On Competing Service Systems
Christos N. Nikolaou
Professor, CS Department
U. of Crete
4/5/2011 CNSR Ottawa
C Nikolaou
Tra...
2
Overview of Presentation
• Introduction - Concepts
• Value Networks – for Services
• Mapping to Processes, People, Softw...
14/2/11
Introduction

Service Networks are
embedded in service
ecosystems

An ecosystem is a biological
environment cons...
14/2/11
What is a Service Ecosystem?

A Service Ecosystem is a socio-technical environment
consisting of:

All the servi...
14/2/11
A Business Entity/
Service Provider
Transformation Services Laboratory
http://www.tsl.gr
5
Offering
Delivery
Cost
...
14/2/11
Service Networks or Service Systems

Service providers prefer to team up and combine their services
to create new...
14/2/11 Transformation Services Laboratory
http://www.tsl.csd.uoc.gr
7
Open Design and Research Issues for
Service Systems...
Offering-Centric Definition
of Value Networks (VNs)
A Value network is a pair of two Directed Acyclic Graph (DAG), the
off...
Value Subnetworks
• Value Sub-Network (VSN)
o Is a Business Entity and a Value Network
o Each offering that is offered or ...
18/4/2008 ICSS Beijing
C Nikolaou
Transformation Services Laboratory
http://www.tsl.csd.uoc.gr
10
Recent Publications
Mart...
SNAPT (1/6)
• Visualize Service Networks
o Business Entities are associated to nodes
o Services and Enablement Services ar...
SNAPT (2/6)
• Visualize Service Sub-Networks
Service Network ServiceSubNetwork
Service “Supplies” that is consumed by
Serv...
SNAPT (3/6)
• Simple Cost Revenue Model
o The profit of each Business Entity is calculated as:
 Profit=Σ(IncomingServiceR...
SNAPT (4/6)
• KPIs Repository
-KPI Library is based on the
APQC Process Classification
Frameworks (PCF)
• Fully compatible...
SNAPT (5/6)
• Defining KPOs
o KPOs expected value can
either be a numeric value,
a duration or an
unspecified one.
o SNAPT...
SNAPT (6/6)
• Mapping Service Networks to Abstract Business Processes
(work in progress)
o Service Network is mapped to an...
Initial objectives of Research
• Mapping interactions from service systems layer to abstract
business processes.
o Example...
Concepts (1/4)
The Service Network Metamodel
C Nikolaou – Stuttgart,
July 8 2010
18© S-Cube
14/2/11
What kind of Models do we need for
Service Networks?

