The regulatory sandbox is a real world alternative to regulatory lag. Its emergence as a novel regulatory development responds to challenges faced by FinTech innovators in navigating an unwieldy regulatory landscape not designed with FinTech in mind. Regulatory sandboxes are in operation in developed countries including Australia, Canada, Denmark, Hong Kong, Singapore, Switzerland, the Netherlands, the United Arab Emirates, the United Kingdom, and the United States. Within the EU they are seen in Denmark, Hungary, Lithuania, Poland and the Netherlands. The concept has also gained traction with regulators in developing countries such as India, Indonesia, Malaysia, Mauritius and Thailand. Not only is the regulatory sandbox an experimental space for firms testing innovative FinTech products and services, it is also a novel regulatory experiment for regulators. This article advances the available literature through focusing on the contradictions inherent in the role of the regulator in administering a regulatory sandbox. It characterises the regulatory sandbox as a form of agile, opportunity-based regulation, distinguished by a regulatory approach that is concerned with actively supporting innovators in nurturing cutting-edge innovation to benefit innovators, consumers, investors, and the wider economy. This is path-breaking regulatory territory. In its provision and design a regulatory sandbox phenomenon performs a crucial positioning function in relation to a given financial system’s receptivity to FinTech business. An economic, pro-innovation agenda is at work. Distinct policy questions are therefore raised regarding the legitimate role of public gatekeeper financial services regulators operating regulatory sandboxes. The role of a regulatory sandbox in nurturing and expanding competition suggests a public interest role in the interests of consumer choice, price and efficiency rather than simply on risk minimisation. However, pressure on regulators to produce sandbox successes and to compete with other sandboxes may influence the exercise of regulatory discretion and produce regulatory distortions that affect competition in FinTech markets.
{"title":"Regulators Nurturing FinTech Innovation: Global Evolution of the Regulatory Sandbox as Opportunity Based Regulation","authors":"Deirdre Ahern","doi":"10.2139/ssrn.3552015","DOIUrl":"https://doi.org/10.2139/ssrn.3552015","url":null,"abstract":"The regulatory sandbox is a real world alternative to regulatory lag. Its emergence as a novel regulatory development responds to challenges faced by FinTech innovators in navigating an unwieldy regulatory landscape not designed with FinTech in mind. Regulatory sandboxes are in operation in developed countries including Australia, Canada, Denmark, Hong Kong, Singapore, Switzerland, the Netherlands, the United Arab Emirates, the United Kingdom, and the United States. Within the EU they are seen in Denmark, Hungary, Lithuania, Poland and the Netherlands. The concept has also gained traction with regulators in developing countries such as India, Indonesia, Malaysia, Mauritius and Thailand. \u0000 \u0000Not only is the regulatory sandbox an experimental space for firms testing innovative FinTech products and services, it is also a novel regulatory experiment for regulators. This article advances the available literature through focusing on the contradictions inherent in the role of the regulator in administering a regulatory sandbox. It characterises the regulatory sandbox as a form of agile, opportunity-based regulation, distinguished by a regulatory approach that is concerned with actively supporting innovators in nurturing cutting-edge innovation to benefit innovators, consumers, investors, and the wider economy. This is path-breaking regulatory territory. In its provision and design a regulatory sandbox phenomenon performs a crucial positioning function in relation to a given financial system’s receptivity to FinTech business. An economic, pro-innovation agenda is at work. Distinct policy questions are therefore raised regarding the legitimate role of public gatekeeper financial services regulators operating regulatory sandboxes. The role of a regulatory sandbox in nurturing and expanding competition suggests a public interest role in the interests of consumer choice, price and efficiency rather than simply on risk minimisation. However, pressure on regulators to produce sandbox successes and to compete with other sandboxes may influence the exercise of regulatory discretion and produce regulatory distortions that affect competition in FinTech markets.","PeriodicalId":430354,"journal":{"name":"IO: Empirical Studies of Firms & Markets eJournal","volume":"26 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-03-09","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"128304961","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This working paper provides an overview of electric cars from their beginnings in the early 20th century to their current entry into the mainstream.
