Hal R. Varian's research while affiliated with Google Inc. and other places

Publications (154)

Article
This is an elementary introduction to causal inference in economics written for readers familiar with machine learning methods. The critical step in any causal analysis is estimating the counterfactual-a prediction of what would have happened in the absence of the treatment. The powerful techniques used in machine learning may be useful for develop...
Article
We describe two auction forms for search engine advertising and present two simple theoretical results concerning i) the estimation of click-through rates and ii) how to adjust the auctions for broad match search. We also describe some of the practical issues involved in implementing a VCG auction.
Article
Computers are now involved in many economic transactions and can capture data associated with these transactions, which can then be manipulated and analyzed. Conventional statistical and econometric techniques such as regression often work well, but there are issues unique to big datasets that may require different tools. First, the sheer size of t...
Article
Full-text available
This article describes a system for short term forecasting based on an ensemble prediction that averages over different combinations of predictors. The system combines a structural time series model for the target series with a regression component capturing the contributions of contemporaneous search query data. A spike-and-slab prior on the regre...
Chapter
This article provides an overview of Google, focusing on its economic history, specifically on three topics of interest: the ad auction, the IPO auction and the role of economics at Google.
Article
Full-text available
This article describes a system for short term forecasting based on an ensemble prediction that averages over different combinations of predictors. The system combines a structural time series model for the target series with regression component capturing the contributions of contemporaneous search query data. A spike-and-slab prior on the regress...
Article
This note contains a short history of my work on the foundations of revealed preference, emphasising the intellectual influence of Sydney Afriat. I also present a few ‘novel’ applications of revealed preference analysis drawn from some areas of applied economics.
Conference Paper
It is now possible to acquire real time information on economic variables of interest from various commercial sources. I illustrate how one can use Google Trends data to measure the state of the macroeconomy in various sectors, and discuss some of the ramifications for research and policy.
Article
The gold standard for scientific research is reproducible controlled experiments. In the last two or three decades economics has made much progress in implementing experiments in both the laboratory and in the field. I propose that the NSF should set up a program to fund field experiments/clinical trials in a variety of areas in economics. These cl...
Conference Paper
This document describes the auction system used by Google for allocation and pricing of TV ads. It is based on a simultaneous ascending auction, and has been in use since September 2008.
Article
Can Google queries help predict economic activity?The answer depends on what you mean by "predict." Google Trends and Google Insights for Search provide a real time report on query volume, while economic data is typically released several days after the close of the month. Given this time lag, it is not implausible that Google queries in a category...
Article
Website morphing seems to be a useful technique, with applications beyond matching cognitive style.
Conference Paper
This talk will describe the auction that Google uses for allocation and pricing of TV ads. The talk describes the actual system and puts it in proper theoretical context.
Conference Paper
Auctions for search engine advertising have been one of the most successful examples of economic mechanism design, at least in the private sector. This talk will review some of the history, theory, and practical issues surrounding these auctions.
Article
This chapter emphasizes the utility maximization of Samuelson's Revealed Preference Theory. It looks for consistency, form, forecasting, and recoverability criteria within the theory. It concludes that the strong axiom is necessary and sufficient for utility maximization, as well as rich in empirical content. The logic of the strong axiom runs as f...
Article
Distributed algorithmic mechanism design is a field at the intersection of computer science and economics.
Article
Full-text available
The ability of groups of people to make predictions is a potent research tool that should be freed of unnecessary government restrictions.
Article
Prediction markets are markets for contracts that yield payments based on the outcome of an uncertain future event, such as a presidential election. Using these markets as forecasting tools could substantially improve decision making in the private and public sectors. We argue that U.S. regulators should lower barriers to the creation and design of...
Article
I analyze the equilibria of a game based on the ad auction used by Google and Yahoo. This auction is closely related to the assignment game studied by Shapley–Shubik, Demange–Gale–Sotomayer and Roth–Sotomayer. However, due to the special structure of preferences, the equilibria of the ad auction can be calculated explicitly and some known results c...
Article
A quais-equilibrium is a set of prices that results in a balanced inflation. This paper sets forth a simpale general equilibrium model with money and proves the existence of a quasi-equibrium.
Article
Prediction markets are markets for contracts that yield payments based on the outcome of an uncertain future event, such as a presidential election. Using these markets as forecasting tools could substantially improve decision making in the private and public sectors. We argue that U.S. regulators should lower barriers to the creation and design of...
Article
The author considers the peculiar properties of copyright as an object of economic analysis and outlines its history in the USA. The article also addresses the problem of the optimal term of copyright from the point of view of social welfare. Simple models of price-setting on the market for information goods are analyzed.
