Thierry Pénard

The economics of digital business models : a framework for analyzing the economics of platforms

The paper proposes an analytical framework for comparing different business models for producing information goods and digital services. It is based on three dimensions that also refer to contrasted literature: the economics of matching, the economics of assembling and the economics of knowledge management. Our framework attempts to identify the principal trade-offs at the core of choices among alternative digital business models, and to compare them in terms of competitiveness and efficiency. It also highlights the role played by users in the production of information goods and competition with pure suppliers.

Dual distribution and royalty rates in franchised chains: an empirical exploration using French data

Abstract Most empirical studies concerning franchise systems have dealt with the monetary contractual provisions, especially with the determinants of royalty rates. But the organizational design of franchised chains has received less attention and dual distribution is still a misunderstood phenomenon in economic theory. What determines the proportion of companyowned units or franchised units within a chain? How does the level of the royalty rate interplay with the extent of company ownership? This paper supports the idea that dual distribution enables to mitigate contractual hazards due to information asymmetry and incomplete contracting. Thus a chains efficiency should strongly depend on the correct balance between royalty rates and the extent of company ownership. The interdependence between these two strategic decisions is analyzed by using a panel data set of 745 French franchisors. Econometric tests show that brand name value has a positive impact both on royalty rates and the proportion of companyowned units. Moreover, we put forth evidence that royalties and company ownership are complementary variables for the organizational design of chains.

Internet Use and Social Capital: The Strength of Virtual Ties

This paper aims to understand how Internet users may improve their social capital by investing in online social activities. We argue that the Internet can be a convenient and efficient means of maintaining existing social ties and/or of creating new ties. We seek to identify the determinants of online investments in social capital and the nature of the interaction with traditional forms of investment in social capital. Using a Luxembourg household survey, the econometric results reveal a significant positive impact of volunteer activities and trust (two measures of social capital) on online investments to maintain social capital, but more ambiguous results are found between online investments and face-to-face contacts with friends. By contrast, online investments to create new ties are poorly related to the Internet users’ existing social capital, but depend on the opportunity cost of time.

Does the Internet Make People Happier

Given the increasingly prominent role the Internet plays in peoples daily life, understanding its influence on individual well-being is crucial. Internet use yields direct utility and economic returns that may increase life satisfaction. But the Internet might also have detrimental effects (e.g. addiction, social isolation). This paper aims to examine the impact of Internet use on individual well-being. Using Luxemburgish data extracted from the European Value Survey, we find evidence that non users are less satisfied in their life than Internet users. Moreover, the positive influence of Internet use is stronger for individuals who are young or not satisfied with their income. These findings suggest that public policies aiming to reduce the digital divide by reaching out to non-Internet users are socially desirable.

Do reputation feedback systems really improve trust among anonymous traders? An experimental study

Feedback systems are claimed to be a crucial component of the success of electronic marketplaces like eBay or Amazon Marketplace. This article aims to compare the effects of various feedback systems on trust between anonymous traders, through a set of experiments based on the trust game. Our results indicate that trust is significantly improved by the introduction of a reputation feedback system. However, such mechanisms are far from being perfect and are vulnerable to strategic ratings and reciprocation. Our findings indicate that some changes in rating rules may significantly improve the efficiency of feedback systems, by avoiding strategic rating or reciprocation, and hence stimulate trust and trustworthiness among traders. In particular, a system in which individuals are not informed of their partners rating decision before making their own decision provides better results, both in terms of trust and earnings.

Graduated Response Policy and the Behavior of Digital Pirates: Evidence from the French Three-Strike (Hadopi) Law

Most developed countries have tried to restrain digital piracy by strengthening laws against copyright infringement. In 2009, France implemented the Hadopi law. Under this law individuals receive a warning the first two times they are detected illegally sharing content through peer to peer (P2P) networks. Legal action is only taken when a third violation is detected. We analyze the impact of this law on individual behavior. Our theoretical model of illegal behavior under a graduated response law predicts that the perceived probability of detection has no impact on the decision to initially engage in digital piracy, but may reduce the intensity of illegal file sharing by those who do pirate. We test the theory using survey data from French Internet users. Our econometric results indicate that the law has no substantial deterrent effect. In addition, we find evidence that individuals who are better informed about the law and piracy alternatives substitute away from monitored P2P networks and illegally access content through unmonitored channels.

