Prof Matthew Shapiro
Feature on Matthew Shapiro, Assistant Professor of Economics
School of Economics, Singapore Management University
Appointed from July 2018 – August 2023
Will super-apps survive? (And what if they don’t?)
Our way of life is changing, even improving, thanks to digital services and a desire to protect the environment. But how deep are these changes and are they sustainable? Assistant Professor of Economics Matthew Shapiro analyses disrupted industries, government policy and consumer behaviour to understand where these changes might take us.
Among the tools adopted by governments to steer citizens towards environmentally friendly decisions, are financial incentives that encourage people to choose electric cars. The problem is that industries do not always stick to the script. Understanding the real effect of subsidies on the car industry is not easy. But the discipline of industrial organisation is evolving to help answer these questions in the modern context, says Assistant Professor Matthew Shapiro, who works at the frontiers of the discipline.
Traditionally concerned with how firms, consumers and regulations interact to make up the market’s nature, industrial organisation has embraced new dilemmas thrown up by modern society, says Shapiro. He originally hails from the United States, where he began his research into a transport industry upheaved by technology and environmental concerns.
His paper, “The Heterogeneous Effect of Subsidy and Infrastructure Investment in Electric Vehicles Adoption” reported on his research into the effectiveness of electric vehicle subsidies across the United States. The research found that the programmes needed a serious tune-up.
“To make a real difference, electric vehicle subsidies should target those who drive often, use a petrol car, and who would not otherwise buy an electric car,” he explains. In the United States, a person who fits into this category is probably going to be someone on a low income, he adds.
“In our study, however, the people receiving electric vehicle incentives typically already had a clean car by combustion engine standards. They also tended to be wealthy enough to afford an car without the subsidy. So there is a high probability they would have purchased an electric vehicle even without the subsidy,” he adds.
“We hope this research helps policymakers redesign these incentives to efficiently target the ‘ideal recipients’ who would not otherwise purchase a more environmentally friendly car.”
The evolution of industrial organisation
Shapiro’s current research provides another example of the evolution of industrial organisation research. Just two decades ago industrial organization research would have little to say on the intersection of digitization and urban economics.
But observing a literal intersection in many of today’s busy cities would make it easy to see industrial organisation at work. A person ignoring taxis at a nearby taxi-stand while watching surge pricing on their smartphone as they choose which transport app to use. Another using the same app to send a meal to their parents. An electric car pulling into a nearby charging facility. Such scenes are both new and ubiquitous in 2022, but are the people within them better off in the long term?
To understand the big picture, industrial organisation research looks at the relationships between the people and businesses involved: the consumer, the taxi drivers, the app provider, and the rules that moderate those relationships. Are they producing the best results for consumers, workers and the environment? Enter Shapiro’s latest research. “My new projects focus on the anatomy of digital platforms, the market power of multi-service businesses, as well as transportation.”
Super Apps in the Big Apple
“Uber’s launch revolutionised the transport sector and brought significant potential for consumer welfare gains,” observes Shapiro of one of his research targets. In his paper “Density of Demand and the Benefit of Uber”, he quantifies the benefits that consumers gained when ride hailing services were introduced to the largest taxi market in the United States—New York.
“Using publicly available transportation data, such as data scraped from Uber and traffic cameras, I found that how much consumers benefited from Uber’s technology is actually dependent on the density of the market.” The people who most benefited from the service, he found, lived in New York City’s less populated outer suburbs. He can even put numbers to it.
“In New York’s densest areas, Uber saved consumers only $0.10 per ride on average. In the outer areas, consumers saved over a dollar,” he says.
But there is a larger point to these numbers, because with change comes disruption to the industry—for taxi drivers, digital economy workers, and consumers, not to mention the wider social and environmental effects. Professor Shapiro’s research also looks at these wider implications.
The future of Superapps
Shapiro now focuses on understanding the concept of super apps inside out. They may be super, but is there a chance that these apps are no more immune to economic change than the traditional market structures that they disrupted?
“The key reason why these disruptive applications have been sustainable in the past is because they've been receiving large amounts of subsidies from free-flowing financial capital.”
But as the markets become more volatile and uncertain, investors may have less money to invest and so will be more discerning about where to put it. “To survive, these businesses will have to charge higher prices. Obviously, that won’t sit well with customers. But if they collapse, the consumers lose a service that they have gotten used to– imagine losing our food delivery options now!”
While highly speculative, these risks could potentially affect everyone—business and consumers alike, he notes. “Given the opportunity, it would be interesting to bring to light some insights on the future of super apps from a financial capital perspective.”
Shapiro exudes excitement about the possibilities for his research, especially given the variety of data becoming available. “You could say it sparks joy! Just a decade ago, we wouldn't have been able to access so much information about how consumers behave.
“The same data that helps businesses to innovate and compete, helps economists like me understand how their industry works and how their consumers behave.”