Multinationals in the Digital Economy

The Brookings Institution‘s Global Goliaths: Multinational Corporations in the 21st Century Economy includes my chapter Multinationals in the Digital Economy. The lead paragraph:

Modern digital services largely come from multinational corporations (MNCs) whose size and scope are unprecedented.  It has not always been this way.  Just a few decades ago, users typically turned to local firms for most kinds of information technology (IT).  And, historically, software was known for its low barriers to entry and the quick rise of startups and small firms.  This chapter examines the forces contributing to the rise of digital MNCs, as well as the challenges they face. 

Revisiting Barlow’s Misplaced Optimism

Revisiting Barlow’s Misplaced Optimism, Symposium for John Perry Barlow, 18 Duke L. & Tech. Rev. 97.

As part of Duke Technology Law Review‘s Symposium for John Perry Barlow, I reflected on the perspective of early Internet luminary John Perry Barlow, the vision he offered, and what I see as the most promising sources of accountability for online behavior. My piece begins:

Barlow’s A Declaration of the Independence of Cyberspace calls for a “civilization of the mind in cyberspace,” and he says it will be “more humane and fair” than what governments have created. Barlow’s vision is unapologetically optimistic, easily embraced by anyone who longs for better times to come.  Yet twenty years later, it’s easy to see some important respects in which reality fell short of his vision.  Alongside the Internet’s many pluses are clickbait, scams, hacks, and all manner of privacy violations.  Ten thousand hours of cat videos may be delightful, but they’re no civilization of the mind.  With a bit of hindsight, Barlow’s techno-utopianism looks as stilted as other utopianism—and equally far removed from reality.

Beyond being overly optimistic about how perfectly the ‘net would unfold, Barlow was also needlessly skeptical of plausible institutions to bring improvements.  He writes: “The only law that all our constituent cultures would generally recognize is the Golden Rule.” But the moral suasion—and practical effectiveness—of the Golden Rule presupposes participants of roughly equal power and status.  It is no small feat to meaningfully consider what Joe User might want from Mega Social Network if the tables were turned and Joe owned the goliath.  As a practical matter, any claim a user has against a goliath requires state institutions to adjudicate and enforce.  When Barlow wrote A Declaration of the Independence of Cyberspace, tech goliaths were much smaller.  Plus, the Internet’s early users were in a certain sense more sophisticated than the mainstream users who eventually joined.  So the gap from little to big was much narrower then, arguably making governments less important in that era.  But as the big get bigger and as the Internet attracts average users who lack the special sophistication of early adopters, governments play key roles—adjudicating disputes, enforcing contracts and beyond.

An Introduction to the Competition Law and Economics of “Free” with Damien Geradin

Benjamin Edelman and Damien Geradin. An Introduction to the Competition Law and Economics of ‘Free’.  Antitrust Chronicle, Competition Policy International.  August 2018.

Many of the largest and most successful businesses today rely on providing services at no charge to at least a portion of their users. Consider companies as diverse as Dropbox, Facebook, Google, LinkedIn, The Guardian, Wikipedia, and the Yellow Pages.

For consumers, it is easy to celebrate free service. At least in the short term, free services are often high quality, and users find a zero price virtually irresistible.

But long-term assessments could differ, particularly if the free service reduces quality and consumer choice. In this short paper, we examine these concerns.  Some highlights:

First, “free” service tends to be free only in terms of currency.  Consumers typically pay in other ways, such as seeing advertising and providing data, though these payments tend to be more difficult to measure.

Second, free service sometimes exacerbates market concentration.  Most notably, free service impedes a natural strategy for entrants: offer a similar product or service at a lower price.  Entrants usually can’t pay users to accept their service.  (That would tend to attract undesirable users who might even discard the product without trying it.)  As a result, prices are stuck at zero, entry may be more difficult, effectively shielding incumbents from entry.

In this short paper, we examine the competition economics of “free” — how competition works in affected markets, what role competition policy might have and what approach it should take, and finally how competitors and prospective competitors can compete with “free.” Our bottom line: While free service has undeniable appeal for consumers, it can also impede competition, and especially entry. Competition authorities should be correspondingly attuned to allegations arising out of “free” service and should, at least, enforce existing doctrines strictly in affected markets.

Updated Research on Discrimination at Airbnb with Jessica Min

In December 2015, Mike Luca, Dan Svirsky, and I posted the results of an experiment in which we created test Airbnb guest accounts, some with black names and some with white names, finding that the latter got favorable responses from hosts more often than the latter. Black users widely reported similar problems — Twitter #AirbnbWhileBlack — and in September 2016 Airbnb responded with a report discussing the problem and Airbnb’s plans for response.

I promptly posted a critique of Airbnb’s plans, broadly arguing that Airbnb’s commitments were minimal and that the company had ignored a simpler and more effective alternative. But ultimately the proof is in the results. Do minority guests still have trouble booking rooms at Airbnb? Available evidence indicates that they do.

