Eric Overby

Markets that are well-integrated spatially are important to the stability and success of the economy because they balance supply and demand and create incentives for innovation. Electronic commerce has the potential to improve market integration by providing visibility into supply/demand conditions in different geographic regions and facilitating trade across geographic distance. We study the effect of electronic commerce on market integration as measured by the prevalence of spatial arbitrage, which has several advantages over the price-based measures used in prior research. We also study the effect of two distinct forms of electronic commerce, which helps us better identify the linkages between electronic commerce, spatial arbitrage, and market integration. Based on an analysis of transactions in the wholesale used vehicle industry from 2003 to 2010, we conclude that electronic commerce improved market integration. Spatially integrated markets – i.e., those in which buyers and sel...

Research on online communities has generated multiple insights into why people join and contribute to online communities. From this research, a theoretical understanding of how to design online communities is emerging. We contribute to this understanding by investigating the impact of an increasingly common but understudied design option available to online communities: whether to integrate with a social network platform such as Facebook or Google+. Social network platform integration may provide several benefits to an online community, including creating more social interaction opportunities for members and helping members share personal information with each other to facilitate the creation of social bonds. Theory suggests that both of these factors (opportunities for interaction and disclosure of personal data) enhance the success of bond-based online communities, i.e., those in which member attachment to the community is driven by social bonds with other members. However, some e...

In an attempt to leverage the profile information people maintain on social network platforms such as Facebook, LinkedIn, and Google+, many web sites and online services encourage users to register and log-in using these profiles. Despite the common adoption of this feature by online services, it is not clear whether they should integrate with social network platforms. On one hand, integration might help the online service recruit and retain users by reducing the friction associated with registration and by creating a more personalized and sociable environment. On the other hand, integration might repel users who would prefer that their actions on the service not be visible to their social networks or tracked by the platform operator (e.g., Facebook). We study whether social network platform integration is valuable to an online service by examining the implementation of the “Login with Facebook” feature by a social 3D virtual world.

The Information Systems research field is inherently dynamic. New technologies, new standards, new legislation, and changing user expectations are some of the reasons why topics of interest to the IS field remain in flux. As researchers, we seek to uncover and explain relationships among variables, but due to the dynamism of IS phenomena, these relationships are apt to change over time. For example, the effect of informational features such as product diagnosticity or seller reputation on the price of an electronic commerce transaction is likely to change over time as users become more comfortable with online trading. This paper describes several statistical methods to model these changes in relationships. Specifically, we discuss methods to investigate time-varying coefficients in regression models, including rolling regression, “parameterizing” the coefficients using process functions, and testing for structural change. Importantly, we describe how the structure of many of the dat...

Price disparities across locations can occur when sellers in one location have difficulty matching with buyers in a different location due to the transaction costs of trading across distance. Spatial arbitrageurs exploit these discrepancies by buying goods from locations where prices are low and reselling them at locations where prices are high. Electronic channels should lower the transaction costs of trading across distance, thereby facilitating buyer/seller matching. It follows that electronic trading should reduce spatial arbitrage opportunities, thereby improving market efficiency. We test this hypothesis in the automotive market. The distinguishing feature of our data is that we can identify the distinct buyers, sellers, and vehicles involved in transactions, giving us a detailed look at transaction patterns likely motivated by spatial arbitrage. We conclude that traders are engaging in spatial arbitrage within the market but that spatial arbitrage has become less prevalent ov...

Table 2: The " deal " orientation of franchise dealers vs. the " relationship " orientation of Executive Summary Dealers can purchase vehicles in either physical or electronic auction environments, but the experience of purchasing a vehicle online differs greatly from the experience of purchasing the vehicle in the live auction lane. To what extent do dealers value the benefits of the physical auction environment, such as the ability to personally inspect vehicles, get a sense for the "buzz" of the market, and network with other dealers and consignors? Conversely, to what extent do they value the benefits of the electronic auction environment, such as greater vehicle selection and increased convenience? This report describes the results of a research study designed to shed light on such questions by surveying dealers about their preferences for physical vs. electronic auction environments. The findings are based on survey responses received from 130 dea...

We analyze how increased use of electronic channels affects geographic price variance by enabling buyers to shift demand across locations. Using data from the wholesale automotive market, we find that buyers use the reach of the electronic channels to shift purchases from highprice to low-price locations. This “arbitrage” reduces the variance of market prices, but not their means. Further, these relationships weaken with distance, due to transportation costs. The study contributes to the literature on how electronic trading affects geographic trade and price dispersion by: a) considering the role of geographic location in price dispersion, b) observing the behavioral mechanism (buyer arbitrage across locations) that leads to lower price dispersion, c) analyzing dispersion when prices are determined by auction rather than fixed price, and d) examining how reduced buyer search costs have led to lower price dispersion throughout the entire market, as opposed to only the online or offli...

Newspapers are increasingly reliant on subscription revenue as advertising spend shifts to online platforms. Many newspapers have implemented paywalls in an attempt to boost subscription revenue. We study whether and how paywalls can help newspapers boost subscription revenue by retaining existing subscribers. Most major newspapers offer free access to paywalled content to subscribers to the print edition, which may help the newspaper retain subscribers by making their subscriptions more valuable. We leverage variation in whether and when existing subscribers activated access to the paywall of a top 30 North American newspaper. Our identification strategy accounts for self-selection in subscribers’ decisions to activate paywall access. We find that a subscriber’s activation of digital access decreases the risk of her canceling her subscription by about 31% and increases her subscription revenue by 7%–12%. In other words, digital activation improves subscriber retention and the assoc...