We need mathematical and simulation models to study
and pre...
20
Today: Service Economies use
ICT enabled Networks
• Rural economies: mainly used market places
• Industrial economies: ...
21
The Emergence of Service Economy
(Percent employment in service jobs)
(United Nations, 1999, p. ??)
Source: US Bureau o...
22
How to define Services?
• The Economist: a service is “anything sold in trade
that cannot be dropped on your foot.”
• a...
23
How to define the Value of a Service?
• Value for Whom (James Teboul, “Service is Front
Stage, 2006”?
– For the Custome...
24
Overview of Presentation
• Introduction - Concepts
• Value Networks – for Services
• Mapping to Processes, People, Soft...
2518/4/2008 ICSS Beijing
C Nikolaou
Transformation Services Laboratory
http://www.tsl.csd.uoc.gr
25
Start from the value p...
2626
Product Value Network
(supply chains ->
business processes)
May Include multiple
Value Chains
Service Value Network
E...
27
Research on Service Value Systems (not
an exhaustive list)
• Seminal work by Verna Allee: ValueNet Works™ analysis, usi...
2818/4/2008 ICSS Beijing
C Nikolaou
Transformation Services Laboratory
http://www.tsl.csd.uoc.gr
28
Estimating Value of SV...
2918/4/2008 ICSS Beijing
C Nikolaou
Transformation Services Laboratory
http://www.tsl.csd.uoc.gr
29
Recent Publications
• ...
3018/4/2008 ICSS Beijing
C Nikolaou
Transformation Services Laboratory
http://www.tsl.csd.uoc.gr
30
A Proposal to define t...
3118/4/2008 ICSS Beijing
C Nikolaou
Transformation Services Laboratory
http://www.tsl.csd.uoc.gr
31
Why is the above usefu...
3218/4/2008 ICSS Beijing
C Nikolaou
Overview of Presentation
• Introduction - Concepts
• Value Networks – for Services
• M...
3318/4/2008 ICSS Beijing
C Nikolaou
Overview of Presentation
• Introduction - Concepts
• Value Networks – for Services
• M...
3418/4/2008 ICSS Beijing
C Nikolaou
Transformation Services Laboratory
http://www.tsl.csd.uoc.gr
34
the Dynamics of Emerge...
35
Strategic Competition
Firms take into account expected behavior by rivals when
choosing their own strategies  interdep...
36
Key Characteristics of Strategic Decision Problems
There is a set of rational players that interact with
each other in ...
37
Example: A Car Repair Service System
Nodes of the network
Original-Equipment-Manufacturer (OEM)
• Content Packager
• He...
38
Example: A Car Repair Service System
39
Experiments
Consider two competing networks A and B
Initially, OEM of A has more customers than that of B
Initial price...
40
Experiment 1
Define common strategies for both OEMs:
if (my value < my value in previous period)
then
if (number of my ...
41
Experiment 2
Define common strategies for both OEMs:
if (number of my customers < number of rival’s customers)
then
if ...
42
Experiment 3
Strategy of OEM of network A: same as in
experiment 2
Strategy of OEM of network B:
if (number of my custo...
43
Experiment 4
Common information: number of customers of both
networks and price of OEM of network A at current
period
S...
Upcoming SlideShare
Loading in …5
×

Cnsr 2011 keynote lecture (1)

349 views
303 views

Published on

On Competing Service Systems
Christos Nikolaou
Transformation Services Lab
UoC, CSD

When innovative new services are introduced to market and society, it is usually the case that a group of service providers (frequently through the leadership of a sector dominant provider) form an alliance that implements the new service as a composition of some of their own offerings (services or goods and resources). The participating service providers set their own business objectives in order to enter the coalition, and these will have to be satisfied if the emerging service system is to be successful against the competition and sustainable in the long run. One of the many interesting questions that emerge in this context is the following: how can these business objectives be translated to appropriate constraints for the design of the necessary business processes and for resource and infrastructure services (cloud) provisioning? How can these - structure of the service system, business processes, infrastructure services - be adapted to a changing and competitive business environment so that old or new business objectives are still met?

I will present some initial research results that can provide a first handle to these problems. I argue that we need a fresh, holistic approach to deal with them. We have to gain a deeper understanding of how value is created in service systems,how people and systems contribute to this creation, and how sensitive this value creation is to our, most of the time, unsuspecting technical decisions on IT systems and infrastructures. I will also discuss a first attempt towards a unified quantitative framework that could be useful towards addressing these issues and concerns.

Published in: Technology, Business
0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total views
349
On SlideShare
0
From Embeds
0
Number of Embeds
1
Actions
Shares
0
Downloads
1
Comments
0
Likes
0
Embeds 0
No embeds

No notes for slide
  • (c) Prof. Dr. Klaus Pohl
  • Distinguish processes based on domains and define KPIs for these domains KPI repository: maintained in TSL server and provides a RESTFUL interface
  • Inside SNAPT, mapping KPIs to KPOs.
  •  Enabler: offers enablement services, enable Services offered by other Business Entities, e.g. courier, amazon provides books-courier transfer them
  • (c) Prof. Dr. Klaus Pohl
  • (c) Prof. Dr. Klaus Pohl
  • (c) Prof. Dr. Klaus Pohl
  • Cnsr 2011 keynote lecture (1)

