Research

My research work focuses on how people use technology to consume experience goods and influence others to do so. These are inextricably linked to how firms behave and how public policies affect market structures. My work focuses on the application of robust empirical identification methods to analyze large datasets obtained from organic in-vivo large-scale network-centric field randomized experiments. Most of my research spans two interrelated applied areas. I am interested in the Impact of Information and Communication Technologies on Education (IICTE) and in Peer-Influence and Consumption in the Media Industry (PICMI). The bulk of my work is in medialytics — using big data to understand the future of the media industry. In addition, I have also been studying Competition, Consumer Churn and Switching Costs (CCCSC) in telecommunications. In 2018, I was awarded the Information Systems Society Sandy Slaughter Early Career Award, which “recognizes and honors early career individuals who are on a path towards making outstanding intellectual contributions to the IS discipline.”

Publications

Selected Publications

Impact of Information and Communication Technologies on Education (IICTE)

Spillovers Effects of Wiring Schools with Broadband: The Critical Role of Children.
Belo, R; Ferreira, P; Telang, R.  Management Science.  Vol 62, N. 12, pp. 3450-3471,  2016.

Abstract

Providing broadband to schools can be an effective way to foster household Internet adoption in neighboring areas. On the one hand, the infrastructure put into place to meet schools’ needs can also serve households. On the other hand, students get acquainted with Internet at school and signal its usefulness to adults at home who, consequently, can be more likely to adopt it. In this paper we model the roles that broadband use at school and Internet adoption in neighboring households play in the decision to adopt Internet at home and measure their effects empirically. We use data from Portugal between 2006 and 2009 on household Internet penetration and on how much schools use broadband. We use two different sets of instruments for the schools’ broadband use to alleviate endogeneity concerns. Both approaches yield similar results. We find that broadband use at school leads to higher levels of Internet penetration in neighboring households. Broadband use in schools was responsible for a year-over-year increase of 3.5 percentage points on Internet penetration in households with children. Across our dataset this effect accounts for about 17% of the increase in home Internet adoption. We also find evidence of regional spillovers in Internet adoption across households. These were roughly responsible for an increase of 2.1 percentage points in Internet penetration or 38% of the total increase in household Internet penetration between 2006 and 2009. These results show that wiring schools with broadband is an effective policy to lower the barriers for Internet adoption at home and as such contributes to accelerate the pace of broadband diffusion.

Broadband in School: Impact on Student Performance.
Belo, R; Ferreira, P; Telang, R.  Management Science, Lead Article.  Vol. 60, N. 2, pp. 265-282,  2014.

Abstract

This paper examines the effects of providing broadband to schools on students’ performance. We use a rich panel of data on broadband use and students’ grades from all middle schools in Portugal. Employing a first-differences specification to control for school-specific unobserved effects and instrumenting the quality of broadband to account for unobserved time-varying effects, we show that high levels of broadband use in schools were detrimental for grades on the ninth-grade national exams in Portugal. For the average broadband use in schools, grades reduced 0.78 of a standard deviation from 2005 to 2009. We also show that broadband has a negative impact on exam scores regardless of gender, subject, or school quality and that the way schools allow students to use the Internet affects their performance. In particular, students in schools that block access to websites such as YouTube perform relatively better.

Peer-Influence and Consumption in the Media Industry (PICMI)

The Effect of Video-on-Demand on Piracy: Evidence From a Household Level Randomized Experiment.
Matos, M; Ferreira, P; Smith, M.  Management Science.  forthcoming.

