When you buy something online, you are rarely the first person to do so. Reviews, ratings and social media posts from earlier buyers all shape how confident you feel about clicking “add to cart.” That chain reaction is the focus of research by Dawei Jian, an assistant professor of supply chain, operations management and business statistics at the Lubar College of Business.
“Early customers matter a lot,” Jian said. “Their experiences don’t just reflect demand. They actually help create future demand.”
In a recent study published in Management Science, Jian and his coauthors examined markets where demand builds over time because of these kinds of spillover effects. Economists call them demand externalities. Think of products sold through large online platforms, where customer reviews, recommendation systems and social sharing all influence future sales. “These markets are powerful, but they are also tricky,” Jian said.
“Retailers often have better information about customers than manufacturers do, and that imbalance can lead to inefficiencies if it’s not handled carefully.”
A real-world example is Xiaomi’s partnership with Flipkart in India. Flipkart controls customer data, online reviews and digital promotion tools that shape how demand grows. For Xiaomi, the challenge is figuring out how to share profits while also encouraging Flipkart to be transparent and to invest in long-term growth.
Jian’s research shows that simple, one-time contracts are often not enough. “When demand evolves over time, static contracts leave too much value on the table,” he said. Instead, his models point to long-term agreements that adjust as new information becomes available.
“These contracts are designed to reward honesty and patience,” Jian said. “They encourage retailers to share what they know and to focus on building demand over time, not just maximizing short-term gains.”
For consumers, this research helps explain why prices, promotions and product availability can change as a product becomes more popular. For businesses, the findings offer practical guidance on how to work with partners in an economy driven by online feedback and digital networks.
“At the end of the day, this is about alignment,” Jian said. “When incentives are designed well, both sides benefit, and so do customers.”
By connecting rigorous analysis with real-world examples, Jian’s work sheds light on how information, trust and collaboration shape the products people encounter every day.
| Research@Lubar Faculty scholarship in the Lubar College of Business spans the business fields and beyond through both theoretical and applied research that is published in leading journals. Here are some of our faculty’s most recent publications: |
| Beyond Complements and Substitutes: A Graph Neural Network Approach for Collaborative Retail Sales Forecasting Information Systems Research Authors: Jing Liu, Gang Wang, Huimin Zhao, Mingfeng Lu, Lihua Huang, and Gang Chen |
| Minding the Gap: How Perspective-taking and Status Reflexivity Help Black Women Executives to Relate Across Difference at Work Organization Science Authors: Jamie Jocelyn Ladge, Keimei Sugiyama, Alexis Nicole Smith, Marla Baskerville Watkins, and Pamela Carlton |
| Bunch of Jerks: How Brands can Benefit by Reappropriating Insults Journal of Consumer Psychology Authors: Katherine M. Du, Lingrui Zhou, Keisha M. Cutright |
| Click here to see more faculty research |