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on Microeconomics |
| By: | Jonas von Wangenheim |
| Abstract: | Customer data enables online marketplaces to identify buyers’ preferences and provide individualized product information. Buyers learn their product value only after contracting when the product is delivered. I characterize the impact of such ex-ante information on buyer surplus and seller surplus, when the seller sets prices and refund conditions in response to the ex-ante information. I show that efficient trade and an arbitrary split of the surplus can be achieved. For the buyer-optimal signal low-valuation buyers remain partially uninformed. Such a signal induces sellers to sell at low prices without refund options, resulting in commonly observed practices of opaque sales. |
| Keywords: | information disclosure, sequential screening, information design, strategic learning, Bayesian persuasion, mechanism design, platform economics, consumer protection |
| JEL: | D82 D86 D18 |
| Date: | 2022–05 |
| URL: | http://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2022_352&r= |
| By: | Fuyuki Saruta (Faculty of Commerce, Doshisha University and Junior Research Fellow, Research Institute for Economics & Business Administration (RIEB), Kobe University, JAPAN) |
| Abstract: | We investigate a two-sided market model in which two platforms compete for sellers and buyers who can participate in multiple platforms (multihoming), and one of the two platforms can make exclusive contracts with sellers. The platform faces a trade-off when it enters into exclusivity agreements with sellers, which gives it an advantage when competing for buyers but reduces its revenue from the seller side. In addition, we expect that the existence of multihoming buyers weakens the platform’s incentive to have an exclusive contract with sellers. Even when buyers can multihome, does a platform have an incentive to make exclusive contracts with sellers? If so, how does exclusive dealing affect social welfare? We obtain the following results. First, in equilibrium, the platform makes exclusive contracts with all sellers or not at all. It offers exclusive contracts to all sellers if the revenue from the buyer side is expected to be somewhat higher than the revenue from the seller side; if sellers' network externality on buyers is sufficiently large (small), it chooses fully exclusive dealing (nonexclusive dealing). Second, exclusive dealing is preferable (detrimental) to social welfare when the network externality is sufficiently large (small). Exclusive dealing encourages the multihoming of buyers, which allows agents to have more interactions on one platform and prompts more buyers to obtain stand-alone benefits from multiple platforms. |
| Keywords: | Matching; Exclusive contracts; Two-sided markets; Multihoming; Platform competition |
| JEL: | D43 D62 L13 L14 |
| Date: | 2022–06 |
| URL: | http://d.repec.org/n?u=RePEc:kob:dpaper:dp2022-26&r= |
| By: | Deniz Kattwinkel; Axel Niemeyer; Justus Preusser; Alexander Winter |
| Abstract: | A principal must decide between two options. Which one she prefers depends on the private information of two agents. One agent always prefers the first option; the other always prefers the second. Transfers are infeasible. One application of this setting is the efficient division of a fixed budget between two competing departments. We first characterize all implementable mechanisms under arbitrary correlation. Second, we study when there exists a mechanism that yields the principal a higher payoff than she could receive by choosing the ex-ante optimal decision without consulting the agents. In the budget example, such a profitable mechanism exists if and only if the information of one department is also relevant for the expected returns of the other department. We generalize this insight to derive necessary and sufficient conditions for the existence of a profitable mechanism in the n-agent allocation problem with independent types. |
| Date: | 2022–05 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2205.10910&r= |
| By: | Didier Laussel (AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique - AMU - Aix Marseille Université); Ngo Van Long (McGill University = Université McGill [Montréal, Canada]); Joana Resende (Universidade do Porto = University of Porto) |
| Abstract: | Using a Markov-perfect equilibrium model, we show that the use of customer data to practice intertemporal price discrimination will improve monopoly profit if and only if information precision is higher than a certain threshold level. This U-shaped relationship lends support to a popular view that knowledge is good only if it is sufficiently refined. When information accuracy can only be achieved through costly investment, we find that investing in profiling is profitable only if this allows to reach a high enough level of information precision. Consumers expected surplus being a hump-shaped function of information accuracy, we show that consumers have an incentive to lobby for privacy protection legislation which raises the cost of monopoly's investment in information accuracy. However, this cost should not dissuade firms to collect some information on customers' tastes, as the absence of consumers' profiling is actually detrimental to consumers. |
| Keywords: | big data,consumers' collective action on privacy protection legislation,consumers profiling,dynamic monopoly,endogenous investment in profiling capability |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-03665780&r= |
