nep-pay New Economics Papers
on Payment Systems and Financial Technology
Issue of 2019‒10‒14
forty-five papers chosen by

  1. Disentangling digital platform competition:the case of UK mobile payment platforms By Kazan, Erol; Tan, Chee-Wee; Lim, Eric T.K; Sørensen, Carsten; Damsgaard, Jan
  2. The Economics of Cryptocurrencies -- Bitcoin and Beyond By Jonathan Chiu
  3. Emerging African Economies:Digital Structures, Disruptive Responses and Demographic Implications By Nwaobi, Godwin
  4. Innovation mechanisms of fintech start-ups: insights from SWIFT Innotribe competition By Gozman, Daniel; Liebenau, Jonathan; Mangan, Jonathan
  5. Optimal Assortment on an Integrated Platform By Zachary Nolan
  6. Multimarket Contact and Platform Competition: Reassessing the Mutual Forbearance Hypothesis By Eric Darmon; Thomas Le Texier; Zhiwen Li; Thierry Pénard
  7. Risks and Returns of Cryptocurrency By Yukun Liu; Aleh Tsyvinski
  8. Two-sided Market, R&D and Payments System Evolution By Zhu Wang
  9. Homogeneity and heterogeneity of cryptocurrencies By Xiao Fan Liu; Zeng-Xian Lin; Xiao-Pu Han
  10. Narrowing the ‘digital divide’: the role of complementarities between fixed and mobile data in South Africa By Ryan Hawthrone; Lukasz Grzybowksi
  11. Financial innovations role in consumer behavior at Russian retail payments market By Egor Krivosheya; Polina Belyakova
  12. Digital Connectivity in sub-Saharan Africa: A Comparative Perspective By Emre Alper; Michal Miktus
  13. The Influence of Online Review on Consumers' Purchase Intention By Yeshika Alversia
  14. Creating a unique mobile financial services framework for Myanmar: A Review By Dr Ma Nang Laik; Chester Mark Hong Wei
  15. What is Libra? Understanding Facebook's currency By Schmeling, Maik
  16. Central Bank Digital Currency: Welfare and Policy Implications By Stephen Williamson
  17. Constrained Credit Networks By Geoffrey Ramseyer; Ashish Goel; David Mazieres
  18. Video Killed the Radio Star? Online Music Videos and Recorded Music Sales By Kretschmer, Tobias; Peukert, Christian
  19. Substitution and Complementarity between Fixed-line and Mobile Access By Vladimir Pavlov; Ron Berman
  20. Deceptive Products on Platforms By Johannes Johnen; Robert Somogyi
  21. On Fintech and Financial Inclusion By Thomas Philippon
  22. Use of AI and Its Impact on Business: Updated Evidence from a Firm Survey (Japanese) By MORIKAWA Masayuki
  23. Political Effects of the Internet and Social Media By Enikolopov, Ruben; Petrova, Maria; Zhuravskaya, Ekaterina
  24. To democratize finance, democratize central banking By Woodruff, David M.
  25. Credit mechanics: a precursor to the current money supply debate By Decker, Frank; Goodhart, C. A. E.
  26. Fintech and Financial Inclusion By Baptiste Venet
  27. Means of Payment By Nancy L Stokey
  28. Credit Smoothing By Sean Hundtofte; Arna Olafsson; Michaela Pagel
  29. Jérôme Denis. The invisible work of the data. Elements for a sociology of infrastructures By D. Desbois
  30. Facing disruption: the cinema value chain in the digital age By Elisa Salvador; Jean-Paul Simon; Pierre-Jean Benghozi
  31. How Incumbents Beat Disruptors? Evidence from Hotels’ Responses to Home-sharing Rivals By Wei Chen; Karen Xie; Jianwei Liu; Yong Liu
  32. Benefits of regulation vs competition where inequality is high: The case of mobile telephony in South Africa By Ryan Hawthrone; Lukasz Grzybowksi
  33. Group Hug: Platform Competition with User-groups By Sarit Markovich; Yaron Yehezkel
  34. Artificial Intelligence, Data, Ethics: An Holistic Approach for Risks and Regulation By Alexis Bogroff; Dominique Guégan
  35. The Influence of User Generated Content and Purchase Intention on Beauty Products By Firda Nosita
  36. Perception of Acceptance Barriers and Cashless Payments Value: Evidence from Russian Merchants By Ekaterina Semerikova; Egor Krivosheya; Alexander Dobrynin
  37. Stable Money and Central Bank Independence: Implementing Monetary Institutions in Postwar Germany By Carsten Hefeker
  38. Do Algorithms Discriminate Against African Americans in Lending? By Jérémie BERTRAND; Laurent WEILL
  39. Can ATMs Get Out the Vote? Evidence from a Nationwide Field Experiment By Pereira Santos, João; Tavares, José; Vicente, Pedro C
  40. Drug Diffusion Through Peer Networks: The Influence of Industry Payments By Leila Agha; Dan Zeltzer
  41. Will Artificial Intelligence Replace Computational Economists Any Time Soon? By Maliar, Lilia; Maliar, Serguei; Winant, Pablo
  42. Application of Machine Learning in Forecasting International Trade Trends By Feras Batarseh; Munisamy Gopinath; Ganesh Nalluru; Jayson Beckman
  43. Behavioural perspectives on bank misdeeds By Goodhart, Charles
  44. Homophily in Social Media and News Polarization By Luis Abreu; Doh-Shin Jeon
  45. "Branch Banking and Regional Financial Markets: Evidence from Prewar Japan" By Mathias Hoffmann; Tetsuji Okazaki; Toshihiro Okubo

  1. By: Kazan, Erol; Tan, Chee-Wee; Lim, Eric T.K; Sørensen, Carsten; Damsgaard, Jan
    Abstract: Digital platforms confer competitive advantage through superior architectural configurations. There is however still a dearth of research that sheds light on the competitive attributes which define platform competition from an architectural standpoint. To disentangle platform competition, we opted for the mobile payment market in the United Kingdom (UK) as our empirical setting. By conceptualizing digital platforms as layered modular architectures and embracing the theoretical lens of strategic groups, this study supplements prior research by deriving a taxonomy of platform profiles that is grounded on the strategic dimensions of value creation and value delivery architectures. We discover that mobile payment platforms could be delineated based on whether they are: (1) integrative or integratable on their value creation architecture; and (2) have direct, indirect, or open access on their value delivery architecture. The preceding attributes of value creation architecture and value delivery architecture aided us in identifying six profiles associated with mobile payment platforms, which in turn led us to advance three competitive strategies that could be pursued by digital platforms in network economies.