    1. 1. On Competing Service Systems Christos N. Nikolaou Professor, CS Department U. of Crete 4/5/2011 CNSR Ottawa C Nikolaou Transformation Services Laboratory http://www.tsl.csd.uoc.gr
    2. 2. 2 Overview of Presentation • Introduction - Concepts • Value Networks – for Services • Mapping to Processes, People, Software Services • Conclusions and Open Problems
    3. 3. 14/2/11 Introduction  Service Networks are embedded in service ecosystems  An ecosystem is a biological environment consisting of  all the organisms living in a particular area, as well as all the nonliving,  physical components of the environment with which the organisms interact, such as air, soil, water, and sunlight. It is all the organisms in a given area, along with the nonliving (abiotic) factors with which they interact; a biological community and its physical environment. (Wikipedia). CS452 Fall 2010-2011 3
    4. 4. 14/2/11 What is a Service Ecosystem?  A Service Ecosystem is a socio-technical environment consisting of:  All the services available in a particular sector of the economy (e.g. home electronics, online media, etc.)  All the supporting (enabling) good and services (e.g. Banking, building mainetance, power and telecom utilities, brokers, distributors, etc.)  All the regulating and supervising authorities
    5. 5. 14/2/11 A Business Entity/ Service Provider Transformation Services Laboratory http://www.tsl.gr 5 Offering Delivery Cost Event Handler Metrics Compliance Regulator Offering Enablers (telecom…) Business Enablers (VCs, lenders) Revenue Enablers (bank, collection agencies) SN Participant /Role
    6. 6. 14/2/11 Service Networks or Service Systems  Service providers prefer to team up and combine their services to create new and innovative ones in the market place.  These new combined ones form a service system or a service network  There may be several service networks within a service ecosystem that offer comparable or replaceable services, and which therefore compete for market share  There may be service providers that belong to more than one service networks, possibly competing ones.  Why do Service Providers form networks/systems?
    7. 7. 14/2/11 Transformation Services Laboratory http://www.tsl.csd.uoc.gr 7 Open Design and Research Issues for Service Systems/Networks  How can we make sure that business objectives (customer satisfaction, market share, time to delivery, etc.) for each Service Provider (participant to the service network) and for the whole network, are observed, as the network is designed/operated?  Can we translate “business pains” to: Either redesign of business processes (solution engineering), and/or to redesign of the whole Service (Value) Net  Can I answer the following questions: How is my service net doing compared to my own or the net's business objectives? What if I (a service net partner) added/removed/modified links? What if I participated in another value net? Are there opportunities for forming new service nets around new, possibly innovative service propositions?  We therefore need tools, models and methodologies to study Service Networks
    8. 8. Offering-Centric Definition of Value Networks (VNs) A Value network is a pair of two Directed Acyclic Graph (DAG), the offerings DAG and the revenues DAG. These two DAGs: Have a common set of nodes • economic entities (firms, cost centers, individuals, …) The offerings DAG has links • Service or goods contracts (relationships) over some pairs of economic entities The revenues DAG has links over some pairs of economic entities denoting a revenue flow If there is a link from node a to node b in the offerings DAG then there is a link between b and a in the revenues DAG. There is a set root nodes (raw materials respectively raw services nodes) that have no incoming links. There is a set of leaf nodes (customers nodes) that have no outgoing links. Associated with the Value network is a set of value equations that associate value to nodes, links and the whole Value network.
    9. 9. Value Subnetworks • Value Sub-Network (VSN) o Is a Business Entity and a Value Network o Each offering that is offered or consumed by a VSN must by also offered or consumed by a single Business Entity inside the sub-network • Key Performance Objectives (KPO) o Each Business Entity has their own business objectives for a single service o Map to Key Performance Indicators (KPIs)  KPIs indicates the actual measured value  KPOs describe the targeted value C Nikolaou – Stuttgart, July 8 2010 9© S-Cube
