Digital Economics Goldfarb, Avi; Tucker, Catherine
Journal of economic literature,
03/2019, Letnik:
57, Številka:
1
Journal Article
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Digital technology is the representation of information in bits. This technology has reduced the cost of storage, computation, and transmission of data. Research on digital economics examines whether ...and how digital technology changes economic activity. In this review, we emphasize the reduction in five distinct economic costs associated with digital economic activity: search costs, replication costs, transportation costs, tracking costs, and verification costs.
Drawing on the literature on online advertising, I argue that the fundamental economic difference between online and offline advertising is a substantial reduction in the cost of targeting. This cost ...reduction informs what I view as the main themes in the online advertising literature: understanding advertising effectiveness, auctions, privacy, and antitrust.
This article aims to broaden the understanding of quasi-experimental methods among marketing scholars and those who read their work by describing the underlying logic and set of actions that make ...their work convincing. The purpose of quasi-experimental methods is, in the absence of experimental variation, to determine the presence of a causal relationship. First, the authors explore how to identify settings and data where it is interesting to understand whether an action causally affects a marketing outcome. Second, they outline how to structure an empirical strategy to identify a causal empirical relationship. The article details the application of various methods to identify how an action affects an outcome in marketing, including difference-in-differences, regression discontinuity, instrumental variables, propensity score matching, synthetic control, and selection bias correction. The authors emphasize the importance of clearly communicating the identifying assumptions underlying the assertion of causality. Last, they explain how exploring the behavioral mechanism—whether individual, organizational, or market level—can actually reinforce arguments of causality.
We use data from a large-scale field experiment to explore what influences the effectiveness of online advertising. We find that matching an ad to website content and increasing an ad's obtrusiveness ...independently increase purchase intent. However,
in combination
, these two strategies are ineffective. Ads that match both website content
and
are obtrusive do worse at increasing purchase intent than ads that do only one or the other. This failure appears to be related to privacy concerns: the negative effect of combining targeting with obtrusiveness is strongest for people who refuse to give their income and for categories where privacy matters most. Our results suggest a possible explanation for the growing bifurcation in Internet advertising between highly targeted plain text ads and more visually striking but less targeted ads.
We examine a crowdfunding platform that connects artists with funders. Although the Internet reduces many distance‐related frictions, local and distant funders exhibit different funding patterns. ...Local funders appear less responsive to information about the cumulative funds raised by an artist. However, this distance effect appears to proxy for a social effect: it is largely explained by funders who likely have an offline social relationship with the artist (“friends and family”). Yet, this social effect does not persist past the first investment, suggesting that it may be driven by an activity like search but not monitoring. Thus, although the platform seems to diminish many distance‐sensitive costs, it does not eliminate all of them. These findings provide a deeper understanding of the abilities and limitations of online markets to facilitate transactions and convey information between buyers and sellers with varying degrees of social connectedness.
We explore how Internet browsing behavior varies between mobile phones and personal computers. Smaller screen sizes on mobile phones increase the cost to the user of browsing for information. In ...addition, a wider range of offline locations for mobile Internet usage suggests that local activities are particularly important. Using data on user behavior at a (Twitter-like) microblogging service, we exploit exogenous variation in the ranking mechanism of posts to identify the ranking effects. We show that (1) ranking effects are higher on mobile phones suggesting higher search costs: links that appear at the top of the screen are especially likely to be clicked on mobile phones and (2) the benefit of browsing for geographically close matches is higher on mobile phones: stores located in close proximity to a user's home are much more likely to be clicked on mobile phones. Thus, the mobile Internet is somewhat less “Internet-like”: search costs are higher and distance matters more. We speculate on how these changes may affect the future direction of Internet commerce.
Shifts in Privacy Concerns Goldfarb, Avi; Tucker, Catherine
The American economic review,
05/2012, Letnik:
102, Številka:
3
Journal Article
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This paper explores how digitization and the associated use of customer data have affected the evolution of consumer privacy concerns. We measure privacy concerns by reluctance to disclose income in ...an online marketing research survey. Using over three million responses over eight years, our data show: (1) Refusals to reveal information have risen over time, (2) Older people are less likely to reveal information, and (3) The difference between older and younger people has increased over time. Our results suggest that the trends over time are partly due to broadening perceptions of the contexts in which privacy is relevant. PUBLICATION ABSTRACT
Information asymmetry presents a challenge to equity crowdfunding just as in other markets for equity capital. Investors are less likely to finance startups when it is difficult to assess quality. ...Syndicates reduce market failures caused by information asymmetry by shifting the focal investment activities of the crowd from startups to lead investors. Syndicates align the incentives of issuers, lead investors, and follow-on investors by providing incentives for lead investors to conduct due diligence, monitor progress, and exploit their reputation. Preliminary evidence foreshadows a meaningful role for syndicates in the allocation of capital to early-stage ventures.
Despite the scientific and engineering challenges facing the development of quantum computers, considerable progress is being made toward applying the technology to commercial applications. In this ...article, we discuss the solutions that some companies are already building using quantum hardware. Framing these as examples of combinatorics problems, we illustrate their application in four industry verticals: cybersecurity, materials and pharmaceuticals, banking and finance, and advanced manufacturing. While quantum computers are not yet available at the scale needed to solve all of these combinatorics problems, we identify three types of near-term opportunities resulting from advances in quantum computing: quantum-safe encryption, material and drug discovery, and quantum-inspired algorithms.
Our paper shows that the parameters in existing theoretical models of channel substitution such as offline transportation cost, online disutility cost, and the prices of online and offline retailers ...interact to determine consumer choice of channels. In this way, our results provide empirical support for many such models. In particular, we empirically examine the trade-off between the benefits of buying online and the benefits of buying in a local retail store. How does a consumer's physical location shape the relative benefits of buying from the online world? We explore this problem using data from Amazon.com on the top-selling books for 1,497 unique locations in the United States for 10 months ending in January 2006. We show that when a store opens locally, people substitute away from online purchasing, even controlling for product-specific preferences by location. These estimates are economically large, suggesting that the disutility costs of purchasing online are substantial and that offline transportation costs matter. We also show that offline entry decreases consumers' sensitivity to online price discounts. However, we find no consistent evidence that the breadth of the product line at a local retail store affects purchases.
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