    Keywords: Competition; digital infrastructures; digital platforms; financial technologies; mobile payments; network economies; strategic groups
    JEL: J50
    Date: 2018–03–30
  2. By: Jonathan Chiu (Bank of Canada)
    Abstract: How well can a cryptocurrency serve as a means of payment? We study the optimal design of cryptocurrencies and assess quantitatively how well such currencies can support bilateral trade. The challenge for cryptocurrencies is to overcome double-spending by relying on competition to update the blockchain (costly mining) and by delaying settlement. We estimate that the current Bitcoin scheme generates a large welfare loss of 1.4% of consumption. This welfare loss can be lowered substantially to 0.08% by adopting an optimal design that reduces mining and relies exclusively on money growth rather than transaction fees to finance mining rewards. We also point out that cryptocurrencies can potentially challenge retail payment systems provided scaling limitations can be addressed.
    Date: 2019
  3. By: Nwaobi, Godwin
    Abstract: Indeed, the world economy is a complex system that has undergone many different phases in the past century. Particularly, the African economy is undergoing a series of transformations (transitions) that subject the future to considerable uncertainty, complexity and unpredictability. In fact, some transformations are cyclical while others are longer-term and more structural in nature. Yet, these transitions or emergence interact in shaping the future; making extrapolation from the past an increasingly unreliable source for future predictions. Thus unlike the previous revolutions, the fourth industrial revolution is characterized by the emergence of various technologies such as virtual (augmented) realities, nanotechnologies, 3D printing, machine learning, big data, cloud computing, drones, autonomous vehicles, robotics, artificial intelligence and blockchain technologies. Again, in this digitization era, work is constantly reshaped by technological progress, while firms adopt new ways of production and markets expand. In other worlds, digital technology brings opportunity, pave the way to create new jobs and increase productivity. Unfortunately, this paper argued that while the digital revolution has forged ahead, its analog complements (regulated entry and competition, new economy skills access and accountable institutions) have not kept pace in Africa. Consequently, African governments should formulate digital development strategies that are much broader than current ICTs strategies. That is, they should create a policy and institutional environment for technology that fosters the greatest benefits to African people of twenty-first century and beyond.
    Keywords: Africa, Digitization, Industrial Revolution, Technologies, Disruptions, Development, Old Work, Innovation, Automation, ICTs, E-commerce Robotics, Artificial Intelligence Block Chain, Cryptology, Fintech, Productivity, New Skills, Human Capital, Institutions, Policies, Emergence, Transformations, Economies, Analog Complements, Unemployment, New Jobs, Social Protection
    JEL: D80 D83 E24 E60 G10 I2 J10 J40 J6 J60 L50 O10 O30 O31 O33 O38
    Date: 2019–10–03
  4. By: Gozman, Daniel; Liebenau, Jonathan; Mangan, Jonathan
    Abstract: The emergence of nascent forms of financial technology around the globe is driven by efforts to de-construct and reimagine business models historically embedded within financial services. Entrepre-neurial endeavors to this end are diverse. Indeed, the propensity towards complexity across the fintech landscape is considerable. Bridging as it does a diverse range of financial services, markets, innova-tions, industry participants, infrastructures and technologies. This study aims to improve the compre-hension of the global fintech landscape. It is based on the analysis of start-ups who participated in SWIFT’s Innotribe competition over a three-year period. We used cluster analysis to group 402 fintech start-up firms, and then selected representative cases to create a foundational understanding of the structure of the fintech landscape. We found that six clusters capture the variety of firms and their activities. The main findings of this work are: (1) the development of fintech clusters to classify core services, business infrastructures and underlying component technologies, which characterize the fintech landscape; (2) an analysis of how fintechs synthesize different technologies to restructure and coordinate flows of financial information through competitive and cooperative mechanisms of disin-termediation, extension of access, financialization, hybridization and personalization; (3) an analysis of related strategies for value creation connected with the competitive and cooperative mechanisms that were identified. Collectively, our results offer new insights into the diversity and range of emer-gent innovations and technologies which are transforming the financial services industry worldwide.
    Keywords: business models; cluster analysis; data analytics; financialization; fintech start-ups; SWIFT Innotribe; technology ecosystems; technological innovation; value proposition
    JEL: J50 F3 G3
    Date: 2018–03–30
  5. By: Zachary Nolan (Duke University, Department of Economics)
    Abstract: Consumers rely on platforms to access goods and services in many industries. Platform firms are often integrated, including their own goods in the menu of products offered to consumers. With the ability to impact both pricing and product assortment, these integrated firms face a trade-off between foreclosing third-party competitors to promote their integrated products and maintaining the value of the platform as a whole. This paper studies the pricing and assortment decisions of internet service providers (ISPs), which sell broadband internet access and TV packages. The ISP’s network connects consumers to third-party online video, which increases the value of internet access, but also competes with the ISP’s TV packages. I develop a model of consumer choice over ISP and third-party subscriptions and estimate the model using a novel household-level dataset of ISP subscriptions and usage. Next, I use a model of bundle pricing to study alternative pricing strategies in which internet prices vary with access to online video. I find that a strategy of blocking access to online video is not profitable due to the imbalance in the profit margins of TV and internet access. For low-margin TV firms, restricting online video usage leads to increased TV market share, but is offset by lower willingness-to-pay for internet access. When the ISP sets an additional access charge for online video, profits rise, and a decrease in the price charged for non-streaming internet access leads to previously unserved consumers gaining access to the internet.
