We consider collective decisions made by agents whose preferences and power depend on past events and decisions. Faced with an inecient equilibrium and an opportunity to commit to a policy, can the agents reach an agreement on such a policy? We provide a consistency condition linking power structures in the dynamic setting and at the commitment stage. When the condition holds, commitment has no value: any agreement that may be reached at the outset coincides with the equilibrium without commitment. When the condition fails, as in the case of time-inconsistent preferences, commitment can improve outcomes. We discuss several applications.
|JEL:||D70 H41 C70|
Many Internet service companies such as providers of two-sided markets, social networks, or online games rely on the social interaction between their user base and thus capitalize from positive network effects. For such companies, a common strategy is to offer (basic) services for free (and thereby abolish entry barrier of a one-off or recurring price) and to charge their users for premium services. Companies such as eBay, PayPal, LinkedIn, or Skype added paid services to their originally free business models, either via subscriptions, PAYG, or direct sales of virtual items. Their strategy how to make money and whom to bill however differs widely. In the Internet business, ‘monetization’ has become a frequently used buzzword for all aspects of a company’s revenue strategy which includes the decision who should be billed (e.g., for a two-sided market: seller vs. buyer vs. advertisers only), with which price model (e.g., mandatory subscription vs. optional subscriptions vs. selling virtual currency or items) and price level (e.g., differentiated between user groups), and – in case of a freemium strategy – how a new (free) user can be converted most efficiently into a paying and remunerative customer (e.g., via effective CRM measures). The overarching objective of all monetization measures is to maximize the company’s revenue and/or profit. The field of monetization offers a wide field of research opportunities. Four of these are covered in this dissertation: The Name-your-own-price model, users’ spending behavior in virtual communities, the monetization of network effects in social networks, and the legal boundaries of social network usage. As a result, this dissertation solves a series of questions currently being worked on by practitioners and uses a wide range of methods from various disciplines such as economic, psychological, and game theory.
|By:||Romeo Matthew Balanquit (School of Economics, University of the Philippines Diliman)|
This study presents how selection of equilibrium in a game with many equilibria can be made possible when the common knowledge assumption (CKA) is replaced by the notion of common belief. Essentially, this idea of pinning down an equilibrium by weakening the CKA is the central feature of the global game approach which introduces a natural perturbation on games with complete information. We argue that since common belief is another form of departure from the CKA, it can also obtain the results attained by the global game framework in terms of selecting an equilibrium. We provide here necessary and sufficient conditions. Following the program of weakening the CKA, we weaken the notion of common belief further to provide a less stringent and a more natural way of believing an event. We call this belief process as iterated quasi-common p-belief which is a generalization to many players of a two-person iterated p-belief. It is shown that this converges with the standard notion of common p-belief at a sufficiently large number of players. Moreover, the agreeing to disagree result in the case of beliefs (Monderer & Samet, 1989 and Neeman, 1996a) can also be given a generalized form, parameterized by the number of players.
|Keywords:||common p-belief; common knowledge assumption; global games|
|By:||Mikel Alvarez-Mozos (Universitat de Barcelona)
José María Alonso-Meijide (Universidade de Santiago de Compostela)
María Gloria Fiestras-Janeiro (Universidade de Vigo)
In this note we characterize the restriction of the externality-free value of de Clippel and Serrano (2008) to the class of simple games with externalities introduced in Alonso-Meijide et al. (2015).
|Keywords:||Externality-free value, Shapley–Shubik index, Partition function.|
|By:||Rosas-Martinez, Victor H.|
We assess theoretically the effect of forming a free trade union on the total production of a nation, where such effects are caused by the absorption of technologies. A popular metaphor describes the people as crabs in a bucket because when one crab tries to scape, the others pull it down avoiding a possible way out for all of them. Given this knowledge, posteriorly and independently of the income inequality levels, we extend our analyses to consider the effect of envy in a macroeconomic level on the total production, and draw the implications which this phenomenon has on the formation of free trade unions. We make strategic policy recommendations to allow the achievement of a globalization that benefits each member nation, where we show that the great trade union might have to start with gradual and charitable subregional agreements.
