Why Do Technology Companies Hire Economists?
JAN 27, 2016
This is a great time for economists in tech companies — the most interesting firms in Silicon Valley are hiring chief economists as well as economic teams at a very rapid clip. Every week, I am contacted to help fill a position, or I hear about a new hire by firms like AirBnb, Netflix, Pandora, Uber, etc. Each tech company, and each chief economist, is different, but there are several main categories.
First are microeconomic issues involved in pricing and product design. Hal Varian was one of the first tech firm chief economists, and by his account, he worked on the AdWords auction in the early days. At Yahoo! and Microsoft, economists (including myself) worked a lot with online advertising marketplaces.
Personally, I was involved in many aspects of marketplace design for search advertising, from changes in auction design, to the design of metrics and measures that better reflect the platform’s long term objectives, to strategy. Generally, technology firms have fairly novel and complex pricing and product design issues. A nice research paper that illustrates some of the issues involved is by Dinerstein, Einav, Levin, and Sundaresan. Here, the way that eBay ranks products in response to a consumer search affects which sellers get more business as well as the extent of price competition. One of my papers (with Denis Nekipelov) models advertiser behavior and looks at the impact of algorithm changes on welfare. Other interesting microeconomic issues arise in the context of on-demand marketplaces like AirBnB and Uber. Former Stanford students Andrey Fradkin (MIT), Chiara Farronato (HBS), and Zoe Cullen (graduating this year) have written interesting research papers that highlight some of the market design issues encountered by tech firms at AirBnB and TaskRabbit, including the role of search frictions for both buyers and sellers; Mike Luca at HBS has analyzed a number of issues with Yelp, and he works closely with them.