Progress 10/01/08 to 09/30/09
Outputs
OUTPUTS: In 2009, the outputs of my project include the following. First, I updated and taught a graduate level course on empirical methods in industrial organization. Attendees of the lectures included Ph.D. graduate students in the Johnson School, Policy Analysis and Management, Economics, and Applied Economics and Management. I also updated and taught a graduate level course on game theory and industrial organization, designed for applied researchers in AEM. In addition, I presented my work at the International Industrial Organization Conference. PARTICIPANTS: Nothing significant to report during this reporting period. TARGET AUDIENCES: Nothing significant to report during this reporting period. PROJECT MODIFICATIONS: Nothing significant to report during this reporting period.
Impacts
The research linked to this project has produced several outcomes, primarily in the form of new knowledge. In the working paper, "Has the Internet Accelerated the Diffusion of New Products," we find that the Internet does accelerate the diffusion of new products, and appears to do so via expansion of information-gathering abilities and creation of new markets. In the working paper, "Are Risk Preferences Stable across Contexts Evidence from Insurance Data," we find that risk preferences are not stable across auto and home deductible choices. This shows that risk preferences measured for one decision may not be applicable when trying to generate predicted behaviors in other contexts. In the working paper, "Measuring Welfare and the Effects of Regulation in a Government-Created Market: The Case of Medicare Part D Plans," we find that the proposed idea of restricting choice (i.e., reducing the number of plans on the market) can result in significant welfare losses. However, much of this loss can be averted if the reduction is coupled with a restriction on product differentiation (e.g., simply eliminate plans that cover the "donut hole"). In the working paper, "Racial Bias in Expert Quality Assessment: A Study of Newspaper Movie Reviews," we find that movies with black leads and all-white supporting casts receive notably lower scores from expert movie critics than any other cast composition. This is a suggestive finding regarding implicit discrimination in the marketplace.
Publications
- "Has the Internet Accelerated the Diffusion of New Products", with Daniel Simon, Research Policy, 38, 8, pp. 1269-1277, 2009.
- "How Do Households Choose Quality and Time to Replacement for a Rapidly Improving Durable Good", International Journal of Industrial Organization, 27, 2, pp. 302-311, 2009.
- "Multi-market Contact and On-Time Performance in the US Airline Industry", with Daniel Simon, Academy of Management Journal, 52, 2, pp. 336-354, 2009.
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Progress 10/01/07 to 09/30/08
Outputs
OUTPUTS: In 2008, the outputs of my project include the following. First, I updated and taught a graduate level course on empirical methods in industrial organization. Attendees of the lectures included Ph.D. graduate students in the Johnson School, Policy Analysis and Management, Economics, and Applied Economics and Management. Some of the material in the lectures came directly from my ongoing research on durable goods demand. I also presented my work at several conferences and invited seminars. These include the Midwest Economic Association Annual Meeting, the International Industrial Organization Conference, the Econometric Society North American Summer Meeting, and a seminar at the Federal Trade Commission. In addition, my work was featured in the Cornell Chronicle, and I was an invited guest to discuss the Digital Divide on Nevada Public Radio. PARTICIPANTS: Nothing significant to report during this reporting period. TARGET AUDIENCES: Nothing significant to report during this reporting period. PROJECT MODIFICATIONS: Nothing significant to report during this reporting period.
Impacts
The research linked to this project has produced several outcomes, primarily in the form of new knowledge. In the working paper, "Has the Internet Accelerated the Diffusion of New Products," we find that the Internet does accelerate the diffusion of new products, and appears to do so via expansion of information-gathering abilities and creation of new markets. In the working paper, "Are Risk Preferences Stable across Contexts Evidence from Insurance Data," we find that risk preferences are not stable across auto and home deductible choices. This shows that risk preferences measured for one decision may not be applicable when trying to generate predicted behaviors in other contexts. In the working paper, "Measuring Welfare and the Effects of Regulation in a Government-Created Market: The Case of Medicare Part D Plans," we find that the proposed idea of restricting choice (i.e., reducing the number of plans on the market) can result in significant welfare losses. However, much of this loss can be averted if the reduction is coupled with a restriction on product differentiation (e.g., simply eliminate plans that cover the "donut hole"). Finally, in the working paper, "Conflict of Interest The Impact of Dual Agency on the Price and Speed of Residential Real Estate Transactions," we find that real estate dual agency (i.e., the same agent or agency representing both the buyer and seller in a real estate transaction) has little overall effect on final home prices, but does appear to speed up transactions.
