Research papers of Hal R. Varian

Recent papers

Non-technical papers

Intelligent Technology [IMF Finance and Development, September 2016]

This is an overview and update of some of the themese in my Ely Lecture on Computer Mediated Transactions available below.

Causal Inference in Social Science: an Elementary Introduction [PNAS reprint]

This is a short and very elementary introduction to causal inference in social science applications targeted to machine learners. I illustrate the techniques described with examples chosen from the economics and marketing literature. [Prepared for Sackler Symposium on Drawing Causal Inference from Big Data, National Academy of Sciences, March 2015.]

A Hands on Guide to Google Data [Working paper] [Slides]. Also need [oosf.R]

Shows how to use Google Correlate, Google Trends, and Google Consumer Surveys for social science research.

Super Returns to Super Bowl Ads? (with Seth Stephens-Davidowitz and Michael D. Smith) [Working paper]

We use a natural experiment---the Super Bowl---to study the causal effect of advertising on demand for movies. Identification of the causal effect rests on two points: 1) Super Bowl ads are purchased before advertisers know which teams will play; 2) home cities of the teams that are playing will have proportionally more viewers that other cities. To appear in Quantitative Marketing and Economics, 2017.

Beyond Big Data [Working paper]

Transcript of keynote given at NABE meeting, Sept 2014, San Francisco.

Big Data: New Tricks for Econometrics [Working paper] [Data] [Published in JEP]

A review of some tools for the manipulation and analysis of big data, along with some speculations about how they can be used in econometrics.

Predicting the Present with Bayesian Structural Time Series (co-author: Steve Scott) [Working paper] [Slides from KDD 2013, Chicago]

A Bayesian model for variable selection in a time series context. Applications use Google Trends data to improve short term forecasts of economic indicators. Now published in Int. J. Mathematical Modeling and Numerical Optimisation, Vol. 5, Nos. 1/2, 2014.

Bayesian Variable Selection for Nowcasting Economic Time Series (co-author: Steve Scott) [Working paper] [Slides] Now published in NBER volume, Economic Analysis of the Digital Economy (2015), Avi Goldfarb, Shane M. Greenstein, and Catherine E. Tucker, editors (p. 119 - 135).

Combining Kalman filters, spike-and-slab regression and model averaging to improve short-term forecasts of time series.

Public Goods and Private Gifts [Working paper] [Slides]

Public goods can be provided by tying them to private goods. Though this is an old phenomenon, Kickstarter has given it a new life on the internet. This is a simple model of how this mechanism works.

Revealed Preference and its Applications [Working paper]

I describe some applications of revealed prefence theory. Royal Economics Society session in honor of Sydney Afriat.

Predicting the Present with Google Trends (with Hyunyoung Choi) [Working paper] [Zip file with data] [Economic Record 2012]

Keynote address at the Australian Conference of Economists, July 2011.

Computer Mediated Transactions [Paper] [Slides] [Video from AEA meetings][Video from previous presentation]

The 2010 Ely Lecture at the American Economics Association meeting, Atlanta Georgia.

Copyright Term and Orphan Works [Working paper] [Reprint of published article]

I discuss copyright term extension and its impact on the orphan works and mass digitization problems.

The Google Library Project [PDF]

A discussion of some of the economic aspects of the Google Library Project.

The Economics of Internet Search [PDF]

Angelo Costa lecture delivered in Rome, February 2007.

Universal Access to Information [PDF]

A two-page thought piece on the possibility of universal access to information.

Copying and Copyright [PDF]

A short survey of the economics of copying and copyright.

Who Signed Up for the Do-Not-Call List? [PDF] [HTML]

(Co-authored with Glenn Woroch and Fredrik Wallenberg) We use census data to determine which socio-demographic groups were likely to sign up for the Federal do-not-call list.

Demographics of the Do-Not-Call List [PDF]

A shorter and less technical version of the above paper, published in IEEE Security and Privacy, Jan/Feb 2005.

Technical papers

Online Ad Auctions [PDF]

A short summary of how online ad auctions work, plus a technique to estimate the value they create for advertisers. Published in AER Papers and Proceedings, May 2009.

Position Auctions [PDF]

A theoretical and empirical analysis of the ad auction used by Google and Yahoo. International Journal of Industrial Organization, Oct 2006.

Revealed Preference [PDF]

This is a survey of revealed preference analysis focusing on the period since Samuelson's seminal development of the topic with emphasis on empirical applications. It was prepared for Samuelsonian Economics and the 21st Century, edited by Michael Szenberg, a volume in honor of Paul Samuelson's 90th birthday.

