Sreya Kolay is an Assistant Professor in Marketing at the School of Business in University at Albany, SUNY. Her research interest is in analytical modeling using game theory and economic analysis to examine firms’ marketing decisions in pricing and channel management under various market contexts. She has published in premier journals such as Management Science, Marketing Science, Quantitative Marketing and Economics, International Journal of Research in Marketing, Journal of Industrial Economics and Journal of Economics and Management Strategy. She has a Masters and PhD in Economics from University of Rochester, a Masters in Quantitative Economics from the Indian Statistical Institute, Calcutta, and has previously worked at University of California, Irvine and the Brattle Group.

Education

    PhD in Economics, University of Rochester 

    MA in Economics, University of Rochester 

    MS in Quantitative Economics, with distinction, Indian Statistical Institute 

    BS in Economics, with honors, Presidency College, Calcutta, India 

Professional Positions

    Assistant Professor, School of Business, University at Albany, SUNY (2019 - current)

    Assistant Professor, Paul Merage School of Business, UC Irvine (2008- 2019 )

    Associate, The Brattle Group (a consultancy firm) (2004 - 2008)

Research Interests

Game Theory, Pricing & Promotion Strategies, Distribution Channel management, Product line design, Durable Good pricing, Product bundling

Publications

1.  Kolay, S., Shaffer, G. (2022), Slotting Fees and Price Discrimination in Retail Channels. Marketing Science, 41(6), 1029 - 1182. 

We consider a manufacturer's optimal contract design in the presence of asymmetric retailers (one large and one small). We first solve for the case in which the manufacturer can overtly discriminate between its retailers by offering each a different two-part tariff contract. We then compare it to the case in which overt discrimination is not feasible and the manufacturer must instead induce self selection. We find that whereas there is no role for slotting payments when overt discrimination is possible, slotting payments can arise as part of the equilibrium menu of contracts offered to both retailers in the absence of such discrimination. It is found that the large retailer always prefers the contract with the lower wholesale price, even if it means not accepting a slotting payment, whereas the small retailer always accepts the largest slotting payment offered, even though it means taking on the contract with the higher wholesale price. Our results also suggest that the wholesale prices (and hence retail prices) of both retailers will be uniformly higher when the manufacturer cannot overtly discriminate between its retailers.

2.  Kolay, S., Tyagi, R.K. (2022). Optimal Bundling of Events, Marketing Science, 41(2), 380 - 400.

We examine a seller's optimal bundling strategy when it sells two events offered over time. Given the temporal and perishability features of events, a bundle can be sold only in the first period, and the first-period event is unavailable later. We consider the following features: (i) events may differ in their popularity; (ii) the more popular product is offered first or later; (iii) consumers may be uncertain about their valuation of the later event; (iv) seller may be unable to commit to the price of a future event; and (v) consumer valuations of events are independently distributed or positively correlated. We show how these market features determine the benefit of segmenting consumers with offers of bundle and individual events; the gains from the unconstrained optimization of the second-period event, and its cannibalization effect on first period offerings. We demonstrate circumstances where the seller's optimal strategy is selling only individual events, only the bundle of events, the bundle of events with only the less popular event offered outside the bundle, or the bundle of events and both events offered outside the bundle. We also show that the seller prefers to offer the more popular event later in all these market settings. 

3.   Kolay, S., Tyagi, R.K. (2022). On the Effects of Raised Rival’s Costs. Review of Industrial Organization, 60(4), 567 – 586.

It is commonly believed that if a firm’s cost increases, then its competing firm gains a strategic advantage and       improves its profitability. In particular, an increase in its costs forces a firm to raise its price or reduce its  output, yielding a competitive advantage to the competing firm. This paper shows that a firm may not benefit  from an increase in its competitor's costs if firms have control over the quality of their product offerings. In  particular, it characterizes conditions on consumer heterogeneity in valuation of product quality, consumer outside options, and the nature of quality-production process under which a firm does not benefit from an  increase in its competitor’s costs.

