Do religious people hold different moral views than non-religious people? Given that a good part of religious teachings are ethical, we could think so. But where exactly are the differences between Catholics, Protestants, and other believers—and non-religious people? And, more importantly for policy insights, are there significant differences not only in views but also in economically relevant actions across denominations or even between clearly identifiable groups within one congregation?

“Religion, Moral Attitudes & Economic Behavior” (joint with Isadora Kirchmaier and Stefan Trautmann) studies and answers such questions empirically, based on a representative survey of the Dutch population and an experimental game with monetary payoffs played with the survey respondents. The paper is now forthcoming in the Journal of Economic Behavior & Organization. Its background and some details are here. The final working paper version is here.

One year ago, Christoph Schottmüller and I put out “Competing with Big Data,” a theory-paper offering a definition and analysis of “data-driven markets”—and a policy proposal to overcome the main problem, market tipping. Based on the idea of an earlier paper (Argenton and Prüfer, 2012), we studied the consequences of a (currently fictive) regulatory requirement for dominant firms in data-driven markets (think of search engines, many digital platform markets, self-driving cars, etc.) to share their data on user preferences and characteristics with each other. We showed that such a policy intervention can mitigate the strong tendency of data-driven markets towards monopolization and that in most relevant cases the net welfare effects would be highly positive.

Since then, this paper—and especially the policy proposal—has been discussed widely both in academic and in policy circles. In January 2018, the Secretary General of the Dutch Ministry of Economic Affairs adopted our view on data sharing (Camps, 2018, p.3):

“one can think of data used for search engine optimisation, such as users’ clickstream following certain search queries. By increasing access to such anonymised clickstream data, other parties in different markets can use them for further innovation. At the same time, a strong concentration of large internet companies on these markets can be avoided (Prüfer and Schottmüller, 2017). One can think of the markets for digital maps, retail and, in the future, autonomous cars.”

Similarly, in his latest book, Viktor Mayer-Schönberger, who co-authored a highly successful book on the economic and social consequences of big data, attributes :

“Rather than algorithmic transparency, regulators wanting to ensure competitive markets should mandate the sharing of data. To this end, economists Jens Prüfer and Christoph Schottmüller offer an intriguing idea.  They suggest that large players using feedback data must share such data (stripped of obvious personal identifiers, and stringently ensuring that privacy is not being unduly compromised) with their competitors. Calculating the effect of such mandated data sharing over a wide spectrum of scenarios, they see an overall net benefit in most cases, especially when one incumbent is close to dominating a market. Building on this idea, we suggest what we term a progressive data-sharing mandate.” (Mayer-Schönberger and Ramge, 2018, p.167)

So, for now we keep the watch from the ivory tower and view to which extent these influential multiplicators may help policy implementation. And we are thinking about an empirical validation of several data-driven sectors …

The Society for Institutional and Organizational Economics (SIOE) just publicized the call for papers for the SIOE 2018 conference, which will be held at HEC Montreal, Canada, on June 21-23, 2018. Keynote lectures will be given by Naomi Lamoreaux (Yale) and Nobel Laureate Jean Tirole (Toulouse), representing nicely SIOE’s two intellectual pillars, institutions and organizations.

The exquisite Program Committee, chaired by President-Elect Francine Lafontaine (Michigan), invites you to submit your proposal to present a paper at the conference. Paper proposals are due by February 5th, 2018.

The Tilburg Law and Economics Center (TILEC) advertises a position for a Postdoctoral Researcher on the Economic Governance of Data-driven Markets (starting date: September 2018). This is a three-year position targeted at promising researchers in economics or related fields who work on the effects of digitalization and datafication on institutions, including markets, legal and political institutions. We are looking for a researcher who combines expertise in the quantitative techniques of modern economics with an interest both in technologies currently transforming our societies, industries, polities, and jurisdictions and with a sincere openness to interdisciplinary research approaches from other social sciences. Within this field, all types of research interests are welcome, with a slight preference for researchers performing empirical work.

TILEC also advertises another Postdoc Position, on the Economics of Innovation. This is a two-year position targeted at promising researchers in economics or related fields who work on the Economics of Innovation. Within this field, all types of research interests are welcome but preference will be given to researchers performing empirical work and/or working on standardization and standard-setting.

Details on the jobs and the application procedure are available via EconJobMarket. 

Nonprofit organizations, religious values, and a complete dataset on strategic choices of German hospitals: these are the main ingredients into a paper co-authored with my colleague Lapo Filistrucchi, which is forthcoming in Management Science.

