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on Contract Theory and Applications |
| By: | Fuyuki Saruta (Faculty of Commerce, Doshisha University and Junior Research Fellow, Research Institute for Economics & Business Administration (RIEB), Kobe University, JAPAN) |
| Abstract: | We investigate a two-sided market model in which two platforms compete for sellers and buyers who can participate in multiple platforms (multihoming), and one of the two platforms can make exclusive contracts with sellers. The platform faces a trade-off when it enters into exclusivity agreements with sellers, which gives it an advantage when competing for buyers but reduces its revenue from the seller side. In addition, we expect that the existence of multihoming buyers weakens the platform’s incentive to have an exclusive contract with sellers. Even when buyers can multihome, does a platform have an incentive to make exclusive contracts with sellers? If so, how does exclusive dealing affect social welfare? We obtain the following results. First, in equilibrium, the platform makes exclusive contracts with all sellers or not at all. It offers exclusive contracts to all sellers if the revenue from the buyer side is expected to be somewhat higher than the revenue from the seller side; if sellers' network externality on buyers is sufficiently large (small), it chooses fully exclusive dealing (nonexclusive dealing). Second, exclusive dealing is preferable (detrimental) to social welfare when the network externality is sufficiently large (small). Exclusive dealing encourages the multihoming of buyers, which allows agents to have more interactions on one platform and prompts more buyers to obtain stand-alone benefits from multiple platforms. |
| Keywords: | Matching; Exclusive contracts; Two-sided markets; Multihoming; Platform competition |
| JEL: | D43 D62 L13 L14 |
| Date: | 2022–06 |
| URL: | http://d.repec.org/n?u=RePEc:kob:dpaper:dp2022-26&r= |
| By: | Wei, A.; Hendrikse, G.W.J. |
| Abstract: | We extend the results of Feng and Hendrikse (2012) by investigating the relationship between cognition and incentives in cooperatives versus investor-owned firms (IOFs) in a multi-tasking principal-agent model. The principal chooses the incentive intensity as well as the precision of monitoring, while the agent chooses the activities. We establish that a cooperative is uniquely efficient when either the synergy between the upstream and downstream activities or the knowledgeability of the members regarding the cooperative enterprise is sufficiently high. |
| Keywords: | Cognition, incentives, cooperative, governance, multi-tasking |
| Date: | 2022–05–30 |
| URL: | http://d.repec.org/n?u=RePEc:ems:eureri:137124&r= |
| By: | Honda, Jun; Inderst, Roman; Ottaviani, Marco |
| Abstract: | We introduce a model of advice in which firms steer advisors through nonlinear incentive schemes. In addition to developing an isomorphism to pricing with mixed bundling, we obtain three main insights. First, firms optimally use nonlinear bonuses to economize on the rent paid to advisors. Second, equilibrium bonus payments induce advisors to make biased recommendations that are artificially contingent on each other, resulting in an inefficient allocation. Third, if advisor liability is stepped up, firms respond by increasing the size of the bonus, leaving advisor bias unchanged. These results support direct regulatory interference on the way advisors are compensated. |
| Keywords: | bonus payments,nonlinear incentive schemes,advisor incentivization |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:esprep:259401&r= |
| By: | Jonas von Wangenheim |
| Abstract: | Customer data enables online marketplaces to identify buyers’ preferences and provide individualized product information. Buyers learn their product value only after contracting when the product is delivered. I characterize the impact of such ex-ante information on buyer surplus and seller surplus, when the seller sets prices and refund conditions in response to the ex-ante information. I show that efficient trade and an arbitrary split of the surplus can be achieved. For the buyer-optimal signal low-valuation buyers remain partially uninformed. Such a signal induces sellers to sell at low prices without refund options, resulting in commonly observed practices of opaque sales. |
| Keywords: | information disclosure, sequential screening, information design, strategic learning, Bayesian persuasion, mechanism design, platform economics, consumer protection |
| JEL: | D82 D86 D18 |
| Date: | 2022–05 |
| URL: | http://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2022_352&r= |
| By: | Deniz Kattwinkel; Axel Niemeyer; Justus Preusser; Alexander Winter |
| Abstract: | A principal must decide between two options. Which one she prefers depends on the private information of two agents. One agent always prefers the first option; the other always prefers the second. Transfers are infeasible. One application of this setting is the efficient division of a fixed budget between two competing departments. We first characterize all implementable mechanisms under arbitrary correlation. Second, we study when there exists a mechanism that yields the principal a higher payoff than she could receive by choosing the ex-ante optimal decision without consulting the agents. In the budget example, such a profitable mechanism exists if and only if the information of one department is also relevant for the expected returns of the other department. We generalize this insight to derive necessary and sufficient conditions for the existence of a profitable mechanism in the n-agent allocation problem with independent types. |
| Date: | 2022–05 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2205.10910&r= |