System Reliability and Free Riding [PDF]

The reliability of a system may depend on the contribution of many people, and thus is potentially subject to incentive problems. I investigate incentives and system performance in the case where reliability depends on the total effort, the minimum effort, and the maximum effort.

Conditioning Prices on Purchase History (with Alessandro Acquisti) [PDF] [Slides]

We examine the consequence of computer mediated transactions that allow sellers to condition pricing on the history of interactions with a particular consumer. Surprisingly, we find that when consumer valuations do not change with consumption the seller will not want to condition prices on past purchase behavior. But if consumer valuations change for subsequent purchases, perhaps due to the provision of personalized enhanced services, the seller may find it profitable to condition prices on purchase history. Published in Marketing Science, 24:3, 367-381, Summer 2005.

2004 and earlier

Non-technical papers

Linux Adoption in the Public Sector [PDF]

(Co-authored with Carl Shapiro.) White paper describing some of the economic issues surrounding open source and open standards software and its adoption by the public sector.

How to make a scene [PDF] [HTML]

My history as a pundit. Presented in 2004 American Economics Association session on "Economics and Journalism". To appear in Journal of Economic Education, 2004.

The Demand for Bandwidth: Evidence from the INDEX Experiment [PDF] [HTML][Slides]

Summarizes evidence about the demand for broadband that can be gleaned from the Internet Demand Experiment (INDEX).

Economics of Information Technology [PDF] [HTML]

An overview and review of the current status of the economic analysis of IT industries. This is a draft of my November 2001 Mattioli Lecture at Bocconi University, Milan, Italy. (It is a substantially enlarged treatment of the issues described in the paper immediately below.)

High Technology Industries and Market Structure [PDF] [HTML]

A short survey of some of the economic forces at work in high-technology industries, prepared for the Kansas City Jackson Hole Symposium, August 2001.

What I've Learned about Writing Economics [HTML]

A short essay for the Journal of Economic Methodology, 8:1, 129-132 2001.

Introduction to Standards Wars [PDF]

An introduction to a reprint of "The Art of Standards Wars", prepared for Managing in a Modular Age: Architectures, Networks and Organizations, (Richard Langlois, Raghu Garud, Arun Kumaraswamy, eds), Blackwell, 2001 (Original article appeared in California Management Review, 1999.)

The "New Economy" and Information Technology Policy (with Pamela Samuelson) [PDF] [FIGURES]

A review of information policy in the 1990s. Prepared "Economic Policy During the Clinton Administration", held at JFK School of Government, Harvard University, June 27-30, 2001.

Academic Publishing in the Online Era: What Will Be For-Fee and What will be For-Free? [HTML]

An online discussion/debate between Hal Varian and Stevan Harnad about the economics of academic and non-academic publishing. Published in Culture Machine, May 2000.

Taxation of Internet Commerce [HTML]

A ten-page overview of the issues published by the Internet Policy Institute. Reprinted in iMP:Information Impacts, April 2001.

A Framework for Negotiation on a Microsoft Remedy [HTML]

A short note on a possible remedy for the Microsoft case called CLOBR: "compulsory licensing of old binaries." CLOBR is also discussed in Steve Lohr's Economic View column in the New York Times on December 12, 1999.

A Proposal to Eliminate Sales and Use Taxes [TEXT]

I propose eliminating all state and local sales taxes and replacing them with a revenue-equivalent state income or consumption tax.

Economics and Search [HTML] [PDF]

Invited plenary address for SIGIR 99, Berkeley, CA, August 15-19, 1999. Published in SIGIR Forum, Fall 1999, Volume 33, Number 3. Published version: ( [PDF].

Market Structure in the Network Age [HTML] [PDF] [PPT] [DOC]

Prepared for Understanding the Digital Economy conference, May 25-26, 1999, Department of Commerce, Washington, DC.

Statement before the Subcommittee on Basic Research of the Committee on Science, United States House of Representatives [HTML]

March 16, 1999 testimony before the House Science Committee. (See the National Coordination Office for Computing, Information, and Communications for background.)

Effect of the Internet on Financial Markets [PDF] [HTML]

Review of some academic work on electronic markes in an effort to provide some guidance about the future evolution of cybermarkets.

Fostering Research on the Economic and Social Impacts of Information Technology [National Academy Press]

The National Science Foundation asked the Computer Science and Telecommunications Board (CSTB) of the National Research Council to gather perspectives on fruitful approaches to assessment of the impacts of using information technology. CSTB formed the multidisciplinary Steering Committee on Research Opportunities Relating to Economic and Social Impacts of Computing and Communications, and organized a workshop that was held on June 30-July 1, 1997. Hal R. Varian was chair of the committee that drafted this report.