    10. 10. 18/4/2008 ICSS Beijing C Nikolaou Transformation Services Laboratory http://www.tsl.csd.uoc.gr 10 Recent Publications Martin Smits, Willem-Jan van den Heuvel, Christos Nikolaou, “Redesign and Performance of Service Networks: A Systems Dynamics Approach”, ECIS 2011 M. Voskakis, C. Nikolaou, W.J.A.M. van den Heuvel, M. Bitsaki, “Service Network Modeling and Performance Analysis”, ICIW 2011 D. Dubois, C. Nikolaou, M. Voskakis, “A Model Transformation for Increasing Value in Service Networks through Intangible Value Exchanges”, ICSS 2010, Beijing K. Zachos, C. Nikolaou, P. Petridis, G. Stratakis, M. Voskakis and E. Papathanasiou. *Enhancing Service Network Analysis and Service Selection using Requirements-based Service Discovery*. In proceedings of 1st International Conferences on Advanced Service Computing, Service Computation 2009/, Athens, Greece, November 2009. M. Bitsaki, O. Danylevych, Willem-Jan van den Heuvel, G. Koutras, F. Leymann, M. Mancioppi, C. Nikolaou, M. Papazoglou, “An Architecture for Managing the Lifecycle of Business Goals for Partners in a Service Network”, ServiceWave 2008. M. Bitsaki1, O. Danylevych, W.J.A.M. van den Heuvel, G.D. Koutras, F.Leymann, M. Mancioppi, C.N. Nikolaou, M.P. Papazoglou, Model Transformations to Leverage ServiceNetworks, WESOA, Sydney, 2008. Branimir Wetzstein, Olga Danylevych, Frank Leymann, Marina Bitsaki,   Christos Nikolaou, Willem-Jan van den Heuvel, Mike Papazoglou, “Modeling and Runtime Support for Key Performance Indicators in Service Value Networks”, MONA, ServiceWave, 2008. C. Nikolaou, M. Bitsaki, G. Iacovidis, P. Mazzoleni, J. Sairamesh and S.Tai “Estimating Value in Value Networks: A Case Study from Pharmaceutical Industry”, 16th  Annual Frontiers in Service, October 4-7 2007, San Francisco, USA. G. Iacovidis, C. Nikolaou, S. Tai, M. Bitsaki, P. Mazzoleni, J. Sairamesh. "Estimating Value in Value Networks - A Case Study from Pharmaceutical Industry". Accepted in the 16th Annual Frontiers in Service Conference, San Francisco, California, Oct. 2007. “Estimating value in service systems – A case study of a repair service system”, N. Caswell, C. Nikolaou, J. Sairamesh, M. Bitsaki, G. D. Koutras and G. Iacovidis, IBM Systems Journal, Vol. 47, Num. 1, 2008
    11. 11. SNAPT (1/6) • Visualize Service Networks o Business Entities are associated to nodes o Services and Enablement Services are associated to links • Simplest forms of a Service Network: Green Link indicates that Enabler, enables the delivery of Service1. Participant offers a Single service to the EndCustomer C Nikolaou – Stuttgart, July 8 2010 11© S-Cube
    12. 12. SNAPT (2/6) • Visualize Service Sub-Networks Service Network ServiceSubNetwork Service “Supplies” that is consumed by ServiceSubNetwork in the Service Network (left), is mapped to an input port in the ServiceSubNetwork (right). “Service” that is offered by ServiceSubNetwork in the Service Network (left), is mapped to an output port in the ServiceSubNetwork (right). C Nikolaou – Stuttgart, July 8 2010 12© S-Cube
    13. 13. SNAPT (3/6) • Simple Cost Revenue Model o The profit of each Business Entity is calculated as:  Profit=Σ(IncomingServiceRevenue) – Σ(OutgoingServiceRevenue) o Enablement Services are Services offered by an Enabler and consumed by the source Business Entity of the enabled Service • Generate Profitability Sheets that indicates the overview Cost Revenue Model of the Service Network and individually for each participant. C Nikolaou – Stuttgart, July 8 2010 13© S-Cube
    14. 14. SNAPT (4/6) • KPIs Repository -KPI Library is based on the APQC Process Classification Frameworks (PCF) • Fully compatible with IBM Websphere Business Modeler -Provides RESTful interface • SNAPT updates its internal KPI library from the KPIs Repository C Nikolaou – Stuttgart, July 8 2010 14© S-Cube
    15. 15. SNAPT (5/6) • Defining KPOs o KPOs expected value can either be a numeric value, a duration or an unspecified one. o SNAPT will serve as a monitoring tool as it will import KPIs from the actual running business processes and compare them with the KPOs. C Nikolaou – Stuttgart, July 8 2010 15© S-Cube
