The Wall Street Journal on Friday had a great article about how Yahoo! has been using economists to apply microeconomic theory to improve the services it offers to its users.
“These days, Mr. Schwarz is thinking about how to use economics to save attractive women from unwanted solicitations on an Internet dating site. One idea employs the concept of "scarcity," rationing the number of free messages each lothario can send. Another uses full disclosure, by displaying how many people a suitor has already approached.”
The article goes on to describe (in the last paragraphs) another research project the economists is working on where he has to predict how parties behave when they enter market where one side is more eager to reveal its preferences than the other. The research has implications on various offerings such as Yahoo! HotJobs and Yahoo! Personals.
“Mr. Schwarz also co-wrote a paper examining search-ad auctions. It concluded that Yahoo's system doesn't encourage people to bid what they think the ad is worth to their business, something that caught the attention of Yahoo executives. They expect Mr. Schwarz to work on future versions of their ad systems, a task he has already embraced.”
A couple of my projects at my summer internship deals with exactly this issue, how much should our clients (companies that sell products on their web pages) bid for various search terms on search engines. These are the keywords that results in the sponsored links that populate the far right margin of a Google of Yahoo! search results page. Yahoo! is currently fine tuning its search-ad system with a project code named Panama. Yahoo! stock plummeted when it was announced over the summer that Panama’s release would be delayed.
This article got my attention because it actually mentions a couple of topics that I know quite a bit about. If only I can convince Yahoo! to hire me based on my grasp of microeconomic theory and my work experience, I’d can then pretty much blow off the rest of my second year, much like what many of my classmates are either doing or planning on doing.
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