Economists (and Economics) in Tech Companies

Susan  Athey; Michael  Luca

Working Paper | HBS Working Paper Series | 2018

Economists (and Economics) in Tech Companies

by Susan Athey and Michael Luca

Abstract

As technology platforms have created new markets and new ways of acquiring information, economists have come to play an increasingly central role in tech companies—tackling problems such as platform design, strategy, pricing, and policy. Over the past five years, hundreds of PhD economists have accepted positions in the technology sector. In this paper, we explore the skills that PhD economists apply in tech companies, the companies that hire them, the types of problems that economists are currently working on, and the areas of academic research that have emerged in relation to these problems.

Keywords: technology companies; economists; Technology; Business Ventures; Economics; Research; Technology Industry;

Language: English

Format: Print

28 pages

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Citation:

Athey, Susan, and Michael Luca. "Economists (and Economics) in Tech Companies." Harvard Business School Working Paper, No. 19-027, September 2018.

Online reviews are transforming the way consumers choose products and services of all sorts. We turn to TripAdvisor to plan a vacation, Zocdoc to find a doctor, and Yelp to choose a new restaurant. Reviews can create value for buyers and sellers alike, but only if they attain a critical level of quantity and quality. The authors describe principles for setting the incentives, design choices, and rules that help review platforms thrive.
To address a shortage of reviews, companies can seed them by hiring reviewers or drawing reviews from other platforms, offering incentives, or pooling products. To address selection bias, they can require reviews, allow private comments, and design prompts carefully. To combat fraudulent and strategic reviews, they can set rules for reviewers and call in moderators—whether employees, the community, or algorithms.

Article | Management Science

Product Quality and Entering Through Tying: Experimental Evidence

Hyunjin Kim and Michael Luca

Dominant platform businesses often develop products in adjacent markets to complement their core business. One common approach used to gain traction in these adjacent markets has been to pursue a tying strategy. For example, Microsoft pre-installed Internet Explorer into Windows, and Apple set Apple Maps as the iOS default. Policymakers have raised concerns that dominant platforms may be leveraging their market power to gain traction for lower quality products when they use a tying strategy. In this paper, we empirically explore this question by examining Google’s decision to tie its new reviews product to its search engine. We experimentally vary the reviews displayed above Google’s organic search results to show either exclusively Google reviews (Google’s current tying strategy) or reviews from multiple platforms determined to be the best-performing by Google’s own organic search algorithm. We find that users prefer the version that does not exclude competitor reviews. Furthermore, looking at observational data on user traffic to Yelp from search engines, we find that Google’s exclusion of downstream competitors may have been effective. The share of Yelp’s traffic coming from Google has declined over this period, relative to traffic from Bing and Yahoo (which do not exclude other companies’ reviews), and Google reviews has grown quicker than Yelp and TripAdvisor during the period in which they excluded these (and other) reviews providers. Overall, these results shed light on platform strategy: tying has the potential to facilitate entry in complementary markets, even when the tied product is of worse quality than competitors.

Keywords: tying; platform strategy; google; Product; Quality; Market Platforms; Strategy; Market Entry and Exit;

Citation:

Kim, Hyunjin, and Michael Luca. "Product Quality and Entering Through Tying: Experimental Evidence." Management Science 65, no. 2 (February 2019): 596–603. View Details

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This case explores how neuroscientist Mariam Chammat helped set up the first behavioral insights team at the center of the French government, and encouraged French administrations to innovate and create policy initiatives based on psychological theories of influence and persuasion. Students are asked to assess 35 projects ripe for behavioral intervention and pick the winning proposals.

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Economists (and Economics) in Tech Companies

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