What happens when the Net is Not Neutral?

Keywords. Consumers Are Going to Love the End of Net Neutrality : at First
by: Christopher Mims
Feb 13, 2017
Click here to view the full article on WSJ.com

TOPICS: Internet, Regulation

SUMMARY: The Trump administration looks likely to change a foundational principle of America's tech ecosystem. And consumers are going to love the government's possible first steps at dismantling net neutrality, writes Christopher Mims. "Advocates for 'net neutrality'-the principle that all data transmitted through the internet should be treated equally-argue it is needed for America to cultivate innovative web-focused startups. Critics say that alternatives to net neutrality could lead to innovation and competition in the country's communications infrastructure, where they are badly needed."

CLASSROOM APPLICATION: Students can learn about net neutrality and two policies : zero rating and paid prioritization : that violate net neutrality. They can also learn about the players that favor net neutrality and those that do not, and they can learn about the possible impact on consumers of dropping net neutrality.

QUESTIONS: 
1. (Advanced) What is 'zero rating'? Why do internet service providers practice zero rating? Why do some content providers oppose the practice? What are criticisms of zero rating?

2. (Advanced) What is 'paid prioritization'? How is paid prioritization similar to zero rating?

3. (Introductory) Why is the end of net neutrality a threat to Snapchat?

4. (Advanced) What are the possible impacts on consumers of dropping net neutrality?

Reviewed By: James Dearden, Lehigh University

Online shopping in rural America

E-Commerce Is a Boon for Rural America, But It Comes With a Price
by: Laura Stevens
Sep 12, 2016
Click here to view the full article on WSJ.com
Click here to view the video on WSJ.com 

TOPICS: E-Commerce

SUMMARY: E-commerce is transforming rural America by providing small-town residents with big-city conveniences and the latest products. But serving these consumers is expensive for retailers and delivery companies.

CLASSROOM APPLICATION: The article informs students the effect of the shift in shopping by rural Americans from brick-and-mortar stores to online retailers.

QUESTIONS: 
1. (Advanced) The article states that online retailers sometimes lose money on products sold to rural customers. Why would online retailers set their pricing and shipping rates that result in losses on products sold to these customers?

2. (Introductory) Which results in lower shipping costs: sales at traditional brick-and-mortar stores or sales by online retailers?

3. (Advanced) Is Wal-Mart's strategic move into groceries a response to the growth of online retailing? Are households who shop at Wal-Mart for perishable groceries more likely to purchases consumer products at the retailer?

Reviewed By: James Dearden, Lehigh University

Google profits from switch to mobile devices

Google Profits Surge on Strong Ad Demand
by: Jack Nicas
Jul 29, 2016
Click here to view the full article on WSJ.com

TOPICS: Advertising

SUMMARY: Google parent Alphabet said quarterly profit soared 24%, the second internet giant in two days to report blockbuster earnings driven by consumers' rapid shift to mobile devices.

CLASSROOM APPLICATION: Students can evaluate the effect of the rise in smartphones on Google's revenues from click ads. The increase in the use of smartphones has increased the demand for click ads, which in turn has increased Google's revenues from click ads. Instructors can emphasize the point that a new technology, smartphones, has increased the demand for a product, click advertising.

QUESTIONS: 
1. (Advanced) What is the effect of the rise of smartphones on internet use? What is the effect of the rise in internet use on click advertising?

2. (Introductory) Why are companies increasingly willing to advertise on smartphones?

3. (Advanced) Why has Google in particular benefited from the rise of smartphones?

Price discrimination in the mobile game industry

How Mobile Games Rake In Billions
by: Sarah E. Needleman
Jul 29, 2016
Click here to view the full article on WSJ.com
Click here to view the video on WSJ.com 

TOPICS: Price Discrimination

SUMMARY: Behind a pair of recent multibillion-dollar deals in the mobile videogame industry is an expertly crafted weapon: virtual goods sold inside apps for as little as 99 cents a pop. In-app purchases let players spend real money to bypass ads, acquire skills or grow powerful quickly.

CLASSROOM APPLICATION: Students can evaluate the evolution of mechanisms within mobile videogames to increase the likelihood that players purchase in-game tools to improve the playing experience. One interesting class of mechanisms involves behavior-based price discrimination: "Data on players' behavior also are used to strategically tweak prices for virtual goods in real time."

QUESTIONS: 
1. (Introductory) Is the use of a countdown clock within a game a tool used by game developers to price discriminate?

2. (Advanced) What is "behavior-based price discrimination"? What are examples of behavior-based price discrimination noted in the article?