| By: | Huihui Ding (THEMA - Théorie économique, modélisation et applications - CNRS - Centre National de la Recherche Scientifique - CY - CY Cergy Paris Université); Marcus Pivato (THEMA - Théorie économique, modélisation et applications - CNRS - Centre National de la Recherche Scientifique - CY - CY Cergy Paris Université) |
| Abstract: | We study the effects of deliberation on epistemic social choice, in two settings. In the first setting, the group faces a binary epistemic decision analogous to the Condorcet Jury Theorem. In the second setting, group members have probabilistic beliefs arising from their private information, and the group wants to aggregate these beliefs in a way that makes optimal use of this information. During deliberation, each agent discloses private information to persuade the other agents of her current views. But her views may also evolve over time, as she learns from other agents. This process will improve the performance of the group, but only under certain conditions; these involve the nature of the social decision rule, the group size, and also the presence of "neutral agents" whom the other agents try to persuade. |
| Keywords: | Multiplicative pooling,Probabilistic belief aggregation,Condorcet Jury Theorem,Epistemic social choice,Deliberation |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-03637874&r= |
| By: | Schmitt, Sefanie Y.; Bruckner, Dominik |
| Abstract: | We analyze firms' incentives to disclose deficiencies of their goods when consumers lack information. We distinguish two types of information: First, only some consumers are aware of the existence of deficiencies, which reduce the quality of the goods. Second, only some consumers have the expertise to infer the true levels of deficiencies once they are aware of the existence of deficiencies. We show that the interplay of awareness and expertise in a market affects firms' incentives to disclose. In particular, we demonstrate that more awareness and/or expertise in a market does not universally lead to more disclosure but depends on the level of competition in the market. Conversely, increasing competition does not always increase firms' incentives to disclose. |
| Keywords: | Awareness,Competition,Disclosure,Expertise,Product Quality |
| JEL: | D83 L15 |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:bamber:178&r= |
| By: | Thayer Morrill; Peter Troyan |
| Abstract: | We consider the problem of aggregating individual preferences over alternatives into a social ranking. A key feature of the problems that we consider, and the one that allows us to obtain positive results, in contrast to negative results such as Arrow's Impossibility Theorem, is that the alternatives to be ranked are outcomes of a competitive process. Examples include rankings of colleges or academic journals. The foundation of our ranking method is that alternatives that an agent desires, those that they have been rejected by, should be ranked higher than the one they receive. We provide a mechanism to produce a social ranking given any preference profile and outcome assignment, and characterize this ranking as the unique one that satisfies certain desirable axioms. |
| Date: | 2022–05 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2205.11684&r= |
| By: | Ian Ball; James Bono; Justing Grana; Nicole Immorlica; Brendan Lucier; Alex Slivkins |
| Abstract: | We develop and analyze a model of content filtering where the content consumers incur deliberation costs when deciding the veracity of the content. Examples of such a scenario include censoring misinformation, information security (spam and phish filtering, for example) and recommender systems. With an exogenous attack probability, we show that increasing the quality of the filter is typically weakly Pareto improving though may sometimes have no impact on equilibrium outcomes and payoffs. Furthermore, when the filter does not internalize the consumer's deliberation costs, the filter's lack of commitment power may render a low-fidelity filter useless and lead to inefficient outcomes. Consequently, improvements to a moderately effective filter will have no impact on equilibrium payoffs until the filter is sufficiently accurate. With an endogenous attacker, improvements to filter quality may lead to strictly lower equilibrium payoffs since the content consumer increases its trust in the filter and thus incentivizes the attacker to increase its attack propensity. |
| Date: | 2022–05 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2205.14060&r= |
| By: | Christian Ewerhart |
| Abstract: | Payoff security combined with reciprocal upper semicontinuity is sufficient for better-reply security, and consequently for the existence of a pure strategy Nash equilibrium in compact, quasiconcave games by Reny's (1999) theorem. Analogously, diagonal payoff security combined with upper semicontinuity of the diagonal payoff function has been widely understood to be sufficient for diagonal better-reply security, and consequently for the existence of a symmetric pure strategy Nash equilibrium in compact, diagonally quasiconcave, quasi-symmetric games. We show by example that this is incorrect. Specifically, diagonal better-reply security may fail to hold, and a symmetric pure strategy equilibrium may fail to exist, if some player's payoff function lacks lower semicontinuity, with respect to the opponents' symmetric strategy profile, at all strategy profiles reached from a non-equilibrium profile on the diagonal by a unilateral better response of that player. These difficulties disappear, both in the game and in its mixed extension, if the lower bound on a player's payoff in the definition of diagonal payoff security is raised to reflect the higher levels that arbitrary better responses may achieve. We also discuss the relationship between our strengthened condition and diagonal payoff security. |