    16. 16. SNAPT (6/6) • Mapping Service Networks to Abstract Business Processes (work in progress) o Service Network is mapped to an Abstract Business Process expressed in BPMN o Each Service is mapped to an Abstract Business Sub- Process owned by the source Business Entity o Sequencing information will be provided by the SNAPT user o The first Business Process Modeling Tool that SNAPT will support is IBM Websphere Modeler C Nikolaou – Stuttgart, July 8 2010 16© S-Cube
    17. 17. Initial objectives of Research • Mapping interactions from service systems layer to abstract business processes. o Example of supply chain management: identifying RosettaNet PIPs from interactions occurring in the service systems layer • Applying ‘delay constraints’ in the service systems’ layer o Initial Choice: response time • Mapping KPIs from service systems’ layer down to service infrastructures’ layer • Simple case study: Order process between a manufacturer and a screw’s supplier C Nikolaou – Stuttgart, July 8 2010 17© S-Cube
    18. 18. Concepts (1/4) The Service Network Metamodel C Nikolaou – Stuttgart, July 8 2010 18© S-Cube
    19. 19. 14/2/11 What kind of Models do we need for Service Networks?  We need mathematical and simulation models to study and predict performance of service networks, study competition between them, winning strategies, etc.  We need visual models to visualize their size, which ones are the important participants, etc.  We need programming models to study the structure and behavior of service networks, to understand the interaction dynamics among participants.
    20. 20. 20 Today: Service Economies use ICT enabled Networks • Rural economies: mainly used market places • Industrial economies: mainly used hierarchies + market places • Service economies today (predominant in developed and developing countries): mainly use ICT enabled around-the-globe networks: – Global cheap communications (abundant bandwidth, VOIP, teleconferencing, collaborative tools, etc.); – ICT enabled contract management and monitoring; – Mechanisms for trust building in global networks (reputation/recommendation systems, third party registries, etc.)
    21. 21. 21 The Emergence of Service Economy (Percent employment in service jobs) (United Nations, 1999, p. ??) Source: US Bureau of Labor Statistics
    22. 22. 22 How to define Services? • The Economist: a service is “anything sold in trade that cannot be dropped on your foot.” • as an economic category, a service is the non- material equivalent of a good – that may be used or consumed but not owned • in a technological sense, a service is one or more software programs, devices and networks working together to supply an end-user a coherent application – as in service-oriented- computing concepts
    23. 23. 23 How to define the Value of a Service? • Value for Whom (James Teboul, “Service is Front Stage, 2006”? – For the Customer: credibility of result, tangible and memorable experience, attentiveness, responsiveness and speed, ease of use, consistency, willingness to pay; – For the Provider: cost, productivity, capacity utilization, barrier to entry – For the Provider’s Employee: compensation and tips, working conditions, participation initiative, sense of belonging, self-esteem, challenge • A successful Service co-creates value for both provider and consumer
    24. 24. 24 Overview of Presentation • Introduction - Concepts • Value Networks – for Services • Mapping to Processes, People, Software Services • Conclusions and Open Problems
    25. 25. 2518/4/2008 ICSS Beijing C Nikolaou Transformation Services Laboratory http://www.tsl.csd.uoc.gr 25 Start from the value proposition! • A set of: – Products – Services • …offered to the market by a network of providers to consumers that creates value for all of them. • Examples: – The “ultimate coffee drinking experience” (Cinzia Parolini, Illy Café) – A new standard – A new banking service – The car repair service network
    26. 26. 2626 Product Value Network (supply chains -> business processes) May Include multiple Value Chains Service Value Network Ecosystem • Suppliers • Customers & Distributors • Enablers (around a common value proposition) • Influencers Competitor’s Value Net Competitor’s Value Net
