Meet the New Faculty: Arthur Campbell, Assistant Professor of Economics

"I’m an industrial organization economist," explains assistant professor of economics, Arthur Campbell, who joined Yale SOM from the PhD program in Economics at MIT.

A recent thread of Campbell’s research focuses on the strategic pricing and advertising strategies firms use when they want to influence the diffusion of information about a product through word of mouth communication.

"One of my findings is that a monopolist will charge a higher price in markets where people with many friends are going to derive more utility, or enjoyment, from the product. On the other hand, it will lower the price when the opposite is true. There’s a connection between the firm’s pricing behavior, the connectivity of people within society, and how they value the product."

According to Campbell’s research, a monopolist will change its prices as it is starting up the firm and information about the product is initially diffusing through the population. "The optimal pricing strategy, at that time, is for the firm to fluctuate the price. So there are periods where their price is quite high and others where it is relatively lower."

Campbell also examined the type of consumer who is the optimal target of advertising. "If you’re going to target your advertising to people depending on how many friends that they have, the natural intuition is to target the person with the most friends. This is not always the case. When there is a significant amount of word of mouth taking place a person with many friends may also be far more likely to find out and pass on information about the product absent any advertising. Thus targeting these highly connected individuals may be less effective than targeting less well connected individuals."

In another recent paper, Campbell studied trust in social networks and how social networks are constructed. "The basic idea is that meeting someone with whom you share a friend in common, allows you to trust them and develop that relationship more easily than would otherwise be the case. You’re more readily going to trust them in different social settings. If that sort of force is at play when people are choosing who to become friends with, then that has implications for the characteristics of social networks at the population level, in terms of the distribution of friendships across the population, and the frequency of clusters of people all of whom know one another."

Campbell is also interested in government policies that support intermittent power generation — electricity generated from sources like solar power and wind that rely on an intermittent energy source (i.e. sun shining, wind blowing) — to deal with the prospect of climate change. In a current working paper, Campbell is looking at the subsidies and policies that support intermittent technologies and the implications for investment in dispatchable power sources such as; coal, gas, and nuclear power.

"The implications for these dispatchable technologies depends on whether they are complementary or substitutable with intermittent generation. Peaking and intermediate technologies like gas and oil tend to be complementary when the intermittent power source (sun or wind) is not too positively correlated with electricity demand. Investment and output from those sources increase as you increase the amount of support for intermittent technologies. Whereas baseload, inflexible sources like coal and nuclear power tend to be substitutes, so you get less output and less investment in those types of technologies as you increase the support for intermittent technologies."

Recently, Campbell has been doing some preliminary work about communication between members of committees which are in charge of making a joint decision. "It’s about the implications of the voluntary disclosure of information by any one member to everyone else: how that influences the decisions that get made, the amount of information that is acquired, and the quality of the decision. Some of the things we’re interested in are how you should structure the decision-making process amongst the people on a team or committee. Should it be a unanimous decision? Should some people have veto rights at differ points in time? Should you have a fixed deadline? How should you structure that decision-making process?"

Read about other new faculty:

• Olav Sorenson, Professor of Organizational Behavior
• Constanca Esteves-Sorenson, Assistant Professor of Management
• Kalin Kolev, Assistant Professor of Accounting