Simone Marinesi

• Christian Kaps, Simone Marinesi, Serguei Netessine (2023), When Should the Off-grid Sun Shine at Night? Optimum Renewable Generation and Energy Storage Investments, Management Science. Abstract

  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
  costly option, but its generation is variable during the day and non-existent at night. Thanks
  to recent technological advances, which have made large-scale electricity storage economically
  viable, a combination of solar generation and storage holds the promise of cheaper, greener, and
  more reliable off-grid power in the future. Still, it is not yet well-understood how to jointly
  determine optimal capacity levels for renewable generation and storage. Our work aims to shed
  light on this question by developing a model of strategic capacity investment in both renewable
  generation and storage to match demand with supply in off-grid use-cases, while relying on
  fossil fuel as backup. Despite the complexity of the underlying model, we are able to extract two
  general results. First, we find that solar capacity and storage capacity are strategic complements,
  except in cases with very high investment in generation capacity, when they surprisingly turn
  into strategic substitutes, with implications for long-term investment decisions. Second, we
  develop a simple heuristic to determine which storage technology, within a given portfolio, can
  turn a profit in the broadest set of market conditions, and thus is likely to be adopted first. We
  find that currently, low-efficiency, cheap technologies such as thermal can more easily turn a
  profit in off-grid applications than high-efficiency, expensive ones such as lithium-ion batteries.
  We then develop two newsvendor-like approximations of the general model that are analytically
  tractable, yield precise values for the optimal investment decisions and profit in some cases, and
  provide bounds to the optimal investment decisions and profits in all other cases. To conclude, we
  calibrate our models to measure the accuracy of our solutions utilizing real-life data from three
  geographically-diverse islands, and then use our approximations to provide high-level insights
  on the role that large-scale storage will play in the years ahead as technology improves, carbon
  taxes are levied, and solar becomes cheaper.

• Ekaterina Astashkina and Simone Marinesi (2023), All-or-Nothing vs Keep-It-All: Comparing Campaign Designs in Rewards-Based Crowdfunding Platforms, R&R at Management Science. Abstract

  We compare the two most popular campaign designs employed by rewards-based
  crowdfunding platforms: AoN, in which the entrepreneur collects the money pledged by backers
  only if the project can raise the funding goal, and KiA, in which the entrepreneur collects the
  money pledged by backers even when the project is partially financed. KiA reduces backers’ willingness
  to pay relative to AoN, as the risk that the project may never see the light of day due to
  a lack of funds increases. However, achieving partial financing of the project under KiA provides
  cash, which the entrepreneur may choose to keep for herself, as well as a tangible proof of demand
  for the product, which may in turn unlock additional financing, allowing the project to move forward.
  We find that (i) a KiA campaign always raises less money relative to an AoN campaign;
  (ii) despite this, KiA leads to higher profits for projects with low ex-ante financing probability and
  high retail potential; and (iii) the advantage of KiA stems not from the extra revenues obtained by
  appropriating backers’ funds, but from increasing the odds to ultimately carry through with the
  project. KiA further improves when backers can withdraw their pledges before the campaign ends.
  A new design employed at Seed&Spark, where the campaign succeeds if a minimum fraction of the
  goal is raised, can dominate both AoN and KiA even when constrained to set the same minimum
  goal completion for all campaigns, provided that said campaigns share the same retail potential.

• Vlad Babich, Simone Marinesi, Gerry Tsoukalas (2020), Does Crowdfunding Benefit Entrepreneurs and Venture Capital Investors?, M&SOM. Abstract

  We study how a new form of entrepreneurial finance – crowdfunding – interacts with more traditional financing sources, such as venture capital (VC) and bank financing. We model a multi-stage bargaining game, with a moral-hazard problem between entrepreneurs and banks, and a double-sided moral-hazard problem between entrepreneurs and VCs. We decompose the economic value of crowdfunding into cash gains or losses, costs of bad investments avoided, and project-payoff probability update. This economic value is generally shared between entrepreneurs and VC investors, benefiting both. In addition, crowdfunding can alleviate the under-investment problem due to moral-hazard frictions. Furthermore, crowdfunding allows some projects to gain access to both VC and bank financing and the competition between those investor classes benefits entrepreneurs. However, competition from other investors reduces value to VC investors, who may walk away from the deal entirely. This can also hurt entrepreneurs who lose out on valuable VC expertise.