    27. 27. 27 Research on Service Value Systems (not an exhaustive list) • Seminal work by Verna Allee: ValueNet Works™ analysis, using the intuitive HoloMapping™ method, which is a methodology for analyzing the dynamics of value in value networks at the operational, tactical, and strategic level. • The e3Value methodology and tools (Gordijn et al.) provide formal models, visualization, value estimation for value networks • Network formation by (economic) agents has been studied in the literature, (Jackson, Bloch, Currarini, Morelli). The objective there is to form both effective and stable networks, which in general is difficult to achieve. • Social networks work and their correlations with economic networks (Wakolbinger, Nagurney). • Value Net research from a business administration perspective (Iansiti, Parolini). • Research work on services at IBM Almaden Research (Spohrer, Maglio)
    28. 28. 2818/4/2008 ICSS Beijing C Nikolaou Transformation Services Laboratory http://www.tsl.csd.uoc.gr 28 Estimating Value of SVNs • Joint work with IBM Research, Hawthorne: – Jakka Sairamesh – Nathan Caswell – Stefan Tai • And of the Transformation Services Lab of UoC: – Christos Nikolaou – Marina Bitsaki – George Iacovidis – George Koutras – Vaggelis Goggolidis – Vaggelis Papathanasiou – Apostolos Zarras – Maria Chalkiadaki
    29. 29. 2918/4/2008 ICSS Beijing C Nikolaou Transformation Services Laboratory http://www.tsl.csd.uoc.gr 29 Recent Publications • G. Iacovidis, C. Nikolaou, S. Tai, M. Bitsaki, P. Mazzoleni, J. Sairamesh. "Estimating Value in Value Networks - A Case Study from Pharmaceutical Industry". Accepted in the 16th Annual Frontiers in Service Conference, San Francisco, California, Oct. 2007. • “Estimating value in service systems – A case study of a repair service system”, N. Caswell, C. Nikolaou, J. Sairamesh, M. Bitsaki, G. D. Koutras and G. Iacovidis, IBM Systems Journal, Vol. 47, Num. 1, 2008
    30. 30. 3018/4/2008 ICSS Beijing C Nikolaou Transformation Services Laboratory http://www.tsl.csd.uoc.gr 30 A Proposal to define the “Value” of a Value Net • V(t) = ∑ of all the revenue flows – ∑ of all the cost flows + ∑ of the value of all relationships • Relationship Value: expected service sales of the provider over the next time period to a particular consumer • Expected service sales: look into the recent past, modulate by customer satisfaction index • … similarly for the value of a partner participation to an SVN – for customers, value is utility of service provided
    31. 31. 3118/4/2008 ICSS Beijing C Nikolaou Transformation Services Laboratory http://www.tsl.csd.uoc.gr 31 Why is the above useful? • Because value computations can be linked to KPIs - examples: – LOB sales to relationship values – Market share to charting the business ecosystem, predicting formation of new relationships (based on anticipated value), new products that fill the quality- product space, and related market research about customer requirements and their clustering in the Q-P space • Because “business pains” can be translated to: – Either redesign of business processes (solution engineering), – and/or to redesign of the Value Net (Value Net Analysis and Engineering) • Because value net computations can be used for value net comparisons: – How are my competing value nets doing (do they have higher value)? – What if I (a value net partner) added/removed/modified links? – What if I participated in another value net? – Are there opportunities for forming new value nets around new value propositions?
    32. 32. 3218/4/2008 ICSS Beijing C Nikolaou Overview of Presentation • Introduction - Concepts • Value Networks – for Services • Mapping to Processes, People, Software Services • Conclusions and Open Problems Transformation Services Laboratory http://www.tsl.csd.uoc.gr 32
    33. 33. 3318/4/2008 ICSS Beijing C Nikolaou Overview of Presentation • Introduction - Concepts • Value Networks – for Services • Mapping to Processes, People, Software Services • What comes next? Transformation Services Laboratory http://www.tsl.csd.uoc.gr 33