Information systems generate detailed "trace" data about what individuals do and when they do it. Trace data may affect the resolution of lawsuits by, for example, changing the time needed for legal discovery. Trace data might speed resolution by clarifying what events happened when, or they might slow resolution by generating new and potentially irrelevant data that must be analyzed. To investigate this, we analyze the effect of electronic medical records (EMRs) on malpractice claim resolution time. Hospitals' use of basic EMRs at the time of the alleged malpractice is associated with a two month (8%) reduction in resolution time, while use of advanced EMRs is associated with a three month (13%) reduction. Because unresolved malpractice claims impose substantial costs on providers and patients, our finding that EMRs speed resolution has important welfare implications. Our study also contributes to the understanding of the effect of trace data on legal outcomes.

By providing quick and easy access to credit, online lending platforms may help borrowers overcome financial setbacks and/or refinance high-interest debt, thereby decreasing bankruptcy filings. On the other hand, these platforms may cause borrowers to overextend themselves financially, leading to a “debt trap” and increasing bankruptcy filings. To investigate the impact of online lending on bankruptcy filings, we leverage variation in when state regulators granted approval for a major online lending platform – Lending Club – to issue peer-to-peer loans. Using a difference-in-differences approach, we find that state approval of Lending Club leads to an increase in bankruptcy filings. A complementary instrumental variable analysis using loan-level data yields similar results. We find suggestive evidence that the ease of receiving a Lending Club loan causes some borrowers to overextend themselves financially, leading to bankruptcy. We also find that “strategic” borrowing – in which borrowers who are considering bankruptcy use a Lending Club loan to restructure their debt or to engage in last-minute consumption before they file – may play a role. Our results suggest that recent initiatives from online lending platforms to control how borrowers use loans, such as Lending Club’s Direct Pay program that sends loan funds directly to creditors, can help these platforms provide safe and affordable credit. Our study adds to the literature that examines how online platforms influence society and the economy; it contributes to the literature that examines how financial products, services, and regulations influence bankruptcy filings; and it has policy implications for online lending design and regulation.

Electronic commerce can improve market efficiency by helping buyers and sellers find and transact with each other across geographic distance. We study the effect of two distinct forms of electronic commerce on market efficiency, which we measure via the existence and exploitation of spatial arbitrage opportunities. Spatial arbitrage represents a more precise measure of market efficiency than does price dispersion, which is typically used, because it accounts for the transaction costs of trading across distance and for unobserved product heterogeneity. One of the forms of electronic commerce that we study is a webcast channel that allows electronic access to the traditional physical market, while the other is a standalone electronic market. Both forms provide traders with expanded reach to find and transact with each other across geographic distance, but only one allows traders to conduct transactions immediately, at any time. This variance helps us isolate the effect of these mechanisms (reach and transac...

Information technology (IT) has significant potential to improve the quality of patient care, to lower costs, and to improve efficiency. However, IT leaves an electronic paper trail that may demonstrate negligence and thereby create legal risk. Emerging research suggests that this fear of electronic discovery is delaying IT adoption, thereby perpetuating inefficiencies. Is this fear founded? If it is, then policy changes are needed to remove this obstacle to streamlining the healthcare system. If not, then healthcare providers should move ahead to realize IT benefits without being stymied by irrational fears. We examined the relationship between Computerized Physician Order Entry (CPOE) and malpractice claims against hospitals in Florida between 1999 and 2006. CPOE reduces the number, severity, and disposition time of claims, while having no effect on the amounts paid. This indicates that CPOE reduces hospital legal risk, suggesting that fears of increased legal risk due to IT are unfounded.

Markets can yield significant economic benefits by improving transaction efficiency, but effective design is necessary to achieve these benefits. We compare a physical market to a discrete electronic market in the wholesale used vehicle industry to evaluate how their different designs work for different types of transactions. We find that buyers and sellers balance adverse selection costs and other transaction costs when using the two markets, with the physical market serving as the general exchange and the electronic market serving as a spot market for vehicles with low adverse selection risk. These findings increase our understanding of how sellers and buyers distribute supply and demand between physical and electronic markets in industries in which they coexist. They also increase our understanding of how information technology can improve market function in wholesale environments.

... E. Overby (*) College of Management, Georgia Institute of Technology, 800 West Peachtree Street, Atlanta, GA 30318, USA e-mail: [email protected] Chapter 6 Migrating Processes from Physical to Virtual Environments: Process Virtualization Theory Eric Overby ...

ABSTRACT Despite the central role of arbitrage in finance and economic theory, there is limited evidence of the factors that create and eliminate arbitrage opportunities, how often arbitrage occurs, and how profitable it is. We address these gaps via a transaction-level analysis of spatial arbitrage in the wholesale automotive market. We investigate why arbitrage opportunities are created by analyzing how sellers choose where to sell vehicles. We find that the attention sellers pay to the distribution of a vehicle is negatively related to the probability that it is arbitraged. Arbitrage occurs in approximately 1% of transactions, although electronic trading is making arbitrage less prevalent by improving buyer/seller matching across locations. Arbitrage yields a 5.6% return on average, although arbitrageurs take a loss 14% of the time. Our results contribute to the literature on arbitrage, the effect of attention allocation on market outcomes, and the effect of information technology on market efficiency.