这篇工作论文提供了电动汽车从20世纪初开始到目前进入主流的概述。
{"title":"Electric Mobility: Looking Back to Look Ahead?","authors":"M. Sachon","doi":"10.2139/ssrn.3695017","DOIUrl":"https://doi.org/10.2139/ssrn.3695017","url":null,"abstract":"This working paper provides an overview of electric cars from their beginnings in the early 20th century to their current entry into the mainstream.","PeriodicalId":430354,"journal":{"name":"IO: Empirical Studies of Firms & Markets eJournal","volume":"56 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-03-03","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"130512495","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Grazia Cecere, Clara Jean, Fabrice Le Guel, Matthieu Manant
We study whether online platforms might reproduce offline stereotypes of girls in the STEM disciplines. The article contributes to work that aims to shed light on the possi- ble bias generated by algorithms. We run a field experiment based on launching online ad campaigns on a popular social media platform on behalf of a French computer sci- ence engineering school. We randomize the ad campaign in order to estimate whether a message aimed at prompting girls is more displayed to girls than to boys. The ad campaign targets students in high schools in the Paris area. Our results show that on average girls received 25 fewer impressions than boys, but were more likely to click on the ad if they come across it. This bias is moderated for science oriented high schools with a large majority of girls enrolled in science track. This group of girls receive more impressions compared to other girls. The treatment ad aimed at targeting more girls has a crowding-out effect, with an ad which was, overall, less shown to all.
{"title":"STEM and Teens: An Algorithmic Bias on a Social Media","authors":"Grazia Cecere, Clara Jean, Fabrice Le Guel, Matthieu Manant","doi":"10.2139/ssrn.3176168","DOIUrl":"https://doi.org/10.2139/ssrn.3176168","url":null,"abstract":"We study whether online platforms might reproduce offline stereotypes of girls in the STEM disciplines. The article contributes to work that aims to shed light on the possi- ble bias generated by algorithms. We run a field experiment based on launching online ad campaigns on a popular social media platform on behalf of a French computer sci- ence engineering school. We randomize the ad campaign in order to estimate whether a message aimed at prompting girls is more displayed to girls than to boys. The ad campaign targets students in high schools in the Paris area. Our results show that on average girls received 25 fewer impressions than boys, but were more likely to click on the ad if they come across it. This bias is moderated for science oriented high schools with a large majority of girls enrolled in science track. This group of girls receive more impressions compared to other girls. The treatment ad aimed at targeting more girls has a crowding-out effect, with an ad which was, overall, less shown to all.","PeriodicalId":430354,"journal":{"name":"IO: Empirical Studies of Firms & Markets eJournal","volume":"120 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-02-28","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"123227975","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
J. Baker, N. Rose, S. Salop, Fiona M. Scott Morton
These recommendations and comments respond to the request by the Federal Trade Commission and the Department of Justice’s Antitrust Division for public comment on the draft 2020 Vertical Merger Guidelines. We commend the agencies for updating the 1984 non-horizontal merger guidelines by recognizing the substantial advances in economic thinking about vertical mergers in the thirty-five years since those guidelines were issued. Our comments emphasize four issues: (i) the treatment of the elimination of double marginalization (“EDM”), particularly that the draft vertical merger guidelines appear inappropriately to make proof of cognizability part of the agencies burden and that they appear to inappropriately treat the merging firm’s failure to have eliminated double marginalization pre-merger as proof that the merger would lead to EDM and that the post-merger EDM would be merger-specific; (ii) the seemingly arbitrary and inappropriately permissive safe harbor; (iii) the inappropriate (though perhaps unintended) apparent requirement that harms be quantified; and (iv) the inappropriate (though perhaps unintended) apparent requirement that the agencies show that foreclosure would not have been profitable before the merger. We are concerned that these features of the draft Guidelines will lead to under-enforcement and false negatives (including under-deterrence).
