eBusiness Research Lunch Seminars
NE20-336 (3 Cambridge Center)
Wednesday, November 14, 12-1:30 pm
Lunch Provided
Visiting Professor Otis Jennings
Content Providers, Consumer Choice, and the eGoods Supply Chain

Abstract

We consider the managerial issues effecting the proliferation and distribution of eGoods, i.e. digital media transmitted over the Internet. The most visible part of the supply chain is the interaction between end-user consumers and content providers of digital media. Other constituents along the chain include content owners, web hosting locations, application service providers (ASP), and owners of private networks.

In the first half of the talk, we outline a research agenda for studying the interactions between members of the supply chain. For example, we consider the tension between content owners and consumers who want free access to the content.

In the second half of the talk we explore a specific managerial problem facing content providers. Increasingly, companies outsource portions of their IT operations to web hosting locations. For content providers whose primary out-going Internet traffic uses data-streaming, web hosters provide special network access pricing options. Data streaming typically involves the transmission of large files at a relatively constant rate over extended periods of time. This technology is particularly useful for real-time transmission of music or video. Through the pricing scheme, referred to as "peak rate pricing," web hosters incentivize the transmission of data at relatively uniform rates.

Under a peak rate pricing scheme, content providers commit to a target peak rate before the beginning of a time horizon, say one month. A penalty is levied if the ultimate peak rate exceeds the target value. We first explore some of the structural details of the agreement between the content provider and the web hoster and conclude with some mathematically- informed managerial insights. For instance, we show the counter-intuitive result that costs associated with network access can decrease as the variability in end-user behavior increases. Finally we propose possible methods to induce randomness in customer behavior through product diversification and an increase in customer "freedom of motion."

For access to presentation materials, please visit the Sponsors Only section.

Students may request materials from Robynne DeCaprio at <decaprio@mit.edu>

Calendar for Fall Lunch seminars