I have published numerous papers in industrial organization, the economics of information technology, the economics of the software and the economics of cybersecurity and cryptocurrencies.
In this paper, we show how product standardization, or its absence, affects the rate of technolog... more In this paper, we show how product standardization, or its absence, affects the rate of technological progress. Two types of outcomesthose in which innovations are compatible with old products and those in which they are not - are market equilibria. The incompatible regime is characterized by more frequent product innovations and more rapid technological progress, on the one hand, and greater expenditure of resources in return for this progress on the other. In our framework, an absence of product standardization fulfills the role of "functional obsolescence," which may serve a socially desirable role by fostering more rapid technological progress.
In this paper we address the possibility of horizontal foreclosure in markets for complementary s... more In this paper we address the possibility of horizontal foreclosure in markets for complementary services (software) where the consumption value of durables (hardware) depends on the availability of software. Horizontal foreclosure occurs when a hardware firm merges with a software firm and the integrated firm ceases to supply compatible software for a rival technology. We find that horizontal foreclosure can be an equilibrium outcome where both the merger and compatibility decisions are part of a multistage game which permits the foreclosed firm to play a number of counter- strategies. Moreover, foreclosure may result in monopolization of the hardware market. We find that the foreclosure equilibrium is inefficient: total surplus would be higher without foreclosure.
The existing literature on optimal learning confines attention to the costs and benefits of exper... more The existing literature on optimal learning confines attention to the costs and benefits of experimentation when there is a single decision maker. In this paper, we consider equilibrium learning in an imperfectly competitive setting. The novel feature of the competitive setting is that experimentation involves strategic costs that are not present in the monopoly context. Using a simple model, we show that competition can inhibit the scope of learning, relative to a monopoly.
This chapter contains sections titled: Introduction, The Search Engine Industry, Data Description... more This chapter contains sections titled: Introduction, The Search Engine Industry, Data Description, Analysis of the Data, Updates and Trends: Where Is Google?, Conclusion, Notes, References
We analyze how network effects affect competition in the nascent crypto-currency market. We do so... more We analyze how network effects affect competition in the nascent crypto-currency market. We do so by examining the changes over time in exchange rate data among crypto-currencies. Specifically, we look at two aspects: (1) competition among different currencies, and (2) competition among exchanges where those currencies are traded. Our data suggest that the winner-take-all effect is dominant early in the market. During this period, when Bitcoin becomes more valuable against the USD, it also becomes more valuable against other crypto-currencies. This trend is reversed in the later period. The data in the latter period are consistent with the use of crypto-currencies as financial assets (popularized by Bitcoin), and not consistent with “winner-take-all” dynamics. For exchanges, we find little if any evidence of arbitrage opportunities. With no arbitrage opportunities, it is possible for multiple exchanges to coexist in equilibrium despite two-sided network effects. ∗Tel Aviv University...
A large literature has used patent data to measure knowledge spillovers across inventions but has... more A large literature has used patent data to measure knowledge spillovers across inventions but has not explicitly considered the collaboration networks formed by inventors as a mechanism for shaping these knowledge flows. Using a recently developed methodology, we examine the incidence and nature of knowledge flows mediated by the collaboration networks of inventors. We apply this methodology to three sectors in which programming skills are vital: (i) Information and Communication Technology/Information Security (ICT/IS) (ii) Financial Technology (Fin-Tech,) and (iii) Medical Technology (Med-Tech.) These are all areas of innovation in which Israel should have a comparative advantage. We find the following: (I) the quality of the Israeli ICT/information security inventions is systematically linked to the structure of the collaborative network. In particular, we find positive and significant direct and indirect knowledge spillovers. (II) We find no evidence of such spillovers in either...
This research explores the relationship between personal values and the tendency to take cyber-ri... more This research explores the relationship between personal values and the tendency to take cyber-risks. We first develop and add six cyber-risk items to the well-known Domain-Specific Risk-Taking (DOSPERT) scale. Importantly, we show that like the other five domains examined by the scale (Health, Ethical, Financial, Recreational, and Social), these cyber items form a separate cluster. Separate clusters are essential in order to employ the DOSPERT scale. We then examine the association between values and cyber risk taking behavior. We find that "conservation (conservatism)" values are negatively correlated with the tendency to take cyber risks. Thus, individuals for whom this value is important are less likely to take cyber risks. We also find that "openness to change" values are positively associated with the tendency to take cyber-risks. Individuals with high scores for this value are more likely to take cyber risks. The findings point to possible "values based" interventions in order to increase cyber-security.
