Hal R. Varian

Articles by Hal R. Varian

These are articles by and about me, op-ed pieces, interviews, columns, etc. that are written for the general reader. More technical work can be found in the research papers section.

Columns

New York Times

An iPod Has Global Value. Ask the (Many) Countries That Make It, June 28, 2007 Who makes the Apple iPod? Hint: It is not Apple. [ Norwegian translation of this page provided by Globe Views]
Copyrights That No One Knows About Don't Help Anyone, May 31, 2007 On the "orphan works" problem.
Sometimes the Stock Does Better Than the Investor That Buys the Stock, May 5, 2007 Dollar-weighted returns tell a different story than buy-and-hold returns.
Why that Hoodie Your Son Wears Isn't Trademarked, April 5, 2007 How the fashion industry survives without intellectual property protection.
The Future of Leisure That Never Arrived, March 8, 2007 How has the amount of leisure time changed in the last 100 years?
Kaizen, That Continuous Improvement Strategy, Finds Its Ideal Environment, February 8, 2007 Continuous improvement is easier on the web than in the physical world.
Why Crazy Eddie Wouldn't Be Undersold, and Other Economic Mysteries, January 11, 2007 Are low-price guarantees pro-competitive or anti-competitive?
Recalculating the Costs of Global Climate Change, December 14, 2006 How should we trade off the welfare of future and present generations?
Beyond Insurance: Weighing the Benefits of Driving vs. the Total Costs of Driving, November 16, 2006 The expected cost of another car on the road is surprisingly high.
Why Old Media and Tom Cruise Should Worry About Cheaper Technology, October 19, 2006 The economic theory of rent, developed in the early 1800s, explains some of the economics of "new media".
Many Theories on Income Inequality, but One Answer Lies in Just a Few Places, September 21, 2006 Much of the geographic increase in income inequality in the late nineties is due to just a handful of counties. [graphic]
The Rapidly Changing Signs at the Gas Station Show Markets at Work, August 24, 2006 The recent gyrations in oil prices offer a textbook illustration of how financial markets and commodity markets interact.
The Global Interest Rate Dance, With Bernanke Leading, July 27, 2006 The most exciting global spectator sport now is watching Ben S. Bernanke: Will he raise interest rates in August or not?
Looking for the Incentives That Will Prompt Americans to Save More, June 29, 2006 Offering to match contributions to an IRA shows promise.
Advertising Commodities Can Be Tricky, but It Does Pay Off , June 1, 2006 Dancing raisins sell, but it's hard to keep the growers in line.
Red States, Blue States: New Labels for Long-Running Differences, May 4, 2006 Geographic differences in political attitudes are nothing new.
Beauty and the Fattened Wallet, April 6, 2006 Beautiful people are paid more, but why?
The Difference Between Men and Women, Revisited: It's About Competition, March 9, 2006 Men and women differ in attitudes about competition and compensation.
A Plug for the Unplugged $100 Laptop Computer for Developing Nations, February 9, 2006 Cellphones or laptops for developing countries? Maybe both.
American Companies Show an Edge in Putting Information to Work, January 11, 2006 Why has productivity growth been higher in the US than the UK?
What Can We Learn From How a Manager Invests His Own Money?, December 15, 2005 Do insider sales indicate bad prospects or prudent investment behavior?
An Opportunity to Consider if Homeowners Get Too Many Breaks, November 17, 2005 Should mortgage interest be tax deductible?
Is Affordable Housing Becoming an Oxymoron?, October 21, 2005 What is the cause of high home prices and what can be done about it?
Tenure, Turnover and the Quality of Teaching, September 22, 2005 Teacher quality depends critically on teacher turnover, but it is not clear why.
Technology Levels the Business Playing Field, August 25, 2005 Information technology allows start-ups access to global labor markets.
Reading Between the Lines of Used Book Sales, July 28, 2005 How much do used book sales cannibalize new book sales?
Online Dating? Thin and Rich Works Here, To, June 30, 2005 What are people looking for and do they find it?
Putting a White House Annual Report to a Test, June 2, 2005 Does the Economic Report of the President accurately reflect the consensus views of the profession.
What Should a Reconfigured Tax System Look Like?, May 5, 2005 How should the tax system be reformed? [Figure showing marginal tax rates]
File-Sharing Is the Latest Battleground in the Clash of Technology and Copyright, April 6, 2005 Piano rolls, VCRs and file sharing have been at issue.
