DS08 - Sociétés innovantes, intégrantes et adaptatives

Information design in experimentation and competitive bidding: applications to the Internet economy and to the economics of organization. – MIE

Submission summary

A new research area of economic theory, called information design, emerged relatively recently and studies how information can be used to create incentives and influence economic and social outcomes. The questions addressed in this literature are what, when, and to whom information should be revealed in order to achieve a particular objective.
Many daily life examples illustrate the importance of information design, in particular in the Internet economy. Most online markets publish recommendations for their goods or services that are partly based on consumers’ reviews. The two objectives of these platforms (influencing consumption and disseminating information) may potentially be contradictory, and full revelation of information may discourage consumer exploration. The general objective of this project is to contribute to the literature on information design, according to two research directions.
In the first one, we will investigate experimentation situations, namely situations in which agents want to improve their knowledge and optimize their decisions at the same time. A typical example is a R&D team, whose members work on painkiller drugs. They can decide to work on the packaging of a well-known molecule, or try to find a completely new molecule. In the former case, the reward of effort is perfectly known. In the latter case, effort can be very rewarding, or not rewarding at all: effort is then called experimentation. The question we will address is how to design the information structure/flow/environment to improve experimentation and enlarge global knowledge? This research direction, called “Information design in experimentation issues”, will be divided into three tasks. In “Task 1: The price of information in exploration/exploitation problem”, we will study a market where agents can trade information about the outcome of their individual experimentation. In “Task 2: Implementing the wisdom of the crowd in the presence of congestion costs”, we will study the trade-off between collecting and disseminating information in the case where consumers bare congestion costs. In “Task 3: Reward schemes in talking teams”, we will characterize efficient reward schemes in teams of workers where communication is possible.
In the second direction, we will investigate competitive bidding situations, namely situations in which a seller wants to sell an indivisible asset to a finite number of buyers. It is reasonable to assume that at least one part of the market has imperfect information on the market environment (quality of the product, number and identity of agents in the market, etc). As a consequence, the uninformed part commonly relies on the advice of informed experts to make their bidding decisions: the potential buyer of the second-hand car may ask for a certification, an art amateur may ask for the advice of the gallery manager, etc. When the two parts of the advising relationship have misaligned preferences however, the question of information revelation through communication is not straightforward. This research direction, called “Information design in competitive bidding issues”, will be divided in three tasks. In “Task 4: Strategic communication with private and common values: the case of the real estate market”, we will address the impact of advised relationships in a competitive bidding model with common and private value, in which one side of the market has no information about the common value. In “Task 5: On the role of messages in quality disclosure situations”, we will study the effect of the set of statements available to the informed party on the amount of information revealed, both in a theoretical and experimental framework. Finally, in “Task 6: On the optimal level of advertising in online auctions”, we will investigate whether online auction platforms should reveal to online buyers the existence of similar, and potentially more competitive, auctions.

Project coordination

Chantal Marlats (Laboratoire d'Economie Mathématique et de Mathématique Appliquée)

The author of this summary is the project coordinator, who is responsible for the content of this summary. The ANR declines any responsibility as for its contents.

Partner

LEMMA Laboratoire d'Economie Mathématique et de Mathématique Appliquée

Help of the ANR 114,598 euros
Beginning and duration of the scientific project: March 2018 - 48 Months

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