Abstract

We partner with a major multinational telecommunications provider to analyze the effect of Subscription Video-on-Demand (SVoD) services on digital piracy. For a period of 45 consecutive days, a group of randomly selected households who used BitTorrent in the past were gifted with a bundle of TV channels with movies and TV shows that could be streamed as in SVoD. We find that, on average, households that received the gift increased overall TV consumption by 4.6% and reduced Internet downloads and uploads by 4.2% and 4.5%, respectively. However, and also on average, treated households did not change their likelihood of using BitTorrent during the experiment. Our findings are heterogeneous across households and are mediated by the fit between the preferences of households in our sample for movies and the content available as part of the gifted channels. Households with preferences aligned with the gifted content reduced their probability of using BitTorrent during the experiment by 18% and decreased their amount of upload traffic by 45%. We also show using simulation that the size of the SVoD catalog and licensing window restrictions limit significantly the ability of content providers to match SVoD offerings to the preferences of BitTorrent users. Finally, we estimate that households in our sample are willing to pay at most $3.25 USD per month to access a SVoD catalog as large as Netflix?s in the US. Together, our results show that, as a stand-alone strategy, using legal SVoD to curtail piracy will require, at the minimum, offering content much earlier, and at much lower prices than those currently offered in the marketplace – changes that are likely to reduce industry revenue and may damage overall incentives to produce new content while, at the same time, might curb only a small share of piracy.

The Effect of Time Shift TV on TV Consumption and Ad-Avoidance.
Reis, F; Belo, R; Ferreira, P; Matos, M.  Management Science.  forthcoming.

Abstract

We partner with a major telecommunications provider to study the effect of Time-Shift TV (TSTV) on TV consumption. TSTV automatically records in the cloud pro- grams that were broadcasted live for the past few days and thus allows users to watch the programs they want when they want. In 2012, our industrial partner deployed TSTV to half the TV channels it offered to premium consumers. Using difference-in-differences with Inverse Probability of Treatment Weighting we find that, on average, the introduction of TSTV increased the consumption of daily TV by 11 minutes (p < 0.01), from a baseline of 3.4 hours, and did not change the consumption of live TV. Furthermore, we find that the concentration of TV consumption increased after TSTV was available. In 2015, our industrial partner run a randomized experiment in which a random set of households was selected to obtain access to a new set of TV channels broadcasting movies and TV shows. A random subset of these households obtained access to these channels with TSTV and another random subset of them obtained access to these channels without TSTV. Using difference-in-differences we find that, on average, the former set of households consumed 4.5 more minutes of TV per day (p < 0.01), from a baseline of 5.0 hours, and as much live TV as the latter set of households. In addition, the consumption of TV by the former set of households was more concentrated towards the most popular programs. Finally, we show that households do not seem to use TSTV as a new tool to strategically avoid ads. In particular, and in 2015, households given access to the new TV channels with TSTV exit ads in the original TV channels as much as the households given access to these channels without TSTV. Therefore, the concern of advertisers that TSTV may reduce their revenues is unwarranted. How- ever, advertisers do not have data on TV audiences. Instead, content distributors do. Therefore, the latter are in a unique powerful position to deploy auction-based systems to sell TV ad slots taking advantage of the fine-grained information they have on TV viewership, much like websites do today online using cookies.

Welfare Properties of Profit Maximizing Recommender Systems: Theory and Results from a Randomized Experiment.
Zhang, X; Ferreira, P; Belo, R; Matos, M.  Management of Information Systems Quarterly (conditional accept).  forthcoming.

Abstract

Recommender systems have been introduced to help consumers navigate large sets of alternatives. They usually lead to more sales, which may increase consumer surplus and firm profit. In this paper, we ask whether firms may hurt consumers when they choose which recommender systems to use. We use data from a large scale field experiment ran using the video-on-demand system of a large telecommunications provider to measure the price elasticity of demand for movies placed in salient and non-salient slots on the TV screen. During this experiment, the firm randomized the slots in which movies were recommended to consumers as well as their prices. This setting readily allows for identifying the effects of price and slot on demand and thus compute consumer surplus. We find empirical evidence that consumers are less price elastic towards movies placed in salient slots. Using the outcomes of this experiment we simulate how consumer surplus and welfare change when the firm implements several recommender system, namely one that maximizes profit. We show that this system hurts both consumer surplus and welfare relative to the systems designed to maximize the latter. We also show that, at least in our setting, the system that maximizes profit does not generate less consumer surplus than some recommender systems often used in practice, such as content-based, lists of most sold, most rated and highest rated products. Yet, how much extra rent the firm can extract from strategically placing movies in salient slots is still a function of the popularity and quality of movies used to do so. Ultimately, our results question whether recommender systems embed mechanisms that extract excessive surplus from consumers, which may call for better scrutiny.