4.  Kolay, S. (2018). Tie-in Contracts with Downstream Competition, Quantitative Marketing and Economics, 16(1), 43-77.

This paper analyzes the product tying strategies of a firm which is a monopolist in the market for one of its products (the primary product) but faces competition from a more efficient rival in the market for another product (the secondary product), where both these competing firms must sell their products through retailers serving both markets. Such tying contracts have frequently been accused of being used for anti-competitive purposes. Specifically, the concern is that a firm that is dominant in a primary product market can utilize such contracts to force buyers to purchase the secondary product from it, thereby driving a more efficient rival out of the secondary market. Most notably in the late 1990s, Microsoft came under considerable fire for tying its browser Internet Explorer to its dominant Windows operating system when it sold its products to PC manufacturers allegedly for the purpose of driving out its rival Netscape Navigator. Recently, Google has been the subject of concern among antitrust authorities with regard to the tying of its applications like Google Play, Google Search, Google Maps and YouTube with its dominant Android operating system for mobile phones. 

This paper examines whether and when the firm finds it optimal to use tie-in contracts to exclude its rival in the secondary market. It shows that the profitability of this tying strategy hinges on the nature of retail competition at the downstream level, as well as the degree to which each of the two upstream firms can credibly commit to the prices they initially announce before retailers’ choices are made.

5.  Kolay, S., Tyagi, R.K. (2018). Consumer Heterogeneity and Surplus under Two-Part Pricing, B.E. Journal of Theoretical Economics, 18(2), 1-18.

The use of two-part pricing .where a seller charges the buyer either a fixed fee alone, a per-unit price alone, or both together is ubiquitous across a large number of industries, for example, entertainment parks, health clubs, online grocery stores and membership discount retailers such as shopping clubs. In most of these cases, the buyers have to sign the pricing contract with the seller under uncertainty about their future consumption need. In the marketing literature, recent empirical and experimental work on consumer choice has shown that in these settings, consumers are heterogeneous in how correctly they estimate their consumption needs and hence in their beliefs about their demands. While some consumers are unbiased or correct in their beliefs about how   much they would need, some may be positively biased and expect a demand higher than what they would actually have, while others may be negatively biased and expect a demand lower than what they would actually have. In this paper, we focus on this particular type of consumer heterogeneity and examine a seller’s optimal two-part pricing and the impact on consumer surplus across heterogeneous segments. We provide interesting findings on the level of consumer welfare of each of the different consumer types as functions of the other coexisting types in the market. We also examine how the optimal pricing plans and the resultant consumer surplus across segments vary with differing levels of consumer uncertainty and bias.

6.  Kolay, S., Tyagi, R.K. (2018). Product Similarity and Cross-Price Elasticity, Review of Industrial Organization, 52(1), 85 – 100.

Cross-price elasticity is one of the most commonly used constructs in theoretical and empirical work in the areas of pricing and market structure. A higher cross-price elasticity between two products is taken to mean that they are more substitutable, and is often suggested as an indication that products are more similar to each other in characteristics space. This paper theoretically investigates the relationship between the similarity between two products and the cross-price elasticities between them.

This paper develops a model of spatial competition between two products that differ along both vertical and horizontal product attributes, and shows circumstances where making the two products more similar on a horizontal product attribute can monotonically increase, monotonically decrease or even change non-monotonically a product’s cross price elasticity.

7.  Kolay, S. (2015). Manufacturer-provided Services vs. Retailer-provided Services: Effect on Product Quality, Channel Profits and Consumer Welfare. International Journal of Research in Marketing, 32(2), 124 – 154.

Demand-enhancing services and activities such as advertising, help desks, toll-free technical support hotlines, or delivery and installation services are routinely offered to consumers by manufacturers or retailers or both. This paper develops a game theoretic model to examine how the identity of the channel member (manufacturer or retailer) providing the demand-enhancing services can have a different impact on the manufacturer’s product quality decisions and resultant channel and consumer welfare.

The paper shows that when a manufacturer wishing to sell its product line through a retailer provides demand-enhancing services to consumers, then it chooses higher product quality levels and channel member profits and consumer welfare are higher. However, when the retailer selling the manufacturer’s product line is the one who provides the demand-enhancing services, then the manufacturer may choose a lower product quality level and retailer profit and consumer welfare may be lower. These results therefore indicate that a manufacturer should not simply look at cost savings arising from shifting service responsibilities from itself to the retailer. Similarly, a retailer should not expect to always benefit from situations where it has secured the ability to choose its own desired levels of services to be provided to consumers.

8.  Kolay, S. (2015). When can a Durable Goods Seller Price Discriminate Intertemporally?  Review of Marketing Science, 13(1), 41 – 58.

