Browsing by Subject "Information design"

Now showing 1 - 4 of 4

Communication, elicitation, and the value of information
(2020-05-07) Whitmeyer, Mark Joseph; Wiseman, Thomas E., 1974-; Skreta, Vasiliki; Bhaskar, Venkatamaran; Fuchs, William
The three chapters of this dissertation explore the value of information in a variety of settings. In each chapter there is a sender (or many senders who has (have access to information and a single receiver who depends on the sender for information. In the first chapter I modify an old question of Frank P. Ramsey, originally asked in the decision problem environment, to the communication game setting, in which an informed sender communicates to a decision maker (receiver, who takes an action that affects both players' welfare. Namely, I ask, ``if information is free prior to a communication game, then does it benefit the receiver in expectation to acquire it?" I show that the answer to this question is not generally yes. I provide tight sufficient conditions that guarantee that the value of information is positive. In the second chapter, I continue to explore communication games. I study how the receiver can acquire more information from the sender by reducing her own ability to observe what the agent transmits. I find that that under broad conditions, the receiver can do just as well as if she could commit to a rule mapping the sender's message to actions: information design is just as good as full commitment. I also investigate how the ability of the receiver to choose what she can see of the sender's message affects the answer to the question asked in the first chapter about the value of information. These broad conditions guarantee that the value of information is always positive. The third chapter departs from the setting of the other two. There, I study an oligopolistic setting in which ex-ante symmetric firms compete via information provision to attract a consumer. I explore how search frictions affect the firms' information provision policies, which are chosen in order to entice the consumer to visit. I find that when the expected quality of the product is sufficiently high, there is a unique symmetric equilibrium in which firms are fully informative. There, a small search cost leads to the perfect competition level of information provision--consumers gain when firms are forced to compete on information. Conversely, in the low and medium expected quality cases there are no pure strategy equilibria. Instead, firms mix over a continuum of levels of information: in the low expected quality case they provide full information with probability zero; and in the medium expected quality case they provide full information with positive probability.
Essays on games of strategic information disclosure
(2021-04-19) Jain, Vasudha; Skreta, Vasiliki; Bhaskar, Venkataraman; Wiseman, Thomas E; Fuchs, William
This dissertation studies communication and information design in strategic settings. In each chapter, I develop a theoretical framework to study an interaction where a decision-maker who lacks access to information relevant for her decision has to rely on one or more interested parties to provide it. My focus is on examining how certain naturally arising constraints faced by agents in these interactions matter for the degree of information transmission, and for welfare of agents. In the first two chapters, I (with my co-author Mark Whitmeyer) revisit the classic strategic problem of two sellers that compete to sell to a consumer by manipulating the availability of information on product quality. In this framework, we examine the role of the consumer's limited ability to process information. Accordingly, we model the consumer as incurring a cost to process more information, and actively deciding how much of available information about each product to process. Chapter 1 studies a baseline environment where our main finding is that sellers are encouraged to disclose more information than they would to a consumer who could freely process all available information. Chapter 2 shows that this finding is robust to various modifications of the environment (such as allowing for ex-ante heterogeneity between sellers). Our analysis illuminates two forces that produce this result: First, substitutability between the two sources of information; second, optimality (for the consumer) of deliberately ignoring some information. As we show, another notable implication of this finding is that the consumer might choose the better product with a higher probability than when she is unconstrained in her ability to process information. Our theoretical framework applies to a variety of settings where information is "complex," and the leading application is that of pharmaceutical companies disclosing drug quality information to doctors. The third chapter is motivated by the problem of a school that decides how liberal its grading policy on a test should be, which in turn determines how much information about students' ability is available to potential employers. The school is constrained by the fact that the test may only generate information about a student's academic ability, whereas employers additionally care about other "soft skills." In my setting, the school may also write a letter of recommendation for the student after privately observing her soft skills--but unlike a grading policy, there is no rule determining the content of the letter. The goal of the school is to maximize a combination of benefits from good placements and long term reputation concerns. My main finding is that the school designs a less informative grading policy when it has the option of additionally writing the letter, than when it does not. Intuitively, this happens because the letter is credible and influential only when there is sufficient uncertainty about the student's academic ability: If academic ability is revealed to (probably) be high, the letter is understood to be exaggerated; if it is revealed to (probably) be low, the employer's optimal decision is already determined. More generally, my analysis delivers insights about the strategic tensions at play in a model of multidimensional communication with partial commitment.
