Table Of ContentPalgrave Advances in the Economics
of Innovation and Technology
Series Editor
Albert N. Link
University of North Carolina at Greensboro
USA
The focus of thisseries is onscholarly inquiry into the economic founda-
tions of technologies and the market and social consequences of subse-
quent innovations. While much has been written about technology and
innovation policy, as well as about the macroeconomic impacts of tech-
nologyoneconomicgrowthanddevelopment,thereremainsagapinour
understanding of the processes through which R&D funding leads to
successful (and unsuccessful) technologies, how technologies enter the
market place, and factors associated with the market success (or lack of
success) ofnew technologies.
This series considers original research into these issues. The scope of
such research includes in-depth case studies; cross-sectional and longitu-
dinal empirical investigations usingproject,firm, industry, publicagency,
and national data; comparative studies across related technologies; diffu-
sion studies of successful and unsuccessful innovations; and evaluation
studies of the economic returns associated with public investments in the
developmentof new technologies.
More information aboutthisseries at
http://www.springer.com/series/14716
SwatiBhatt
How Digital
Communication
Technology Shapes
Markets
fi
Rede ning Competition, Building Cooperation
SwatiBhatt
DepartmentofEconomics
PrincetonUniversity
Princeton,NewJersey,USA
PalgraveAdvancesintheEconomicsofInnovationandTechnology
ISBN978-3-319-47249-2 ISBN978-3-319-47250-8(eBook)
DOI10.1007/978-3-319-47250-8
LibraryofCongressControlNumber:2016954957
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ToIshaan
For whomconnectivity means somuch morethantechnology
P
REFACE
Thisbookiswrittenforthosewhoarelookingforawayofconceptualizing
the economic impact of the Internet. It does not focus on a particular
problem nor is it aimed at my peers at academic institutions. If you have
been wondering about how the various apps you use, the websites you
browse, the text messages you use to communicate fit into some larger
worldview then you may find some answers inthisbook. I aim to provide
a framework for thinking about the Internet so that new developments or
variationsonexistingproductsandservicescanbecontextualizedwithinthis
construction.
The process of writing this book began in the spring of 2011 when
Dan Mavraides – one of my senior thesis advisees at Princeton, and
captain of the very successful Princeton University men’s basketball
team – walked into my office, three weeks before the thesis deadline.
After having led the team in March Madness or the NCAA Division I
Men’s Basketball Tournament, he was diligently polishing his thesis. In
the course of our discussion, he asked a great question. In the age of
smartphones, will more fans attend basketball games in person or will
they simply view them on their devices? Questions such as these fueled
my research and prompted me to design and teach a course on the
“Economics of the Internet” in the fall of 2013, and then every subse-
quent fall. The interactive nature of this course triggered fascinating
discussions with my students, many of whom subsequently wrote their
senior thesis or junior research paper on the subject. I have had the
privilege of supervising over 150 senior theses during the past quarter
century at Princeton University.
vii
viii PREFACE
Ithasbeenajoytointeractwithmanybrightandenthusiasticstudents
over the years. This new digital world is their world and there is much I
havelearntfromthem;thenamesIthankbelowconstitutejustthetipof
the iceberg.
SamvithaRamandPiaSurweresuperlativecriticsofmyearlydrafts.They
tookmyclassandstartedaskingprofoundquestionsbeforetheendofthefirst
week.DarwinLi,myadviseeforthepastfouryears(includingmyclass,junior
and senior thesis), provided excellent editorial assistance and diligently con-
ductedtheempiricalresearchforthediagramsinChap.3.
Jason Yu (also in my class, and advisee for four years) did his senior
thesisonUber,challengingmythinkingonlabormarkets.ChuckDibilio
and Florin Radu, sitting in the back of the class, always extended the
discussion in novel ways. Hillary Bernstein, ever engaged and sitting in
the front of the class, kept me alert and on target. Dalia Katan reminded
me that advertising, correctly, is at the heart of digital business models.
Jose De Alba and Tom Pham taught me how to “Venmo” as college
studentsdoit,andHanneloraEverettmademeunderstand,atapersonal
level,thesecurityaddedbytheRedAlertappinIsrael.LindaZhongmade
me reevaluate my thinking about online courses, arguing that they can
never capture the professor–student dynamics of a classroom; Lillian
Cartwright gave a face to technology in talking about her work with
GiveDirectly, a non-profit in Kenya, that targets thatched roofs using
Google Earth technology to hand cash directly to the impoverished; and
Garrett Frey taught me about the potency of Instagram’s multi-interface
sharingcapabilities.
Conversationsinmyofficewithstudentswereanothersourceofstimu-
lation and delight, and the names that follow are only a partial list: Anna
Matlin, Haebin Kim, Karina Marvin, Saahil Madge, Kenny Anhalt, Yasin
Hegazy, Eric Rehe, Ryan Albert and Everett Price. Spontaneous in-class
debatesbetweenJudyHou,KevinTang,AmbikaVoraandCharlesZhou
were anaffirmationof the excitementof the generaltopic.
I am deeply appreciative of the support and stimulation offered by my
friendsintheEconomicsDepartmentatPrinceton,manyofwhomIhave
known since I was a graduate student: Avinash Dixit, Gene Grossman,
Alan Blinder, Harvey Rosen, Alan Krueger, Dilip Abreu, Anne Case and
JanetCurrie.Ihavebeeninspiredbytheseminarsandconversationswith
faculty at Center for Information Technology Policy at Princeton: Brian
Kernighan, Ed Felten, Nick Feamster, Paul DiMaggio and Zeynep
Tufekci.
PREFACE ix
My editors at Palgrave Macmillan, Allison Neuburger and Sarah
Lawrence, were extremely patient, generous with their advice and pro-
vided thecamaraderie thatmakes endeavorssuch asthisrewarding.
My own family network is a treasure. My daughter Andie, with whom
three-hour brainstorming sessions across the continent are a unique
sourceofjoyandinspiration,hasbeenmyclosestadvisorandbestfriend.
Mydearhusband,Ravin,whohasbeenmyintellectualGoogleeversince
hehelpedmewithBrownianmotionconceptswhenIwasstrugglingwith
options pricing formulae in graduate school, has been my deepest con-
nection. My son Ishaan, the wisest treasure, whose autism and struggle
with connections has made me truly understand what connectivity is all
about.
C
ONTENTS
1 TheTechnology: Has the DigitalCommunication
TechnologyChangedthe Way Markets Function?
Cooperationor Competition? 1
2 TheThree Drivers: Connectivity,Data andAttention 17
3 TheThree Trends:Granularity,Behemoths and
Cooperation 29
4 TheIndependent Contractor andEntrepreneurship
inLabor Markets 57
5 TheOn-Demand Economy andHow WeLive:
Communication,Information,Media andEntertainment 71
6 TheSharing Economy: InformationCascades, Network
Effectsand PowerLaws 105
7 ThePrivate World ofSharing andCooperation 119
8 TheInternet andRegulation 133
xi