The vast literature on durable good pricing assumes a continuum of small insignificant consumers. The prevailing wisdom in that literature is that the seller is unable to perfectly price discriminate between consumers of different types.  Any attempt to charge a high enough price is defeated by each consumer rationally expecting a drop in prices in the future and opting not to purchase the good at the moment.

This paper extends this literature to commonly observed settings where consumers are small in number and large (e.g., firms). The paper characterizes conditions on the heterogeneity in consumer reservation prices and relative sizes of the different consumer segments that lead the optimal pricing strategy to  be (i) perfect price discrimination where the seller sells to all the consumers at their respective reservation prices; or (ii) an absence of price discrimination where the seller sells the product to all consumers at the lowest reservation price; or (iii) intermediate scenarios where the seller may sell to a subset of consumers at their reservation prices and others at a lower price.

9.  Kolay, S., Shaffer, G. (2013). Contract Design with a Dominant Retailer and a Competitive Fringe. Management Science, 59(9), 2111-2116.

Channel coordination has been a major focus of the literature on vertical contracting in distribution channels. This paper examines the channel coordination problem in a market characterized by a dominant retailer and a fringe of price–taking smaller retailers. This is an important market structure to consider because of the increasing attention given to dominant retailers, such as Wal-Mart, in both the popular media and in policy circles. In this market setting, this paper shows that under some general conditions, quantity discounts and two-part tariffs offered by manufacturer to retailers are equivalent as mechanisms for channel coordination. The results imply that a manufacturer’s choice of contract design may simply turn on which one is easier to implement.

10.  Kahana, N., Gotlibovski, C., Kolay, S., Shaffer, G. (2008). Bundling and Menus of Two-Part Tariffs: Comment. Journal of Industrial Economics, LVI(4), 1-11.

This paper is an extension of Paper #8 which examined a seller’s choice between a menu of two-part tariffs and price-quantity bundles when serving both high-end and low-end consumers. Paper #1 showed that bundling, although strictly more profitable than two-part tariffs, may not necessarily lead to higher consumer surplus. This paper extends that analysis to allow the seller to choose whether to sell to both high- and low-end consumers or to just one consumer segment. While the previous results from paper #1 regarding the relative profitability of bundling compared to two-part tariffs are preserved, this paper shows that bundling becomes more attractive from consumer welfare perspective compared to two-part tariffs when one introduces this flexibility in the seller’s choice of consumer segments to serve.

11.  Kolay, S., Shaffer, G., Ordover, J. (2004). All-units Discounts in Retail Contracts. Journal of  Economics and Management Strategy, 13(3), 429-459.

This paper explains the prevalence of a particular kind of pricing mechanism – all-units discounts – in retail contracts. All-units discounts refer to discounts that lower a retailer’s wholesale price on every unit purchased when the retailer’s purchases equal or exceed some quantity threshold. These discounts pose a challenge to economic theory and concern to regulators because it is difficult to understand why a manufacturer ever would charge less for a larger order if its intentions were benign. In fact, these contracts have raised numerous concerns at the European Commission for being potentially anticompetitive.

 This paper demonstrates that all-units discounts may profitably arise absent any anticompetitive motive. Specifically, it shows that by using all-units discounts in its retail contract, a manufacturer can eliminate the well-known double marginalization problem and align retailer incentives so as to maximize channel profit. Further, it shows that in an uncertain environment where the retailer possesses better information regarding the nature of market demand compared to the manufacturer, a menu of all-units discounts performs better than a benchmark menu of two-part tariffs in limiting retailer opportunism, and therefore yields higher profit for the manufacturer.   However, with regards to total social welfare, it finds that the optimal menu of all-units discounts may perform better or worse relative to the optimal menu of two-part tariffs depending on demand parameters.

12.  Kolay, S., Shaffer, G. (2003). Bundling and Menus of Two-Part Tariffs. Journal of Industrial  Economics, 51, 383-404.

There are various pricing schemes that firms use to price discriminate across heterogeneous consumers but  whose valuations are private and unobservable to the firms. Examples commonly seen include a menu of two-part tariffs (e.g., a menu of rate plans for cell phone where one option has high monthly fixed fee but a lower  per-minute fee and the other option has low monthly fixed fee but a higher per-minute fee). This pricing  scheme lets consumers select any quantity they prefer to consume, given the pricing scheme they choose.  Another common pricing scheme is a menu of price-quantity bundles (e.g., different package sizes, each  consisting of a fixed quantity for a package and a price per package). This pricing scheme lets consumers select a quantity only from among these bundles. This paper compares these two pricing schemes, and shows that  bundling yields higher profit than two-part tariffs, absent cost considerations. However, social welfare may be higher or lower with bundling.

