This paper investigates a contest in information revelation between firms that seek to persuade c... more This paper investigates a contest in information revelation between firms that seek to persuade consumers by disclosing own and rival’s information.
Humanities and Social Sciences Communications, 2022
Vaccine hesitancy is a significant barrier to reaching herd immunity and exiting the Covid-19 pan... more Vaccine hesitancy is a significant barrier to reaching herd immunity and exiting the Covid-19 pandemic. This study examines the potential effectiveness of monetary incentives in conjunction with informational treatments about vaccine efficacy, lack of side effects, and zero costs. We elicit monetary valuations (both positive and negative) for the coronavirus vaccine by conducting an online randomized experiment on a representative sample of 2461 individuals across the US. The study elicits vaccination uptake, then participants’ valuations (willingness to pay (WTP) or the willingness to accept (WTA)) for the vaccine based upon the stated choice of participants to accept or reject the vaccine. We find that a $1000 incentive increases vaccination uptake up to 86.9%. We identify two distinct segments among the vaccine hesitants—“Reluctants” and “Unwillings”. Reluctants can be persuaded to vaccinate for some level of monetary incentive, whereas Unwillings indicate that no amount of monet...
This paper investigates the effects of a limited consumer memory on the price competition between... more This paper investigates the effects of a limited consumer memory on the price competition between firms. It studies a specific aspect of memory, namely, the categorization of available price information that the consumers may need to recall for decision making. The paper analyzes competition between firms in a market with uninformed consumers who do not compare prices, informed consumers who compare prices but with limited memory as well as informed consumers who have perfect memory. Consumers, aware of their memory limitations, choose how to encode the prices into categories while firms take the limitations of consumers into account in choosing their pricing strategies. Two distinct types of categorization processes are investigated: a symmetric one in which consumers compare only the labels of price categories from the competing firms, and an asymmetric one in which consumers compare the recalled price of one firm with the actual price of the other. We find that the equilibrium pa...
We study the dynamic information design problem of a firm seeking to influence consumer checking ... more We study the dynamic information design problem of a firm seeking to influence consumer checking behavior under stochastic information arrivals. The firm's payoffs increase in the frequency of consumer checking. The consumer is uncertain about the arrival of information as well as its valuation. In addition to direct consumption utility, the consumer also has preferences over realized uncertainty: i.e., they experience disutility from the uncertainty of the information stock that has arrived, but which remains unchecked. This disutility increases in the variance of the information stock and can be interpreted as the anxiety costs resulting from unchecked information. The consumer's optimal checking behavior is a trade-off between costly checking and costly waiting. The firm can design a push notification mechanism to inform the consumer of the information arrival. We show that push notifications can lead to more frequent checking compared to no-push, even though it reduces the variance of the information. While push notifications resolve the information arrival uncertainty, they also create an endogenous impulse to check the information immediately. We consider generalized push strategies that allow the firm to add phantom notifications that do not contain valuable information. This noisy push strategy can lead to more frequent consumer checking, even though the consumer has rational expectations of the firm's strategy. We extend the model to account for consumer self-control and show that sophisticated consumers have the equilibrium incentive to block notifications. The main results also hold in a model with endogenous prices.
We thank Jinfeng Lu, Amit Pazgal and Shubhranshu Singh, Hema Yoganarasimhan, and seminar/conferen... more We thank Jinfeng Lu, Amit Pazgal and Shubhranshu Singh, Hema Yoganarasimhan, and seminar/conference participants at the University of Wisconsin and 2015 SAET Meeting (Cambridge) for comments for comments.
This paper examines the incentives of firms to invest in socially responsible product innovations... more This paper examines the incentives of firms to invest in socially responsible product innovations. Our analysis connects the existence of socially responsible innovations to the presence of intrinsic and extrinsic social responsibility preferences. In addition to deriving economic value from the product, consumers have heterogeneous intrinsic needs to consume products that are socially responsible. They also have extrinsic social comparison preferences that are based on their meetings with others in social interactions. The frequency of these meetings are endogenous to the consumption choices of consumers. A consumer enjoys a social comparison benefit if her consumption decision is more socially responsible than the consumer that she meets in a social interaction and a social comparison cost if it is less socially responsible. The analysis reveals a nonmonotonic effect of social comparison effects on innovation incentives. When the economic value of a product is relatively small, th...