Publications
- "Repeat Purchase amid Rapid Quality Improvement: Structural Estimation of the Demand for Personal Computers", Journal of Economics and Management Strategy, 17, 1, pp. 1-33, 2008.
- "Internet Adoption Patterns and Usage are Different: Implications for the Digital Divide", with Avi Goldfarb, Information Economics and Policy, 20, 1, pp. 2-15, 2008.
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Progress 10/01/06 to 09/30/07
Outputs
OUTPUTS: In the past year, I've disseminated my research findings across several venues. I presented my work at Penn State, the University of Maryland, Duke, the International Industrial Organization Conference, the Econometric Society North American Summer Meetings, and here at Cornell. My findings were also presented by a co-author at the National Bureau of Economic Research this Summer. I also developed a new graduate-level course on Industrial Organization, accessible to all graduate students at Cornell and have encouraged students within my department to take the class to enhance their empirical researching skills. I completed writing three papers in the past year, and am near completion on three more. My working drafts are available on the Social Science Research Network, and they have been downloaded at a rate that puts me in the top 20% of all researchers who post there (over 80,000).
TARGET AUDIENCES: My target audiences consist of undergraduate and graduate students along with economic professionals and policymakers. I present my research and related research to my graduate industrial organization students, and I present knowledge related to my area of expertise in my "Introduction to Regulation" course for undergraduates. I formally (through presentations) and informally (via email/telephone) discuss my work with many economic professionals at top universities. Several of my papers are directly relevant for policymakers concerned about topics including: the Digital Divide, gender inequality, and conflicts of interest in business.
Impacts
My research this past year has led to several changes in knowledge. First, along with a graduate student here at Cornell, I found that men and women possess different levels of time consistency. We found that women are less prone to change their preferences over monetary outcomes with the passing of time. This finding expands our knowledge of inter-temporal preferences and fundamental differences between men and women. Second, along with a colleague at Cornell, my data analysis has shown that airline delays are at least partially linked to levels of multimarket contact. As airlines meet each other on more routes, they are less prone to compete on product quality (in the form of on-time performance). This finding expands our knowledge of the effect of multimarket contact beyond just price competition. Third, along with two colleagues at Cornell, my data analysis has shown that dual agency in real estate markets leads to faster home sales and no noticeable change in
final price. This finding informs policymakers that potential conflicts of interest arising from dual agency may not be much of a concern for real estate markets. Finally, along with two Cornell colleagues, I found the surprising result that households' choices of home and auto insurance have very little relation. That is, demonstration of high risk aversion in the choice of auto insurance deductible provides little or no information as to the level of risk aversion in the choice of home insurance deductible. This result provides new basic knowledge on the relevance of risk aversion measures across contexts.
Publications
- Prince, J.T. 2007. The Beginning of Online/Retail Competition and Its Origins: An Application to Personal Computers. International Journal of Industrial Organization, 25, 1, pp. 139-156.
- Prince, J.T. and Greenstein, S. 2007. The Diffusion of the Internet and the Geography of the Digital Divide in the United States. In (eds) Robin Mansell, Chrisanthi Avgerou, Danny Quah, and Roger Silverstone, The Oxford Handbook of Information and Communication Technologies, Oxford University Press, pp. 168-195.
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Progress 01/01/06 to 12/31/06
Outputs
In 2006, I made significant progress on several existing papers, and produced several more papers consistent with the objective of this project. I made a major revision on a structural PC demand paper, now entitled 'Repeat Purchase amid Rapid Quality Improvement: Structural Estimation of Demand for Personal Computers.' This revision now has revise and resubmit status at a strong industrial organization journal, the Journal of Economics and Management Strategy. My paper with Avi Goldfarb, 'Internet Adoption and Usage Patterns are Different: Implications for the Digital Divide,' is now under second revision for a strong policy journal, Information Economics and Policy. My paper with Dan Shawhan, 'Inter-temporal Preference Reversal in Group Decision-Making: Experimental Evidence,' is nearly ready for submission to a public economics journal. I also have made significant progress on three new papers. First, I've finished a first draft of 'Does Buying High Mean Buying
Often? Quality Choice and Replacement Cycles for a Vertically Differentiated, Rapidly Improving Durable Good.' In this paper, I show that people who buy high-end computers actually wait longer on average between purchases. Second, I wrote 'Does Inertia Increase with Experience for Expensive Durable Goods.' In this paper, I show that people with more buying experience establish a stronger tie to their PC brand. Finally, I've nearly finished a draft of 'Inter-temporal Preference Reversal, Primarily a Male Phenomenon?' with Dan Shawhan. In this paper, we present evidence that time inconsistency may be notably more prevalent in men than in women.
