Information Transparency Hypothesis

2011 ◽  
pp. 15-42 ◽  
Author(s):  
Kevin Zhu
Keyword(s):  
Social Welfare ◽  
Consumer Surplus ◽  
Electronic Markets ◽  
Theoretic Model ◽  
Electronic Market ◽  
Information Transparency ◽  
The Social ◽  
B2b Exchanges ◽  
Game Theoretic ◽  
Business To Business

This chapter explores the private and social desirability of information transparency of a business-to-business (B2B) electronic market that provides an online platform for information transmission. The abundance of transaction data available on the Internet tends to make information more transparent in B2B electronic markets. In such a transparent environment, it becomes easier for firms to obtain information that may allow them to infer their rivals’ costs than in a traditional, opaque market. How then does this benefit firms participating in the B2B exchanges? To what extent does information transparency affect consumers and the social welfare in a broader sense? Focusing on the informational effects, this study explores firms’ incentives to join a B2B exchange by developing a game-theoretic model under asymmetric information. We then examine its effect on expected profits, consumer surplus, and social welfare. Our results challenge the “information transparency hypothesis” (that is, open sharing of information in electronic markets is beneficial to all participating firms). In contrast to the popular belief, we show that information transparency could be a double-edged sword. Although its overall effect on social welfare is positive, its private desirability is deeply divided between producers and consumers, and even among producers themselves.

A Model of Queue Scalping

2021 ◽  
Author(s):  
Luyi Yang ◽  
Zhongbin Wang ◽  
Shiliang Cui
Keyword(s):  
Social Welfare ◽  
Service Provider ◽  
Operations Management ◽  
Consumer Surplus ◽  
System Throughput ◽  
Theoretic Model ◽  
Material Interest ◽  
Long Run ◽  
Short Run ◽  
Primary Service

Recent years have witnessed the rise of queue scalping in congestion-prone service systems. A queue scalper has no material interest in the primary service but proactively enters the queue in hopes of selling his spot later. This paper develops a queueing-game-theoretic model of queue scalping and generates the following insights. First, we find that queues with either a very small or very large demand volume may be immune to scalping, whereas queues with a nonextreme demand volume may attract the most scalpers. Second, in the short run, when capacity is fixed, the presence of queue scalping often increases social welfare and can increase or reduce system throughput, but it tends to reduce consumer surplus. Third, in the long run, the presence of queue scalping motivates a welfare-maximizing service provider to adjust capacity using a “pull-to-center” rule, increasing (respectively, reducing) capacity if the original capacity level is low (respectively, high). When the service provider responds by expanding capacity, the presence of queue scalping can increase social welfare, system throughput, and even consumer surplus in the long run, reversing its short-run detrimental effect on customers. Despite these potential benefits, such capacity expansion does little to mitigate scalping and may only generate more scalpers in the queue. Finally, we compare and contrast queue scalping with other common mechanisms in practice—namely, (centralized) pay-for-priority, line sitting, and callbacks. This paper was accepted by Victor Martínez de Albéniz, operations management.

STORE PROMOTION, MANUFACTURER COMPETITION AND WELFARE

2021 ◽  
pp. 1-18
Author(s):  
HAO WANG ◽  
XUNDONG YIN ◽  
ALICE Y. OUYANG
Keyword(s):  
Social Welfare ◽  
Consumer Preferences ◽  
Consumer Surplus ◽  
Weighted Average ◽  
Brand Name ◽  
Price Distortion ◽  
Online Platforms ◽  
Brand Competition ◽  
The Social ◽  
Partial Exclusion

This study evaluates the partial exclusion effects of store promotion. We find that a manufacturer with a better brand name has a higher willingness-to-pay for promotion services offered by retail stores or online platforms. The promotion results in higher sales-weighted average prices (wholesale and retail) and a larger inter-brand price gap. The stores or platforms extract more profits from manufacturers and consumers through the promotion services. The effects on consumer surplus and social welfare depend on whether the promotion alters consumer preferences. If it does, more consumers would be choosing their less-preferred brands because of the larger inter-brand price gap, which would be socially inefficient. If it does not, the promotion may help to correct the price distortion, but the social welfare effect is positive only when the promotion effect is small enough. In both cases, the promotion services reduce the total consumer surplus by softening inter-brand competition.