    Keywords: Bundling, Platforms, Broadband, Internet, Online Video, Telecommunications Industry, Cord-cutting
    JEL: L11 L13 L96
    Date: 2019–09
  6. By: Eric Darmon (Univ Rennes, CNRS, CREM - UMR 6211, F-35000 Rennes, France); Thomas Le Texier (Univ Rennes, CNRS, CREM - UMR 6211, F-35000 Rennes, France); Zhiwen Li (School of Management, Jiangsu University, China); Thierry Pénard (Univ Rennes, CNRS, CREM - UMR 6211, F-35000 Rennes, France)
    Abstract: Antitrust authorities are particularly concerned with the dominant market position of tech giants such as Google, Facebook, and Amazon. These digital conglomerates are characterized by platform-based business models. However, despite their dominance, they are competing with each other to attract the same groups of users (developers, advertisers, end users, third party sellers, etc). They therefore have not only overlapping users (or sides) but also multimarket contact (MMC). In traditional one-sided markets, theory and empirical evidence show that MMC tends to relax competition. However, it is unclear whether this result holds under platform competition. This paper examines how MMC a ects pricing behaviour and pro ts of two-sided platforms. We develop a model of platform competition with two distinct markets. We assume that platforms only charge one group of users and provide free access to the other group. We argue that multimarket platforms also generate cross-market externalities that favour their users, in addition to well-known cross-group externalities. We nd that when cross-market externalities bene t the side that has free access, price competition is ercer and total welfare increases under MMC. However, when they bene t the side that pays to access the platform, the same result only holds if the cross-group externality and/or cross-market externality are suciently high. Finally, we show that a single-market platform competing with a multimarket platform may be deterred from entering the second market if cross-market or cross-group externalities are high. Our ndings contrast with the mutual forbearance hypothesis which claims that MMC relaxes competition in traditional (one-sided) industries. From a competition policy perspective, our paper provides an insight into how antitrust authorities should review conglomerate mergers and assess the e ects of diversi cation strategies of digital platforms.
    Keywords: two-sided markets, platform competition, multimarket contact, conglomerate, digital markets
    JEL: L13 L49 L86
    Date: 2019–09
  7. By: Yukun Liu (Yale University); Aleh Tsyvinski (Yale University)
    Abstract: We establish that the risk-return tradeoff of cryptocurrencies (Bitcoin, Ripple, and Ethereum) is distinct from those of stocks, currencies, and precious metals. Cryptocurrencies have no exposure to most common stock market and macroeconomic factors or to the returns of currencies and commodities. In contrast, we show that the cryptocurrency returns can be predicted by factors which are specific to cryptocurrency markets – there is a strong time-series momentum effect and proxies for investor attention strongly forecast cryptocurrency returns. Finally, we create an index of exposures to cryptocurrencies of 354 industries in the US and 137 industries in China.
    Date: 2019
  8. By: Zhu Wang (Federal Reserve Bank of Richmond)
    Abstract: It takes many years for more efficient electronic payments to be widely used, and the fees that merchants (consumers) pay for using those services are increasing (decreasing) over time. We address these puzzles by studying payments system evolution with a dynamic model in a two-sided market setting. We calibrate the model to the U.S. payment card data, and conduct welfare and policy analysis. Our analysis shows that the market power of electronic payment networks plays important roles in explaining the slow adoption and asymmetric price changes, and the welfare impact of regulations may vary significantly through the endogenous R&D channel.
    Date: 2019
  9. By: Xiao Fan Liu; Zeng-Xian Lin; Xiao-Pu Han
    Abstract: Thousands of cryptocurrencies have been issued and publicly exchanged since Bitcoin was invented in 2008. The total cryptocurrency market value exceeds 300 billion US dollars as of 2019. This paper analyzes the prices, volumes, blockchain transactions, coin difficulties and public opinion popularities of 3607 actively exchanged cryptocurrencies. We aim to reveal and explain the homogeneity, i.e., the strong correlation of market performance, and the heterogeneity, i.e., the imbalance of popularities and sophistications, of the cryptocurrencies.
    Date: 2019–10
  10. By: Ryan Hawthrone; Lukasz Grzybowksi
    Abstract: We study substitution between fixed and mobile broadband services in South Africa using survey data on 134,000 individuals between 2009 and 2014. In our discrete-choice model, individuals choose fixed or mobile and data services in a framework that allows them to be substitutes or complements. We find that voice services are complements on average but data services are substitutes. However, many consumers see data services as complements. Our results show that having a computer and access to an internet connection at work or school are more important that reducing mobile data prices by 10% in driving broadband penetration.
    Keywords: Fixed-To-Mobile Substitution, Mobile Broadband, Fixed Broadband
    JEL: L13 L43 L96
    Date: 2019–09
  11. By: Egor Krivosheya (Moscow School of Management SKOLKOVO; National Research University - Higher School of Economics); Polina Belyakova (National Research University - Higher School of Economics)
    Abstract: This study estimates the effect of contactless payment and various financial innovations on the frequency of payments in terms of number of transactions for different individuals at the Russian retail payments market. Using the representative nation-wide survey of 1500 individuals, it was found that various types of financial innovations promote activity of consumers at the retail payments market. This paper contributes to the existing literature in payment economics by empirically analyzing the effects of emerging and existing retail financial innovations on the consumers? behavior at Russian retail payments market. The results of the paper provide important implications for both consumers and merchants, as well as help to overcome barriers that prevent spread and use various financial innovations in the future.
    Keywords: Retail payments; payment cards; customers? behavior; financial services; benefits; financial innovation
    JEL: G21 D53 E42
    Date: 2019–10
  12. By: Emre Alper; Michal Miktus
    Abstract: Higher digital connectivity is expected to bring opportunities to leapfrog development in sub-Saharan Africa (SSA). Experience within the region demonstrates that if there is an adequate digital infrastructure and a supportive business environment, new forms of business spring up and create jobs for the educated as well as the less educated. The paper first confirms the global digital divide through the unsupervised machine learning clustering K-means algorithm. Next, it derives a composite digital connectivity index, in the spirit of De Muro-Mazziotta-Pareto, for about 190 economies. Descriptive analysis shows that majority of SSA countries lag in digital connectivity, specifically in infrastructure, internet usage, and knowledge. Finally, using fractional logit regressions we document that better business enabling and regulatory environment, financial access, and urbanization are associated with higher digital connectivity.
