Pinar Yildirim

Gorkem Bostanci, Pinar Yildirim, Kinshuk Jerath (2022), Negative Advertising and Competitive Positioning, Management Science .

Abstract: Negative advertising provides information about the weaknesses of a competitor’s product. We study negative advertising with a focus on how it impacts product positioning for profit-maximizing firms. We build a model of informative advertising competition, where product positioning is endogenous and consumers have rational expectations. We show that despite the informational benefits of negative advertising, permitting it (as the Federal Trade Commission in the United States does) may lead to reduced product differentiation and lower consumer welfare, even in markets where firms do not utilize negative advertising in equilibrium. We then extend our model to political competition, where a candidate’s objective is to obtain a larger share of votes than the competitor. We show that political competition supports higher positional differentiation, along with more negative advertising than product competition, in line with observed high use of negative advertising in political races and their rarer use in product competition.

Camilo Garcia-Jimeno, Pinar Yildirim, Angel Iglesias-Diaz (2022), Information Networks and Collective Action: Evidence from the Women’s Temperance Crusade, American Economic Review, 41–80.

Abstract: How do social interactions shape collective action, and how are they mediated by networked information technologies? We answer these questions studying the Temperance Crusade, a wave of anti-liquor protest activity spreading across 29 states between 1873 and 1874. Relying on exogenous variation in network links generated by railroad accidents, we provide causal evidence of social interactions driving the diffusion of the movement, mediated by rail and telegraph information about neighboring activity. Local newspaper coverage of the crusade was a key channel mediating these effects. Using an event-study methodology, we find strong complementarities between rail and telegraph networks in driving the movement's spread.

Yi Liu, Pinar Yildirim, Z. John Zhang (2022), Implications of Revenue Models and Technology for Content Moderation Strategies, Marketing Science.

Abstract: This paper develops a theoretical model to study the economic incentives for a social media platform to moderate user-generated content. We show that a self-interested platform can use content moderation as an effective marketing tool to expand its installed user base, to increase the utility of its users, and to achieve its positioning as a moderate or extreme content platform. For the purpose of maximizing its own profit, a platform will balance pruning some extreme content, thus losing some users, with gaining new users because of a more moderate content on the platform. This balancing act will play out differently depending on whether users will have to pay to join (subscription vs advertising revenue models) and on whether the technology for content moderation is perfect. We show that when conducting content moderation optimally, a platform under advertising is more likely to moderate its content than one under subscription, but does it less aggressively compared to the latter when it does. This is because a platform under advertising is more concerned about expanding its user base, while a platform under subscription is also concerned with users' willingness-to-pay. We also show a platform's optimal content moderation strategy depends on its technical sophistication. Because of imperfect technology, a platform may optimally throw away the moderate content more than the extreme content. Therefore, one cannot judge how extreme a platform is by just looking at its content moderation strategy. Furthermore, we show that a platform under advertising does not necessarily benefit from a better technology for content moderation, but one under subscription does, as the latter can always internalize the benefits of a better technology. This means that platforms under different revenue models can have different incentives to improve their content moderation technology. Finally, we draw managerial and policy implications from our insights.

Jessie Liu, Pinar Yildirim, Z. John Zhang (2022), A Theory of Maximalist Luxury, Journal of Economics and Management Strategy.

Abstract: The availability of high-quality, low-price counterfeits in many luxury markets threatens the role of luxury goods as a status symbol. If those counterfeits look and feel the same as the authentic counterparts, as many professional authenticators observe, and they are available at a fraction of the price of authentic goods, why would self-interested consumers purchase authentic luxury goods? Then, the future of luxury goods is called into question. In this paper, we propose that the presence of high-quality, low-price counterfeits can, surprisingly, motivate the wealthy consumers to pursue what we term as the “maximalist luxury” strategy. In the presence of these counterfeits, the wealthy can resort to signaling their status by purchasing the maximum number of luxury goods available and put their copious consumption on display, while in the absence of such counterfeits, the wealthy consumers only need to purchase the minimum number of luxury goods to stand out. This new signaling mechanism then highlights the importance of product line decisions by a luxury brand in combating counterfeits and provides a number of managerial insights about how to maintain the role of luxury goods as a status symbol through pricing, adjusting the product line, and limiting its products' functionality.

Mustafa Dogan and Pinar Yildirim (2021), Managing Automation in Teams, Journal of Economics and Management Strategy.

Abstract: In this paper, we study a principal's decision to introduce automation into a production process governed by a team of employees. When introduced, automation displaces an employee with a machine. This displacement increases efficiency as the machine carries out the tasks of the employee at a lower cost, and reduces the scope of moral hazard as the machine does not make unobserved effort choices. We show that, despite the direct benefits, a principal may prefer not to adopt automation due to its indirect costs. Before automation is introduced, the principal is able to take advantage of her ability to shape the interactions between the team members to manage the agency problem. Automation eliminates this ability and removes an incentive device at the principal's discretion, resulting in an indirect cost. On the one hand, adopting automation is always optimal when the principal incentivizes employees independently, abstaining from creating a team interaction. On the other hand, automation may be suboptimal when the principal incentivizes employees by encouraging them to compete via a “relative performance evaluation” contract or to cooperate via a “joint performance evaluation” contract. We offer two extensions to test the robustness of these findings qualitatively. First, the findings carry through if we consider alternative effects of automation, where it impacts employees symmetrically without displacing any employee. Second, the findings also remain consistent when there are synergies between the efforts of team members.