{"title":"Recommendations and Comments on the Draft Vertical Merger Guidelines","authors":"J. Baker, N. Rose, S. Salop, Fiona M. Scott Morton","doi":"10.2139/ssrn.3543736","DOIUrl":"https://doi.org/10.2139/ssrn.3543736","url":null,"abstract":"These recommendations and comments respond to the request by the Federal Trade Commission and the Department of Justice’s Antitrust Division for public comment on the draft 2020 Vertical Merger Guidelines. We commend the agencies for updating the 1984 non-horizontal merger guidelines by recognizing the substantial advances in economic thinking about vertical mergers in the thirty-five years since those guidelines were issued. Our comments emphasize four issues: (i) the treatment of the elimination of double marginalization (“EDM”), particularly that the draft vertical merger guidelines appear inappropriately to make proof of cognizability part of the agencies burden and that they appear to inappropriately treat the merging firm’s failure to have eliminated double marginalization pre-merger as proof that the merger would lead to EDM and that the post-merger EDM would be merger-specific; (ii) the seemingly arbitrary and inappropriately permissive safe harbor; (iii) the inappropriate (though perhaps unintended) apparent requirement that harms be quantified; and (iv) the inappropriate (though perhaps unintended) apparent requirement that the agencies show that foreclosure would not have been profitable before the merger. We are concerned that these features of the draft Guidelines will lead to under-enforcement and false negatives (including under-deterrence).","PeriodicalId":430354,"journal":{"name":"IO: Empirical Studies of Firms & Markets eJournal","volume":"21 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-02-24","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"127593555","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
With peer-to-peer sharing of durable goods like cars, boats, and condominiums, it is unclear how manufacturers should react. They could seek to encourage these markets or compete against them by offering their own rentals. This work shows why the best business model depends on whether consumer usage rates vary or not. Contrary to what might be expected, this paper shows that manufacturers have an incentive to facilitate transactions of P2P rental markets in a large variety of cases. We find that when consumer variation in usage rates is intermediate, the manufacturer is surprisingly best off avoiding offering its own direct rentals option and instead, facilitating a peer-to-peer rental market where consumers can share among themselves. The reason for this is an effect unique to the sharing economy, the equalizing effect. The equalizing effect shows that peer-to-peer rentals uniquely make previously heterogeneous willingness-to-pay among consumers more similar, making it easier for the firm to discriminate between the higher- and lower-value consumers, thus allowing it to extract a higher portion of consumers’ surplus. Surprisingly, there are some cases where peer-to-peer rentals benefit the manufacturer, but consumers are hurt overall (though the lower-usage consumers do always benefit from the availability of peer-to-peer rentals).
{"title":"Business Models in the Sharing Economy: Manufacturing Durable Goods in the Presence of Peer-to-Peer Rental Markets","authors":"Vibhanshu Abhishek, Jose A. Guajardo, Z. Zhang","doi":"10.2139/ssrn.2891908","DOIUrl":"https://doi.org/10.2139/ssrn.2891908","url":null,"abstract":"With peer-to-peer sharing of durable goods like cars, boats, and condominiums, it is unclear how manufacturers should react. They could seek to encourage these markets or compete against them by offering their own rentals. This work shows why the best business model depends on whether consumer usage rates vary or not. Contrary to what might be expected, this paper shows that manufacturers have an incentive to facilitate transactions of P2P rental markets in a large variety of cases. We find that when consumer variation in usage rates is intermediate, the manufacturer is surprisingly best off avoiding offering its own direct rentals option and instead, facilitating a peer-to-peer rental market where consumers can share among themselves. The reason for this is an effect unique to the sharing economy, the equalizing effect. The equalizing effect shows that peer-to-peer rentals uniquely make previously heterogeneous willingness-to-pay among consumers more similar, making it easier for the firm to discriminate between the higher- and lower-value consumers, thus allowing it to extract a higher portion of consumers’ surplus. Surprisingly, there are some cases where peer-to-peer rentals benefit the manufacturer, but consumers are hurt overall (though the lower-usage consumers do always benefit from the availability of peer-to-peer rentals).","PeriodicalId":430354,"journal":{"name":"IO: Empirical Studies of Firms & Markets eJournal","volume":"25 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-02-10","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"123236072","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2020-02-01DOI: 10.5089/9781513526379.001
Reda Cherif, Sandesh Dhungana, X. Fang, Jesus R. Gonzalez-Garcia, M. Mendes, Yuanchen Yang, M. Yenice, Jung Eun Yoon
Does greater product market competition improve external competitiveness and growth? This paper examines this question by using country-and firm-level data for a sample of 39 sub-Saharan African countries over 2000–17, as well as other emerging market economies and developing countries, and finds that an improvement in domestic competition is associated with a signficant increase in real GDP per capita growth rate, achieved mainly through an improvement in export competitiveness and productivity growth. Price levels, including of essential items, are also generally lowered with an increase in competition. Moreover, at the firm-level, evidence shows that greater competition—proxied through a decline in corporate market power—is associated with an increase in firm’s investment and the labor’s share in output. These effects are more pronounced in the manufacturing sector and among domestic firms compared to foreign firms.