This paper makes three key contributions. First, it confirms that the values and beliefs of organizational decision makers, as required by their employers, influence the strategic actions of firms. This study is the first to show that this premise of some behavioral scholars also holds for nonprofits.

Second, this paper is among the first to investigate the strategic effects of decision makers’ religious values. Thereby, as Laurence Iannacone told me recently, we are the first to show that the content of religious teachings actually influence firms’ strategies in a coherent and, thereby, predictable way: roughly speaking, we propose that, because Catholicism is more communal and because Protestantism is more individualistic (and education-oriented), Catholic hospitals are larger, make more revenues, and serve more medical fields, whereas Protestant hospitals are smaller, focus on a few medical fields, specialize in more complex (and more expensive) treatments, and have more links to universities.

Third, we have tackled the difficulties of the empirical and theoretical literatures on nonprofits to predict their strategic choices by fleshing out lines of distinction between different nonprofit subgroups that are distinguishable according to observable organizational characteristics (here: whether a given organization is Catholic or Protestant or neither of the two).

Earlier press coverage related to the paper:

• Socialevraagstukken.nl, January 2015: Religie manager bepaalt het gezicht van het ziekenhuis (in Dutch)
• Nederlands Dagblad, December 2014: “Geloofsopvatting manager beïnvloedt koers ziekenhuis” (in Dutch)
• Tilburg University Press Release, June 2014: “Manager’s religious affiliation impacts hospital’s strategy” (in English), “Geloof manager beïnvloedt strategie ziekenhuis” (in Dutch).

We just received a nice piece of appreciation: The Annals of Public and Cooperative Economics informed us that our paper, “Firms, Nonprofits and Cooperatives: A Theory of Organizational Choice” (joint with Patrick Herbst) is in the top 5 most downloaded papers of the journal during 2016. Apparently, this equals > 500 downloads.

Given that the business of publishing research in economics is tough—and rejections are very frequent (and necessary to get acceptance rates of 10% and below at the top journals)—receiving such positive information is balm for the soul…

A brief description of the paper is here.

One of the hot topics these days is big data – and the consequences of the increasing datafication of our world for all parts of our lives, i.e. on polities, jurisdictions, societies, and markets. Regarding the latter, the key questions asked frequently both by researchers and by policy makers these days comprise: Is there anything special about markets driven by (big) data? If so, what? How important is the “big” part and what is a “data-driven” market, in the first place? What does this imply for the business models of sellers in data-driven markets? In which way, if at all, should (competition) policy react?

In “Competing with Big Data,” Christoph Schottmüller (University of Copenhagen) and I try to shed some light on these questions. A nontechnical summary of the paper recently appeared in the blog of the Data Science Center Tilburg. A summary cum further thinking (not all in line with the paper) was written by a Danish consulting firm.

For the Tilburg Law and Economics Center (TILEC) and the Governance and Regulation Chair (GovReg) at University Paris-Dauphine, PSL Research University, I will organize a two-day Workshop on “Economic Governance of Data-driven Markets” at Tilburg University, the Netherlands, on October 12 and 13, 2017.

We aim to discuss the specific problems that arise on markets and in political and legal systems through the ongoing process of datafication. Once such a problem and the optimal response/intervention are identified, the enforcement institution must be endogenized: How should data-driven markets or political systems be governed? By national or supranational regulation (public ordering)? Or by self-governance of industry-participants in some form (private ordering)?

Scholars from various backgrounds, including institutional economics, industrial organization, and law & economics, and extending to neighboring disciplines such as political science, management, and information science will meet in a pleasant atmosphere to advance our knowledge.

Keynote Speakers:

• Yochai Benkler (Harvard)
• Paul Seabright (Toulouse)
• Joshua Tucker (NYU)
• Marshall Van Alstyne (Boston U)

Important Dates:

The deadline for submissions is May 14, 2017. The call for papers is here. Further details are here.

In a recent working paper, “Consumers’ Privacy Choices in the Era of Big Data,” together with job market candidate Sebastian Dengler I study a question that is at the heart of the economics of privacy: Why would consumers with standard preferences facing a monopolistic seller ever anonymize themselves if it comes at a cost?