Strategic priority-purchasing and joining rules in a retrial queue

2020 ◽  
Author(s):  
Zhongbin Wang ◽  
Jinting Wang
Keyword(s):  
Retrial Queue ◽  
Dominant Strategy ◽  
Equilibrium Strategy ◽  
Social Planner ◽  
Theoretic Model ◽  
Retrial Queueing System ◽  
Retrial Queueing ◽  
The Social ◽  
Game Theoretic ◽  
Customer Welfare

Abstract This paper considers a retrial queueing system with a pay-for-priority option. A queueing-game-theoretic model that captures the interaction among the customers, the service provider (SP) and the social planner is developed. We obtain the equilibrium strategy of customers for any fixed priority premium and identify the unique Pareto-dominant strategy. The optimal pricing strategies for the SP and the social planner are derived and compared extensively. Interestingly, we find that the equilibrium outcome of customers is non-monotone in the service reward and the profit of the SP is bimodal in the priority premium. We reveal the fact that the SP’s optimization makes the system more congested than what is socially desirable. Finally, numerical examples indicate that the customer welfare can be improved by providing priorities when the market size is large.

Optimal eco-labeling strategy with imperfectly informed consumers

2019 ◽  
Vol 119 (6) ◽  
pp. 1166-1188 ◽  
Author(s):  
Tijun Fan ◽  
Yang Song ◽  
Huan Cao ◽  
Haiyang Xia
Keyword(s):  
Social Welfare ◽  
Environmental Quality ◽  
Design Methodology ◽  
Quality Criteria ◽  
Backward Induction ◽  
Content Type ◽  
Subgame Perfect Nash Equilibrium ◽  
Equilibrium Strategies ◽  
The Social ◽  
Game Theoretic

Purpose The purpose of this paper is to find the optimal environmental quality criteria for a strategic eco-labeling authority with three objectives (i.e. maximizing the aggregate environmental quality, maximizing the industry profit and maximizing the social welfare). Particularly, the authors investigate how the existence of imperfectly informed consumers affects labeling criteria determination and competition among firms. Design/methodology/approach A game-theoretic modeling approach was adopted in this paper. A three-stage sequential game was modeled and backward induction was used to solve for a subgame perfect Nash equilibrium. To investigate the impacts of the existence of imperfectly informed consumers, the equilibrium, if all consumers are perfectly informed of the eco-label, was studied as a benchmark. Findings A more strict eco-labeling criterion improves revenues for both the labeled and unlabeled firms. It is interesting to find that the eco-labeling criteria to maximize industry profits are stricter than the criteria to maximize social welfare. Moreover, when the fraction of imperfectly informed consumers increases, the eco-labeling criteria to maximize aggregate environmental quality or industry profits will be more strict, while the criteria to maximize the social welfare will be looser. Originality/value The authors analyze the equilibrium strategies for firms against the eco-labeling criteria certified by authority with different objectives. The obtained optimal labeling strategies could provide insightful guidelines for the certifying authority to select the best suitable labeling criteria to achieve its goals.

Frenemies in Platform Markets: Heterogeneous Profit Foci as Drivers of Compatibility Decisions

2020 ◽  
Vol 66 (6) ◽  
pp. 2432-2451 ◽  
Author(s):  
Ron Adner ◽  
Jianqing Chen ◽  
Feng Zhu
Keyword(s):  
Information Systems ◽  
Social Welfare ◽  
The Other ◽  
Theoretic Model ◽  
Game Theoretic ◽  
Game Theoretic Model ◽  
The Difference

We study compatibility decisions of two competing platform owners that generate profits through both hardware sales and royalties from content sales. We consider a game-theoretic model in which two platforms offer different standalone utilities to users. We find that incentives to establish one-way compatibility—the platform owner with smaller standalone value grants access to its proprietary content application to users of the competing platform—can arise from the difference in their profit foci. As the difference in the standalone utilities increases, royalties from content sales become less important to the platform owner with greater standalone value, but more important to the other platform owner. One-way compatibility can thus increase asymmetry between the platform owners’ profit foci and, given a sufficiently large difference in the standalone utilities, yields greater profits for both platform owners. We further show that social welfare is greater under one-way compatibility than under incompatibility. We also investigate how factors such as exclusive content and hardware-only adopters affect compatibility incentives. This paper was accepted by Chris Forman, information systems.

Manufacturer’s “1-Up” from Used Games: Insights from the Secondhand Market for Video Games

2021 ◽  
Author(s):  
Antino Kim ◽  
Rajib L. Saha ◽  
Warut Khern-am-nuai
Keyword(s):  
Video Game ◽  
Intrinsic Value ◽  
Consumer Surplus ◽  
Theoretic Model ◽  
Information Goods ◽  
Gaming Industry ◽  
Game Theoretic ◽  
Technological Means ◽  
Types Of Information ◽  
The Cost