Five Years After Nasdaq Hit Its Peak, Some Lessons Learned, March 10, 2005 Financial economists are trying to find out how stock prices were pushed to such irrational and unsustainable levels during the dot-com bubble. [Graphic: Peaks and Valleys]
Two Issues Face Social Security, and Applying One Answer to Both Is Risky, February 9, 2005 Balancing the Social Security budget and introducing private accounts are two distinct issues.
The Dynamics of Pricing Tickets for Broadway Shows, January 13, 2005 Like airlines, Broadway shows use a variety of methods to price discriminate.
Burden Growing on Pension Group, December 16, 2004 Easing the burden on the Pension Benefit Guaranty Corporation will do the same for taxpayers.
Competition and Incentives May Help Control Health Care Costs, November 17, 2004 But to reap the benefits of competition, consumers have to have more choices.
Patent Protection Gone Awry, October 21, 2004 Changes in the patent system have contributed to a deterioration in patent quality.
Good Stock Advice or Online Noise?, September 23, 2004 Do online stock message boards contain any useful information?
Donations Can Buy You Profits, August 25, 2004 Little wonder that companies pour huge sums into presidential campaigns. The payoffs can be far greater.
Analyzing the Marriage Gap, July 29, 2004 According to recent research a married male identical twin makes more money than his single brother.
Parsing California Gas Prices, July 1, 2004 Small fluctuations in supply or demand can mean large price swings in California's gas market.
Exchange Rates the Economy, June 3, 2004 Exchange rates have a lot to do with the health of the world economy.
How Much Does Information Technology Matter?, May 6, 2004 Does information technology confer a competitive advantage?
Options Accounting Rules Are Changing, April 8, 2004 Stock options are still a gamble, but the size of the pot may soon be clearer.
What Goes Abroad Usually Comes Back, With Benefits, March 11, 2004 Trade is a two way street.
Information Technology May Have Cured Low Service-Sector Productivity, February 11, 2004 IT's big productivity impact seems to have been on services.
Why is that Dollar in Your Pocket Worth Anything?, January 15, 2004 The Iraqi dinar provides a lesson in monetary theory.
The True Costs of S.U.V.s, December 12, 2003 The laudable private incentive to choose a safe vehicle may, perversely, reduce overall safety.
Which Party in the White House Means Good Times for Investors?, November 20, 2003 Does the stock market do better when a Republican is president or when a Democrat is president? [chart]
The Mixed Bag of Productivity, October 23, 2003 Productivity, trade and jobs.
Lessons from California's Budget, September 25, 2003 California's budget mess is widely misunderstood.
The Hunk Differential, Aug 28, 2003 Being beautiful pays off, even in occupations where you wouldn't expect it to.
A Good Idea with Bad Press, July 31, 2003 The Pentagon's proposal for a market in terrorism indicators was a good idea that had bad PR.
When Emotions Guide Investors , July 3, 2003 Is the current tech stock recovery a rational reaction to oversold sector, or is it the start of another bubble?
Dealing With Deflation, June 5, 2003 Just as a rosy complexion can be a sign of health or of a fever, deflation can be a sign of economic strength or weakness.
A Market Approach to Politics, May 7, 2003 How markets can help aggregate beliefs?
Novel Ideas for a Risky World, April 10, 2003 Some risks are more manageable than others. Can we design markets to change that?
Why New Savings Plans Won't Work, March 13, 2003 Default choices in saving plans may be too powerful.
Deficits and Political Pain, Feb 13, 2003 The deficit is bad and getting worse.
Bush's Plan to Eliminate Taxes on Stock Dividends, Jan 16, 2003 There's a lot to be said for eliminating the double taxation of dividends, but it should be done at the right time in the right way.
Online Sales Offer Fresh Look at Economy, Dec 19, 2002 Online shopping was supposed to revolutionize the way we buy. That hasn't happened quite yet, but economic research on online commerce is booming.
The Fed Trounces the Private Sector in Crystal-Ball Gazing, Nov 22, 2002 Whom should we believe: Fed forecasts or the private sector?
Lessons in Experiments Gone Wrong, Oct 24, 2002 The 2002 Nobel in Economic Science.
Employment and Prosperity Affect Body Inflation, Sept 26, 2002 Close to half the American population is estimated to be overweight, a condition that has serious economic consequences because of its impact on labor supply and health care.
When Economics Shifts From Science to Engineering, August 29, 2002 Economists are increasingly being called on to give advice a variety of market and market-like mechanisms.
