ISyE Seminar Series: Dan Zhang
"Customer Reward Programs for Two-Sided Markets"
Dan Zhang
Associate Dean for Research and Academics and MediaOne Professor of Operations Management at Leeds School of Business
University of Colorado Boulder
About the Seminar:
Two-sided markets spend billions annually on customer reward programs, yet their rationale and impact remain underexplored compared with the extensive literature on such programs in traditional one-sided markets. This paper develops an analytical model of a platform interacting with service providers and heterogeneous customers (differing in request probabilities and valuations) over an infinite horizon. Customers earn a cash reward for each purchase, redeemable within a fixed time frame to offset the price of a future purchase. The platform sets provider compensation, customer price, reward parameters, and the matching scheme to maximize profit. We find that customer reward programs can substantially increase platform profits, especially under priority matching schemes, where gains far exceed those under random matching. Our results rationalize the large investments made by many two-sided markets in customer incentives and matching design, and show that reward programs can be even more effective profit drivers in two-sided markets than in one-sided settings. We provide strategic design guidelines, discuss welfare implications, and confirm robustness through multiple model extensions.
(Joint work with Chengyi Lyu)
About the Speaker:
Dan Zhang is Associate Dean for Research and Academics and MediaOne Professor of Operations Management at Leeds School of Business, University of Colorado Boulder. Dr. Zhang’s primary research interests include revenue management, pricing, and data-driven decision making. He regularly consults in his area of expertise and is a frequent speaker at academic and industry conferences, companies, and academic institutions. He formerly served as chair of INFORMS Pricing and Revenue Management Section. He held editorial positions at several journals, including Production and Operations Management (Department Editor of Revenue Management, Senior Editor), Decision Sciences (Department Editor of Revenue Management), Operations Research (Associate Editor), Manufacturing and Service Operations Management (Associate Editor), and INFORMS Journal on Computing (Associate Editor). Dr. Zhang taught operations management, statistics, and data analytics courses in undergraduate, MBA, and specialized master programs in in-person, online, and hybrid formats. Together with two colleagues, he has been offering a five-course specialization Data Analytics for Business on the MOOC platform Coursera since 2016. He also offered research courses on Operations Management and Revenue Management to PhD students at several universities. Dr. Zhang previously served on the faculty at Desautels Faculty of Management, McGill University and held visiting appointments at Cornell University, University of Michigan, and City University of Hong Kong. He was awarded the Changjiang Chaired Professorship by the Chinese Ministry of Education. Dr. Zhang served on the advisory board of several technology startups and is a co-founder of PricingService.ai.
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