Essays on value creation in online marketplaces

This dissertation consists of three essays that study the transformative impact of new information technologies under three specific contexts using both empirical and theoretical approaches. Chapter 2 examines the online review system, which is the new type of information technology that replaces the traditional word-of-mouth communication. Particularly, we study the practice of the platform owner that uses monetary incentives to attract reviewers. The research problem is important as firms, which seek to strengthen their online review platforms, have considered various forms of incentives, including extrinsic rewards, to encourage users to write reviews. We encountered a natural experiment design where one review platform suddenly started offering monetary incentives for writing reviews. Along with data from Amazon.com and using the difference-in-differences approach, we compare the quantity and quality of reviews before and after rewards were introduced in the treated platform. We find that reviews are significantly more positive but the quality decreases. Taking advantage of the panel data, we also evaluate the effect of rewards on existing reviewers. We find that their level of participation after monetary incentives decreases, but not their quality of participation. Lastly, even though the platform enjoys an increase in the number of new reviewers, disproportionately more reviews appear to be written for highly rated products. In Chapter 3, we investigate the economic implications of the new online communication system that has become increasing popular in recent years. This system allows consumers to ask and answer questions regarding the products that are available on the platform. It typically co-exists with the standard online review system where consumers share their own experience of the products. Although several websites adopt this Q&A system or even replace the standard review system with it, the economic implications of such a Q&A system have not been studied in the previous literature. We collected the data from two online shopping platforms and employed the difference-in-differences approach to empirically examine the effect of question & answer elements, which exist only on one platform, on product sales. Interestingly, we find that, controlling for everything else, question elements negatively affect product sales while answer elements, particularly the depth of the answers, have a positive impact on sales. However, as we focus on the initial sales, it turns out that the number of questions and the fraction of questions that have at least one answer positively influence the sales. We also find that there is an interaction between Q&A elements and review elements, in that an increase in the number of questions seems to be positively correlated with an increase in the number of reviews in the following period. Meanwhile, an increase in the number of answers appears to reduce the average review length in the subsequent period. Our findings suggest that incorporating the question & answer system could be a potential approach to drive sales. However, it is crucially important for managers to develop appropriate policies to gather necessary answers to questions asked on the platform in order to capitalize on such a system. In Chapter 4, we provide an analysis of a two-sided platform, which becomes a dominant framework adopted by new Information Technology platforms such as Uber and Airbnb. We develop a game-theoretic model featuring a platform owner who acts as an intermediary that services two types of users to examine the influence of incentive policies the platform owner enforces. Specifically, our main interest is to study the implication of the incentive policy on user behavior and welfare metrics. We find that although the seller welfare always increases with the amount of incentives given by the platform, an adjustment of the incentive allocation policy can also yield similar results in many scenarios. In addition, there exists a case where the platform can increase both the seller welfare and its own welfare without increasing the amount of incentives

The influence of Twitch and sustainability on the stock returns of video game companies: before and after COVID-19

The covid-19 pandemic has shocked society greatly, causing many changes in people's lives. One of these changes relates to leisure and how we relate to others. Videogames became one of the first entertainment options during the pandemic, making the video game industry and the pharmaceutical industry-one of the least affected by economic slowdown. This study analyzes how Twitch and sustainability jointly influence the stock returns of major videogame companies before and during Covid-19 using panel fsQCA analysis. The results show a positive relationship between Twitch, sustainability, and stock returns in video game companies, but this relationship differs yearly, being stronger during the Covid-19 periodS

Startup dilemmas - Strategic problems of early-stage platforms on the internet

siirretty Doriast

Market definition of multi-sided platforms in European Union competition law: Theory and practice