{"title":"Competition, Competitiveness and Growth in Sub-Saharan Africa","authors":"Reda Cherif, Sandesh Dhungana, X. Fang, Jesus R. Gonzalez-Garcia, M. Mendes, Yuanchen Yang, M. Yenice, Jung Eun Yoon","doi":"10.5089/9781513526379.001","DOIUrl":"https://doi.org/10.5089/9781513526379.001","url":null,"abstract":"Does greater product market competition improve external competitiveness and growth? This paper examines this question by using country-and firm-level data for a sample of 39 sub-Saharan African countries over 2000–17, as well as other emerging market economies and developing countries, and finds that an improvement in domestic competition is associated with a signficant increase in real GDP per capita growth rate, achieved mainly through an improvement in export competitiveness and productivity growth. Price levels, including of essential items, are also generally lowered with an increase in competition. Moreover, at the firm-level, evidence shows that greater competition—proxied through a decline in corporate market power—is associated with an increase in firm’s investment and the labor’s share in output. These effects are more pronounced in the manufacturing sector and among domestic firms compared to foreign firms.","PeriodicalId":430354,"journal":{"name":"IO: Empirical Studies of Firms & Markets eJournal","volume":"270 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-02-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"132749733","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Understanding the key drivers of prices and energy consumption is an important issue, which is complicated because the distributions of prices and consumption are asymmetric and fat-tailed. That is, the sets of relevant covariates can vary depending on the segment of interest in the conditional distributions of price and demand. Using a large data set from the Electric Reliability Council of Texas, this study uses quantile regressions and attendant variable selection methods to choose the most important factors that influence demand and price distributions; subsequently, the marginal effects of these factors are studied. Among the many findings, two critical ones are that the marginal effects of the covariates change throughout the distributions of demand and price, and that the number of relevant variables selected using mean regressions generally exceeds the number selected using quantile regressions. Related consequences for maintaining a reliable electricity market are discussed.
{"title":"Estimating Marginal Effects of Key Factors that Influence Wholesale Electricity Demand and Price Distributions in Texas via Quantile Variable Selection Methods","authors":"Tahir Ekin, P. Damien, J. Zarnikau","doi":"10.21314/JEM.2020.202","DOIUrl":"https://doi.org/10.21314/JEM.2020.202","url":null,"abstract":"Understanding the key drivers of prices and energy consumption is an important issue, which is complicated because the distributions of prices and consumption are asymmetric and fat-tailed. That is, the sets of relevant covariates can vary depending on the segment of interest in the conditional distributions of price and demand. Using a large data set from the Electric Reliability Council of Texas, this study uses quantile regressions and attendant variable selection methods to choose the most important factors that influence demand and price distributions; subsequently, the marginal effects of these factors are studied. Among the many findings, two critical ones are that the marginal effects of the covariates change throughout the distributions of demand and price, and that the number of relevant variables selected using mean regressions generally exceeds the number selected using quantile regressions. Related consequences for maintaining a reliable electricity market are discussed.","PeriodicalId":430354,"journal":{"name":"IO: Empirical Studies of Firms & Markets eJournal","volume":"29 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-01-24","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"131503463","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
In this paper, I present a framework for GVC‐oriented industrial policy that merges the so‐called GVC perspective and the so‐called developmentalist perspective—the latter of which is a perspective that industrial policy is most often analysed through, but has been somewhat neglected by the GVC perspective. I argue that the GVC perspective too quickly dismisses the relevance of industrial policy in the East Asian development experience, particularly those in South Korea and Taiwan between roughly 1960 and 1990. By drawing on the industrialisation experiences of these two countries, my framework for industrial policy suggests that the GVC perspective's ideas for industrial policy would be strengthened by more clearly acknowledging the continued importance of three observations by the developmentalist perspective: (a) the need for governments in developing countries to bargain with foreign investors for the purpose of domestic industrialisation; (b) policy design should not only focus on increasing exports, but also focus on replacing some imports with domestic production; and (c) linking up to the value chains of transnational corporations based in high‐income countries can bring about some benefits, but ultimately, successful industrialisation necessitates a degree of competing with transnational corporations. State‐owned enterprises have historically played an important role in this respect.