  Related
  Links

  SSRN
• Elena Belavina, Simone Marinesi, Gerry Tsoukalas (2020), Rethinking Crowdfunding Platform Design: Mechanisms to Deter Misconduct and Improve Efficiency, Management Science. Abstract

  Lacking credible rule enforcement mechanisms to punish entrepreneurial misconduct, existing reward-based crowdfunding platforms can leave campaign backers exposed to two sources of risk: the risk that entrepreneurs run away with backers’ money (funds misappropriation) and the risk of product misrepresentation (performance opacity). In contrast to prior work, which has mainly focused on studying the first, we examine the adverse consequences of both. We show that not only do both risks have a material impact on crowdfunding efficiency, but they cannot even be analyzed in isolation: rather, their joint presence leads to complex interactions that either dampen or amplify their individual adverse effects. In light of these results, we find that a simple deferred payment scheme with escrow, which the literature argues to be optimal, cannot overcome both sources of friction. We then propose two new designs that Pareto dominate this benchmark. The first design does not rely on escrow, and thus requires less involvement on the part of the platform—but cannot achieve optimality. The second design can restore full efficiency, but requires the platform to take a more active role: we thus provide guidance on how to ease its practical implementation.

  Related
  Links

  SSRN
• Vlad Babich, Simone Marinesi, Gerry Tsoukalas, Updating the Crowdfunding Narrative in Wharton Public Policy Initiative, 7(5).
• Ekaterina Astashkina, Elena Belavina, Simone Marinesi (2018), The Environmental Impact of the Advent of Online Grocery Retailing, R&R at Management Science. Abstract

  This study assesses the environmental impact of the advent of online grocery retailing. We model the grocery supply chain before and after the emergence of online grocery retail. The models include suppliers, offline and online retailers, the delivery infrastructure, and households. All firms and households optimally manage their inventory; online retailers also optimally manage deliveries. We compare food waste and transportation emissions before and after the advent of online grocery retail. We isolate three key factors that drive the difference: (i) which households switch to online shopping, (ii) their shopping patterns, and (iii) how the first two factors change where inventories are held. In general, moderate online grocery prices and delivery fees lead to (desirable) adoption primarily by households located “far” from offline stores, neither too frequent shopping nor too large basket sizes by these online households, and enough beneficial inventory centralization—and a consequent reduction in emissions. Numerical calibration using industry and demographic data reveals that in most US cities the advent of online grocery should be beneficial, leading to an eventual 8-41% reduction in emissions; more congested, wealthier, lower offline-store-density cities have the most substantial gains. Finally, making online deliveries from existing offline stores further enhances environmental benefits.

• Simone Marinesi, Karan Girotra, Serguei Netessine (2018), The Operational Advantages of Threshold Discounting Offers, Management Science. Abstract

  We study threshold discounting, or the practice of offering a discounted-price service if at least a pre-specified number of customers signal interest in it, as pioneered by Groupon. We model a capacity-constrained firm, a random-sized population of strategic customers, a desirable hot period and a less desirable slow period. Compared to a more traditional approach (slow period discounting or closure) threshold discounting has two operational advantages. First, the contingent discount temporally balances demand when the market for the service is large, and reduces supply of the service (preserving higher margins) when the market is small, allowing the firm to respond to the service’s unobserved market potential. Second, activation of the threshold discount signals the market state and the consequent service availability to strategic customers, inducing them into selfselecting the consumption period to one that improves the firm’s capacity utilization. Yet, threshold discounting can be harmful in situations with chronically low demand. In contrast with past work on strategic customers, their presence is advantageous to firms in our context. A calibrated numerical study shows that threshold discounting improves firm profits over a traditional approach by as much as 33% (7% on average).

  Related
  Links

  link

  Files

  Threshold_Discounting
• Simone Marinesi and Karan Girotra (2014), Information Acquisition through Customer Voting Systems, working paper. Abstract

  We study the use of customer voting systems that enable information acquisition from strategic customers to improve pricing and product development decisions. In these systems, the firm presents customers with a product design and gives them the opportunity to cast a vote on this design, a vote that has costs and benefits. For example, voting may be cumbersome, but those that vote in favor of a design may be eligible for a discount if and when the design gets developed. Customers vote and the firm interprets the voting outcome to discern customer interest in the product, and to advise on further development and/or pricing of the product. We model the interactions between the rm and strategic customers in such systems as a game of incomplete information with voting embedded as a subgame. Our analysis shows that the design and effectiveness of a voting system depends crucially on the intended use of the acquired information. When the acquired information is used to advise on development decisions, where rm and customer interests are aligned, voting systems that reward voters with discounts on subsequent purchase of products, in effect incentivizing voting in favor of products, can elicit information from customers and improve profit. On the other hand, when the information is used to set prices, a decision where firm and customer interests are misaligned, such systems are ineffective. In these cases, voting systems that effectively incentivize customers to vote against products or those that partially limit the firm’s future price flexibility should instead be used to acquire information. While both solutions improve firm profit, the former is preferred for high-value products, while the latter is preferred when voting involves less effort. Based on data for two representative products in the home decor industry, we find that these systems may increase gross product profits by up to 50% for development and by 20-30% for pricing.