Culling the Herd: Using Real World Randomized Experiments to Measure Social Bias with Known Costly Goods.
Matos, M; Ferreira, P; Smith, M; Telang, R.  Management Science.  Vol 62, N. 9, pp. 2563-2580,  2016.

Abstract

Peer-ratings have become increasingly important sources of product information, particularly in markets for “information goods.” However, in spite of the increasing prevalence of this information, there are relatively few academic studies that analyze the impact of peer-ratings on consumers transacting in “real world” marketplaces. In this paper, we partner with a major cable company to analyze the impact of peer-ratings in a real-world Video-on-Demand market where consumer participation is organic and where movies are costly and well-known to consumers. After experimentally manipulating the initial conditions of product information displayed to consumers, we find that, consistent with the prior literature, peer-ratings influence consumer behavior independently from underlying product quality. However, we also find that, in contrast to the prior literature, at least in our setting there is little evidence of long-term bias due to herding effects. Specifically, when movies are artificially promoted or demoted in peer-rating lists, subsequent reviews cause them to return to their true quality position relatively quickly. One explanation for this difference is that consumers in our empirical setting likely had more outside information about the true quality of the products they were evaluating than did consumers in the studies reported in prior literature. While tentative, this explanation suggests that in real-world marketplaces where consumers have sufficient access to outside information about true product quality, peer-ratings may be more robust to herding effects and thus provide more reliable signals of true product quality, than previously thought.

Peer Influence in the Diffusion of iPhone 3G over a Large Social Network.
Matos, M; Ferreira, P; Krackhardt, D.  Management of Information Systems Quarterly.  Vol. 38, I. 4, pp. 1103-1133,  2014.

Abstract

In this paper, we study the effect of peer influence in the diffusion of the iPhone 3G across a number of communities
sampled from a large dataset provided by a major European Mobile carrier in one country. We identify
tight communities of users in which peer influence may play a role and use instrumental variables to control
for potential correlation between unobserved subscriber heterogeneity and friends’ adoption. We provide
evidence that the propensity of a subscriber to adopt increases with the percentage of friends who have already
adopted. During a period of 11 months, we estimate that 14 percent of iPhone 3Gs sold by this carrier were
due to peer influence. This result is obtained after controlling for social clustering, gender, previous adoption
of mobile Internet data plans, ownership of technologically advanced handsets, and heterogeneity in the
regions where subscribers move during the day and spend most of their evenings. This result remains qualitatively
unchanged when we control for changes over time in the structure of the social network. We provide
results from several policy experiments showing that, with this level of effect of peer influence, the carrier
would have hardly benefitted from using traditional marketing strategies to seed the iPhone 3G to benefit from
viral marketing.

Competition, Consumer Churn and Switching Costs (CCCSC)

The Effect of Shortening Lock-In Periods in Telecommunication Services.
Yang, C; Matos, M; Ferreira, P.  Management of Information Systems Quarterly (conditional accept).  forthcoming.

Abstract

We study the welfare implications of shortening the length of the lock-in period associated to triple play contracts using household level data for a period of 6 months from a large telecommunications provider. Using a multinomial logit model to explain consumer behavior we show that, in our setting, shortening the length of the lock-in period decreases the aggregated profit of the firms in the market more than it increases consumer surplus. This result arises because shortening the length of the lock-in period increases churn and the costs to set up service for the consumers that churn and join a new carrier supersede the increase in the consumers’ willingness to pay for service when the length of the lock-in period reduces. We also show that, in our setting, consumers are worse off with shorter lock-in periods if firms react by increasing prices to keep their profits. Therefore, regulators that introduce policies to shorten the length of lock-in periods may also need to consider policies that prevent firms from increasing prices (too much) in order to improve consumer well-being.

