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on Microeconomics |
| By: | Shiva Shekhar; Radostina Shopova |
| Abstract: | We study the welfare effects of a merger between ad-funded platforms facing elastic consumer demand. We show that advertising fees as well as quality investment levels by the platforms fall post-merger. Interestingly, despite the lower advertising fees, advertisers may be worse off when their value of interacting with consumers is high enough. The intuition for this result is that the decrease in quality investments post-merger reduces overall consumer participation. Thus, studying innovation incentives is important in these ad-funded markets as the well-known surplus see-saw result may not hold making both sides of the markets worse while the merged entity emerges as the sole winner. |
| Keywords: | Ad-funded platforms, two-sided markets, horizontal mergers, innovation, quality. |
| JEL: | D42 D43 L12 L13 L22 L86 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11768 |
| By: | Gretschko, Vitali; Simon, Jasmina |
| Abstract: | We examine a setting of independent private value auctions where bidders can covertly acquire gradual information about their valuations. We demonstrate that a dynamic pivot mechanism implements the rst-best information acquisition and allocation rule. We apply our results to a commonly used model of auctions with information acquisition. The bidders are symmetric and information acquisition costs are moderate. Our analysis shows that the Dutch auction achieves near-eciency. That is, the welfare loss is bounded by the information acquisition cost of a single bidder. In contrast, the English auction may result in greater welfare losses. |
| Keywords: | Information acquisition, dynamic auctions, dynamic pivot mechanism |
| JEL: | D44 D82 D83 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:zewdip:312569 |
| By: | Chongwoo Choe; Jiajia Cong; Noriaki Matsushima; Shiva Shekhar |
| Abstract: | Privacy regulations like the General Data Protection Regulation aim to empower consumers with greater transparency and control over their personal data. In response, firms may exercise price discrimination in the form of versioning. This paper studies how these two aspects of privacy regulation—consumer empowerment and versioning—affect market outcomes and welfare. We develop a model where firms earn revenue from sales of service and data monetization, and consumers differ in their preferences for the service and privacy costs incurred when sharing data with the firm. In a monopoly, the firm is better off after regulation because its ability to price discriminate outweighs the effects of increased consumer empowerment. In a duopoly, however, greater consumer choice after regulation intensifies competition, as firms have more ways to deviate from mutually beneficial outcomes. This results in the firm with more data monetization earning smaller profit, while the firm with less data monetization earns larger profit. However, the industry profit as a whole decreases and consumer surplus increases after the regulation. Therefore, the regulation’s impact is nuanced and depends on the market structure. We also examine the regulatory impact on firms’ optimal data-driven revenue models and market entry. |
| Keywords: | privacy regulation, privacy management, versioning, monopoly, competition. |
| JEL: | D18 D61 K24 L12 L51 L86 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11769 |
| By: | Evsyukova, Yulia; Innocenti, Federico; Lomys, Niccolò |
| Abstract: | We study how framing interplays with information design. Whereas Sender conceives all contingencies separately, Receiver cannot initially distinguish among some of them, i.e., has a coarse frame. To influence Receiver's behavior, Sender first decides whether to refine Receiver's frame and then designs an information structure for the chosen frame. Sender faces a trade-off between keeping Receiver under the coarse frame - thus concealing part of the information structure - and re-framing - hence inducing Receiver to revise preferences and prior beliefs after telling apart initially indistinguishable contingencies. Sender benefits from re-framing if this enhances persuasion possibilities or makes persuasion unnecessary. Compared to classical information design, Receiver's frame becomes more critical than preferences and prior beliefs in shaping the optimal information structure. Although a coarse worldview may open the doors to Receiver's exploitation, re-framing can harm Receiver in practice, thus questioning the scope of disclosure policies. |
| Keywords: | Framing, Information Design, Disclosure Policies |
| JEL: | D1 D8 D9 G2 G4 M3 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:zewdip:312572 |