A large percentage of the deaths from COVID-19 occur among residents of long-term care facilities... more A large percentage of the deaths from COVID-19 occur among residents of long-term care facilities. There are two possible reasons for this phenomenon. First, the structural features of such settings may lead to death. Alternatively, it is possible that individuals in these facilities are in poorer health than those living elsewhere, and that these individuals would have died even if they had not been in these facilities. Our findings show that, controlling for the population density, the percentage of older adults in the population, and the number of hospital beds per capita, there is a significant positive association between the number of long-term care beds (LTCB) per capita and COVID-19 mortality rates. This finding provides support for the claim that long-term care living arrangements (of older people) are a significant risk factor for dying from COVID-19.
This paper extends the blockchain sustainability framework of Budish (2018) to consider proof of ... more This paper extends the blockchain sustainability framework of Budish (2018) to consider proof of stake (in addition to proof of work) consensus mechanisms and permissioned (where the number of nodes are fixed) networks. It is demonstrated that an economically sustainable network will involve the same cost regardless of whether it is proof of work or proof of stake although in the later the cost will take the form of illiquid financial resources. In addition, it is shown that regulating the number of nodes (as in a permissioned network) does not lead to additional cost savings that cannot otherwise be achieved via a setting of block rewards in a permissionless (i.e., free entry) network. This suggests that permissioned networks will not be able to economize on costs relative to permissionless networks.
Scientific understanding of innovation processes and of the patent system increasingly relies on ... more Scientific understanding of innovation processes and of the patent system increasingly relies on big data analyses of patent citations. Much of that research focuses on highly cited patents. This study, conversely, offers the first systematic exploration of uncited patents-patents that receive no citations. Analyzing data on all US patents issued between 1976 and 2008, we focus on the ratio of uncited patents out of all patents granted each year. We track the changes in the percentage of uncited patents during that period, and across technological fields, controlling for patents' age. We also investigate traits of uncited patents by examining the association between lack of citations and various factors including the number of inventors, number of technological subclasses, number of backward citations, and number of claims in the patent. We find a robust pattern whereby the percentage of uncited patents declined between 1976 and the mid 1990s, but has been significantly increasing since then. These findings are consistent across technological fields and hold after controlling for patent characteristics. We discuss these and additional findings, and propose possible explanations. We suggest that the trend of increase in uncited patents raises, and reinforces, concerns regarding patent quality and "patent explosion". More broadly, our focus on "negative information" embedded in patent data opens up a new avenue for further research that can deepen our understanding of the patent system.
We employ a unique data set on white-collar workers that combines direct observations of individu... more We employ a unique data set on white-collar workers that combines direct observations of individual use of information technology as well as objective information on individual performance. The main hypothesis we examine is whether heavier users of IT are more productive, and if heavier users of IT are indeed more productive, how does this increase in productivity manifest itself? Our results suggest that, controlling for other factors, the size of an individual’s internal email network is more highly correlated with revenues generated by that individual than age, experience or education. Further, the number of unique electronic contacts is more significant than the number of messages, external network size, and all other measures of email communication including declared time spent on email. Additionally, even after accounting for the individual’s number of unique contacts within the firm, the social network measure of “betweenness” is also highly correlated with revenues. We attri...
... Page 7. COMPETING COMPATIBILITY STANDARDS AND PC SOFTWARE 605 TABLE 4.-REGRESSION RESULTS FOR... more ... Page 7. COMPETING COMPATIBILITY STANDARDS AND PC SOFTWARE 605 TABLE 4.-REGRESSION RESULTS FOR DATABASE MANAGEMENT SYSTEMS .(Dependent Variable Is LPRICE) Regression (2) Time Dummies Interacted ...