An important phenomenon on the Internet has been the emergence of "infomediaries" or Internet ref... more An important phenomenon on the Internet has been the emergence of "infomediaries" or Internet referral services such as Autobytel.com and Carpoint.com in the automobile industry, Avviva.com in real estate and Healthcareadvocates.com in medicine. These services offer consumers the opportunity to get price quotes from enrolled brick-and-mortar retailers as also information on invoice prices, reviews and specifications before they commence the shopping process. Internet referral services also direct consumer traffic to particular retailers who join them.
Please scroll down for article-it is on subsequent pages With 12,500 members from nearly 90 count... more Please scroll down for article-it is on subsequent pages With 12,500 members from nearly 90 countries, INFORMS is the largest international association of operations research (O.R.) and analytics professionals and students. INFORMS provides unique networking and learning opportunities for individual professionals, and organizations of all types and sizes, to better understand and use O.R. and analytics tools and methods to transform strategic visions and achieve better outcomes. For more information on INFORMS, its publications, membership, or meetings visit http://www.informs.org
This paper investigates the effects of a limited consumer memory on the price competition between... more This paper investigates the effects of a limited consumer memory on the price competition between firms. It studies a specific aspect of memory—namely, the categorization of available price information that the consumers may need to recall for decision making. This paper analyzes competition between firms in a market with uninformed consumers who do not compare prices, informed consumers who compare prices but with limited memory, and informed consumers who have perfect memory. Consumers, aware of their memory limitations, choose how to encode the prices into categories, whereas firms take the limitations of consumers into account in choosing their pricing strategies. Two distinct types of categorization processes are investigated: (1) a symmetric one in which consumers compare only the labels of price categories from the competing firms and (2) an asymmetric one in which consumers compare the recalled price of one firm with the actual price of the other. We find that the equilibriu...
Manufacturers can acquire consumer information in a sequential manner and influence downstream re... more Manufacturers can acquire consumer information in a sequential manner and influence downstream retail behavior through sharing the acquired information. This paper examines the interaction between a manufacturer's optimal information acquisition and sharing strategies in a vertical relationship, capturing the impacts of both the flexibility to sequentially control information collection and the flexibility in ex post voluntary sharing. We show that when information acquisition is sequential, the manufacturer may not acquire perfect information even if it is costless to do so. This self-restriction in information acquisition follows from the manufacturer's motivation to strategically influence retail behavior. When information acquisition is inflexible and constrained to be either zero or perfect information, the manufacturer acquires less (more) information under mandatory (voluntary) sharing. Moreover, voluntary sharing unambiguously leads to more information being generate...
We study information transmission to a decision maker from an advisor who values a reputation for... more We study information transmission to a decision maker from an advisor who values a reputation for incorruptibility in the presence of a third party who offers unobservable payments/bribes. While it is common to ascribe negative effects to such bribes, we show that given reputational concerns, bribes can play a positive role by restoring truthful communication that would otherwise not occur. Thus, while bribes can influence self-interested bad advisors to lie about the unfavorable state, they can also be used to motivate good advisors who care more about the decision maker's utility to truthfully report the favorable state. (JEL D82, D83)
This paper analyzes how manufacturers should coordinate distribution channels when retailers comp... more This paper analyzes how manufacturers should coordinate distribution channels when retailers compete in price as well as important nonprice factors such as the provision of product information, free repair, faster check-out, or after-sales service. Differentiation among retailers in price and nonprice service factors is a central feature of markets ranging from automobiles and appliances to gasoline and is especially observed in the coexistence of high-service retailers and lower price discount retailers. Therefore, how a manufacturer should manage retail differentiation is an important channel management question. Yet, the approach in the existing literature has been to examine channel coordination under the standard “symmetric contracting” assumption that offering a uniform contract to all the retailers in a market will be sufficient for coordination. I bring this assumption into question and ask when is it optimal for the manufacturer to use the channel contract to deliberately i...