    34. 34. 3418/4/2008 ICSS Beijing C Nikolaou Transformation Services Laboratory http://www.tsl.csd.uoc.gr 34 the Dynamics of Emergent Service Value Networks • Capturing the dynamics of the SVNs (emerging markets and business models, networks, consumers, regulators, etc.) is to a large extent an open problem today. • Special interest in analyzing and predicting how existing market interactions can give rise to emergent SVNs, with possibly business sector specific patterns: – develop models of value creation and destruction in networks and of value optimization. – Use game theory to understand behavior, evolution of competing SVNs – show how the drive for value optimization and the constant change of the environment (new businesses enter the ecosystem and others die, innovative services and products appear, etc.) push the network to waves of restructuring in order to remain competitive. – develop criteria and indicators of change that can serve as input for business process and alliances redesign and realignment.
    35. 35. 35 Strategic Competition Firms take into account expected behavior by rivals when choosing their own strategies  interdependence Types of firms’ behavior Competitive firms that reduce prices in order to gain a large portion of market share (price wars) Co-operative firms that form alliances and partnerships in order to achieve their common interests
    36. 36. 36 Key Characteristics of Strategic Decision Problems There is a set of rational players that interact with each other in a strategic way Each player has incomplete information that is private and all players hold some information that is common knowledge Each player defines a set of available strategies OBJECTIVE: determine optimal strategies in order to maximize individual payoffs
    37. 37. 37 Example: A Car Repair Service System Nodes of the network Original-Equipment-Manufacturer (OEM) • Content Packager • Help Desk Experts Dealers • Technicians • Parts Manager Supply-Chain-Suppliers (SCS) Third-Party Suppliers (TPS) Customers EXPERIMENTS: examine the behavior of OEM in the presence of competing networks, taking other players’ actions fixed
    38. 38. 38 Example: A Car Repair Service System
    39. 39. 39 Experiments Consider two competing networks A and B Initially, OEM of A has more customers than that of B Initial price of OEM of B for selling parts to dealers is less than that of A Strategy of each OEM: choose price p for selling parts to dealers at each time period Common information: rival’s number of customers Private information for each OEM: its own costs and revenues OBJECTIVE: find equilibrium strategies
    40. 40. 40 Experiment 1 Define common strategies for both OEMs: if (my value < my value in previous period) then if (number of my customers < number of rival’s customers) then my price is reduced else my price is not changed Results: The two OEMs reach an equilibrium after a few periods OEM of network B gains the larger portion of market share
    41. 41. 41 Experiment 2 Define common strategies for both OEMs: if (number of my customers < number of rival’s customers) then if (my value < my value in previous period) then my price is reduced else my price is not changed Results: The two OEMs reach an equilibrium after a longer period than that of experiment 1 OEM of network B gains again the larger portion of market share
    42. 42. 42 Experiment 3 Strategy of OEM of network A: same as in experiment 2 Strategy of OEM of network B: if (number of my customers < number of rival’s customers) then if (my value < my value in previous period) then my price is reduced and my service time is increased else my price is increased and my service time is reduced Results: At equilibrium, network B gains more customers than in the previous experiments (since its strategy is more flexible adding the time factor)
    43. 43. 43 Experiment 4 Common information: number of customers of both networks and price of OEM of network A at current period Strategy of OEM of network A: same as in experiment 1 Strategy of OEM of network B (follower): if (my value < my value in previous period) then if (number of my customers < number of rival’s customers) then my price = rival’s price – constant factor else my price is not changed Results: Equilibrium is reached later than that of experiment 1

    ×