Le commerce électronique en France: un essai de mesure sur le marché des CD

[fre] Le commerce electronique en France: un essai de mesure sur le marche des CD En France, le commerce electronique connait un fort developpement depuis 1999, meme si les volumes de transaction restent encore modestes. Au-dela de ce succes relatif, la vente sur Internet suscite de nombreuses questions. Quelles sont les specificites du commerce electronique par rapport au commerce traditionnel? Les marches sur Internet sont-ils plus concurrentiels que les marches physiques? Afin de mieux comprendre les strategies des vendeurs en ligne de disques, les prix d’un panel de CD ont ete recueillis de mai a octobre 2000 aupres des principaux «cyberdisquaires» francais. Les prix des CD sur Internet apparaissent en moyenne inferieurs de plus de 7 % aux prix en magasin, cette difference etant plus sensible sur les CD etrangers (12 % d’ecart) que sur les CD francais (moins de 2 % d’ecart). Pour chacun des CD apparait une forte dispersion des prix entre les cyberdisquaires, ainsi qu’une volatilite des prix importante sur la periode etudiee. Les sites les plus connus (ayant fait l’objet de campagnes publicitaires) pratiquent des prix plus eleves que les sites de moindre notoriete et procedent aussi a des changements de prix de plus grande ampleur. Les analyses econometriques permettent de reveler des phenomenes de cycles dans les decisions de prix (alternance de hausses et de baisses de prix) et l’existence d’interactions strategiques entre les cyberdisquaires. Toutefois, l’anciennete des CD reduit ces deux phenomenes et conduit a une stabilite des prix. De plus, les cyberdisquaires pratiquent moins de baisses de prix sur les CD francais que sur les CD etrangers. [eng] E-Commerce in France: a Test Measurement of the CD Market E-commerce has boomed in France since 1999, albeit with still modest transaction volumes. Yet despite this relative success, the issue of selling on the Internet begs numerous questions. How does e-commerce differ from traditional trade? Are Internet market (This abstract was borrowed from another version of this item.)

Olson's Paradox Revisited: An Empirical Analysis of incentives to contribute in P2P File-Sharing Communities

This article aims to examine how the size of file-sharing communities affects their functioning and performance (i.e. their capacity to share content). Olson (1965) argued that small communities are more able to provide collective goods. Using an original database on BitTorrent file-sharing communities, our article finds a positive relationship between the size of a community and the amount of collective goods provided. But, the individual incentives to contribute slightly decrease with community size. These results seem to indicate that Peer to Peer file-sharing communities provide a pure (non rival) public good. We also show that specialized communities are more efficient than general communities to promote cooperative behavior. Finally, the rules designed by the administrators of these communities play an active role to manage voluntary contributions and improve file-sharing performance.

Assembling Platforms: Strategy and Competition

Strategic behaviour in digital markets is difficult to interpret as these industries compete via alternative business models, rather than competing via an accepted business format. Digital market strategies are also more sophisticated and dynamic along product positioning and pricing, alliance, merger and acquisition, and innovation activity dimensions. This paper analyses key variables to be considered in the design of digital business models. First, the trade-offs specific to matching, assembling and knowledge management are presented. Then, the strategic interdependency among these dimensions is related to the main features characterising demand: heterogeneity in users preferences, willingness to pay for quality, and organised solidarity among users. Furthermore, the firm’s challenge is not only to establish a market niche or to obtain a gatekeeper position, since in an industry characterised by permanent innovation and a ‘winner-takes-all’ race firms must add new functions to their portfolios in an ongoing manner. Such ‘agility’ or adaptability is required to preserve competitive advantage. The inherent difficulty in managing innovative capability and commercial image, when the supply of services is continually being extended to new domains (that require new capabilities and the evolution of commercial practice) are also underlined. The framework attempts to identify the principal trade-offs among alternative digital strategies. The analysis also stresses the importance of uncertainty regarding digital market competition due to the threat of market invasion by rivals. Rivalry can spoil market positioning because of interdependency among business models due to direct network externalities and competitors’ indirect revenues.

Bargaining and Fixed Price Offers: How Online Intermediaries are Changing New Car Transactions

This paper develops a model of oligopolistic price competition to analyze the impact of online intermediaries such as Autobytel.com on the price setting process in the automobile market. The roles of dealer search costs, the fraction of buyers using the intermediary, the value of the item being sold, and heterogeneity in buyer bargaining abilities are explored. The model provides theoretical insights relevant to the empirical literature addressing the role that intermediaries like Autobytel play in online markets. For example, we present conditions under which the price offered through the intermediary is either higher or lower than offline (bargained) prices.