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Lockdown Without Loss? A Natural Experiment of Net Payoffs from COVID-19 Lockdowns

with Gerard J. Tellis, Ashish Sood, and Nitish Sood. Journal of Public Policy & Marketing, 42(2), 133-151.

Lacking a federal policy to control the spread of COVID-19, state governors ordered lockdowns and mask mandates, at different times, generating a massive natural experiment. The authors exploit this natural experiment to address four issues: (1) Were lockdowns effective in reducing infections? (2) What were the costs to consumers? (3) Did lockdowns increase (signaling effect) or reduce (substitution effect) consumers’ mask adoption? (4) Did governors’ decisions depend on medical science or nonmedical drivers? Analyses via difference-in-differences and generalized synthetic control methods indicate that lockdowns causally reduced infections. Although lockdowns reduced infections by 480 per million consumers per day (equivalent to a reduction of 56%), they reduced customer satisfaction by 2.2%, consumer spending by 7.5%, and gross domestic product by 5.4% and significantly increased unemployment by 2% per average state by the end of the observation period. A counterfactual analysis shows that a nationwide lockdown on March 15, 2020, would have reduced total cases by 60%, whereas the absence of any state lockdowns would have resulted in five times more cases by April 30. The average cost of reducing the number of cases by one new infection was about $28,000 in lower gross domestic product.

Working papers

The Impact of Price and Reviewing Frequency on Ratings of Restaurants. 
with Gerard J. Tellis and S. Siddarth. Under review at the Journal of Marketing.

Online ratings play a major role in most consumers’ purchase decisions, but the impact of price and reviewing frequency on ratings is less known. The authors text-analyze 2.2 million reviews of over 5,000 restaurants from about 900,000 reviewers on Yelp. They exploit a quasi-experiment using ratings of restaurants in Los Angeles and Las Vegas and use generalized synthetic control to identify the causal impact of price and reviewing frequency on ratings. The main results are as follows. First, frequent reviewers write reviews that are significantly more 1) lengthy, 2) useful, 3) multi-dimensional, 4) non-extreme, 5) authentic, and 6) consistent with restaurants’ expert reviewers’ than do infrequent reviewers. These results suggest that frequent reviewers are more knowledgeable about restaurants. Second, infrequent reviewers give lower ratings to high-priced restaurants than frequent reviewers. These low ratings reduce the average Yelp ratings of several high-priced restaurants by an extra half star, potentially reducing revenues of those restaurants. These findings are robust to alternative measures of reviewing frequency and sample of restaurants. The authors discuss implications for theory, review platforms, consumers, and firms.

New Product Entry for Long Term Survival: Waterfall, Sprinkler, or Niche?
with Gerard J. Tellis and S. Siddarth. 

Launch strategies play a critical role in the long-term success of products, yet they have not been addressed in the literature. The authors test the ten-year survival of over 650 new products launched in 18 categories in the $360 billion US CPG market. They use a two-stage model: 1) Multinomial logit model of strategy choice as a function of the type of firm and category and 2) Hazard of survival as a function of strategy choice plus controls. Results are as follows. First, firms widely use a strategy that has not been analyzed in the literature – niche – besides previously reported waterfall and sprinkler strategies. Second, the niche strategy has the widest use, but the waterfall strategy has the longest survival. Third, a substantial mismatch exists between firms’ current choice of strategy and the best strategy for long-term survival. Fourth, the model’s predicted long-term survival is superior to that of baseline models in out-of-sample tests. The study has critical implications for new product strategies.

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