Beyond Coase: Emerging Technologies and Property Theory

In addition to prompting the development of the Coase Theorem, Ronald Coase’s landmark 1959 article on the Federal Communications Commission touched off a revolution in spectrum policy. Although one of Coase’s proposed reforms (that spectrum should be allocated through markets) has now become the conventional wisdom, his other principal recommendation (that governments stop dedicating portions of the spectrum to particular uses) has yet to be fully embraced. Drawing on spectrum as well as Internet traffic and electric power as examples, this Article argues that emerging technologies often reflect qualities that make defining property rights particularly difficult. These include the cumulative nature of interference, the presence of significant interdependencies, and the presence of significant geographic discontinuities in interference patterns, exacerbated by the localized nature of information. These technological considerations define the natural boundaries of property by creating transaction-free zones that must be encompassed within a single parcel. They also complicate defining property rights by making it difficult to identify and attribute harm to particular sources of interference. These challenges can make governance a more attractive solution than exclusion. Other commentators have suggested that the failure of creating well-defined property rights in spectrum support wider use of open access regimes, citing the work of Elinor Ostrom and Michael Heller, or arguing that spectrum is not scarce. Ostrom’s work points out that governance of common property requires features that are quite inconsistent with open access, including a finely tailored and unequal allocation mechanism, strict internal monitoring, strong property protection to prevent outside interference, stability, and homogeneity. Heller’s theory of the anticommons is sometimes misinterpreted as being hostile towards property. Instead, it is better understood as condemning giving exclusionary rights in the same piece of property to multiple owners, all of whom must agree on any major decision. The primary solution to the anticommons is not open access, but rather unitization of the interests in a single owner. Moreover, bargaining over an anticommons is also properly modeled through the chicken (or snowdrift) game, which has more of a zero-sum, all-or-nothing quality, rather than opportunities for cooperation frustrated by a lack of trust that characterize the prisoner’s dilemma and traditional holdout behavior. The final argument, that spectrum is not scarce, simply cannot be squared with Shannon’s Law. Instead the solution may lie in reconfiguring rights to increase owners’ ability to bargain towards workable solutions. A market maker controlling sufficient property and able to integrate local information could design a mechanism that can solve some of these problems. Property could also be reconfigured to provide more of the primitives needed to write effective contracts. Finally, these challenges, as well as the need to reduce information costs on third parties, provide an explanation for the persistence of use restrictions. In addition, continuing the fiction of government ownership of the spectrum may make it easier to reconfigure rights when necessary

Beyond Coase: Emerging Technologies and Property Theory

In addition to prompting the development of the Coase Theorem, Ronald Coase’s landmark 1959 article on the Federal Communications Commission touched off a revolution in spectrum policy. Although one of Coase’s proposed reforms (that spectrum should be allocated through markets) has now become the conventional wisdom, his other principal recommendation (that governments stop dedicating portions of the spectrum to particular uses) has yet to be fully embraced. Drawing on spectrum as well as Internet traffic and electric power as examples, this Article argues that emerging technologies often reflect qualities that make defining property rights particularly difficult. These include the cumulative nature of interference, the presence of significant interdependencies, and the presence of significant geographic discontinuities in interference patterns, exacerbated by the localized nature of information. These technological considerations define the natural boundaries of property by creating transaction-free zones that must be encompassed within a single parcel. They also complicate defining property rights by making it difficult to identify and attribute harm to particular sources of interference. These challenges can make governance a more attractive solution than exclusion. Other commentators have suggested that the failure of creating well-defined property rights in spectrum support wider use of open access regimes, citing the work of Elinor Ostrom and Michael Heller, or arguing that spectrum is not scarce. Ostrom’s work points out that governance of common property requires features that are quite inconsistent with open access, including a finely tailored and unequal allocation mechanism, strict internal monitoring, strong property protection to prevent outside interference, stability, and homogeneity. Heller’s theory of the anticommons is sometimes misinterpreted as being hostile towards property. Instead, it is better understood as condemning giving exclusionary rights in the same piece of property to multiple owners, all of whom must agree on any major decision. The primary solution to the anticommons is not open access, but rather unitization of the interests in a single owner. Moreover, bargaining over an anticommons is also properly modeled through the chicken (or snowdrift) game, which has more of a zero-sum, all-or-nothing quality, rather than opportunities for cooperation frustrated by a lack of trust that characterize the prisoner’s dilemma and traditional holdout behavior. The final argument, that spectrum is not scarce, simply cannot be squared with Shannon’s Law. Instead the solution may lie in reconfiguring rights to increase owners’ ability to bargain towards workable solutions. A market maker controlling sufficient property and able to integrate local information could design a mechanism that can solve some of these problems. Property could also be reconfigured to provide more of the primitives needed to write effective contracts. Finally, these challenges, as well as the need to reduce information costs on third parties, provide an explanation for the persistence of use restrictions. In addition, continuing the fiction of government ownership of the spectrum may make it easier to reconfigure rights when necessary

Electronic word of mouth in online social networks: strategies for coping with opportunities and challenges

In today's world, the widespread success of the Internet, social media, and online social networks (OSN) provide the basis for electronic word of mouth (EWOM). EWOM can be seen as a digital enhancement of traditional word of mouth that makes communication more efficient and involves less effort by its users. The resulting speed of diffusion and information transparency have caused transformative changes in consumer behaviour in all types of markets, which requires the development of new business strategies for adequately dealing with the new circumstances. This doctoral dissertation is divided into three overall subject areas that concern the investigation of capable strategies for coping with the emerged opportunities and challenges of EWOM in OSN. The first subject area concerns negative electronic word of mouth in OSN and investigates capable countermeasure strategies for firms to adequately address claims of unsatisfied customers. For this, three simulation studies are conducted in which the propagation of a negative message and its countering by a positive message published by the firm are numerically analysed. The results reveal that, in general, the persuasiveness of a firm's response is more important than a quick response with a less persuasive counter-message. To some extent, this also holds if the number of OSN members who initially disseminate the counter-message on behalf of the firm is increased. In the second subject area, an optimisation model for individualised pricing is developed for an online store whose customers are interconnected in an OSN and can share price information via EWOM. The model is solved numerically by artificial intelligence solution methods. The results indicate that personalised prices can be financially worthwhile even under price transparency. The third subject area investigates market entry strategies for social media apps and services that are advertised in an OSN for acquiring new users and examines the role of EWOM in this context. A diffusion model is developed and analysed numerically by simulation. Three different targeting approaches are compared to each other regarding their ability to reach a high share of active users in the OSN: (1) a random marketing strategy, where randomly chosen members in the OSN are presented the advertisement, (2) cluster marketing, where whole clusters of members who are densely connected to each other are simultaneously shown the advertisement, and (3) influencer marketing, where the most influential users in the OSN are selected to share sponsored posts about the app in the OSN. The results suggest that EWOM can have detrimental effects if OSN members are too early informed about the app or service. If the information about the app reaches clusters in the OSN prematurely where a sufficient level of activity is not present yet, it can deplete the excitement of the users. The lack of excitement, in turn, can significantly reduce the effect of subsequent marketing campaigns. However, if applied appropriately, a higher level of EWOM about the app or service can increase the performance of the random marketing strategy to the extent that it outperforms cluster and influencer marketing