In Israel, area cable television (CATV) licenses were auctioned sequentially. This paper provides... more In Israel, area cable television (CATV) licenses were auctioned sequentially. This paper provides evidence that (i) there were interdependencies among many of the franchises and that (ii) subscriber fees for the interdependent franchises decreased over time in this auction. i. introduction How well do auctions of interdependent objects work when combined bidding for groups of licenses is not allowed? Despite a growing literature on the auctioning of multiple objects, the auction literature has focused exclusively on settings in which the value of each object was independent of all other objects to be auctioned. 1 In many multiple auctions, the values of the objects are potentially interdependent. This paper examines a sequential auction of interdependent objects. In Israel, area cable television (CATV) licenses were auctioned in sequential blocks. I present evidence supporting the hypothesis that (1) there were indeed interdependencies among many of the CATV franchises and (2) among the interdependent franchises, subscriber fees decreased over time in this auction. To the extent that the technology for delivering cable television resembles the technology for delivering personal communications services (PCS), 2 this paper sheds some light on the debate concerning the auctioning of spectrum for PCS. This is because, as Chakravorti et al. [1995] note, the optimal aggregation of PCS licenses depends on whether there are
ABSTRACT The Israeli telecommunications industry has recently undergone significant changes. One ... more ABSTRACT The Israeli telecommunications industry has recently undergone significant changes. One of the most important changes was the decision to establish a cable television (CATV) industry in the country. The decision of the government not to play an active role in the development and provision of CATV represented a significant departure from past practice. This paper describes the development of the CATV industry in Israel and evaluates how well the evolution of the industry has served the public interest.
In this paper, I first estimate hedonic price equations for computer spreadsheet programs, and th... more In this paper, I first estimate hedonic price equations for computer spreadsheet programs, and then use the analysis to empirically test whether network externalities exist in this industry. The study shows that consumers are willing to pay a significant premium for spreadsheets that are compatible with the Lotus platform and for spreadsheets that offer links to external data bases, and a smaller premium for spreadsheets that offer local area network compatibility. These results support the hypothesis that the computer spreadsheet market exhibits network externalities. Finally, the quality-adjusted (real) price index of computer spreadsheets declined by approximately 15 percent per year from 1986-1991. 2
This information is provided to you by IDEAS at the Department of Economics, College of Liberal A... more This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.
In this paper, we show how product standardization, or its absence, affects the rate of technolog... more In this paper, we show how product standardization, or its absence, affects the rate of technological progress. Two types of outcomesthose in which innovations are compatible with old products and those in which they are not - are market equilibria. The incompatible regime is characterized by more frequent product innovations and more rapid technological progress, on the one hand, and greater expenditure of resources in return for this progress on the other. In our framework, an absence of product standardization fulfills the role of "functional obsolescence," which may serve a socially desirable role by fostering more rapid technological progress.
In this paper we address the possibility of horizontal foreclosure in markets for complementary s... more In this paper we address the possibility of horizontal foreclosure in markets for complementary services (software) where the consumption value of durables (hardware) depends on the availability of software. Horizontal foreclosure occurs when a hardware firm merges with a software firm and the integrated firm ceases to supply compatible software for a rival technology. We find that horizontal foreclosure can be an equilibrium outcome where both the merger and compatibility decisions are part of a multistage game which permits the foreclosed firm to play a number of counter- strategies. Moreover, foreclosure may result in monopolization of the hardware market. We find that the foreclosure equilibrium is inefficient: total surplus would be higher without foreclosure.
The existing literature on optimal learning confines attention to the costs and benefits of exper... more The existing literature on optimal learning confines attention to the costs and benefits of experimentation when there is a single decision maker. In this paper, we consider equilibrium learning in an imperfectly competitive setting. The novel feature of the competitive setting is that experimentation involves strategic costs that are not present in the monopoly context. Using a simple model, we show that competition can inhibit the scope of learning, relative to a monopoly.