Article
This article examines three recent topics in copyright policy from an economic perspective: (i) term extensions, (ii) the orphan works problem, and (iii) mass digitization projects. Copyright term extensions will make it even more difficult to locate rights holders in the future than it is at present; however there are some recent legislative propo...
Article
In this statement, a group of economists assembled by the AEI-Brookings Joint Center makes the following two recommendations to improve the competitive provision of broadband services. First, Congress should eliminate local franchising regulations, which serve as a barrier to new entry. Second, Congress and the Federal Communications Commission sho...
Article
This lecture provides an introduction to the economics of Internet search engines. After a brief review of the historical development of the technology and the industry, I describe some of the economic features of the auction system used for displaying ads. It turns out that some relatively simple economic models provide significant insight into th...
Article
Various steps required for the improvement of legal infrastructure to provide universal access to all the world's information are discussed. Inexpensive technologies such as variations on personal digital assistants could be used to access such material. It would be much better to require authors to register their works in order to enjoy the benefi...
Article
Today most newly created textual, photographic, audio, and video content is available in digital form. Even older content that was not "born digital" can relatively easily converted to machine-readable formats. At same time, the world has become more networked, making it easy to transfer digital content from one person to another. The combination o...
Book
The Economics of Information Technology is a concise and accessible review of some of the important economic factors affecting information technology industries. These industries are characterized by high fixed costs and low marginal costs of production, large switching costs for users, and strong network effects. These factors combine to produce s...
Article
Each Thursday, the New York Times publishes a column called “Economic Scene†on page C2 of the Business Section. The authorship of the column rotates among four individuals: Alan Krueger, Virginia Postrel, Jeff Madrick, and the author. This essay is about how he came to be a columnist and how he goes about writing the columns.
Article
Full-text available
The rapid advance in information technology now makes it feasible for sellers to condition their price offers on consumers’ prior purchase behavior. In this paper we examine when it is profitable to engage in this form of price discrimination when consumers can adopt strategies to protect their privacy. Our baseline model involves rational consumer...
Article
Mokyr's book is instructive, entertaining, and perhaps most importantly, thought provoking. The parallels with earlier times are well worth examining for their own sake, and at least some of them are likely to be useful in our own speculation about present and future development of technology. The book presents a consistent and convincing story, al...
Article
This is an overview of economic phenomena that are important for high-technology industries. Topics covered include personalization of products and prices, versioning, bundling, switching costs, lock-in, economies of scale, network e#ects, standards, and systems e#ects.
Article
The attempts to develop interchangeable parts during the early nine-teenth century is a good example of a technology revolution driven by com-binatorial innovation., The standardization of design (at least in principle) of gears, pullies, chains, cams, and other mechanical devices led to the de-velopment of the so-called "American system of manufac...
Article
sroom use is granted without fee provided that copies are not made or distributed for profit or commercial advantage and that copies bear this notice and the full citation on the first page. To copy otherwise, to republish, to post on servers or to redistribute to lists, requires prior specific permission and/or a fee. . 2. Thea mount of underprovi...
Article
This brief provides an economic analysis of the main feature of the Copyright Term Extension Act of 1998 ('CTEA'), a twenty-year extension of the copyright term for existing and future works. Taken as a whole, the authors believe that it is highly unlikely that the economic benefits from copyright extension under the CTEA outweigh the additional co...
Article
This is a review of various economic phenomenon that are important in high-technology industries, such as personalization of products and pricing, versioning, bundling, switching costs, lock-in, economics of scale, network e#ects, complements and computer-mediated contracts. Most of these forces tend to point towards higher industry concentration r...
Article
The article presents a vision of future computer-mediated economy. According to the author most market transactions in the future will also be mediated by specialists, most likely in the form of computerized agents. According to the author extraterrestrials would be discovered in the next 1,000 years, thus opening up the possibility of interstellar...
Article
Filed February 7, 2001 as a Comment in the Federal Communications Commission's "Secondary Markets" rule making, 37 prominent economists in regulation and telecommunications policy urge dramatic liberalization of spectrum policy. The statement calls for eliminating restrictions on wireless licenses for new and existing users, giving competitors wide...
Article
This is a set of Frequently Asked Questions (and answers) about the economic, institutional, and technological structure of the Internet.
Article
. I examine the incentives for software providers to design appropriate user interfaces. There are two sorts of costs involved when one uses software: the fixed cost of learning to use a piece of software and the variable cost of operating the software. I show that a monopoly provider of software generally invests the right amount of resources in m...
