Luca and co-author Susan Athey, the economics of technology professor at Stanford Graduate School of Business and a pioneering tech economist herself, delve into the phenomenon in their paper Economists (and Economics) in Tech Companies, forthcoming in the Journal of Economic Perspectives.
“Inside tech firms there’s a huge competition for talent right now,” Athey says. “There are fairly junior PhDs making in the high six figures or even seven figures because their expertise is just so valuable.”
What does a digitization/tech economist do every day? Problems they work on include:
Online advertising design. Advertising inventory on search engines is often sold via auction. Economists help companies design those auctions, advising on everything from the type of auction to run to where to set reserve prices. “Tech firms have also hired economists to solve challenges relating to the choice of outcome of advertising, such as pay-per-click versus alternatives,” the paper states.
The role of ranking and incentives in marketplaces. The way marketplaces and intermediaries rank offers from sellers or service-providers can be thought of as an incentive system. Economists are well positioned to analyze issues such as short-term user behavior and the equilibrium impact on the marketplace as a whole.