In many procurement situations with simultaneously offered projects, firms face participation res... more In many procurement situations with simultaneously offered projects, firms face participation restrictions and can bid only on a subset of the projects. This phenomenon is prevalent in a variety of observed situations such as bidding for private label supplies, business to business procurement or government projects. We show that for the case of n bidding firms where each is restricted to bid on a subset of the offered projects, there exists a symmetric equilibrium in which each bidder has a positive expected equilibrium profit. Prices are bounded away from marginal costs even if all the bidders are homogenous. this results from the fact that there is a positive probability that each firm will find itself in the position of being the sole bidder on a project. While the equilibrium probability of bidding on a project increases with its value, it is interesting to note that the bidding probability on the projects approaches an equiprobable one as the number of bidding firms increases. We find that the equilibrium profits decrease as firms are able to bid on more of the available projects. In contrast, bidder commitment to bid on specific projects increases the equilibrium profits of all firms. We also examine the effect of heterogeneity on equilibrium profits. Greater heterogeneity in the project valuations leads to lower firm profits. On the other hand, heterogeneity among bidders in terms of the number of projects that they are constrained to bid on leads to greater profits for the firms that can bid on more projects (regardless of the mix of the firms in the industry.) Finally, we analyze the effect of uncertainty in project valuations and show greater uncertainty in project valuations (as represented by a mean preserving spread) decreases the equilibrium profits. We conclude with an empirical analysis of bidding behavior that tests the predictions of the theory. We find that the probability of bidding on a particular project is increasing in its value, decreasing in the other projects values and decreasing in the number of bidding subjects. Furthermore, the value of the bids on a project increase with its valuation and decrease with the total number of bidders.
The authors study the phenomenon of strategic group polarization, in which members take more extr... more The authors study the phenomenon of strategic group polarization, in which members take more extreme actions than their preferences. The analysis is relevant for a broad range of formal and informal group settings, including social media, online platforms, sales teams, corporate and academic committees, and political action committees. In the model, agents with private preferences choose a public action (voice opinions), and the mean of their actions represents the group’s realized outcome. The agents face a trade-off between influencing the group decision and truth-telling. In a simultaneous-move game, agents strategically shade their actions toward the extreme. The strategic group influence motive can create substantial polarization in actions and group decisions even when the preferences are relatively moderate. Compared with a simultaneous game, a randomized-sequential-actions game lowers polarization when agents’ preferences are relatively similar. Sequential actions can even l...
We study the phenomenon of strategic polarization in group interactions. Agents with private pref... more We study the phenomenon of strategic polarization in group interactions. Agents with private preferences choose a public action (e.g., voice opinions), and the mean of their actions represents the group's realized outcome. They face a trade-off between influencing the group outcome and truth-telling. In equilibrium, agents strategically shade their actions towards the extreme leading to polarization. The group outcome is also more extreme than the mean preference. Compared to a simultaneous actions game, randomized (or exogenous) sequential actions lowers polarization when agents' preferences are relatively similar. Endogenizing the order of moves always increases polarization, though it is also welfare enhancing.
We investigate the strategic role of a recommender who cares about accuracy and whose recommendat... more We investigate the strategic role of a recommender who cares about accuracy and whose recommendations influence product quality. In the presence of such feedback effects, recommendations have a self-fulling property: the recommendation agent can select any firm which will end up being the firm with the best quality. Recommendations can lead to significant inefficiencies which include: i) a lack of incentive to acquire valuable information, ii) a status quo bias, and iii) the avoidance of risky innovations. Direct monetary payments from firms may work in mitigating these inefficiencies, while competition between recommenders and monetary transfers from consumers are ineffective.
In this paper, we investigate a gasoline station’s incentive to price-discriminate by selling ful... more In this paper, we investigate a gasoline station’s incentive to price-discriminate by selling full-service gasoline as well as self-service gasoline. Unlike previous research, we explicitly model a firm’s incentive to price discriminate by choosing to be either single-product or multi-product as a function of market and station characteristics. Using cross-sectional survey data on prices, station and market characteristics for 198 gasoline stations in the Greater Saint Louis area, we estimate a switching regression model of station decisions. Specifically, we employ a binary probit framework that models a station’s decision to pricediscriminate through the choice of the station-type as a function of market and station characteristics. We then estimate conditional linear regressions with self-selectivity corrections for the station’s choice of prices. Our empirical analysis shows that significant spurious inferences about station pricing behavior would result if the endogeneity in th...
