding when entrepreneurs' misbehavior is seldom punished, as in contemporary crowdfunding, but it attenuates profit loss otherwise. We then propose an improved crowdfunding design that remedies the negative consequences of such features.

Vlad Babich, Gerry Tsoukalas, Simone Marinesi (Under Review), Does Crowdfunding Benefit Entrepreneurs and Venture Capital Investors?.

Abstract: We study how a new form of entrepreneurial finance crowdfunding interacts with more traditional financing sources, such as venture capital (VC) and bank financing. We model a multistage bargaining game, with a moralhazard problem between entrepreneurs and banks, and a doublesided moralhazard problem between entrepreneurs and VCs. We decompose the economic value of crowdfunding into cash gains or losses, costs of bad investments avoided, and projectpayoff probability update. This economic value is generally shared between entrepreneurs and VC investors, benefiting both. In addition, crowdfunding can alleviate the underinvestment problem due to moralhazard frictions. Furthermore, crowdfunding allows some projects to gain access to both VC and bank financing and the competition between those investor classes benefits entrepreneurs. However, competition from other investors reduces value to VC investors, who may walk away from the deal entirely. This can also hurt entrepreneurs who lose out on valuable VC expertise.

Simone Marinesi, Karan Girotra, Serguei Netessine (Forthcoming), The Operational Advantages of Threshold Discounting Offers.

Abstract: We study threshold discounting, or the practice of offering a discountedprice service if at least a prespecified number of customers signal interest in it, as pioneered by Groupon. We model a capacityconstrained firm, a randomsized population of strategic customers, a desirable hot period and a less desirable slow period. Compared to a more traditional approach (slow period discounting or closure) threshold discounting has two operational advantages. First, the contingent discount temporally balances demand when the market for the service is large, and reduces supply of the service (preserving higher margins) when the market is small, allowing the firm to respond to the service’s unobserved market potential. Second, activation of the threshold discount signals the market state and the consequent service availability to strategic customers, inducing them into selfselecting the consumption period to one that improves the firm’s capacity utilization. Yet, threshold discounting can be harmful in situations with chronically low demand. In contrast with past work on strategic customers, their presence is advantageous to firms in our context. A calibrated numerical study shows that threshold discounting improves firm profits over a traditional approach by as much as 33% (7% on average).

Simone Marinesi and Karan Girotra (Under Revision), Information Acquisition through Customer Voting Systems.

Abstract: We study the use of customer voting systems that enable information acquisition from strategic customers to improve pricing and product development decisions. In these systems, the firm presents customers with a product design and gives them the opportunity to cast a vote on this design, a vote that has costs and benefits. For example, voting may be cumbersome, but those that vote in favor of a design may be eligible for a discount if and when the design gets developed. Customers vote and the firm interprets the voting outcome to discern customer interest in the product, and to advise on further development and/or pricing of the product. We model the interactions between the rm and strategic customers in such systems as a game of incomplete information with voting embedded as a subgame. Our analysis shows that the design and effectiveness of a voting system depends crucially on the intended use of the acquired information. When the acquired information is used to advise on development decisions, where rm and customer interests are aligned, voting systems that reward voters with discounts on subsequent purchase of products, in effect incentivizing voting in favor of products, can elicit information from customers and improve profit. On the other hand, when the information is used to set prices, a decision where firm and customer interests are misaligned, such systems are ineffective. In these cases, voting systems that effectively incentivize customers to vote against products or those that partially limit the firm's future price flexibility should instead be used to acquire information. While both solutions improve firm profit, the former is preferred for highvalue products, while the latter is preferred when voting involves less effort. Based on data for two representative products in the home decor industry, we find that these systems may increase gross product profits by up to 50% for development and by 2030% for pricing.

Simone Marinesi and Karan Girotra (Work In Progress), Kickstarter vs Indiegogo: Choosing the Right Approach to Crowdfunding.

Karan Girotra, Simone Marinesi, Serguei Netessine (2013), Can Groupon Save Its Business Model? , Harvard Business Review.

Past Courses

OIDD611 QUALITY AND PRODUCTIVITY

Matching supply with demand is an enormous challenge for firms: excess supply is too costly, inadequate supply irritates customers. In the course, we will explore how firms can better organize their operations so that they more effectively align their supply with the demand for their products and services. Throughout the course, we illustrate mathematical analysis applied to real operational challengeswe seek rigor and relevance. Our aim is to provide both tactical knowledge and highlevel insights needed by general managers and management consultants. We will demonstrate that companies can use (and have used) the principles from this course to significantly enhance their competitiveness.

OIDD615 OPERATIONS STRATEGY

Operations strategy is about organizing people and resources to gain a competitive advantage in the delivery of products (both goods and services) to customers. This course approaches this challenge primarily from two perspectives: 1) how should a firm design their products so that they can be profitably offered; 2) how can a firm best organize and acquire resources to deliver its portfolio of products to customers. To be able to make intelligent decisions regarding these highlevel choices, this course also provides a foundation of analytical methods. These methods give students a conceptual framekwork for understanding the linkage between how a firm manages its supply and how well that supply matches the firm's resulting demand. Specific course topics include designing service systems, managing inventory and product variety, capacity planning, approaches to sourcing and supplier management, constructing global supply chains, managing sustainability initiatives, and revenue management. This course emphasizes both quantitative tools and qualitative frameworks. Neither is more important than the other.