| Keywords: | Discontinuous games, equilibrium existence, quasi-symmetric games, diagonal payoff security |
| JEL: | C62 C72 |
| Date: | 2022–06 |
| URL: | http://d.repec.org/n?u=RePEc:zur:econwp:414&r= |
| By: | Ronen Gradwohl; Moshe Tennenholtz |
| Abstract: | We study the effects of data sharing between firms on prices, profits, and consumer welfare. Although indiscriminate sharing of consumer data decreases firm profits due to the subsequent increase in competition, selective sharing can be beneficial. We show that there are data-sharing mechanisms that are strictly Pareto-improving, simultaneously increasing firm profits and consumer welfare. Within the class of Pareto-improving mechanisms, we identify one that maximizes firm profits and one that maximizes consumer welfare. |
| Date: | 2022–05 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2205.11295&r= |
| By: | Honda, Jun; Inderst, Roman; Ottaviani, Marco |
| Abstract: | We introduce a model of advice in which firms steer advisors through nonlinear incentive schemes. In addition to developing an isomorphism to pricing with mixed bundling, we obtain three main insights. First, firms optimally use nonlinear bonuses to economize on the rent paid to advisors. Second, equilibrium bonus payments induce advisors to make biased recommendations that are artificially contingent on each other, resulting in an inefficient allocation. Third, if advisor liability is stepped up, firms respond by increasing the size of the bonus, leaving advisor bias unchanged. These results support direct regulatory interference on the way advisors are compensated. |
| Keywords: | bonus payments,nonlinear incentive schemes,advisor incentivization |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:esprep:259401&r= |
| By: | Wei, A.; Hendrikse, G.W.J. |
| Abstract: | We extend the results of Feng and Hendrikse (2012) by investigating the relationship between cognition and incentives in cooperatives versus investor-owned firms (IOFs) in a multi-tasking principal-agent model. The principal chooses the incentive intensity as well as the precision of monitoring, while the agent chooses the activities. We establish that a cooperative is uniquely efficient when either the synergy between the upstream and downstream activities or the knowledgeability of the members regarding the cooperative enterprise is sufficiently high. |
| Keywords: | Cognition, incentives, cooperative, governance, multi-tasking |
| Date: | 2022–05–30 |
| URL: | http://d.repec.org/n?u=RePEc:ems:eureri:137124&r= |
| By: | Matteo Escud\'e; Paula Onuchic; Ludvig Sinander; Quitz\'e Valenzuela-Stookey |
| Abstract: | We revisit Chambers and Echenique's (2021) characterization of Phelps-Aigner-Cain-type statistical discrimination. We firstly propose an alternative interpretation of their "identification" property. On our interpretation, their main result is a dismal one: discrimination is inevitable. Secondly, we show how Blackwell's Theorem characterizes statistical discrimination in terms of statistical informativeness. Its corollaries include half of Chambers and Echenique's main result and some finer-grained properties of statistical discrimination. Finally, we illustrate how the close link between discrimination and informativeness may be used to characterize other forms of discrimination. |
| Date: | 2022–05 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2205.07128&r= |
| By: | Vladimir Shikhman |
| Abstract: | For generalized Nash equilibrium problems (GNEP) with shared constraints we focus on the notion of normalized Nash equilibrium in the nonconvex setting. The property of nondegeneracy for normalized Nash equilibria is introduced. Nondegeneracy refers to GNEP-tailored versions of linear independence constraint qualification, strict complementarity and second-order regularity. Surprisingly enough, nondegeneracy of normalized Nash equilibrium does not prevent from degeneracies at the individual players' level. We show that generically all normalized Nash equilibria are nondegenerate. Moreover, nondegeneracy turns out to be a sufficient condition for the local uniqueness of normalized Nash equilibria. We emphasize that even in the convex setting the proposed notion of nondegeneracy differs from the sufficient condition for (global) uniqueness of normalized Nash equilibria, which is known from the literature. |
| Date: | 2022–05 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2205.13878&r= |
| By: | Yumou Fei |
| Abstract: | We study the two-agent single-item bilateral trade. Ideally, the trade should happen whenever the buyer's value for the item exceeds the seller's cost. However, the classical result of Myerson and Satterthwaite showed that no mechanism can achieve this without violating one of the Bayesian incentive compatibility, individual rationality and weakly balanced budget conditions. This motivates the study of approximating the trade-whenever-socially-beneficial mechanism, in terms of the expected gains-from-trade. Recently, Deng, Mao, Sivan, and Wang showed that the random-offerer mechanism achieves at least a 1/8.23 approximation. We improve this lower bound to 1/3.15 in this paper. We also determine the exact worst-case approximation ratio of the seller-pricing mechanism assuming the distribution of the buyer's value satisfies the monotone hazard rate property. |
| Date: | 2022–04 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2205.00140&r= |
| By: | David K Levine; Salvatore Modica; Aldo Rustichini |
| Date: | 2022–06–11 |
| URL: | http://d.repec.org/n?u=RePEc:cla:levarc:11694000000000112&r= |