Daeho Lee

Metafrontier Production Function Analysis of Horizontal and Vertical Integration in Korea's Cable TV Industry

With its remarkable growth, the cable TV industry has witnessed increasing business integration continuously. This study categorizes technology-based operators into 3 groups on the basis of business integration—vertically integrated, horizontally integrated, and isolated system operators-and estimates the efficiency of each group. In addition, metafrontier analysis is employed to compare the efficiencies of the groups. The results suggest that vertically and horizontally integrated system operators can improve technical efficiency by accomplishing economies of scope and scale, respectively.

Measuring the efficiency of standardisation policy using meta-frontier analysis: a case of mobile platform standardisation

While Android and iOS are now prevalent platforms in the mobile ecosystem, some still argue one standardised mobile platform is necessary to ensure the efficiency of content providers. For this reason, it is pertinent to examine whether government-led standardisation policy for mobile platform standard, WIPI, was efficient to content providers in South Korea. This study categorises content providers into three groups according to the period of mobile platform technologies and measures efficiency of each group based on stochastic frontier analysis. The results show content providers using MNO-dependent mobile platform are most efficient. However, as a hypothesis that the production function for each group is identical is rejected, additional analysis using meta-frontier production function is conducted to compare different efficiency levels for each group. In this case, content providers using a standardised mobile platform are least efficient rather, and firms using MNO-independent mobile platforms are most efficient.

The effects of network neutrality on the diffusion of new Internet application services

The debate over network neutrality started with the appearance of new Internet application services that are latency sensitive and the use of broad bandwidth. These services are still diffusing, and more applications that use broader bandwidth with greater latency sensitivity are expected to be developed. To estimate precisely the effect of network neutrality regulation, it is necessary to forecast the number of end-users that will adopt application services. However, previous studies are limited in that they assume that the potential market and the final number of adopters are constant at the current market penetration level. By computational experiments, this research estimates the effect of network neutrality regulation considering the diffusion process of application services such as IPTV and VoIP. Additionally, it deduces the relation between the effect of network neutrality regulation and the level of diffusion of new Internet application services.

Efficiency comparison of digital content providers with different pricing strategies

Abstract Unlike traditional products, digital content can be offered free because the marginal cost required for additional production is close to zero. Since free digital content is offered at a lower price than that of the competitors, it is a strategy that can beat the competition. However, digital content firms use various strategies, such as the advertising sales-based strategy, freemium strategy, and membership fee-based strategy. This study categorizes Korea’s digital content firms into three groups based on the pricing strategy and uses the meta-frontier analysis method in order to determine which group’s production function is closer to the meta-frontier production function. In addition, Tobit regression is used to analyze whether the differences in the efficiency levels between groups are statistically significant. The results reveal that the free group has the highest efficiency, followed by the fee group and the mix group in that order.

Model for studying commodity bundling with a focus on consumer preference

This research complements the demand-side analysis of previous commodity bundling studies. Most previous have researchers analyzed the effects of commodity bundling by focusing on firm behavior and have assumed a simple consumer utility that does not reflect the heterogeneity of consumer preference. However, to measure the results of competition with the bundling strategy, an analysis of commodity bundling based on consumer preference is useful. Unlike previous studies, this study proposes a model that directly analyzes consumer behavior for commodity bundling and incorporates consumer heterogeneity to measure the consumer utility derived from bundled commodities. To validate the model, we used data on service subscriptions and usage of information communication technology in Korea, including fixed phone service, mobile service, and Internet. The empirical results show that the proposed model is useful in analyzing the effects of bundling for various services and products.

Intra-industry Innovation, Spillovers, and Industry Evolution: Evidence from the Korean ICT Industry

Abstract Companies innovate themselves to survive competition, and successful innovations are transferred to the industry as a whole through imitation. In this paper, the technical efficiency (TE) of the Korean information and communication technology (ICT) industry is estimated through stochastic frontier analysis, and the efficiencies from 2000 to 2013 are compared through meta-frontier analysis. In addition, by analyzing the effect of innovations that move the production function up on the TE and the meta-frontier efficiency through the two-stage least square model, this paper investigates the effects of innovation on other companies in the industry in the short- and long-term and how the industry evolves accordingly. As a result, sudden inflation of the meta-technology ratio caused by a few innovative firms automatically lowers the average TE. However, the innovation spills over intra-industry by the efforts of other firms trying to reach around the innovation (i.e., imitation). This recovers other firms’ TE and increases meta-frontier efficiency. In addition, this paper provides theoretical and practical implications of the results.