This chapter contains sections titled: Introduction, The Search Engine Industry, Data Description... more This chapter contains sections titled: Introduction, The Search Engine Industry, Data Description, Analysis of the Data, Updates and Trends: Where Is Google?, Conclusion, Notes, References
We analyze how network effects affect competition in the nascent crypto-currency market. We do so... more We analyze how network effects affect competition in the nascent crypto-currency market. We do so by examining the changes over time in exchange rate data among crypto-currencies. Specifically, we look at two aspects: (1) competition among different currencies, and (2) competition among exchanges where those currencies are traded. Our data suggest that the winner-take-all effect is dominant early in the market. During this period, when Bitcoin becomes more valuable against the USD, it also becomes more valuable against other crypto-currencies. This trend is reversed in the later period. The data in the latter period are consistent with the use of crypto-currencies as financial assets (popularized by Bitcoin), and not consistent with “winner-take-all” dynamics. For exchanges, we find little if any evidence of arbitrage opportunities. With no arbitrage opportunities, it is possible for multiple exchanges to coexist in equilibrium despite two-sided network effects. ∗Tel Aviv University...
A large literature has used patent data to measure knowledge spillovers across inventions but has... more A large literature has used patent data to measure knowledge spillovers across inventions but has not explicitly considered the collaboration networks formed by inventors as a mechanism for shaping these knowledge flows. Using a recently developed methodology, we examine the incidence and nature of knowledge flows mediated by the collaboration networks of inventors. We apply this methodology to three sectors in which programming skills are vital: (i) Information and Communication Technology/Information Security (ICT/IS) (ii) Financial Technology (Fin-Tech,) and (iii) Medical Technology (Med-Tech.) These are all areas of innovation in which Israel should have a comparative advantage. We find the following: (I) the quality of the Israeli ICT/information security inventions is systematically linked to the structure of the collaborative network. In particular, we find positive and significant direct and indirect knowledge spillovers. (II) We find no evidence of such spillovers in either...
This research explores the relationship between personal values and the tendency to take cyber-ri... more This research explores the relationship between personal values and the tendency to take cyber-risks. We first develop and add six cyber-risk items to the well-known Domain-Specific Risk-Taking (DOSPERT) scale. Importantly, we show that like the other five domains examined by the scale (Health, Ethical, Financial, Recreational, and Social), these cyber items form a separate cluster. Separate clusters are essential in order to employ the DOSPERT scale. We then examine the association between values and cyber risk taking behavior. We find that "conservation (conservatism)" values are negatively correlated with the tendency to take cyber risks. Thus, individuals for whom this value is important are less likely to take cyber risks. We also find that "openness to change" values are positively associated with the tendency to take cyber-risks. Individuals with high scores for this value are more likely to take cyber risks. The findings point to possible "values based" interventions in order to increase cyber-security.
A large percentage of the deaths from COVID-19 occur among residents of long-term care facilities... more A large percentage of the deaths from COVID-19 occur among residents of long-term care facilities. There are two possible reasons for this phenomenon. First, the structural features of such settings may lead to death. Alternatively, it is possible that individuals in these facilities are in poorer health than those living elsewhere, and that these individuals would have died even if they had not been in these facilities. Our findings show that, controlling for the population density, the percentage of older adults in the population, and the number of hospital beds per capita, there is a significant positive association between the number of long-term care beds (LTCB) per capita and COVID-19 mortality rates. This finding provides support for the claim that long-term care living arrangements (of older people) are a significant risk factor for dying from COVID-19.
This paper extends the blockchain sustainability framework of Budish (2018) to consider proof of ... more This paper extends the blockchain sustainability framework of Budish (2018) to consider proof of stake (in addition to proof of work) consensus mechanisms and permissioned (where the number of nodes are fixed) networks. It is demonstrated that an economically sustainable network will involve the same cost regardless of whether it is proof of work or proof of stake although in the later the cost will take the form of illiquid financial resources. In addition, it is shown that regulating the number of nodes (as in a permissioned network) does not lead to additional cost savings that cannot otherwise be achieved via a setting of block rewards in a permissionless (i.e., free entry) network. This suggests that permissioned networks will not be able to economize on costs relative to permissionless networks.
