nep-mic New Economics Papers
on Microeconomics
Issue of 2020‒10‒12
ten papers chosen by
Jing-Yuan Chiou
National Taipei University

  1. Cheap Talk with Multiple Experts and Uncertain Biases By Gülen Karakoç
  2. Formation of flower networks with endogenous information benet from connections By Laurent, Thibault; Panova, Elena
  3. Unhappy is the land without symbols - Group symbols in infinitely repeated public good games By Tom Potoms; Tom Truyts
  4. Self-Preferencing in Markets with Vertically-Integrated Gatekeeper Platforms By Jorge Padilla; Joe Perkins; Salvatore Piccolo
  5. Marketing with Shallow and Prudent Influencers By Ron Berman; Xudong Zheng
  6. Regulating Platform Fees under Price Parity By Renato Gomes; Andrea Mantovani
  7. Market share transparency, signaling and welfare: Cournot and Bertrand By David Spector
  8. Two-Sided Platforms and Biases in Technology Adoption By Jay Pil Choi; Doh-Shin Jeon
  9. Catastrophes, delays, and learning By Liski, Matti; Salanié, François
  10. Committee Decision-Making under the Threat of Leaks By Fehrler, Sebastian; Hahn, Volker

  1. By: Gülen Karakoç
    Abstract: A decision maker solicits information from two partially informed experts and then makes a choice under uncertainty. The experts can be either moderately or extremely biased relative to the decision maker, which is their private information. I investigate the incentives of the experts to share their private information with the decision maker and analyze the resulting effects on information transmission. I show that it may be optimal to consult a single expert rather than two experts if the decision maker is sufficiently concerned about taking advice from extremely biased experts. In contrast to what may be expected, this result suggests that getting a second opinion may not always be helpful for decision making.
    Keywords: Cheap Talk, Multiple Experts, Asymmetric Information.
    JEL: C72 D82 D83
    Date: 2020–10
  2. By: Laurent, Thibault; Panova, Elena
    Abstract: Various social networks share prominent features: clustering, rightskewed degree distribution, segregation into densely connected com- munities. We build network formation game rationalizing these features with signal-extraction benet by network participants. The players build network to exchange their private signals on the relevant state. We show that a family of Nash equilibrium networks possesses the above-mentioned prominent features of real networks. We show, furthermore, that networks with these features are e¢ cient.
    Keywords: network formation, endogenous information benet, clustering, hubs, differentiated priors, Bayesian learning in networks.
    JEL: D82 D85 C72
    Date: 2020–09–24
  3. By: Tom Potoms (Department of Economics, University of Sussex); Tom Truyts (CEREC, Saint-Louis University)
    Abstract: How are group symbols (e.g. a flag, Muslim veil, clothing style) helpful in sustaining cooperation and social norms? We study the role of symbols in an infinitely repeated public goods game with random matching, endogenous partnership termination, limited information flows and endogenous symbol choice. We characterize an efficiently segregating equilbrium, in which players only cooperate with others bearing the same symbol. Players bearing a scarcer symbol face a longer expected search time to find a cooperative partner upon partnership termination, and can therefore sustain higher levels of cooperation. We compare this equilibrium to other equilibria in terms of Pareto dominance and robustness to (some form of) bilateral renegotiation.
    Keywords: Endogenous segregation, repeated games, random matching, public goods games
    JEL: C73 D83
    Date: 2020–09
  4. By: Jorge Padilla (Compass Lexecon); Joe Perkins (Compass Lexecon); Salvatore Piccolo (Università di Bergamo, Compass Lexecon and CSEF)
    Abstract: The competitive strategies of 'gatekeeper' platforms are subject to enhanced scrutiny. For instance, Apple and Google are being accused of charging excessive access fees to app providers and privileging their own apps. Some have argued that such allegations make no economic sense when the platform's business model is to sell devices. In this paper, we build a model in which a gatekeeper device-seller facing potentially saturated demand for its device has the incentive and the ability to exclude from the market third-party suppliers of a service that consumers buy via its devices. Foreclosure is more likely if demand growth for the platform's devices is slow or negative, and can harm consumers if the device-seller's services are inferior to those offered by the third parties.
    Keywords: Durable Goods, Foreclosure, Gatekeeper Platforms, Self-Preferencing, Vertical Integration.
    JEL: D43 K21 L41 L81
    Date: 2020–10–02
  5. By: Ron Berman (The Wharton School, University of Pennsylvania, 3730 Walnut Street, Philadelphia, PA 19104, USA); Xudong Zheng (Johns Hopkins University, 3100 Wyman Park Drive, Baltimore, MD 21211, USA)
    Abstract: Marketers often utilize social media influencers to reach audiences with more authentic and credible messaging. While some influencers are prudent and carefully test products before promoting them, many others are shallow and merely post the marketer messaging as is. We analyze the impact of shallow and prudent influencers on marketer profits, customer satisfaction, and influencer payoffs. Counter to intuition, we find that shallow influencers increase market transparency, consumer satisfaction and marketer profits, while prudent influencers entice the marketers to reduce information efficiency in the market, and increase the share of unsatisfied consumers. In a market where both shallow and prudent influencers exist, prudent influencers may increase their payoff even further by extracting additional information rent. The results provide insight into the value that shallow influencers bring to the market and guidance for marketers considering the use of influencer marketing.
