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Research

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Key Publications:  

All Publications (peer reviewed):                           Other Publications (non-peer reviewed)

  • Fiedler, Clemens, Larrain, Maria, and Jens Prüfer (forthcoming), “Membership, Governance, and Lobbying in Standard-Setting Organizations,” Research Policy.
    • Paper_image Standard-setting organizations (SSOs) are collectively self-governed industry associations, formed by innovators and implementers. They are a key organizational form to agree on and manage technical standards, and form the foundation for many technological and economic sectors. We develop a model of endogeneous SSO participation that highlights different incentives for joining (namely licensing, learning, and implementation). We analyze equilibrium selection and conduct comparative statics for a policy parameter that is related to implementer-friendly Intellectual Property Rights policies, or alternatively, minimum viable implementation. The results can reconcile existing evidence, including that many SSO member firms are small. The extent of statutory participation of implementers in SSO control has an inverted U-shape effect on industry profits and welfare.
  • Dengler, Sebastian and Jens Prüfer (2021), “Consumers’ Privacy Choices in the Era of Big Data,” Games and Economic Behavior, 130: 499–520.
    •  Paper_imageRecent progress in information technologies provides sellers with detailed knowledge about consumers’ preferences, approaching perfect price discrimination in the limit. We construct a model where consumers with less strategic sophistication than the seller’s pricing algorithm face a trade-off when buying. They choose between a direct, transaction cost-free sales channel and a privacy-protecting, but costly, anonymous channel. We show that the anonymous channel is used even in the absence of an explicit taste for privacy if consumers are not too strategically sophisticated. This provides a micro-foundation for consumers’ privacy choices. Some consumers benefit but others suffer from their anonymization.
  • Graef, Inge and Jens Prüfer (2021), “Governance of Data Sharing: a Law & Economics Proposal,” Research Policy, 50: 104330.
    • Paper_image To prevent market tipping, which inhibits innovation, there is an urgent need to mandate sharing of user information in data-driven markets. Existing legal mechanisms to impose data sharing under EU competition law and data portability under the GDPR are not sufficient to tackle this problem. Mandated data sharing requires the design of a governance structure that combines elements of economically efficient centralization with legally necessary decentralization. We identify three feasible options. One is to centralize investigations and enforcement in a European Data Sharing Agency (EDSA), while decision- making power lies with National Competition Authorities in a Board of Supervisors. The second option is to set up a Data Sharing Cooperation Network coordinated through a European Data Sharing Board, with the National Competition Authority best placed to run the investigation adjudicating and enforcing the mandatory data-sharing decision across the EU. A third option is to mix both governance structures and to task national authorities to investigate and adjudicate and the EU-level EDSA with enforcement of data sharing.
  • Prüfer, Jens and Christoph Schottmüller (2021), “Competing with Big Data,” Journal of Industrial Economics, 69: 967-1008.
    • Paper_image We study competition in data-driven markets, where the cost of quality production decreases in the amount of machine-generated data about user preferences or characteristics. This gives rise to data-driven indirect network effects. We construct a dynamic model of R&D competition, where duopolists repeatedly determine innovation investments. Such markets tip under very mild conditions, moving towards monopoly. After tipping, innovation incentives both for the dominant firm and the competitor are small. We show when a dominant firm can leverage its dominance to a connected market, thereby initiating a domino effect. Market tipping can be avoided if competitors share their user information.
  • Prüfer, Jens and Patricia Prüfer (2020), “Data Science for Entrepreneurship Research: Studying Demand Dynamics for Entrepreneurial Skills in the Netherlands,” Small Business Economics, 55, 651–672.