Maria Petrova, Ananya Sen, Pinar Yildirim (2021), Social Media and Political Donations: New Technology and Incumbency Advantage in the United States, Management Science , 67 (5), pp. 2657-3320.

Abstract: Political campaigns are among the most sophisticated marketing exercises in the United States. As part of their marketing communication strategy, an increasing number of politicians adopt social media to inform their constituencies. This study documents the returns from adopting a new technology, namely Twitter, for politicians running for Congress by focusing on the change in campaign contributions received. We compare weekly donations received just before and just after a politician opens a Twitter account in regions with high and low levels of Twitter penetration, controlling for politician-month fixed effects. Specifically, over the course of a political campaign, we estimate that the differential effect of opening a Twitter account in regions with high versus low levels of Twitter penetration amounts to an increase of 0.7%–2% in donations for all politicians and 1%–3.1% for new politicians who were never elected to Congress before. In contrast, the effect of joining Twitter for experienced politicians remains negligibly small. We find some evidence consistent with the explanation that the effect is driven by new information about the candidates; for example, the effect is primarily driven by new donors rather than past donors, by candidates without Facebook accounts, and by tweeting more informatively. Overall, our findings imply that social media can intensify political competition by lowering the costs of disseminating information for new entrants to their constituents and thus may reduce the barriers to enter politics.

Mustafa Dogan, Pinar Yildirim, Alexandre Jacquillat (Under Review), Strategic Automation and Decision-making Authority.

Abstract: This paper studies adoption and utilization of automation within firms of different organizational structures. We develop a theoretical model of organizational design with embedded cheap-talk. Specifically, we study a firm with a principal and two divisional managers, where production tasks can be automated in each division. Our findings show that there exists heterogeneity among firms in how they utilize automation based on their organizational structure. In specific, while more centralized firms may automate divisions facing higher risk and uncertainty, more decentralized firms choose to do the opposite. Moreover, as the overall automation capacity increases, firms follow distinctly different strategies to adapt to changing market conditions. With higher automation capacity, a firm is more likely to centralize decision-making at the top, rather than having a decentralized decision-making structure. This suggests that, the structure of firms and the role of managers may change as well, altering the allocation of decision-making rights within organizations. In consequence, as firms automate more and more tasks, mid-level managers become more focused on day-to-day operations and less involved in strategic decision-making on behalf of the firm. Finally, the paper shows that automation can be a strategic substitute to monetary contracts.

Pinar Yildirim, Maria Petrova, Ricardo Perez Truglia, Andrei Simonov (Under Review), Are Political and Charitable Giving Substitutes? Evidence from the United States.

Abstract: We provide evidence that individuals substitute between political contributions and charitable contributions, using micro data from the American Red Cross and Federal Election Commission. First, we find that foreign natural disasters, which are positive shocks to charitable giving, crowd out political giving. Second, we show that political advertisement campaigns, which are positive shocks to political giving, crowd out charitable giving. Our evidence suggests that individuals give to political and charitable causes to satisfy similar needs, and some of the drivers of charitable giving, such as other-regarding preferences, may be driving political giving too.

Yi Liu, Pinar Yildirim, Z. John Zhang (Under Revision), Consumer Preferences and Firm Technology Choice.

Abstract: Advances in intelligent technologies change the way consumers search and shop for products. Emerging is the trend of home-shopping devices such as Amazon's Alexa and Google Home, which allow consumers to search or order products using voice commands. We study the impact of such artificial intelligence (AI) enabled devices on a brand's channel strategy and its price discrimination across these channels. After making a theoretical breakdown of the functionalities of the AI-enabled shopping devices into (1) adding convenience in ordering procedure ("OC") and (2) providing support in purchase decision-making ("DS"), we document via a set of experiments that consumers who have strong (weak) shopping preferences are less-inclined to shop through AI-enabled devices with the functionality of DS (OC) compared to their existing shopping heuristics. The hesitation of the group to adopt AI-enabled shopping devices makes it efficient for a brand operating in a competitive environment to price discriminate across distribution channels. In the second part of the paper, we build an analytical model and derive the equilibrium distribution and pricing strategies for competing brands conditional on the heterogeneity of consumers with respect to their willingness to adopt AI-enabled devices. We also analyze the welfare impact of the introduction of AI technology as a new possible distribution channel.

Pinar Yildirim, Yanhao Wei, Christophe Van den Bulte, Joy Lu (2020), Social Network Design for Inducing Effort, Quantitative Marketing and Economics, 18, pp. 381-417.

Abstract: Many companies create and manage communities where consumers observe and exchange information about the effort exerted by other consumers. Such communities are especially popular in the areas of fitness, education, dieting, and financial savings. We study how to optimally structure such consumer communities when the objective is to maximize the total or average amount of effort expended. Using network modeling and assuming peer influence through conformity, we find that the optimal community design consists of a set of disconnected or very loosely connected sub-communities, each of which is very densely connected within. Also, each sub-community in the optimal design consists of consumers selected such that their “standalone” propensity to exert effort correlates negatively with their propensity to conform and correlates positively with their propensity to influence others.