    Keywords: influencer marketing; product reviews; information design; Bayesian persuasion
    JEL: D82 D83 M31
    Date: 2020–09
  6. By: Renato Gomes (Toulouse School of Economics, 1, Esplanade de l’Université, 31080, Toulouse, France); Andrea Mantovani (Toulouse Business School, 1, Place Alphonse Jourdain, 31068, Toulouse, France)
    Abstract: Online marketplaces, such as Amazon, or online travel agencies, such as, greatly expand consumer information about market offers, but also raise firms’ marginal costs by charging high commissions. To prevent show-rooming, platforms adopted price parity clauses, which restrict sellers’ ability to offer lower prices in alternative sales channels. Whether to uphold, reform, or ban price parity has been at the center of the policy debate, but so far little consensus has emerged. In this paper, we investigate a natural alternative to lifting price parity; namely, we study how to optimally cap platforms’ commissions. The optimal cap reflects the Pigouvian precept according to which the platform should not charge fees greater than the externality that its presence generates on other market participants. Employing techniques from extreme-value theory, we are able to express the optimal cap in terms of observable quantities. In an application to online travel agencies, we find that current average fees are welfare increasing only if platforms at least double consumers’ consideration sets (relative to alternative ways of gathering information online). This suggests that, in some markets, regulation capping commissions should bind if optimally set.
    Keywords: platforms, price parity, regulation, commission caps, extreme value theory.
    JEL: D83 L10 L41
    Date: 2020–09
  7. By: David Spector (PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, PSE - Paris School of Economics)
    Abstract: When demand is noisy and firms' costs are uncertain, the availability of market share data increases the accuracy of each firm's information, and it creates incentives for signaling. Taking both effects into account, we find that under quantity competition with a homogeneous good, the availability of market share data has a positive impact on total surplus and an ambiguous one on consumer surplus. Under price competition with differentiated substitutes, it has a negative impact on consumer surplus and an ambiguous one on total surplus. If the cost difference is small, the effect of first-period signaling dominates the effect of second-period full information. Accordingly, in this case, the availability of market share data causes total and consumer surplus to increase in the case of quantity competition and to decrease in the case of price competition.
    Date: 2020–09
  8. By: Jay Pil Choi; Doh-Shin Jeon
    Abstract: We investigate the relationship between market structure and platforms’ incentives to adopt technological innovations in two-sided markets, where platforms may find it optimal to charge zero price on the consumer side and to extract surplus on the advertising side. We consider innovations that affect the two sides in an opposite way. We compare private incentives with social incentives and find that the bias in technology adoption depends crucially on whether the non-negative pricing constraint binds or not. Our results provide a rationale for a tougher competition policy to curb concentration if competition authorities put more weight on consumer surplus in welfare calculations.
    Keywords: technology adoption, two-sided platforms, non-negative pricing constraint, pass-through
    JEL: D40 L10 L50
    Date: 2020
  9. By: Liski, Matti; Salanié, François
    Abstract: How to plan for catastrophes that may be under way? In a simple but general model of experimentation, a decision-maker chooses a flow variable contributing to a stock that may trigger a catastrophe at each untried level. Once triggered, the catastrophe itself occurs only after a stochastic delay. Consequently, the rhythm of past experimentations determines the arrival of information. This has strong implications for policies in situations where the planner inherits a history of experiments, like climate change and pandemic crisis. The structure encompasses canonical approaches in the literature.
    Keywords: catastrophes, experimentation, delays
    JEL: C61 D81 Q54
    Date: 2020–09–24
  10. By: Fehrler, Sebastian (University of Bremen); Hahn, Volker (University of Konstanz)
    Abstract: Leaks are pervasive in politics. Hence, many committees that nominally operate under secrecy de facto operate under the threat that information might be passed on to outsiders. We study theoretically and experimentally how this possibility affects the behavior of committee members and the decision-making accuracy. Our theoretical analysis generates two major predictions. First, a committee operating under the threat of leaks is equivalent to a formally transparent committee in terms of the probabilities of project implementation as well as welfare (despite differences in individual voting behavior). Second, the threat of leaks causes a committee to recommend rejection of a project whenever precise information has been shared among committee members. As a consequence, a status-quo bias arises. Our laboratory results confirm these predictions despite subjects communicating less strategically than predicted.
    Keywords: committee decision-making, strategic communication, voting, leaks, transparency, monetary policy committees, information aggregation
    JEL: C92 D71 D82 J45
    Date: 2020–09

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