    Date: 2019–09–27
  13. By: Yeshika Alversia (Faculty of Economics and Business Universitas Indonesia, Jakarta, Indonesia Author-2-Name: Anindita R. Aditya Author-2-Workplace-Name: Faculty of Economics and Business Universitas Indonesia, Jakarta, Indonesia Author-3-Name: Author-3-Workplace-Name: Author-4-Name: Author-4-Workplace-Name: Author-5-Name: Author-5-Workplace-Name: Author-6-Name: Author-6-Workplace-Name: Author-7-Name: Author-7-Workplace-Name: Author-8-Name: Author-8-Workplace-Name:)
    Abstract: Objective - The development of cafe businesses in Indonesia has recently increased, making the level of competition become tighter. This is what makes cafe business able to maintain the loyalty of the customer, due to consumers' tending to try new things or places. In this context, research was conducted to determine the impact of online reviews on a review website platform on consumer purchase intention in choosing the first visited cafe. Methodology/Technique - The customer's decision-making is affected by various factors such as review platforms, other customer reviews, and property characteristics as well as the customer's profile itself. Previous research models have become a reference for this study, and this study was conducted by collecting data from questionnaires that were distributed using an online survey. Finding - This study identified six features of online review content and one source attribute, namely timeliness, reviewer expertise, usefulness, volume, positive online reviews, negative online reviews, and comprehensiveness. Regression analysis was used to examine the impact of these attributes on consumer purchase intention. Novelty – The results of the regression analysis showed significant relationships among variables like usefulness, volume, timeliness, positive online reviews, negative online reviews, and comprehensiveness, along with property characteristics on consumer's purchase intention. Type of Paper - Empirical.
    Keywords: Online review, electronic word-of-mouth, review website platform, purchase intention
    JEL: M30 M31 M39
    Date: 2019–09–23
  14. By: Dr Ma Nang Laik; Chester Mark Hong Wei
    Abstract: Myanmar is languishing at the bottom of key international indexes. United Nations considers the country as a structurally weak and vulnerable economy. Yet, from 2011 when Myanmar ended decades of military rule and isolationism and transited towards democracy, its breakneck development has led to many considering the country to be one of the final frontiers for growth in the Asia region. One such industry that has benefitted from the opening of the country is telecommunications. The mobile penetration rate at 4.8% in 2011 has increased significantly to 90% in 2016. Despite renewed optimism and development in the economy, one statistic remains disappointing. According to a report by Asian Development Bank (ADB), only 23% of the adult population have access to a bank account. This highlights a need to reach out and increase access to financial resources to a population that is severely unbanked and underbanked. This creates an interesting proposition of allowing both the telecommunications and financial sector to form the mobile financial services (MFS) sector and meet the need of improving access to financial resources for the population. This report explores the government role in supporting, growing and sustaining the MFS sector and conducts a comparative research into Singapore, Malaysia and Thailand to understand the steps taken by these governments to develop their own Financial Technology (FinTech), specifically MFS, industry. Finally, the report will present preliminary recommendations that the Myanmar government could consider implementing to drive growth in its MFS sector.
    Date: 2019–10
  15. By: Schmeling, Maik
    Abstract: Facebook's proposal to create a global digital currency, Libra, has generated a wide discussion about its potential benefits and drawbacks. This note contributes to this discussion and, first, characterizes similarities and dissimilarities of Libra's building blocks with existing institutions. Second, the note discusses open questions about Libra which arise from this characterization and, third, potential future developments and their policy implications. A central issue is that Libra raises considerable questions about its role in and impact on the international monetary and financial system that should be addressed before policymakers and regulators give Libra the green light.
    Date: 2019
  16. By: Stephen Williamson (University of Western Ontario)
    Abstract: A model of multiple means of payment is constructed to analyze the effects of the introduction of central bank digital currency (CBDC). The introduction of CBDC has three beneficial effects. It mitigates crime associated with physical currency, permits the payment of interest on a key central bank liability, and economizes on scarce safe collateral. CBDC admits another instrument of monetary policy, but may require that the central bank take on private assets in its portfolio if CBDC significantly displaces privately supplied means of payment.
    Date: 2019
  17. By: Geoffrey Ramseyer; Ashish Goel; David Mazieres
    Abstract: The Credit Network is a model for transactions across a network of agents based on bilateral trust between agents. Credit Networks capture many aspects of traditional currencies as well as new virtual currencies and payment mechanisms. In a credit network, if an agent defaults, every other node that trusted it is vulnerable to loss. Alternatively, in a cryptocurrency context, securing a payment channel requires putting capital into escrow to guarantee against default. In this paper, we introduce constraints that bound the total amount of loss that the rest of the network can suffer if an agent (or a set of agents) were to default. We show that these constraints preserve two important aspects of credit networks. The first is route independence: if there are multiple trust-paths over which a transaction can clear, then it does not matter which one is used. The second pertains to liquidity (i.e. the fraction of transactions that succeed): given a symmetric transaction matrix, any achievable vector of net "credit balances" of the agents is equally likely. This technical property allows us to extend the original analysis of liquidity in credit networks to the constrained case. Surprisingly, aggregate borrowing constraints greatly simplify the analysis and achieve the optimal tradeoff between liquidity and the number of trust-edges.
    Date: 2019–10
  18. By: Kretschmer, Tobias; Peukert, Christian
    Abstract: We study the heterogeneous effects of online video platforms on the sales volume and sales distribution of recorded music. Identification comes from two natural experiments in Germany. In 2009, virtually all music videos were blocked from YouTube due to a legal dispute. In 2013, the dedicated platform VEVO entered the market, making videos of a large number of artists available overnight. Our estimates suggest that restricting (enabling) access to online videos decreases (increases) recorded music sales on average by about 5-10%. We show that the effect operates independently of the nature of video content, suggesting that user-generated content is as effective as official content. Moreover, we highlight heterogeneity in this effect: Online music video disproportionally benefits sales of new artists and sales of mainstream music.