    • Paper_image The recent rise of big data and artificial intelligence (AI) is changing markets, politics, organizations, and societies. It also affects the domain of research. Supported by new statistical methods that rely on computational power and computer science — data science methods — we are now able to analyze data sets that can be huge, multidimensional, unstructured, and are diversely sourced. In this paper, we describe the most prominent data science methods suitable for entrepreneurship research and provide links to literature and Internet resources for self-starters. We survey how data science methods have been applied in the entrepreneurship research literature. As a showcase of data science techniques, based on a dataset of 95% of all job vacancies in the Netherlands over a 6-year period with 7.7 million data points, we provide an original analysis of the demand dynamics for entrepreneurial skills in the Netherlands. We show which entrepreneurial skills are particularly important for which type of profession. Moreover, we find that demand for both entrepreneurial and digital skills has increased for managerial positions, but not for others. We also find that entrepreneurial skills were significantly more demanded than digital skills over the entire period 2012-2017 and that the absolute importance of entrepreneurial skills has even increased more than digital skills for managers, despite the impact of datafication on the labor market. We conclude that further studies of entrepreneurial skills in the general population — outside the domain of entrepreneurs — is a rewarding subject for future research.
  • Filistrucchi, Lapo and Jens Prüfer (2019), “Faithful Strategies: How Religion Shapes Nonprofit Management,” Management Science, 65(1), 188-208. Online Appendix.
    • Paper_image This paper studies the strategies employed by Catholic and Protestant nonprofit hospitals in Germany and traces them back to the theological foundations of those religions. Using a unique data set, we find that Catholic nonprofit hospitals follow a strategy of horizontal diversification and maximization of the number of patients treated. By contrast, Protestant hospitals pursue a strategy of horizontal specialization and focus on vertical differentiation, putting in more sophisticated inputs and producing more complex services. These effects increase if the environment of a hospital gets more competitive. We present a model that rationalizes the strategic differences as a result of the difference between Catholic and Protestant values identified in the literature. We then test alternative explanations to the observed empirical differences and show that none of them is supported by the data.
  • Prüfer, Jens (2018), “Trusting Privacy in the Cloud,” Information Economics and Policy, 45, 52-67.
    • Paper_image Cloud computing technologies can increase innovation and economic growth considerably. Because of privacy concerns, however, many users underutilize cloud technologies. This paper designs an institution attenuating the problem: a two-layered certification scheme built around a private, nonprofit organization called cloud association. This association is governed by representatives of both users and cloud service providers and sources auditing and certification of providers out to independent for-profit certifiers. It is shown how this institution incentivizes providers to produce high data security, and users with strong privacy preferences to trust them and pay a premium for their services.
  • Kirchmaier, Isadora, Prüfer, Jens and Stefan Trautmann (2018), “Religion, Moral Attitudes & Economic Behavior,” Journal of Economic Behavior & Organization, 148, 282-300. Online Appendix.
    • Paper_image Using data for a representative sample of the Dutch population with information about participants’ religious background, we study the link between religion and moral behavior and attitudes.  We find that religious people are less accepting of unethical behavior (e.g. tax evasion, bribery) and report more volunteering. They are equally likely as non-religious people to betray trust in an experimental game, where social behavior is unobservable and not directed to a self-selected group of recipients. Religious people also report lower preference for redistribution. Considering differences between denominations, 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 and the potential causality of these associations.
  • Herbst, Patrick and Jens Prüfer (2016), “Firms, Nonprofits, and Cooperatives: A Theory of Organizational Choice,” Annals of Public and Cooperative Economics, 87(3), 315-343.
    • Paper_imageWe formalize the difference between profit-maximizing firms, nonprofits, and cooperatives and identify optimal organizational choice in a model of quality provision. Firms provide lowest and nonprofits highest levels of quality. Efficiency, however, depends on the competitive environment, the decision making process among owners and technology. Firms are optimal when decision making costs are high. Else, firms are increasingly dominated by either nonprofits or cooperatives. Increased competition improves relative efficiency of firms and decreases relative efficiency of nonprofits.
  • Prüfer, Jens (2016), “Business Associations and Private Ordering,” Journal of Law, Economics, and Organization, 32(2), 306-358.
    • Paper_image We study the capacity of business associations—private, formal, noncommercial organizations designed to promote the common business interests of their members—to support contract enforcement and collective action. Inspired by recent empirical literature, our theoretical framework connects the organizational and institutional features of formal and informal business organizations with socioeconomic distance. We show how associations provide value to their members even if members are already embedded in social networks, and which players join an association. We propose explanations for empirical puzzles, put forward novel testable hypotheses, and relate business associations to alternative private ordering institutions.