{"title":"Industrial Policy in the Era of Global Value Chains: Towards a Developmentalist Framework Drawing on the Industrialisation Experiences of South Korea and Taiwan","authors":"J. Hauge","doi":"10.1111/twec.12922","DOIUrl":"https://doi.org/10.1111/twec.12922","url":null,"abstract":"In this paper, I present a framework for GVC‐oriented industrial policy that merges the so‐called GVC perspective and the so‐called developmentalist perspective—the latter of which is a perspective that industrial policy is most often analysed through, but has been somewhat neglected by the GVC perspective. I argue that the GVC perspective too quickly dismisses the relevance of industrial policy in the East Asian development experience, particularly those in South Korea and Taiwan between roughly 1960 and 1990. By drawing on the industrialisation experiences of these two countries, my framework for industrial policy suggests that the GVC perspective's ideas for industrial policy would be strengthened by more clearly acknowledging the continued importance of three observations by the developmentalist perspective: (a) the need for governments in developing countries to bargain with foreign investors for the purpose of domestic industrialisation; (b) policy design should not only focus on increasing exports, but also focus on replacing some imports with domestic production; and (c) linking up to the value chains of transnational corporations based in high‐income countries can bring about some benefits, but ultimately, successful industrialisation necessitates a degree of competing with transnational corporations. State‐owned enterprises have historically played an important role in this respect.","PeriodicalId":430354,"journal":{"name":"IO: Empirical Studies of Firms & Markets eJournal","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-01-17","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"130990352","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Research summary. We examine how interactions among a firm’s capabilities influence the extent and direction of firm adaptation under conditions of demand-side change. Our empirical context is the U.S. defense industry, within which we study firms receiving defense-related Small Business Innovation Research (SBIR) awards around September 11, 2001, an event which constituted an exogenous demand-side shock in which technology-related preferences of customers were reshuffled. We find that under demand-side change, pre-existing customer relationships have a double-edged effect: they facilitate “extension-based” adaptation when interacted with technology capabilities experiencing a decline in customer preferences, and they hinder “novelty-based” adaptation when interacted with technology capabilities experiencing an increase in such preferences. We also find that both types of technological capabilities together facilitate adaptation along the extension and novelty paths.
Managerial summary. Demand-side change, in which customer preferences for particular technologies are reshuffled, occurs in many industry settings. A deeper understanding of the factors shaping firm adaptation under this form of change can influence managers’ decisions to implement strategies to plan for and react to such change. Using a sample of firms receiving defense-related Small Business Innovation Research (SBIR) awards around September 11, 2001, we show that the customer relationships a firm develops prior to demand-side change can have a double-edged effect on firm adaptation. Such relationships facilitate “extension-based” adaptation when combined with technology capabilities declining in customer preferences and hinder “novelty-based” adaptation when combined with technology capabilities increasing in customer preferences. In addition, the combination of the two technological capability types facilitates adaptation along both paths.