Impacts
The work described above enhances our knowledge of Internet diffusion and the Digital Divide (i.e., the differences between those with Internet access and without). In this context, we are better able to determine how the Internet diffuses when left to market forces and the potential benefits from public policy instruments. It also describes many aspects of people's durable goods purchasing decisions with particular focus on computers. This information can help fill the many gaps in our understanding in how people make purchasing decisions that (potentially) involve forward-looking behavior and stock effects (i.e., effects coming from products already held by the consumer). Further, it draws a picture of how online and retail products compete, suggesting that these markets may only be strong competitors when firms from both ends proactively compete for the same customers. Finally, the work above shows that an important, and potentially costly, behavior for
inter-temporal choice exists for group decision-making. Realizing that this is a potential concern can aid in the construction of options requiring group approval (e.g., restructuring the timing of costs and benefits to avoid excessive delay).
Publications
- No publications reported this period
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Progress 01/01/05 to 12/31/05
Outputs
In 2005, I wrote four papers. The first is The Diffusion of the Internet and the Geography of the Digital Divide in the United States, with Shane Greenstein. We analyze the rapid diffusion of the Internet across the United States over the past decade for both households and firms. We put the diffusion of the Internet into the context of economic diffusion theory where we consider costs and benefits on the demand and supply side. We also discuss several pictures of the current physical presence of the Internet using some of the main techniques for Internet measurement to date. We highlight different economic perspectives and explanations for the digital divide, that is, unequal availability and use of the Internet. The second paper is Internet Adoption and Usage Patterns are Different: Implications for the Digital Divide, with Avi Goldfarb. We show that Internet adoption and usage patterns are different. We find that high income, educated people are more likely to have
adopted the Internet by December 2001. However, of those who have adopted, low income, less educated people spend more time online, even controlling for leisure time and for self-selection. Furthermore, these current non-adopters will use the Internet for many of the activities explicitly stated as goals of policy initiatives: telemedicine, e-government, and online communications. This result has important implications for policies aimed at closing the Digital Divide. The third paper is The Beginning of Online/Retail Competition and the Consumers Driving It: An Application to Personal Computers. I measure substitutability between online and retail personal computers across several years. The results indicate that these two types of computers were not substitutes in 1996 and 1997, but were strong substitutes in 1998. I consider both demand-side and supply-side theories explaining this change. My demand-side theories argue that a change in the composition of households shopping in
online and retail markets is responsible for the switch. The empirical results suggest that these theories are not correct. My supply-side theory argues that a convergence of business models late in 1997, where retail suppliers offered customizable PCs and online suppliers opened more physical locations in order to target high-end buyers, was responsible for online and retail PCs becoming substitutes in 1998. The data shows that the change in cross-price elasticity from 1997 to 1998 is entirely at the high end (PCs more than $2000), consistent with the new strategies of the suppliers. The fourth paper is Inter-temporal Preference Reversal in Group Decisions: Experimental Evidence, with Daniel Shawhan. This paper extends the literature on inter-temporal preference reversal to a group context.
Impacts
The work described above enhances our knowledge of Internet diffusion and the Digital Divide (i.e., the differences between those with Internet access and without). In this context, we are better able to determine how the Internet diffuses when left to market forces and the potential benefits from public policy instruments. Further, it draws a picture of how online and retail products compete, suggesting that these markets may only be strong competitors when firms from both ends proactively compete for the same customers. Finally, the work above shows that an important, and potentially costly, behavior for inter-temporal choice exists for group decision-making. Realizing that this is a potential concern can aid in the construction of options requiring group approval (e.g., restructuring the timing of costs and benefits to avoid excessive delay).
Publications
- No publications reported this period
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