| By: | Stéphane Caprice; Shiva Shekhar |
| Abstract: | In this paper, we study supplier encroachment in competition with multi-product retailers and its effects on retail profits under endogenous consumer shopping behavior. We find that supplier encroachment (weakly) increases both supplier and retailer profits, as the retailer benefits from better consumer segmentation and price discrimination despite (weakly) higher wholesale prices. The effect of encroachment on consumers is more nuanced: when the competitive product’s value is high, consumers benefit. Instead, when the value of the competitive product is low, consumers buying exclusively from the multi-product retailer are worse off while consumers who mix and match across stores are better off. Overall, supplier encroachment can improve market outcomes if the value of the supplier’s product offering is sufficiently high. |
| Keywords: | supplier encroachment, vertical contracting, downstream competition, consumer shopping costs. |
| JEL: | L13 L22 L42 L81 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11767 |
| By: | Catherine Bobtcheff (PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, CNRS - Centre National de la Recherche Scientifique, CEPR - Center for Economic Policy Research, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Raphaël Levy (HEC Paris - Ecole des Hautes Etudes Commerciales); Thomas Mariotti (TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, CNRS - Centre National de la Recherche Scientifique) |
| Abstract: | Two players receiving independent signals on a risky project with common value compete to be the rst to innovate. We characterize the equilibrium of this preemption game as the publicity of signals varies. Private signals create a winner's curse:investing rst implies that the rival has abstained from investing, possibly because he has privately received adverse information about the project. Since players want to gather more evidence in support of the project as a compensation, they invest later when signals are more likely to be private. Because of preemption, the NPV of investment is zero at equilibrium regardless of the publicity of signals. However, for a conservative planner who cares about avoiding unprotable investments, this implies that investment arises too early at equilibrium, and such a planner then prefers signals to be private. This provides a rationale against the mandatory disclosure of negative results in science, notably when competition is severe. Our results suggest that policy interventions should primarily tackle winner-takes-all competition, and regulate transparency only once competition is suciently mild. |
| Date: | 2025–02 |
| URL: | https://d.repec.org/n?u=RePEc:hal:psewpa:hal-04965752 |
| By: | Dirk Bergemann (Yale University); Kevin Breuer; Peter Cramton (Max Planck Institute for Research on Collective Goods and University of Maryland); Jack Hirsch (Harvard University); Yero S. Ndiaye (University of Cologne and Max Planck Institute for Research on Collective Goods); Axel Ockenfels (University of Cologne and Max Planck Institute for Research on Collective Goods) |
| Abstract: | A soft-floor auction asks bidders to accept an opening price to participate in an ascending auction. If no bidder accepts, lower bids are considered using first-price rules. Soft floors are common despite being irrelevant with standard assumptions. When bidders regret losing, soft-floor auctions are more efficient and profitable than standard optimal auctions. Revenue increases as bidders are inclined to accept the opening price to compete in a regret-free ascending auction. Efficiency is improved since having a soft floor allows for a lower hard reserve price, reducing the frequency of no sale. Theory and experiment confirm these motivations from practice. |
| Date: | 2025–04–14 |
| URL: | https://d.repec.org/n?u=RePEc:cwl:cwldpp:2438 |
| By: | Caspari, Gian |
| Abstract: | We study the problem of distributing subsidies in a market that includes both marginal individuals in need of assistance and infra-marginal individuals who would purchase the subsidized product without additional incentives. We propose the use of a wait time auction, where individuals bid the amount of time they are willing to wait in exchange for a specified subsidy amount. This design enables more direct targeting of marginal individuals, thereby enhancing the overall effectiveness of the subsidy program. Furthermore, screening is costless in equilibrium as no wait times are imposed, and practical robustness against deviations from equilibrium behavior can be ensured by implementing a maximum allowable bid. |
| Keywords: | Subsidies, Market Design, Auctions |
| JEL: | D47 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:zewdip:313007 |