Target the Ego or Target the Group: Evidence from a Randomized Experiment in Proactive Churn Management.
Matos, M; Ferreira, P; Belo, R.  Marketing Science.  forthcoming.

Abstract

We propose a new strategy for proactive churn management that actively uses social network information to help retain consumers. We collaborate with a major telecommunications provider to design, deploy and analyze the outcomes of a randomized control trial at the household level to evaluate the effectiveness of this strategy. A random subset of likely churners were selected to be called by the firm. We also randomly selected whether their friends would be called. We find that listing likely churners to be called reduced their propensity to churn by 1.9 percentage points from a baseline of 17.2%. When their friends were also listed to be called their likelihood of churn reduced an additional 1.3 percentage points. The NPV of likely churners increased 2.1% with traditional proactive churn management and this statistic becomes 6.4% when their friends were also listed to be called by the firm. We show that in our setting likely churners receive a signal from their friends that reduces churn among the former. We also discuss how this signal may trigger mechanisms akin to both financial comparisons and conformity that may explain our findings.

Welfare Changes in the Cournot Setting: An Applications to the Telecommunications Industry.
Ferreira, P.  Journal of Industrial Economics.  Forthcoming,

Abstract

This paper characterizes the welfare efficiency of the Cournot equi- librium and provides bounds for the loss in consumer surplus, producer surplus and welfare when the number of firms in the market changes. I only assume that demand is decreasing in price and costs increasing in the quantity produced as long as Cournot equilibrium exists. I show how price, demand and average cost, before and after the number of firms in the market changes, can be used to compute these bounds. I apply these bounds to the Portuguese wireline market and conclude that the welfare loss carried by Portugal Telecom’s monopoly in 2005 reduced significantly when the company was split in 2007.


Papers Under Review

Impact of Information and Communication Technologies on Education (IICTE)

Peer-Influence and Consumption in the Media Industry (PICMI)

Binge Yourself Out: The Effect of Binge Watching on the Subscription of Video on Demand.
Matos, M; Ferreira, P.

Abstract

We analyze outcomes of two randomized field experiments to study the effect of binge watching on the subscription of Video-on-Demand (SVoD). In both cases we offer access to SVoD service to a random set of households and use another random set of households as control group. In both cases, we find that the households induced to binge watch TV shows are less likely to pay for SVoD after the gift period. In our second experiment, we also show that treated households subscribe the service less despite enjoying more their experience with the VoD system. Our results suggest that binge watchers deplete the content of interest to them very fast, which reduces their short-term willingness to pay for SVoD. We also show that carefully crafted recommendation reminders aimed at widening the preferences of consumers for content lessen the concerns of binge watchers with content refresh and thus may help content providers manage supply costs that may otherwise become prohibitive with frequent updates to SVoD catalogs.

The Interplay of Information from Friends and from the Crowd to Search and to Purchase Experience Goods.
Yang, C; Matos, M; Ferreira, P.

Abstract

Consumers use information from both friends and the crowd to estimate the quality of products prior to search and purchase. However, these signals may carry information of different nature and value and thus consumers are likely to combine them in different ways throughout the consumption funnel. We study how they do so using an optimal stopping framework to model search behavior and a multinomial choice model to describe purchase decisions. We show results from an observational study using clickstream data from a large provider of video-on-demand and from a randomized control trial using an online video-on-demand system created and operated by us for the purpose of this study. In the latter case, we randomize the friends that buy movies, the movies’ number of likes and their prices, thus obtaining identification by design for the effects of interest. We find consistent evidence that the relative value of a like increases from search to purchase although less so for more expensive movies. In particular, for the most browsed movies, additional likes do not change the likelihood of searching for a movie but increase the likelihood of purchasing the movie whereas additional friends’ rentals increase the likelihood of searching for a movie but do not further increase the likelihood of purchasing the movie. In our setting, consumers seem to primarily start by browsing movies that their friends bought to form a consideration set and use likes for decision making purposes only when they are closer to commit. Our results show how highlighting different signals throughout the consumers’ shopping journey may help improve recommender systems.