    Keywords: Digital Distribution Platforms; Natural Experiment; User-generated content
    JEL: L15 L82
    Date: 2019–10
  19. By: Vladimir Pavlov (The Wharton School, University of Pennsylvania, 3730 Walnut St, Philadelphia, PA 19104 USA); Ron Berman (The Wharton School, University of Pennsylvania, 3730 Walnut St, Philadelphia, PA 19104 USA)
    Abstract: Should a peer-to-peer platform set prices for the products on the platform, or should it let sellers set their own prices while providing price recommendations? Centralized prices allow a platform to use demand information it observes, while price recommendations allow for competition in which sellers set prices based on their private information. On sharing economy platforms, for example, we observe a myriad of such pricing regimes. We investigate the implications of each pricing regime for the profits of platforms, buyers and sellers. When a platform recommends prices, it effectively plays the role of a sender in a multi-receiver cheap-talk game. platforms are not always better off by centralizing pricing. When the variance of aggregate demand is large, price recommendations can be sustained in equilibrium and are often more profitable for the platform. Otherwise, a price recommendation is not credible. High (low) quality sellers have a stronger (weaker) preference for centralized pricing than the platform. Buyers, in contrast, receive lower surplus when the platform provides price recommendations, and prefer centralized pricing or competition without price recommendations. The results provide tools for platform designers and policy makers to assess the impact of different pricing regimes in markets with platforms. Although price recommendations might seem to encourage lower prices among sellers through increased competition, this is not always the case.
    Keywords: two-sided markets; peer-to-peer platforms; sharing economy; price recommendations; cheap talk
    JEL: D21 L13 L16 L22 M31
    Date: 2019–09
  20. By: Johannes Johnen (CORE and LIDAM, Universite catholique de Louvain, Voie du Roman Pays 34, 1348 Ottignies-Louvain-la-Neuve, Belgium); Robert Somogyi (Budapest University of Technology and Economics, Department of Finance and Centre for Economic and Regional Studies, Magyar tudosok korutja 2, 1117 Budapest, Hungary)
    Abstract: On many online platforms, sellers offer products with additional fees and features. Platforms often deliberately shroud these fees from consumers. Examples are shipping fees, luggage fees on flight-aggregator websites, or resort fees and upgrades on hotel booking platforms. We explore the incentives of two-sided platforms to disclose additional fees and design a transparent marketplace when consumers might naively ignore shrouded additional fees. First, we find that platforms have stronger incentives to shroud additional fees than sellers in the absence of platforms. This result holds for monopoly platforms and in some competitive settings. Second, competition might induce platforms to regulate additional fees, which benefits consumers. We discuss connections to frequent practices like drip pricing, and platforms like Amazon or eBay regulating shipping fees.
    Keywords: Two-sided markets; Deceptive products; Platform competition; Consumer mistakes; Shrouded attributes
    JEL: D18 D42 D90 L13 L86
    Date: 2019–09
  21. By: Thomas Philippon
    Abstract: The cost of financial intermediation has declined in recent years thanks to technological progress and increased competition. I document this fact and I analyze two features of new financial technologies that have stirred controversy: returns to scale, and the use of big data and machine learning. I argue that the nature of fixed versus variable costs in robo-advising is likely to democratize access to financial services. Big data is likely to reduce the impact of negative prejudice in the credit market but it could reduce the effectiveness of existing policies aimed at protecting minorities.
    JEL: G11 G2 L1 N2
    Date: 2019–09
  22. By: MORIKAWA Masayuki
    Abstract: This study, based on an original survey of Japanese firms, presents evidence on the use of AI, big data, and robots as well as firms' perception about the impacts of these new technologies on business and employment. The major findings can be summarized as follows. First, the number of firms already using AI and big data is small, but the number of firms interested in using these technologies for their business is large and increasing. Second, the use of AI and big data is positively associated with the share of highly educated employees, but this relationship is weak for the use of robots in the manufacturing industry. Third, the use of the new technologies has a strong positive association with the innovation probability of the firms. Fourth, the majority, and an increasing number of firms view the impact of these new technologies on their future business positively. Fifth, relatively large numbers of firms expects that the use of these new technologies is likely to reduce their employees.
    Date: 2019–08
  23. By: Enikolopov, Ruben; Petrova, Maria; Zhuravskaya, Ekaterina
    Abstract: How do the internet and social media affect political outcomes? We review empirical evidence from the recent political economy literature focusing especially on the work that considers those features that distinguish the internet and social media from traditional offline media, such as low barriers to entry and reliance on user-generated content. We discuss the main results about the effects of the internet, in general, and social media, in particular, on voting, street protests, attitudes toward government, political polarization, xenophobia, and politicians' behavior. We also review evidence on the role of social media in the dissemination of false news and summarize results about the strategies employed by autocratic regimes to censor internet and to use social media for surveillance and propaganda. We conclude by highlighting the key open questions about how the internet and social media shape politics in democracies and autocracies.
    Keywords: internet; social media; survey
    Date: 2019–09
  24. By: Woodruff, David M.
    Abstract: Hockett’s “franchise view” argues, convincingly, that the capacity of banks or quasi-bank financial entities to create money rests on the regulations and guarantees of the state maintaining the legal and regulatory system under which they operate. Block suggests that this insight could be used as a beachhead from which to establish the legitimacy of locally embedded, non-profit lenders whose investments would be dedicated to public purposes. However, given the contemporary ideological, political, and economic context, this proposal on its own could prove counterproductive. To maximize the positive impact of the insight into the public character of money creation, the proposal for public-purpose banking should be fused to democratization of central banking. This could plausibly have ideological effects that would make the public character of private economic power easier to perceive, and to reshape. Subordination of central banks to elected officials would also bring an end to the dynamic whereby monetary easing provides political cover for damaging fiscal austerity, leading to more democratic decision-making about the appropriate combination of fiscal and monetary policy.
    Keywords: Central bank independence; everyday libertarianism; coordination of fiscal and monetary policy
    JEL: F3 G3
    Date: 2019–06–19
  25. By: Decker, Frank; Goodhart, C. A. E.
    Abstract: This paper assesses the theory of credit mechanics within the context of the current money supply debate. Credit mechanics and related approaches were developed by a group of German monetary economists during the 1920s-1960s. Credit mechanics overcomes a one-sided, bank-centric view of money creation, which is often encountered in monetary theory. We show that the money supply is influenced by the interplay of loan creation and repayment rates; the relative share of credit volume neutral debtor-to-debtor and creditor-to-creditor payments; the availability of loan security; and the behavior of non-banks and non-borrowing bank creditors . With the standard textbook models of money creation now discredited, we argue that a more general approach to money supply theory involving credit mechanics needs to be established.
