BMAN31952 DIGITAL ECONOMY: PLATFORMS, AI AND THE BUSINESS 2021
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BMAN31952
DIGITAL ECONOMY: PLATFORMS, AI AND THE BUSINESS
2021
SECTION A
Answer FOUR PARTS of the question (10 marks each)
Question 1
a. Consider setting up a crowdfunding platform to assist inventors to
commercialise their inventions. Identify two key challenges crowdfunding platforms face. How will you design the platform to deal with the challenges
effectively? (10 marks)
b. Explain the Hub and Spoke algorithmic pricing. How may such algorithms affect prices? Will such techniques cause any concern for consumers’ welfare? Could such algorithms enhance market efficiency? (10 marks)
c. Explain how advances in big data and machine learning technologies are likely to improve on the performance of matching algorithms such as Gale’s Top Trading Cycles Algorithm. Your analysis should provide a clear description of the algorithm using a simple example and highlight its limitations. Will machine- learning algorithms ultimately replace matching algorithms? (10 marks)
d. How may advances in Blockchain technologies give rise to novel ways to finance new ventures? Will your proposal have any implications for the venture capital market? [hint: your analysis should refer to smart contracts and the ICO process.] (10 marks)
e. Market competition rules aim to stop firms amassing market shares exceeding 25%. Could these rules equally be extended to recent tech firms? How does your analysis bear on the proposal to break up tech firms such as Alphabet? Put forward a proposal to regulate tech firms. (10 marks)
f. Critically analyse the thesis that “predictions complement judgements”; they are not substitutes. Use your analysis to discuss possible effects of AI on the job market. (10 marks)
SECTION B
Answer ONE question (30 marks)
Question 2
a. Consider setting up a multi-sided platform to connect medical service providers with patients – call it MediBid. Drawing on the theory of multi-sided platforms, discuss your growth strategies for MediBid. Your analysis should distinguish between platform initiation and growth strategies. (10 marks)
b. Information asymmetries pose challenges on online platforms for medical services. Why has it proven difficult to establish reputation systems for medical platforms? How would you try to meet some of the challenges? Your analysis should discuss the possible role of AI technologies in mitigating the effect of information asymmetries. (10 marks)
c. How will the rise of multi-sided platforms for medical services affect competition in the healthcare sector? Analyse whether prices will rise or fall over time.
(10 marks)
Question 3
a. Explore how and why big data, AI and platform technologies may transform the financial industry and give rise to a more efficient sector. (10 marks)
b. Will the digital transformation of the financial sector give rise to higher market concentration? Why? How will financial intermediaries compete with each other in the future? (10 marks)
c. Current Blockchain technologies exhibit a strong trade-off between security and scalability. Explain the trade-off and discuss how it may limit applications of the technologies to the financial sector (e.g., wholesale or retail payments).
(10 marks)
Question 4
a. Reflect on the recruitment process. Discuss channels through which big data and machine learning technologies are likely to affect the process and improve the efficiency of the HR sector. (10 marks)
b. Explain how the rise of firms such as LinkedIn is likely to transform the HR sector, shape competition among HR firms and force the reorganisation of firms in other sectors. (10 marks)
c. How will advances in big data and machine learning technologies inform selection of CEOs in the future? How is it likely that we will automate the process of CEO selection? Support your analysis using relevant theoretical concepts. (10 marks)
SECTION C
Answer ONE question (30 marks)
Question 5
On 15 December 2020, the European Commission approved the acquisition of Fitbit by Alphabet, subject to a number of conditions. Once a leader in the design and production of fitness trackers, Fitbit had seen its worldwide market share of the overall smartwatch segment to fall to between 5% and 10% and was for sale. By acquiring Fitbit, Google would get access to the company’s product, data about the health and health habits of Fitbit users, and Fitbit’s expertise in designing efficient sensor technology for digital wear.
a. Reflecting on the economic properties of data, explain how access to data about the health and health habits of Fitbit users may complement Google’s existing data, and discuss ways in which Alphabet may create value from Fitbit’s data.
(8 marks)
b. Analyse the thesis that data is labour, Fitbit users own their data, and Google should pay Fitbit users for the data they provide. (8 marks)
c. Explore the benefits and risks of deploying analytic technologies to Fitbit’s data, including implications for users’ privacy. Discuss steps regulators may take to mitigate potential risks associated with applications of analytic technologies to health habit data. (8 marks)
d. How may Alphabet’s acquisition of Fitbit reshape the health insurance market? (6 marks)
Question 6
Suppose you set up a two-sided platform (e.g., Google) to link end users with advertisers. Your market research suggests the demand for your service from the two groups is given by:
= () + ℎℎ (ℎ)
ℎ = ℎ (ℎ) + ℎ ()
() = 100 − 0.4
ℎ(ℎ) = 100 − 0.2ℎ
where Qh represents the demand for your service by advertisers and Qt the demand for your service by ordinary users. Parameters eht and eth measure inter-market externalities – how the demand for the service on one side of the platform affects the demand for the service on the other side. For simplicity assume zero fixed costs and zero marginal cost.
a. Assuming that both eht and eth are equal to 0.5, determine the optimal price for the service in each market. (8 marks)
b. Formally demonstrate whether it can ever be optimal to offer the service to end users for free. If so, how much will you charge advertisers for access to the service? (8 marks)
c. Draw relevant lessons from the analysis to guide pricing decisions of multi-sided platforms. Suppose the number of advertisers on the platform grows. How will
this affect the platform’s pricing strategy? (6 marks)
d. How may platform pricing differ in Winner-take-all and multi-homing markets? Reflecting on your answer, explain how platforms compete in multi-homing
markets to gain and keep market share. [Multi-homing markets refer to sectors
where several platforms can coexist.] (8 marks)
2022-05-10