The Impact of DNS Blocking on Digital Piracy Activity.
Reis, F; Matos, M; Ferreira, P.

Abstract

We use a unique household level dataset to measure the impact of DNS blocking on digital piracy and on the consumption of several legal alternatives not covered before in the literature. Our results show that DNS blocking reduces Internet traffic, including upload traffic, which proxies piracy. These blocks increase TV viewership, in particular across channels devoted to movies and TV shows, but they do not change the use of paid legal alternatives such as video-on-demand rentals or the subscription of premium TV channels. Furthermore, we observe that DNS blocking increases Google searches for tools to bypass them. We find evidence that more BitTorrent users remained active after the blocks in regions where this search behavior was more prevalent. Finally, combining the household level data with survey data from a smaller subscriber sample, we find that the presence of teenagers in the household and the head of household’s computer literacy level and willingness to pay for content are significant moderators of the household’s response to the DNS blocking policy.

Peer Influence in Products with Network Externalities: Empirical Evidence from a Large Mobile Network.
Belo, R; Ferreira, P.

Abstract

We study the effect of peer influence for products that exhibit positive network externalities to non-adopters. Users benefit from these products when their friends adopt even if they do not, which reduces their likelihood of adoption. However, using observational data to measure the effect of peer influence in these cases is likely to provide a positive estimate due to unobserved homophily. We suggest using the number of friends that end up adopting the product as a proxy for the unobserved user fixed effects and we show that this method recovers a negative effect of peer influence when expected. We use this method and data from a mobile service provider serving 5.7 million customers to estimate the effect of peer influence across a set of 5 different products with the feature. In all cases, we obtain negative estimates. Using randomization yields similar results providing robustness to our findings. Finally, we show that even for these products the effect of peer influence associated to the first friend that adopts the product is positive, which arises because these friends convey useful information about the product reducing uncertainty. The negative effect of peer influence arises only for subsequent friends that adopt the product. The latter are unlikely to convey new information about the product but each of them decreases the economic incentives for adoption resulting in a negative effect of peer influence.

Price Discounts and Peer Effects in Information Goods: Results from a Randomized Experiment.
Matos, M; Ferreira, P; Belo, R.

Abstract

This paper studies how price promotions affect the consumption of information goods that cannot be stored, and how peer influence moderates these effects by triggering spillovers to the friends of the users that receive the promotions. We analyze outcomes from a large-scale randomized field experiment ran for 3 consecutive months using the Video-on-Demand (VoD) system of a large telecommunications provider. We show that households with access to movies priced 25% lower than usual lease 11.1% more of these movies than households that never had access to movies at reduced prices. However, they also lease 3.3% fewer of the movies without price discounts during the entire experiment, which reduces aggregate sales by 2.9%, hurting the provider’s profitability. We use cell phone call detail records from this same provider to infer a graph of social proximity across households. The average degree in this graph is 10.23 friends. Using this graph, we then find a positive effect of peer influence in the consumption of movies in this VoD system, which can be strategically used by the firm to issue price promotions minimizing profit losses. Firms can break-even if they offer price promotions to households with enough friends to generate enough sales through peer influence to counter the undesirable effect of price promotions. At the average of the covariates observed in our setting, our industrial partner would break-even if it targets households with more than 4 friends with price promotions, which would be easy to achieve in the market we study.

Competition, Consumer Churn and Switching Costs (CCCSC)

The Effect of Friends Churn on Consumer Behavior in Mobile Networks.
Ferreira, P; Telang, R; Matos, M.