Article
Full-text available
Competition in the information age often takes the form of a standards war: a battle for market dominance between incompatible technologies. A company's success or failure can easily hinge on its ability to wage such a standards war. Standards wars are especially bitter in markets with strong network effects, where consumers place great value on co...
Article
Introduction In this note we describe some interesting parallels between circulating libraries in England circa 1750-1850 and video rental stores in the U.S. circa 1980-1990. Both institutions evolved in a similar manner, which suggests that common economic and social forces were at work. What happened in these two instances may happen yet again, a...
Article
The advent of low-cost technology for manipulating and communicating information has raised significant concerns about personal privacy. Privacy is a complex issue that can be treated from many perspectives; this chapter provides an overview of some of the economic issues surrounding it. I first describe the role of privacy in economic transactions...
Article
, Fall, 1999. 1 1 ECONOMIC VALUE OF INFORMATION 2 1 Economic value of information Economists define the (economic) value of information in the context of an optimal choice problem. A consumer is making a choice to maximize expected utility or minimize expected cost. The value of information is the increment in expected utility resulting from the im...
Article
Full-text available
. This paper was prepared for the conference "Public Access to the Internet," JFK School of Government, May 26--27 , 1993. We describe the technology and cost structure of the NSFNET backbone of the Internet, and discuss how one might price Internet access and use. We argue that usage-based pricing is likely to be necessary to control congestion on...
Article
Full-text available
There are at least two competing visions for the future National Information Infrastructure. One model is based on the application-blind architecture of the Internet; the other is based on the application-aware architecture of cable TV systems and online services. Among application-aware architectures, some are content-aware and some are content-bl...
Article
. This is a list of Frequently Asked Questions about usage-based pricing of the Internet. We argue that usage-based pricing is likely to come sooner or later and that some serious thought should be devoted to devising a sensible system of usage-based pricing. Keywords. Internet, FAQs, usage-based pricing Address. Jeffrey K. MacKie-Mason, Hal R. Var...
Article
We describe a generalization of the Vickrey auction. Our mechanism extends the auction to implement efficient allocations for problems with more than one good, multiple units for the goods, and externalities. The primary restriction on preferences is that they must be quasilinear. http://deepblue.lib.umich.edu/bitstream/2027.42/41250/1/gva3.pdf
Article
. This paper was prepared for the Tenth Michigan Public Utility Conference at Western Michigan University March 25--27, 1993. We describe the history, technology and cost structure of the Internet. We also describe a possible smart-market mechanism for pricing congestion on the Internet. Keywords. Networks, Internet, NREN, NII. Address. Hal R. Vari...
Article
. I describe some of the issues involved in pricing information goods such as computer software, databases, electronic journals and so on. In particular I discuss the incentives to engage in differential pricing and examine some of the forms such differential pricing may take. This paper was presented at the Research Libraries Group Symposium on "S...
Article
. Information goods such as books, journals, computer software, videos, etc. can often be copied, shared, or rented. I outline various circumstances under which such sharing may increase or decrease producer profits. If a rental market is present, more copies will be sold at a lower price; I derive conditions that illustrate when this is more or le...
Article
Editor’s Introduction Originally published in Volume 41, Number 2, Fall 1997, pages 3-10. Hal Varian (born 1947) is widely known by professional economists for his pathbreaking work in the economics of information and networks. Many more know him as the author of two bestselling microeconomics textbooks, one written for undergraduate college studen...
Article
Recommender systems assist and augment a natural social process. In a typical recommender system people, provide recommendations as inputs, which tile system then aggregates and directs to appropriate recipients. In some cases, the primary transformation is in the aggregation; in others, the system's value lies in its ability to make good matches b...
Article
This paper describes the American Economic Association's electronic publishing plans. Special attention is given to the JSTOR project and to pricing issues. There is also some speculation about how journals and publication will evolve in this new medium. Copyright 1997 by American Economic Association.
Article
This chapter discusses the design of mathematica, the front end, programming, packages, mathsource, and application in economics. Mathematica is a computer program that can help in mathematics. It can be used to do symbolic, numeric, and graphical analysis. There are two parts to the Mathematica program: the kernel and the front end. The kernel is...
Article
In other cases, it may be necessary to vary the quality of the product in order to induce the consumers to pay the appropriate price. In economics jargon, this is called ``inducing self selection.'' Airline pricing is a good example of this form of pricing strategy: airlines have two classes of customers, business travelers who are willing to pay a...
Article
Full-text available
There are at least two competing visions for the future National Information Infrastructure. One model is based on the application-blind architecture of the Internet; the other is based on the application-aware architecture of cable television systems and online services. Among application-aware architectures, some are content-aware and some are co...