W e examine multilateral bargaining in vertical supply relationships that involve an upstream man... more W e examine multilateral bargaining in vertical supply relationships that involve an upstream manufacturer who sells through two competing retailers. In these relationships the negotiations are interdependent, and bargaining externality may arise across the retailers. In addition, the timing by which the manufacturer negotiates with the retailers becomes important. In simultaneous bargaining the retailers negotiate without knowing if an agreement has been reached in the other retail channel, whereas in sequential bargaining the retailer in the second negotiation is able to observe whether an agreement was reached in the first negotiation. We show that simultaneous bargaining is optimal for the manufacturer when the retail prices (and profitability) are similar, and sequential bargaining is preferred when the dispersion in the retail prices is sufficiently large. As a result of ex post renegotiations, the manufacturer may strategically stock out the less profitable retailer who charged a relatively low retail price and exclusively supply only the retailer who charged a relatively high retail price and maintained high channel profitability. Moreover, ex post multilateral bargaining can buffer downstream competition and thus lead to positive retail profits even in markets that are close to perfect competition.
A n interesting phenomenon has been the emergence of ‘‘infomediaries’’ in the form of Internet re... more A n interesting phenomenon has been the emergence of ‘‘infomediaries’’ in the form of Internet referral services in many markets. These services offer consumers the opportunity to get price quotes from enrolled brick-and-mortar retailers and direct consumer traffic to particular retailers who join them. This paper analyzes the effect of referral infomediaries on retail markets and examines the contractual arrangements that they should use in selling their services. We identify the conditions necessary for the infomediary to exist and explain how they would evolve with the growth of the Internet. The role of an infomediary as a price discrimination mechanism leads to lower online prices. Perhaps the most interesting result is that the referral infomediary can unravel (i.e., no retailer can get any net profit gain from joining) when its reach becomes too large. The analysis also shows why referral infomediaries would prefer to offer geographical exclusivity to joining retailers. (Refe...
This paper investigates a contest in information revelation between firms that seek to persuade c... more This paper investigates a contest in information revelation between firms that seek to persuade consumers by disclosing own and rival’s information.
Humanities and Social Sciences Communications, 2022
Vaccine hesitancy is a significant barrier to reaching herd immunity and exiting the Covid-19 pan... more Vaccine hesitancy is a significant barrier to reaching herd immunity and exiting the Covid-19 pandemic. This study examines the potential effectiveness of monetary incentives in conjunction with informational treatments about vaccine efficacy, lack of side effects, and zero costs. We elicit monetary valuations (both positive and negative) for the coronavirus vaccine by conducting an online randomized experiment on a representative sample of 2461 individuals across the US. The study elicits vaccination uptake, then participants’ valuations (willingness to pay (WTP) or the willingness to accept (WTA)) for the vaccine based upon the stated choice of participants to accept or reject the vaccine. We find that a $1000 incentive increases vaccination uptake up to 86.9%. We identify two distinct segments among the vaccine hesitants—“Reluctants” and “Unwillings”. Reluctants can be persuaded to vaccinate for some level of monetary incentive, whereas Unwillings indicate that no amount of monet...
This paper investigates the effects of a limited consumer memory on the price competition between... more This paper investigates the effects of a limited consumer memory on the price competition between firms. It studies a specific aspect of memory, namely, the categorization of available price information that the consumers may need to recall for decision making. The paper analyzes competition between firms in a market with uninformed consumers who do not compare prices, informed consumers who compare prices but with limited memory as well as informed consumers who have perfect memory. Consumers, aware of their memory limitations, choose how to encode the prices into categories while firms take the limitations of consumers into account in choosing their pricing strategies. Two distinct types of categorization processes are investigated: a symmetric one in which consumers compare only the labels of price categories from the competing firms, and an asymmetric one in which consumers compare the recalled price of one firm with the actual price of the other. We find that the equilibrium pa...
