ALBERT

Description: Digital technologies like the Internet can affect income inequality through increased demand for employment in manual and abstract jobs and reduced demand for employment in routine jobs. In this paper, we combine city-level income distribution and jobs data with broadband data from France to investigate the impact of broadband Internet access on income inequality. Using an instrumental variable estimation strategy, we find that broadband Internet reduces income inequality through increased employment in manual jobs. These effects increase with the availability of skilled workers and are significant in cities with a large service sector or high-speed Internet access. Further, the diffusion of broadband Internet comes with relatively greater benefits in low-income cities compared to high-income cities. Several robustness checks support these findings.

Description: In this paper, we analyze how fixed-mobile (quadruple-play) bundling impacts the decision of consumers to churn telecommunications services. We use a database from an European operator of fixed and mobile telecommunications services which includes information about 9.6 million fixed broadband subscribers and 14.2 million mobile subscribers between March 2014 and February 2015. These data is combined with socio-demographic characteristics from each municipality in this country. We find that consumers who bundle fixed and mobile services from the same provider are less likely to churn. Without fixed-mobile bundling the annual churn of fixed broadband consumers would increase from 8.4 to 9.2%. Furthermore, the consumer churn in the mobile market would increase from 11.5 to 13.1%. We conclude that in the current competitive environment in the country considered, bundling has a moderate impact on consumer retention on both fixed and mobile networks.

Description: A large literature has used patent data to measure knowledge spillovers across inventions but few papers have explicitly measured the impact of the collaboration networks formed by inventors on the quality of invention. This paper develops a method to measure the impact of collaboration networks of inventors on invention quality. We apply this methodology to the information and communication technology (ICT) and information security sectors in Israel and find that the quality of Israeli inventions are systematically linked to the structure of the collaborative network in these sectors. We are very grateful to the editor Lukasz Grzybowski and an anonymous referee for very helpful comments and suggestions that significantly improved the paper. We thank the Maurice Falk Institute for Economic Research in Israel, Start-Up Nation Central, the U. S. National Science Foundation (SciSIP grants 1360165 and 1360170), and Portugal’s Foundation for Science and Technology for financial support of this research. Lee Branstetter’s work on this project was supported by the National Science Foundation and we thank Britta Glennon for excellent research assistance. We are also grateful to Tim Bresnahan, Eugene Kandel, Imke Reimers, and seminar/conference participants at the 19th CEPR IO conference, the 10th Paris conference on Digital Economics, Collegio Carlo Alberto, Hebrew University, Stanford University, Tel Aviv University, ad UC-Berkeley and for helpful comments and suggestions. © 2020 by Neil Gandal, Nadav Kunievsky, and Lee Branstetter. All rights reserved. Short sections of text, not to exceed two paragraphs, may be quoted without explicit permission provided that full credit, including the © notice, is given to the source.

Description: In 2008, former FCC Commissioner McDowell warned that Net Neutrality regulatory rulings could change every two to four years with election results His prediction was prescient. The democrat-led Wheeler Commission used technical definitions of telecommunication and information services to place all carriers under light touch Title II common carrier regulations. The succeeding republican-led Pai Commission rescinded the Wheeler Commission’s Order. The problem with both orders is that telecommunications and information services as separate categories are losing relevance in the online economy. A new approach to Net Neutrality policy is introduced that recognizes the emergence of large platforms and Internet service providers (ISPs) competing against each other. The recommendation is to break regulatory silos and develop a holistic oversight of the online ecosystem that examines in an integrated way anticompetitive behavior associated with communication, information, and services.

Description: We study how quality uncertainty among consumers affects price competition in the presence of network effects. Our main result is that quality uncertainty has non-monotonic effects on firms’ price setting behavior. Prices and industry profit is first falling, then increasing, in quality uncertainty. In addition we show that quality uncertainty can force a high quality provider to be aggressive to the point where its price in the first period is below that of a low quality provider. We also analyse the incentives for compatibility under quality uncertainty, and find that when quality uncertainty is sufficiently high, compatibility may be used as a means of softening price competition.

Description: In this paper, we analyze the effects on content provision in the news market of single-homing (i.e. when readers consume news from just one outlet) and multi-homing (i.e. when readers can choose to consume news from competing outlets). Media firms compete on content provision and on advertising revenues. Readers have an ideal variety of content and experience a disutility from consuming news that differs from their ideal variety. In addition, readers have a preference for single-homing and for multi-homing. In this set-up, we show that media firms only diversify content with single-homing, but not with multi-homing. The reason for this is that competition for readers and advertising is lower under multi-homing than under single-homing, since multi-homing readers consume from all media outlets. We derive the consequences of single-homing and multi-homing for profits, consumer surplus and social welfare. We also discuss the implications of our results for the current debate in the media market related with social media and echo chambers.

Description: This paper considers the organization of a single (domestic) payment system. When card issuers that are members of a payment system set their fees individually, this gives rise to a free-riding problem, as in providing access to different customers, card issuers are complements from the perspective of each merchant. When payment systems can threaten to exclude, in particular, card issuers with a smaller customer base that do not adhere to a common cap on fees, this allows to restore the full internalization outcome, leading to lower fees but higher profits and higher welfare. When payment systems cannot threaten to exclude card issuers, the full internalization outcome arises only when card issuers are sufficiently symmetric.

Description: This paper analyzes the effects of direct interconnection agreements in the Internet backbone on content quality investment for content providers (CPs). The model assumes that when the Internet service provider (ISP) has a vertical affiliation with one CP, the ISP directly interconnects the affiliated CP’s traffic to its network for free while collecting a direct interconnection fee from the unaffiliated CP. If the unaffiliated CP’s traffic is indirectly interconnected to the ISP’s network via a third party transit provider, its network quality is lower than that via a direct interconnection. For the CPs’ content quality investments, I find that the affiliated CP invests more in content when the rival indirectly interconnects, leading to a higher total level of content investment. Accordingly, there is a condition under which the ISP does not want to offer direct interconnection to the unaffiliated CP. However, consumers are not always worse off from this interconnection foreclosure. Thus, the regulation of a paid direct interconnection does not necessarily enhance welfare in terms of consumer surplus.

Description: We study the welfare impact of revenue management, a practice which is widely spread in the transport industry, but whose impact on consumer surplus remains unclear. We develop a theoretical model of revenue management allowing for heterogeneity in product characteristics, capacity constraints, consumer preferences, and probabilities of arrival. We also introduce dynamic competition between revenue managers. We solve this model computationally and recover the optimal pricing strategies. We find that revenue management is generally welfare enhancing as it raises the number of sales.