nep-ict New Economics Papers
on Information and Communication Technologies
Issue of 2018‒06‒11
eight papers chosen by
Walter Frisch
Universität Wien

  1. “Free” Internet Content: Web 1.0, Web 2.0, and the Sources of Economic Growth By Nakamura, Leonard I.; Samuels, Jon; Soloveichik, Rachel
  2. Unbundling the Incumbent and Entry into Fiber: Evidence from France By Marc Bourreau; Lukasz Grzybowski; Maude Hasbi
  3. Consumer Search with and without Tracking By Marcel Preuss
  4. The Wider Impacts of High-Technology Employment: Evidence from U.S. Cities By Thomas Kemeny; Taner Osman
  5. News Media and Crime Perceptions: Evidence from a Natural Experiment By Mastrorocco, Nicola; Minale, Luigi
  6. The Impact of Mobile App Failures on Online and Offline Purchases By Narang, Unnati; Shankar, Venkatesh; Narayanan, Sridhar
  7. Trust and Disintermediation: Evidence from an Online Freelance Marketplace By Grace Gu; Feng Zhu
  8. Investor attention and technology salience: Does personal data related innovation boost firm value? By Koski, Heli; Luukkonen, Juha

  1. By: Nakamura, Leonard I. (Federal Reserve Bank of Philadelphia); Samuels, Jon (Bureau of Economic Analysis); Soloveichik, Rachel (Bureau of Economic Analysis)
    Abstract: The Internet has evolved from Web 1.0, with static web pages and limited interactivity, to Web 2.0, with dynamic content that relies on user engagement. This change increased production costs significantly, but the price charged for Internet content has generally remained the same: zero. Because no transaction records the “purchase” of this content, its value is not reflected in measured growth and productivity. To capture the contribution of the “free” Internet, we model the provision of “free” content as a barter transaction between the content users and the content creators, and we value this transaction at production cost. When we incorporate this implicit transaction into U.S. gross domestic product (GDP), productivity, and household accounts, we find that including “free” content raises estimates of growth, but not nearly enough to reverse the recent slowdown.
    Keywords: Internet; productivity; advertising; marketing; measurement; GDP
    JEL: C82 L81 L82 M3 O3 O4
    Date: 2018–05–24
  2. By: Marc Bourreau; Lukasz Grzybowski; Maude Hasbi
    Abstract: We use panel data on 36,104 municipalities in metropolitan France over the period 2010-2014 to estimate two models of entry into local markets by: (i) alternative operators using wholesale access to the legacy copper network via local loop unbundling (LLU), and (ii) the incumbent and two alternative operators using the fiber technology. We find that a higher number of LLU competitors, and hence a less concentrated local market, has a positive impact on entry by fiber operators. Moreover, the presence of upgraded cable network in the local municipality stimulates fiber deployment. However, firms may choose to upgrade copper lines instead of investing in fiber networks. We use the estimates to calculate entry thresholds into local markets, which are substantially lower for broadband provision via LLU than via fiber and decrease over time. Fiber deployment becomes cheaper over time, but according to our estimates it will remain unprofitable for the vast majority of municipalities in France within the next years.
    Keywords: fiber broadband, local loop unbundling, market entry
    JEL: K23 L13 L51 L96
    Date: 2018
  3. By: Marcel Preuss
    Abstract: In this paper, I develop a tractable framework with sequential consumer search to address the effect of tracking on market outcomes. Tracking search histories is informative about consumers’ valuations because different consumer types have different stopping probabilities. With tracking, the unique equilibrium price path is increasing whereas without tracking, an average uniform price prevails. Welfare effects largely depend on how tracking affects consumers’ search persistence. For intermediate search costs, tracking based price discrimination exacerbates the holdup problem and leads to inefficiently low search persistence. For high search costs instead, tracking prevents a market breakdown as low prices conditional on short search histories secure consumers a positive surplus from search. Tracking prevails endogenously when consumers can dynamically opt out from tracking. This holds since disclosing their search history is always individually rational for consumers, irrespective of the overall effect on consumer surplus.
    Keywords: consumer search, privacy, dynamic price discrimination
    JEL: D11 D18 D83 L13 L86
    Date: 2018–05
  4. By: Thomas Kemeny (Queen Mary, University of London); Taner Osman (University of California, Los Angeles)
    Abstract: Innovative, high-technology industries are commonly described as drivers of regional development. ‘Tech’ workers earn high wages, but they are also said to generate knock-on effects throughout the local economies that host them, spurring growth in jobs and wages in nontradable activities. At the same time, in iconic high-tech agglomerations like the San Francisco Bay Area, the home of Silicon Valley, the success of the tech industry creates tensions, in part as living costs rise beyond the reach of many non-tech workers. Across a large sample of U.S. cities, this paper explores these issues systematically. Combining annual data on wages, employment and prices from the Quarterly Census of Employment and Wages, the Department of Housing and Urban Development and the Consumer Price Index, it estimates how growth in tradable tech employment affects the real, living-cost deflated wages of local workers in nontradable sectors. Results indicate that high-technology employment has significant, positive, but modest effects on the real wages of workers in nontradable sectors. These effects appear to be spread consistently across different kinds of nontradable activities. In terms of substantive wider impacts, tech appears benign, though fairly ineffectual.