Markets for Information Goods [PDF] [HTML]

An overview of how markets deal with the peculiar properties of information goods. Prepared for Bank of Japan conference, June 18-19, 1998. To appear in conference proceedings: Monetary Policy in a World of Knowlege-Based Growth, Quality Change, and Uncertain Measurement, 2000.

US Government Information Policy (with Carl Shapiro) [PDF] [HTML]

An overview of information policy, emphasizing economics issues, along with some recommendations.

The Information Economy [HTML]

A short piece on problems facing the development of the information economy. Reprinted from Scientific American, September, 1995, pages 200-201. [View this article in Romanian courtesy of azoft.]

Economic Issues Facing the Internet [HTML] [PostScript]

A survey of the past, present, and future of the Internet which emphasizes economic issues as of 1996.

Pricing Electronic Journals [HTML]

Some thoughts on how to price electronic journals; published in June 1996 DLIB Magazine.

Economic Aspects of Personal Privacy [HTML]

A brief overview of economic aspects of privacy and what appropriate policy might be in a networked society. Published in Privacy and Self-Regulation in the Information Age, a report issued by the NTIA.

The AEA's Electronic Publishing Plans: a Progress Report [HTML]

Published in Journal of Economic Perspectives, Summer 1997, Volume 11, Number 3.

Future of Electronic Journals [HTML]

Some speculations about the evolution of academic electronic publishing. Presented at the Scholarly Communication and Technology Conference, Emory University, April 1997. Published in Journal of Electronic Publishing, September 1998.

How to Build an Economic Model in your Spare Time [PDF]

This is an essay providing advice to graduate students in economics about how to do economic modeling. It was written for the American Economist, and is part of a collection titled Passion and Craft: Economists at Work, edited by Michael Szenberg, University of Michigan Press, 1997. [Spanish translation in HTML]

Technical papers

Estimating the Demand for Bandwidth [PDF] [HTML] [PDF slides]

One experiment in the INDEX Project offered users different bandwidths for different prices. We use the data from this experiment to estimate the demand for bandwidth and the value of waiting time for users. The parameter estimates for the demand functions for bandwidth are plausible and well-behaved. The parameter estimates for the value of time are, on average, very low, but there are some subjects with relatively high time values.

Pre-Play Contracting in the Prisoners' Dilemma (with Jim Andreoni) [preprint PDF] [published PDF]

We consider a modified Prisoners' Dilemma game in which each agent can offer to pay the other agent to cooperate. The subgame-perfect equilibrium of this two-stage game is Pareto efficient. We examine experimentally whether subjects actually manage to achieve this efficient outcome. We find an encouraging level of support for the mechanism, but also find some evidence that subjects' tastes for cooperation and equity may have significant interactions with the incentives provided by the mechanism. To appear in Proceedings of the National Academy of Sciences, August/September, 1999.

Versioning Information Goods [PDF] [PostScript]

This paper describes the economic theory and practice of creating product lines of information goods, a practice known as versioning. Versioning is effective since it helps segment the market and makes value-based pricing feasible. I describe examples of versioning for both physical and digital information goods, and discuss the impact of versioning on consumer welfare.

Circulating Libraries and Video Rental Stores (with Richard Roehl) [HTML] [PDF]

In this note we describe some interesting parallels between circulating libraries in England in the late seventeenth century and video rental stores in the U.S. in the decade of the 1980s. Both industries developed in a similar manner, which suggests that the underlying economic and social forces were significant determinants of the outcomes. [Published in First Monday.]

Differential Pricing and Efficiency [HTML]

The classic prescription for economically efficient pricing---set price at marginal cost---is not relevant for technologies that exhibit the kinds of increasing returns to scale, large fixed costs, or economies of scope found in the telecommunications and information industries. The appropriate guiding principle in these contexts should be that the marginal willingness to pay should be equal to marginal cost. This condition for efficiency can be approximated using differential pricing, and will in fact, be a natural outcome of profit-seeking behavior. (Published in First Monday, Vol.1 No.2 - August 5th. 1996.)

