Publication Date: January 2022
Revision Date: July 2022
This paper examines the welfare implications of third-party informational intermediation. A seller sets the price of a product that is sold through an informational intermediary. The intermediary can disclose information about the product to consumers and earns a ﬁxed percentage of sales revenue in each period. The intermediary’s market base grows at a rate that increases with past consumer surplus. We characterize the stationary equilibria and the set of subgame perfect equilibrium payoﬀs. When market feedback (i.e., the extent to which past consumer surplus aﬀects future market bases) increases, welfare may decrease in the Pareto sense.
Supplement pages: 17
Keywords: : Informational intermediary, market base, market feedback, consumer surplus, Pareto-inferior outcomes, stationary-Markov equilibrium, subgame perfect equilibriumCDFP 2321