    Keywords: high-technology, inequality, real wages, nontradable services; specialization, housing
    JEL: E24 J21 J31 L86 O18 R11 R31
    Date: 2018–05
  5. By: Mastrorocco, Nicola (Trinity College Dublin); Minale, Luigi (Universidad Carlos III de Madrid)
    Abstract: In democracies voters rely on media outlets to learn about politically salient issues. This raises an important question: how strongly can media affect public perceptions? This paper uses a natural experiment – the staggered introduction of the Digital TV signal in Italy – to measure the effect of media persuasion on the perceptions individuals hold. We focus on crime perceptions and, combining channel-specific viewership and content data, we show that the reduced exposure to channels characterized by high levels of crime reporting decreases individual concerns about crime. The effect is driven by individuals aged 50 and over, who turn out to be more exposed to television while using other sources of information less frequently. Finally, we provide some evidence about the effect of the digital introduction on public policies closely related to crime perceptions and on voting behavior.
    Keywords: information, news media, persuasion, crime perceptions
    JEL: D72 D83 K42 L82
    Date: 2018–04
  6. By: Narang, Unnati (?); Shankar, Venkatesh (?); Narayanan, Sridhar (Stanford Universtiy)
    Abstract: Over half of all shopping journeys start with the mobile channel. In particular, the presence of a branded mobile app significantly influences shopping across channels. However, a majority of app users decrease app usage or even abandon an app, in part, due to app service failure(s). Do app failures influence purchases made within the online channel? Are there any spillover effects across other channels? What factors moderate the within and across channel effects? We leverage exogenous systemwide failure shocks in a large multichannel retailer's mobile app and related data to examine the impact of app failures on purchases in all channels using a differences-in-differences approach. We investigate heterogeneity among shoppers using a set of moderators of these effects based on insights from prior research. Our analysis reveals that although app failures have a significant overall negative effect on shoppers' frequency, quantity, and monetary value of purchases across channels, the effects are heterogeneous across channels and shoppers. Interestingly, the overall decreases in purchases across channels are driven by purchase reductions in brick and mortar stores and not in digital channels. Furthermore, we find that shoppers with a stronger relationship with the retailer, greater digital channel use, and who experienced failures less attributable to the retailer, are less sensitive to app failures. We outline failure preventive and recovery strategies for app providers based on the insights from this study.
    Date: 2018–03
  7. By: Grace Gu (Harvard Business School); Feng Zhu (Harvard Business School, Technology and Operations Management Unit)
    Abstract: As an intermediary improves trust between two sides of its market to facilitate matching and transactions, it faces an increased risk of disintermediation: with sufficient trust, the two sides may circumvent the intermediary to avoid the intermediary's fees. We investigate the relationship between increased trust and disintermediation by leveraging a randomized control trial on a major online freelance marketplace. Our results show that enhanced trust increases the chance for high-quality freelancers to be hired. When the trust level is sufficiently high, however, it also increases disintermediation, which offsets the revenue gains from the increase in the hiring of high-quality freelancers. We also identify heterogeneity across clients and freelancers in their tendencies to disintermediate.
    Keywords: Disintermediation, Intermediary, Trust, Online Marketplace
    JEL: L14 L86 O33
    Date: 2018–05
  8. By: Koski, Heli; Luukkonen, Juha
    Abstract: This paper empirically analyzes how markets value personal data related innovation in four prominent domains, in which firms’ potential to exploit value from data is identified to be considerable: finance, health, location-based services and artificial intelligence. We link the innovation economics literature to psychology-grounded financial economics theories of investor attention and salience theory. Our data from 117 large technology companies active in the ICT sector from the years 2007–2014 suggest that firms’ personal data related innovations and knowledge stocks in technology domains of location-based services and artificial intelligence contributed substantially to firm value. The premiums gained from personal data related innovation were particularly significant for data giants holding knowledge stocks in the location-based service domain. Our empirical results indicate that a strong positive relationship between personal data related knowledge stocks of the location-based services domain and firm value relates primarily to investor attention intensified during periods of media hype. Our data provide new insights into the market valuation of intangible assets: investors seem to overweight more salient right tails of firms’ knowledge stocks of emerging technologies while neglecting salient left tails.
    Keywords: Firm value, innovation, personal data, investor attention, saliency theory, technology salience
    JEL: D22 L2 O3
    Date: 2018–05–25

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