Empirical background

This paper is driven by two recent empirical developments: first, the increasing ability of sellers, often via the Internet, to obtain many data points about the preferences and characteristics of individual consumers. This enables them to come closer and closer to perfect price discrimination, a case that was dismissed by the literature in industrial organization for many decades due to its strong information requirements. Second, the combined access of sellers to large datasets and the power of algorithms to respond to information about a given consumer quickly. By contrast, many consumers feel overwhelmed by the choices they have to make while shopping and face cognitive constraints.

A guessing game between sellers and buyers

We combine these ingredients in a generic model, where consumers with heterogenous willingness-to-pay for a product can either use a direct sales channel — but expect that the seller will charge them their full willingness-to-pay — or they can spend a cost to hide their identity from the seller, via an anonymous sales channel. For anonymized shoppers, the seller only sees that they anonymized but, for direct shoppers, the seller knows the exact willingness-to-pay.

The tricky part of the model is the guessing game between a consumer and the seller, where the seller sets prices for the product depending on the information she has, and the consumer decides about the sales channel based on his expectation of the prices in both channels. This is implemented as a level-k cognitive hierarchy model. Consumers are characterized by a certain level k, starting at k=0, which stands for the number of iterations they can predict the seller’s best pricing response. The traditional assumption of unlimited cognitive sophistication is nested in this model for k = ∞. The seller, having access to big data and powerful algorithms, has higher k than consumers.

Who anonymizes — and why? Microfounding privacy choices

The information assumptions turn out to be crucial for the model’s results. We show that consumers with high willingness-to-pay have an incentive to anonymize, whereas those with low willingness-to-pay use the direct channel, get perfectly-discriminated prices, and walk home with zero consumer surplus. Anonymous shoppers, however, do not (fully) predict that the seller understands that their cost of anonymization are sunk when deciding about a purchase. Therefore, the seller will increase the price in the anonymous market segment by the cost of anonymization, which leaves some consumers with negative and others with positive consumer surplus. If consumers understand this threat (at k=1), those with moderate willingness-to-pay also prefer the direct channel. This process is repeated with increasing k of consumers: the anonymous market unravels level by level. Importantly, it unravels already for finite k. That is, unlimited sophistication of consumers is a sufficient but not necessary condition for the breakdown of the anonymous channel. In essence, the higher consumers’ sophistication, the fewer consumers choose to anonymize, and the lower is aggregate consumer surplus. On the other hand, the seller benefits from this unraveling as her profits are maximized on consumers in the direct channel. We also show that k and the cost of anonymization interact in equilibrium: for a given k, increased anonymization costs also lead to a smaller anonymized market and, finally, to the breakdown of that segment.

The key contribution of this paper is to show that and when a costly anonymous sales channel is used in equilibrium. This offers a micro-foundation of privacy choices—the existence of privacy preferences is often assumed in other works.

Policy implications

Moreover, this paper has clear and important policy implications. Considering that consumers’ level of sophistication is exogenous, the key parameter that can be influenced by policy makers is the cost of anonymization. We show that consumers fare best if these costs are zero, whereas the seller maximizes profits if no consumer anonymizes, due to prohibitive anonymization costs. From a total welfare perspective, these two cases have identical consequences. Hence, the model suggests that those authorities focusing on consumers’ interests invest in cheaper and easier-to-use privacy-protective tools and legislate that the default sales channel be the anonymous one. That is, to allow sellers to offer consumers registration/tracking technologies, in exchange for a price discount, but to prohibit that consumers are tracked and targeted by default and have to anonymize for a cost (which is standard today).

Economics of religion is a relatively new field within economics (which just got its own JEL code, Z12, not long ago).  By contrast, connecting economics and the moral attitudes of man has a long history and include philosophers of ancient Greece just as 18-century whizkid Adam Smith.

What these scholarly giants have not scrutinized, however, is whether and, if so, how the moral attitudes of individuals are shaped by their personal religiosities. Religiosity can be measured by church membership, the frequency of church attendance or private praying, a believer’s intensity of believing in God or in religious concepts.

Using data for a representative sample of the Dutch population with information about participants’ religious background, in “Religion, Moral Attitudes & Economic Behavior,” with Isadora Kirchmaier and Stefan Trautmann (both at the University of Heidelberg) I study the link between religion and moral behavior and attitudes. We find that religious people are less accepting of unethical behavior and report more volunteering. They report lower preference for redistribution. Religious people are equally likely as non-religious people to betray trust in an anonymous experimental game. Controlling for Christian denominations, we find that Catholics betray less than non-religious people, while Protestants betray more than Catholics and are indistinguishable from the non-religious. We also explore the intergenerational transmission of religiosity effects.