Essays on pricing and allocation of perishable goods
(2019-06-12) Zhai, Yingda; Stinchcombe, Maxwell; Whinston, Andrew B.; Xu, Haiqing; Stahl, Dale; Rui, Huaxia
In the first chapter, I examine how a monopoly service provider prices and allocates their multi-server queuing system to handle the large volume of computing jobs, jobs that differ along several dimensions. Modern network operators, be they cloud computing providers or telecommunication carriers, must carefully design their pricing and allocation plans in the face of the surging demand for their perishable good, namely, computing resources or wireless connections. Motivated by the market for cloud computing, we examine how a monopoly service provider prices and allocates its multi-server queuing system to handle the large volume of computing jobs, jobs that differ along several dimensions. To study the regularities in such a large and diverse system, we construct a service model with a large user base, one whose large numbers make the aggregate statistics of queuing behavior nearly deterministic. Even if the provider has resources that are more than sufficient to serve the entire market, variability in the users' willingness to pay and delay sensitivity means that segmenting the queue's capacity into different tranches to serve users with different preferences increases profits, giving rise to "strategic throttling". In parallel with the classical analyses of durable goods monopolies, the inability to perfectly discriminate between consumers means that the allocation is inefficient. To implement the optimal allocation, we propose an appealing spot market auction mechanism in which users find bidding a supplier's optimal prices to be a weakly dominant bidding strategy. In the second chapter, I develop a theoretical model for the optimal design of airfare as options under capacity constraint to study the price dispersion in U.S airline industry. Monopoly seller uses a menu of refund contracts to sequentially screen heterogeneous travellers who purchase the tickets before travel uncertainty is fully resolved. Airline finds it optimal to sell fully refundable fares to high-value customer when capacity is limited and to sell partially refundable fare when seats are abundant. The change of capacity accounts for the distinct jumps of non-refundable fare and the variation of refundable fare over booking periods. The model predicts that the price dispersion might fluctuate and then diminish as the number of available seat shrinks. An original data, which contains both high-frequent price and seat availability information for differentiated fares, provides strong empirical evidence that the price gap experiences stepwise drops before diminishing as departure date nears. In the final chapter, I study an optimal information design for efficient fleet redeployment in an urban area. Inefficiency in the form of mismatch between demand and supply could arise in the traditional taxi industry where drivers receive no additional information about market demand. Yet, providing complete public information, such as Uber surge map or Lyft prime time zone, to entire fleet might incur inefficiency as well ([17]). A market designer, who observes both the demand and supply level, could send private message to influence beliefs and thus actions of multiple drivers whose payoff depends on the state of demand level. We impose consistency condition requiring the signaled matching probability must be equal to the realized one for credible persuasion in the Bayesian persuasion game.
Essays on the economics of ride-hailing
(2024-05) Aliabadi Farahani, Ebrahim; Ackerberg, Daniel A.; Robert Town; Victoria Marone
Two-sided platforms facilitate trade by providing information about goods and trading partners to market participants. Common belief suggests that match quality and outcome is enhanced for all parties when they are provided with more information. However, this is not necessarily as intuitive in the settings I focus on, as information about demand has first-order implications on suppliers’ decisions. In the first chapter, I use the novel data from a ride-hailing platform, and examine whether disclosing information about ride to drivers improves market efficiency. I develop an empirical model of spatial equilibrium to measure the welfare effects of information disclosure. I find that while hiding information decreases the match quality for drivers, the platform does not lose too many drivers on the supply side, and it is able to utilize its existing drivers more effectively. This results in more matches, which benefits riders. Overall, the ”no information disclosure policy” increases total welfare, while it also has a redistribution effect from drivers to riders. In the second chapter, I focus on the role of two-sided platforms in transactions and their connection to information policy. Online platforms can choose to act as mere facilitators of transactions between independent providers and buyers, essentially creating a marketplace, or they can take control over some or all aspects of the transactions. I explore this issue and its associated trade-offs within the context of ride-hailing, where the platform determines the pricing. Specifically, I examine when the platform should solely enable transactions by disclosing information to drivers, allowing them to decide on matching, and when it should take control of the transaction by concealing information and directly matching drivers to riders. The findings suggest that when drivers have less diverse preferences that are unknown to the platform and riders are not patient in the matching process, it is optimal for the platform to control transactions by hiding information rather than fully disclosing it.