Publication Date: January 2022
This paper examines the welfare eﬀects of informational intermediation. A (short-lived) seller sets the price of a product that is sold through a (long-lived) informational intermediary. The intermediary can disclose information about the product to consumers, earns a ﬁxed percentage of the sales revenue in each period, and has concerns about its prominence—the market size it faces in the future, which in turn is increasing in past consumer surplus. We characterize the Markov perfect equilibria and the set of subgame perfect equilibrium payoﬀs of this game and show that when the market feedback (i.e., how much past consumer surplus aﬀects future market sizes) increases, welfare may decrease in the Pareto sense.
Supplement pages: 45
Keywords: Informational intermediary, market size, market feedback, consumer surplus, Pareto-inferior outcomes, Markov perfect equilibriumCDFP 2321R