Essays on Industrial Organization and the Digital Economy
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CitationJin, Yizhou. 2019. Essays on Industrial Organization and the Digital Economy. Doctoral dissertation, Harvard University, Graduate School of Arts & Sciences.
AbstractThis dissertation consists of three chapters related to industrial organization and the economic impact of data collection by firms in various industries.
The first two chapters studies the economic impact of direct transactions of consumer data in the context of auto-insurance monitoring programs, in which insurers incentivize consumers to have their driving behavior monitored for a short period of time. I acquire proprietary datasets from a major U.S. auto insurer that offers a monitoring program. The data is matched with price menus of the firm's main competitors.
The first chapter provides reduced-form evidence that documents that the monitoring program simultaneously led to safer driving while mitigating information asymmetry between the insurer and drivers. In particular, drivers become 30\% safer when monitored, which boosts total surplus and alters the informativeness of the data collected by the firm.
The second chapter develops a structural model of consumers' monitoring opt-in choice in relations to their insurance demand and the cost to insure them. Key parameters are estimated using rich data variation in insurance claims, prices, contract space, and monitoring status. I then conduct counterfactual simulations using a dynamic pricing model that endogenizes the firm's information set. We find two main results. First, safer drivers are more likely to opt in. But monitoring take-up is low due to both consumers' innate preference against being monitored and attractive outside options from other insurers. Nonetheless, introducing monitoring raises both consumer welfare and total surplus. Second, proprietary data facilitate higher markups but protect the firm's ex-ante incentives to produce the data. A counterfactual equilibrium in which the firm must share monitoring data with competitors harms both profit and consumer welfare. This is because the firm offers smaller upfront incentives for monitoring opt-in, so that fewer drivers are monitored in equilibrium.
The third chapter turns to the adoption of data analytics tools by sellers on an e-commerce platform in China. I provide evidence on online firms' decision to acquire information and on the impact of data access on firm strategy and performance. I take advantage of proprietary data from a large e-commerce platform that offers a data analytics product for stores operating on the platform. The product provides detailed and real-time information on traffic sources, customer characteristics, aggregate demand, and competitor strategies. These data are largely proprietary to the platform, and firms need to pay lump-sum fees to access some data. Focusing on several consumer electronics and peripherals markets, I show that firms are very sensitive to the cost of acquiring information, especially small ones. There is also a concentration of information gathering among large incumbent firms, despite a growing popularity across all types of firms. Meanwhile, acquiring information is primarily tied to, and enhances the effect of, product and marketing strategies. I find no evidence that prices are impacted by the information gathered.
Citable link to this pagehttp://nrs.harvard.edu/urn-3:HUL.InstRepos:42106918
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