Consumer Search Costs and Preferences on the Internet

Date: 2014-11
By: Jolivet, Grégory (University of Bristol)
Turon, Hélène (University of Bristol)
We analyse consumers’ search and purchase decisions on an Internet platform. Using a rich dataset on all adverts posted and transactions made on a major French Internet platform (PriceMinister), we show evidence of substantial price dispersion among adverts for the same product. We also show that consumers do not necessarily choose the cheapest advert available and sometimes even choose an advert that is dominated in price and non-price characteristics (such as seller’s reputation) by another available advert. To explain the transactions observed on the platform, we derive and estimate a structural model of sequential directed search where consumers observe all advert prices but have to pay a search cost to see the other advert characteristics. We allow for flexible heterogeneity in consumers’ preferences and search costs. After deriving tractable identification conditions for our model, we estimate sets of parameters that can rationalize each transaction. Our model can predict a wide range of consumer search strategies and fits almost all transactions observed in our sample. We find empirical evidence of heterogenous, sometimes positive and substantially large search costs and marginal willingness to pay for advert hedonic characteristics.
Keywords: consumer search, revealed preferences, individual heterogeneity, price dispersion, internet
JEL: C13 D12 D81 D83 L13

“Read my Lips!" Experimental Evidence on the Effects of Electoral Competition on Shirking and Trust

Date: 2014-11-30
By: Gari Walkowitz (University of Cologne)
Arne R. Weiss (University of Cologne)
We experimentally test whether electoral competition reduces shirking behavior by office-holders and increases citizens’ trust. We hypothesize that competition increases campaign promises by office-holders, who feel committed to what they promise. Using a novel repeated multi-person investment-game with periodic elections, we indeed find that elected office-holders shirk less (i.e., they back-transfer more to citizens relative to investments) as compared to randomly appointed office-holders. Surprisingly, this effect cannot be explained through competition inflating the level of electoral promises. Nevertheless, promises do matter; in fact, they carry greater weight for the behavior of elected office-holders than for their randomly appointed counterparts. Elections also have a positive short-term effect on citizens’ trust by cutting off both low and excessively high promises.
Keywords: elections, promises, shirking, trust game
JEL: D72 D02 D03 C71 C91

Leaders as Role Models for the Voluntary Provision of Public Goods

Date: 2014-10
By: Gächter, Simon (University of Nottingham)
Renner, Elke (University of Nottingham)
We investigate the link between leadership, beliefs and pro-social behavior. This link is interesting because field evidence suggests that people’s behavior in domains like charitable giving, tax evasion, corporate culture and corruption is influenced by leaders (CEOs, politicians) and beliefs about others’ behavior. Our framework is an experimental public goods game with a leader. We find that leaders strongly shape their followers’ initial beliefs and contributions. In later rounds, followers put more weight on other followers’ past behavior than on the leader’s current action. This creates a path dependency the leader can hardly correct. We discuss the implications for understanding belief effects in naturally occurring situations.
Keywords: leadership, beliefs, experiments, public goods, path dependency, public policy, management
JEL: C72 C90 H41 Z13

Learning, Words and Actions: Experimental Evidence on Coordination-Improving Information

Date: 2013-07
By: Nicolas Jacquemet (EEP-PSE – Ecole d’Économie de Paris – Paris School of Economics – Ecole d’Économie de Paris, BETA – Bureau d’économie théorique et appliquée – CNRS : UMR7522 – Université de Strasbourg – Université Nancy II)
Adam Zylbersztejn (EEP-PSE – Ecole d’Économie de Paris – Paris School of Economics – Ecole d’Économie de Paris, CES – Centre d’économie de la Sorbonne – CNRS : UMR8174 – Université Paris I – Panthéon-Sorbonne)
We experimentally study an asymmetric coordination game with two Nash equilibria: one is Pareto-efficient, the other is Pareto-inefficient and involves a weakly dominated strategy. We assess whether information about the interaction partner helps eliminate the imperfect equilibrium. Our treatments involve three information-enhancing mechanisms: repetition and two kinds of individual signals: messages from partner or observation of his past choices. Repetition-based learning increases the frequencies of the most efficient outcome and the most costly strategic mismatch. Moreover, it is superseded by individual signals. Like previous empirical studies, we find that signals provide a screening of partners’ intentions that reduces the frequency of coordination failures. Unlike these studies, we find that the transmission of information between partners, either via messages or observation, does not suffice to significantly increase the overall efficiency of outcomes. This happens mostly because information does not restrain the choice of the dominated action by senders.
Keywords: coordination game; communication; cheap-talk; observation

Individual Characteristics and Behavior in Repeated Games: An Experimental Study

Date: 2014-10
By: Douglas Davis (Virginia Commonwealth University)
Asen Ivanov (Queen Mary University of London)
Oleg Korenok (Virginia Commonwealth University)
Using a laboratory experiment, we investigate whether a variety of behaviors in repeated games are related to an array of individual characteristics that are popular in economics: risk attitude, time preference, trust, trustworthiness, altruism, strategic skills in one-shot matrix games, compliance with first-order stochastic dominance, ability to plan ahead, and gender. We do find some systematic relationships. A subject’s patience, gender, altruism, and compliance with first-order stochastic dominance have some limited systematic effects on her behavior in repeated games. At the level of a pair of subjects who are playing a repeated game, each subject’s patience, gender, and ability to choose an available dominant strategy in a one-shot matrix game systematically affect the frequency of the cooperate-cooperate outcome. However, overall, the number of systematic relationships is surprisingly small.
Keywords: Experiment, Repeated game, Individual characteristics
JEL: C91 C92 D03 D70