The effect of online platform maturity on the efficiency of offline industry

Abstract The role of platform as an information mediator has been becoming more vital by satisfying buyers’ needs for a reasonable purchase and sellers’ need for more exposure to buyers within the copious information flood. For the platform service provider, increasing the network externality is important to induce both sides while platforms can cause sellers to invest more and create severe competition among sellers, which take a toll on sellers’ surplus. Therefore, this study investigates whether platforms yield benefits for sellers as the platform matures, securing the network externality. Thus, this study divides the seller side industry into 3 periods based on the level of platform maturation. The efficiency in each period is measured using stochastic frontier analysis and efficiencies of each period are compared using meta-frontier analysis. The results show the overall industry efficiency improves with securing the network externality as the platform matures. However, if the individual firm is resistant to innovation, the firm’s efficiency might not be far behind compared to the firm which led the innovation.

Dividing network externality into the number of peers and users: Focusing on sociability and enjoyment in online games

Even though network externality plays an important role in users’ motivations to use services or products, the implications of this are not clear because previous studies did not distinguish between the number of peers and the number of total users. Thus, the purpose of this paper is to demonstrate that there is a difference between the two network externalities, i.e., the number of peers and the total number of users. To accomplish this, the perception of quality of life is considered to have an impact on the effects of the two different network externalities.,Data were collected from a survey that covered 508 online game players in South Korea, and the two hypotheses of “player experience of need satisfaction” from self-determination theory as well as user gratification theory (UGT) were assessed using structural equation modeling.,The results indicate that people consider the total number of users and the number of peers differently. In addition, the effects of the total number of users and the number of peers vary according to respondents’ perceived life quality in four dimensions: loneliness, happiness, satisfaction with life (SWL), and escapism. In particular, people’s offline tendencies are reflected online in terms of loneliness, whereas online life compensates for a lack of enjoyment offline.,The authors verify that UGT can affect the network externality by considering perceived quality of life (loneliness, SWL, happiness, and escapism) as a moderating effect.

Understanding the majority opinion formation process in online environments: An exploratory approach to Facebook

Abstract Majority opinions are often observed in the process of social interaction in online communities, but few studies have addressed this issue with empirical data. To identify an appropriate theoretical lens for explaining majority opinions in online environments, this study investigates the skewness statistic, which indicates how many “Likes” are skewed to major comments on a Facebook post; 3489 posts are gathered from the New York Times Facebook page for 100 days. Results show that time is not an influential factor for skewness increase, but the number of comments has a logarithmic relation to skewness increase. Regression models and Chow tests show that this relationship differs depending on topic contents, but majority opinions are significant in overall. These results suggest that the bandwagon effect due to social affordance can be a suitable mechanism for explaining majority opinion formation in an online environment and that majority opinions in online communities can be misperceived due to overestimation.

Research on the mutual relations between ISP and ASP efficiency changes for the sustainable growth of the Internet industry

ABSTRACT Innovations in Internet networks and applications are equally important. However, there is controversy in the literature regarding whether it is network or application innovation that leads to the development and innovation of Internet industries. In this study, the mutual relations of Internet service providers’ (ISP) and application service providers’ efficiency changes are analysed empirically using a Granger causality test. Over the entire period of 1998–2011, efficiency changes of web service companies positively Granger-cause those of ISPs and vice versa. In the case of VoIP and streaming services, however, efficiency changes of VoIP and streaming services Granger-cause those of ISPs during the former half period, whereas those of ISPs negatively Granger-cause efficiency changes of streaming services during the latter half. As services that require heavy data traffic and QoS guarantees are launched, a policy that promotes virtuous circulation between ISPs and application service providers (ASPs) is necessary for the development of all Internet-related industries.