Below is a table based on work of Jessica Min (Harvard College ’18) as part of her undergraduate thesis measuring discrimination against Muslim guests. The table summarizes eight studies, with data collected as early as July 2015 (mine) and as late as November-December 2017 (hers), the latter postdating Airbnb’s report by more than a year. Each study finds minority users at a disadvantage, statistically significantly so.


Author/title/place and year of publication Dates of data collection Sample size Summary of findings Noteworthy secondary findings
Edelman, Benjamin, Michael Luca, and Dan Svirsky.

Racial Discrimination in the Sharing Economy: Evidence from a Field Experiment.

American Economic Journal: Applied Economics, 2017.

July 2015 6,400 listings across five U.S. cities Guests with distinctively black names received positive responses 42% of the time, compared to 50% for white guests.


Results were  persistent across type of hosts (i.e. race, gender, experience level, type and neighborhood of listing).

Discrimination was concentrated among hosts with no African American guests in their review history.

Hosts lost $65 to $100 of revenue for each black guest rejected.

Ameri, Mason, Sean Rogers, Lisa Schur, and Douglas Kruse.

No Room At The Inn? Disability Access in The New Sharing Economy.

Working paper, 2017.

June to November 2016 3,847 listings across 48 U.S. states Guests with disabilities received positive responses less often. Hosts  preapproved 75% of guests without disabilities, but only 61% of guests with dwarfism, 50% of blind guests, 43% of guests with cerebral palsy, and 25% of guests with spinal cord injury. Airbnb’s  non-discrimination policy, which took effect midway through data collection, did not have a significant effect on host responses to guests with disabilities.
Ahuja, Rishi and Ronan C. Lyons.

The Silent Treatment: LGBT Discrimination in the Sharing Economy.

Working paper, 2017.

June – July 2016 794 listings in Dublin, Ireland Guests in male same-sex relationships were approximately 25 percentage points less likely to be accepted than identical guests in heterosexual relationships or female same-sex relationships. The difference was driven by non-responses from hosts, not outright rejection.

The difference persisted across a variety of host and location characteristics.  Male hosts and hosts with many listings were less likely to discriminate.

Cui, Ruomeng and Li, Jun and Zhang, Dennis J.

Discrimination with Incomplete Information in the Sharing Economy: Evidence from Field Experiments on Airbnb.

Working paper, 2016.

Three audit studies.  Summarizing the results as to guests without prior reviews:
September 2016 598 listings in Chicago, Boston, and Seattle Guests with distinctively black names received positive responses 29% of the time, compared to 48% for white guests. The authors assess hosts’ apparent reasons for discrimination, including whether hosts were engaged in statistical discrimination and whether reviews reduce the problem of discrimination.
October – November 2016 250 listings in Boston and Seattle Guests with distinctively black names received positive responses 41% of the time, compared to 63% for white guests.
July – August 2017 660 listings in Boston, Seattle, and Austin Guests with distinctively black names received positive responses 42% of the time, compared to 53% for white guests.
Sveriges Radio’s Kaliber show,  Sweden October 2016 200 listings in Stockholm, Gothenburg, and Malmö For hosts who said no to guests with black-sounding names, a second inquiry was then sent from a guest with a white-sounding name. Of hosts who had previously declined the black guest,  many told the  white guest that the listing was available. Methodology follows longstanding testing for discrimination in US housing markets, sending a white applicant after a landlord declines a black prospective tenant.
Min, Jessica

No Room for Muhammad: Evidence of Discrimination from a Field Experiment over Airbnb in Australia.

Undergraduate honors thesis, 2018.

November – December 2017 813 listings in Sydney, Australia Guests with distinctively Middle Eastern names received positive responses 13.5 percentage points less often, compared to identical guests with white-sounding names. Results were  persistent across all hosts, including hosts with shared properties and those with expensive listings.

Discrimination was most prominent for hosts with highly sought-after listings, where hosts can reject disfavored guests with  confidence of finding replacements.

My bottom line remains as I remarked in fall 2016: Airbnb’s proposed responses are unlikely to solve the problem and indeed have not done so. Truly fixing discrimination at Airbnb will require more far-reaching efforts, likely including preventing hosts from seeing guests’ faces before a booking is confirmed.  Anything less is just distraction and demonstrably insufficient to solve this important, and long-festering, problem.

From the Digital to the Physical: Federal Limitations on Regulating Online Marketplaces with Abbey Stemler

Edelman, Benjamin, and Abbey Stemler. “From the Digital to the Physical: Federal Limitations on Regulating Online Marketplaces.” Harvard Journal on Legislation, Volume 56, Number 1, pp. 141-198.