Scientific understanding of innovation processes and of the patent system increasingly relies on ... more Scientific understanding of innovation processes and of the patent system increasingly relies on big data analyses of patent citations. Much of that research focuses on highly cited patents. This study, conversely, offers the first systematic exploration of uncited patents-patents that receive no citations. Analyzing data on all US patents issued between 1976 and 2008, we focus on the ratio of uncited patents out of all patents granted each year. We track the changes in the percentage of uncited patents during that period, and across technological fields, controlling for patents' age. We also investigate traits of uncited patents by examining the association between lack of citations and various factors including the number of inventors, number of technological subclasses, number of backward citations, and number of claims in the patent. We find a robust pattern whereby the percentage of uncited patents declined between 1976 and the mid 1990s, but has been significantly increasing since then. These findings are consistent across technological fields and hold after controlling for patent characteristics. We discuss these and additional findings, and propose possible explanations. We suggest that the trend of increase in uncited patents raises, and reinforces, concerns regarding patent quality and "patent explosion". More broadly, our focus on "negative information" embedded in patent data opens up a new avenue for further research that can deepen our understanding of the patent system.
We employ a unique data set on white-collar workers that combines direct observations of individu... more We employ a unique data set on white-collar workers that combines direct observations of individual use of information technology as well as objective information on individual performance. The main hypothesis we examine is whether heavier users of IT are more productive, and if heavier users of IT are indeed more productive, how does this increase in productivity manifest itself? Our results suggest that, controlling for other factors, the size of an individual’s internal email network is more highly correlated with revenues generated by that individual than age, experience or education. Further, the number of unique electronic contacts is more significant than the number of messages, external network size, and all other measures of email communication including declared time spent on email. Additionally, even after accounting for the individual’s number of unique contacts within the firm, the social network measure of “betweenness” is also highly correlated with revenues. We attri...
... Page 7. COMPETING COMPATIBILITY STANDARDS AND PC SOFTWARE 605 TABLE 4.-REGRESSION RESULTS FOR... more ... Page 7. COMPETING COMPATIBILITY STANDARDS AND PC SOFTWARE 605 TABLE 4.-REGRESSION RESULTS FOR DATABASE MANAGEMENT SYSTEMS .(Dependent Variable Is LPRICE) Regression (2) Time Dummies Interacted ...
In Israel, area cable television (CATV) licenses were auctioned sequentially. This paper provides... more In Israel, area cable television (CATV) licenses were auctioned sequentially. This paper provides evidence that (i) there were interdependencies among many of the franchises and that (ii) subscriber fees for the interdependent franchises decreased over time in this auction. i. introduction How well do auctions of interdependent objects work when combined bidding for groups of licenses is not allowed? Despite a growing literature on the auctioning of multiple objects, the auction literature has focused exclusively on settings in which the value of each object was independent of all other objects to be auctioned. 1 In many multiple auctions, the values of the objects are potentially interdependent. This paper examines a sequential auction of interdependent objects. In Israel, area cable television (CATV) licenses were auctioned in sequential blocks. I present evidence supporting the hypothesis that (1) there were indeed interdependencies among many of the CATV franchises and (2) among the interdependent franchises, subscriber fees decreased over time in this auction. To the extent that the technology for delivering cable television resembles the technology for delivering personal communications services (PCS), 2 this paper sheds some light on the debate concerning the auctioning of spectrum for PCS. This is because, as Chakravorti et al. [1995] note, the optimal aggregation of PCS licenses depends on whether there are
ABSTRACT The Israeli telecommunications industry has recently undergone significant changes. One ... more ABSTRACT The Israeli telecommunications industry has recently undergone significant changes. One of the most important changes was the decision to establish a cable television (CATV) industry in the country. The decision of the government not to play an active role in the development and provision of CATV represented a significant departure from past practice. This paper describes the development of the CATV industry in Israel and evaluates how well the evolution of the industry has served the public interest.
In this paper, I first estimate hedonic price equations for computer spreadsheet programs, and th... more In this paper, I first estimate hedonic price equations for computer spreadsheet programs, and then use the analysis to empirically test whether network externalities exist in this industry. The study shows that consumers are willing to pay a significant premium for spreadsheets that are compatible with the Lotus platform and for spreadsheets that offer links to external data bases, and a smaller premium for spreadsheets that offer local area network compatibility. These results support the hypothesis that the computer spreadsheet market exhibits network externalities. Finally, the quality-adjusted (real) price index of computer spreadsheets declined by approximately 15 percent per year from 1986-1991. 2
This information is provided to you by IDEAS at the Department of Economics, College of Liberal A... more This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.
Uploads
Papers by Neil Gandal