Working Papers Archives

The Efficiency of Dynamic Electricity Prices

The marginal cost of electricity fluctuates hour-by-hour, yet retail customers typically face flat prices. Using data from all seven US wholesale markets and a new method to evaluate alternative rates set in advance that accounts for equilibrium price effects, we estimate efficiency gains from time-varying price schedules that better align price with cost. We have three main results. First, time-of-use rates and critical-peak pricing, the two most common time-varying rate plans, each correct about 10% of mispricing. Second, complex rate structures based on historical prices often backfire. Third, real-time pricing with price ceilings can capture most potential efficiency gains while limiting customer risk.…Read More

Financial Reporting and Consumer Behavior

We show that financial reporting spurs consumer behavior. Using granular GPS data, we show that foot-traffic to firms’ commerce locations significantly increases in the days following their earnings announcements.…Read More

Multi-Channel Healthcare Operations: The Impact of Video Visits on the Usage of In-Person Care

Healthcare organizations have increasingly adopted video visits as an alternative care channel that offers higher convenience and holds promise for improving patients’ access to care. Despite the growing use, the impact of a new digital channel on care demand within existing physical channels has not been thoroughly investigated, especially in the primary care context of a traditional healthcare organization. We study a large healthcare system that made video visits available to a subset of its patients for primary care needs, prior to the COVID-19 pandemic. Using a difference-in-differences approach and visit data spanning over 9.5 million patient-months, we find that the introduction of video visits increases the demand for in-person primary care provider (PCP) visits by 20% and the demand for emergency department (ED) visits by 30%. We also find that patients who have poorer access to in-person care are more likely to initiate care via a video visit rather than an…Read More

The Role of Large Language Models in Educational Simulations

Mack Institute Research Assistant Lennart Meincke and Wharton Associate Professor of Management Andrew Carton have released a new working paper in our series of working papers on ChatGPT spearheaded by Mack Faculty Director Christian Terwiesch. The new paper, entitled “Beyond Multiple Choice: The Role of Large Language Models in Educational…Read More

Increasing AI Idea Variance

Hands arranging blank sticky notes on a dark surface, with one hand holding a marker.

Mack Institute Research Assistant Lennart Meincke, Wharton Professor Ethan Mollick and Mack Institute Co-Director and Wharton Professor Christian Terwiesch have published the next in Terwiesch’s series of working papers on ChatGPT. The new paper evaluates how LLMs can be used for idea generation and explores methods to increase the novelty,…Read More

Will EFTs Drive Mutual Funds Extinct?

I study investors’ trade-off between ETFs and open-ended mutual funds in the presence of idiosyncratic liquidity risk and aggregate uncertainty. Based on a portfolio choice model, I show that ETFs and mutual funds provide liquidity at different maturities. Mutual funds (ETFs) are preferred by investors facing high (low) idiosyncratic liquidity risk and shorter (longer) investment horizons. In equilibrium, the pooling of investors into fund types based on their expected investment horizon directly emerges from the differential frictions of ETFs and mutual funds. Over the long-term, payoff complementarities in mutual funds dilute investors fund holdings and generate underperformance vis-à-vis ETFs. Yet, in the short-run, ETFs can be mispriced due to intermediary arbitrage constraints. The optimal size of the mutual fund sector relative to ETFs decreases in the illiquidity of portfolio assets but increases in the proportion of mutual fund shares held via retirement accounts.…Read More

Back to the familiar? How attention and rare experiences overcome local search in external technology sourcing.

In this paper, we develop and test a theoretical framework that considers how established firms forming partnerships with startups may be subject to spatial and temporal myopia and how these tendencies are moderated by the established firms’ histories of experiencing essential failures and successes in solving R&D problems. …Read More

Capability-Enhancing Foreign Investments, and Evolution of Corporate Scope In Software Services Offshore Outsourcing: Market Reactions and Implications for Competitive Advantage

How does the stock market react to competitive actions by firms and their rivals? In this study we empirically explore capability-seeking investments by firms from different strategic groups within an industry and examine their impact on rival firms in the competitive context of global software services.…Read More

Online Learning with Randomized Neural Networks

This project adapts online learning techniques to unstructured data, focusing on neural networks. We posit a non-parametric multi-armed bandit algorithm with context that uses a neural network for its underlying function approximation. We theoretically analyze and prove guarantees on the regret under this algorithm…Read More

Implications of Revenue Models and Technology for Content Moderation Strategies

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.…Read More

The Peril of Pay Variability: Determinants of Worker Aversion to Variable Compensation in Lower-Wage Jobs

Uber. Upwork. TaskRabbit. The world of work is transforming and my research agenda attempts to identify and explain 1) how work is changing and 2) how these changes affect workers, especially those who are marginalized or vulnerable.…Read More

Towards a Causal Theory and Test of Network Effects: Structural Holes, Alliance-Network Externalities, and Organizational Innovation

We investigate whether the effect of network position on innovation is causal or spurious. Although empirical evidence demonstrates that certain structural positions in alliance networks (e.g. structural holes) affect firm innovation, it is hard to disentangle the factors allowing a firm to put itself in a certain position from the innovation outcomes that stem from being in that position.…Read More

When Should the Off-grid Sun Shine at Night? Optimum Renewable Generation and Energy Storage Investments

Globally, 1.5 billion people live off the grid, their only access to electricity often limited to operationally-expensive fossil fuel generators. Solar power has risen as a sustainable and less expensive option, but its generation is variable during the day and non-existent at night.…Read More

Productivity Gains From Labor Outsourcing: The Role of Trade Secrets

I quantify the impact of trade secret protection on labor outsourcing, and consequently, on aggregate productivity.…Read More

Pricing in Service Platforms: Who Should Set the Prices?

Tolga Dizdarer, PhD Candidate, The Wharton School, Gerry Tsoukalas, Operations, Information & Decisions, The Wharton School, and Gérard Cachon, Operations, Information & Decisions, The Wharton School Abstract: Service platforms like Uber and AirBnb create markets that connect customers with service providers. Platforms provide the medium of interaction and receive commissions from…Read More

Human Capital and Startup Financing

We establish the relevance of human capital to startup financing. Using administrative databases from the Central Bank of Brazil, we obtain information on private firms, their founders and their access to bank credit.…Read More

Privately Owned Battery Storage: Re-Shaping the Utility Business Case

How can rooftop solar owners capture economic value from investing in battery technologies? Storage adds at least three strategic options for homeowners that previously could only directly consume solar generation and sell any excess instantaneously, thus they traditionally relied on feed-in tariffs or other subsidies.…Read More

The Effects of Content Ephemerality on Information Processing

Most digital communication platforms store content and allow users to see it multiple times. Despite the benefits that recording content holds for both users and companies, many applications delete it after it was seen by the receiver (i.e., ephemeral communication channels). …Read More

To Mine or to Trade? An Empirical Study of Bitcoin Exchange and Mining Markets

We empirically show people tend to associate a higher valuation of Bitcoin with a higher Bitcoin exchange rate, and such exchange rate has significant impacts on both the supply and demand of the mining rigs.…Read More