    Keywords: balances mechanics; bank credit; money creation; credit creation; credit mechanics; money supply theory
    JEL: E40 E41 E50 E51
    Date: 2018–10
  26. By: Baptiste Venet (LEDa - Laboratoire d'Economie de Dauphine - Université Paris-Dauphine)
    Keywords: Finance inclusive,Financial Technology,finance,innovation
    Date: 2019
  27. By: Nancy L Stokey (Department of Economics)
    Abstract: When consumers or firms purchase goods or pay bills, they must choose a means of payment: cash, credit card, check, electronic transfer, etc. What governs those choices? In particular, how do their choices vary with the inflation rate, and how do total transaction costs change?
    Date: 2019
  28. By: Sean Hundtofte; Arna Olafsson; Michaela Pagel
    Abstract: Standard economic theory says that unsecured, high-interest, short-term debt — such as borrowing via credit cards and bank overdraft facilities — helps individuals smooth consumption in the event of transitory income shocks. This paper shows that — on average — individuals do not use such borrowing to smooth consumption when they experience a typical transitory income shock of unemployment. Instead, individuals smooth their credit card debt and overdrafts by adjusting consumption. We first use detailed longitudinal information on debit and credit card transactions, account balances, and credit lines from a financial aggregator in Iceland to document that unemployment does not induce a borrowing response at the individual level. We then replicate this finding in a representative sample of U.S. credit card holders, instrumenting local changes in employment using a Bartik (1991)-style instrument. The absence of a borrowing response occurs even when credit supply is ample and liquidity constraints, captured by credit limits, do not bind. Standard economic models predict a strictly countercyclical demand for credit; in contrast, the demand for credit appears to be procyclical which may deepen business cycle fluctuations.
    JEL: D14 D90
    Date: 2019–10
  29. By: D. Desbois (ECO-PUB - Economie Publique - INRA - Institut National de la Recherche Agronomique - AgroParisTech)
    Abstract: Cet ouvrage part d'une impuissance à décrypter que beaucoup d'entre nous éprouvent dans leur quotidien en manipulant des informations écrites et plus encore chiffrées sans avoir le loisir ni les moyens de soupeser l'impact des conditions de leur production et de leur circulation : ce que l'on tient pour « données » l'est-il vraiment ? Comment s'agencent les infrastructures matérielles et logicielles qui peuplent nos mondes numériques pour faire advenir des informations au statut de « données », puis en organiser la diffusion ?
    Abstract: This work starts from an inability to decrypt that many of us experience in their daily lives by manipulating written information and more quantified without having the leisure or the means to weigh the impact of the conditions of their production and circulation: what is held for "data" is it really? How do the hardware and software infrastructures that populate our digital worlds fit together to bring information to the status of "data" and then organize its dissemination?
    Keywords: Labor Issues,Digitalization
    Date: 2018–12
  30. By: Elisa Salvador (ESSCA - Groupe ESSCA); Jean-Paul Simon; Pierre-Jean Benghozi (PREG-CRG - Pole de recherche en économie et gestion - X - École polytechnique - CNRS - Centre National de la Recherche Scientifique)
    Date: 2019
  31. By: Wei Chen (Eller College of Management, University of Arizona, Tucson, Arizona, 85721); Karen Xie (Daniels College of Business, University of Denver, Denver, Colorado, 80208); Jianwei Liu (School of Management, Harbin Institute of Technology, Harbin, China, 150001); Yong Liu (Eller College of Management, University of Arizona, Tucson, Arizona, 85721)
    Abstract: Growing research attention is paid to the disruption of sharing economy services (Airbnb, Uber, Lending Club, etc.) and how they cut into incumbent firms’ profit. Yet, the literature is silent on how incumbents respond to the rivalry and what are the performance outcomes if taking a defensive stance. In this paper, we investigate incumbent hotels’ responses to home sharing and how different reactions among hotels lead to distinct outcomes in customer satisfaction. Integrating casual inference and machine learning, we analyze large-scale, multidimensional data on hotels and home-sharing services in Beijing from March, 2015 to December, 2017 and three findings are gleaned. First, we find heterogeneous reactions of hotels, with their management responses to online guest reviews (reviews, hereafter) surging at higher-priced hotels while plunging at lower-priced ones compared with hotels that do not experience home sharing’s entry. The distinct response strategy (active vs passive) is likely due to different extent of decline in sales at these two types of hotels after home sharing’s entry. Second, hotels that are responsive to reviews experience a significant rise in customer satisfaction while the less responsive hotels do not. We show that this difference can be attributed to distinct response strategies of hotels and not their price segment (higher-priced or lower-priced). Third, utilizing state-of-the-art deep learning algorithms combined with topic modeling, we identify the theme-specific content features (topics and their sentiments) in reviews on both hotels and home sharing. Hotels that are responsive to reviews improve significantly on sentiments of two out of seven topics (i.e., cleanliness and service), which explains their performance gains when facing the disruption. And these two topics are the exact areas where home sharing outperforms hotels based on the review comparison. These suggest that responding to reviews allows hotel managers to not only bridge the gap between their property and home-sharing rivals but also differentiate from hotels less responsive - an interesting segmentation in the market when disruptors enter the game. This study makes the first attempt to investigate incumbent firms acting to sharing economy disruptors. Implications are made on how different types of hotels can and should react for improved performance.
    Keywords: Incumbent business, sharing economy, management response, difference-in-differences, deep learning, convolutional neutral network, topic modeling
    JEL: L8 M31
    Date: 2019–09
  32. By: Ryan Hawthrone; Lukasz Grzybowksi
    Abstract: We test for the distributional effects of regulation and entry in the mobile telecommunications sector in a highly unequal country, South Africa. Using six waves of a consumer survey of over 134,000 individuals between 2009-2014, we estimate a discrete-choice model allowing for individual-specific price-responsiveness and preferences for network operators. Next, we use a demand and supply equilibrium framework to simulate prices and the distribution of welfare without entry and mobile termination rate regulation. We find that regulation benefits consumers significantly more than entry does, and that high-income consumers and city-dwellers benefit more in terms of increased consumer surplus.
