Competition

We explore the welfare implications of data-tracking technologies that enable firms to collect consumer data and use it for price discrimination. The model we develop centers around two features: competition between firms and consumers’ level of sophistication. We find that the absence of data tracking may lead to a decrease in consumer surplus, even when consumers are myopic. Importantly, this result relies critically on competition: consumer surplus may be higher when data-tracking technologies are used only when multiple firms offer substitutable products.

This paper establishes that two-sided platforms have an incentive to strategically disclose (coarse) information about demand to the supply side as this can considerably boost their profits. However, this practice may also adversely affect the welfare of consumers. By optimally designing its information disclosure policy, a platform can influence the entry and pricing decisions of its potential suppliers. On the other hand, consumers may end up being worse off as they have access to fewer trading options and/or face higher prices compared to when the platform refrains from sharing any demand information to its potential suppliers.

This paper studies multi-tier supply chain networks in the presence of disruption risk. Firms decide how to source their inputs from upstream suppliers so as to maximize their expected profits, and prices of intermediate goods are set so that markets clear. We provide an explicit characterization of equilibrium prices and profits, which allows us to derive insights into how the network structure, i.e., the number of firms in each tier, production costs, and disruption risk, affect firms’ profits. Also, we consider supply chains that are formed endogenously and argue that endogenous entry leads to chains that are inefficient in terms of the number of firms that engage in production.

This paper studies the interaction between a seller of an information product and potential buyers that compete in a downstream market. Our results illustrate that the nature and intensity of competition are key in determining the optimal strategy. We show that when customers’ actions are strategic complements, the provider finds it optimal to offer the most accurate information to all potential customers. In contrast, when customers’ actions are strategic substitutes, the provider maximizes her profits by either (i) restricting the supply of the information product, or (ii) distorting its content. We also establish that the provider’s incentive to restrict the supply information intensifies in the presence of information leakage.

This paper examines a game-theoretic model of competition between firms which can target their marketing budgets to individuals embedded in a social network. We provide a sharp characterization of the optimal targeted advertising strategies and highlight their dependence on the underlying social network structure. Furthermore, we provide conditions under which it is optimal for the firms to asymmetrically target a subset of the individuals and establish a lower bound on the ratio of their payoffs in these asymmetric equilibria. Finally, we find that at equilibrium firms invest inefficiently high in targeted advertising and the extent of the inefficiency is increasing in the centralities of the agents they target.

We study the efficiency of oligopoly equilibria in a model where firms compete over capacities and prices. We show that efficiency in the worst oligopoly equilibria can be arbitrarily low. However, if the best oligopoly equilibrium is selected (among multiple equilibria), the worst-case efficiency loss is $$2(\sqrt{N}-1)/(N-1)$$ with $N$ firms, and this bound is tight. We also suggest a simple way of implementing the best oligopoly equilibrium.