  • Larrain, Maria and Jens Prüfer (2015) “Trade Associations, Lobbying, and Endogenous Institutions” Journal of Legal Analysis, 7(2), 467-516. 
    • Paper_image This paper explores whether positive or negative effects of trade associations – private, formal, nonprofit organizations designed to promote the common interests of their members – on the economy prevail. We construct a model that endogenizes association membership of firms and the main functions of associations, which can have positive or negative spillovers on the economy. We show that, all else equal, the incentives of associations to lobby for better property rights are highest when property rights are unprotected. In turn, incentives to seek rents are strongest when property rights are well protected. This suggests that associations can be a valuable private ordering institution when governments are ineffective but recommends caution when governments supply a functioning legal system.
  • Masten, Scott E. and Jens Prüfer (2014), “On the Evolution of Collective Enforcement Institutions: Communities and Courts,” Journal of Legal Studies, 43(2), 359-400. Supplement to section 2.4.
    • Paper_image We analyze the capacities of communities (or social networks) and courts to secure cooperation among heterogeneous, impersonal transactors. We find that communities and courts are complementary in that they tend to support cooperation for different types of transactions but that the existence of courts weakens the effectiveness of community enforcement. Our findings are consistent with the emergence of the medieval Law Merchant and its subsequent supersession by state courts as changes in the costs and risks of long-distance trade, driven in part by improvement in shipbuilding methods, altered the characteristics of merchant transactions over the course of the Commercial Revolution in Europe. We then contrast the European experience with the evolution of enforcement institutions in Asia over the same period.
  • Prüfer, Jens (2013), “How to Govern the Cloud?” IEEE CloudCom 2013, DOI 10.1109/CloudCom.2013.100, 33-38. 
    • Paper_image This paper applies economic governance theory to the cloud computing industry. We analyze which governance institution may be best suited to solve the problems stemming from asymmetric information about the true level of data protection, security, and accountability offered by cloud service providers. We conclude that certification agencies – private, independent organizations which award certificates to cloud service providers meeting certain technical and organizational criteria – are the optimal institution available. Those users with high valuation for accountability will be willing to pay more for the services of certified providers, whereas other users may patronize uncertified providers.
  • Prüfer, Jens and Uwe Walz (2013), “Academic Faculty Governance and Recruitment Decisions”, Public Choice, 155(3), 507-529.
    • Paper_image We analyze the implications of the governance structure in academic faculties for their recruitment decisions when competing for new researchers. The value to individual members through social interaction within the faculty depends on the average status of their fellow members. In recruitment decisions, incumbent members trade off the effect of entry on average faculty status against alternative uses of the recruitment budget if no entry takes place. We show that the best candidates join the best faculties but that they receive lower wages than some lesser ranking candidates. We also study the allocation of surplus created by the entry of a new faculty member and show that faculties with symmetric status distributions maximize their joint surplus under majority voting.
  • Argenton, Cedric and Jens Prüfer (2012), “Search Engine Competition with Network Externalities”, Journal of Competition Law & Economics, 8(1), 73-105.
    • Paper_image The market for Internet search is not only economically and socially important, it is also highly concentrated. Is this a problem? We study the question of whether “competition is only a free click away.” We argue that the market for Internet search is characterized by indirect network externalities and construct a simple model of search engine competition, which produces a market share development that fits well the empirically observed developments since 2003. We find that there is a strong tendency toward market tipping and, subsequently,
      monopolization, with negative consequences on economic welfare. Therefore, we propose to require search engines to share their data on previous searches. We compare the resulting “competitive oligopoly” market structure with the less-competitive current situation and show that our proposal would spur innovation, search quality, consumer surplus, and total welfare. We also discuss the practical feasibility of our policy proposal and sketch the legal issues involved.
  • Binswanger, Johannes and Jens Prüfer (2012), “Democracy, Populism, and (Un)bounded Rationality”, European Journal of Political Economy, 28, 358-372.