Consumer Price Search and Platform Design in Internet Commerce

==noted by yinung==
這個網站搜尋、比價的主題很久了, 但仍是有趣, 也是有人用 law of one price 的觀念來看, 但裡頭的實驗怎麼做, 再了解。
Date: 2014-08
By: Michael Dinerstein
Liran Einav
Jonathan Levin
Neel Sundaresan
Search frictions can explain why the “law of one price" fails in retail markets and why even firms selling commodity products have pricing power. In online commerce, physical search costs are low, yet price dispersion is common. We use browsing data from eBay to estimate a model of consumer search and price competition when retailers offer homogeneous goods. We find that retail margins are on the order of 10%, and use the model to analyze the design of search rankings. Our model explains most of the effects of a major re-design of eBay’s product search, and allows us to identify conditions where narrowing consumer choice sets can be pro-competitive. Finally, we examine a subsequent A/B experiment run by eBay that illustrates the greater difficulties in designing search algorithms for differentiated products, where price is only one of the relevant product attributes.
JEL: D12 D22 D83 L13 L86

Turf Wars

Date: 2014-10
By: Herrera, Helios (HEC Montreal)
Reuben, Ernesto (Columbia University)
Ting, Michael M. (Columbia University)
Turf wars commonly occur in environments where competition undermines collaboration. We develop a game theoretic model and experimental test of turf wars. The model explores how team production incentives ex post affect team formation decisions ex ante. In the game, one agent decides whether to share jurisdiction over a project with other agents. Agents with jurisdiction decide whether to exert effort and receive a reward based on their relative performance. Hence, sharing can increase joint production but introduces competition for the reward. We find that collaboration has a non-monotonic relationship with both productivity and rewards. The laboratory experiment confirms the model’s main predictions. We also explore extensions of the basic model, including one where each agent’s productivity is private information.
Keywords: turf war, bureaucracy, jurisdiction, competition, information withholding
JEL: D73 D74 D82

Anonymous social influence

Date: 2013
By: Manuel Foerster (CES – Centre d’économie de la Sorbonne – CNRS : UMR8174 – Université Paris I – Panthéon-Sorbonne, CORE – Center of Operation Research and Econometrics [Louvain] – Université Catholique de Louvain (UCL) – Belgique)
Michel Grabisch (CES – Centre d’économie de la Sorbonne – CNRS : UMR8174 – Université Paris I – Panthéon-Sorbonne, EEP-PSE – Ecole d’Économie de Paris – Paris School of Economics – Ecole d’Économie de Paris)
Agnieszka Rusinowska (CES – Centre d’économie de la Sorbonne – CNRS : UMR8174 – Université Paris I – Panthéon-Sorbonne, EEP-PSE – Ecole d’Économie de Paris – Paris School of Economics – Ecole d’Économie de Paris)
We study a stochastic model of influence where agents have “yes" or “no" inclinations on some issue, and opinions may change due to mutual influence among the agents. Each agent independently aggregates the opinions of the other agents and possibly herself. We study influence processes modeled by ordered weighted averaging operators, which are anonymous: they only depend on how many agents share an opinion. For instance, this allows to study situations where the influence process is based on majorities, which are not covered by the classical approach of weighted averaging aggregation. We find a necessary and sufficient condition for convergence to consensus and characterize outcomes where the society ends up polarized. Our results can also be used to understand more general situations, where ordered weighted averages are only used to some extent. Furthermore, we apply our results to fuzzy linguistic quantifiers, i.e., expressions like “most" or “at least a few".
Keywords: Influence; Anonymity; Ordered weighted averaging operator; Convergence; Consensus; Fuzzy linguistic quantifier

Methods of Identification in Social Networks

Date: 2014-08
By: Bryan S. Graham
Social and economic networks are ubiquitous, serving as contexts for job search, technology diffusion, the accumulation of human capital and even the formulation of norms and values. The systematic empirical study of network formation – the process by which agents form, maintain and dissolve links – within economics is recent, is associated with extraordinarily challenging modeling and identification issues, and is an area of exciting new developments, with many open questions. This article reviews prominent research on the empirical analysis of network formation, with an emphasis on contributions made by economists.
JEL: C23 C25 D85

Either or Both Competition: A “Two-sided" Theory of Advertising with Overlapping Viewerships

Date: 2014-10-18
By: Attila Ambrus (Duke University)
Emilio Calvano (CSEF, Università di Napoli Federico II)
Markus Reisinger (Otto Beisheim School of Management)
In media markets, consumers spread their attention to several outlets, increasingly so as consumption migrates online. The traditional framework for studying competition among media outlets rules out this behavior by assumption. We propose a new model that allows consumers to choose multiple outlets and use it to study the effect of strategic interaction on advertising levels, and the impact of entry and mergers. We show that novel forces come into play, which reflect the outlets’ incentives to control the composition of the customer base in addition to its size. We link consumer preferences and advertising technologies to market outcomes. The model can explain a number of empirical regularities that are difficult to reconcile with existing models.
Keywords: Media Competition, Two-Sided Markets, Multi-Homing, Viewer Composition, Viewer, Preference Correlation
JEL: D43 L13 L82 M37