Tales of Manipulation and Design, August 1, 2002 Auctions are a great way to sell, but they are subject to manipulation.
New Chips Can Keep a Tight Rein on Consumers, July 4, 2002 As chips get cheaper, products get smarter. Sometimes they can get too smart for their own good.
Productivity and Profitability Make Odd Couple in Odd Recession, June 6, 2002 Is the recent increase in productivity good news for business? Not necessarily. The relationship between productivity and profitability is looser than one might think.
Knowing About Diluted Earnings Is a Powerful Tool, May 9 2002 Should options be expensed or not? Here's a suggestion.
What, Exactly, Was on John Nash's Beautiful Mind?, April 11, 2002 So what did John Nash actually do?
Enron Is Worst-Case Example of Need for Clearer Accounting Rules, March 14, 2002 The "genius of capitalism" depends critically on having clear rules and transparent reporting for accounting.
Investor Behavior Plays Role in Debate Over Wider Choice in 401(ks)s, February 14, 2002 Behaviorial economists present evidence that more choice isn't necessarily better, a finding relevant to the debate over 401(k) plans.
A New Economy With No New Economics, January 17, 2002 Coase's 1937 paper on "The Nature of the Firm" doesn't necessarily imply that firms will get smaller when communication costs go down, contrary to some claims.
For Too Many, Social Security Is Main Retirement Plan, December 20,2001 Even relatively wealthy Americans save too little for retirement.
A Bangladesh Bank Relies on Peer Pressure for Collateral, November 22, 2001 How the Grameen Bank overcomes asymmetric information problems that perpetuate local monopolies.
The Case for Catastrophe Bonds, October 25, 2001 Catastrophe bonds, a form of reinsurance, are based on a 50-year old idea by a Nobel laureate economic theorist.
Some Views on How to Steer the Economy Towards Recovery, October 13, 2001 Temporary tax rebates for consumers and firms will induce them to spend quickly.
Videoconferencing May Get Much-Needed Critical Mass, October 4, 2001 Will videoconferencing ever take off?
Slowdown in IT Equipment Sales Fuels Push Into Services Business, September 10, 2001 Forget about personalization, portals and push. Today's mantra in information technology is "services."
Good Monitors Make for Better Contracts, August 23, 2001. Most computers have monitors, but some computers are monitors.
Sorting Out Bundling and Antitrust Law, July 26, 2001 Selling bundles of products to increase profits.
G.E. and Honeywell Ran Afoul of 19th-Century Thinking, June 28, 2001 How the economics of complements influenced EU thinking on the G.E.-Honeywell merger.
Market Risks Could Hurt the Social Security Safety Net, May 31, 2001 Privatizing social security caries significant risks, since the recent performance of the stock market cannot be counted on.
The Power of Luck Is Important in Tax Policy, May 3, 2001 How much income is due to ability, and how much to luck? The answer is important for the shape of the "optimal income tax".
Special Rate Schedules May Solve Energy Woes, April 5, 2001 An "increasing block rate" can help moderate demand for electricity.
Forget Net Taxes. Forget Sales Taxes Altogether, March 8, 2001 Rather than extend sales tax to the Internet, think about dropping it altogether and find better ways to tax consumption.
Comparing Nasdaq and Tulips Unfair to Flowers, February 8, 2001 Was the Nasdaq bubble yet another example of tuplimania? No, but not for the reason you think. [Chart.]
California Must Control Demand for Power, January 11, 2001 The reason for the California electricity crisis can be summed up in four words: demand grew, supply didn't.
Exposing the Fraying Edges in the Fabric of the Economy, December 18, 2000 Part of the 2001 Economic Outlook section.
Technology Rise and Fall Is as American as the Model T, December 14, 2000 Technology booms and busts have been with us for centuries.
Online Users as Laboratory Rats, November 16, 2000 Unravelling the mystery of "late bidders" on eBay and Amazon.
Tax Cuts May Be Fashionable, but Now's a Good Time to Raise Gas Taxes, October 19, 2000 United States policy on gasoline taxation could be much improved.
Examining Differences in Drug Prices, September 21, 2000 The economics of differential drug pricing.
Online Commerce Creates Strange Competition, August 24, 2000 The Internet may raise or lower prices, depending on the nature of competition.
Internet Changes the Economics of Information Industries, July 27, 2000. Economics of Napster.
Mixing Economics and Political Science at Universities, June 29, 2000 Economic approaches to forecasting election results.
Managing Online Security Risks, June 1, 2000. Role of liability in risk management for computer security.