Article
Full-text available
. This is a preliminary version of a paper prepared for the Tenth Michigan Public Utility Conference at Western Michigan University March 25--27, 1993. We describe the history, technology and cost structure of the Internet. We also describe a possible smart-market mechanism for pricing traffic on the Internet. Keywords. Networks, Internet, NREN. Ad...
Article
The classic prescription for economically efficient pricing - set price at marginal cost - is not relevant for technologies that exhibit the kinds of increasing returns to scale, large fixed costs, or economies of scope found in the telecommunications and information industries. The appropriate guiding principle in these contexts should be that the...
Article
The field of economic mechanism design has been an active area of research in economics for at least 20 years. This field uses the tools of economics and game theory to design "rules of interaction" for economic transactions that will, in principle, yield some desired outcome. In this paper I provide an overview of this subject for an audience inte...
Article
Full-text available
Written for WWW '94 (Chicago). We answer some frequently asked questions about usage-sensitive pricing for Internet resources. http://deepblue.lib.umich.edu/bitstream/2027.42/50465/1/useFAQs.pdf
Article
There is a lot of anecdotal evidence that entry of new firms reduces not only prices but also costs. However, the causal mechanism for this phenomenon is far from clear. This paper investigates three models of how entry may cause cost reduction: managerial incentives, survival of the fittest, and imitation. The models have quite different implicati...
Article
Full-text available
We describe the basic economic theory of pricing a congestible resource such as an FTP server, a router, a Web site, etc. In particular, we examine the implications of “congestion pricing” as a way to encourage efficient use of network resources. We explore the implications of flat pricing and congestion pricing for capacity expansion in centrally...
Article
The purpose of this paper is to offer an exposition of the results on the existence and optimality of equilibria when production sets are not assumed to be convex, in a general equilibrium framework. We aim at providing a formal and systematic account of the main results available, rather than survey the literature. Besides presenting an abstract m...
Article
I examine how neoclassical economic theory is useful to the understanding of economic policy. I also describe what I view as the role of economic theory in economics. This talk was prepared for the conference ``Is Economics Becoming a Hard Science?'' 29--30 October, 1992, Paris, France.
Article
I describe a goodness-of-fit measure for revealed preference tests. This index can be used to measure the degree to which an economic agent violates the model of utility maximization. I calculate the violation indices for a 38 consumers and find that the observed choice behavior is very close to optimizing behavior.
Article
The author describes a class of simple two-stage mechanisms that implement efficient allocations as subgame-perfect equilibria for economic environments involving externalities. These mechanisms, known as compensation mechanisms, solve a wide variety of externalities problems, including implementation of Lindahl allocations, regulation of monopoly,...
Article
Full-text available
This is a set for frequently asked questions (and answers) about the economic, institutional, and technological structure of the Internet. The authors describe the current state of the Internet, discuss some of the pressing economic and regulatory problems, and speculate about future developments. Copyright 1994 by American Economic Association.
Article
The popular press attaches particular significance to certain numerical values of the Dow-Jones index. These magic numbers are referred to as ‘resistance levels’ or ‘psychological barriers’. In this note we examine 41 years of closing values of the Dow-Jones index to see if it is useful for predicting future stock market returns.
Article
I examine games involving private contributions to a public good and show that less of the public good will be supplied if agents move sequentially than if they move simultaneously. If the agents bid for the right to move first, the agent who values the public good least will win. If each agent chooses the rate at which he will subsidize the other...
Article
Corruption in the public sector erodes tax compliance and leads to higher tax evasion. Moreover, corrupt public officials abuse their public power to extort bribes from the private agents. In both types of interaction with the public sector, the private agents are bound to face uncertainty with respect to their disposable incomes. To analyse effect...
Article
In this paper, we consider the Coase theorem in a non cooperative game framework. In particular, we explore the robustness of the Coase theorem with respect to the ?nal distribution of alienable property rights which constitutes, as far as we know, a less cultivated ?eld of research. In our framework, in order to reach e� ciency, agents have to sti...
Article
There is a presumption in some circles that the identification of an externality or a public good presents a prima facie case for government intervention. Tyler Cowen has assembled a group of articles that challenge this view by arguing that the market, broadly construed, can handle many problems of public goods and externalities that are normally...
Article
Three pioneers of quantitative finance have now been justly honored: Harry Markowitz, Merton Miller, and William Sharpe received the Nobel Prize in Economic Science in 1990. From today's perspective it is hard to understand what finance was like before portfolio theory. Here I attempt to provide a very brief history of the quantitative revolution i...
