Thumbnail

Digital Democracy?

While the internet facilitates the growth of alternative business platforms, offering new opportunities to previously untapped populations, it also behaves in traditional market patterns. As always, those who start with more potentially benefit most, new research shows

 

March 05, 2020
Thumbnail

When Mohammed Alyakoob began his doctoral studies at Purdue University’s Krannert School of Management, he was poised to study information systems and digital platforms. But, he said he was struck by discussion of the democracy of the internet. “I kept hearing about how the internet democratizes everything,” Alyakoob said. “I didn’t think it was that straightforward.”

Now a USC Marshall Assistant Professor of Data Operations and Sciences, Alyakoob studies the role of local factors, such as market structure and demographics, on the digital platform model.

While the internet facilitates the growth of alternative business platforms, offering new opportunities to previously untapped populations, it also behaves in traditional market patterns.

“In the democracy of the internet, I can be a hotel too, everyone can benefit!” Alyakoob said. “Our research shows that’s not the case. The people with more advantages potentially benefit more, and those with less may not benefit in the same way.” 

Alyakoob published these findings online, along with Mohammad Rahman of Krannert in the 2018 paper, “Shared Prosperity (or Lack Thereof) in the Sharing Economy.”

In the study, the researchers looked at the economic impact of Airbnb rentals on restaurants in New York City’s non-traditional neighborhood destinations. Generally, research has shown that Airbnb can be a catalyst for increased economic activity across several industries in the neighborhoods it enters.

“But,” said Alyakoob, “it is ambiguous whether or not visitors actually only use the neighborhood for lodging without prompting a spillover economic effect on adjacent industries.”

“We’re thinking about how platforms like Airbnb expose biases.  We see many offline factors that make digital platforms less of a democracy. Online, people benefit differently due to offline realities.”—Mohammed Alyakoob, Assistant Professor of Data Operations and Sciences

Using Airbnb and Yelp reviews, as well as employment data from the U.S. Bureau of Labor Statistics over a 10-year period, Alyakoob and Rahman found, “a salient and economically significant positive spillover effect on restaurant job growth in an average NYC locality,” according to the paper. “A 1 percent increase in the intensity of Airbnb activity (Airbnb reviews per household) leads to approximately 1.7 percent restaurant employment growth.”

This would seem to be good news. But the team also investigated the role of demographics and market concentration on the economic spillover. In this case they found that restaurants in areas with a relatively high number of white residents disproportionately benefit from the economic spillover of Airbnb activity; the impact in black areas is not statistically significant.

Now, Alyakoob said, “We’re thinking about how platforms like Airbnb expose biases.  We see many offline factors that make digital platforms less of a democracy. Online, people benefit differently due to offline realities.”

Alyakoob will be presenting his work at the National Bureau for Economic Research Digitization Workshop this spring. In the meantime, his study of bias on Airbnb is focused on visitor behavior.

His next paper examines how people decide which Airbnb to use. “How much does the host play a role in the decision to stay somewhere?” Alyakoob asks. “Does a picture of the host make a difference? People say yes. But why does the picture matter in terms of overall impression? If you’re comparing two places in order to understand the best value for you, why take the picture into account? The point in my subsequent work is to understand whether host profile pictures make a difference. This would imply that there might be biased behavior by platform users. Then we will try and understand what the platform can do to mitigate the role of such biases.” 

peer-to-peer loans and their promise to democratize credit. Originally seen as the solution to geographic, economic and other constraints on some populations when it comes to getting credit, Alyakoob has found this effect doesn’t last. His 2019 online paper, “Where You Live Matters: The Impact of Local Financial Market Competition in Managing Peer-to-Peer Loans,” with co-author Mohammad Rahman and Krannert’s Zaiyan Wei, shows that after the initial access provided by peer-to-peer credit, banks in competitive areas, end up taking over the peer-to-peer market.

“Traditional players look at these peer-to-peer platforms and create their own online peer-to-peer system,” Alyakoob said. “They retake over the market and if the strategic reaction of traditional institutions continues the legacy of being territorial, borrowers will ultimately gain unevenly from the competition. That is, where a borrower lives may still matter.”

Alyakoob said these days his work is a blend of data science tools and the economics of information systems. He’s found that using this lens to study digital transformations provides opportunities across many industries. “That’s the fun part.”