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Informational Intermediation, Market Feedback, And Welfare Losses, Kai Hao Yang, Wenji Xu
Informational Intermediation, Market Feedback, And Welfare Losses, Kai Hao Yang, Wenji Xu
Cowles Foundation Discussion Papers
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.
Market-Minded Informational Intermediary And Unintended Welfare Loss, Wenji Xu, Kai Hao Yang
Market-Minded Informational Intermediary And Unintended Welfare Loss, Wenji Xu, Kai Hao Yang
Cowles Foundation Discussion Papers
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 …
Informational Intermediation, Market Feedback, And Welfare Losses, Wenji Xu, Kai Hao Yang
Informational Intermediation, Market Feedback, And Welfare Losses, Wenji Xu, Kai Hao Yang
Cowles Foundation Discussion Papers
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 fied 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.