Multi-sided platforms are firms which, by acting as intermediaries, enable interaction of distinct but related consumer groups. They operate on two-sided markets that are characterised by indirect network effects and create added value by internalising these network effects. The Internet and the development of information and communication technology have contributed to their growth and today the most valuable firms in the world by market capitalisation are platforms firms. Despite the vast economic literature, the effects of platforms to competition law, however, remain ambiguous. In my thesis, I study multi-sided platforms in the European Union competition law. By using methods of law and economics, I focus especially on the question of how the relevant market in two-sided markets should be defined for the purposes of assessment of market power and competitive effects. I present the economic theory underlying competition law and two-sided markets and, in the light of that theory, discuss the role and tools of market definition in antitrust analysis of platforms. I further analyse the Court of Justice's seminal rulings in Groupement des cartes bancaires and MasterCard, which concerned the two-sided nature of payment card systems, and discuss their implications for the EU competition law. Although the Court of Justice has not explicitly discussed market definition in two-sided markets, its case law leaves no doubt that the two-sided nature of platforms matter for their competitive analysis under the EU competition rules. I propose that the European Commission should clarify its practice on certain questions of market definition relating particularly to when a ‘single’ two-sided market and when two separate but ‘interrelated’ markets should be defined, how to adjust the SSNIP test to take network effects into account and how to define the relevant market in the presence of a zero price on one side of the platform. I present my own recommendations for these practices and contribute to the debate on the subject which is currently of particular interest as the Commission is renewing its Notice on Market Definition.Monenpuoliset alustat ovat yrityksiä, jotka toimien välittäjinä mahdollistavat erillisten mutta toisistaan riippuvaisten kuluttajaryhmien välisen vuorovaikutuksen. Ne toimivat kaksipuolisilla markkinoilla, joilla on epäsuoria verkostovaikutuksia, ja luovat lisäarvoa sisäistämällä nämä verkostovaikutukset. Internet sekä tieto- ja viestintätekniikan kehitys ovat myötävaikuttaneet niiden kasvuun ja nykyään markkina-arvoltaan maailman arvokkaimmat yritykset ovat alustayrityksiä. Laajasta taloustieteellisestä kirjallisuudesta huolimatta alustojen vaikutukset kilpailuoikeuteen ovat kuitenkin yhä moniselitteisiä. Tutkielmassani tarkastelen monenpuolisia alustoja Euroopan unionin kilpailuoikeudessa. Keskityn oikeustaloustieteen menetelmiä hyödyntäen erityisesti kysymykseen siitä kuinka merkitykselliset markkinat tulisi määritellä kaksipuolisilla markkinoilla markkinavoiman ja kilpailuvaikutusten arvioinnin tarkoituksia varten. Esittelen kilpailuoikeuden ja kaksipuolisten markkinoiden pohjana olevan talousteorian ja keskustelen sen valossa markkinamäärittelyn roolista ja välineistä alustojen kilpailuoikeudellisessa tarkastelussa. Analysoin lisäksi unionin tuomioistuimen merkittäviä ratkaisuja tapauksissa Groupement des Cartes Bancaires ja MasterCard, jotka koskivat maksukorttijärjestelmien kaksipuolista luonnetta, ja keskustelen näiden vaikutuksista EU:n kilpailuoikeuteen. Vaikka unionin tuomioistuin ei ole eksplisiittisesti käsitellyt markkinoiden määrittelyä kaksipuolisilla markkinoilla, sen oikeuskäytäntö ei jätä epäilystäkään siitä, että alustojen kaksipuolisella luonteella on merkitystä niiden kilpailuoikeudelliselle tarkastelulle EU:n kilpailuoikeussääntöjen mukaan. Esitän, että Euroopan komission tulisi selkeyttää käytäntöään tietyissä markkinoiden määrittelyn kysymyksissä, jotka liittyvät erityisesti siihen, milloin ‘yksi’ kaksipuolinen markkina ja milloin kaksi erillistä mutta ‘toisiinsa liittyvää’ markkinaa tulisi määritellä, kuinka SSNIP-testi tulisi muokata huomioimaan verkostovaikutukset ja kuinka relevantit markkinat tulisi määritellä silloin, kun yhdellä puolella alustaa on nollahinnat. Esitän omat suositukseni näiksi käytännöiksi ja osallistun keskusteluun aiheesta, joka on tällä hetkellä erityisen kiinnostuksen kohteena, sillä komissio on uudistamassa tiedonantonsa merkityksellisten markkinoiden määritelmästä

Privacy as a Public Good

Privacy is commonly studied as a private good: my personal data is mine to protect and control, and yours is yours. This conception of privacy misses an important component of the policy problem. An individual who is careless with data exposes not only extensive information about herself, but about others as well. The negative externalities imposed on nonconsenting outsiders by such carelessness can be productively studied in terms of welfare economics. If all relevant individuals maximize private benefit, and expect all other relevant individuals to do the same, neoclassical economic theory predicts that society will achieve a suboptimal level of privacy. This prediction holds even if all individuals cherish privacy with the same intensity. As the theoretical literature would have it, the struggle for privacy is destined to become a tragedy. But according to the experimental public-goods literature, there is hope. Like in real life, people in experiments cooperate in groups at rates well above those predicted by neoclassical theory. Groups can be aided in their struggle to produce public goods by institutions, such as communication, framing, or sanction. With these institutions, communities can manage public goods without heavy-handed government intervention. Legal scholarship has not fully engaged this problem in these terms. In this Article, we explain why privacy has aspects of a public good, and we draw lessons from both the theoretical and the empirical literature on public goods to inform the policy discourse on privacy

Stability in a network economy: The role of institutions

We consider an economy in which agents are embedded in a network of potential value-generating relationships. Agents are assumed to be able to participate in three types of economic interactions: Autarkic self-provision; bilateral interaction; and multilateral collaboration through endogenously provided platforms. We introduce two stability concepts and provide sufficient and necessary conditions on the network structure that guarantee existence, in cases of the absence of externalities, link-based externalities and crowding externalities. We show that institutional arrangements based on socioeconomic roles and leadership guarantee stability. In particular, the stability of more complex economic outcomes requires more strict and complex institutional rules to govern economic interactions. We investigate strict social hierarchies, tiered leadership structures and global market places