Yahoo: Now Hiring Economists

The Wall Street Journal notes that Yahoo has recently hired a team of economists and other researchers to stimulate research into ways of turning data mining into more revenue. For economists, this is an opportunity to test a variety of theories that they've been working on in their ivory towers.

Until now, university economists typically have had to rely on limited sets of historical data to test their theories. At Yahoo, they can tweak market conditions and watch what happens to the company's roughly 500 million monthly visitors.

Economic theory can be applied in a variety of settings. For instance, consider Yahoo's online dating site, Yahoo Personals. In 2001, Yahoo started charging users for the service and actually saw membership increase as a result. [Ordinarily economists would expect higher prices to decrease consumption. Why, in this case, do you think a fee led to an increase in use?]

One of the academics hired by Yahoo is Cal-Berkeley microeconomist Michael Scharwz, whose recent research includes a paper titled "Synchronization Under Uncertainty." Dr. Scharwz's research has clear implications for online dating:

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 battle for internet supremacy may have more to do with economists than computer programmers.