The Industry Standard

Cool Media, November 13, 2000. A new generation is turning the tables on television.
Paying Complements, May 22, 2000. The proposed Microsoft breakup puts the economics of competition to the test.
Priceline's Magic Show, April 17, 2000 The name-your-price retailer has an old trick up its sleeve.
Field of Dreams, March 17, 2000. What if you build broadband and no one comes?
The Law of Recombinant Growth, February 28, 2000. Like Eli Whitney, Thomas Edison and the Wright Brothers, today's inventors have learned that the sum is greater than its parts.
Drop the Sales Tax, January 21, 2000. Stop worrying about online sales tax collection. Tax income or consumption instead.

Books by Hal R. Varian

You can order these books at http://www.inforules.com/other.htm.

The Economics of Information Technology: (with Joe Farrell and Carl Shapiro) This is a brief introductionn to some of the economic forces associated with information technology. It is part of the Raffaele Mattioli Lectures given at Bocconi Business School in Milan.
Information Rules: A Strategic Guide to the Network Economy: (with Carl Shapiro) This is a book about how to use economics to think about competitive strategy in high-tech industries. We examine pricing of information, lockin, networks, positive feedback, systems competition, standards, intellectual property, electronic markets, etc. Harvard Business School Press, November, 1998. For more information, see the Information Rules website.
Internet Publishing and Beyond: Co-edited with Brian Kahin. A collection of papers from a conference held at Harvard in 1996.
Variants in Economic Theory: This is a collection of selected works, along with some biographical reflections.
Fostering Research on the Economic and Social Impacts of Information Technology [HTML and Image] [PDF]: 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.
Microeconomic Analysis: Graduate textbook in microeconomics, W. W. Norton and Company, 1978. Second edition, 1987. Third edition, 1992. Translated into Spanish, German, Japanese, French. You may also be interested in the Errata for Microeconomics Analysis [TeX] [PDF] [HTML]. [Publisher's description.]
Mathematica Notebooks to Accompany Microeconomic Analysis: This is a set of Mathematica Notebooks that describe various calculations used in Microeonomic Analysis.
Intermediate Microeconomics: Undergraduate textbook in microeconomics. W. W. Norton and Company 1987. Second edition 1990. Third edition 1993. Translated into Spanish, Italian, French, German, Hungarian, Portugese, Polish, Japanese, Chinese. Fourth English edition 1996. Fifth English edition 1999. Russian translation, in progress. Here is are chapter-by-chapter lecture notes in PDF format. You may also be interested in the Errata for Intermediate Microeconomics [TeX] [PDF] [HTML]. [Publishers's description .]
Microeconomic Workouts: (with Theodore Bergstrom) Exercises for Intermediate Microeconomics. W. W. Norton and Company, 1987. Second edition, 1990. Third edition 1993. Fourth edition 1996. Translated into Spanish, Italian, German.[Publisher's description.]
Economic and Financial Modeling with Mathematica: (editor) Collection of articles showing how to use the computer language Mathematica for economic and financial applications. [Notebooks]
Computational Economics and Finance: Modeling and Analysis with Mathematica: (editor) Collection of articles showing how to use the computer language Mathematica for economic and financial applications. [Notebooks]

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.

Papers 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

Hal R. Varian

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