Home / Opinion / Using peer-to-peer payment apps can hurt your relationships

Mumbai: Usage of modern peer-to-peer payment apps can hurt relationships by making them appear too transactional, according to Tami Kim, assistant professor at the Darden School of Business, and co-authors. They argue that the precise nature of payments delineated in such apps can lead to a perception of pettiness and lack of generosity. For instance, a payment of $5.05 made to a friend or colleague to settle old dues, as opposed to a round figure of $5, could be negatively perceived as intentional attentiveness to trivial details, despite the actual contribution being objectively more generous than the round figure. Precise payments among friends or colleagues may signal that the sender is treating the relationship as transactional. Repeated experiments with users of such payment apps confirmed the researchers’ hypothesis. It is possible that attitudes towards precise payments might change in future, with increased usage of digital payment platforms.

Also read: Pettiness in Social Exchange

Around 40% of profits earned by multinational companies (MNCs) outside their home country are shifted to tax havens, according to a new National Bureau of Economic Research (NBER) paper by Thomas R. Tørsløv, PhD student at the University of Copenhagen, and co-authors. Such profit shifting by MNCs is generally a result of innovative accounting and rarely involves shifting actual production or employees to the low-tax jurisdictions. The authors note that Google Alphabet made $19.2 billion in revenue in Bermuda in 2016 while barely employing any worker or owning much tangible assets in the tiny island country. The corporate tax rate in Bermuda is 0%. Governments of the European Union and developing countries appear to be the prime losers of such profit shifting by MNCs.

Also read:The Missing Profits of Nations

Firms in developing countries start small, stay small and are less productive because of a lack of market integration and consumer information, according to a new NBER paper by Robert T. Jensen, professor of business economics at Wharton, and Nolan H. Miller, professor of finance at the University of Illinois. However, increase in awareness can lead to market integration and elimination of the less productive firms, as the experience of boat markets in Kerala shows. Most fishermen initially used to buy their boats from the nearest seller as they were not aware of better quality sellers elsewhere. The advent of cell phones enabled fishermen to sell their catch outside local markets. As they became aware of better quality non-local builders, they began purchasing boats from them. This eventually increased the latter’s market share and led to the demise of inferior firms.

Also read: Market Integration, Demand and the Growth of Firms: Evidence from a Natural Experiment in India

Bridging the information gap between the management of a company and its board of directors is essential for good corporate governance. Directors who are generally not involved in the daily operations of a company need to be informed to be able to protect shareholders’ interests. David F. Larcker and Brian Tayan of the Stanford Graduate School of Business, in their paper, highlight the unique corporate governance practices at Netflix that have ensured greater and regular flow of information to directors. Netflix board members periodically attend senior management meetings, and quarterly board communications are shared as 30-page online memos that include links to supporting data and analysis, and open access to internal, shared data and documents.

Also read: Netflix Approach to Governance: Genuine Transparency with the Board

Economics Digest runs weekly and features interesting reads from the world of economics.

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