Essays on the economics of internet enabled markets: Last mile internet, e-commerce, and digital divide
Nattamai Kannan, Karthik Babu
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Improvements in technology such as internet, mobile phones, electronic markets have helped us make enormous social and economic progress. However, there is evidence of growing inequality between those who can use these technologies to their advantage and those who don’t. In this dissertation, I examine how the internet enabled markets can potentially address three such problems. First, geographic divide – the uneven development between those who are in urban areas vs. those who are in the rural areas. Second, socioeconomic divide – the uneven development between those who have high education, income levels and those who don’t. Third, the ability for (small scale) designers to compete against well-known brands and retail giants like Amazon. In the first chapter, we examine whether improving mobile internet access is an effective method for closing the digital divide caused by geographic location or socioeconomic status. We do this by studying the adoption and use of unlimited mobile data plans offered by a large telecommunications provider. We find that adoption of an unlimited plan leads to a substantial increase in a household’s data consumption, with the increase being particularly large for rural households and those of low socioeconomic status. This suggests that unlimited plans help these households “catch up”, potentially narrowing the digital divide. Although most of the increase is accounted for by media and entertainment content, there is a significant increase in consumption of content likely to be socially beneficial: specifically news, education, and career-related content. We conclude that policy makers should encourage unlimited mobile data plans as a method to close the digital divide. They should also invest in educational programs on how to use the internet for beneficial purposes and help web site providers make their services accessible via mobile phones. The emergence of the maker movement and e-commerce platforms such as Etsy, Fab has democratized the production of goods and increased consumer demand for designer goods. However, designers with little brand recognition must overcome high buyer search costs to succeed in these markets or on their own websites. The second chapter examines two mechanisms that designers use to promote their products—flash sales and social media. Using two different identification techniques, we find that social media activities such as Facebook Likes, Pinterest Pins, and Faves have positive but different magnitudes of causal (and predictive) impact on sales, moderated by product type. Also, flash sale promotions increase average daily sales on the designer’s primary website by up to 0.8 units in the first week after a flash sale is initiated. The third chapter examines how promotion of free Wi-Fi hotspots impacts both paid mobile and free Wi-Fi data usage. Interestingly, we find promoting Wi-Fi hotspots leads to a small but significant mobile data usage, with the heavy mobile users having the highest impact. Also, increase in Wi-Fi usage is moderated by the type of business (or location) that provides the hotspots. Public places like airports, convention centers where people spend a lot of time have the highest increase in Wi-fi usage. Overall, our study reveals how and where Wi-Fi last mile channel can complement mobile internet usage. We find that internet is a tool that has the potential to reduce the barrier between the haves and have nots. However, policy makers, managers and individuals have to understand the economics, mechanisms, and limitations of this tool in order to effectively utilize these technologies.
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