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2017 | Book

The Technology: Has the Digital Communication Technology Changed the Way Markets Function? Cooperation or Competition? Read chapter Read first chapter

How Digital Communication Technology Shapes Markets

Redefining Competition, Building Cooperation

Author: Swati Bhatt

Publisher: Springer International Publishing

Book Series : Palgrave Advances in the Economics of Innovation and Technology

Part of: Springer Professional "Wirtschaft+Technik" , Springer Professional "Technik" , Springer Professional "Wirtschaft"

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About this book

This Palgrave Pivot explores how communication technology such as the Internet has changed the nature of trade, focusing especially on economy-wide reductions in company size (granularity) and the role of retailers (disintermediation). By increasing access to comparative data, influencing conceptions of time, and reducing the number of intermediaries between creator and consumer, technological connectivity is changing the very definition of competition. In the new network economy, disintermediation and granularity are turning cooperative information gathering and sharing into a vital market institution.
To exemplify the effects of communication technology, Bhatt focuses on two markets with particularly powerful effects on the economy: labor and education, and CIME (communication, information services, media, and entertainment). Mobile connectivity is radically changing the extent, capabilities, and operations of these markets, both in terms of the services they provide and how they interact with consumers. Bhatt also explores how these benefits intersect with new concerns about privacy and security when the line between public and private information is becoming ever more fluid.