    Keywords: Mobile telecommunications, Competition; Entry, Discrete choice, inequality
    JEL: L13 L40 L50 L96
    Date: 2019–08
  33. By: Sarit Markovich (Kellogg School of Management, Northwestern University, Evanston, IL, USA); Yaron Yehezkel (Coller School of Management, Tel Aviv University, Ramat Aviv, Israel)
    Abstract: We consider platform competition in the presence of small users and a user-group. One platform enjoys a quality advantage and the other benefits from favorable beliefs. We study whether the group mitigates the users' coordination problem –i.e., joining a low-quality platform because they believe that other users would do the same. We find that when the group is sufficiently large to facilitate coordination on the high-quality platform, the group may choose to join the low-quality one. When the group joins the more efficient platform it does not necessarily increase consumer surplus. Specifically, a non-group user benefits from a group with an intermediate size, and prefers a small group over a large group. The utility of a group user is also non-monotonic in the size of the group.
    Keywords: network externalities; coordination
    JEL: L1
    Date: 2019–09
  34. By: Alexis Bogroff (Université Paris1 Panthéon-Sorbonne); Dominique Guégan (Université Paris1 Panthéon-Sorbonne, Centre d'Economie de la Sorbonne, LabEx ReFi and Ca' Foscari University of Venezia)
    Abstract: An extensive list of risks relative to big data frameworks and their use through models of artificial intelligence is provided along with measurements and implementable solutions. Bias, interpretability and ethics are studied in depth, with several interpretations from the point of view of developers, companies and regulators. Reflexions suggest that fragmented frameworks increase the risks of models misspecification, opacity and bias in the result; Domain experts and statisticians need to be involved in the whole process as the business objective must drive each decision from the data extraction step to the final activatable prediction. We propose an holistic and original approach to take into account the risks encountered all along the implementation of systems using artificial intelligence from the choice of the data and the selection of the algorithm, to the decision making
    Keywords: Artificial Intelligence; Bias; Big Data; Ethics; Governance; Interpretability; Regulation; Risk
    JEL: C4 C5 C6 C8 D8 G28 G38 K2
    Date: 2019–06
  35. By: Firda Nosita (Department of Management, Sekolah Tinggi Ilmu Ekonomi Pancasetia, Indonesia Author-2-Name: Tina Lestari Author-2-Workplace-Name: Department of Management, Sekolah Tinggi Ilmu Ekonomi Pancasetia, Indonesia Author-3-Name: Author-3-Workplace-Name: Author-4-Name: Author-4-Workplace-Name: Author-5-Name: Author-5-Workplace-Name: Author-6-Name: Author-6-Workplace-Name: Author-7-Name: Author-7-Workplace-Name: Author-8-Name: Author-8-Workplace-Name:)
    Abstract: Objective - The thrive of social media enables everyone to share their purchase and consumption experiences, including beauty product consumption. The study aims to determine whether the attitude towards UGC, perceived credibility and user activity of UGC on YouTube influences the purchase intention toward a beauty product. Methodology/Technique - Questionnaires were distributed online to 200 people who had watched beauty product review videos on YouTube at least once and who were minimum 18 years old. The data was analyzed using multiple regression. Finding - The results indicate that attitudes towards UGC content on YouTube and perceived credibility affect purchasing intentions. Whereas user activities does not correlate with purchase intentions on beauty products. UGC content usually provides information and provides tips and tricks about using beauty products. The more attractive the content is, the more people want to see it and the more likely they will be to use the content to fulfill their information needs. Beauty vloggers are considered more credible than producer-generated content. Activities such as searching for, liking, subscribing or commenting does not necessarily indicate purchase intentions. This simply represents people fulfilling their social needs to interact with each other in a social environment. Novelty – Companies could provide training or facilities for UGC creators in order to create more attractive content. The most important finding of this study is that companies should continually improve the quality of their products, because the credibility of content makers relies on their experience with the products themselves. Marketers should monitor community discussions to find out more about the public interest in their products. In addition, marketers can also identify the shortcomings of their products to better enable them to fix them by reviewing comments on UGC. Type of Paper - Empirical.
    Keywords: User Generated Content (UGC); Beauty Vlogger; Beauty Product; E-WoM; YouTube.
    JEL: M31 M37 M39
    Date: 2019–09–28
  36. By: Ekaterina Semerikova (Moscow School of Management SKOLKOVO); Egor Krivosheya (Moscow School of Management SKOLKOVO); Alexander Dobrynin (National Research University - Higher School of Economics)
    Abstract: This study is aimed to examine the effect caused by perception of higher card acceptance barriers on cashless revenue share of Russian merchants. The empirical testing is conducted based on two representative samples of Russian nation-wide merchants survey data collected in 2014 and 2017. The analysis considers a set of regional controls, as well as merchant-specific characteristics. The statistically significant evidence in favor of negative impact caused by perception of higher infrastructural barriers on cashless revenue share is found in both samples, while only a partial significance of higher perceived institutional and human capital barriers may be observed. No significant evidence for merchants? rationality with respect to acceptance barrier has been found based on the comparison of perceived and actual barriers effects.
    Keywords: retail payments; financial services; merchants; barriers; card acceptance
    JEL: G21 D53 E42
    Date: 2019–10
  37. By: Carsten Hefeker (University of Siegen)
    Abstract: Germany prides itself in having one of the most successful central banks and currencies with respect to independence and stability. I show that not only were both imposed on the country after 1945 but that there was also initial resistance to both among German experts and officials. This was then a rare case of successful imposition of institutions from abroad. Events are discussed in light of Peter Bernholz’s requirements for stable money and a successful central bank.
    Keywords: Currency reform, Bundesbank, central bank independence, institutional reform
    JEL: E42 E58 N14 N24
    Date: 2019
  38. By: Jérémie BERTRAND (IESEG); Laurent WEILL (LaRGE Research Center, Université de Strasbourg)
    Abstract: We investigate whether discrimination against African Americans occurs in peer-to-peer lending. We consider data from a large peer-to-peer lender that uses algorithms and no face-to-face interview to decide loan approval and conditions. Using data from 3.6 million loan applications and 817,000 granted loans for 2016 and 2017, we perform regressions of loan acceptance and loan conditions on the percentage of African Americans by 3-digit zip area. We observe evidence of discrimination in peer-to-peer lending. African Americans have a greater chance to have their loan applications rejected, pay higher loan rates, and obtain loans with shorter maturity. Discrimination is more pronounced after the election of Trump.
    Keywords: discrimination, Fintech, peer-to-peer lending, loans.
