2019 - Working Papers: Managerial Economics
The value of information in dynamic vertical relations, 26 pp.
Y. Yehezkel
(Working paper no. 5/2019)
Research no.: 03490100
This paper asks whether a privately informed retailer may have an incentive to share its marketing data with the manufacturer, in a way that would enable the manufacturer to gain ex-post, but non-contractible information. I consider infinitely repeated dynamic vertical relations with adverse selection. In every period, a retailer (an agent) has private information concerning the demand while a manufacturer (the principal) can observe this information only at the end of the period. The paper finds that ex-post information motivates the manufacturer to leave the retailer with higher (lower) one-period profits when the retailer is short-sighted (forward looking).
Group hug: Platform competition with user-groups, 34 pp.
S. Markovich and Y. Yehezkel
(Working paper no. 6/2019)
Research no.: 03480100
We consider platform competition in the presence of small users and a user group. One platform enjoys a quality advantage and the other benefits from favorable beliefs. We study whether the group mitigates the users’ coordination problem –i.e., joining a low-quality platform because they believe that other users would do the same. We find that when the group is sufficiently large to facilitate coordination on the high-quality platform, the group may choose to join the low-quality one. When the group joins the more efficient platform it does not necessarily increase consumer surplus. Specifically, a non-group user benefits from a group with an intermediate size, and prefers a small group over a large group. The utility of a group user is also non-monotonic in the size of the group.
