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Econ Focus

Third Quarter 2015

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What Are They Working On Now?

Two economists at leading technology companies offered a peek behind the curtains at their own current research agendas. The projects they're describing here are among the many that are active at their companies:

Tom Blake, economist, eBay

We're currently working on a wide set of questions relating to online bargaining. eBay has a feature on its site called "Best Offer" that allows buyers and sellers to negotiate in bilateral one-on-one bargaining over particular items that are being sold. That's a mechanism eBay can do a lot to adjust. There are a lot of ways in which bargaining can fail, and there's a lot eBay can do to reduce asymmetric information frictions and other frictions in the market to increase transactions.

That's in eBay's best interest — eBay wants more transaction volume — but it's also a really interesting way to add value to the academic literature. There isn't a lot of detailed data out there on bilateral bargaining, on offer-level behavior, and on the actual interactions of buyers and sellers in how they position themselves to extract better deals for themselves. Running experiments by changing features of the platform generates experimental variations in bargaining settings. That level of data can inform a lot of academic questions.

Main Story

The Techonomist in the Machine

When tech companies need to understand marketplaces, and tens of millions of dollars are at stake, some of them are turning to a new kind of researcher

Justin Rao, senior researcher, Microsoft Research

Right now, I'm focusing almost all of my energy on cloud computing. It changes the way everything works. We don't understand a lot of the economics of it. It's a very competitive market, with Amazon and Google also being big players.

The model of boxed software — pay $2,000 for a license to install an application on 10 computers — just won't be a thing in five years. A lot of what is on the cloud is basically doing the same: Bring your software license and we'll run your software. We don't think that is going to prevail.

I'm working mainly on cloud dynamic pricing for infrastructure and pricing models for the software. What are the mechanisms that we need to have ready for the future of computing and the future of software use — how we price it, how we sell it, the dynamics of it? I think there's going to be a lot of mechanism design work there.

It's in its early days, and it's a huge space. We're trying to identify the core economic issues, project where the market's going, and be sitting there ready with mechanisms to sell things that are efficient, clear the market, and help us compete.

Trying to become an expert and understand the engineering side is really challenging. It's required about a year's investment to get up to speed. It's just so much more complicated than anything I've worked on.

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