Abstract

We use a large anonymized longitudinal panel of call detailed records to infer a social network across mobile users and to study how they decide which tariff plan to choose and whether to churn when their friends churn. We develop a theoretical model showing conditions under which users remain with their carrier and conditions under which they churn when their friends do. We explore the structure of the network to derive instruments for friends’ churn, which is typically endogenous in network settings, allowing us to identify the effect of peer influence. On average, we find that each additional friend that churns increases the monthly churn rate by 0.06%. The observed monthly churn rate across our dataset is 2.15%. We also find that firms introducing the pre-paid tariff plans that charge the same price to call users inside and outside the carrier helps retain consumers that would otherwise churn. In our setting, without this tariff plan the monthly churn rate could have been as high as 8.09%. We show empirical evidence that when friends churn consumers first adjust their volume of calls inside vs. outside the network, then switch to tariff plan that charges the same price to call inside and outside the network and finally churn only when a significant number of friends do. Therefore, we take advantage of the granular data available to us to characterize the “path to death” of consumers in mobile networks to an unprecedented level of behavioral detail. Finally, our paper shows that the traditional definition of customer lifetime value underestimates the value of consumers, and in particular that of consumers with more friends due to the effect of contagious churn.

The Impact of Mobile Number Portability on Price and Consumer Welfare.
Cho, D, Ferreira, P, and Telang, R.

Abstract

This paper examines the effect of Mobile Number Portability (MNP) on market price and consumer surplus. MNP reduces switching costs by allowing consumers to keep their phone number when they change service provider. Most European countries introduced MNP in the early 2000s as a result of a mandate from the European Commission. This supra-national legislative shock provides a unique opportunity to study the relationship between switching costs, price and consumer surplus. Theory shows that market prices can either increase or decrease when switching costs reduce and that followers may try to take advantage of decreasing switching costs to attract consumers from the market leaders. Using quarterly data from 47 wireless service providers in 15 EU countries between 1999 and 2006, we find that MNP decreased market price by at least 4.98% and increased consumer welfare by at least 1.83 euros per person per quarter on average during our period of analysis. This amounts to 749 Million euros per quarter across the 15 EU countries analyzed in this paper and 13% of the observed increase in consumer surplus during the period of analysis. This result is obtained using an an indicator for whether adjacent countries adopted MNP to instrument the decision of MNP adoption in each country, which allows for determining the demand curve in the markets we analyze. Our study shows how the European experience with regards to the introduction of MNP can be used as an example of best practice by other countries that plan to introduce it in the near future


Working Papers

Impact of Information and Communication Technologies on Education (IICTE)

The Effect of Smartphone use in the classroom on student performance: Results from a randomized field experiment.
Zhe, D; Cheng, A; Ferreira, P; Pavlov, P.

Abstract

The use of mobile devices in the classroom has become a serious concern for educators since the proliferation of smartphones. Prior research in information systems and economics has shown mixed results on how Information and Communication Technologies (ICT) affect students’ performance. Yet, empirical evidence on the effect of mobile devices is lacking, particularly regarding how students actually use these devices in the classroom (either for learning or for distraction). To close this gap, we examine whether and how mobile device use in the classroom can affect students’ academic outcomes. First, we develop an attention allocation model of how students allocate lecture time to mobile devices use and disentangle the effects of learning through the devices versus distraction from the devices. Second, and to empirically test these effects, we conduct a randomized field experiment with three smartphone use policies in the classroom for a verbal lecture. Students are randomly assigned to three conditions: (I) banning smartphone use, (II) allowing smartphone use, and (III) allowing smartphone use with mobile-assisted learning instruction (i.e., students are required to use a dictionary mobile app). We collect and analyze rich student behavior data from video-tracking, Wi-Fi use, and students’ test scores. We show evidence that allowing smartphone use with mobile-assisted learning instruction (III) is the most effective classroom technology policy to increase students’ performance, even better than banning smartphones from the classroom (I). Third, we test the attention allocation model and offer evidence that mobile devices can be leveraged to allocate students’ attention in the classroom more to effective learning from distractions, which in turn enhances their academic achievement. Theoretical and practical implications for students, teachers, and policymakers are discussed.

Peer-Effects in Student Performance at the University Level.
Turner, R, Ferreira, P and Belo, R.  INFORMS Annual Meeting.  San Francisco, CA,  November 6 - 12, 2014.