|Keywords:||International Trade; Technological Absorption; Behavioral Macroeconomics; Economic Growth; Trade Policy|
|By:||Percin Batum (Anadolu University)|
The purpose of the exploratory study is to compare the perspectives of management and marketing sciences on networks and reveal out why and how firms become connected and interdependent, and how the relationships affect their ability to compete according to these perspectives. For this purpose, network theory has been taken as a common ground. The management theories which form the network theory and relationship marketing have been discussed. In this paper, the difference between the perception of management and marketing sciences on networks have been expressed in terms of the components of ARA Model. It is possible to notice that some issues have been reverted under different components. This paper aims to put emphasize on that the two arm in arm sciences are in the opposite edges and explain why by presenting the attitude of two different sciences to networks through a model which explains the network theory. It is hoped that this paper helps decision takers to be enlightened if they act as a manager or marketer.
|Keywords:||Relationship marketing, The network approach, ARA model, Interaction approach, Resource dependence theory, Social exchange theory, Institutional theory|
|JEL:||M31 L19 M19|
This paper shows theoretically and experimentally that hearing expert opinions can be a double-edged sword for collective decision making. We present a majoritarian voting game of common interest where committee members receive not only private information, but also expert information that is more accurate than private information and observed by all members. In theory, there are Bayesian Nash equilibria where the committee members’ voting strategy incorporates both types of information and access to expert information enhances the efficiency of the majority decision. However, there is also a class of potentially inefficient equilibria where a supermajority always follow expert information and the majority decision does not aggregate private information. In the laboratory, the majority decisions and the subjects’ voting behaviour were largely consistent with those in the class of inefficient equilibria. We found a large efficiency loss due to the presence of expert information especially when the committee size was large. We suggest that it may be desirable for expert information to be revealed only to a subset of committee members.
|Keywords:||committee decision making, voting experiment, expert information, strategic voting|
|JEL:||C92 D72 D82|
|By:||Gaston Llanes (Escuela de Administracion, Pontificia Universidad Catolica de Chile)
Francisco Ruiz-Aliseda (Escuela de Administracion, Pontificia Universidad Catolica de Chile)
We study a two-sided market in which a platform connects consumers and sellers, and signs private contracts with sellers. We compare this situation with a two-sided market with public contracts. We find that the platform provider sets positive (negative) royalties to sellers and earns a negative (positive) markup on consumers when contracts are private (public). Thus, private contracting has a significant effect on the price structure. Private contracting leads to lower platform profits, consumer surplus, and social welfare. We study the welfare effects of most-favored-nation clauses, price-forcing contracts, and integration with sellers; and relate our results with the agency model of sales. Our results indicate that enhancing the market power of a dominant platform over sellers may increase welfare because it acts as a commitment device for inducing lower seller prices, mitigating the hold-up problem borne by consumers when they cannot observe sellers’ contracts.
|Keywords:||Two-Sided Markets; Platforms; Vertical Relations; Most-Favored Nation; Price-Forcing Contracts; Resale Price Maintenance; Integration; Agency Model of Sales|
|JEL:||L12 L14 L42|
|By:||Markus Kinateder (â€‹University of Navarra)
Luca Paolo Merlino (Universit e libre de Bruxelles)
In this paper we study a local public good game in an endogenous network with heterogeneous agents. We consider two specifications, in which different networks arise. When agents differ in the cost of acquiring the public good, active agents form hierarchical complete multipartite graphs; yet, better types need not have more neighbors. When agents have heterogeneous benefits from the public good, nested split graphs in which investment need not be monotonic in type emerge. In large societies, few agents are active and the network dampens inequality.
|JEL:||C72 D00 D85 H41|
Network effects may be either direct or indirect. While many analyses conflate the two, I show that the ways in which direct and indirect effects influence technological standardization are quite different. Some parameter changes have opposite effects in the two models, and some factors which are irrelevant under direct effects are central under indirect effects. Compatibility in particular has a different interpretation and more subtle implications for standardization in the indirect model.
Network effects, Network externalities, Standards, Compatibility