Broadband Internet and Income Inequality

Digital technologies like the Internet can affect income inequality through increased demand for employment in manual and abstract jobs and reduced demand for employment in routine jobs. In this paper, we combine city-level income distribution and jobs data with broadband data from France to investigate the impact of broadband Internet access on income inequality. Using an instrumental variable estimation strategy, we find that broadband Internet reduces income inequality through increased employment in manual jobs. These effects increase with the availability of skilled workers and are significant in cities with a large service sector or high-speed Internet access. Further, the diffusion of broadband Internet comes with relatively greater benefits in low-income cities compared to high-income cities. Several robustness checks support these findings.

Bundling and Consumer Churn in Telecommunications Markets

In this paper, we analyze how fixed-mobile (quadruple-play) bundling impacts the decision of consumers to churn telecommunications services. We use a database from an European operator of fixed and mobile telecommunications services which includes information about 9.6 million fixed broadband subscribers and 14.2 million mobile subscribers between March 2014 and February 2015. These data is combined with socio-demographic characteristics from each municipality in this country. We find that consumers who bundle fixed and mobile services from the same provider are less likely to churn. Without fixed-mobile bundling the annual churn of fixed broadband consumers would increase from 8.4 to 9.2%. Furthermore, the consumer churn in the mobile market would increase from 11.5 to 13.1%. We conclude that in the current competitive environment in the country considered, bundling has a moderate impact on consumer retention on both fixed and mobile networks.

Competition and Schedule Padding in the US Airline Industry

Disclosure programs can help consumers with limited information about product quality make better purchase decisions. A quality disclosure mandate such as the On-Time Disclosure Rule in the U.S. that requires airlines to provide information on the quality of their products can be beneficial, but can also be counterproductive if it encourages airlines to act deceptively by “gaming” the system. If airlines care about public perceptions of their on-time record, they have an incentive to improve their on-time performance ranking by resorting to unscrupulous means such as padding their schedules beyond normal time required to absorb scheduling stochastic fluctuations. This study investigates the impact of competition on airline schedule padding. We construct a measure for schedule padding under different optimal flight time choices. Using different measures of market structure, we find that more competitive (concentrated) markets are subject to less (more) schedule padding.

The Expansion of Peer-to-Peer Lending

We use data from the two leading US platforms, Prosper and Lending Club, to explore the drivers of the growing consumer demand for peer-to-peer (P2P) credit. Despite the online nature of new entrants, we rely on the spatial autoregressive model because spatial effects play an important role. Our findings suggest that the initial growth of P2P lending was spurred by the global financial crisis, but its growth after 2011 occurred in counties that were underserved by bank branches. The growth of P2P lending is slower in counties with high bank concentration and this factor is the most robust, stable over time and economically important in our study. Counties with lower population density, lower share of educated and young people experience lower growth of P2P lending, consistent with the hypothesis that learning costs deter the entry of new entrants.

The Impact of Mobile Number Portability on Demand Price Elasticities in Sub-Saharan African Countries

This paper examines the effect of mobile number portability (MNP) on own- and cross-price elasticities. We use quarterly data for 27 mobile operators in seven Sub-Saharan Africa countries between 2010Q4 and 2014Q4 to estimate a differentiated products demand model. We find that the implementation of MNP increases price elasticities of demand for mobile services. This increase in price elasticities may be a result of reduction in switching costs between operators. On average, the introduction of MNP increases own-price elasticities by 0.47 in absolute value. We compare the level of price elasticities before and after the implementation of MNP in Ghana and Kenya, which implemented this policy in the time period of our study. Our results suggest that in Ghana, MNP increased own-price elasticities by an average of 0.35 in absolute term from an average of −0.74. In Kenya, the introduction of MNP increased own-price elasticities by an average of 0.21 in absolute term from a lower average of −0.39. However, we find that the average own-price elasticities in Kenya and Ghana remained small even after the implementation of MNP relative to other countries without MNP in place.

Planned Obsolescence with Network Effects

This paper appeals to the interplay between network effects and quality to justify the use of planned obsolescence by well-settled firms. We propose a simple contagion model to analyze an asymmetric duopoly market where an incumbent firm benefits, at least initially, from the first‐mover advantages attributed to network industries, while the entrant offers a product with higher quality. The simpler version of the model describes the evolution of the market shares, showing that network effects can overtake the quality effect if the market is sufficiently small. If the market lasts enough, network effects end up enhancing the effect of quality and the entrant gets a higher market share. If the incumbent can set the size of the market by launching a new product every so often, the model provides a rationale for the use of planned obsolescence from a strategic point of view. Social efficiency is then challenged.

Mobile Telephony in Emerging Markets: The Importance of Dual-SIM Phones

A substantial share of customers in emerging markets use dual-SIM phones and subscribe to two mobile networks. A primary motive for so called multi-simming is to take advantage of cheap on-net services from both networks. In our modelling effort, we augment the seminal model of competing telephone networks á la Laffont, Rey and Tirole (1998b) by a segment of flexible price hunters that may choose to multi-sim. According to our findings, in equilibrium, the networks set a high off-net price in the linear tariffs to achieve segmentation. This induces the price hunters to multi-sim. We show that increased deployment of dual-SIM phones may induce a mixing equilibrium with high expected on-net prices. Thus, somewhat paradoxically, deployment of a technology that increases substitutability, and thereby competition, may end up raising prices.

Network-Mediated Knowledge Spillovers in ICT/Information Security

A large literature has used patent data to measure knowledge spillovers across inventions but few papers have explicitly measured the impact of the collaboration networks formed by inventors on the quality of invention. This paper develops a method to measure the impact of collaboration networks of inventors on invention quality. We apply this methodology to the information and communication technology (ICT) and information security sectors in Israel and find that the quality of Israeli inventions are systematically linked to the structure of the collaborative network in these sectors. We are very grateful to the editor Lukasz Grzybowski and an anonymous referee for very helpful comments and suggestions that significantly improved the paper. We thank the Maurice Falk Institute for Economic Research in Israel, Start-Up Nation Central, the U. S. National Science Foundation (SciSIP grants 1360165 and 1360170), and Portugal’s Foundation for Science and Technology for financial support of this research. Lee Branstetter’s work on this project was supported by the National Science Foundation and we thank Britta Glennon for excellent research assistance. We are also grateful to Tim Bresnahan, Eugene Kandel, Imke Reimers, and seminar/conference participants at the 19th CEPR IO conference, the 10th Paris conference on Digital Economics, Collegio Carlo Alberto, Hebrew University, Stanford University, Tel Aviv University, ad UC-Berkeley and for helpful comments and suggestions. © 2020 by Neil Gandal, Nadav Kunievsky, and Lee Branstetter. All rights reserved. Short sections of text, not to exceed two paragraphs, may be quoted without explicit permission provided that full credit, including the © notice, is given to the source.