Table of Contents

Frontmatter
1. The Technology: Has the Digital Communication Technology Changed the Way Markets Function? Cooperation or Competition?
Abstract
As social beings, humans have traded goods and services for generations. The mechanics of exchange have adapted over time to the changing environment but the underlying incentives remain the same. Differences in preferences and resources are bridged by connecting with individuals in other parts of the economic network using digital communication technology (DCT). DCT has generated new scarcities and new mechanisms for resource allocation, enlarging the scope of exchange along three dimensions. One is the trend toward organizational restructuring (OR) precipitated by granularity and disintermediation. The second trend is the emergence of organizational behemoths (OB), fostered by network effects. And third, competition for scarce resources is channeled into cooperation as individuals adapt to a rapidly changing context for exchange, and this adaptation itself changes the environment.
Swati Bhatt
2. The Three Drivers: Connectivity, Data and Attention
Abstract
DCT has unleashed three powerful drivers: connectivity itself; the collection and parsing of voluminous data and a newly recognized resource bottleneck; and attention. These drivers present opportunities as well as challenges, which enable the network economy to innovate and develop. Connectivity generates transparency as information transfer is more efficient; data enables the creation of patterns and stories about individuals; and the trading of attention (or eyeballs) as a commodity, the central feature of advertising, reveals attention as the new scarce resource. Together, these forces propel a reconfiguration – unbundling and repackaging – of markets and products. Manifestation of DCT across markets is subtle and economic growth is uneven, sticking at the challenges in some sectors, but the race to adapt is enticing and we move forward.
Swati Bhatt
3. The Three Trends: Granularity, Behemoths and Cooperation
Abstract
The first trend, OR, has redefined markets and unbundled products, transforming economic units into granular structures which operate with fewer employees and intermediaries. Connections and data allow buyers and sellers to confront each other directly and transactional integrity is maintained by the pillars of social capital – trust, reputation, responsibility and rights. Agency costs of monitoring and incentivizing workers are lower due to disintermediation. The second trend is an agglomeration of transactions. This trend, enabled by network effects and the trading of attention across multi-sided markets, results in the concentration of economic activity around a few major hubs, the OB. Advertising emerges as a major player in these multi-sided markets. The third trend is a recalibration of the notion of competition.
Swati Bhatt
4. The Independent Contractor and Entrepreneurship in Labor Markets
Abstract
Empowerment of workers and degree of control are central themes in the workplace. The shift of workers from employee status to independent contractors is accompanied by more control. Employees typically have job security and multiple benefits, but limited freedom over terms of the work. Contractors are at the other end of the spectrum of control, with the ability to tailor their work environment but face the risk of disruptive forces. Jobs are parceled out in discrete packets to workers around the globe, requiring only an Internet connection and execution, while at a distance, is on-demand. As independent contractors, workers own their skill set and, therefore, have incentives, and opportunity, to reconfigure skills using the Internet in online education.
Swati Bhatt
5. The On-Demand Economy and How We Live: Communication, Information, Media and Entertainment
Abstract
DCT has provided choices over content and the vehicle for consuming media content. Unbundling enables the authors of content, the sellers, to be separate from the distributors, or buyers, of their creations. This induces both sides to innovate in the creation, curation and dissemination process, as exemplified by user-generated content in social media and product reviews. Consumption of content is a choice between ownership of individual units in the content bundle; renting via streaming or temporary ownership and the traditional format of purchasing the entire bundle via download. The distinction, from a consumption point of view, between a product that is owned and a service that incurs a one-time fee has been dissolved – access is all that matters.
Swati Bhatt
6. The Sharing Economy: Information Cascades, Network Effects and Power Laws
Abstract
Connectivity generates familiarity and induces collaboration, and also the phenomenon of copying, known also as FOMO (fear of missing out). Imitating others’ behavior derives from the social influence of networks which is different from homophily or joining groups with similar characteristics. While financial markets have manifested granularity in the unbundling of functions of financial intermediation, such as payments, risk management, savings and investment, there has also been the formation of OB due to copying. Connectivity has fostered imitation to economize on search costs and to benefit from shared networks. Copying can have adverse consequences, as when all economic agents congregate at the same hub, and, by adopting the same behavior, precipitate disastrous consequences as we saw in the 2008 financial crisis.
Swati Bhatt
7. The Private World of Sharing and Cooperation
Abstract
Connectivity builds bridges between individuals’ private space and threatens notions of identity and privacy. While the notion of privacy as anonymity is relatively new from a historical point of view, the constitutional guarantees pertain to lines of control over what we share, when we share and with whom we share. Anonymity implies the absence of any form of identity so the requirement is not one of erasing identity but rather preserving that identity in a secure and undisturbed form. People don’t want to vanish into obscurity, they want to be known as obscure, private individuals. There is, however, the reality that DCT has swamped our ability to create privacy shields and that transparency may be the new normal.
Swati Bhatt
8. The Internet and Regulation
Abstract
The Internet was created in a culture of collaboration and distributed decision-making. With organization behemoths co-existing with granularity, has the Internet lost this collaborative culture? Ownership of data, of domain names and control over the flow of content in the entertainment industry (net neutrality) have become central issues in the digital economy. The concern with behemoths is not pricing power but rather the power to shape ideas by controlling content. Who curates and regulates global content with a view to fairness and balance? While social media are part of this larger picture the trajectory from cause to effect is ambiguous – there is no individual directing the show, only computer code. Virtual space is a shared resource whose free consumption necessitates governance of this commons.
Swati Bhatt
9. The Conclusion
Abstract
We are in a moment of increasing interdependency because of our connections. Competition in terms of a zero-sum game is simply not an option. There is an acknowledgement, by recognizing our intertwined lives, that cooperating is the individually rational way forward. Since common knowledge is endemic in the network economy – my strategy choices are known almost before I know them – an open conversation about the game, or cooperation, is the best strategy. When the dominant pillars of the network economy are technology and human behavior, and technology has outrun the limits of the law and our ability to grasp its global outcomes, we adapt to fit the environment as we transform it. We cooperate in order to better comprehend.
Swati Bhatt
Backmatter
Metadata
Title
How Digital Communication Technology Shapes Markets
Author
Swati Bhatt
Copyright Year
2017
Electronic ISBN
978-3-319-47250-8
Print ISBN
978-3-319-47249-2
DOI
https://doi.org/10.1007/978-3-319-47250-8

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