    • Paper_image In this paper we aim to understand how bounded rationality affects performance of democratic institutions. We consider policy choice in a representative democracy when voters do not fully anticipate a politician’s strategic behavior to manipulate his reelection chances. We find that this limited strategic sophistication affects policy choice in a fundamental way. Under perfect sophistication, a politician does not make any use of his private information but completely panders to voters’ opinions. In contrast, under limited sophistication, a politician makes some use of private information and panders only partially. Limited sophistication crucially determines how welfare under representative democracy compares to welfare under alternative political institutions such as direct democracy or governance by experts. We find that, under limited strategic sophistication, representative democracy is preferable to the other institutions from an ex ante perspective.
  • Prüfer, Jens (2011), “Competition and Mergers among Nonprofits”, Journal of Competition Law & Economics, 7(1), 69-92.
    • Paper_image Should mergers among nonprofit organizations be assessed differently than mergers among for-profit firms? A recent debate in law and economics, boosted by apparently one-sided court decisions, has produced the result that promoting competition is socially valuable regardless of the particular objectives of producers. In this paper, I challenge the general validity of this result by showing that it may indeed depend on the particular objectives of producers whether a merger between two nonprofits is welfare-decreasing or -increasing. This implies that it is impossible to assess the net effects of a merger between two nonprofits without examining the objectives of the owners involved.
  • Prüfer, Jens and David Zetland (2010), “An Auction Market for Journal Articles,” Public Choice, 145, 379-403.
    • Paper_image We recommend that an auction market replace the current system for submitting academic papers and show a strict Pareto-improvement in equilibrium. Besides the benefit of speed, this mechanism increases the average quality of articles and journals and rewards editors and referees for their effort. The “academic dollar” proceeds from papers sold at auction go to authors, editors and referees of cited articles. This nonpecuniary income indicates the academic impact of an article—facilitating decisions on tenure and promotion. This auction market does not require more work of editors.
  • Jahn, Eric and Jens Prüfer (2008), “Interconnection and Competition among Asymmetric Networks in the Internet Backbone Market,” Information Economics and Policy, 20 (3), 243-256.
    • Paper_image We examine the interrelation between interconnection and competition in the Internet backbone market. Networks that are asymmetric in size choose among different interconnection regimes and compete for end-users. We show that a direct interconnection regime, peering, softens competition as compared to indirect interconnection since asymmetries become less influential when networks peer. If interconnection fees are paid, the smaller network pays the larger one. Sufficiently symmetric networks enter a Peering agreement while others use an intermediary network for exchanging traffic. This is in line with considerations of a non-US policy maker. In contrast, US policy makers prefer that relatively asymmetric networks peer.
  • Prüfer, Jens and Eric Jahn (2007), “Dark Clouds over the Internet?” Telecommunications Policy, 31, 144-154.
    • Paper_image Currently, the Internet is characterized by excess capacity, which benefits consumers and producers of Internet-based services alike. High quality and declining prices of interconnection are the basis for many e-commerce, software and equipment businesses. However, tough competition in the Internet backbone market driving these developments could ruin network operators and threaten other markets, too. This paper will pursue the idea of the Internet backbone market’s decline based on standard economic theory. The paper will present several scenarios and discuss potential market- and policy-based remedies. It is argued that due to a phenomenon called capacity paradox the industry’s future development is overshadowed by ‘‘dark clouds’’.

Other Publications:

  • Prüfer, Jens and Patricia Prüfer (2018), “Data Science for Institutional and Organizational Economics,” in: A Research Agenda for New Institutional Economics, Claude Ménard and Mary M. Shirley (eds.), Edward Elgar Publishers, 248-259.
    •  Paper_image To which extent can data science methods – such as machine learning, text analysis, or sentiment analysis – push the research frontier in the social sciences? This essay briefly describes the most prominent data science techniques that lend themselves to analyses of institutional and organizational governance structures. We elaborate on several examples applying data science to analyze legal, political, and social institutions and sketch how specific data science techniques can be used to study important research questions that could not (to the same extent) be studied without these techniques. We conclude by comparing the main strengths and limitations of computational social science with traditional empirical research methods and its relation to theory.
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