We study the dynamic information design problem of a firm seeking to influence consumer checking ... more We study the dynamic information design problem of a firm seeking to influence consumer checking behavior under stochastic information arrivals. The firm's payoffs increase in the frequency of consumer checking. The consumer is uncertain about the arrival of information as well as its valuation. In addition to direct consumption utility, the consumer also has preferences over realized uncertainty: i.e., they experience disutility from the uncertainty of the information stock that has arrived, but which remains unchecked. This disutility increases in the variance of the information stock and can be interpreted as the anxiety costs resulting from unchecked information. The consumer's optimal checking behavior is a trade-off between costly checking and costly waiting. The firm can design a push notification mechanism to inform the consumer of the information arrival. We show that push notifications can lead to more frequent checking compared to no-push, even though it reduces the variance of the information. While push notifications resolve the information arrival uncertainty, they also create an endogenous impulse to check the information immediately. We consider generalized push strategies that allow the firm to add phantom notifications that do not contain valuable information. This noisy push strategy can lead to more frequent consumer checking, even though the consumer has rational expectations of the firm's strategy. We extend the model to account for consumer self-control and show that sophisticated consumers have the equilibrium incentive to block notifications. The main results also hold in a model with endogenous prices.
We thank Jinfeng Lu, Amit Pazgal and Shubhranshu Singh, Hema Yoganarasimhan, and seminar/conferen... more We thank Jinfeng Lu, Amit Pazgal and Shubhranshu Singh, Hema Yoganarasimhan, and seminar/conference participants at the University of Wisconsin and 2015 SAET Meeting (Cambridge) for comments for comments.
This paper examines the incentives of firms to invest in socially responsible product innovations... more This paper examines the incentives of firms to invest in socially responsible product innovations. Our analysis connects the existence of socially responsible innovations to the presence of intrinsic and extrinsic social responsibility preferences. In addition to deriving economic value from the product, consumers have heterogeneous intrinsic needs to consume products that are socially responsible. They also have extrinsic social comparison preferences that are based on their meetings with others in social interactions. The frequency of these meetings are endogenous to the consumption choices of consumers. A consumer enjoys a social comparison benefit if her consumption decision is more socially responsible than the consumer that she meets in a social interaction and a social comparison cost if it is less socially responsible. The analysis reveals a nonmonotonic effect of social comparison effects on innovation incentives. When the economic value of a product is relatively small, th...
An important phenomenon on the Internet has been the emergence of "infomediaries" or Internet ref... more An important phenomenon on the Internet has been the emergence of "infomediaries" or Internet referral services such as Autobytel.com and Carpoint.com in the automobile industry, Avviva.com in real estate and Healthcareadvocates.com in medicine. These services offer consumers the opportunity to get price quotes from enrolled brick-and-mortar retailers as also information on invoice prices, reviews and specifications before they commence the shopping process. Internet referral services also direct consumer traffic to particular retailers who join them.
Please scroll down for article-it is on subsequent pages With 12,500 members from nearly 90 count... more Please scroll down for article-it is on subsequent pages With 12,500 members from nearly 90 countries, INFORMS is the largest international association of operations research (O.R.) and analytics professionals and students. INFORMS provides unique networking and learning opportunities for individual professionals, and organizations of all types and sizes, to better understand and use O.R. and analytics tools and methods to transform strategic visions and achieve better outcomes. For more information on INFORMS, its publications, membership, or meetings visit http://www.informs.org
This paper investigates the effects of a limited consumer memory on the price competition between... more This paper investigates the effects of a limited consumer memory on the price competition between firms. It studies a specific aspect of memory—namely, the categorization of available price information that the consumers may need to recall for decision making. This paper analyzes competition between firms in a market with uninformed consumers who do not compare prices, informed consumers who compare prices but with limited memory, and informed consumers who have perfect memory. Consumers, aware of their memory limitations, choose how to encode the prices into categories, whereas firms take the limitations of consumers into account in choosing their pricing strategies. Two distinct types of categorization processes are investigated: (1) a symmetric one in which consumers compare only the labels of price categories from the competing firms and (2) an asymmetric one in which consumers compare the recalled price of one firm with the actual price of the other. We find that the equilibriu...
