Heinz Privacy/Information Security Job Candidate Talk


Understanding the Implications of the Data Economy

Several new technologies for collecting, storing, and analyzing increasingly granular data are transforming the way many industries operate. Data has become a crucial asset that shapes products, services, and market interactions. The increasing use of these technologies is expected to foster growth and innovation, provide better products and services, generate new gains from trade, and increase overall welfare. However, ubiquitous data collection and the increasing importance of algorithmic systems also create novel concerns. For example, the erosion of privacy may limit the autonomy of choice, algorithmic opacity may lead to unintended bias or discrimination, and the concentration of data on a handful of intermediaries may exacerbate information asymmetries. While the ability to leverage vast amounts of data is certainly generating economic benefits, not enough is known about the extent to which different stakeholders are reaping the benefits, and bearing the costs, of these technological advances. 

In the first part of this talk, I provide an overview of how my research explores the technological, economic, and policy considerations that underpin those tradeoffs. My ongoing projects include studies on the role of online intermediary platforms in legacy industries, the impact of privacy regulations for the availability of free online content and services, the effect of behaviorally targeted advertising on consumers’ search and purchase decisions, and the strategic implications of the use of tracking and analytics in the online advertising industry.  In the second part of my talk, I present a study on how online intermediaries, such as Uber, Airbnb, or OpenTable, enter legacy industries by leveraging data and network externalities, and on how they influence the economic outcomes experienced by consumers and firms. In particular, I focus on how the increasing adoption of OpenTable (a platform that makes it easier for consumers to book restaurants) has affected restaurants’ survival and prices faced by diners in New York City. While platforms of this type can alleviate market inefficiencies by reducing search and transaction costs, they can also garner significant market power due to their networked nature. Using a simple game-theoretical model, I show how an online intermediary that charges sellers and subsidizes buyers may be adopted by sellers even if it provides no apparent long-term benefits to them. The model proposes that the platform configures a prisoner’s dilemma. All sellers have incentives to join the platform to capture customers from competitors, or to protect its clientele from adopters. However, if all sellers adopt, no one gets additional customers and the costs of the platform are passed down to customers through price. To empirically test the predictions of the model, I created a dataset containing prices, survival, and OpenTable participation for over 5,000 restaurants in NYC between 2005 and 2016. The empirical analysis confirms three key features of my model: Adoption of OT by neighboring restaurants increase the probability of a restaurant joining OT, the costs of the platform are passed down to customers through price increases, and restaurants whose competitors participate in OT get little to no benefits, in terms of probability of survival, from participating in OT.

Cristobal Cheyre is a postdoctoral fellow at the Heinz College at Carnegie Mellon University. Previously, he obtained his PhD in Engineering and Public Policy at CMU and served as executive director of Engineering 2030, a strategic initiative funded by the Chilean Government to propel the School of Engineering of Pontificia Universidad Catolica de Chile to world class standards. His research has been disseminated across leading journals and premier academic conferences, including Management Science, Industrial and Corporate Change, the Privacy Law Scholar Conference, the Workshop on Information Systems and Economics, and others.

Faculty Hosts: Alessandro Acquisti (Heinz)

Heinz College

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