The Economics of Internet Search

This lecture provides an introduction to the economics of Internet search engines. After a brief review of the historical development of the technology and the industry, I describe some of the economic features of the auction system used for displaying ads. It turns out that some relatively simple economic models provide significant insight into the operation of these auctions. In particular, the classical theory of two-sided matching markets turns out to be very useful in this context.

Are there Psychological Barriers in the Dow-Jones Index?

The popular press attaches particular significance to certain numerical values of the Dow-Jones index. These magic numbers are referred to as `resistance levels' or `psychological barriers.' We examine 38 years of closing values of this index to see if it is of any help in predicting future stock market returns.Dow-Jones index, psychological barriers, resistance levels, market efficiency

Improving revealed preference bounds on demand responses

There are three key dimensions by which revealed preference bounds on consumer demand responses can be improved. The first relates to the improvements that arise from using expansion paths for given relative prices, E-bounds. The second concerns the addition of new price information. Thirdly, there are improvements due to assuming separability. Our previous research has examined the first two cases. In this article, we show how to impose separability assumptions within a fully nonparametric analysis and distinguish between weak and homothetic separability. We also apply these ideas to the analysis of demand responses using United Kingdom household level data

Contidioning Prices on Purchase History

Many transactions are now computer mediated, making it possible for sellers to condition their pricing on the history of interactions with individual consumers. This paper investigates conditions under which price conditioning will or will not be used. Our simplest model involves rational consumers with constant valuations for the good being sold and a monopoly seller who can commit to a pricing policy. In this framework, the seller will not find it profitable to condition pricing on past behavior. We consider various generalizations of this model, such as allowing the seller to offer enhanced services to previous customers, making the seller unable to commit to a pricing policy, and allowing competition in the marketplace. All of these generalizations have equilibria with price conditioning.Price discrimination, Price conditioning, Privacy, Ecommerce

The Combinatorial World (of Auctions) According to GARP

Revealed preference techniques are used to test whether a data set is compatible with rational behaviour. They are also incorporated as constraints in mechanism design to encourage truthful behaviour in applications such as combinatorial auctions. In the auction setting, we present an efficient combinatorial algorithm to find a virtual valuation function with the optimal (additive) rationality guarantee. Moreover, we show that there exists such a valuation function that both is individually rational and is minimum (that is, it is component-wise dominated by any other individually rational, virtual valuation function that approximately fits the data). Similarly, given upper bound constraints on the valuation function, we show how to fit the maximum virtual valuation function with the optimal additive rationality guarantee. In practice, revealed preference bidding constraints are very demanding. We explain how approximate rationality can be used to create relaxed revealed preference constraints in an auction. We then show how combinatorial methods can be used to implement these relaxed constraints. Worst/best-case welfare guarantees that result from the use of such mechanisms can be quantified via the minimum/maximum virtual valuation function

Taxation of Asset Income in the Presence of a World Securites Market

This paper shows, using a standard CAPM model of security prices in a world market, that even small countries can affect the price of domestically issued risky securities, while large countries can affect the prices of all securities. As a result, countries have the incentive to set tax rates such that in equilibrium investors specialize in domestic securities, and net capital flows between countries are restricted. Each country does this to increase the utility of domestic residents, taking as given the tax policies of other governments, but the net outcome is a reduction in world efficiency and likely a reduction in the utility of all individuals.

The economics of Edwardian imperial preference: what can New Zealand reveal?

In the Edwardian era, the British Dominions adopted policies of imperial preference, amid a period of rising imports from the United States and industrial Continental Europe. Hitherto, there has been no econometric assessment of whether these policies produced an intra-Empire trade diversion, as intended. This paper focuses on New Zealand’s initial policy of imperial preference, codified in the Preferential and Reciprocal Trade Act of 1903. New Zealand’s policy was unique insofar as it extended preference to only certain commodities. Using a commodity panel regression, this paper exploits the cross-commodity variation in the extension of preference, but finds no statistically significant effect of preference on either the Empire share or, specifically, the British share of New Zealand’s imports. This finding is corroborated by an alternative empirical approach involving propensity-score matching

Elastic Multi-resource Network Slicing: Can Protection Lead to Improved Performance?

In order to meet the performance/privacy requirements of future data-intensive mobile applications, e.g., self-driving cars, mobile data analytics, and AR/VR, service providers are expected to draw on shared storage/computation/connectivity resources at the network "edge". To be cost-effective, a key functional requirement for such infrastructure is enabling the sharing of heterogeneous resources amongst tenants/service providers supporting spatially varying and dynamic user demands. This paper proposes a resource allocation criterion, namely, Share Constrained Slicing (SCS), for slices allocated predefined shares of the network's resources, which extends the traditional alpha-fairness criterion, by striking a balance among inter- and intra-slice fairness vs. overall efficiency. We show that SCS has several desirable properties including slice-level protection, envyfreeness, and load driven elasticity. In practice, mobile users' dynamics could make the cost of implementing SCS high, so we discuss the feasibility of using a simpler (dynamically) weighted max-min as a surrogate resource allocation scheme. For a setting with stochastic loads and elastic user requirements, we establish a sufficient condition for the stability of the associated coupled network system. Finally, and perhaps surprisingly, we show via extensive simulations that while SCS (and/or the surrogate weighted max-min allocation) provides inter-slice protection, they can achieve improved job delay and/or perceived throughput, as compared to other weighted max-min based allocation schemes whose intra-slice weight allocation is not share-constrained, e.g., traditional max-min or discriminatory processor sharing

Economic FAQs About the Internet

This is a set of Frequently Asked Questions (and answers) about the economic, institutional, and technological structure of the Internet. We describe the history and current state of the Internet, discuss some of the pressing economic and regulatory problems, and speculate about future developments.Internet, telecommunications, congestion pricing, National Information Infrastructure

The revealed comparative advantages of late-Victorian Britain

This paper calculates indicators of revealed comparative advantage (RCA) and revealed symmetric comparative advantage (RSCA) for 17 British manufacturing industries for the years 1880, 1890, and 1900. The resulting indicators show that the late-Victorian ‘workshop of the world’ was at a marked comparative disadvantage in a number of manufacturing industries. The paper then proceeds to identify the factor determinants of Britain’s manufacturing comparative advantages (disadvantages) using a fourfactor Heckscher-Ohlin model that relies upon these indicators. In contrast with previous scholarship, the manufacturing comparative advantages of late-Victorian Britain were in the relatively labour nonintensive industries, and this pattern became more pronounced throughout the period. The paper concludes with the observation that the factor determinants of Britain’s manufacturing comparative advantages appear closer to those of the United States than had traditionally been thought