When to Be Agile: Ratings and Version Updates in Mobile Apps

Gad Allon (), Georgios Askalidis (), Randall Berry (), Nicole Immorlica (), Ken Moon () and Amandeep Singh ()
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Gad Allon: The Wharton School, University of Pennsylvania, Philadelphia, Pennsylvania 19104
Georgios Askalidis: Northwestern University, Evanston, Illinois 60208
Randall Berry: Northwestern University, Evanston, Illinois 60208
Nicole Immorlica: Microsoft Research, Redmond, Washington 98052
Ken Moon: The Wharton School, University of Pennsylvania, Philadelphia, Pennsylvania 19104
Amandeep Singh: The Wharton School, University of Pennsylvania, Philadelphia, Pennsylvania 19104

Management Science, 2022, vol. 68, issue 6, 4261-4278

Abstract: Lean and agile models of product development organize the flexible capacity to rapidly update individual products in response to customer feedback. Although agile operations have been adopted across numerous industries, neither the benefits nor the factors explaining when firms choose to become agile are validated and understood. We study these questions using data on the development of mobile apps, which occurs through the dynamic release of new versions into the mobile app marketplace, and the apps’ customer ratings. We develop a structural model estimating the dependence of product versioning on (a) market feedback in the form of customer ratings against (b) project and work-based considerations, such as development timelines, scale economies, and operational constraints. In contrast to when they actually benefit from operational agility, firms become agile when launching riskier products (in terms of uncertainty in initial customer reception) and less agile when they are able to exploit scale economies from coordinating development over a portfolio of apps. Agile operations increase firm payoffs by margins of 20% to 80%, and interestingly, partial agility is often sufficient to capture the bulk of these returns. Finally, turning to a question of marketplace design, we study how the mobile app marketplace should design the display of ratings to incentivize quality (increasing app categories’ average user satisfaction rates by as much as 22%).

Keywords: agile product development; empirical operations management; mobile apps; online marketplace; product quality and reviews; product versioning and innovation; structural estimation (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (1)

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