Manufacturers can acquire consumer information in a sequential manner and influence downstream re... more Manufacturers can acquire consumer information in a sequential manner and influence downstream retail behavior through sharing the acquired information. This paper examines the interaction between a manufacturer's optimal information acquisition and sharing strategies in a vertical relationship, capturing the impacts of both the flexibility to sequentially control information collection and the flexibility in ex post voluntary sharing. We show that when information acquisition is sequential, the manufacturer may not acquire perfect information even if it is costless to do so. This self-restriction in information acquisition follows from the manufacturer's motivation to strategically influence retail behavior. When information acquisition is inflexible and constrained to be either zero or perfect information, the manufacturer acquires less (more) information under mandatory (voluntary) sharing. Moreover, voluntary sharing unambiguously leads to more information being generate...
We study information transmission to a decision maker from an advisor who values a reputation for... more We study information transmission to a decision maker from an advisor who values a reputation for incorruptibility in the presence of a third party who offers unobservable payments/bribes. While it is common to ascribe negative effects to such bribes, we show that given reputational concerns, bribes can play a positive role by restoring truthful communication that would otherwise not occur. Thus, while bribes can influence self-interested bad advisors to lie about the unfavorable state, they can also be used to motivate good advisors who care more about the decision maker's utility to truthfully report the favorable state. (JEL D82, D83)
This paper analyzes how manufacturers should coordinate distribution channels when retailers comp... more This paper analyzes how manufacturers should coordinate distribution channels when retailers compete in price as well as important nonprice factors such as the provision of product information, free repair, faster check-out, or after-sales service. Differentiation among retailers in price and nonprice service factors is a central feature of markets ranging from automobiles and appliances to gasoline and is especially observed in the coexistence of high-service retailers and lower price discount retailers. Therefore, how a manufacturer should manage retail differentiation is an important channel management question. Yet, the approach in the existing literature has been to examine channel coordination under the standard “symmetric contracting” assumption that offering a uniform contract to all the retailers in a market will be sufficient for coordination. I bring this assumption into question and ask when is it optimal for the manufacturer to use the channel contract to deliberately i...
In many procurement situations with simultaneously offered projects, firms face participation res... more In many procurement situations with simultaneously offered projects, firms face participation restrictions and can bid only on a subset of the projects. This phenomenon is prevalent in a variety of observed situations such as bidding for private label supplies, business to business procurement or government projects. We show that for the case of n bidding firms where each is restricted to bid on a subset of the offered projects, there exists a symmetric equilibrium in which each bidder has a positive expected equilibrium profit. Prices are bounded away from marginal costs even if all the bidders are homogenous. this results from the fact that there is a positive probability that each firm will find itself in the position of being the sole bidder on a project. While the equilibrium probability of bidding on a project increases with its value, it is interesting to note that the bidding probability on the projects approaches an equiprobable one as the number of bidding firms increases. We find that the equilibrium profits decrease as firms are able to bid on more of the available projects. In contrast, bidder commitment to bid on specific projects increases the equilibrium profits of all firms. We also examine the effect of heterogeneity on equilibrium profits. Greater heterogeneity in the project valuations leads to lower firm profits. On the other hand, heterogeneity among bidders in terms of the number of projects that they are constrained to bid on leads to greater profits for the firms that can bid on more projects (regardless of the mix of the firms in the industry.) Finally, we analyze the effect of uncertainty in project valuations and show greater uncertainty in project valuations (as represented by a mean preserving spread) decreases the equilibrium profits. We conclude with an empirical analysis of bidding behavior that tests the predictions of the theory. We find that the probability of bidding on a particular project is increasing in its value, decreasing in the other projects values and decreasing in the number of bidding subjects. Furthermore, the value of the bids on a project increase with its valuation and decrease with the total number of bidders.
The authors study the phenomenon of strategic group polarization, in which members take more extr... more The authors study the phenomenon of strategic group polarization, in which members take more extreme actions than their preferences. The analysis is relevant for a broad range of formal and informal group settings, including social media, online platforms, sales teams, corporate and academic committees, and political action committees. In the model, agents with private preferences choose a public action (voice opinions), and the mean of their actions represents the group’s realized outcome. The agents face a trade-off between influencing the group decision and truth-telling. In a simultaneous-move game, agents strategically shade their actions toward the extreme. The strategic group influence motive can create substantial polarization in actions and group decisions even when the preferences are relatively moderate. Compared with a simultaneous game, a randomized-sequential-actions game lowers polarization when agents’ preferences are relatively similar. Sequential actions can even l...
