BRENT RICHARD HICKMAN, University of Iowa Department of Economics
Email: brent-hickman@uiowa.edu

Researchers and experts have typically viewed electronic auctions (such as those implemented by eBay, Amazon, and Yahoo!) as either oral, ascending-price (English) auctions or second-price, sealed-bid (Vickrey) auctions. I show that significant differences exist, both theoretical and practical, between English and Vickrey pricing rules and those used in electronic auctions. In addition, in a static model, within the symmetric independent private-values (IPV) paradigm, I derive the unique symmetric equilibrium bid function, showing that the presence of bid increments can significantly alter bidder behavior. Using numerical methods, I also illustrate that these result in a highly non-linear bid function, in contrast to that predicted under either the English or the Vickrey formats.

ARVIND ASHTA, Burgundy School of Business (ESC Dijon), France - CEREN
Email: aashta@escdijon.com
DJAMCHID ASSADI, American University of Paris
Email: dassadi@aup.fr

Microcredit interest costs remain higher than those of commercial banks in spite of significant donor funds, largely owing to transaction costs relative to small loan sizes. With the rise of Web 2.0 and online social interactivity, can these transaction costs be reduced through peer to peer lending? Peer to Peer lending and Web 2.0 have two things in common. The first common denominator is that both of them are rather newcomers in their respective fields and growing fast. The second is that they are both based on mutual and social exchanges between people instead of centrally controlled communications and relationships. The main objective of this paper was to investigate whether they are integrated to support a higher level of social interactions and associations for less (transaction) costs. We find that peer to peer lending consists of diverse websites of microcredit (Kiva, Wokai), social investing (MicroPlace) as well as small loans at market rates (Prosper, Zopa, Lending Club), and even lending between friends and family members (Virgin Money). The paper studies the use of web 2.0 technologies (blogs, interactivity between lenders and buyers, peers' reviews and comments, peers communities and chats) in six such peer-to-peer lending sites. It finds that most of the peer-to-peer lenders are in fact intermediaries between the peers (lender and borrowers) and there is little direct contact between the peers. One website used none of the web 2.0 tools. None of the websites used all the web 2.0 tools. The impact on transaction costs is therefore very little.

NEIL POLLOCK, University of Edinburgh
Email: neil.pollock@ed.ac.uk
ROBIN WILLIAMS, affiliation not provided to SSRN
CHRISTINE GRIMM, affiliation not provided to SSRN
LUCIANA D'ADDERIO, University of Edinburgh - Institute for Studies of Science, Technology and Innovation (ISSTI)
Email: L.D-Adderio@ed.ac.uk

We address the seemingly implausible project of moving the technical support of complex organisational technologies online. We say 'implausible' because from the point of view of micro-sociological analysis, and the influential work of Julian Orr, there appears a consensus that the diagnosis and resolution of technical failures is an intrinsically local affair: technical problems are theorised as context specific, requiring specialists to have knowledge of and close interactions with local settings. However, more recently, there has been a push amongst technology producers for the development of online forms of support so that failures and problem-settings can be handled remotely. Today, and particularly in the area of organisational software, many failures are repaired at a distance. How is this possible given the consensus amongst sociologists? Drawing on ethnographic fieldwork conducted at a major software producer we show how technical support has been recast and inserted in a new geographical and temporal regime. This has implications for how sociologists of technology conceptualise the nature of technical failure as well as the situation in which repair occurs. We shift understandings of technical problems from a focus on rootedness to 'disentanglement' and 'exporting' (how problems are lifted out of local contexts and passed around globally distributed offices in search of requisite specialist expertise). From the point of view of the producer, this is seemingly an effective means to resolve failures, but it is also one with negative consequences. Thus, we describe how the support process is further modified and regulated in an attempt to rid it of unwanted features. Finally, we show how globalised online support reconfigures relationships between various actors. Our conclusions are that whilst the circumstances underpinning localist views of technical support are not abolished by virtualisation they are substantially reshaped by it. We suggest that different analytical approaches are needed that address tensions between local practices and technological restructuring, and their contradictory outcomes.

XINXIN LI, University of Connecticut, School of Business
Email: xli@business.uconn.edu
LORIN M. HITT, University of Pennsylvania - The Wharton School
Email: LHITT@WHARTON.UPENN.EDU

Consumer reviews may reflect not only perceived quality but also the difference between price and quality (perceived value). In markets where product prices change frequently, these price-influenced reviews may be biased as a signal of product quality when used by consumers possessing no knowledge of historical prices. In this paper, we develop an analytical model that examines the impact of price-influenced reviews on firm optimal pricing and consumer welfare. We quantify the price effects in consumer reviews for different formats of review systems using actual market prices and online consumer ratings data collected for the digital camera market. Our empirical results suggest that unidimensional ratings commonly used in most review systems can be substantially biased by price effects and appear to be similar to a value measure used in more complex rating systems which separate quality ratings from value ratings. Our findings suggest the importance for firms to account for these price effects in their overall marketing strategy and for review systems to consider expanding the review dimensions to improve consumer welfare.

SERGEI KOULAYEV, Columbia University, Graduate School of Arts and Sciences, Department of Economics
Email: sak2104@columbia.edu

In this paper we estimate a structural model of search for differentiated products, using a unique dataset of individual search histories for hotels online. We propose and implement an identification strategy that allows to separately estimate consumer's beliefs, search costs and preferences. Learning plays an essential role in this strategy: it creates variation of posterior beliefs across consumers that's orthogonal to variation in search costs. We obtain two kinds of results. First, we estimate consumer's demand from the search model and compare it to results from the static model. We find that ignoring the endogeneity of choice sets leads to biased estimates: in particular, the aggregate price elasticity is over-estimated by about 80%. Second, we attempt to evaluate an empirical performance of a model of rational search. The mean search cost is estimated to be around 40 dollars, and median is 30 dollars; however, there is also a significant variation of search costs among population. A test between models of search from known (Stigler 1967) and from unknown (Rothschild 1974) distribution favors the second one: we find a statistically significant amount of Bayesian learning, even though it doesn't seem to affect demand estimates in an economically meaningful way.

FENG ZHU, University of Southern California - Management and Organization Department
Email: fzhu@marshall.usc.edu

This paper examines social networks' incentives to establish compatibility under fee and ad-sponsored business models. I analyze the competition between two social networks and show that compatibility is only possible when the two networks are ad-sponsored. I also find that even when both networks are ad-sponsored, a network with a significant installed-base advantage may choose not to be compatible when the cost from sharing the market outweighs the benefit from additional ad profits. Finally, compatibility also requires a significant number of single-homing users. The results are consistent with empirical observations of social networks and suggest that increased adoption of ad-sponsored business models may lead to many de-facto standards in high-technology industries.