Papers Under Advanced Stages of Review and Completed Working Paper

13.  Gao, X., Kolay, S. Employee or Contractor: On The Employment Status Of Drivers And  Compensation Design By Ridesharing Platforms

Ridesharing platforms like Uber and Lyft have recently come under public scrutiny regarding the "independent contractor" vs "employee" status of their drivers. Proponents of employee status argue that it establishes a safety net for the drivers. Opponents argue that it removes flexibility in participation valued by many drivers. To address whether or under what circumstances, the platform, the drivers and consumers are better off under the "employee" or under the "independent contractor" status, we derive the optimal compensation design under each of these two statuses. We show how the profitability and welfare comparisons for the platform, drivers and consumers across the two statuses depend on key market characteristics, such as difference in demand between rush hour and non-rush hour periods and the degree of heterogeneity in the outside options of drivers. Our paper provides support for the concerns in the public arena by highlighting potential regions of conflict where the platform's preferred choice of the contractor status can leave drivers worse off. At the same time, we show that there are also scenarios where the drivers and the platform are aligned in their preference for the contractor status, and any regulatory intervention forcing a switch to an employee status may leave drivers worse off. In addition, we highlight areas where such intervention can improve drivers' welfare but hurt consumers in the process, as well as areas where the intervention can benefit both drivers and consumers.

14. Kolay,  S., Tyagi, R.K. Inflation vs Shrinkflation: Effects of Cost increase on Package Size and Price

In the face of increased costs of production, firms selling consumer packaged goods have typically responded in the following ways: (i) use an "inflation" strategy where they raise the price of the package while retaining the same package size, or (ii) use a "shrinkflation" or "downsizing" strategy where they reduce the package size while keeping the package price same or even increasing it, or (iii) use a ''value-sizing" strategy where they reduce both the package size and package price. While all three strategies have been observed in the marketplace, it is shrinkflation or downsizing that has invited the most controversy.  Detractors of this practice have argued that shrinkflation is employed by firms to take advantage of consumers’ inability to notice quantity change within their purchased package. In this view, shrinkflation is a sneaky backdoor way to increase the per-unit price, thus hurting consumers. 

We build formal models in which a monopolist or two competing firms sell to consumers who are aware of any change in package size. We characterize conditions on consumer tastes, degree of competition, and magnitude of cost increase under which seller(s) prefer to use shrinkflation, inflation or value-sizing.  Thus, we show shrinkflation could be optimal for the seller(s) even when consumers are perfectly cognizant of the changes to the package size.  Further, we analyze if/when shrinkflation can be beneficial to consumers and society.

Professional Memberships 

    INFORMS

    American Marketing Association

    Social Science Research Network (SSRN)

Awards and Honors

  Junior Faculty/Scholar recognition, Division for Research and Economic Development, University at Albany (2023)

   Elite Journal Publication Award, School of Business, University at Albany (2023)

   Research Award, School of Business, University at Albany (2022)

   Elite Journal Publication Award, School of Business, University at Albany (2022)

   CORCLR Research Award, University of California, Irvine (2009 & 2014)

    Summer Research Grant, University of Rochester (2000)

    MS Fellowship, Indian Statistical Institute, Calcutta (1999)

    B. Sc. Merit Scholarship, University of Calcutta (1997)

 Presentations Given

    INFORMS Marketing Science Conference, University of Miami, Miami (June 2023)

    Marketing Seminar, School of Business, Wake Forest University (Jan 2023)

    INFORMS Marketing Science Conference, virtual (June 2021)

    Marketing Department Seminar, University at Albany, SUNY (April 2019)

    Marketing Department Seminar, University of Illinois, Urbana-Champaign (December 2018)

    Marketing Department Seminar, University of Connecticut (September 2018)

    INFORMS Annual Conference, Houston (October 2017)

    INFORMS Marketing Science Conference, University of Southern California, Los Angeles (June  2017)

    Assistant Professor Colloquia Series, Paul Merage School of Business, University of California,  Irvine (May 2017)

    Economic Sciences Institute Seminar, Chapman University (May 2017)

    INFORMS Annual Conference, Nashville (November 2016)

    Assistant Professor Colloquia Series, Paul Merage School of Business, University of California, Irvine (May 2016)

    INFORMS Marketing Science Conference, Johns Hopkins University, Baltimore (June 2015)

    12th Annual Industrial Organization Conference, Invited Discussant, Northwestern University (April  2014)

    Pricing and Retailing Conference, Babson College (August 2013)

    Assistant Professor Colloquia Series, Paul Merage School of Business, University of California, Irvine (May 2013)

    Midwest Economic Theory Conference, Michigan State University (April 2013).