• Karan Girotra, Simone Marinesi, Serguei Netessine (2013), Can Groupon Save Its Business Model?, Harvard Business Review, digital article.

Current Courses

• OIDD6110 - Quality And Productivity

  Matching supply with demand is an enormous challenge for firms: excess supply is too costly, inadequate supply irritates customers. In the course, we will explore how firms can better organize their operations so that they more effectively align their supply with the demand for their products and services. Throughout the course, we illustrate mathematical analysis applied to real operational challenges--we seek rigor and relevance. Our aim is to provide both tactical knowledge and high-level insights needed by general managers and management consultants. We will demonstrate that companies can use (and have used) the principles from this course to significantly enhance their competitiveness.

  OIDD6110005 ( Syllabus )

  OIDD6110007 ( Syllabus )

  OIDD6110009 ( Syllabus )

Past Courses

• OIDD6110 - Quality and Productivity

  Matching supply with demand is an enormous challenge for firms: excess supply is too costly, inadequate supply irritates customers. In the course, we will explore how firms can better organize their operations so that they more effectively align their supply with the demand for their products and services. Throughout the course, we illustrate mathematical analysis applied to real operational challenges--we seek rigor and relevance. Our aim is to provide both tactical knowledge and high-level insights needed by general managers and management consultants. We will demonstrate that companies can use (and have used) the principles from this course to significantly enhance their competitiveness.

• OIDD6150 - Operations Strategy

  Operations strategy is about organizing people and resources to gain a competitive advantage in the delivery of products (both goods and services) to customers. This course approaches this challenge primarily from two perspectives: 1) how should a firm design their products so that they can be profitably offered; 2) how can a firm best organize and acquire resources to deliver its portfolio of products to customers. To be able to make intelligent decisions regarding these high-level choices, this course also provides a foundation of analytical methods. These methods give students a conceptual framework for understanding the linkage between how a firm manages its supply and how well that supply matches the firm's resulting demand. Specific course topics include designing service systems, managing inventory and product variety, capacity planning, approaches to sourcing and supplier management, constructing global supply chains, managing sustainability initiatives, and revenue management. This course emphasizes both quantitative tools and qualitative frameworks. Neither is more important than the other.

• Wharton Teaching Excellence Award, 2024
• M&SOM Meritorious Service Award, 2023
• Wharton Teaching Excellence Award, 2023
• POMS College of Sustainable Operations Best Paper Award, honorable mention, 2022
• iFORM Best Paper Award, 2nd place, 2022
• iFORM Best Paper Award, finalist, 2021
• Management Science Distinguished Service Award, 2021
• Management Science Meritorious Service Award, 2020
• M&SOM Meritorious Service Award, 2019
• “Tough but We’ll Thank You in Five Years” Wharton MBA Core Curriculum Teaching Award, 2018
• Management Science Distinguished Service Award, 2016
• M&SOM Meritorious Service Award, 2015
• Winner, POMS College of Supply Chain Student Paper Competition, 2014

Knowledge @ Wharton

• How Dynamic Electricity Pricing Can Improve Market Efficiency, Knowledge @ Wharton - 11/12/2024
• Is Algorithmic Management Too Controlling?, Knowledge @ Wharton - 11/12/2024
• The Hidden Cost of AI Energy Consumption, Knowledge @ Wharton - 11/12/2024
• Charitable and Political Giving | Pinar Yildirim, Knowledge @ Wharton - 11/12/2024
• The Future of Banking, Knowledge @ Wharton - 11/11/2024
• Election Statistics, Knowledge @ Wharton - 11/06/2024
• Robots Are Taking Over Low-skilled Jobs — and Changing Votes, Knowledge @ Wharton - 11/05/2024
• Crypto Politics: Liberals’ and Conservatives’ Confidence in Cryptocurrencies, Knowledge @ Wharton - 11/05/2024
• Leadership and Elections | Mike Useem, Knowledge @ Wharton - 11/05/2024
• Automation Is Harming Low-skilled Workers and Possibly Their Voting Preferences, Knowledge @ Wharton - 11/01/2024