We study personalized pricing in a general oligopoly model. When the market structure is fixed, the impact of personalized pricing relative to uniform pricing hinges on the degree of market coverage. If market conditions are such that coverage is high, personalized pricing harms firms and benefits consumers, whereas the opposite is true if coverage is low. However, when the market structure is endogenous, personalized pricing benefits consumers because it induces socially optimal firm entry. Finally, when only some firms have data to personalize prices, consumers can be worse off compared to when either all or no firms personalize prices.
We study personalized pricing (or ﬁrst-degree price discrimination) in a general oligopoly model. In the short-run, when the market structure is ﬁxed, the impact of personalized pricing hinges on the degree of market coverage (i.e., how many consumers buy). If coverage is high (e.g., because the production cost is low, or the number of ﬁrms is large), personalized pricing intensiﬁes competition and so harms ﬁrms but beneﬁts consumers, whereas the opposite is true if coverage is low. However in the long-run, when the market structure is endogenous, personalized pricing always beneﬁts consumers because it induces the socially optimal level of ﬁrm entry. We also study the asymmetric case where some ﬁrms can use consumer data to price discriminate while others cannot, and show it can be worse for consumers than when either all or no ﬁrms can personalize prices.
This paper studies competition between ﬁrms when consumers observe a private signal of their preferences over products. Within the class of signal structures which induce pure-strategy pricing equilibria, we derive signal structures which are optimal for ﬁrms and those which are optimal for consumers. The ﬁrm-optimal policy ampliﬁes underlying product diﬀerentiation, thereby relaxing competition, while ensuring consumers purchase their preferred product, thereby maximizing total welfare. The consumer-optimal policy dampens diﬀerentiation, which intensiﬁes competition, but induces some consumers to buy their less-preferred product. Our analysis sheds light on the limits to competition when the information possessed by consumers can be designed flexibly.
This paper proposes a framework for studying competitive mixed bundling with an arbitrary number of ﬁrms. We examine both a ﬁrm’s incentive to introduce mixed bundling and equilibrium tariﬀs when all ﬁrms adopt the mixed-bundling strategy. In the duopoly case, relative to separate sales, mixed bundling has ambiguous impacts on prices, proﬁt and consumer surplus; with many ﬁrms, however, mixed bundling typically lowers all prices, harms ﬁrms and beneﬁts consumers.
We propose a model of how multiple societies respond to a common crisis. A government faces a "damned-either-way" policymaking dilemma: aggressive intervention contains the crisis, but the resulting good outcome makes people skeptical about the costly response; light intervention worsens the crisis and causes the government to be faulted for not doing enough. When multiple societies encounter the crisis sequentially, due to this policymaking dilemma, late societies may underperform despite having more information, while early societies can benefit from a dynamic counterfactual effect.
We propose a model of how multiple societies respond to a common crisis. A government faces a “damned-either-way” policy-making dilemma: aggressive intervention contains the crisis, but the resulting good outcome makes people skeptical of the costly response; light intervention worsens the crisis and causes the government to be faulted for not doing enough. This dilemma can be mitigated for the society that encounters the crisis ﬁrst if another society faces the same crisis afterward. Our model predicts that the later society does not necessarily perform better despite having more information, while the earlier society might beneﬁt from a dynamic counterfactual eﬀect.
Open banking facilitates data sharing consented by customers who generate the data, with a regulatory goal of promoting competition between traditional banks and challenger ﬁntech entrants. We study lending market competition when sharing banks’ customer data enables better borrower screening or targeting by ﬁntech lenders. Open banking could make the entire ﬁnancial industry better oﬀ yet leave all borrowers worse oﬀ, even if borrowers could choose whether to share their data. We highlight the importance of equilibrium credit quality inference from borrowers’ endogenous sign-up decisions. When data sharing triggers privacy concerns by facilitating exploitative targeted loans, the equilibrium sign-up population can grow with the degree of privacy concerns.
This paper studies how an improved information environment aﬀects consumer search and ﬁrm competition. We ﬁnd conditions for information improvement to have unambiguous impacts on search duration, price and consumer welfare. In many cases consumers beneﬁt from information improvement regardless of how it aﬀects the market price, but there are also cases where information improvement raises price signiﬁcantly so that consumers suﬀer from it. Our model provides a uniﬁed way to consider the market implications of various types of information improvement such as search advertising, personalized recommendations, ﬁltering, and VR shopping technology.
This paper develops a new framework for studying multiproduct intermediaries when consumers demand multiple products and face search frictions. We show that a multiproduct intermediary is proﬁtable even when it does not improve consumer search eﬀiciency. In its optimal product selection, it stocks high-value products exclusively to attract consumers to visit, then proﬁts by selling non-exclusive products which are relatively cheap to buy from upstream suppliers. However, relative to the social optimum, the intermediary tends to be too big and stock too many products exclusively. As applications we use the framework to study the optimal design of a shopping mall, and the impact of direct-to-consumer sales by upstream suppliers on the retail market.
Open banking facilitates data sharing consented to by customers who generate the data, with the regulatory goal of promoting competition between traditional banks and challenger ﬁntech entrants. We study lending market competition when sharing banks’ customer transaction data enables better borrower screening. Open banking can make the entire ﬁnancial industry better oﬀ yet leave all borrowers worse oﬀ, even if borrowers have the control of whether to share their banking data. We highlight the importance of the equilibrium credit quality inference from borrowers’ endogenous sign-up decisions. We also study extensions with ﬁntech aﬀinities and data sharing on borrower preferences.
How will an improved information environment aﬀects competition and market performance when consumers face search frictions? This paper provides a uniﬁed way to model information improvement that makes the search pool more “selective” (e.g., due to personalized recommendations), or more “informative” (e.g., due to the availability of more detailed product information). Information improvement tends to induce consumers to search less, intensify price competition and beneﬁt consumers, if the search friction is small, or if information improvement truncates the match utility distribution from below. More generally, however, it is also possible for information improvement to raise the market price and harm consumers.