Essays on Information Economics in Games

Abstract

My dissertation focuses on information economics in games. In Chapter II, ``Optimal Disclosure of Private Information to Competitors", I consider a duopoly model with differentiated substitutes, price competition, and uncertain demand, in which one firm has an information advantage over a competitor. I study the incentives of the informed firm to share its private information with its competitor and the incentives of a regulator to control disclosure in order to benefit consumers. I show that full disclosure of information is optimal for the informed firm, because it increases price correlation and surplus extraction from consumers. I also show that the regulator can increase expected consumer surplus and welfare by restricting disclosure, but that, surprisingly, consumers can benefit from the regulator privately disclosing some information to the competitor. My findings highlight the consequences of an unequal distribution of consumer data between firms on welfare allocation. They also inform an ongoing policy debate about regulating what data online platforms release to other firms who offer goods on its platform.

In Chapter II, ``Strategic Incentives and the Optimal Sale of Information", I study the optimal sale of information by a monopolist data-seller to multiple privately informed data-buyers who play a two-stage game of incomplete information. In the information stage, data-buyers can simultaneously acquire supplemental information to reduce their uncertainty about the state. In the action stage, data-buyers simultaneously select an action to maximize their expected payoffs. The data-seller offers a menu of Blackwell experiments and prices to screen between two types of data-buyers. I show that the nature of data-buyer's preferences for information allows the data-seller to extract all surplus from data-buyers, distorting the information provided to the low type such that the high type is indifferent between both experiments. I also show that the features of the optimal menu are determined by the interaction between data-buyers' strategic incentives in the action stage and the correlation of their private information. This interaction can expand the data-seller's ability to serve all segments of the market, increasing expected profits.

In Chapter IV, ``Product reviews - Information Source or Persuasion Device?", which is joint work with Anne-Katrin Roesler, we study the optimal design of review systems by a platform that has the best interest of consumers in mind. We consider a setting in which a seller offers a good of ex-ante unknown quality through a platform with a review system to sequentially arriving short-lived heterogeneous buyers. Reviews from previous buyers provide consumers with information about the good's quality. Based on the review system, the seller chooses an optimal pricing scheme. Buyers make their purchasing decision based on the information available through reviews, their type, and the price. In a two period setting, we approximate the optimal review system by characterizing the optimal K-piecewise linear distribution over posterior quality estimates.