Book
Mathematica is a computer program (software) for doing symbolic, numeric and graphical analysis of mathematical problems. In the hands of economists, financial analysts and other professionals in econometrics and the quantitative sector of economic and financial modeling, it can be an invaluable tool for modeling and simulation on a large number of...
Article
As we indicated at the beginning of this chapter, price discrimination is a ubiquitous phenomenon. Nearly all firms with market power attempt to engage in some type of price discrimination. Thus, the analysis of the forms that price discrimination can take and the effects of price discrimination on economic welfare are a very important aspect of th...
Article
This paper examines a CAPM model of world security prices in which governments recognize their ability to influence international security prices via their tax treatment of foreign and domestic investors. In this model, governments have the incentive to set tax rates such that investors tend to specialize in domestic securities, and to restrict net...
Article
I examine a simple model of rent seeking behavior in order to determine the correct way to measure welfare loss due to rent seeking. I conduct this analysis using a general equilibrium version of the standard partial equilibrium consumers' surplus cost-benefit setup. I conclude that the ordinary tools of cost-benefit analysis, such as consumers' an...

Citations

... As an instance, options can be used to hedge assets and portfolios in order to run the risk due to the changes in stock prices see e.g. [20,21]. ...
... It is greater obvious due to the fact that its illustration does now no longer depend upon differencing, lags, and shifting averages. These models could be useful in setting priorities in public health, growing, and imposing regulations to address and keep away from the negative health situations [16]. These models have already been used to predict the fitness consequences of alcohol consumption. ...
... In other words, the correlation does not mean that diaper promotions affect the sales of beer. An introduction of causal inference was given in Varian (2016), which is a case study evaluating the effect of ad expenditure. ...
... Specifically, first of all, pricing models decide which factors to charge, or how to evaluate network operating and maintaining costs. Mason and Varian [18][19] analyzed the major fee component from users' cost point of view. This includes: a fixed fee to provide basic service structure costs such as leased lines, routing equipment maintenance, and human resource utilities; marginal costs of access; network expansion costs; marginal costs of sending data packets into the congested network; and social costs that cause negative impact on other users. ...
... In the context of the current study, we incorporate the prior knowledge of the distributions of the long-term variability which includes secular trend and interannual-decadal variations (intercepts, and slopes) as t-distribution to account for the flat tails, and Gaussian distribution for annual and semi-annual components. We then used the MCMC method to generate 2,000 samples from the posterior distribution (P(θ|D) for each component (Durbin & Koopman, 2012;Harvey, 1990;Scott & Varian, 2014) (Figure 1). The observational equation for the GRACE (-FO) data can be described as: ...
... Thus, and according to Varian and Harris (2014), each bidder has to pay the cost that his presence in the auction imposes to other players; that is, according to Facebook's chief economist, John Hegeman, if someone is an advertiser with a chance to show an ad, then he/she is going to take away the opportunity from someone else. The price [of the ad] can be determined based on how much value is being displaced from those other people. ...
... Leaving aside for a moment the question of AI's predictive performance compared to traditional statistical risk analysis models, AI-based methods for the analysis of banking risks have another undeniable advantage over the usual parametric scoring approaches (Bedi et al., 2020). Namely, they allow significant productivity gains, particularly in the following areas: data pre-processing, data managing, and modelling in service of decision-making (Athey, 2019;Athey & Imbens, 2019;Charpentier et al., 2018;Mullainathan & Spiess, 2017;Varian, 2014).To understand this point fully, it is necessary to consider the heavy workload traditionally required of a statistician in charge of building a credit rating model in a bank's risk department. ...
... Following the standard method from economics, utility maximization was formally assessed according to 532 the procedure outlined by Varian (Varian, 1995). This assessment yields a single number that captures the 533 total degree of consistency of preferences. ...
... Table 5 reports the estimated sizesα for different values of nt and for mt = 1, when test 15 is performed at α = 0.01 on the same sets of t = 1, . . . , 85, 500 idealized traders already considered in Table 1, and the Monte Carlo average in [14] is computed on T * = 10, 000 independent replicates for each value of nt . The analysis for the case mt = 5 is given in SI Appendix, Table 5. ...
... Damit entfällt die Notwendigkeit, unterschiedliche Produktvarianten zu kreieren, um unterschiedliche Preise fordern zu können. In der Regel kann davon ausgegangen werden, dass bei Preisdifferenzierung dritten Grades Märkte, die bei Einheitspreisen unbedient blieben, mitversorgt werden können, zumindest aber die soziale Wohlfahrt nicht verringert wird (Varian 1996). ...