    UC/USC Annual Marketing Seminar, Paul Merage School of Business, University of California, Irvine  (April 2013)

    Assistant Professor Colloquia Series, Paul Merage School of Business, University of California, Irvine (May 2011)

    INFORMS Marketing Science Conference, University of Cologne, Germany (June 2010)

    Assistant Professor Colloquia Series, Paul Merage School of Business, University of California, Irvine (May 2010)

    UC/USC Annual Marketing Seminar, University of California, Riverside (April 2010)

    Assistant Professor Colloquia Series, Paul Merage School of Business, University of California, Irvine (June 2009)

    INFORMS Marketing Science Conference, University of Michigan, Ann Arbor (June 2009)

    Third Workshop on Game Theory in Marketing, GERAD & HEC Montreal (May 2009)

    Midwest Mathematical Economics and Theory Conference, Ohio State University (October 2008)

    Marketing Area Colloquium, Paul Merage School of Business, University of California, Irvine (October 2007)

    Marketing Area Workshop, Rutgers Business School (October 2007)

    Second Workshop on Game Theory in Marketing, GERAD & HEC Montreal (June 2007)

    Associate Recruitment Seminar, The Brattle Group (February 2004)

    Economic Theory Workshop, Department of Economics, University of Rochester (October 2003)

Professional Service

 Referee for Management Science, Marketing Science, RAND Journal of Economics, Journal of Public   Economics, Manufacturing & Service Operations Management, Production and Operations  Management, Omega, International Journal of Research in Marketing, International Journal of  Industrial Organization, Quantitative Marketing and Economics, Journal of Economics and   Management Strategy, Review of Industrial Organization, Information Systems Research, Journal of       Industrial Economics, Journal of the Association for Information Systems,  Bulletin of Economic Research, Managerial and Decision Economics,  Telecommunications Policy.

Membership of Doctoral Committee

    Co-Chair, Yeong Seon Kang, 2009 – 2012 (Paul Merage School of Business, UCI)

    Co-Chair, Ji-Hung Choi, 2011 – 2015 (Paul Merage School of Business, UCI)

Membership of Dissertation Proposal Committee

    Xiaoyi (Sylvia) Gao, 2017 (Paul Merage School of Business, UCI)

    Duygu Akdevelioglu, 2015 (Paul Merage School of Business, UCI)

    Federico Bumbaca, 2015 (Paul Merage School of Business, UCI)

    Marshall Brendan Urias, 2015 (Economics Department, School of Social Sciences, UCI)

    Steven Brownlee, 2015 (Economics Department, School of Social Sciences, UCI)

    Alexander Burtea, 2016, (Chemistry Department, School of Physical Sciences, UCI)

    Sanjana Goswami, 2016 (Economics Department, School of Social Sciences, UCI)

Courses Taught

   Marketing Management (MBA, Executive MBA)

   Introduction to Marketing (Undergraduate)

   Marketing Research (Undergraduate)

   Pricing Strategy (Undergraduate, MBA)

   Seminar in Theoretical Modeling in Marketing (Ph.D)

   Basics of Modeling in Marketing (Ph.D.)

Professional Development

    Course Design Academy, University at Albany, SUNY,  June 2022

   Teaching with Cases Workshop, Harvard Business School, November 2019  

    Faculty Teaching Academy,  University of California, Irvine,  September 2008

Service

    Member, Impact Committee (2022- present)

    Member, Research Committee (2021 – 2022)

   Member, Undergraduate Academic Council (2021 –2022)

    Chair, Teaching and Learning Committee (2020-2021)

    Member, Teaching and Learning Committee (2019 - 2021)

    Member, Undergraduate Committee (2012 – 2019)

    Chair, Undergraduate Committee (Spring 2017).

    Member, Ph.D. Committee (2008 - 2011)

    Member, Council on Educational Policy (2012 – 2013)