3. (Advanced) Evaluate the statement, "Developers have gotten savvier about giving players more free things to do to keep them hooked until they start spending." Does getting hooked on a game imply that the player's demand for continued and faster play is more price inelastic? Does the higher price inelasticity imply that the player is more willing to pay to play a game without imposed delays?

Reviewed By: James Dearden, Lehigh University

Economies of scale in the on-demand economy

http://www.bloomberg.com/view/articles/2016-06-29/uber-isn-t-going-to-conquer-the-world

Does what Kalanick say about Uber apply to Facebook? Airbnb? Microsoft Windows? Google Chrome? Verizon cell phone service? A brand of cell phone?

Creating an on-demand company is not easy

http://qz.com/627605/inside-instacarts-fraught-and-misguided-quest-to-become-the-uber-of-groceries/

Surveillance and behavior modification

This article says that the ultimate goal of Internet survelliance is behavior modification: http://www.faz.net/aktuell/feuilleton/debatten/the-digital-debate/shoshana-zuboff-secrets-of-surveillance-capitalism-14103616-p2.html?printPagedArticle=true.

What are some possible applications? Let's dream.

1. Consumers when shopping in bricks and mortar stores?
2. Consumers when browsing the Internet?
3. Reduction of information asymmetries in insurance markets?
4. Rewarding employees for good performance?
5. Providing feedback to employees?
6. Replacing supervisors?
7. Replacing salespeople?
8. ...

Do we need human coaches?

http://www.bbc.com/news/technology-35579005

Could this technology replace the instructor in bricks and mortar classrooms?

How do Uber and Aibnb create wealth?

http://managerialecon.blogspot.com/2016/02/should-we-eliminate-middlemen.html

Data analytics @ Spotify

http://qz.com/571007/the-magic-that-makes-spotifys-discover-weekly-playlists-so-damn-good/

On-Demand Pricing

Now Prices Can Change From Minute to Minute
by: Jack Nicas
Dec 14, 2015
Click here to view the full article on WSJ.com

TOPICS: Price Discrimination, Pricing

SUMMARY: Backed by vast amounts of data and powerful software, more businesses are varying prices by the day, the hour, even the minute. Online sellers have used such tactics for years, but frequent price changes are increasingly common in the physical world. "On average, consumers pay more as a result of [pricing based on demand and also supply conditions at a particular point in time], economists say. Dynamic pricing also affects who gets the goods in highest demand, favoring those willing to pay the most, while creating deeper discounts for shoppers who can buy when prices are low."

CLASSROOM APPLICATION: Students can evaluate the effect of "dynamic pricing" (i.e., basing prices at a particular point in time on the demand and supply characteristics at that point in time) on seller profits, consumer welfare, and economic efficiency. One important point for instructors to emphasize is that sellers changing prices according to demand and supply conditions can be the result of a technological change in measuring demand on the equilibrium process of a competitive markets. Due to the technological change, equilibrium prices adjust quickly. Alternatively, changing prices over time as a result of changing demand conditions can be the result of price discrimination with consumers selecting from a price-time of purchase menu.

QUESTIONS: 
1. (Advanced) Consider the statement: "Previously, a taxi at rush hour went to 'the person who happened to be on the right street corner,' said Ian McHenry, the president of Beyond Pricing, which helps homeowners price their rented guest rooms like big hotels. Now, rides go to people willing to pay more, and fewer people 'hit the jackpot and get that underpriced reservation or baseball ticket or open cab.'" Does this statement imply that prior to "dynamic pricing," markets experienced excess demand during peak demand periods? Does "dynamic pricing" improve economic efficiency?

2. (Advanced) Evaluate the statement: "'This is not a passing fad,' said Peter Fader, co-director of the University of Pennsylvania's customer-analytics initiative. Amazon is making dynamic pricing the norm, he said, 'and then it's going to become imperative for the brick-and-mortar players to figure out how to do this.'" Why is it imperative for brick-and-mortar stores to adopt the same pricing policies as those of online retailers? In terms of game-theoretic analysis, why is it a best response for brick-and-mortar players to do so?

3. (Advanced) Does the price discrimination based on demand and supply characteristics a particular points in time result in higher average consumer prices?

4. (Introductory) The article notes a case about highway pricing based on time-of-day or congestion. Does basing the price of highway use on the amount of congestion improve economic efficiency?

Reviewed By: James Dearden, Lehigh University

Part-time work and the app economy

http://qz.com/472246/the-industrial-revolution-of-our-time-is-changing-the-way-we-work/