Abstract

There is mixed evidence on the effect of peers on student performance and little evidence at all on whether friends influence grades at the University level. Yet, peer-based education has been pursue in recent times has a natural mechanism to improve student performance. In this paper we use randomization techniques to measure the effect of peers on student performance. Randomization allows us to separate homophily from peer influence under very mild assumptions. We use a panel of data on more than 10k students in an Engineering school between 2008 and 2010. We have data on grades per course passed and we use data on Wi-Fi sessions to proxy friendships. We find positive peer effects for worse student in all curricular years and for better students in later curricular years. We find no peer effects for better students in early curricular years. More interestingly, we find that the positive effect on worse students is greater than that on better students in later curricular years but not in early ones. This provides evidence in favor of tracking students in early years and grouping them in later years, that is, peer influence might only be beneficial in later stages of education when maturity abounds. A draft of this paper will be available soon.

Effect of Wi-Fi on Student Performance in a University Campus.
Turner, R, Ferreira, P, and Belo, R.  INFORMS Annual Meeting.  Minneapolis, MN,  October 6 - 9, 2013.

Abstract

The Internet can be beneficial to students but can also be a disruptive distraction. Many schools are anxious to deploy Information and Communications Technologies (ICTs) such as Wi-Fi networks but the literature remains undecided as to whether, and in what contexts, Wi-Fi is academically productive. Using a panel of data on Wi-Fi sessions and grades of more than 10k students in an Engineering school between 2008 and 2010, we show that students who use more Wi-Fi have better grades. Using minimal Wi-Fi usage as a proxy for having a laptop, we show that laptop ownership alone is not associated to changes in performance. These results are obtained using dynamic propensity score matching and are robust across majors, curricular years and cohorts. A draft of this paper will be available soon.

Peer-Influence and Consumption in the Media Industry (PICMI)

Can Personalization be as Bad as Price Discrimination? A Theoretical Model.
Zhang, X; Ferreira, P; Matos, M; Belo, R.

Abstract

Consumers receive online recommendations personalized by their past purchase behavior. Personalization can include customized suggestions of products to buy as well as personalized pricing schedules. The literature in welfare analysis of personalization strategies has been focusing exclusively on only one of these two dimensions. In this paper, we investigate the welfare impact of personalized product recommendations from a novel perspective. In particular, we study how personalized product recommendations may resemble first and third-degree price discrimination. We model a monopoly firm that recommends a single product to each consumer with a specific level of personalization. The latter indicates the number of consumer segments that obtain the same recommendation. By incorporating elements of the consumer search behavior, horizontal product differentiation, and heterogeneous consumer preferences, we show that personalization with finite segments of consumers resembles third-degree price discrimination. Perfect personalization, where each consumer is recommended a different product, resembles first-degree price discrimination. In sum, personalization and price discrimination may yield similar welfare properties although only the latter is scrutinized by policy makers. Personalization improves social welfare because it reduces search cost. However, personalization is not always beneficial to consumers. With low levels of personalization, the firm leads consumers to accept recommendations by reducing search costs. However, with high levels of personalization, all consumers accept the recommendations from the firm, which reduces consumer surplus. Therefore, search costs balance the behavior of the firm between exploring and exploiting consumers.

Understanding the Role of Social Networks on Labor Market Outcomes Using a Large Dataset from a Mobile Operator.
Reis, F; Ferreira, P.  International Conference on Information Systems (ICIS).  University of Texas at Dallas, Fort Worth,  December 13-16, 2015.

Abstract

We use a new and unique dataset combining social network data from Call Detail Records with employment information on mobile phone subscribers to study the role of informa- tion networks on job market outcomes. The novel contribution of our work is to focus on the effect of actual social connections beyond that associated to living in the same neigh- borhood. We find that the propensity to work together is two orders of magnitude greater for a pair of neighbors who call each other than that for a pair of neighbors who do not, suggesting that actual social ties play a significant role in learning about job opportunities. We also find that social networks play a stronger role in less privileged neighborhoods, which provides some evidence that social networks may be unable to mitigate the insulation problems of such neighborhoods.

Competition, Consumer Churn and Switching Costs (CCCSC)