In contrast to industries of other types of information goods, the video game industry still has a sizable secondhand market for games. This is particularly notable because some of the major gaming-console companies (e.g., Sony and Microsoft) actually possess the ability to annihilate the secondhand market altogether; it appears that those companies have given tacit approval to buying and selling used games. Naturally, the question is, what is the special ingredient in the gaming industry that gives a manufacturer incentive to keep a healthy secondhand market even when it has the technological means to shut it down? In this study, leveraging a game-theoretic model, we investigate the effect of gaming console on a manufacturer’s strategy in the presence of a secondhand market for games. We find that when the manufacturer offers a valuable console that provides utilities in addition to playing games, the secondhand market increases the manufacturer’s profit, and that is not at the cost of consumers; the consumers—as well as the society as a whole—also benefit from the secondhand market. This is in stark contrast with settings where there are no consoles involved or the consoles do not offer any intrinsic value; in such settings, the manufacturer would opt to shut down the secondhand market. In the case with a valuable console, however, the increasing appeal of the secondhand market to consumers may improve the manufacturer’s profit, consumer surplus, and social welfare, all at the same time. We discuss our findings along with managerial and welfare implications.

WHEN ALTRUISM LOWERS TOTAL WELFARE

2006 ◽  
Vol 22 (1) ◽  
pp. 1-18 ◽  
Author(s):  
KENNETH S. CORTS
Keyword(s):  
Social Welfare ◽  
Simple Game ◽  
Theoretic Model ◽  
Ethical Theories ◽  
Coordination Problems ◽  
Game Theoretic ◽  
Game Theoretic Model ◽  
Selfish Agents ◽  
Total Welfare

Ethical theories grounded in utilitarianism suggest that social welfare is improved when agents seek to maximize others' welfare in addition to their own (i.e., are altruistic). However, I use a simple game-theoretic model to demonstrate two shortcomings of this argument. First, altruistic preferences can generate coordination problems where none exist for selfish agents. Second, when agents care somewhat about others' utility but weight their own more highly, total social welfare may be lower than with selfish agents even in the absence of coordination problems.

Multiproduct Duopoly with Vertical Differentiation

2011 ◽  
Vol 11 (1) ◽  
Author(s):  
Yi-Ling Cheng ◽  
Shin-Kun Peng ◽  
Takatoshi Tabuchi
Keyword(s):  
Quality Improvement ◽  
Social Welfare ◽  
Arbitrary Number ◽  
Consumer Surplus ◽  
Vertical Differentiation ◽  
Two Stage ◽  
Unit Costs ◽  
The Social ◽  
Market Coverage ◽  
Heterogeneous Consumers

This paper investigates a two-stage competition in a vertically differentiated industry, where each firm produces an arbitrary number of similar qualities and sells them to heterogeneous consumers. The number of products, qualities, prices, and the extent of the market coverage are endogenously determined. We show that when unit costs of quality improvement are increasing and quadratic, each firm has an incentive to provide a disconnected set of similar qualities approximating a continuum. The finding contrasts sharply with the single-quality outcome when the market coverage is exogenously determined. We also show that allowing for multiple qualities intensifies the level of competition, lowers the profit of each firm, and raises the consumer surplus and the social welfare in comparison to the single-quality duopoly.

scholarly journals Optimal Tradable Credits Scheme and Congestion Pricing with the Efficiency Analysis to Congestion

2015 ◽  
Vol 2015 ◽  
pp. 1-6 ◽  
Author(s):  
Ge Gao ◽  
Jun Hu
Keyword(s):  
Social Welfare ◽  
Choice Behavior ◽  
Congestion Pricing ◽  
Consumer Surplus ◽  
Efficiency Analysis ◽  
Numerical Examples ◽  
Demand Distribution ◽  
The Social ◽  
Tradable Credits ◽  
Performance Results

We allow for three traffic scenarios: the tradable credits scheme, congestion pricing, and no traffic measure. The utility functions of different modes (car, bus, and bicycle) are developed by considering the income’s impact on travelers’ behaviors. Their purpose is to analyze the demand distribution of different modes. A social optimization model is built aiming at maximizing the social welfare. The optimal tradable credits scheme (distribution of credits, credits charging, and the credit price), congestion pricing fees, bus frequency, and bus fare are obtained by solving the model. Mode choice behavior under the tradable credits scheme is also studied. Numerical examples are presented to demonstrate the model’s availability and explore the effects of the three schemes on traffic system’s performance. Results show congestion pricing would earn more social welfare than the other traffic measures. However, tradable credits scheme will give travelers more consumer surplus than congestion pricing. Travelers’ consumer surplus with congestion pricing is the minimum, which injures the travelers’ benefits. Tradable credits scheme is considered the best scenario by comparing the three scenarios’ efficiency.

Sign in / Sign up

Export Citation Format

Share Document