    JEL: G21 J15
    Date: 2019
  39. By: Pereira Santos, João; Tavares, José; Vicente, Pedro C
    Abstract: We report on a large-scale field experiment to assess ATMs (automatic teller machines) capacity to "get out the vote". This is a heretofore unexploited method. Our experimental design used the universe of functioning ATMs in Portugal. We randomly selected a set of treatment civil parishes, where a civic message took over the totality of ad time, which we compare with a set of control areas. The campaign we follow was active for three days before and during the 2017 local elections. Although we do not achieve statistical significance on a stable but small average treatment effect, when we consider the intensity of treatment, results show a statistically significant increase in the likelihood of voting. Placebo tests using turnout rates in previous elections strengthen our interpretation. We ran a post-treatment survey around ATMs located in two neighbouring civil parishes, one treated, the other not. We found a sizeable difference in recall.
    Keywords: ATMs; Local Elections; Portugal; Voter mobilization
    JEL: C93 D72 H70
    Date: 2019–09
  40. By: Leila Agha; Dan Zeltzer
    Abstract: Pharmaceutical companies' marketing efforts primarily target physicians, often through individual detailing that entails monetary or in-kind transfers. We study how peer influence broadens these payments' reach beyond the directly paid physicians. Combining Medicare prescriptions and Open Payments data for anticoagulant drugs, we document that pharmaceutical payments target highly connected physicians. We exploit within-physician variation in payment exposure over time to estimate the payments' influence. Unlike the paid doctor, peer physicians are not directly selected by the pharmaceutical company on the basis of their expertise or enthusiasm for the target drug. Yet, following a large payment, prescriptions for the target drug increase both by the paid physician and the paid physician's peers. These peer effects influence doctors who share patients with the paid physician, even when the two doctors are not affiliated with the same group practice. We find no evidence that payments reduce prescriptions among high-risk patients. Over the period 2014--2016, physician payments associated with anticoagulant marketing increased the drugs' prescription volume by 23 percent, with peer spillovers contributing a quarter of the increase.
    JEL: I11 O33
    Date: 2019–10
  41. By: Maliar, Lilia; Maliar, Serguei; Winant, Pablo
    Abstract: Artificial intelligence (AI) has impressive applications in many fields (speech recognition, computer vision, etc.). This paper demonstrates that AI can be also used to analyze complex and high-dimensional dynamic economic models. We show how to convert three fundamental objects of economic dynamics -- lifetime reward, Bellman equation and Euler equation -- into objective functions suitable for deep learning (DL). We introduce all-in-one integration technique that makes the stochastic gradient unbiased for the constructed objective functions. We show how to use neural networks to deal with multicollinearity and perform model reduction in Krusell and Smith's (1998) model in which decision functions depend on thousands of state variables -- we literally feed distributions into neural networks! In our examples, the DL method was reliable, accurate and linearly scalable. Our ubiquitous Python code, built with Dolo and Google TensorFlow platforms, is designed to accommodate a variety of models and applications.
    Keywords: artificial intelligence; Bellman equation; deep learning; Dynamic Models; Dynamic programming; Euler Equation; Machine Learning; neural network; stochastic gradient; value function
    Date: 2019–09
  42. By: Feras Batarseh; Munisamy Gopinath; Ganesh Nalluru; Jayson Beckman
    Abstract: International trade policies have recently garnered attention for limiting cross-border exchange of essential goods (e.g. steel, aluminum, soybeans, and beef). Since trade critically affects employment and wages, predicting future patterns of trade is a high-priority for policy makers around the world. While traditional economic models aim to be reliable predictors, we consider the possibility that Machine Learning (ML) techniques allow for better predictions to inform policy decisions. Open-government data provide the fuel to power the algorithms that can explain and forecast trade flows to inform policies. Data collected in this article describe international trade transactions and commonly associated economic factors. Machine learning (ML) models deployed include: ARIMA, GBoosting, XGBoosting, and LightGBM for predicting future trade patterns, and K-Means clustering of countries according to economic factors. Unlike short-term and subjective (straight-line) projections and medium-term (aggre-gated) projections, ML methods provide a range of data-driven and interpretable projections for individual commodities. Models, their results, and policies are introduced and evaluated for prediction quality.
    Date: 2019–10
  43. By: Goodhart, Charles
    JEL: F3 G3
    Date: 2018–03–28
  44. By: Luis Abreu (Toulouse School of Economics, 21 Allée de Brienne, 31015 Toulouse Cedex 6, France); Doh-Shin Jeon (Toulouse School of Economics, 21 Allée de Brienne, 31015 Toulouse Cedex 6, France)
    Abstract: We study how media bias is affected by the structure of social networks on social media. We consider an ad-financed media firm which chooses the ideological location of its news and targets consumers who can share the news with their followers on an online social media. After studying how a targeted consumer’s incentive to share the news is shaped by the network structure of her followers, we study the firm’s strategy to maximize the breadth of news sharing and find that when the mean (respectively, the variance) of followers’ ideological locations is a convex (respectively, concave) function of a direct consumer’s location, the media firm is likely to produce polarized news. The analysis of the case in which consumers are uniformly distributed reveals that news polarization is more likely to occur as the degree of homophily increases. We also find that media competition makes polarization more likely.
    Keywords: media bias; online social networks; homophily; sharing, polarization
    JEL: D21 D85 L82
    Date: 2019–09
  45. By: Mathias Hoffmann (Department of Economics, University of Zurich); Tetsuji Okazaki (Faculty of Economics, The University of Tokyo); Toshihiro Okubo (Faculty of Economics, Keio University)
    Abstract: The banking sector in Japan experienced a substantial organizational change in the early twentieth century, including an expansion of branch networks. In this paper, we explore the implications of branch banking in regional economies, using unique bank branch office-level data for four rural regions: Fukushima, Tottori, Kumamoto, and Miyazaki Prefectures. We find that branch banking had a positive scale effect on lending. However, compared with branch offices of banks headquartered in the same municipality, branch offices of banks headquartered in other municipalities, especially in other prefectures, tended to have a lower propensity to issue loans. In particular, branch offices of banks headquartered in urban areas, such as Osaka and Tokyo, tended to collect deposits rather than to lend money through their branch networks, which restricted regional finance.
    Date: 2019–01

General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.