{"title":"Capability Interactions and Adaptation to Demand-Side Change","authors":"Tang Wang, Vikas A. Aggarwal, Brian Wu","doi":"10.2139/ssrn.3502116","DOIUrl":"https://doi.org/10.2139/ssrn.3502116","url":null,"abstract":"Research summary. We examine how interactions among a firm’s capabilities influence the extent and direction of firm adaptation under conditions of demand-side change. Our empirical context is the U.S. defense industry, within which we study firms receiving defense-related Small Business Innovation Research (SBIR) awards around September 11, 2001, an event which constituted an exogenous demand-side shock in which technology-related preferences of customers were reshuffled. We find that under demand-side change, pre-existing customer relationships have a double-edged effect: they facilitate “extension-based” adaptation when interacted with technology capabilities experiencing a decline in customer preferences, and they hinder “novelty-based” adaptation when interacted with technology capabilities experiencing an increase in such preferences. We also find that both types of technological capabilities together facilitate adaptation along the extension and novelty paths.<br> <br>Managerial summary. Demand-side change, in which customer preferences for particular technologies are reshuffled, occurs in many industry settings. A deeper understanding of the factors shaping firm adaptation under this form of change can influence managers’ decisions to implement strategies to plan for and react to such change. Using a sample of firms receiving defense-related Small Business Innovation Research (SBIR) awards around September 11, 2001, we show that the customer relationships a firm develops prior to demand-side change can have a double-edged effect on firm adaptation. Such relationships facilitate “extension-based” adaptation when combined with technology capabilities declining in customer preferences and hinder “novelty-based” adaptation when combined with technology capabilities increasing in customer preferences. In addition, the combination of the two technological capability types facilitates adaptation along both paths.<br>","PeriodicalId":430354,"journal":{"name":"IO: Empirical Studies of Firms & Markets eJournal","volume":"292 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-12-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"129452584","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
M. M. Tunç, Huseyin Cavusoglu, Srinivasan Raghunathan
We examine two-sided adverse selection in a sharing economy context where a platform matches service providers with consumers and both providers and consumers derive heterogeneous payoffs depending on whom they are matched with. Unlike the more prevalent unilateral review scheme in which only consumers rate providers, many sharing economy platforms use a bilateral review scheme in which both consumers and providers rate each other to reduce the information asymmetry on both sides of the market and to facilitate superior matches. However, we show that the bilateral review scheme does not necessarily lead to a higher social welfare than either the unilateral review scheme or the no review scheme. If the proportion of the low-cost consumers is less than a threshold, consumers are better off, the platform is worse off, and the providers are worse off under the bilateral review scheme than the unilateral review scheme. The key driver for these results is that the price competition between providers for the low-cost consumers can be fundamentally different under the different review schemes; the price competition affects the consumer preference for a provider and hence the match between consumers and providers, which ultimately determines the payoffs to participants and the social welfare. Our results highlight the importance of addressing the consumer-side adverse selection first to eliminate a market failure even in the sharing economy context. Our findings also contribute to the adverse selection literature by identifying the critical role played by demand and supply conditions on the impact of adverse selection.
{"title":"Two-Sided Adverse Selection and Bilateral Reviews in Sharing Economy","authors":"M. M. Tunç, Huseyin Cavusoglu, Srinivasan Raghunathan","doi":"10.2139/ssrn.3499979","DOIUrl":"https://doi.org/10.2139/ssrn.3499979","url":null,"abstract":"We examine two-sided adverse selection in a sharing economy context where a platform matches service providers with consumers and both providers and consumers derive heterogeneous payoffs depending on whom they are matched with. Unlike the more prevalent unilateral review scheme in which only consumers rate providers, many sharing economy platforms use a bilateral review scheme in which both consumers and providers rate each other to reduce the information asymmetry on both sides of the market and to facilitate superior matches. However, we show that the bilateral review scheme does not necessarily lead to a higher social welfare than either the unilateral review scheme or the no review scheme. If the proportion of the low-cost consumers is less than a threshold, consumers are better off, the platform is worse off, and the providers are worse off under the bilateral review scheme than the unilateral review scheme. The key driver for these results is that the price competition between providers for the low-cost consumers can be fundamentally different under the different review schemes; the price competition affects the consumer preference for a provider and hence the match between consumers and providers, which ultimately determines the payoffs to participants and the social welfare. Our results highlight the importance of addressing the consumer-side adverse selection first to eliminate a market failure even in the sharing economy context. Our findings also contribute to the adverse selection literature by identifying the critical role played by demand and supply conditions on the impact of adverse selection.","PeriodicalId":430354,"journal":{"name":"IO: Empirical Studies of Firms & Markets eJournal","volume":"61 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-12-07","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"127001150","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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