Information Technology and Markets for Information Jon Zinman Dartmouth College January 8, 2010

How Might IT Transform Decisions, Markets, Outcomes? Consumer side Producer side Watchdog side Market level Challenges Next steps

How Might IT Transform Consumer Decisions, Outcomes? Reducing search/shopping costs –U.S. lit on this –Anything from LDCs?

Consumer Side: Priming “Priming” may become more cost-effective –Motivating example: baseline survey increases later demand for related investment behaviors (Zwane et al) –A subtle “nudge” –Do priming on larger scale with text messages?

Consumer Side: Reminders “Reminders” may be cost effective –Example: Karlan et al (2010): text reminders increase savings Many unanswered questions remain –Increase overall savings, financial health? –Any perverse effects (e.g., borrowing to increase consumption)? –Work for other healthy behaviors? –Optimal timing, frequency, duration E.g., do people “tune out” at some point? –Optimal content Reminders and/or feedback on goal tracking –Strong defaults on these features? –How much customization optimal for consumer?

Consumer Side: Goals & Plans Reminders worked well on sample of people who had set goals, make plans Can IT improve outreach on goal-setting, making effective plans (then sticking)? Probably yes, where computers and smart phones are prevalent Key here: testing the marketing and content of streamlined, fun decision aids –Trying to get this going with software startup in USA –Information vs. information overload –Goals vs. plans

How Might IT Transform Producer Decisions, Outcomes? Reduce search costs for market (e.g., price) information –Svensson and Yanagizawa (2009): Uganda farmers Zitzewitz and Zinman (2009): iPhone app dramatically reduces deceptive advertising by ski resorts

How Might IT Transform What Watchdogs (Can) Do? Burstyn and Coffman (2009) text message reports to parents on kids’ school attendance IPA: how can we use IT to audit human service NGOs more efficiently (partner = Global Giving)

How Might IT Transform Market Outcomes? Jensen (2007): access to price info via mobile phones increase fish market efficiency –Reduced waste –Reduced price dispersion (also Aker 2008)

Challenges and Next Steps R&D has really high value here –Very practical applications –Very weak body of evidence on what works, doesn’t and why Wrinkle: “bad guys” not passive participants here –E.g., investments in obfuscation by firms who seek to deceive customers (Ellison and Ellison) By my sense is that IT levels the playing field a bit by reducing the importance of fixed costs

Consumer Side: Impulse Saving Automating healthy behaviors –Probably most relevant for financial behavior, and where people have checking accounts E.g., use mobile banking to make easy: –One-time setup of automated transfers from checking to savings –On-the-go transfers: “impulse saving” Well-timed feedback/reminders probably key here Use strong defaults here –Measuring the right outcomes key