We study the phenomenon of strategic polarization in group interactions. Agents with private pref... more We study the phenomenon of strategic polarization in group interactions. Agents with private preferences choose a public action (e.g., voice opinions), and the mean of their actions represents the group's realized outcome. They face a trade-off between influencing the group outcome and truth-telling. In equilibrium, agents strategically shade their actions towards the extreme leading to polarization. The group outcome is also more extreme than the mean preference. Compared to a simultaneous actions game, randomized (or exogenous) sequential actions lowers polarization when agents' preferences are relatively similar. Endogenizing the order of moves always increases polarization, though it is also welfare enhancing.
We investigate the strategic role of a recommender who cares about accuracy and whose recommendat... more We investigate the strategic role of a recommender who cares about accuracy and whose recommendations influence product quality. In the presence of such feedback effects, recommendations have a self-fulling property: the recommendation agent can select any firm which will end up being the firm with the best quality. Recommendations can lead to significant inefficiencies which include: i) a lack of incentive to acquire valuable information, ii) a status quo bias, and iii) the avoidance of risky innovations. Direct monetary payments from firms may work in mitigating these inefficiencies, while competition between recommenders and monetary transfers from consumers are ineffective.
In this paper, we investigate a gasoline station’s incentive to price-discriminate by selling ful... more In this paper, we investigate a gasoline station’s incentive to price-discriminate by selling full-service gasoline as well as self-service gasoline. Unlike previous research, we explicitly model a firm’s incentive to price discriminate by choosing to be either single-product or multi-product as a function of market and station characteristics. Using cross-sectional survey data on prices, station and market characteristics for 198 gasoline stations in the Greater Saint Louis area, we estimate a switching regression model of station decisions. Specifically, we employ a binary probit framework that models a station’s decision to pricediscriminate through the choice of the station-type as a function of market and station characteristics. We then estimate conditional linear regressions with self-selectivity corrections for the station’s choice of prices. Our empirical analysis shows that significant spurious inferences about station pricing behavior would result if the endogeneity in th...
W e examine multilateral bargaining in vertical supply relationships that involve an upstream man... more W e examine multilateral bargaining in vertical supply relationships that involve an upstream manufacturer who sells through two competing retailers. In these relationships the negotiations are interdependent, and bargaining externality may arise across the retailers. In addition, the timing by which the manufacturer negotiates with the retailers becomes important. In simultaneous bargaining the retailers negotiate without knowing if an agreement has been reached in the other retail channel, whereas in sequential bargaining the retailer in the second negotiation is able to observe whether an agreement was reached in the first negotiation. We show that simultaneous bargaining is optimal for the manufacturer when the retail prices (and profitability) are similar, and sequential bargaining is preferred when the dispersion in the retail prices is sufficiently large. As a result of ex post renegotiations, the manufacturer may strategically stock out the less profitable retailer who charged a relatively low retail price and exclusively supply only the retailer who charged a relatively high retail price and maintained high channel profitability. Moreover, ex post multilateral bargaining can buffer downstream competition and thus lead to positive retail profits even in markets that are close to perfect competition.
A n interesting phenomenon has been the emergence of ‘‘infomediaries’’ in the form of Internet re... more A n interesting phenomenon has been the emergence of ‘‘infomediaries’’ in the form of Internet referral services in many markets. These services offer consumers the opportunity to get price quotes from enrolled brick-and-mortar retailers and direct consumer traffic to particular retailers who join them. This paper analyzes the effect of referral infomediaries on retail markets and examines the contractual arrangements that they should use in selling their services. We identify the conditions necessary for the infomediary to exist and explain how they would evolve with the growth of the Internet. The role of an infomediary as a price discrimination mechanism leads to lower online prices. Perhaps the most interesting result is that the referral infomediary can unravel (i.e., no retailer can get any net profit gain from joining) when its reach becomes too large. The analysis also shows why referral infomediaries would prefer to offer geographical exclusivity to joining retailers. (Refe...
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