Service Architecture and Content Provision: The Network Provider as Editor [PDF]

Written with Scott Shenker and Jeff MacKie-Mason. Published in Telecommunications Policy (1996), and in The Internet and Telecommunications Policy, G. Brock, ed. (forthcoming). There are at least two competing visions for the future National Information Infrastructure. One model is based on the application-blind architecture of the Internet; the other is based on the application-aware architecture of cable TV systems and online services. Awareness is the extent to which the network provider observes the application or content being transported. We examine some consequences of these different network architectures for content provision. For example, we ask why some network architectures favor mass market vs. niche goods, and examine conflicts between network providers and users.

Network Architecture and Content Provision: An Economic Analysis [PDF]

An earlier version of the above paper, as presented at the Telecom Policy Research Conference 1995. There are some additional mathematical examples, and a short section on the effects of architecture on content creation that we did not include in the published version.

Buying, Renting and Sharing Information Goods [PDF]

Information goods such as books, journals, computer software, videos, etc. can often be copied, shared, or rented. I outline various circumstances under which such sharing may increase or decrease producer profits. If a rental market is present, more copies will be sold at a lower price; I derive conditions that illustrate when this is more or less profitable than a sales-only market. When content is viewed only a few times and transactions costs of rental are low, rental may be more attractive than sales to both producers and consumers. Finally, when users have heterogeneous tastes, a rental market provides a nice way to segment high-value and low value users. These effects tend to suggest that rental markets may often increase profits, contrary to widespread views to the contrary.

Mechanism Design for Computerized Agents [PDF]

The field of economic mechanism design has been an active area of research in economics for at least 20 years. This field uses the tools of economics and game theory to design ``rules of interaction'' for economic transactions that will, in principle, yield some desired outcome. In this paper I provide an overview of this subject for an audience interested in applications to electronic commerce and discuss some special problems that arise in this context. This paper was presented at the Usenix Workshop on Electronic Commerce, July 11-12, 1995, New York.

Pricing Information Goods [PDF] [PostScript]

I describe some of the issues involved in pricing information goods such as computer software, databases, electronic journals and so on. In particular I discuss the incentives to engage in differential pricing and examine some of the forms such differential pricing may take. This paper was presented at the Research Libraries Group Symposium on "Scholarship in the New Information Environment" held at Harvard Law School, May 2-3, 1995.

Pricing the Internet [PDF]

Written with Jeff MacKie-Mason. We describe the technology and costs of the Internet, then discuss how to design efficient pricing in order to allocate scarce Internet resources. We offer a "smart market" as a device to efficiently price congestion.

Some Economics of the Internet [PDF]

Written with Jeff MacKie-Mason. This paper overlaps substantially with the paper above ("Pricing"). We describe the history, technology and costs of the Internet (at greater length than in "Pricing"). We describe a "smart market" for pricing Internet congestion. There is more attention to the smart market, and less to other pricing considerations, than in "Pricing".

Economic FAQs About the Internet [PDF]

Some questions and answers about Internet economics. Written with Jeff MacKie-Mason.

Usage Pricing FAQs [PDF]

Written with Jeff MacKie-Mason. Written for WWW '94 (Chicago), which answers some frequently asked questions about usage-sensitive pricing for Internet resources.

Pricing Congestible Network Resources [PDF]

Written with Jeff MacKie-Mason. We describe the basic economic theory of pricing a congestible resource such as an ftp server, a router, a Web site, etc. In particular, we examine the implications of ``congestion pricing'' as a way to encourage efficient use of network resources. We explore the implications of flat pricing and congestion pricing for capacity expansion in centrally planned, competitive, and monopolistic environments.

Entry and Cost Reduction [PostScript] [PDF]

There is a lot of anecdotal evidence that entry of new firms reduces not only prices but also costs. However, the causal mechanism for this phenomenon is far from clear. In this paper I investigate three models of how entry may cause cost reduction: managerial incentives, survival of the fittest, and imitation. The models have quite different implications for social welfare.

Economic Incentives in Software Design [PDF] [PostScript]

I examine the incentives for software providers to design appropriate user interfaces. There are two sorts of costs involved when one uses software: the fixed cost of learning to use a piece of software and the variable cost of operating the software. I show that a monopoly provider of software generally invests the right amount of resources in making the software easy to learn, but too little in making it easy to operate. In some extreme cases a monopolist may even make the software too easy to learn.

What Use is Economic Theory? [PDF]

I examine how neoclassical economic theory is useful to the understanding of economic policy. I also describe what I view as the role of economic theory in economics. This talk was prepared for the conference ``Is Economics Becoming a Hard Science?'' 29-30 October, 1992, Paris, France. An earlier version of this paper was published (in French) in A. Autume and J. Cartelier, ed. L'Economie Devient-Elle Une Science Dure?, Economica, Paris