Showing papers by "Jay Pil Choi published in 2018"

Privacy and Personal Data Collection with Information Externalities

Abstract: We provide a theoretical model of privacy in which data collection requires consumers' consent and consumers are fully aware of the consequences of such consent Nonetheless, excessive collection of personal information arises in the monopoly market equilibrium which results in excessive loss of privacy compared to the social optimum In a fragmented market with a continuum of firms, no individual website has incentives to collect and monetize users' personal data in the presence of scale economies in data analytics However, the emergence of data brokerage industry can restore these incentives Our results have important policy implications for the ongoing debate regarding online privacy protection: excessive loss of privacy emerges even with costless reading and perfect understanding of all privacy policies We support the view that privacy is a public good and propose alternative policy remedies beyond the current informed-consent approach

Net Neutrality, Network Capacity, and Innovation at the Edges

Abstract: We study how net neutrality regulations affect a high-bandwidth content provider (CP)'s investment incentives to enhance its quality of services (QoS) in content delivery to end users. We find that the effects crucially depend on whether the CP's entry decision is constrained by the Internet service provider (ISP)'s network capacity. If capacity is relatively large, prioritized services reduce the QoS investment as they become substitutes, but improve trafic management. With limited capacity, by contrast, prioritized delivery services are complementary to the CP's investments and can facilitate entry of congestionsensitive content; however, this creates more congestion for other existing content. Our analysis suggests that the optimal policy may call for potentially asymmetric regulations across mobile and fixed networks.

A model of patent trolls

Abstract: This article develops a model of patent trolls to understand various litigation strategies employed by nonpracticing entities (NPEs). When an NPE faces multiple potential infringers who use related technologies, it can gain a credible threat to litigate even when it has no such credibility vis-a-vis any single potential infringer in isolation. This is due to an information externality generated by an early litigation outcome for subsequent litigation. Successful litigation creates an option value against future potential infringers through Bayesian updating. We discuss policy implications including legal fee shifting and the use of injunctive relief.

Transfer Pricing and the Arm's Length Principle under Imperfect Competition

Abstract: This paper analyzes incentives of a multinational enterprise to manipulate an internal transfer price to take advantage of corporate-tax differences across countries under both monopoly and oligopoly. We examine “cost plus” and “comparable uncontrollable price” as two alternative implementations of the so-called arm’s length principle (ALP) to mitigate this problem. Tax-induced foreign direct investment (FDI) may entail inefficient internal production. We show how the mechanisms behind such inefficient FDI differ between alternative implementation schemes of the ALP and explore implications of the ALP for welfare and dual sourcing incentives. We also develop a novel theory of vertical foreclosure as an equilibrium outcome of strategic transfer pricing.

Sequential innovation, naked exclusion, and upfront lump-sum payments

Abstract: We present a potentially benign naked exclusion mechanism that can be applied to sequential innovation; a non-patentable original innovation by the incumbent supplier fosters derivative innovation by rivals. In the absence of an appropriate legal framework, the original innovator’s equilibrium exclusivity contracts block subsequent efficient entry even if there is (leader–follower) competition in the contracting phase. However, the legal framework may maximize social welfare by imposing a ban on upfront lump-sum payments in exclusivity contracts (by all suppliers) combined with an outright ban on exclusivity contracts by the derivative innovator. The former ban precludes the exclusion of socially beneficial derivative innovation by causing the incumbent supplier to resort to accommodation, rather than to pure exclusion, strategies. The latter ban complements the former by preventing inefficient or excessive derivative innovation.