Online marketplaces have transformed how we shop, travel, and interact with the world. Yet, their unique innovations also present a panoply of challenges for communities and states. Surprisingly, federal laws are chief among those challenges despite the fact that online marketplaces facilitate transactions traditionally regulated at the local level. In this paper, we survey the federal laws that frame the situation, especially §230 of the Communications Decency Act (CDA), a 1996 law largely meant to protect online platforms from defamation lawsuits. The CDA has been stretched beyond recognition to prevent all manner of prudent regulation. We offer specific suggestions to correct this misinterpretation to assure that state and local governments can appropriately respond to the digital activities that impact physical realities.

Informal introduction:

Perhaps the most beloved twenty-six words in tech law, §230 of the Communications Decency Act of 1996 has been heralded as a “masterpiece” and the “law that gave us the modern Internet.” It was originally designed to protect online companies from defamation claims for third-party speech (think message boards and AOL chat rooms), but over the years §230 has been used to protect online firms from all kinds of regulation—including civil rights and consumer protection laws. As a result, it is now the first line of defense for online marketplaces seeking to avoid state and local regulation.

In our new working paper, Abbey Stemler and I challenge existing interpretations of §230 and highlight how it and other federal laws interfere with state and local government’s ability to regulate online marketplaces—particularly those that dramatically shape our physical realties, such as Uber and Airbnb. §230 is sacred to many, but as Congress considers revising §230 and Courts continually reassess its interpretation, we hope our paper will encourage a richer discussion about the duties of online marketplaces.

The Market Design and Policy of Online Review Platforms

Edelman, Benjamin. “The Market Design and Policy of Online Review Platforms.” Oxford Review of Economic Policy 33, no. 4 (Winter 2017): 635-649.

I present the institutions and incentives of online reviews, including attracting initial reviews, assuring truthful reviews of genuine experiences, and avoiding inflated or deceptive reviews. I also explore the competition and consumer protection concerns associated with reviews.

Uber Can’t Be Fixed — It’s Time for Regulators to Shut It Down

Edelman, Benjamin G. “Uber Can’t Be Fixed — It’s Time for Regulators to Shut It Down.” Harvard Business Review (digital) (June 21, 2017). (Translations: Japanese, Russian.)

From many passengers’ perspective, Uber is a godsend — lower fares than taxis, clean vehicles, courteous drivers, easy electronic payments. Yet the company’s mounting scandals reveal something seriously amiss, culminating in last week’s stern report from former U.S. Attorney General Eric Holder.

Some people attribute the company’s missteps to the personal failings of founder-CEO Travis Kalanick. These have certainly contributed to the company’s problems, and his resignation is probably appropriate. Kalanick and other top executives signal by example what is and is not acceptable behavior, and they are clearly responsible for the company’s ethically and legally questionable decisions and practices.

But I suggest that the problem at Uber goes beyond a culture created by toxic leadership. The company’s cultural dysfunction, it seems to me, stems from the very nature of the company’s competitive advantage: Uber’s business model is predicated on lawbreaking. And having grown through intentional illegality, Uber can’t easily pivot toward following the rules.

Racial Discrimination in the Sharing Economy: Evidence from a Field Experiment

Edelman, Benjamin, Michael Luca, and Daniel Svirsky. “Racial Discrimination in the Sharing Economy: Evidence from a Field Experiment.” American Economic Journal: Applied Economics 9, no. 2 (April 2017): 1-22.

In an experiment on Airbnb, we find that applications from guests with distinctively African-American names are 16% less likely to be accepted relative to identical guests with distinctively White names. Discrimination occurs among landlords of all sizes, including small landlords sharing the property and larger landlords with multiple properties. It is most pronounced among hosts who have never had an African-American guest, suggesting only a subset of hosts discriminate. While rental markets have achieved significant reductions in discrimination in recent decades, our results suggest that Airbnb’s current design choices facilitate discrimination and raise the possibility of erasing some of these civil rights gains.

Design of Search Engine Services: Channel Interdependence in Search Engine Results

Edelman, Benjamin, and Zhenyu Lai. “Design of Search Engine Services: Channel Interdependence in Search Engine Results.” Journal of Marketing Research (JMR) 53, no. 6 (December 2016): 881-900. (First posted April 2013.)

The authors examine prominent placement of search engines’ own services and effects on users’ choices. Evaluating a natural experiment in which different results were shown to users who performed similar searches, they find that Google’s prominent placement of its Flight Search service increased the clicks on paid advertising listings by more than half while decreasing the clicks on organic search listings by about the same quantity. This effect appears to result from interactions between the design of search results and users’ decisions about where and how to focus their attention: users who decide what to click based on listings’ relevance became more likely to select paid listings, while users who are influenced by listings’ visual presentation and page position became more likely to click on Google’s own Flight Search listing. The authors consider implications of these findings for competition policy and for online marketing strategies.